Daunting tasks await Brazil's president-elect

SAO PAULO – Brazilian President Luiz Inacio Lula da Silva realized his dream of continuity by ushering his political protege into the presidency of Latin America's largest nation with a resounding election victory.

Now, President-elect Dilma Rousseff faces the monumental tasks of cutting government spending, developing some of the world's biggest oil finds in decades and improving schools.

At the same time, she has to prepare her nation to host the 2014 World Cup and 2016 Summer Olympics, and try to maintain Brazil's new prominence in international economic and political affairs carved out by her hugely popular predecessor.

Not clear, analysts said Monday, are what policy choices Rousseff will take to meet those challenges when she takes office Jan. 1 — and how the president-elect who has never before held elected office will orchestrate Brazil's boisterous and competing political interests that go into them.

"She is an enigma, a political case study in the making," said Marco Vicenzino, director of the Washington-based Global Strategy Project, a geopolitical research and analysis organization.

On Sunday, Rousseff was elected with 56 percent of the vote as the first female leader of Brazil, a country that has seen its economic fortunes rise and its global political clout grow during Silva's two 4-year terms. He was barred by law from seeking a third consecutive term.

During a heated campaign against a centrist rival, Rousseff, a former Marxist revolutionary during Brazil's dictatorship, made few detailed policy proposals. Analysts were left to read the tea leaves of her years in Silva's moderate government, where she first served as his energy minister and then spent four years as his chief of staff.

"The big landmine is can Brazil cut fiscal spending and bring interest rates down," said Riordan Roett, director of Latin American studies at Johns Hopkins University. "They're going to have to cut back on spending at some point. Or they will get a run of inflation. Where they cut will be an interesting issue."

Rousseff herself acknowledged that government spending — ramped up in this election year — would have to be tamed as she offered the first real peeks at how she might govern just moments are being elected.

"The Brazilian people will not accept a government that spends above a sustainable level," she said during a sober, 25-minute victory speech Sunday night. "We will make all efforts to improve the quality of public spending, to simplify and ease taxation and to improve the quality of public services."

Despite offering few details, that was talk investors wanted to hear. Standard & Poor's wrote in a Monday report that the credit rating of Brazil's government would face few risks of a downgrade "as long as the next administration reaffirms its commitment to fiscal prudence."

Meanwhile, there are questions about how proposed changes to an oil law that will give the government more control over production might affect the development of offshore oil fields that could hold more than 50 billion barrels of oil. The changes have been delayed by political rancor over royalty splitting among states and it is unclear if Rousseff will have the political clout to push it through Congress.

Also not clear is how spending cuts could affect Brazil's ability to complete stadiums and other facilities for the 2014 World Cup and the 2016 Summer Olympics.

Rio de Janeiro will host the Olympics and its winning $14.4 billion bid stated that funding was partially guaranteed by the city, state and federal governments. However, it has never been spelled out how that combination would exactly work.

Silva, a charismatic leader with notable negotiating skills, could be counted on to make sure everyone got in line. It's less clear if Rousseff, who is known for a demanding managerial manner, will have the same command to ensure preparations go ahead smoothly.

There are concerns on the World Cup, too.

Brazil needs significant upgrades to successfully host football's biggest showcase and many critics and even some government officials say the country needs to pick up the pace to get ready on time. Brazil is expected to spend nearly $20 billion on World Cup infrastructure, but bureaucracy — especially in bidding process and environmental licensing — may create obstacles and delay some of the necessary construction.

In August, Silva himself sounded a warning, saying that businessmen and those responsible for monitoring and executing the necessary improvements have to increase cooperation if Brazil is going to pull off the event.

Brazil missed a deadline to start renovating most of the 12 stadiums that will be used in the tournament. Sao Paulo, South America's largest city, may not even have a stadium ready despite plans that the opening match would be hosted there.

What seems clear is there is no lack of resources in Brazil, whose economy grew strongly during Silva's presidency — and is forecast to grow more than 7.5 percent this year. Rather it is the politics of deciding who spends what and where that could be the most daunting task, the sort of bargaining between all levels of government that could be handicapped by Rousseff's lack of political experience.

Roett, at Johns Hopkins, said Brazil has the money and the construction capabilities to handle infrastructure projects for the big events. But, he said, "it's a matter of getting priorities straight ... and that means working at three different levels — municipal, state and federal — and that's never been very easy in the case of Brazil."

He also said Rousseff will have to come through on promises of improving Brazil's public education system, which he said is not necessarily lacking for funds but rather needs to be restructured to focus more on math and science skills needed by Brazil's labor force.

"Dilma made that an important part of her campaign and she raised it again last night (in her victory speech) as an important mechanism for moving the nation away from its extraordinarily high poverty levels," Roett said.