-- The vigorous growth in the world economy during most of his two terms gave Lula the luxury of relative inaction, with the exceptions of 2003 (when he increased interest rates, cut spending and passed tax and social security reforms in Congress) and 2008 (when he took one-time measures to stimulate demand).
Few Risks
Lula was able to follow the economic recipe of his predecessor without major risks, making a few adjustments here and there, and was rewarded in popularity. Rousseff won’t be as lucky.
Global growth is no longer vibrant, Brazil’s external accounts are deteriorating fast, the country’s currency, the real, has appreciated too much and fiscal responsibility has been squandered. Brazil’s state development bank and other federal banks and companies have pushed lending to unhealthy levels. There aren’t enough budget funds or an established long- term credit market to enable the private sector to finance the massive demands for investments in offshore oil exploration, the 2014 soccer World Cup or the 2016 Rio de Janeiro Olympics, not to mention other important and urgent needs of the population, especially the poor.--
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