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EXCLUSIVE-UPDATE 2-Brazil party to name Rousseff, back reform

Published 12/08/2009, 05:50 PM
Updated 12/08/2009, 05:54 PM

* Rousseff to be "proclaimed unanimously" - party chief

* She will continue current economic policy (Adds detail, context)

By Raymond Colitt and Natuza Nery

BRASILIA, Dec 8 (Reuters) - Brazil's ruling Workers' Party will confirm Chief of Staff Dilma Rousseff as its presidential candidate for next year's election and push reforms to improve state efficiency, the party's president-elect said on Tuesday.

"She'll be proclaimed unanimously," Jose Eduardo Dutra, who was elected party chief last month, told Reuters in reference to Rousseff's nomination at a party congress next February.

President Luiz Inacio Lula da Silva, who hand-picked Rousseff as his candidate, cannot run for a third consecutive term in the October general election.

Opinion polls show Rousseff trailing Sao Paulo state Governor Jose Serra of the opposition PSDB party by nearly 20 percentage points.

Dutra said Rousseff would continue Lula's market-friendly economic policy -- including a floating exchange rate and inflation targets -- if elected next year.

"Rousseff is not Lula with a skirt but the project is one of continuity," said Dutra. "She'll be the third term of this project."

Dutra's statements may help allay isolated concerns that Rousseff could bring more left-leaning members of the party to the forefront and intervene more in the economy than Lula.

Asked whether Rousseff would try to reduce interest rates more aggressively, Dutra said: "You don't change rates by decree. There aren't many options on monetary policy."

Lula, a former union leader, surprised investors with market-friendly policies when he took office in January 2003. More recently he pushed an aggressive stimulus package to help the country emerge from a recession in the second quarter of this year.

But the administration of Lula, who failed in three presidential races before his first win, had not advanced enough in modernizing the state, Dutra said.

The Worker's Party, or PT, would put on the campaign agenda structural reforms to make labor and union laws more flexible and to overhaul a costly pension system, he said.

Flexible remuneration such as productivity bonuses needed to be incorporated into the legislation, he cited as an example.

"The task is to convince all of society that modernization is necessary to make the state more efficient," Dutra said.

That task had become easier because of several years of strong economic growth the PT could cite under the Lula administration, he said.

The economy has grown by an average of 4.7 percent per year between 2004 and 2008, compared to an average of 1.6 percent annually between 1998 and 2003 under Lula's predecessor.

After cutting retirement benefits early during his first term, Lula made little progress on other structural reforms including an unwieldy tax system that business leaders say scare off more investors.

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