February 3, 2014 / 5:37 PM / 5 years ago

Brazil's Rousseff shifts Cabinet into election gear

BRASILIA (Reuters) - President Dilma Rousseff on Monday picked a co-founder of her leftist Workers’ Party to oversee the Cabinet as Brazil gears up for October general elections, in which she’s expected to run for a second term.

Brazil's President Dilma Rousseff speaks during an inauguration ceremony for new ministers at the Planalto Palace in Brasilia February 3, 2014. REUTERS/Ueslei Marcelino

She swore in Aloizio Mercadante as chief of staff, the lead Cabinet post, succeeding Gleisi Hoffmann who plans to run for governor of the state of Parana.

Rousseff also replaced three other ministers and said more would leave later this month to seek elected office. But she added the Cabinet overhaul did not mark a change in policy.

The picks seemed mostly aimed at ensuring party loyalty and seem unlikely to improve Rousseff’s strained relationship with the private sector at a time when the economy is expected to grow just 2 percent this year.

Rousseff has not officially announced that she will seek a second four-year term, but she is widely expected to run. Opinion polls place her well ahead of her potential rivals for the October 5 vote.

New chief of staff Mercadante, 59, is a close associate of former president Luiz Inacio Lula da Silva and ran his failed election campaigns when the Workers’ Party was much more leftist in the 1990s. Some investors distrust him, but officials say he is unlikely to have much influence on economic policy.

On Monday, Rousseff also swore in presidential spokesman Thomas Traumann as social communications minister. Traumann has built up Rousseff’s presence on social media, which will have a large role in the elections.

She also named José Henrique Paim as the new education minister and Arthur Chioro as health minister. Chioro replaces Alexandre Padilha who will run for governor of Brazil’s richest state Sao Paulo.

Brazil’s once-booming economy is entering its fourth year of slow growth. Rousseff again blamed domestic problems on financial turbulence abroad, but many business leaders attribute them to excessive state intervention undermining investor confidence.

The deterioration in Brazil’s fiscal accounts, including a growing public sector budget deficit, have led to calls for the replacement of Finance Minister Guido Mantega.

However analysts do not expect Rousseff to bow to pressure to swap him to restore credibility to her economic policies.

“Changing the head of her economic team right now would be a bad idea because it would create unneeded turbulence,” said Andre Cesar, a political analyst at Brasilia-based consultancy Prospectiva.

Market talk of central bank head Alexandre Tombini replacing Mantega is wishful thinking at this point and would not happen until the beginning of a second Rousseff term if she is re-elected, Cesar said.

Massive protests that shook Brazil last June and damaged Rousseff’s popularity were largely organized via social media. Millions of Brazilians unexpectedly took to the streets to protests against poor public services, corruption and the expense of hosting the 2014 World Cup in June.

Rousseff’s government is bracing for a new outburst of discontent during the global soccer tournament to be played through July 13, three months before election day.

Additional reporting by Jeferson Ribeiro Editing by W Simon

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