January 11, 2010 / 4:50 PM / 10 years ago

FACTBOX-Positions of Brazil's leading candidates

Jan 11 (Reuters) - 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 issues:

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)

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