Coalition brawl is early test for Brazil’s Rousseff

* Rousseff’s two main coalition partners vie for power

* Risk could derail or stall Rousseff’s legislative agenda

* Ruling party also risks losing congressional leadership

By Raymond Colitt

BRASILIA, Jan 4 (BestGrowthStock) – An ugly fight over the
distribution of government jobs poses an early test for new
Brazilian President Dilma Rousseff and could endanger her
legislative agenda unless she sorts it out quickly.

Leaders from the centrist PMDB party feel they are losing
out to Rousseff’s Workers’ Party, or PT, in the race for prized
positions at agencies — such as the postal service — which
politicians often use to direct spending toward their
constituencies and perpetuate their grip on power.

Tensions between the two biggest parties in Rousseff’s
coalition have simmered since well before her inauguration on
Saturday, and the eruption of a public split so early in her
four-year term raises questions about what will happen when
Congress starts debating tough issues such as tax reform.

“It’s an ugly fight. The PT is taking control of everything
— there are several unhappy coalition partners,” PMDB Senator
Pedro Simon told Reuters.

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Full coverage: [ID:nN30101900]

Political risks in Brazil: [ID:nRISKBR]

Special report on Rousseff: http://link.reuters.com/fab25p

Factbox on cabinet members: [ID:nN29258362]

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Rousseff, 63, is holding elected office for the first time
after a career spent as a respected government technocrat, and
she may struggle with the more classic political tasks such as
horse trading among parties — and soothing damaged egos.

Without the support of the PMDB, which holds the largest
number of seats in the Senate, Rousseff would struggle to get
legislation approved.

Even if Rousseff does keep the coalition together, as
appears the most likely outcome, she may find it harder to keep
legislators in line as she pursues her top priority in Congress
— an overhaul of the onerous, complex tax code.

The PMDB balked at Rousseff’s decision to move control over
the postal service and two health sector agencies to the PT.
Their combined budgets are around 67 billion reais ($41
billion).

Now, the party is concerned it will also lose control over
key state power companies, such as Eletrobras (ELET6.SA: ) and
its various subsidiaries, which together control much of
Brazil’s power industry and are currently building some of the
world’s largest hydroelectric plants.

“The main objective of our party is to wield power and
we’re getting less of it despite having done better in the
elections,” PMDB Senator Almeida Lima told Reuters.

The Valor Economico newspaper said in an editorial,
however, that Rousseff should be less dependent on the PMDB’s
support than predecessor Luiz Inacio Lula da Silva because of
the other coalition parties’ strong performance in the October
elections. That should enable her to pass legislation in
Congress without the full support of the PMDB, it said.

“In this way, Dilma starts her government in a more
favorable situation than her predecessor,” Valor said.

HORSE-TRADING, CORRUPTION WORRIES

Discontent in the PMDB could also cost the Workers’ Party
its leadership roles in the lower house Chamber of Deputies
when those positions are decided in an internal vote in
February.

A similar coalition split cost Rousseff’s predecessor, Luiz
Inacio Lula da Silva the Chamber’s top post a few years ago.

Discontent among allies also helped trigger a major scandal
in 2005, in which the Workers’ Party allegedly resorted to vote
buying in Congress — an episode that nearly led to Lula’s
impeachment.

During the Lula administration several PMDB appointees were
caught charging kickbacks for public works contracts and
analysts say Rousseff is trying to clean up the most
corruption-prone state agencies.

PMDB leaders called a meeting on Tuesday to discuss the
situation and Rousseff put further appointments on hold.

“Nominations are on hold until we get some dialogue,” said
Vice-President Michel Temer, who is also head of the PMDB.

Caught between the demands of the president and of his own
party, veteran politician Temer will have a particularly
delicate balancing act to play in the Rousseff administration.

“I think he’ll only delve into this one as a last resort,”
said Lima.
(Additional reporting by Jeferson Ribeiro; Editing by Brian
Winter and Anthony Boadle)

Coalition brawl is early test for Brazil’s Rousseff