Brazil's president-elect Dilma Rousseff prepared today to take over an economy that is booming but faces several threats including heavy budget spending, an overvalued currency and creaking infrastructure.
Ms Rousseff, who based her campaign on extending the legacy of president Luiz Inacio Lula da Silva, won her first election yesterday as Brazilians voted overwhelmingly for continuity.
Rousseff (62) paid homage to Mr Lula in her victory speech, pledging to extend a "new era of prosperity" that has lifted 20 million Brazilians into the middle class and turned the country into an investor favourite.
"We cannot rest while there are Brazilians who are hungry, while there are families living on the street, while poor children are abandoned to their fate," Ms Rousseff, a former leftist militant, told cheering supporters.
Ms Rousseff, who will be sworn in on January 1st, took 56 per cent of the vote. Her rival, Jose Serra of the centrist PSDB party, had 44 per cent.
She also set two main goals: eradicating extreme poverty while maintaining economic stability.
To do that, Ms Rousseff will have to rein in a spurt of election-year spending that has placed the country's budget goals in doubt. The real currency, pressured by the fiscal stimulus and foreign investors desperate for high-yield assets at a time when most developed economies are stagnant, is also battering local exporters.
Antonio Palocci, a Wall Street darling who could become Ms Rousseff's chief of staff, said her transition team would be looking carefully at both problems and suggested that the budget could be adjusted to reduce spending growth.
"There's no fiscal crisis in Brazil today ... but we have no problem in finding the savings that Brazil needs to keep its debt projections on a downward trend," Mr Palocci said in an interview with Folha de S.Paulo newspaper.
Ms Rousseff must now emerge from Lula's shadow and overcome the perception, still held by some Brazilians, that she is an inexperienced acolyte with little experience of her own.
The headline in today's O Estado de S. Paulo newspaper was simply: "Lula's victory".
In a sign of the changing of the guard, Mr Lula laid low after Ms Rousseff's victory yesterday, leaving her to bask in the moment she became the first woman elected to lead Brazil.
"It's historic. Brazil elected a factory worker and now a woman. Dilma will be a mother for the Brazilian people," said Ivoni Klock, a government worker who celebrated in Brasilia.
Financial markets have taken Rousseff's rise to the presidency in stride and are likely to react calmly today. In the long term, though, investors worry that Brazil could suffer from Rousseff's insistence that the economy does not need major reforms to keep growing at a robust pace.
"We expect a continuation of the decent economic policies carried out by Lula, but unfortunately there seems to be no room for the structural reforms that Brazil needs to optimize public spending," said Alberto Bernal, head of research at Bulltick Capital Markets.
Ms Rousseff will inherit an economy that is among the world's hottest emerging markets but which may struggle to maintain such lofty growth rates as it runs up against barriers such as its poor infrastructure and suffocating bureaucracy.
Politically difficult reforms such as tackling the bloated social security system appear to be off Ms Rousseff's agenda, even though her coalition will enjoy expanded majorities in Congress. Instead, she is expected to focus on easing specific bottlenecks in the economy, such as its tax system.
Ms Rousseff will continue to push Lula's flagship initiatives, including reforms to give the state a greater role in developing vast new oil wealth and ambitious infrastructure plans as Brazil prepares to host the 2014 World Cup and the Olympics two years later.
Reuters