Former allies a stumbling block for Dilma Rousseff

If Brazil's president Dilma Rousseff thought her victory in last week's election would boost her authority heading into a second term, congress provided a quick corrective to any such optimism.

Just 48 hours after her victory speech, the lower house in Brasília blocked her plans to have "popular councils" drawn from civil society vet the work of government.

Ominously it was her own allies who orchestrated the defeat. This followed a familiar pattern from throughout her first term in office when Rousseff’s unruly coalition often refused to do her bidding.

In part the leaders of allied parties could afford such disobedience because her election in 2010 was widely interpreted as a third victory for her predecessor and political mentor Luiz Inácio Lula da Silva rather than her. She lacked his authority when it came to forging the deals necessary to get a president's agenda through congress.

Now running on her own record after four years in power, she has seen her majority cut from more than 12 million votes in 2010 to 3.5 million in what was the closest election since the return of democracy.

Intransigent style

With opposition parties also doing better than expected in congressional and state elections this has only reinforced grumbling about the president among her own congressional base, which has long expressed its discontent at what is viewed as her aloof and intransigent style.

This dysfunctional relationship could complicate what is set to be a testing start to her second term with the economy weakening, a corruption scandal raging and the opposition reinvigorated by its best performance since the Workers Party came to power.

"Next year is going to be the most difficult the president has faced," believes Glauco Peres da Silva, professor of political science at the University of São Paulo. "After the election, she has less political capital than before and Tuesday's vote is a signal of how the congress will deal with her."

The president’s immediate task is to try and pull Brazil’s economy out of recession and return to the higher rates of growth she inherited from Lula. She largely owes her re-election to the fact the downturn has not yet hit jobs or wages, but that could change if her economic team does not get to grips with deteriorating fundamentals.

Immediately, markets are looking for efforts to combat inflation and reverse the weakening in public accounts. A surprise interest rates rise last week was a first step in this direction. Now the president is reportedly considering the sort of austerity package she warned her opponents would impose.

That could complicate her fraught relations with her own Workers Party. Its militants did much to mobilise support for her but they have been left grumbling after previous elections when, power secured, they were stood down as the leadership tacked back towards the centre.

While cuts in spending could reassure business and kick-start a cycle of investment, they would leave pending the far thornier issue of reforms to Byzantine tax, legal and labour laws widely viewed as necessary to drive sustained long-term growth.

But passing such difficult reforms in Brazil’s congress is almost impossible apart from during crisis because of the power wielded there by special interests groups.

The president’s call in her victory speech for a renewed push on political reform was a signal she will seek to break this grip by sectional interests on the political system.

But how far she can push her reform agenda in a frequently hostile congress is uncertain. "Those who can change the rules are the ones who benefit most from the current system," notes Sylvio Costa, editor of the Congress in Focus website that monitors the legislature in Brasília.

When the president proposed political reform last year in response to massive street demonstrations, she was almost immediately thwarted by her supposed allies and meekly dropped the idea. How far she gets with her second attempt will be a key early indicator as to how her second term will evolve.