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UPDATED: November 3, 2014 NO. 45 NOVEMBER 6, 2014
Round Two
Brazil's newly reelected president is tasked for reform
By Yu Lintao

"Due to historical reasons and current difficulties including high production costs, severe labor protection regulations and poor infrastructure, it is hard to make a breakthrough in such a short time," Zhou said.

The heavy fiscal pressure on the Brazilian Government also increases difficulties for the Rousseff administration amidst the current economic hardship, he added.

Sun of the CICIR echoed Zhou's concerns. "Improving the economy is without a doubt the priority of Rousseff's second term, as it is closely related to people's livelihoods and the ruling foundation of PT."

According to Sun, the priority the new government needs to give to economic revival should be to calibrate its economic policies, win back market confidence and realize sustainable development of the national economy. "Rousseff and her ruling team clearly know that," he added.

In her victory speech, Rousseff told supporters that the government would take special measures to boost the economy. "We will continue ensuring high levels of employment and the recovery of wages, curbing inflation and fulfilling responsibility in the fiscal field. We will give more impetus to economic activity in all sectors, and particularly in the industrial sector," the president said.

The other major challenge to Rousseff is the transitioning of social policies through political reform. How to help the middle-class newcomers who have just been lifted out of poverty navigate the government's social programs and help them feel secure in the current economy are among the major issues the new government faces, observers said.

In a certain sense, Zhou noted, Rousseff's PT is a populist party that pursues pro-lower class policies. "However, with the success of anti-poverty programs, the social structure of Brazil is changing with a much larger middle class. Thus, PT should also make changes of its policy to meet the demands of the most people," he noted.

Sun told Beijing Review that to appease Brazil's new middle class, improving public services and investing more in education, innovation, research and development are issues the new government needs to strongly consider in the next four years.

Foreign policy

As the largest country in Latin America, Brazil has been playing a significant role in promoting regional integration, which observers believe will be sped up with the reelection of Rousseff. In the meantime, due to domestic economic problems, the president will need to take a more pragmatic stance when dealing with other emerging economies in her second term.

"Rousseff will be more pragmatic in developing ties with Western countries, especially the United States as Brazil shares more and more economic interests with the West," Sun told Beijing Review. "She will continue to promote Foreign Trade Association negotiations with the EU, too."

Following her reelection, in a phone conversation with U.S. President Barack Obama, Rousseff affirmed strengthening ties with the United States as a "priority" for her country.

Bilateral ties between Brazil and the United States took a dive last year following revelations, based on documents leaked by U.S. whistleblower Edward Snowden, of extensive U.S. digital surveillance on foreign leaders, including Rousseff and her advisers. In response, Rousseff canceled a planned trip to the United States in late October 2013.

In regards to China-Brazil relations, however, Sun claimed that Rousseff's reelection is good news as it guarantees the consistency of the Brazilian Government's China-related policies.

Zhou is also optimistic about China-Brazil relations over the coming four years. "I believe the two countries will continue their cooperative relations, both bilaterally or under some multilateral cooperation mechanisms," Zhou said.

In the meantime, Sun noted, "China is a very important economic partner of Brazil. As Brazil faces big domestic economic challenges, it is increasingly likely that the Rousseff administration will further deepen economic cooperation with China."

China is now Brazil's largest trading partner and also its largest export and import markets. Trade volume between the two countries surpassed $90 billion last year, with the figure expected to increase this year. Brazil also enjoyed a trade surplus of $8.7 billion last year.

In addition, observers believe that economic ties between China and Brazil could go far beyond simple trade to include more joint ventures and investment, with Brazil already showing interest in China-funded building projects. Chinese companies' relative wealth can help compensate for the shortage of private or public funds in Brazil.

To date, Rousseff has shown increased interest in Chinese investment. During Chinese President Xi Jinping's visit to Brazil in July, Rousseff welcomed broader investment in her country by Chinese enterprises, particularly in the areas of transportation, infrastructure construction, agriculture, information technology, logistics and science and technology innovation.

"In the next four years, the Rousseff administration may request larger investment from China for helping revive the domestic economy," Zhou told Beijing Review. "She has stressed the importance of improving Brazil's investment environment and reforming the taxation system. If these promises are fulfilled in her second term, it will surely provide more room for Chinese investment."

Email us at: yulintao@bjreview.com

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