Brazil’s Rousseff picks new chief of staff

Looking at Gleisi Hoffman’s Twitter feed on Tuesday, there is little sense that the 45-year-old senator from Curitiba in Brazil’s rich south is about to take up one of the most powerful positions in the nation.

Worthy causes, from a campaign for pension rights for housewives to a push to increase testing for rare diseases among babies, dominate the feed with only one tweet late in the afternoon mentioning her views on the economy.

Ms Hoffman, who late on Tuesday took over as President Dilma Rousseff’s chief of staff after the scandal-prone incumbent, Antonio Palocci, was forced to resign, is known to be a young technocrat with a reputation for sound management skills.

“She [Ms Rousseff] was looking for someone with the profile of a manager,” said Senator Eduardo Suplicy, one of the founders of the president’s ruling Workers’ Party, known as the PT.

For Ms Rousseff, the appointment of the first-time senator is a gamble at a time when she is facing the first critical test of her five-month-old government.

A former finance minister under Ms Rousseff’s predecessor, Luiz Inácio Lula da Silva, Mr Palocci was seen as the new president’s behind-the-scenes dealmaker and his loss threatens to undermine her influence in Brazil’s unruly Congress.

“She certainly has been weakened but I think how seriously will depend on what comes next,” said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.

A career bureaucrat who had never been elected to office before last year, Ms Rousseff relied on Mr Palocci to manage relations between the PT and its unwieldy coalition.

The PT’s main ally, the PMDB, a loose collection of regional interests, is seen as particularly tricky to manage.

Some analysts speculate that this may have been where Ms Rousseff and Mr Palocci tripped up. They embarked earlier this year on an austerity programme to help reduce public spending and quell rising inflation and were accused of withholding important government jobs from their allies.

This may have angered some in the coalition, prompting them to leak to the media details of the lucrative dealings of a consultancy Mr Palocci has been running on the side during his past four years as a Congressman.

Although he is not alleged to have done anything illegal, the opposition and the Brazilian media have demanded an investigation into the reports. These say he has increased his personal wealth twentyfold, with much of this rise coming during Ms Rousseff’s election campaign in 2010.

The Brazilian dollar-denominated sovereign bond due in 2040 weakened on the news of Mr Palocci’s departure. But most analysts are not expecting a severe correction when Brazil’s stock market opens on Wednesday morning.

The scandal has been making its way through the newspapers for several weeks and will largely have been priced into markets, analysts say.

“It won’t have a material short-term market impact. It’s occurring early in her term when her approval ratings are still high,” said Christopher Garman, director for Latin America at political risk consultants Eurasia Group.

But investors worry that the loss of Mr Palocci in the longer term could create a vacuum in the government’s economic policy-making machine that could be occupied by the PT’s left-wing elements.

As finance minister under Mr Lula da Silva until 2005, Mr Palocci was credited with helping to lay the foundations for Brazil’s present economic boom.

Others argue, however, that the loss of Mr Palocci gives Ms Rousseff an ideal opportunity to distance herself from the previous administration.

Mr Palocci is no stranger to trouble. As finance minister, he was alleged to have violated the banking secrecy code to try to cover up an earlier scandal. He was eventually cleared of that charge but not before he was forced to step down.

Ms Hoffman may be the sort of fresh face that Ms Rousseff needs if she is to break with the ways of the past.

“One thing that I found was in a sense positive in this is that a new face is there,” said Mr Sotero. “In Brazil, at all levels of government you tend to see more or less the same group of politicians – usually men – being recycled. This is different.”