| SAO PAULO
SAO PAULO Oct 4 Dilma Rousseff's failure to
win enough votes in Brazil's presidential election on Sunday to
avoid a runoff has prolonged the campaign by four weeks and
given opposition challenger Jose Serra renewed hope.
Following are some questions and answers on the election
landscape and how the runoff vote on Oct. 31 could play out.
COULD ROUSSEFF LOSE IT?
That is unlikely, barring a new corruption scandal that
implicates her directly or the formation of a firm alliance
between Serra's centrist PSDB party and supporters of Green
Party candidate Marina Silva, who was eliminated despite a
strong showing on Sunday.
Rousseff, a pragmatic former leftist militant from the
ruling Workers' Party, can still count on the hugely
influential support of President Luiz Inacio Lula da Silva, who
has public approval ratings of around 80 percent and has
overseen Brazil's biggest burst of economic growth in three
Despite staying in the game on Sunday with 32.6 percent of
the votes cast, Serra has failed to inspire most Brazilians
with a campaign in which he has landed few significant blows on
Rousseff or Lula. All opinion polls ahead of Sunday showed
Rousseff beating Serra handily in a second round.
Rousseff drew 46.9 percent of the vote on Sunday but fell
short of the majority needed to win outright.
Serra's best hope is an endorsement from Silva, who forced
the second round by winning 19.3 percent of the vote -- much
higher than polls had forecast. Upcoming opinion polls will be
crucial to assess whether Rousseff's support has found a floor
after its late slide on a corruption scandal and concerns over
her views on social issues such as abortion.
WHERE WILL MARINA SILVA'S VOTES GO?
The early indications are that Silva, who served as Lula's
environment minister until 2008 before quitting the Workers'
Party, may remain neutral. But the Green Party appears more
likely to lean toward Serra's party.
A survey by pollster Datafolha shows that Serra would be
the biggest beneficiary of Silva's dropout, winning 51 percent
of her votes while Rousseff would pick up 31 percent.
According to calculations by the Eurasia Group, a political
consulting firm, Rousseff would still have a lead of more than
7 percentage points even if Serra manages to attract up to 68
percent of Silva's votes.
While that lead would seem small compared to her previous
20 percentage point advantage over Serra, it would be hard for
Serra to overcome, Eurasia said in a report on Monday.
Despite her humble background, Silva did better among
middle-class voters -- who tend to be natural Serra supporters
-- than among poorer people. Still, a solid chunk of Green
Party members and supporters tend to be more ideologically in
line with the left-leaning Workers' Party than with Serra's
slightly more centrist, free-market stance.
Serra has started courting the green vote. Both candidates
will play up their environmental credentials in the remainder
of the campaign.
Another crucial factor is whether the evangelical Christian
voters who appeared to turn to Silva in large numbers in recent
weeks will now favor Serra due to their concerns over
Rousseff's positions on abortion and other social issues.
Rousseff has faced a flood of Internet-driven rumors, some
unfounded, about her comments on religious issues. While that
could continue to erode her support among evangelicals, who
make up about 20 percent of the electorate in heavily Catholic
Brazil, Lula's governing coalition includes powerful religious
leaders who have already been employed to defend Rousseff.
WILL THE CANDIDATES CHANGE THEIR PROPOSALS?
Rousseff has little incentive to change her central message
of continuity from Lula that, after all, gave her a strong
first-place finish on Sunday. Given the need to attract Green
Party voters, she may stress more heavily her concern for the
environment despite being known mostly as a strong proponent of
development in sensitive areas such as the Amazon rain forest.
There is much more pressure on Serra to reinvigorate his
campaign with fresh policies and energy. In the final weeks of
the first-round campaign, he announced he would raise the
national minimum wage substantially in an apparent bid to
combat Rousseff's strong support among poorer voters.
The Serra camp could also rely more on Aecio Neves, a
popular former governor of Minas Gerais state who many think
will run for president someday, to rally voters in the runoff.
Neves, who was elected to the Senate in a landslide on Sunday,
had been reluctant to campaign aggressively for Serra while his
congressional seat was still in the balance.
WHAT ARE THE IMPLICATIONS FOR MARKETS?
Markets hate uncertainty, and the surprise of Rousseff's
weaker-than-expected performance could cause unease among some
There will be no wild swings given that neither candidate
is proposing radical changes from current economic and
financial policies, but market nerves could be frayed if the
rhetoric heats up in the coming weeks and the race tightens.
The extension could put further upward pressure on Brazil's
currency, the real BRL=, which has surged to two-year highs
on a flood on foreign inflows and rose again on Monday. Some
analysts think Lula's government may put off policies to stem
the real's rise for fear they may hurt Rousseff's chances.
The painfully strong currency could become a major focus in
the runoff, prompting the candidates to compete over how best
to curb its strength, which is hurting exporters.
The real could come under selling pressure if Serra starts
narrowing the gap on Rousseff. He has taken a much stronger
stance than her on the need to reduce Brazil's double-digit
(Editing by Todd Benson and Will Dunham)