x Abu Dhabi, UAEMonday 22 January 2018

Brazil in safe enough hands with former Marxist guerrilla

As an appointed technocrat, Mr Rousseff will have the tough task of maintaining the enviable record of growth, stability and poverty-reduction under the outgoing president Lula.

The Brazilian president Lula da Silva is a hard act to follow.

The former trade union leader will hand over the keys of the presidential palace on New Year's Day to his chosen successor Dilma Rousseff, whose second-round election victory was confirmed last Sunday.

But will Ms Rousseff be up to the job of maintaining the enviable record of growth, stability and poverty-reduction under Lula, as he is popularly known? Or will the country's arduous climb towards developed nation status be halted or even reversed?

The doubts about Ms Rousseff, an economist, centre on two very different elements in her background. In the 1960s she was a leading member of a small, armed leftist group that sought to overthrow Brazil's military dictatorship. And more recently, her experience is as an appointed technocrat - the presidency was the first elected office she has stood for.

Had Ms Rousseff not been anointed by Mr da Silva, who campaigned strenuously on her behalf, she would never have got where she is today.

So a lot is riding on the departing president's view that his former chief of staff, the first woman ever to lead Brazil, is the right person for the job.

On the face of it, she inherits a country in an enviable position. After briefly dipping into recession last year, Brazil is set to grow by 6 or 7 per cent this year.

Its exports are booming, thanks largely to the Chinese, and the anti-poverty programmes that have seen about 20 million of its inhabitants join the middle class have also boosted its potentially vast internal market.

Not the least of its blessings is the recent discovery of huge new reserves of crude oil - albeit in technically challenging offshore fields, the exploitation of which promises to provide a further huge boost to the energy sector.

But there are reasons to think that "steady as she goes" will not be an adequate policy, although it is entirely understandable that in her early statements as the president-elect Ms Rousseff has been stressing continuity rather than innovation.

Brazil faces considerable challenges in the coming years, some of which appear to pull it in opposite directions, such as the need for a major overhaul of infrastructure while simultaneously curbing the public-sector deficit.

The fact that the country will be hosting the Olympics and the football World Cup between 2014 and 2016 makes the task even more urgent.

In the longer term, perhaps the biggest risk is that Brazil will follow other oil-rich developing nations down the road to petro-populism, which inevitably stunts the non-oil economy while boosting corruption and creating an excessively powerful state.

The global downturn and Brazil's emergence from it almost unscathed has heightened the government's statist tendencies, which were happily held in check during Mr da Silva's first term.

The incoming president has already said she would maintain the policy of strengthening the public sector, particularly in the oil industry and finance.

But she insists this will not be done at the expense of curbing competition.

A reform of tax and labour laws is badly needed if growth is to be maintained. Both, it is widely agreed, act as an unnecessary drag on private businesses.

To her credit, Ms Rousseff has already said she intended to simplify tax regulations and reduce some of the fiscal burden.

The good news is that despite her youthful involvement with Marxist guerrillas, the president-elect is no leftist ideologue. She believes in a strong state but combined with a vibrant and competitive private sector.

In office, Ms Rousseff is likely to be accompanied by the more pro-market wing of the ruling Partido dos Trabalhadores (Workers' Party).

Even if she were to give in to the temptation to use burgeoning oil income to pursue a utopian socialist dream, the realities of 21st-century Brazil would almost certainly bring her back to earth. For one thing, it will be many years before the new offshore fields come on-stream.

Meanwhile, the government's capital requirements will oblige it to work closely with private investors.

And Brazil, unlike neighbouring Venezuela, is a thriving democracy with functioning checks and balances.

Even if she wanted to, Ms Rousseff could not turn herself into the kind of autocrat she fought against back in the 1960s.