On October 1, more than 100 million Brazilians went to the polls to vote for president. They also cast their ballots for federal senators and representatives, governors, and state legislators. Public surveys had predicted incumbent President Luiz Inácio "Lula" da Silva would win by a large margin. But fresh allegations in a series of corruption scandals, and Lula's decision to avoid a televised debate with three of his challengers in the final week of the campaign, significantly changed the dynamic of the electoral picture at the last minute. The president fell short by just over 1 percent of the 50 percent threshold needed to declare an outright victory and was forced into a runoff election against former governor of the State of São Paulo, Geraldo Alckmin.

The Political Landscape
While the presidential election produced a runoff, congressional elections consolidated the hold of four of the country's two dozen political parties that have dominated Brazilian politics in recent years: the Workers' Party (PT), Brazilian Social-Democracy Party (PSDB), Brazilian Democratic Movement Party (PMDB), and Party of the Liberal Front (PFL).

Fernando Henrique Cardoso (PSDB) served two terms as president, beginning in 1994, following the success of his anti-inflation, economic stabilization plan, the Plano Real. His closest challenger in his 1998 re-election bid, Lula (PT), garnered about 32 percent of the vote.

In 2002, Lula won 61 percent of the vote in a second-round election to become Brazil's 39th president. While his labor-union background and radical rhetoric has characterized him as left wing, he surprised many with his pragmatic move to the center, especially in terms of economic policy.

Such a shift, combined with corruption scandals that have tainted what was considered to be the cleanest party in Brazil, has led to the deterioration of Lula's support base in the developed South and Southeast. However, Lula fared better than Alckmin (PSDB) in the first round, demonstrating his new electoral clout in the undeveloped North and Northeast, a likely result of the tangible economic benefits his government has brought to the majority of poor Brazilians.

Lula's Record
In September and October, the Brazil Institute held seminars to evaluate Lula's term in office and the October 1 election outcome, and to offer prospects on the coming four years.

Aline Machado, a journalist from TV Câmara, led off the October 6 discussion on implications of the elections results, highlighting the challenge the next administration will face in forming a governing coalition, regardless of the outcome of the presidential runoff. In contrast with previous elections, the 2006 vote caused little anxiety in the markets, said Alexander Kazan, vice president of Global Emerging Markets Strategy at Bear Stearns, calling attention to the increased economic stability and the absence of populist proposals in the presidential race.

Jeffrey Cason, an associate professor at Middlebury College, and Ted Goertzel, who teaches at Rutgers University, emphasized the political polarization and the impact of the corruption scandals, expanding on issues discussed at an earlier September 15 seminar.

At that event, Timothy Power, a lecturer at Oxford University, said the preeminence of the president has led Lula to transcend his party and the corruption associated with it. This has occurred as Lula shed his reluctance to engage in populist measures and expand Bolsa Família, a conditional cash transfer program that now reaches nearly a quarter of Brazil's population. Lula has embraced the formation of heterodox inter-class alliances, relying on popular support as well as that of elites, and using a disconnected and oversized inter-party coalition to govern with the PMDB.

While many believed electing the PT would produce a wave of leftist radicalism, social policy under Lula continued and expanded existing social programs. This strategy, coupled with maintaining the economic stability policies of his predecessor, which pushed inflation to its lowest in decades, produced an economic boom for lower income Brazilians, said Maria Herminia Tavares de Almeida, deputy director of the International Relations Institute at the University of São Paulo. In addition to the successful Bolsa Família, social achievements include expanded educational attainment that lowered illiteracy rates, an increase in minimum wage, and the largest decrease in poverty levels in the last 30 years. More than 5 million people have emerged from impoverished conditions in the last three years alone.

The past four years have seen significant changes in the relationship among Lula, the PT, and organized civil society. Kathryn Hochstetler, a professor at the University of New Mexico, said while civil society groups often have joined with Lula and the PT in government and in social mobilization, their relationship to him as president has been complicated and recently turned sour. As the electorate considered Lula's candidacy for re-election, most organized civil society groups declined to support Lula formally, although most were predicted to vote for him.

Amaury de Souza, a consultant at MCM Consultores Associados, said he did not think a second term in office would allow Lula to overcome the limitations of his first four years. Lula thus far has succeeded in adhering to economic orthodoxy, increasing investor confidence, extending Cardoso's program of cash transfers, and keeping Congress and his own party at bay. But the dilemmas and failures since his first term began are now more severe, notably the high level of political corruption and Congress's failure to act decisively on impeachment. He said it is possible Brazil will experience a "Watergate effect" as congressmen and many of Lula's closest advisers continue to be indicted.

The economic experience in Brazil during Lula's first term can be called the "Brasília Consensus" based on the positive experience with a high fiscal surplus, low inflation, a stable and competitive exchange rate, privatization, and openness to foreign investment, said Thomas Trebat, executive director of Columbia University's Brazil Institute. Overall, he said, Brazil's economic indicators point to less vulnerability and a greater capacity for consumption. Among the electorate, many people perceive an improvement in their economic well being, but others remain dissatisfied with relatively mediocre GDP per capita growth.

Wendy Hunter, who teaches government at the University of Texas at Austin, noted Lula and the PT have undergone changes in their electoral support base, likely due to the revelation of government malfeasance, which diminished the party's support among middle-class voters.

Barry Ames, chair of the political science department at the University of Pittsburgh, said the number of voters who intend to switch their vote from Lula and the PT in 2002 to Alckmin in 2006 is significantly smaller than the number of voters who said they would vote for Lula after voting for José Serra and the PSDB in the previous election (a ratio of 5 to 3). Voters who did switch from Serra to Lula do not necessarily identify with the left, said Ames, but are mostly from poor neighborhoods and reported that the economy did fairly well under Lula. These figures, combined with those expressing voter intentions for October, indicated that Alckmin was incapable of capitalizing on the Mensalão scandal or capturing votes that went to Lula in 2002.

The country has done quite well economically under Lula, argued Eliana Cardoso, an economics professor at the Getulio Vargas Foundation in São Paulo. An exchange rate appreciation prompted the restructuring of public debt while the growth rate, though modest for developing country standards, has improved. However, she said, Brazil's fiscal vulnerabilities still persist: gross public debt to GDP is high; the tax regime remains unnecessarily complex; and inefficient spending rigidities have become more binding, stalling reforms.

Carlos Pio, an associate professor at the University of Brasília, said he would expect few structural economic reforms over the course of the next four years under Lula. The administration likely would lack a majority in either house of Congress, he said, thereby necessitating coalition governance. He said the administration will face strong resistance to increasing the fiscal surplus, the deepening of pro-market microeconomic reforms, and perfecting the floating exchange rate regime.

In Brazil, foreign policy has a disproportionate value for politicians in office compared with its value as electoral currency, argued Leticia Pinheiro, who teaches international relations at the Pontifical Catholic University in Rio de Janeiro. In a public-opinion poll in June asking respondents what issues they most wanted to see debated in the presidential race, a mere 1.28 percent chose foreign relations. With the apparently low degree of interest, it's not surprising that foreign policy issues did not affect the election, even though election results will greatly affect foreign policy.