RPT-FACTBOX-Brazilian president-elect’s economic proposals

(Repeating story from late Sunday with no changes to text)

By Raymond Colitt

BRASILIA, Oct 31 (BestGrowthStock) – Dilma Rousseff of the ruling
Workers’ Party won Brazil’s presidential election on Sunday by
a wide margin over opposition rival Jose Serra, and will become
the first woman to lead Latin America’s largest country.

Rousseff, a former chief of staff under President Luiz
Inacio Lula da Silva, won a strong mandate with about 56
percent of valid votes. Her campaign had benefited from a
booming economy and Lula’s huge popularity.

Rousseff, 62, endorses the pillars of economic policy that
have made Brazil one of the world’s hottest emerging markets.
Here are some of her positions on key issues:

ECONOMIC STABILITY

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.

FISCAL DISCIPLINE

The career civil servant whose party has strong ties to
public sector unions, Rousseff 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.

She has pledged to 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 percent of GDP in
September.

The government still expects to hit its primary budget
target in 2010, after a large one-off payment by state oil
company Petrobras helped it partially offset a ramp-up in
public spending this year. Still, it may only meet its target
by excluding spending on its infrastructure program or adopting
other unusual accounting methods.

STATE ROLE IN ECONOMY

Rousseff favors a strong state role in strategic areas,
such as 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.

A former energy and mining minister under Lula, 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 industry leaders have said the
private sector could be harmed by the plan.

The president-elect has said she would also make it easier
to establish small businesses, though she has not detailed how
she would make that happen.

CENTRAL BANK

Rousseff said she would maintain the central bank’s
operational autonomy and the status of its president as a
cabinet minister. Brazil’s central bank follows an
inflation-targeting regime that investors say is crucial for
price stability in the country.

Rousseff praised the central bank for successfully steering
Brazil through the global credit crunch that began in 2008.

STRUCTURAL REFORMS

Rousseff has made an overhaul of Brazil’s complicated tax
system a top priority and could push a series of microeconomic
reforms to improve the investment climate.

Her proposals include capital investment and payroll tax
breaks and harmonizing tax levels among states. She would set
up a fund to offset some states’ revenue shortfalls — an
obstacle that had undermined previous reform efforts by Lula.

Rousseff favors a piecemeal reform of the costly pension
system that would raise more money to finance the growing
social-security deficit and alter some retirement rules.

She has skirted proposals by labor unions to reduce the
work week to 40 hours from 44, but she has also ruled out
cutting generous labor benefits, which business leaders say
erode the competitiveness of Brazil’s economy by making it
costly to hire and fire workers.

MONETARY POLICY

Rousseff has said that until Brazil’s debt burden falls
considerably, the central bank will have to focus exclusively
on inflation, rather than looking at the broader economy,
including job growth.

Rousseff has said she wants to bring down Brazil’s interest
rates, which are among the world’s highest and are a major
factor keeping the currency strong. But she is not expected to
strong-arm the central bank into lower rates.

OIL INDUSTRY

Rousseff fully supports the Lula government’s drive to
heighten government control over massive newfound oil reserves,
and she helped draft the proposal. The move includes the
creation of a new state company to manage the reserves, a
requirement that state-owned oil company Petrobras operate
every field, and a new fund to invest oil revenue into
education, health and other development projects.

She is likely to continue to push Petrobras to align its
goals with government policy, which could result in a more
limited role for foreign companies in the sector.

CURRENCY

Rousseff has ruled out targeting a specific exchange rate
for Brazil’s currency, which is trading near a two-year high
and hurting exporters.

The Lula administration has taken steps to limit the flow
of foreign capital into Brazilian financial markets in a bid to
curb the real, but so far has had little success in reversing
the currency’s rally.

Rousseff has blamed the volatility in Brazil’s foreign
exchange market on the economic crisis in rich nations, which
is driving investors to pour money into emerging markets in
search of high returns.

She supported the decision to raise taxes on the purchase
of Brazilian bonds by foreign investors but has not offered any
specifics on how she would seek to address the currency issue.

FOREIGN POLICY

Rousseff favors continuity of Lula’s foreign policy
objectives, including regional integration in Latin America and
a greater say for developing nations in the World Bank and the
International Monetary Fund.

She has proposed to create a bi-national energy company
with Bolivia. But given her priority on domestic issues and her
lower international profile, she is less likely to continue
Lula’s high-profile diplomacy.
(Edited by Todd Benson and Kieran Murray)

RPT-FACTBOX-Brazilian president-elect’s economic proposals