Brazil's president suffered a stunning defeat on Tuesday in the fight for the leadership of the lower house of Congress that could put at risk reform proposals that have impressed investors. Lawmakers chose Severino Cavalcanti of the small Progressive Party over Workers' Party lawmaker Luiz Eduardo Greenhalgh 300 to 195. It will be the first time that the lower house is led by someone who is not the government's top pick. Cavalcanti now wields great power in setting legislative priorities and is the third in line to the presidency in Brazil.
Without a faithful ally there, President Luiz Inacio Lula da Silva could struggle to pass legislation such as giving independence to the central bank, completing reforms of the tax and legal systems and streamlining regulatory agencies.
"The government will have to negotiate heavily with Congress and resort to horse trading in order to get legislation approved in Congress, especially since it - the PT (Workers' Party) - already faces stiff opposition in the Senate," Nuno Camara, an economist at Dresdner Kleinwort Wasserstein, said in a report.
Cavalcanti will lead the house in the build-up to next year's presidential election, giving him clout in such matters as party political reforms that the administration has sought.
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