Brazil President-elect Luiz Inacio Lula da Silva - also known as Lula - has confirmed that Antonio Palocci is to become finance minister in his new government.

Knowing that the Brazilian economy is in intensive care, I've nominated a doctor as minister of finance President-elect Luiz Inacio Lula da Silva

Mr Palocci has been heading Lula's government transition team since the October election victory.

He has impressed financial markets by pledging that Brazil will follow sound financial policies.

In the run up to the election victory, market worries over the incoming left-wing government hit both the Brazilian stock market and the value of the real.

'Positive' appointment

Mr Palocci is the former mayor of the city of Ribeirao Preto and is a doctor who specialises in preventative medicine.

"Knowing that the Brazilian economy is in intensive care, I've nominated a doctor as minister of finance," Lula said on Tuesday, during a one-day visit to Washington.

Mr Palocci has been credited with moderating the stance of Lula's Workers Party, and economists welcomed his appointment.

"I think it's good and positive," said Carlos Kawall, chief economist at Citibank in Sao Paulo.

"We have seen his position is associated with cautious commentary about fiscal austerity and commitment to low inflation."

Markets calm

Analysts said the markets were unlikely to react as they had been expecting the appointment.

"He's a good man and has earned for himself a very good reputation, so this will not be negative," said Suhas Ketkar, senior economist at Royal Bank of Scotland in New York.

"It will certainly be a positive thing for the markets, except there is nothing new in this announcement - it's already priced in."

Tough task ahead

In the run-up to October's election, the financial markets had been rattled by the prospect of a left-wing victory.

Lula had promised to create jobs and help the poor, and had once indicated that this may take priority over repaying the country's debts.

But Mr Palocci has calmed fears by saying that the government will follow sound economic policies and will stick to budget targets set by the International Monetary Fund (IMF).

Last month an IMF team which held talks with Mr Palocci said the planned economic programme made a "good impression" on them.

But the new government still faces a tough task.

Last month the Organisation for Economic Co-operation & Development (OECD) warned that Brazil's external $260bn debt burden risks destabilising the economy.