President Lula Secures a Second Term

With 99.7% of the ballots counted, Lula has won 58.2 million votes or 60.8% of the valid vote in the second round of the October 2006 presidential elections, against 37.5 million votes for the former governor of São Paulo Geraldo Alckmin of the PSDB. However, not only has Lula achieved a resounding victory over Alckmin, he has also achieved more votes than in his landslide victory over José Serra in the second round of the 2002 elections when Lula gained 52.7 million votes.

Lula's victory represents a dramatic turnaround for a candidate that in August 2005 saw his darkest hour with speculation that the most serious government corruption scandal in over a decade might cut short his first term or ensure a certain victory for the PSDB in this year's elections. However, despite various corruption scandals continuing to dominate Brazil's press, Lula's popularity has risen and he probably would have won the elections outright in the first round on 1 October if a new scandal had not emerged implicating the ruling Worker's Party (PT) just days before the vote. Lula dismissed his campaign coordinator just days before the first round, repeating a strategy that had enabled him to distance himself from earlier scandals implicating close allies such as former Chief of Staff José Dirceu and Finance Antonio Palocci. Alckmin kept up the pressure on Lula over his government's corruption record in the second-round campaign, but this was insufficient to alter the outcome predicted by the polls.

Lula's Continued Appeal

Increased economic stability and the Bolsa Família programme, which provides cash-transfers to 11.1 million poor families on condition that their children are vaccinated and attend school, are regarded as the main reasons for Lula's continued appeal amongst the poor. Although he failed to fulfil an electoral pledge to create 10 million new jobs, lower inflation, a higher minimum wage, and the Bolsa Família programme mean that the poor feel better off than they were before. Lula's personal charisma and the image that he has cultivated as “a poor boy made good” also helps explain his appeal to the poor.

Alckmin also attacked the PT government for not having achieved stronger economic growth over the past four years, but failed to produce a strong alternative policy programme aimed at bringing about the sustained high growth rates Brazil needs if it is to make further progress in terms of poverty alleviation and debt reduction. Alckmin was regarded as the market’s favourite, but the convergence of economic policy between the PT and the PSDB and a campaign characterised more by mutual attacks than by a debate about different policy options meant that he was not able to mount a stronger challenge based on his economic credentials. Instead, the PT campaign in the second round tried to discredit the former PSDB government's record on the economy with insinuations that Alckmin had a hidden agenda to privatise state companies like Petrobras and Banco do Brasil. Alckmin denied the allegations, but the strategy did help to secure more support for Lula. Alckmin's lack of personal charisma and his low profile outside his home state of São Paulo were also disadvantages.

Outlook and Implications

Although the results indicate that Lula has strong popular support, he will begin a second term in January 2007 under very different circumstances to his first term. Although Lula remains popular, the PT has been diminished by the corruption scandals and the low visibility given to the red star on Lula's campaign material was evidence of his campaign strategists’ attempts to put the party at a distance. This means Lula's leadership in a second term may be more personalistic in style and that it will be harder for Lula to pass the blame for any failures on to the PT.

Lula's first challenge will be to gain the support of other parties to build the congressional majority needed to govern effectively. The PT did not do as badly as initially anticipated, but Lula will still need to gain the support of other parties. Meanwhile, the performance of the right-wing Liberal Front Party (PFL) in the Senate elections and the PSDB victories in the gubernatorial elections for the key states of São Paulo and Minas Gerais shows the need for improved relations with the opposition parties.

Relations between the executive and the Congress will determine whether Brazil makes any further progress on much-needed reforms in areas such as pension and tax. The prospects are not particularly favourable and there is a risk that Lula's second term could be like Fernando Henrique Cardoso's which saw squabbles within the governing coalition and a stalling of his reform agenda, and a lot will depend on President Lula's ability to forge consensus with members of the opposition over priority reforms.

Contact: Raul Dary

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raul.dary@globalinsight.com

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