BRASILIA (Reuters) - Brazil's ruling Workers' Party formally nominated President Dilma Rousseff on Saturday to run for re-election in October in what is shaping up to be its toughest race since winning power in 2002.
Rousseff's popularity is falling because of Brazil's high cost of living and slowing economy, and she was jeered at the opening game of the soccer World Cup last week.
Rousseff survived massive protests last year by Brazilians demanding better health, education and public transport services instead of the costly stadiums built for the World Cup.
She is still favored to win re-election in a second-round runoff, though her lead has narrowed in recent months, according to opinion polls.
"We face a challenge because the quality of life has improved in Brazil and when that happens in a country, its people demand more and improved quality," Rousseff said in a speech to a cheering party convention.
The Workers' Party plans to campaign on the gains in social welfare and income distribution made by Brazil in the last decade. Under its rule, 35 million people have climbed out of poverty.
Rousseff's main challenger, Aecio Neves of the centrist Brazilian Social Democracy (PSDB) party and a former governor of Brazil's second-richest state, is running on a more business-friendly platform aimed at restoring investment and growth to Brazil's once-booming economy.
Brazil's stock market has risen in recent months on investor hopes that Neves could defeat Rousseff.
"It will be a very difficult election, but, wait, the game has not even kicked off yet," said party founder and former president Luiz Inacio Lula da Silva.
Lula lambasted affluent Brazilians for wanting to cut back social programs and run Brazil for the benefit of the richest one-third. He also blamed them for the obscene chants directed at Rousseff at the World Cup stadium in Sao Paulo.
Rousseff said she would not be cowered by the insults.
"We will turn those stones into bricks to build low cost housing," she said.
(Reporting by Anthony Boadle; Editing by Jeb Blount and Steve Orlofsky)