Significance: Dilma Rousseff is Brazil's first ever female president and the country's fourth president elected by direct popular vote since the restoration of democracy.

Implications: Lula's record-high approval ratings, which helped secure ex-chief of staff Dilma Rousseff's victory in the 2010 presidential race, show that the electorate has little appetite for change and broad policy continuity is expected under the new government. The main differences are likely to be the personal style of the new leader, perhaps a stronger emphasis on the role of the state, and a more pragmatic foreign policy.

Outlook: Key challenges ahead include the approval of tax and political reforms, stemming the rise of organised crime in urban areas, meeting the infrastructure challenges posed by upcoming global sporting events, and further reducing the country's wide income inequalities.

Policy expectations

Dilma Rousseff was sworn in as Brazil's first ever female president on 1 January, marking the start of a new political era after eight years of rule by President Luiz Inácio Lula da Silva.

Rousseff has a hard act to follow. Lula was the country's most popular president since the restoration of democracy, leaving office with popular approval ratings above 80% according to various polls. Indeed Rousseff's electoral victory last October would not have been possible without Lula's personal blessing and the perception that she was the candidate most likely to continue his government's economic and social policies. Conscious of this, Rousseff used her inaugural speech to praise Lula, describing him as a "great leader" and promising to consolidate and advance his "transformative work". In terms of policy priorities she reiterated her electoral pledge to "eradicate extreme poverty" and to create opportunities for all. Her vision for Brazil was a positive one. She saw the possibility of Brazil becoming a country of a "solid and entrepreneurial middle class" and said that there was for the first time a real opportunity for Brazil to become a developed nation with the country's new-found oil wealth providing a "passport to the future". She said that her government would fight for "quality education, health and security" and would work in partnership with state and municipal governments to guarantee the presence of the state in all regions sensitive to criminality and drug trafficking. Other policy priorities referred to in the speech were political reform, which she described as "urgent", and the modernisation and simplification of the tax system. Her speech included a stronger commitment to the environment than earlier speeches, but did miss a pledge for further reform of the social security system. She was also less fulsome on fiscal adjustment than she had been in her victory speech last October, defending public investment through the government's economic acceleration programmes, PAC and PAC 2, but not making any reference to upcoming budget cuts that have been referred to by various government officials in recent weeks. She did, however, talk of the importance of maintaining economic stability and in particular, keeping inflation under control.

Meanwhile, her comments on foreign policy, in particular her desire to "deepen relations" with the United States and the EU, and not to be indifferent on issues such as nuclear proliferation, were interpreted by some as a signal that a Rousseff-led government may distance itself from some of the more controversial policies of her predecessor, especially with regard to countries such as Iran and Cuba. In another indication that foreign policy under the new government may be more pragmatic than during Lula's second term, Rousseff said that her foreign policy goals would be based on the "traditional values" of Brazilian diplomacy, including promoting peace and upholding the principles of non-interventionism and multilateralism. She also pledged to continue the battle against global poverty and hunger, to contribute to international financial stability through international fora, and to continue to push for reform of the UN Security Council.

Outlook and Implications

Rousseff takes power under very different circumstances than Lula did in 2003. The country's finances are much stronger, there have been improvements in the quality of life for many Brazilians, and the country is more confident about its place in the world. There are still challenges ahead, however. On the economic front, immediate action is required to bring inflation and government spending under tighter control, while the negative impact of the appreciation of the real on exports will increase pressure on the government to tackle longstanding obstacles to competiveness, such as the country's high corporate taxes and heavy government bureaucracy. Other challenges include the 2014 football World Cup and 2016 Olympic Games, which provide concrete deadlines for tangible improvements in infrastructure and public security. Further improvements are also required in terms of poverty reduction, as deep income inequalities continue despite the country's expanding middle class.

Rousseff's first speech as president gave out positive signals on several of these issues, although putting her policy priorities into practice could prove more challenging. Securing political approval for a comprehensive tax reform is notoriously difficult, requiring the support of all levels of government. Previous attempts at securing political reform have been thwarted by smaller parties belonging to the governing coalition. The strong performance of allied parties in the 2010 congressional election suggests that Rousseff would in theory have the three-fifths of votes needed to secure approval for constitutional amendments, but does not imply that she will find the task of getting structural reforms through Congress any easier, especially as she lacks former-president Lula's personal charisma and negotiating skills.

Another area of uncertainty is the future of Lula; in his first speech since stepping down he said that he wanted to remain in Brazil and continue to be active in politics. Without a concrete role in the new government, however, and with Rousseff likely to want to carve out a separate identity for her own administration, it remains to be seen if his presence in the background will be a hindrance or a help.