Brazilian markets delivered a harsh verdict Monday after left-wing President Dilma Rousseff narrowly won re-election, despite her pledge to unite a divided nation and reboot a stagnant economy.
The Sao Paulo stock market plunged six percent in opening trade and the currency, the real, fell four percent against the dollar after Rousseff — the first woman to lead the world’s seventh-largest economy — defeated business world favorite Aecio Neves in a run-off.
Stocks recovered slightly but still closed down 2.77 percent, with the real closing 2.58 percent lower at 2.52 to the dollar, its lowest level since 2005.
State-owned oil giant Petrobras, which was thrust into the campaign spotlight by a multi-billion-dollar kickback scandal implicating politicians linked to Rousseff, closed down 12.33 percent.
Rousseff sought to downplay the market turbulence in her first post-election interview.
“Markets fell in the US, markets fell in Europe. The whole world is facing a lot of difficulties. It’s true that in Brazil they fell more… But I’m not going to make a list of measures (to address the situation) here,” she told TV Record.
“The measures will be… the subject of a wide-ranging dialogue, a discussion with all sectors,” she said.
“And let’s hope the market calms. And it will.”
After a vitriolic campaign that largely split the country between the poor north and the wealthier south, Rousseff won 51.6 percent of the vote Sunday to 48.4 percent for Neves, the closest margin of victory since the return to democracy in 1985.
The 66-year-old incumbent crucially picked up enough middle-class votes in the industrialized southeast to cement a fourth straight win for her Workers’ Party (PT).
She will start her second four-year term on January 1 facing a laundry list of challenges: governing a polarized country, winning back the confidence of the private sector, reviving an economy in recession and tackling corruption.
“Rousseff will have her work cut out, politically and on the economy,” said David Fleischer, a political analyst at the University of Brasilia.
“She must reach out to industry and the private sector. Investments are way down — she must restore confidence.”
Tackling the economy will be all the more difficult given a market implacably opposed to her.
Rousseff has promised to replace Finance Minister Guido Mantega, and investors are watching closely to see who she names.
She refused to discuss possible candidates Monday.
Andre Leite, an economic analyst at TAG Investimentos, said the choice would have a big impact on markets.
“If the next finance minister is a more orthodox choice, the market will like it. If not, it may get worse,” he said.
– ‘A much better president’ –
After four years of low growth culminating in recession this year, Rousseff admitted in her victory speech that she had room to improve.
“I want to be a much better president than I have been to date,” she said, issuing “a call for peace and unity” after a bitter campaign of low blows and mutual recriminations with Neves, a 54-year-old senator and former governor.
Rousseff won after persuading enough voters from a growing middle class to pin their hopes on further social gains that have lifted tens of millions out of poverty.
Under the PT, wages have increased and unemployment has fallen to a record-low 4.9 percent.
But economic growth — which hit 7.5 percent in 2010, the year Rousseff first won election — has stagnated.
Besides an economic revival, voters are demanding an overhaul of shoddy public services and an end to corruption.
Rousseff roundly denied eve-of-poll allegations that she knew of the massive embezzlement scheme implicating dozens of politicians — mainly her allies — at Petrobras.
She vowed Monday to investigate the scandal “no matter who it hurts.”
“It’s not like the election’s over and I’m going to forget the corruption accusations. No, not me,” she said.
But the case could have deep repercussions, analysts say.
“If what they are saying were to be proven, then that would deal a serious blow to Dilma’s second administration to the point where she might even have to stand down,” said Gil Castelo Branco, founder of Brazilian transparency watchdog Open Accounts.