President Fernando Henrique Cardoso of Brazil won widely anticipated re-election, according to partial results available yesterday.
With 58 per cent of votes counted, the Social Democratic president was far ahead with 50.87 per cent, compared to 34.39 per cent for his main rival, the left-wing coalition leader, Mr Luiz Inacio "Lula" da Silva.
President Cardoso's victory was hailed domestically and abroad as a vote for economic reform essential to prevent financial crisis from crushing Brazil and spreading to the rest of Latin America. But it failed to reassure the international financial community or boost confidence in domestic markets.
The Bovespa index of leading stocks on the Sao Paulo exchange plummeted 4.47 per cent, closing down 232 points at 6,122. The slide reflected impatience in financial circles for concrete measures to rescue the ailing Brazilian economy.
The president has to "announce a fiscal programme to cut the deficit - which is almost 7.5 per cent of gross national product - as soon as possible," said Mr Sergio Cabrera, head of emerging markets at the New York securities house Merril Lynch.
Mr Ernest Brown, an economist at Morgan Stanley Dean Witter, said markets were waiting to see if President Cardoso could implement aggressive reforms to combat the deficit and the current account deficit.
In particular, economists question whether President Cardoso will carry through reforms which could stifle domestic demand and propel the country into recession. But other analysts said his victory should strengthen his hand in negotiating a massive foreign aid package and imposing austerity measures.
"The election results seem to be a statement of support for reform and it's important for them to get on with the reforms they've been considering," said the White House spokesman Mr Joe Lockhart.
The results showed that President Cardoso (67) garnered more votes than all his rivals together, winning the election without having to go through a second round. This is in spite of the fact that he warned that painful measures would be needed to tackle the economic crisis and shore up the currency during his election campaign.
International financial institutions are expected to announce assistance measures shortly, but are still awaiting a formal request from Brazil.
The Finance Minister, Mr Pedro Malan, has said Brazil needs between $16 billion and $21 billion over the next 15 months.
The country's domestic debt has grown to $300 billion; capital flight since August amounts to $30 billion and reserves have fallen from $70 billion to $45 billion.
While partial results gave President Cardoso an assured victory in the first round, results in gubernatorial elections showed a second round of voting would need to be held on October 25th in Rio de Janeiro, Sao Paolo, Minas Gerais and Brasilia - the economic and political backbone of the country likely to bear the brunt of the government's proposed spending cuts.