BRASILIA, Brazil (Reuters) -- Brazil's President Luiz Inacio Lula da Silva suffered a defeat Tuesday after his government's candidate to head the lower house of Congress lost to a surprise contender from the small Progressive Party.

By a vote of 300-195, Severino Cavalcanti beat Luiz Eduardo Greenhalgh, a member of the ruling left-wing Workers' Party that had been widely expected to win the race.

It will be the first time that the lower house will be led by a member of Congress who was not the government's official pick, a situation that could complicate its efforts to get legislation passed.

"To cut a long story short, 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 (the Workers' Party) -- already faces stiff opposition in the Senate," said Nuno Camara, an economist at Dresdner Kleinwort Wasserstein, in a report.

Analysts said the surprise upset was the result of divisions within Lula's Workers' Party and dissatisfaction among congressmen with their relationship with the administration.

In the weeks leading up to the vote, government allies in Congress had focused on beating Virgilio Guimaraes, a Workers' Party congressman who made a dissident bid for the house leadership.

Greenhalgh beat Guimaraes in a first round vote, but won too few votes to win outright, forcing him into a runoff against second-place Cavalcanti.

"There's a recurring complaint that Planalto (the presidential palace) promises a lot and then delivers very little or takes a long time to do it," said Andre Cesar, a political analyst at Goes consultants.

Members of Congress "felt that it was the time to give the government a lesson and they did it," he said.

Still, it is not clear what kind of relationship Cavalcanti, who hails from the northern state of Pernambuco, will have with the Lula administration as the Progressive Party is considered a government ally.

As president of the lower house, Cavalcanti controls which bills go to the floor and when they get voted. He will also become Brazil's acting president when Lula and his vice president are out of the country.

Copyright 2005 Reuters.