Where will Dilma take Brazil?

Unlike Americans, Brazilians believe their country is headed in the right direction — and voted to keep it on course. That was the central message of Dilma Rousseff’s triumph in Sunday’s election in Brazil. Dilma, as she is universally called, was the chief of staff and handpicked successor of current Brazilian President Luiz Inacio Lula da Silva, who leaves office after two terms with an 80% approval rating. He will be a hard act to follow, even for Dilma, who played a crucial part in his accomplishments.

Securing the continuity Brazilians want is no simple task. Just sticking with Lula-era policies will not be enough. Sustaining Brazil’s trajectory of success will require fresh approaches to deal with an array of long-standing, stubborn problems that no Brazilian government has managed to solve. And no matter how bright the future looks now, new ideas will be needed as conditions change and unexpected challenges emerge.

Brazil today is enjoying its best economic run since the 1970s. The economy has grown steadily during Lula’s eight years in office, and poverty has diminished by 25%. The global financial crisis that wreaked havoc on the U.S. economy was hardly felt in Brazil. Unemployment is at a record low. For the first time ever, Brazil’s middle class outnumbers its poor. Recent petroleum discoveries promise to turn already energy self-sufficient Brazil into one of the world’s giant oil exporters.

Brazil is also a nation of growing stature and influence in global affairs. In South America, it has displaced the United States as the dominant presence on many issues. Along with China and India, it is one of the world’s most powerful developing countries. Brazil has assumed a central role in debates and decision-making on important international issues, including climate change, trade policy, nuclear nonproliferation and governance of multilateral institutions. It is one of four leading candidates for a new permanent seat on the U.N. Security Council, and it will host both the 2014 World Cup and the 2016 Olympics.

Brazilians are justifiably proud of their country’s progress. Formidable problems, however, stand in the way of further advance.

This year’s elections were a showcase for the vitality of Brazil’s democracy. Still, government performance is erratic, and many public institutions, including Congress and the courts, can be feckless and unreliable. Politics are plagued by rampant corruption, which led to the resignation of both Dilma’s predecessor and her successor as chief of staff. Like the rest of Latin America, Brazil has to find a solution to the crime and violence that pervade and debilitate its cities — without undermining an already shaky human rights performance.

The new government also will be challenged to make productive use of the country’s global influence. Brazil’s foreign policy is under intense scrutiny. Latin Americans complain that Brazil has become too domineering in regional affairs, drawing criticism once reserved for the United States. Brazil’s diplomacy sometimes appears to lack a moral center. Time and again, the government has seemed untroubled by abuses of democracy and human rights and indifferent to the dangers of nuclear weapons proliferation. It has established close and uncritical relations with international pariahs such as Iran and Venezuela. The country’s rising tensions with Washington — over Iran and many other global and regional matters — could close off important diplomatic and economic opportunities.

For most Brazilians, the new president’s most critical test will be to keep the economy humming, to keep growth and employment high, inflation low and money flowing to social programs. Despite the country’s impressive progress in recent years, the challenges are severe: Stagnant productivity needs boosting in most sectors; low public and private savings restrict new investments in overstretched and deteriorating infrastructure; chaotic tax and expenditure policies cost the economy dearly; and education standards remain abysmally poor. Here, new policies and more aggressive reforms, not continuity, are needed. Dilma will have to take on the entrenched interests of her own party, prevail over sluggish and self-protective bureaucracies and face down multiple other political constraints.

The new president also needs to be realistic in her aspirations. Dilma will be tempted to accelerate Brazil’s economic growth and bulk up spending to alleviate poverty. But continued prosperity hinges on balancing those desirable goals with the equally critical need for fiscal discipline and stable prices. She has said that her government will assume a stronger and more pervasive hand in directing the economy. Finding the appropriate economic role for the Brazilian state without constricting or undercutting private markets may turn out to be Dilma’s most crucial policy test. This is a choice that comes with risks — as Brazil’s mixed record of state intervention shows. She should not forget that what mostly determines the success of Brazilian presidents is how the economy performs on their watch.

Peter Hakim is president emeritus and a senior fellow of the Inter-American Dialogue, a Washington-based think tank.