Lula knows that his huge internal public suppport is based on economic stability. Polls show that historically Brazilian leaders always enjoy full public support when inflation is under control and consumption levels are high.
Lula has elected Central Bank's President Meirelles as one of his govt. pillars, despite the fact that Meirelles decided, in 2002, for his own political career. Economics, and stability more specifically, are key for Lula and he knows it well. And the model has inherited from the previous govt. which Lula called "damn heritage".
Lula's bets are paying very well. The country became investment grade in 2008, inflation is under control, interest rates were reduced - still extremely high if under OECD standards - and the employment rate is also going down, reflecting efforts to curbe informal jobs.
Politically, Lula has also been wise. He has managed well the largest country's party, PMDB, which has given support to his govt. and the Lower Chamber. The price for such fidelity is high, as critics say, and this entails a huge corruption scheme that seems to be working unchanged since discovered in 2005. Almost any law passes there; only at the Senate debates take place, however the opposition is struggling and not adapting to the new "way of governing".
All this success has caused Lula to continue with his party's (the Labour Party, historically radical and socialist) ambitions to reshape Brazil inside and outside its borders.
Top ideologists of his party share the hate at the Western way of life, having elected America (called imperialistic) as its best victim. Disalignment is a present word within Brasilia's corridors, influencing foreign affairs, mostly silently.
The good message is that the growing middle class dreams of becoming also consumers. If Lula is borowing islamic revolution concepts for his world transformation dream, most of Brazilians still dream of the Western way of life: strong individual rights and purchase power (prosperity).
The presidential elections this year will not change much in the economic landscape at the short term. In the longer term, however, it is our belief that the progressive distanciation from the western powers conducted by the Brazilian Labour Govt. has a potential to harm investors interests.
Differently from Venezuela, where mismanagement caused Chavez to drown in his megalomanic dreams, the Brazilian Labour Party's learning curve shows a steadfast disposition to rule Brazil and defy economic and intellectual concepts/elites that used to have a say there. Perseverance is a word that better defines PT (LAbour Party) as Lula ran for presidency 4 times before being elected. Now their plan is to change Brazil and make it an example for the world, even if this means becoming nuclear and getting closer to evil nations like Iran.
If Jose Serra wins for president, we expect some social unrest, especially after some unions that give support to Lula expressed their intent to avoid Serra coming to power. Serra might have headaches for starting changes, especially within the administration (invaded by Lula's militants), however no Coup d'État or a similar thing can be imagined. Not at all.
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