www.csmonitor.com from the January 27, 2003 edition ERALDO PERES/AP

MAN OF THE PEOPLE: President Luiz Inácio Lula da Silva (center) poses with children at the World Social Forum in Porto Alegre, Brazil.

Brazil's new leader takes an unlikely global role President da Silva speaks to political and business leaders in Switzerland.

By Andrew Downie | Special to The Christian Science Monitor

PORTO ALEGRE, BRAZIL – Brazilian President Luiz Inácio Lula da Silva had a message Sunday for the world's political and business leaders meeting Davos, Switzerland, at the annual World Economic Forum.

"It is absolutely necessary to build the world economic order to meet the demands of billions of people who live at the margins," Mr. da Silva said, urging rich countries to declare "war on hunger."

This call for attention to social issues is not surprising coming from a former union leader and socialist. But the fact that he would be making it to the world's elite on an international stage is unexpected.

When he took office on Jan. 1, after more than two decades as the leader of Brazil's left-of-center Workers' Party, most people thought the man known as Lula would concentrate his efforts on resolving domestic issues. The former shoeshine boy speaks no foreign languages and had shown no particular aptitude, or interest, in foreign affairs.

Now though, his trip to Davos - coming on the heels of a stop at the World Social Forum in Porto Alegre, Brazil, the anticapitalist answer to the Davos meeting - shows that Lula is hoping the developed world will hear his message as clearly as the developing one, and perhaps even embrace him as the man capable of bridging the gap between the two. The only sitting president to attend both weekend summits, Lula has surprised politicians and analysts with vigorous international forays that have given Brazil a much higher profile, particularly in its own backyard.

Brazil needs "to assume its greatness," Lula said on a visit to Ecuador earlier this month, the first foreign trip of his presidency. "I find it incredible that all the other South American countries see Brazil as a natural leader for the continent. Brazil was the only one who for 500 years didn't see that or want to do anything about it."

Not all its neighbors were keen to see Brazil become the region's dominant power. That was partly because the former Portuguese colony's distinct culture, language, and history set it apart from its Hispanic neighbors; and partly because other Latin American leaders were reluctant to see Brazil, the nation with the largest population and economy in the region, become too strong.

Lula's predecessor, Fernando Henrique Cardoso, made some moves to change that, playing active roles in ending a border dispute between Peru and Ecuador in 1995 and also by discreetly helping Paraguay solve its political problems a few years later. In August 2000, Mr. Cardoso hosted South America's first presidential summit.

Lula has taken up the baton, primarily with troubled neighbors Venezuela and Argentina. He has extended a hand to Argentina as it tries to recover from the worst economic crisis in its history, offering to rework a regional trade agreement and even enter into talks on a common currency and joint parliament.

Even more enthusiastic, however, has been his involvement in Venezuela, where opponents of President Hugo Chávez are eight weeks into a national strike aimed at toppling him. Lula was instrumental in creating of the "group of friends," six nations (Brazil, Chile, Spain, Portugal, the United States, and Mexico) that hope find a peaceful way out of the crisis.

Although he objected to the inclusion of the US and Spain in the group - an objection he later dropped - Mr. Chávez has responded favorably to Lula, flying to Brazil to meet with the man he considers an ally. But he has not secured Lula's unfettered support. Lula remains impartial, telling those wanting to oust Chávez that their actions must be made within the Constitution, while at the same time counseling the Venezuelan leader that he must negotiate with his opponents for a peaceful solution.

Lula's handling of the situation has given him and his fledgling administration some international credibility.

"The [Workers' Party] has made it very clear it is a social democratic party in the making," says Riordan Roett, a Brazil expert at Johns Hopkins University in Baltimore, Md. "They want nothing to do with dictatorship or authoritarianism or anticonstitutional moves. And while [Lula] politically and psychologically identifies more with [Fidel] Castro, [Ecuadorean President Lucio] Gutierrez, and Chávez ... he realizes very well that he has to have a very pragmatic and shrewd foreign policy."

Mr. Roett and other experts acknowledge that the US is probably not overjoyed at Lula's close relationship with Mr. Castro, or his willingness to engage other presidents, like Chávez or the leftist Mr. Gutierrez, who have never hidden their dislike of US policy and influence.

Some, like Rep. Henry Hyde (R) of Illinois, chairman of the House International Relations Committee, have even gone as far as to say that Lula may have posed as a moderate in order to win the election and then form, with Chávez and Castro, a Latin American axis.

Lula's words and actions since taking power call in question that prediction, and with President Bush paying little attention to the region - the administration did not send high-ranking officials to the inaugurations of either Lula or Gutierrez - the way may be open for Lula to continue carving out a leadership role.

"Brazil has always had good diplomats," says Mauro Silva, a union leader attending the six-day Porto Alegre summit, which is due to wrap up tomorrow. "Lula knows how to talk to people. It was a skill he learned as a trade-union leader. He could be a mediator ... and a bridge between [the right and left]."

www.forbes.com Reuters, 01.26.03, 5:17 PM ET    By Susan Schneider

NEW YORK, Jan 26 (Reuters) - Emerging sovereign debt may endure a rocky ride in the week ahead as uncertainty about a possible U.S.-led war with Iraq remains center stage, pushing investors to the sidelines or prompting a retreat on fears of the economic fallout of a conflict in the Gulf.

The week promises to be a critical one for the U.S. campaign against Iraq. United Nations weapons inspectors are set to deliver the results of a two-month hunt for Iraqi weapons to the U.N. Security Council on Monday, and one day later, U.S. President George W. Bush will give a State of the Union in which he is expected to lay out his views on the threat posed by Iraqi leader Saddam Hussein.

The events will likely add to the war worries already weighing on the emerging debt market, giving investors more room for worry about a possible conflict's impact on U.S. stocks, the dollar and oil prices, said analysts.

"The next two weeks are going to be pretty telling," said Francis Rodilosso, a portfolio manager at Van Eck Capital. "I think the market is going to get increasingly jittery over near-term prospects for conflict."

The currencies of Latin America's two biggest economies -- Brazil and Mexico -- have already taken a tumble in recent days because of the war uncertainty. The Brazilian real and the Mexican peso slid last week in tandem with the U.S. dollar, which has fallen for seven straight sessions on Iraq fears.

The nervousness in U.S. equity markets, now at their lowest point since October, has also ricocheted across Latin America. Increased worries about the war are likely to be felt this week, particularly in market heavyweight Brazil, said analysts.

"There's going to be an increasing focus on the Iraq uncertainty and the question is the vulnerability of the U.S. equity markets," to which Brazil has looked for direction, said Siobhan Manning, Latin American debt strategist at Italian investment bank Caboto.

A recent survey by J.P. Morgan showed fund managers expect a war in Iraq would sink emerging market debt by about 1.5 percent in one day. The investment bank polled 181 institutions managing $136 billion in emerging market assets.

The survey also showed investors expected emerging debt spreads -- the premium paid over benchmark U.S. Treasuries to compensate for risk -- on the J.P. Morgan Emerging Markets BondIndex (Global) would widen 0.30 percentage points within a day. The current risk premium on the EMBI Global is around 7 percentage points over safe-haven Treasuries.

Still, investors underscored that the direction of emerging bonds is no easy call if the U.S. does lead a move to oust Iraqi President Saddam Hussein.

"There are an unimaginable number of potential outcomes to this conflict. There is a chance that the true military conflict part of it is pretty brief, and in that case we might actually see risk premiums come in," said Rodilosso.

"But there are so many potential unexpected outcomes that could result in higher risk premiums," Rodilosso added.

One chief concern is the impact of red-hot oil prices on global growth rates. U.S. crude prices shot up to a two-year high of $35.20 a barrel last week on the Iraq worries and the strangling of Venezuela's oil production by a general strike. They closed at $33.40 a barrel on Friday.

VENEZUELA WORRIES STILL LOOM

Among emerging economies themselves, Venezuela remains the key focus as the shutdown staged by foes of President Hugo Chavez extends into its ninth week.

The strike, aimed at forcing Chavez to step down or call new elections, has stifled oil output -- once the source of half the government's income -- and fired worries that the cash-starved government might default on its debt.

There are signs that oil production levels have climbed through the use of replacement workers, and Chavez also bought some time by closing the foreign exchange market for five trading days, a bid to stave off capital flight.

But with the crisis still unresolved, investors are wondering what steps Chavez might take next to ease the chokehold on the economy.

"The most important thing (in Venezuela) is the next move from the central bank. Are they going to open up the (foreign exchange) market or will it remain closed? Or will they introduce capital controls?" said Manning.

On Sunday, tens of thousands of Chavez foes clamored for early elections in the second day of a street protest in the capital, Caracas.

Chavez, meanwhile, told reporters in Brazil that the government was studying a tax on speculative financial market transactions as it tries to cope with the economic crisis. The leader was in Brazil to shore up support for his government at the World Social Forum.

www.afxpress.com

CARACAS (AFX) - The nation's crude oil is close to 1 mln barrels per day (bpd), striking managers of the Petroleos de Venezuela SA state oil firm said on Saturday.

"Oil production... rose to 957,000 bpd or about 29 pct of the daily production before the strike started," the group said in a statement.

The government has put the figure at more than 1 mln bpd, saying most of the production was being exported.

The opposition statement said the country was refining 180,000 barrels a day, or 14 pct of normal levels.

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abcnews.go.com The Associated Press PORTO ALEGRE, Brazil Jan. 26 —

Venezuelan President Meets Sympathetic Crowd at World Social Forum

Venezuelan President Hugo Chavez criticized his opponents Sunday after arriving at the World Social Forum to meet with sympathizers among the 100,000 activists gathered to protest American-style capitalism.

Chavez, who left his country despite a 56-day general strike, lashed out at Venezuelan opposition leaders, predicting they would fail in their bid to oust him from power.

"Our struggle against the terrorists and fascists has further strengthened the will of the Venezuelan people," Chavez said after arriving at this far southern Brazilian port city. "It is one thing to try to get rid of me, and another thing to succeed. I have the popularity to remain in power."

Although Chavez wasn't formally invited to the World Social Forum, a counter-conference to the World Economic Forum being held in Davos, Switzerland, he was attending some events.

The social forum has shunned government leaders in the past but this year welcomed Brazil's new leftist president, Luiz Inacio Lula da Silva, as a keynote speaker.

One of the forum's founders, Oded Grajew, said organizers weren't embarrassed by Chavez' decision to come, but warned the Venezuelan leader not to use the event for self-promotion.

"He will get no sympathy from anyone at the forum if he uses it to capitalize for his own benefit," said Grajew.

Activists at the six-day social forum are participating in 1,700 sessions and workshops on topics ranging from corporate misdeeds to Third World debt.

Also Sunday, an unidentified woman threw a strawberry cake in the face of Jose Genoino, the president of Silva's Workers Party, yelling "Lula does not represent us in Davos."

Silva, who is popularly known as Lula, was criticized by some for going to the economic forum after attending the social forum.

The woman left a statement saying she belonged to a group called "Bakers Without Borders" before fleeing. Genoino called the incident an "act of anarchists," according to Brazil's GloboNews television network.

The Associated Press PORTO ALEGRE, Brazil Jan. 26 —

Venezuelan President Meets Sympathetic Crowd at World Social Forum

Venezuelan President Hugo Chavez criticized his opponents Sunday after arriving at the World Social Forum to meet with sympathizers among the 100,000 activists gathered to protest American-style capitalism.

Chavez, who left his country despite a 56-day general strike, lashed out at Venezuelan opposition leaders, predicting they would fail in their bid to oust him from power.

"Our struggle against the terrorists and fascists has further strengthened the will of the Venezuelan people," Chavez said after arriving at this far southern Brazilian port city. "It is one thing to try to get rid of me, and another thing to succeed. I have the popularity to remain in power."

Although Chavez wasn't formally invited to the World Social Forum, a counter-conference to the World Economic Forum being held in Davos, Switzerland, he was attending some events.

The social forum has shunned government leaders in the past but this year welcomed Brazil's new leftist president, Luiz Inacio Lula da Silva, as a keynote speaker.

One of the forum's founders, Oded Grajew, said organizers weren't embarrassed by Chavez' decision to come, but warned the Venezuelan leader not to use the event for self-promotion.

"He will get no sympathy from anyone at the forum if he uses it to capitalize for his own benefit," said Grajew.

Activists at the six-day social forum are participating in 1,700 sessions and workshops on topics ranging from corporate misdeeds to Third World debt.

Also Sunday, an unidentified woman threw a strawberry cake in the face of Jose Genoino, the president of Silva's Workers Party, yelling "Lula does not represent us in Davos."

Silva, who is popularly known as Lula, was criticized by some for going to the economic forum after attending the social forum.

The woman left a statement saying she belonged to a group called "Bakers Without Borders" before fleeing. Genoino called the incident an "act of anarchists," according to Brazil's GloboNews television network.