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DewDiligence

10/02/10 1:03 PM

#1584 RE: DewDiligence #1530

Ex-Guerrilla Rousseff on Cusp of Power in Brazil

[Investors in Brazilian companies—especially Petrobras—should know the details set forth in this profile.]

http://online.wsj.com/article/SB10001424052748704791004575520171395595534.html

›OCTOBER 1, 2010
By PAULO PRADA

SÃO PAULO—Until recently, Dilma Rousseff was a little-known bureaucrat. Now, the 62-year-old economist is poised to add another title to a résumé that already includes left-wing guerrilla, political prisoner and cancer survivor: Brazil's first female president.

Opinion polls predict the former energy minister and candidate for the ruling Workers Party will win Brazil's presidency in a first-round victory on Sunday. A runoff is scheduled for a month if no candidate gets 50% of the vote. But either way, analysts predict, Ms. Rousseff will take office Jan. 1.

A win by Ms. Rousseff, who was once arrested on charges of subversion and later testified that she was tortured by Brazil's military dictatorship, would extend the legacy of Brazil's immensely popular left-wing president Luiz Inácio Lula da Silva. The former union leader, who is unable to run again after two terms, handpicked Ms. Rousseff and presented her as the person best placed to continue Brazil's economic boom, one which has lifted 35 million people into the middle class.

Over the past two years, the twice-divorced mother of one received a make-over that included cosmetic surgery, contact lenses and a stylish hairdo more apt for a television-news anchor than a former revolutionary. Once lagging behind chief rivals like centrist former governor José Serra, Ms. Rousseff soared in popularity this year during a series of side-by-side rallies with Mr. da Silva, from Brazil's Amazon to its southern industrial hubs.

"We have come a long way," Ms. Rousseff said at a recent campaign speech to Brazilian businessmen—comments meant to refer to Brazil, but which could also apply to her own trajectory.

Ms. Rousseff's relatively sudden rise has provoked criticism that she is Mr. da Silva's creation and lacks the experience to steward Latin America's biggest economy, one with a noisy multiparty democracy and hundreds of billions of dollars of infrastructure in the works, from giant river dams to high-speed trains. Ms. Rousseff has never held or run for elected office, spending her career in supporting roles. Critics say she hasn't been sufficiently forthcoming with voters; she has given few interviews since taking a lead in the race, and has skipped several presidential debates.

Questions about the integrity of some in Ms. Rousseff's inner circle have also grown in recent weeks after her former aide, Erenice Guerra, was forced to resign from the government in September when reports surfaced that family members she hired were soliciting bribes. Ms. Guerra, in a statement, denied any involvement, and Ms. Rousseff has said she had no knowledge of any wrongdoing. Ms. Rousseff herself was lambasted by journalists last year for having what turned out to be an embellished résumé.

Further troubling skeptics, Ms. Rousseff has shown little interest in backing the kinds of structural reforms that some say are necessary for Brazil to rise from an emerging market to a developed nation. Those reforms include lowering what a United Nations agency says is Latin America's highest tax burden, and reining in government spending that doubled in the da Silva years.

"It will be difficult to manage a big, diverse and growing economy and all the pressures that entails," says Thomas Trebat, an economist and head of the Center for Brazilian Studies at Columbia University. "You better have a game plan other than just intent to keep doing the same."

Unlike Mr. da Silva, a charismatic leader known for his ability to compromise with rivals on the right, Ms. Rousseff has historically been more of an intellectual leftist and less of a pragmatist. That's prompted some to question whether she will be as willing to negotiate with conservatives or fend off demands from those on the left. Still, as energy minister and Mr. da Silva's chief of staff, Ms. Rousseff often sided with business interests, famously clashing with a prominent environment minister to expedite licensing for infrastructure projects in ecologically sensitive areas.

In a recent televised interview, Ms. Rousseff said she believes "in the strength of private initiatives," but rejected the notion that "the state shouldn't be present to create the conditions for investment." In comments to O Globo, a Rio de Janeiro daily, she called "talk of a fiscal adjustment," or state cost-cutting, "backward."

Ms. Rousseff declined to comment for this story. Interviews with nearly two dozen former and current colleagues and friends paint a picture of a talented and sometimes ruthless technocrat who has also proven flexible and ambitious enough to rise through government.

Born to a schoolteacher mother and Bulgarian father who successfully bought and sold property, Ms. Rousseff was raised in an upper-middle-class neighborhood of Belo Horizonte, the capital of the southeastern state of Minas Gerais. A bookworm as a child, she began flirting with leftist ideologies around the time Brazilian generals in 1964 overthrew a democratically elected president and began a 21-year dictatorship.

By the late 1960s, she joined a loosely connected group of activists who staged bank robberies and other heists to finance a revolution. Ms. Rousseff never took part in the planning or execution of the heists, but earned respect among the group as a bright thinker, according to fellow guerrillas at the time.

"She was quick, and she could argue a point with reason and conviction," says Roberto Espinosa, an academic and former activist who became a leader of a consolidated faction of the groups, along with Ms. Rousseff. Her intelligence, combined with her intense appearance—close-cropped hair and thick glasses—"made her someone you didn't easily forget."

By her early 20s, Ms. Rousseff had been twice married, both men fellow activists. Like other guerrillas, she used a nom de guerre, Stella, according to Carlos Araújo, her second husband, who took the code-name Max.

In January 1970, Ms. Rousseff was arrested at a São Paulo bar when she showed up, armed with a handgun and carrying false identity cards, for a meeting with another activist, according to Luiz Maklouf, a Brazilian author who has written extensively about the guerrilla movement.

Ms. Rousseff was convicted of subversion and spent three years in prison. The prosecutor, in documents, dubbed her the "Joan of Arc" of the movement.

…Ms. Rousseff said in hindsight that the movement "did a lot of dumb things," but she remained proud of "daring to want a better country."

Upon her release in late 1973, she moved to the southern state of Rio Grande do Sul. There, she finished an economics degree and helped form a leftist party that would govern several Brazilian states after democracy was restored in 1985.

Mostly, Ms. Rousseff avoided the limelight. Happy to pore over arcane policy issues, she initially worked as an adviser to unions, party leaders and candidates.

…Eventually, Ms. Rousseff's role as a party adviser earned her a succession of bureaucratic positions, starting with an appointment as a municipal budget secretary in Porto Alegre, the [Rio Grande do Sul] capital, in 1986, and state energy secretary in 1993.

…By 2000, Brazil was beginning to face crippling power shortages, and Ms. Rousseff turned her attention to revamping the state's energy grid, working with private companies to loosen bottlenecks and develop wind power and other energy sources. When a blackout darkened much of Brazil in 2002, Rio Grande do Sul was one of the few states still lit.

That's what caught Mr. da Silva's attention as he campaigned for what would soon be his first term, according to current and former members of the government. He asked Ms. Rousseff for advice on energy policy ahead of the election and then named her energy minister when he took office in 2003.

Once there, she impressed Mr. da Silva with her drive. Some colleagues, however, said she sometimes cursed at underlings and could be rude to colleagues, often in front of Mr. da Silva.

For instance, Ildo Sauer, a prominent energy expert who formerly led natural-gas operations at Petróleo Brasileiro SA, the state-run energy giant known as Petrobras, recalls a 2005 meeting in Brasília among company executives, Ms. Rousseff, and the president. There to discuss an auction for power plants that would use Petrobras gas, Mr. Sauer and his colleagues rejected a price for the gas that Ms. Rousseff had suggested. She grew aggressive, he says, telling the president that their assertion that the gas was worth more "is a lie" and that "Petrobras is trying to mislead you."

"It was moral harassment," says Mr. Sauer, who also advised the administration on energy issues. Mr. Sauer was dismissed by Mr. da Silva two years later because of differences over policy, according to Mr. Sauer and people familiar with the president's decision. Ms. Rousseff's campaign declined to comment on the episode, saying it was a private meeting.

Ms. Rousseff's defenders agree that she can be stern, but say a demanding leader is welcome in the slow and stodgy culture of Brazilian government. "What's wrong with exacting performance in a culture where a lot of workers just coast?" asks Guilherme Cassel, Brazil's minister of agrarian development.

In mid-2005, when a corruption scandal brought down Mr. da Silva's chief of staff, the president named Ms. Rousseff to the post. She broadened the position into a super-ministry that oversaw some of the government's landmark projects. She continued to manage energy matters, taking the lead role in the restructuring of the country's oil sector after Petrobras reported massive new offshore oil fields.

When it became apparent that Ms. Rousseff was being groomed to succeed Mr. da Silva, journalists in Brazil began scrutinizing her past. A 2009 article in Piauí, a monthly magazine, reported that she had never earned a masters degree listed on her official résumé. Ms. Rousseff admitted there was "an error" on the document, but never disclosed how the mistake occurred.

To soften Ms. Rousseff's image, Mr. da Silva and the ruling party over the past two years have sought to humanize her. Playing along, she swapped glasses for contact lenses, began wearing makeup more regularly and, according to friends and her doctor, got a face lift.

A triumph against a nascent lymphatic cancer last year helped cast her as a fighter just as she entered the political spotlight. In the days after her first grandson was born last month, she posted photos of him on her website and sometimes tweets about him, moves that some say show off her maternal side.

At a rally last month in Joinville, a city first settled by German immigrants, Ms. Rousseff stood next to Mr. da Silva and said her feminine side would be an asset in governing Brazil. She then took a page from the playbook of Mr. da Silva, who has long said he was driven to succeed as president to prove that a working-class Brazilian was capable of doing a job previously held by the wealthy elite.

"I have to show that a woman can do it, too," she said to the crowd. "I won't let you down either."‹