www.austin360.com By MICHAEL ASTOR Associated Press Writer

RIO DE JANEIRO, Brazil (AP)--Brazil said Thursday it plans to pursue a broad range of nuclear research, but has no intention of making atomic weapons.

The statement came in response to comments this week by Science and Technology Minister Roberto Amaral, which stoked fears in some circles that Brazil might develop a nuclear weapon.

The Ministry of Science and Technology emphatically manifests its position against any activity related to the production of nuclear arms,'' the ministry said in a statement. We are committed to scientific and technological development in all areas of knowledge, and placing that knowledge at the service of human progress and the construction of a more just society.''

In an interview aired Sunday night on the British Broadcasting Corp., Amaral said Brazil ``can't renounce any form of scientific knowledge, whether the genome, DNA or nuclear fission.''

Although Amaral prefaced his comments by saying the country had no intention of making a nuclear weapon, many feared the new government of President Luiz Inacio Lula da Silva might reinvigorate Brazil's nuclear energy program, Latin America's most advanced.

The government had originally said it would clarify its position with the International Atomic Energy Agency, but Brazil's Foreign Ministry said Thursday it considered the ministry statement sufficient clarification.

Presidential spokesman Andre Singer sounded a similar theme, saying ``the government is in favor of research in these areas for peaceful ends only and exclusively.''

During last year's presidential campaign, Silva criticized the nuclear nonproliferation treaty as being biased in favor of the United States in a speech before a group of retired military officers.

``I want a strong Brazil, respected economically, technically and militarily,'' he said at the time, adding that he planned to reactivate a $100 million plan to build a nuclear submarine.

Brazil, which has two functioning nuclear reactors and a third in the works, has signed the nonproliferation treaty.

www.thestatesman.net By JONATHAN POWER

WASHINGTON and its closest allies — at least those who try to put themselves in Washington’s shoes — now realise they are beleaguered by the Pandora’s Box of nuclear and missile proliferation and that they have no adequate policy to deal with them. Their moral authority is all but used up, just when they need it most, to deal with Iraq first and now North Korea. George Bush must be wishing he were Lula in Brazil — cancel the order for new military jets, tell the nation the money is going to relieve poverty and meanwhile use the credibility earned to keep the Brazilian economy on a responsible course, even though that will incur quite a bit of belt-tightening for everybody. Lula, a week into office, must be already set to win re-election. But what equivalent moral authority does George Bush have in order to win over the hearts and minds of both his electorate and the UN Security Council? Could he really persuade either his voters or his closest allies to go to war simultaneously with Iraq and North Korea? Yet just to launch an invasion of Iraq, when it is the lesser sinner, seems by the day increasingly irrational. It is North Korea that has the missiles, the bombs, and the possibility for producing quickly more plutonium and more bombs. Clearly something has to be done with both. But as word leaks out that under a previous Republican administration a blind eye was turned to Iraq’s development and use of weapons of mass destruction in its war with Iran the Bush administration (containing people like Defence Secretary Donald Rumsfeld who was party to these previous decisions) finds it difficult to summon up sufficient credible moral authority to deal effectively with what has now become an exceedingly complex three-ring circus.

Washington, London, Paris and Berlin are all culpable in their various ways for letting the nuclear genie out of the bottle. It is no use blaming North Korea, China and Russia when Western companies have been making a fortune over the years out of proliferation. Look at the case now being brought against Boeing Co and Hughes Electronic Corps for selling forbidden rocket knowledge to China. It is good to see the case becoming so public as it reminds us what has been going on for decades. But for much of the time too little was done. As for government policy towards the proliferators it has been, as Michael Klare wrote in his book Rogue States and Nuclear Outlaws, “ambivalent, indecisive and inconsistent”.

A prime example of this is America’s attitude towards Pakistan. In April 1979 the Carter Administration, convinced that Pakistan was secretly building a nuclear weapon, suspended military aid, in a move mandated by Congress’s Symington Amendment. However, when Soviet troops invaded Afghanistan in December 1979 the Administration persuaded Congress to overrule the amendment and a large arms aid program was started up again. For the next decade, in return for Pakistan’s help in building up the mujahidin fighters in Afghanistan, who later turned into Osama bin Laden’s storm troopers — Washington turned a blind eye to Pakistan’s nuclear bomb efforts. Only in 1990 with the Soviet occupation of Afghanistan defeated did President George Bush, the father, belatedly cut off military assistance. Even today, after all the lesson’s learnt, in return for winning Pakistan’s support in defeating the Taliban and pursuing al-Qaeda Washington appears to be turning yet another blind eye to Pakistan’s latest acquisition of missiles from North Korea.

It was the same with Israel. Although senior US officials (and probably those of other Western countries too) were aware in the early 1960s of the secret Israeli nuclear reactor and weapons plant at Dimona in the Negev desert, they chose to connive in concealing it from public knowledge. Nothing was allowed to interfere with Washington’s “strategic relationship” with Tel Aviv, a policy whose chickens are now coming home to roost.

The issue of credibility also runs right through two important international agreements. The Nuclear Non-Proliferation Treaty permits five already declared nuclear weapon states — the US, the UK, Russia, China and France — the right to maintain their nuclear arsenals while denying this privilege to other countries. On the last occasion the treaty was renewed these nuclear-haves solemnly promised to start getting rid of their nuclear weapons in return for most of the rest of the world remaining signatories. The promise has been clearly and unambiguously flouted.

Similarly, the Missile Technology Control Regime allows member states — mainly the most advanced industrial powers — to possess unlimited numbers of ballistic missiles. But it bans sales of missile technology to non-members.

Maybe all this hypocrisy and doublethink had some justification when the West was locked in a life and death struggle with the Soviet Union. But for the last ten years it has become visibly intellectually unsustainable. If President Bush feels that events are propelling him into a no-win situation with Iraq and North Korea then here in 40 years of dissembling and double dealing is at least some part of the explanation.

www.upi.com By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 1/9/2003 10:36 AM

RIO DE JANEIRO, Brazil, Jan. 9 (UPI) -- Brazil's new president will quickly use his position as leader of Latin America's largest country to try and mediate crises on the continent, namely the civil unrest engulfing Venezuela.

Luiz Inacio Lula da Silva will travel to Ecuador Wednesday -- his first international trip since taking power on Jan. 1 -- and will huddle with other South American leaders in an attempt to form what aides call a "group of friends" to augment the work of the Organization of the American States in advising countries in times of crisis.

"The group could be formed by countries like Colombia, Brazil and Mexico, and Latin nations in Europe, such as Portugal, Spain and France," said Marco Aurelio Garcia, a top adviser to Lula, as he is known.

Brazil's Foreign Minister Celso Amorim was careful to point out that the OAS won't be superceded by any such alliance.

"This group wouldn't take the place of the OAS, but would help facilitate the dialogue between two sides," Amorim said.

The idea for the group largely came from Venezuelan President Hugo Chavez himself.

At Lula's inauguration, Chavez made an off-the-cuff invitation to Lula to join an "axis of good" in Latin America -- a little jab at U.S. President George Bush and his famous "axis of evil" speech.

Chavez was speaking of an alliance among Brazil, Cuba and Venezuela.

The more-moderate-by-the-day Lula grabbed onto the idea, twisted it a bit, and came up with his version, which, incidentally, fits in nicely with his loud calls for stronger pan-Latin American ties to take on the First World when it comes to trade.

Latin American leaders will be gathering in Ecuador next week for the inauguration of that country's President-elect, Lucio Gutierrez.

Most of the talk of such alliances will be informal, analysts say, but it will certainly be a hot topic.

The general strike in Venezuela is sure to be the focus, as it threatens the nascent stability on the continent after a 13-month period that has seen Argentina default on its debt and Brazil's economy just squeak by after a tumultuous presidential election.

The strike in Venezuela is in its second month. Protesters are demanding the ouster of Chavez, who they say has sorely mishandled the economy. Chavez and his supporters say that as a democratically elected leader, he has every right to retain power.

International despair over the crisis in Venezuela is building as the country's oil industry is producing at a fraction of its maximum output of 2.5 million barrels daily. Venezuela is the world's fifth-largest producer of oil.

The general strike, coupled with the threat of war in the Middle East, has combined in the past month to drive up oil prices.

For emerging economies such as Brazil and Argentina, just beginning to see signs of recovery in their limp economies, the scenario of a prolonged period of high oil prices would be doubly deadly on their attempts to reverse their fortunes.

Latin American leaders -- and especially Lula, who is on friendly terms with Chavez -- will work hard to see a peaceful, negotiated settlement through in Venezuela.

The U.S. government has sniffed at the idea of an "axis of good" in Latin America, though the Bush administration backs Lula's efforts at mediating a peaceful end to the Venezuelan crisis, as that country is a key source of U.S. oil imports.

On Wednesday, the U.S. Energy Information Agency said the trouble in Venezuela, coupled with the threat of war with Iraq, could mean oil price volatility for several months.

Adding to the pressure, the agency noted, is the fact that the level of U.S. oil stocks is edging near its "lower operational inventory level" -- which is 270 million barrels.

www.upi.com By Bradly Brooks UPI Business Correspondent From the Business & Economics Desk Published 1/9/2003 10:03 AM

RIO DE JANEIRO, Brazil, Jan. 9 (UPI) -- Stocks were mixed across Latin America this week as investors were buoyed by optimism that 2003 will be better than the past disastrous year but remain well aware of the region's lingering economic dangers.

News from Brazil and Argentina, South America's two biggest economies, dominated the week.

In Brazil, markets have been lifted by new President Luiz Inacio Lula da Silva's continued moderate stance in regard to economic policies. Cracks, though, are beginning to show, and equities were hit late in the week.

For more than a year investors have fretted over Brazil's ability to stay current on its $240 billion debt. Lula and his team have repeatedly said maintaining debt payments is a top priority.

But this week foreshadowed a battle that may determine whether the country will surpass neighboring Argentina as registering the world's largest sovereign default.

State governments in Brazil are broke. Some key states have missed debt payments owed the federal government, and a majority of the governors are clamoring to have their debt renegotiated.

On Tuesday, Rio de Janeiro state won access to its federal tax transfers through a Supreme Court ruling, though the court said Wednesday it will review the case further.

The federal government had confiscated the cash in lieu of the state's debt payment.

Lula, as he is commonly known, has clearly stated he expects the states to pay up, as some $80 billion owed the federal government by the states is key to avoiding a national default.

On Wednesday, the business newspaper Valor reported that any renegotiating with the states will be done in a purely technical manner in accordance with the country's fiscal responsibility law, rather than falling into the trap of becoming a political debate.

"A political negotiation doesn't exist," Finance Minister Antonio Palocci told the newspaper. "The debt issues are technically dealt with between the Treasury Secretary and the finance secretaries of the states."

Investors will watch this fight closely, as it will largely signal the Lula team's appetite for austerity.

In Argentina, the local stock index was boosted nicely on thoughts that an interim loan agreement with the International Monetary Fund is imminent within weeks.

On Wednesday, the IMF's executive board met to discuss Argentina's situation.

"A fund mission will travel to Buenos Aires (on Wednesday) to pursue discussions with the authorities on their request for a transitional program with the IMF," the Fund said in a statement late Wednesday.

Argentina received a mixed review in the IMF statement.

"Directors recognized the greater economic and financial stability seen during the second half of 2002," the statement noted.

The fund signaled, though, that more progress must be made.

"Argentina should focus on achieving a clear political consensus in favor of reforms, building a sound fiscal framework, restoring confidence in the banking sector, increasing trade openness, and restructuring debt," the IMF wrote.

On the economic policy front, Argentina this week eased currency controls -- largely because of pressure from the IMF. The controls had been in place for more than one year.

Among other things, the Central Bank announced Tuesday that it was lifting restrictions for international companies sending abroad dividends and retained earnings from Argentina, as well as easing the ability of local companies to pay for imports.

The government, in addition to a yearlong banking freeze, severely restricted the ability of citizens and local companies to send money out of the country.

As for the markets, Brazil's Bovespa stock index gained 2.96 percent to 11,602 on the first day of this year's trading last Thursday. Investors seemed bullish on the newly installed government, and the continuing words of moderation coming from Lula.

Friday brought a slight loss to 11,600 for the index. Long-distance carrier Embratel gained 4.4 percent to lead the day. Monday saw a big gain for the Bovespa, as it added 3.6 percent to 12,020. Investors were cheered by a rally in the local currency, which gained more than 6 percent in the first three trading sessions of 2003.

On Tuesday, the Bovespa lost 1.2 percent to end at 11,876 as investors took profits. Aircraft manufacturer Embraer lost 1.2 percent, while Petrobras lost just over 2 percent.

Wednesday saw the Bovespa lose 0.75 percent to 11,787. The cellular company Telesp shed 3.67 percent and Embratel fall 1.88 percent as investors followed Wall Street down.

In Mexico, the IPC index ended last Thursday up 1.6 percent at 6,225, mostly on surprisingly good economic reports out of the United States. Volume, though, was low. Broadcasters led the way, with Televisa gaining 4.6 percent and TV Azteca adding 3.6 percent.

Friday saw the index up 0.45 percent to 6,253 in thin trade. Fixed-line phone company Telmex gained 1.12 percent. On Monday, the IPC gained 1.28 percent to 6,333 as investors finally returned to the market following the holidays. Wireless operator America Movil added 2.61 percent.

On Tuesday, the IPC lost 0.9 percent to 6,280, it first losing session after four gainers. Retailers were hit hard, with Walmex dropping 2.3 percent and Gigante losing 20 percent. Wednesday brought a loss of 0.2 percent to 6,266. Brewer Grupo Modelo was a rare winner on the day, as it gained 1.6 percent.

Argentina's Merval index lost 0.83 percent to 520.5 in quiet trade Thursday, then posted a 10-point gain to 530.6 on Friday.

On Monday, the Merval jumped 4.48 percent to 554.4 as Telecom Argentina gained more than 13 percent. Investors were cheered by the local currency's recent gains against the dollar, as the peso sat at its highest point in seven months.

Tuesday brought a gain of 0.94 percent to 559.7, as investors see-sawed, trying to weigh the possible outcomes of the IMF negotiating team likely to arrive this week. Electricity company Central Puerto gained 4.26 percent.

Wednesday saw the Merval up 1.83 percent at 569.9. Grupo Financiero Galicia, which controls the nation's largest private bank, added 2.5 percent, while Banco Frances gained 1.6 percent.

In Chile, the reconfigured IPSA index lost 0.05 percent to 999.5 Thursday. Each year, Chilean officials reset the stock index at 100 points after Jan. 1. This year, the index was set at 1,000 points and will no longer be reset. The supermarket chain D&S lost 3 percent on the day.

On Friday, the index closed up 0.9 percent at 1,009 as utilities led the day. Monday brought a gain of 1.16 percent to 1,020 as signs of optimism in neighboring Brazil and Argentina buoyed investors. Telecom Telefonica CTC gained nearly 5 percent.

Tuesday saw the IPSA down 0.5 percent at 1,015 as investors took profits. Telecom Entel shed more than 3 percent. On Wednesday, the index lost 0.9 percent to 1,005.7.

Venezuela's markets have remained shuttered for more than one month as a general strike paralyzes the country. Protesters are calling for the ouster of President Hugo Chavez, largely because of his handling of the economy.

www.forbes.com Reuters, 01.09.03, 9:50 AM ET

By Todd Benson SAO PAULO, Brazil, Jan 9 (Reuters) - Brazil's financial markets traded steady to lower early on Thursday, with investors waiting to see if the new government can strike a deal in Congress with the country's largest political party.

After spending much of the morning seesawing in and out of the red, the Brazilian real slipped 1 centavo to 3.335 per dollar, leaving the currency up more than 6 percent so far this year.

Stocks, meanwhile, headed higher as investors tiptoed back into the market after a two-day bout of profit-taking. In early afternoon trading, the Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index was up 0.23 percent at 11,812 points, buoyed by rising blue chips.

"The market opened eyeing the news of the PT's difficulties in bringing (political) allies on board," said Alexandre Vasarhelyi, head of foreign exchange at ING Bank in Sao Paulo, using the Portuguese acronym for President Luiz Inacio Lula da Silva's left-wing Workers' Party.

"It's not all that worrisome, but the market wants to know if they (the PT) are going to get the deal they need."

Still short of a congressional majority needed to push through key economic reforms, the PT is struggling to reach an agreement with the deeply divided Brazilian Democratic Party (PMDB) to divvy up the leadership of the lower house and the Senate.

Though the parties have a history of mutual distrust, party officials on both sides have said they expect to come to an agreement soon, which could bode well for the new government's ambitious agenda of reforms in Congress.

Since winning October's election and being sworn in last week, Lula has pleased investors by promising not to abandon prudent economic policies in his quest to improve the lot of ordinary Brazilians, 54 million of whom live in poverty.

The former union boss has also pledged to give the Central Bank autonomy to set monetary policy and overhaul the country's bloated public pension system, which saps billions of dollars from government coffers every year.

Encouraged by the market-friendly signals coming from the new government, Brazil's stocks, bonds and currency have all rallied so far this year, but investors caution that concrete measures are needed if the honeymoon is to last.

"The market seems to have priced in all the good news coming from the government so far," said Clive Botelho, treasury director at Banco Santos in Sao Paulo. "But from here on out, people want to see the discourse put into practice, and a deal with the PMDB would be a step in that direction."

In stock action, blue chips like state oil giant Petroleo Brasileiro (Petrobras) <PETR4.SA> (nyse: PBR - news - people) and telephone company Tele Norte Leste Participacoes (Telemar) <TNLP4.SA> (nyse: PBR - news - people) helped keep the market on the upside.

Petrobras shares, which have rallied of late with rising oil prices, were up 1.04 percent at 48.70 reais, while Telemar stock inched up 0.36 percent to 27.80 reais.

Telemar shares are among the most liquid at the exchange, accounting for about 13 percent of the Bovespa index.

On the downside, long-distance operator Embratel Participacoes <EBTP4.SA> continued to suffer as investors locked in gains that saw the company's share price double over the last two months. Embratel shares slipped 1.52 percent to 4.54 percent.