Brazil's Lula seeks reconciliation after victory

BRASILIA, Brazil, Oct 30 (Reuters) Fresh from a landslide re-election win, Brazil's President Luiz Inacio Lula da Silva faced the sobering challenge on Monday of forging a broad governing coalition and kick-starting stalled reforms.

Lula, as Brazil's first working-class president is universally known, won a strong mandate yesterday with 60.8 per cent of votes against rival Geraldo Alckmin of the centrist Brazilian Social Democracy Party, who took 39.2 per cent.

The victory marked a remarkable comeback from a series of corruption scandals involving Lula's left-leaning Workers' Party over the past two years, which had threatened to end the political career of the former union leader.

Lula was to meet with several state governors later today in an attempt to seek common ground on economic reforms and help him secure the clear majority in Congress that has eluded him so far, partly because of lack of party discipline.

Tarso Genro, Lula's top political advisor, said the president would personally lead coalition talks. Genro will meet with congressional leaders tomorrow to push a stalled tax reform bill.

''I think it's possible to get the tax reform approved by year-end,'' Genro told journalists. Lula's other priority is to overhaul a corruption-prone party system, he said.

While Lula's large margin of victory should confer him some political capital, some analysts cautioned that the president still faces an uphill battle to govern effectively.

''Behind the headline victory, Lula faces a long and tough negotiation before he can begin governing,'' said Jose Luciano Dias, a political analyst in Brasilia. ''The problem is agreeing on an agenda -- Lula during the campaign distanced himself from market-friendly reforms the country needs.'' Lula said in a victory speech yesterday night in Sao Paulo that he would seek broad-based support. ''I'm going to call everyone in to talk. No one will be turned away,'' he said.

Aecio Neves, governor of Minas Gerais state and a key opposition figure, told Globo TV last night that the make-up of the president's new cabinet would be a first indication whether Lula was serious about consensus politics.

LULA NEEDS CENTRIST SUPPORT In order to govern with a majority, Lula's focus in coming weeks, Genro said, will be to lock in support from the centrist Brazilian Democratic Movement Party (PMDB), which in recent years has been split between government and opposition.

The PMDB, the country's largest party, would give Lula's current six-party alliance from left to center-right a narrow majority in the Lower House.

In the Senate, the government's position is weaker. There, the opposition could win the presidency and potentially stonewall government initiatives, Dias said.

Lula can count on support from more than half of Brazil's 27 elected governors, compared to support from only three governors after his 2002 victory. Governors wield much influence over their parties in Congress and will be key to approve a tax reform.

Financial markets reacted cautiously to the election result on Monday, with the currency drifting lower and Sao Paulo's Bovespa stock index falling more than 1 percent in afternoon trading.

Sandra Utsumi, chief economist of BES Investimentos in Sao Paulo, said the market would compare Lula's renewed pledges for economic austerity during his acceptance speech with ''friendly fire'' from top government aides, who said yesterday Lula should ease tight fiscal and monetary policies.

Genro insisted today that nobody in the government was proposing ''a break'' with current economic policy.

Finance Minister Guido Mantega said ''we are now entering a new phase in which (economic) growth will be more intense.'' REUTERS SRS BD0101