Neves, a former two-term state governor and senator who had been widely written off until the last few days of the campaign, took second place with 33.6 percent of the vote and now faces the leftist Rousseff in the runoff on October 26.
Rousseff won 41.6 percent support and remains a slight favorite but Neves is within striking distance and will pick up support from voters who had backed other anti-government candidates.
The runoff campaign will be a battle between opposing visions for development in Brazil—the state-led capitalism of the ruling Workers’ Party as it struggles to revive an economy that fell into recession in the first half of the year, and the market-friendly policies promised by Neves and his centrist Brazilian Social Democracy Party, or PSDB.
The two parties have dominated politics since Brazil returned to democracy three decades ago and their electoral battles highlight class divisions in a country struggling with a huge gap between haves and have-nots.
Rousseff came out ahead in the first round of voting thanks to working-class supporters who are still grateful to her party for economic gains and popular social welfare programs it expanded since it came to power 12 years ago.
Recent polls have given Rousseff an edge over Neves in a runoff, with an advantage of as much as 8 percentage points, although Neves will have momentum on his side after his showing on Sunday.
“Brazil cannot go backwards,” Rousseff said as she celebrated her first-place finish. “I clearly understood the message from the streets and from the ballot boxes. The majority of Brazilians want us to speed up the Brazil we are building.”
Neves, however, will likely pick up support from many of the voters who backed Marina Silva, a prominent environmentalist who entered the race late and led opinion polls but fell away in the final days. She came in third with 21.3 percent of the vote.
After mass protests last year illustrated growing discontent over ills ranging from corruption to poor public services, Silva and Neves wooed a grab-bag of anti-Rousseff voters.
Silva stopped just shy of endorsing Neves on Sunday night.
“There is no way to misinterpret the sentiment of voters, of the 60 percent who moved for change,” she said.
With the economy in its fourth year of slow growth following a sustained boom during much of the previous decade, Rousseff is vulnerable. And Neves, having clawed back from a distant third place in polls earlier in the campaign, enjoys new found vigor.
“He is now a difficult adversary,” said Andre Cesar, a political analyst in Brasilia. “He gained force and drive when he got back in the race.”
To win, Neves will have to convince voters that his promise to jump-start the economy won’t come at the expense of social programs, especially a popular monthly stipend that low-income families receive in exchange for keeping their kids in school.
Neves, 54, has vowed to keep the programs, which have become a symbol of Workers’ Party rule even though they were first implemented by the PSDB.
Late on Sunday, he promised “the best project for Brazil” and said he represents “Brazilians who want the country growing again, generating jobs and improving the lives of people.”
Workers’ Party voters are betting that Rousseff, 66, can weather the economic slowdown and ensure continued progress for blue-collar Brazilians.
Despite falling investment, weak consumer confidence and a loss of competitiveness by Brazilian manufacturers, Rousseff and her supporters blame the economic woes on international instability, not her policies.
Neves says Rousseff has strayed too far from policies of fiscal discipline originally introduced by his party when it held power for two terms before the Workers’ Party took office.
Credited by most economists as laying the groundwork for last decade’s boom, the policies were largely kept in place by former president Luiz Inacio Lula da Silva, Rousseff’s mentor and predecessor.
Neves is pledging to streamline government finances and return to the triad of policies that economists say set firm foundations for the boom during Lula’s presidency—fiscal discipline, inflation control and a free-floating currency.
Since Rousseff took office in 2011, she has sought to boost specific industries and areas of the economy with targeted stimulus packages. But critics say problems will persist until deeper reforms make Brazil more efficient.
Inflation is running just above the government’s official tolerance ceiling of 6.5 percent, eroding purchasing power for many of those who benefited during the boom.
Brazilian industry, crippled by a currency that Rousseff sought to shore up, has grown less competitive against foreign rivals.
In recent weeks, as the president rebounded in opinion polls, investors battered Brazil’s stock market and drove the real currency to a five-year low.
But late on Sunday, heartened by Neves’ showing, investors said they expected a rally.
“The expectation now is that we’re going to have a highly competitive second round of elections,” said Mauro Schneider, chief economist at CGD Securities in Sao Paulo. “Markets are poised to have a strong positive reaction.”
Still, many voters say they are willing to give Rousseff and her party the benefit of the doubt. “It’s not that they’re doing such a good job, but they are the ones most attuned to the needs of the people,” said Luiza Soares, a 22-year-old supermarket clerk in the southeastern city of Sao Jose dos Campos.