Factbox: Economic proposals of Brazilian candidates

By Raymond Colitt

BRASILIA (BestGrowthStock) – Brazil’s ruling party candidate Dilma Rousseff is the clear favorite against opposition rival Jose Serra in the presidential runoff vote on Sunday.

Rousseff, who has benefited from a booming economy and the huge popularity of President Luiz Inacio Lula da Silva, fell short of the 50 percent she needed to win a first round vote on October 3, sending the election to a runoff.

Both of the leading candidates broadly endorse the pillars of current economic policy that have made Brazil one of the world’s hottest emerging markets.

Still, there are important differences between former Sao Paulo state Governor Serra and Rousseff, Lula’s former chief of staff. Here are some of their positions on key issues:

ECONOMIC STABILITY

Both Serra and Rousseff would maintain the mostly market-friendly policies that have provided economic stability over the past decade: a free-floating currency, inflation control and fiscal discipline. Serra says he would make some changes but has given few details.

FISCAL DISCIPLINE

Serra of the Brazilian Social Democracy Party is perceived by some to be the tougher of the two on fiscal discipline, though he has not announced detailed budget targets. He pledged to cut government fat to allow for more public investment but also proposed measures that would increase current expenditures. These include increasing the minimum monthly salary to 600 reais ($349) from the current 510 reais, expanding the social welfare program Bolsa Familia, and boosting pension pay by 10 percent. Together the measures could cost the government 1 percent of gross domestic product, according to private sector estimates.

Serra says the cost is closer to 1 percent of the federal budget and could be offset by projected revenue increases and cutting government waste.

Rousseff, whose Workers’ Party has strong ties to public sector unions, proposes maintaining fiscal discipline with gradual adjustments but has ruled out the kind of drastic austerity measures that marked the first year of Lula’s administration in 2003. She has said Brazil does not need to rein in public spending for the economy to keep growing at a robust pace.

Rousseff says she would keep a primary budget surplus target of 3.3 percent of gross domestic product until net debt falls to 30 percent of GDP in late 2014. It was 41.4 percent in August.

The government still expects to hit its primary budget target in 2010, but a ramp-up in government spending this year means it may only be able to achieve that by excluding spending on its infrastructure program or adopting other innovative accounting methods.

STATE ROLE IN ECONOMY

Rousseff favors a strong state role in strategic areas, like banking, petroleum and energy, but she insists private companies in those sectors would not be crowded out.

She also pledges to promote government efficiency and a meritocracy while cutting red tape.

Rousseff may also increase state intervention in the mining sector, which could create risks for iron-ore giant Vale. Lula’s government has put pressure on the world’s biggest iron-ore producer to create more jobs in Brazil by investing in steel production.

Rousseff is likely to push on with efforts to boost access to broadband Internet services among low-income households through the revived state-run Telebras, whose assets had been privatized in the 1990s. Some private industry leaders have said they could be harmed by the plan.

The Workers’ Party candidate would also make it easier to establish small businesses.

Serra favors a strong and active government and applauded Lula’s fiscal stimulus measures during the 2008-2009 global financial crisis. But Serra, who authorized the sale of a Sao Paulo state bank when he was governor there to state-controlled Banco do Brasil, is seen as more open to selective privatization and says he would not use state funds or push state-owned banks to promote mergers and acquisitions between private companies.

Under his model more airports, roads, and railways would be operated under concessions by private companies.

He would strengthen the role of industry regulators and the state’s capacity to police and control by reducing political interference and heightening meritocracy.

He proposes policies to develop national industry and would step up trade safeguards against cheap, mostly Chinese, imports.

Factbox: Economic proposals of Brazilian candidates