Foreign investors feel more comfortable with mainstream liberal policies instead of socialist ones. And foreign investment was extremely critical to the survival of Brazil's economy. It had been a major source of debt servicing and Brazil couldn't afford to turn foreign investors out. This heavy dependence on foreign investment also meant that Lula and his government had to allow investors considerable control over domestic economic policies. Amaral et al. explain the effect of foreign investor sentiment on Brazilian economy: "…if the capital markets had decided Brazil was insolvent, the resulting pressure on the Real and domestic interest rates would guarantee that Brazil would in fact be insolvent. If capital markets had decided Brazil was solvent, Brazil would in fact have been solvent. The investor community was entirely aware of this role, noting that Lula needed to strongly signal a fiscally conservative orientation, so that he could "win the game" of investor sentiment."

To send a message to foreign investors that Lula's government was still commitment to some features of neoliberal measures, the President ensured continuity in some areas of macroeconomic policy. One such area was the pension plan. The government went against its original plan and "…raised effective minimum -- retirement age, reduced survivor benefits, limited benefit ceilings, and called for taxes to be levied...

This is rather ironic but there is another side to the rosy picture. While the economy looks stable, Brazil's decision to stick with conventional policies of the past has brought little relief for the poor. There has been average growth at best and little or no reduction in crippling poverty. Social disparities are still as stark a reality as they were before and inequalities prevail in all areas. (Amaral).
The government's commitment to conventional politics also leaves little room for alternatives in politics. It is believed that Lula's second term might be as conformist as the first term was. But this is a far-fetched idea because there is no indication that Brazil would want to let go of policies that have worked for it so far in terms of bringing economic stability.

REFERENCES

Wendy Hunter. The Partido dos Trabalhadores: Still a Party of the Left?

Aline Diniz Amaral, Peter Kingstone, and Jonathan Krieckhaus. The Limits of Economic Reform in Brazil

Janice E. Perlman. Re-Democratization In Brazil: A View From Below

Urban Poverty and Politics in Rio de Janeiro 1968-2005