Brazil market slides after Rousseff re-elected

Yahoo – AFP, Chris Wright, 27 Oct 2014

Re-elected Brazilian President Dilma Rousseff (L) greets former Brazilian president

 Luiz Inacio Lula Da Silva following her win, as her Vice President Michel Temer (R)

looks on, in Brasilia on October 26, 2014 (AFP Photo/Evaristo Sa)

Re-elected Brazilian President Dilma Rousseff (L) greets former Brazilian president Luiz Inacio Lula Da Silva following her win, as her Vice President Michel Temer (R) looks on, in Brasilia on October 26, 2014

Rio de Janeiro (AFP) - 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.

Supporters of re-elected President Dilma

 Rousseff celebrate in Brasilia on Oct. 26,

2014 (AFP Photo/Evaristo Sa)

Stocks had recovered slightly by mid-day but were still down 4.7 percent, with the real off more than two percent.

State-owned oil giant Petrobras, which was thrust into the campaign spotlight by a multi-billion-dollar kickback scandal implicating politicians linked to Rousseff, was down 15 percent.

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 to 48.4 percent for Neves, the closest margin of victory since 1945.

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.

"There is polarization -- and that is a negative. But there is pressure within her party for Rousseff to change course," said Lia Valls, an economist with the Getulio Vargas Foundation.

Rousseff has promised to replace Finance Minister Guido Mantega, and markets are watching closely to see who she names.

Reach out to industry

Rousseff, a former leftist guerrilla jailed and tortured for fighting Brazil's 1964-1985 dictatorship, called for unity in her victory speech and promised to listen to voters' demands for change after a record 26.1 percent of voters abstained.

Supporters of Brazilian President and presidential candidate for the Workers Party, 

Dilma Rousseff, celebrate in Brasilia on October 26, 2014 (AFP Photo/Evaristo Sa)

Voting is compulsory in Brazil -- but a no-show just brings a small fine.

"This president is open to dialogue. This is the top priority of my second term," she told supporters in the capital Brasilia alongside two-term predecessor Luiz Inacio Lula da Silva, who media predict will have a key role in reshaping her new team.

After four years of low growth culminating in recession this year, Rousseff admitted she must do better.

"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.

Lula, who remains broadly popular, recognized the country's deep division Monday in remarks published in local newspapers.

"Coexisting will now be increasingly difficult," he said.

"Rather than complain, we have to think about constructing a functioning government in the country."

Call for unity

Neves, a 54-year-old senator and former governor, congratulated Rousseff but told her "the priority should be to unite Brazil."

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.

People queue at a polling station in Mare,

 a complex of favelas in Rio de Janeiro, 

Brazil, on October 26, 2014 (AFP Photo/

Vanderlei Almeida)

But economic growth -- which hit 7.5 percent in 2010, the year Rousseff first won election -- has since 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.

Rousseff fought a hard-hitting campaign throughout a dramatic race in which the lead changed hands several times, fending off both Neves and, in the October 5 first-round vote, popular environmentalist Marina Silva.

US President Barack Obama sent his congratulations, calling Brazil an "important partner."

His relationship with Rousseff has been strained since revelations emerged that the US spied on her communications, part of the National Security Agency (NSA) leaks by former intelligence analyst Edward Snowden.

Numerous Latin American leftist leaders also sent congratulations, including Presidents Nicolas Maduro of Venezuela and Evo Morales of Bolivia.