Jan 11 Brazil will hold elections on Oct. 3 to
choose the successor to President Luiz Inacio Lula da Silva.
The front-runners are Lula's chief of staff Dilma Rousseff
of the ruling Workers' Party and Sao Paulo state Governor Jose
Serra of the opposition PSDB party, who leads opinion polls.
The election appears to pose less risk to investors than
any previous transition in at least 25 years because the two
front-runners are both from mainstream parties and there are no
mavericks with a serious chance of victory.
Still, there are important differences between Serra and
Rousseff. Here are expert views of their positions on key
For a related story and a timeline click on [ID:nN07180513]
and [ID:nN30216377], respectively.
PRIMARY BUDGET SURPLUS - Both candidates would likely
maintain a primary budget surplus to make public debt payments
and reduce the ratio of debt to GDP. Some analysts believe
Serra would contain current expenditures more effectively.
Pre-election spending could further erode the health of
Brazil's public accounts, forcing the incoming government to
adopt belt-tightening measures. Public spending rose sharply in
2009, reducing the primary budget surplus to just over 1
percent of GDP from over 4 percent the year before.
MONETARY POLICY - Both are unlikely to abandon inflation
targeting but have criticized the central bank for being too
rigorous in pursuing such targets and not lowering rates fast
enough to promote growth. During the 2008/9 financial crisis
Serra urged larger rate cuts instead of an incremental easing.
Rousseff has said the central bank should consider economic and
job growth when setting monetary policy instead of focusing
exclusively on inflation.
CURRENCY - Both would maintain a free-floating exchange
rate but Serra has repeatedly warned that the real BRBY is
overvalued. Some analysts believe he could adopt more
aggressive measures to weaken it and thereby help exporters.
STATE ENTERPRISES - Rousseff favors a bigger role for state
enterprises in the economy, which could reduce participation by
private firms in some sectors such as banking and oil and gas.
Serra, who authorized the sale of a Sao Paulo state bank last
year, is seen as more open to selective privatization.
FOREIGN POLICY - Rousseff is expected to continue Lula's
foreign policy, boosting ties with developing nations, pushing
for reform of multilateral agencies and lobbying for a
permanent seat on the U.N. Security Council. Serra would likely
cool ties with some of Lula's left-wing allies in Latin
America, which could affect energy investments in Bolivia and
Venezuela. He could also take a harder line in trade disputes
with Argentina and the South American trade block Mercosur.
DOMESTIC ALLIANCES - Governing coalitions in Brazil are
notoriously unstable and prone to corruption. Both Serra and
Rousseff may lack the political savvy that Lula has used to
keep a broad coalition together. Rousseff has never held a
publicly elected post.
(Reporting by Raymond Colitt in Brasilia; additional reporting
by Maria Carolina Marcello and AnaPaula Paiva; editing by
Stuart Grudgings and Anthony Boadle)