On October 31st more than 135 million voters went to the polls in Brazil to elect their next president. They chose a career technocrat named Dilma Rousseff of the leftist Worker's Party (PT), who was the hand-picked successor of Brazil's current president, Luiz Inácio Lula da Silva (known as Lula).

The vote was a run-off between Rousseff and José Serra of the centrist Brazilian Social Democratic Party (PSDB), who were the top two vote-getters in Brazil's October 3rd general election. And Rousseff won decisively in the second round, claiming 56 million votes—fully 12 million more than her opponent.

The general election also included contests for all 513 members of Brazil's Chamber of Deputies, two-thirds of the Federal Senate seats, as well as governors and representatives in all 26 state legislatures and the Federal District.

It was thus a big election, and an historic one. Brazilians elected not only their first female president, but they did so at a time of strong growth and prosperity, with little of the economic volatility that has until recently surrounded presidential elections in Brazil. At the same time, the elections indicate that peaceful, civilian democracy—which returned to Brazil only in 1985 after long stretches of political unrest and military rule in the 19th and 20th centuries—is hopefully here to stay.

The direction in which Brazil's new president takes her country is deeply consequential not only for that nation of 190 million, but also for global geopolitics. In a matter of just two decades, Brazil has gone from long being a perennial economic laggard—mired in high inflation and slow growth that won it the moniker of Latin America's "sleeping giant" for its vast unrealized potential—to now being the eighth largest economy in the world, a major exporter of oil to the United States, and an ever more important player in hemispheric and global politics.

Recent years have seen Brazil take on an ever bolder international profile, a trend that is unlikely to change under the next administration. Brazil currently holds a two-year nonpermanent seat on the United Nations Security Council and is lobbying vigorously to assume a permanent seat.

Brazil is also poised to bypass Venezuela as the hemisphere's major oil exporter; and with an economy larger than those of India and Russia, and with nearly two times the per-capita income of China, Brazil is on track to become a major force in the global economy.

How Things Change

One of the most striking features of Brazil's 2010 election is the economic stability and strong growth that surrounded it. The Brazilian economy is expected to grow at a rate of 7% this year, and it was among the first emerging market economies to recover from the global recession.

As recently as the early 1990s, however, Brazil remained engulfed in decades-long economic tumult with prices rising at a rate of 80% per month. At that rate, a sandwich that cost $1 in January would cost $1,000 by year's end. Inflation had long cast a heavy pall over Brazil's economy, dampening private investment and deepening poverty and inequality.

It was only in 1994 that Brazil's so-called "inflationary disease" was finally cured by a team of academic economists who introduced a new currency, the Real, which achieved the long-elusive goal of stability and credibility.

The quelling of inflation did not solve all of Brazil's economic problems, however, for the country remained heavily indebted and dependent on foreign inflows of capital – vulnerabilities that were laid bare in the run-up to the 2002 general election.

That election pitted José Serra of the Brazilian Social Democratic Party (PSDB) against Lula of the PT, in his fourth attempt to win the presidency. Lula's campaign was bolstered by a sense of exhaustion after eight years of difficult structural reform in Brazil's economy.

As Lula took the lead in opinion polls, however, the prospect of his victory sent shockwaves through international markets, elevating Brazil's sovereign risk rating, which pushed up the price at which the government could borrow on international markets. By September 2002, when a Lula victory seemed likely, fears of default left the benchmark Brazilian government bond trading at a face value of just 49 cents to the dollar. The country's hard-won economic stability seemed to be imperiled by the prospect of a Lula victory.

Much of investors' concern came from the candidate's fiery rhetoric during his three earlier presidential campaigns, which had included calls for the renegotiation of Brazil's foreign debt and for meaningful redistribution of Brazil's highly unequal income and land. Investors also feared that the former metalworker and union leader would place little value on fiscal and monetary discipline.

But Lula's 2002 campaign was different; and so was Lula. Having tamped down the heated rhetoric and replaced his more casual attire with sharp business suits, Lula hired a high-power marketing firm to run his campaign advertising. The firm used focus groups to craft an image of Lula as moderate and friendly, including by adopting the motto "Lula peace and love."

Even as Lula made gains to win over the domestic electorate, international capital markets remained skeptical. In the month before the 2002 election as markets continued to gyrate and outflows of capital from Brazil reached $60 billion, the IMF stepped in with $30.4 billion stand-by credit.

In an unprecedented move, the IMF agreement was signed not just by then President Fernando Henrique Cardoso (elected President in 1994 and 1998), but also by Lula and the other two front-running candidates. They all committed to maintaining a primary fiscal surplus (the budget balance before interest payments on outstanding debt) of 3.75% of GDP in the next government.

After his decisive second-round victory, Lula took further measures to bolster market confidence in his government. He appointed Henrique Meirelles, a former executive of BankBoston, to head the central bank, and selected a market-friendly Finance Minister, Antonio Palocci.

Lula also pledged to maintain an even larger primary surplus (4.25% of GDP) than was dictated by the IMF loan. In effect, in order to persuade investors that he was not a risk to the country's stability, Lula became even more economically orthodox than his predecessor—whose market-friendly policies he had long subjected to withering criticism.

Lula's Government: Continuity and Change

Those early choices presaged the more pragmatic, rather than strictly ideological, course of Lula's government. Despite Lula's explicitly anti-Cardoso campaign rhetoric, his governance has been characterized by a striking continuity, rather than departure from Cardoso.

For instance, one of the most difficult political battles of the Cardoso presidency was his effort to reform Brazil's regressive and deficit-ridden social security system. Lula's Workers' Party fought bitterly against Cardoso's social security reform every step of the way, as their core constituents—the public sector workers—are a main beneficiary of the system's largess.

Yet, shortly after taking office, Lula stunned his base by picking up the reform battle where Cardoso left off. In his first year in office, he passed a constitutional amendment to reform the public sector pension system. That effort, which addressed an important source of Brazil's budget deficit, sent a powerful signal of credibility to international markets and won the government strong praise from investors. But it came at a high political cost, prompting a rupture within the Worker's Party and the disillusionment of one of the PT's strongest allies, the civil servants.

Lula's antipoverty policies also bear the heavy imprint of his predecessor. The centerpiece of Lula's social policy agenda is a conditional cash transfer program called Bolsa Familia (Family Grant), which offers monthly stipends to mothers as long as children remain in school and meet certain health care criteria.

Although the program is closely associated with Lula in the public mind, it was launched at the national level by the Cardoso government under the name Bolsa Escola (School Grant). Lula greatly expanded the program coverage to reach 11 million families, and merged it with other social benefit programs under the umbrella of a broader social welfare program called Fome Zero (Zero Hunger).

Lula's economic policy parted company from that of Cardoso, however, on the issue of the state's role in the economy (and it is expected that Rousseff will follow Lula's course here). Lula promoted an expanded state role in several sectors of the economy, such as in credit allocation. He did so by using the state development bank (BNDES) to extend hundreds of billions of dollars worth of loans to private companies to spur domestic, and international, investment.

Lula also promoted a broader role of the state in the petroleum sector, which is dominated by the government-controlled oil company Petroleo Brasileiro SA, known as Petrobras. President Cardoso had partially privatized Petrobras in the 1990s.

However, the discovery of immense new oil reserves—estimated at 80 billion barrels—in Brazil's offshore "pre-salt" oil fields has led to a reversal of this trend. It has also positioned Petrobras to become a global leader in the petroleum industry and within the near future, a regional leader in petroleum exports (Brazil is currently second to Venezuela in its proven reserves of oil and production).

The discovery has prompted the Brazilian government to move to claim a greater role in the development of these oil fields and the vast resources they hold. In September 2010, for instance, the Brazilian government effected a $67 billion offering of Petrobras shares, in which the government expanded its holding from 40 to 48% (and from 57.5 to 64% of voting shares). The government is also preparing legislation to expand Petrobras' role in the future operation and development of the deep-water oil fields, which also represents a shift from Cardoso's effort to broaden the role of the private sector in oil production.

Lula also charted a foreign policy course that has been increasingly independent and assertive on the international stage—a break from Brazil's "unwritten alliance" with the United States that began early in the twentieth century. This shift included strengthening ties with Fidel Castro of Cuba and Mahmoud Ahmadinejad of Iran, and an unsuccessful effort along with Turkey to sidestep the United States-led negotiations with United Nations Security Council and broker a deal over Iran's nuclear program.

Lula asserted Brazil's economic weight in global economic forums such as the Group of 20 and the World Trade Organization, and took the lead in global negotiations over climate change, food security and the international financial architecture.