Rousseff vows to fight rising inflation

Dilma Rousseff, Brazil’s new president, pledged to prevent the “plague” of inflation from undermining her plans to eradicate poverty in Latin America’s biggest economy while fostering economic growth.

“To ensure the continuation of the current economic growth cycle we need to ensure stability, especially price stability”, Ms Rousseff said in her inaugural speech to Congress on Saturday.

“We won’t allow under any hypothesis that this plague returns to eat away our economic tissue and hurt the poorest families,” Brazil’s first female president added.

Ms Rousseff takes over from Luiz Inacio Lula da Silva, who leaves office as the most popular leader on record in Brazil after overseeing growth last year forecast to be the fastest since the mid-1980s.

The career civil servant and former political activist promises continuity with the policies of her predecessor and political mentor, Mr Lula da Silva, who served two terms in office as head of the leftwing Workers’ party (PT).

“Many things have improved in Brazil, but this is just the beginning of a new era,” Ms Rousseff told Congress during an emotional inauguration speech.

“My promise is … to honor women, to protect the most fragile, and to govern for all.”

The new president inherits an economy that is expected to have grown by more than 7 per cent last year but is facing soaring prices, with consumer price inflation – close to 6 per cent – well ahead of the government’s 4.5 per cent target.

Inflation has been driven partly by rising international commodity prices, especially for food. But price rises have spread to other sectors as the fast growth in Brazil’s economy puts pressure on supply.

Brazil’s central bank is expected to raise interest rates in the coming months to combat the threat of rising prices against the wishes of senior ministers in Ms Rousseff’s cabinet.

But Henrique Meirelles, the central bank’s president, said last month that raising interest rates was key to ensuring price stability and “a benign inflation path”.

Ms Rousseff also highlighted the need to simplify the country’s tax system in her address to congress on Saturday and she is also expected to give priority to modernising the country’s infrastructure ahead of the 2014 World Cup and 2016 Olympics.

Her 37-member cabinet features several senior figures from her predecessor’s administration most notably Guido Mantega, finance minister since 2006.

Since he was confirmed in the job following Ms Rousseff’s second-round victory in October, Mr Mantega has advocated cuts in government spending to reduce aggregate demand and allow a reduction in Brazil’s very high policy interest rate of 10.75 per cent a year.

Antonio Palocci, Mr Lula da Silva’s first finance minister, who fell foul of a corruption scandal returns as head of the “Casa Civil” or presidential staff – in effect, first minister.

He is credited with engineering an about-turn in Mr Lula da Silva’s policies as he approached office in 2002, when the incoming president opted to maintain the macroeconomic pillars put in place by his predecessor, Fernando Henrique Cardoso, which he had previously promised to change.

Ms Rousseff, the daughter of a Bulgarian immigrant, was active in the resistance to Brazil’s 1964-85 dictatorship. She was jailed on subversion charges for three years and tortured by her military captors. Several of her former cellmates were present at her inauguration on Saturday. After Brazil returned to democracy, Ms Rousseff held a series of mid-level government jobs and acquired a reputation as a shrewd technocrat who is unafraid to pinpoint underlings for shoddy work or incompetence, but often lacks a common touch when dealing with voters.

More recently, she overcame lymphoma in 2009 and she briefly wore a wig as she underwent chemotherapy. Her doctors have given her a clean bill of health.

After the swearing-in, the twice-divorced president rode through the streets of the capital Brasilia in a 1953 Rolls Royce with the roof down, and her daughter by her side.

Given the many pressing demands at home, Ms Rousseff is likely to take a lower international profile and avoid courting controversy, like Mr Lula da Silva did when he angered Washington with mediation efforts over Iran’s nuclear programme.