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BRASILIA, Brazil (AP) _ Brazil's new president launched his anti-hunger program Thursday with a move to provide $14 a month to 1.5 million families, most from the country's poverty-stricken northeast.

While the stipend may seem insignificant, President Luiz Inacio Lula da Silva's hunger task force estimated 46 million of the country's 175 million citizens survive on less than $1 a day.

"The struggle against hunger is a fundamental step toward overcoming misery, poverty, a lack of opportunities and social inequality," said Silva, who as a boy dropped out of grade school to help support his family.

He made hunger eradication his top priority during his Jan. 1 inauguration speech.

"We are going to create the conditions so that everyone in our country can eat a decent meal three times a day, every day, without needing donations from anyone," he said.

But Silva, Brazil's first elected leftist president, cautioned that there were no quick fixes to eliminate hunger in Brazil, which has the world's fifth-largest population.

"Hunger cannot be vanquished from one day to another, or with some isolated government measures," he said. "Conquering hunger will demand a lot of effort, a lot of persistence, a lot of courage and dedication from all of us during the next four years."

Brazil will spend $514 million this year on its food program, and the first payments start next week when 1,000 poor families in the arid northeastern state of Piaui receive their $14. All the 1.5 million families will be enrolled by the end of the year.

Eligible families living in towns and cities will get a kind of debit card to draw funds from a state-owned bank, while coupons similar to food stamps will be used in remote regions without banks.

Still, the launch of the program has been burdened with controversy.

Inexplicably, Maranhao _ which borders Piaui _ was left off the initial list of participating states. And Maranhao ranks second worst of Brazil's 26 states on a human development index that measures income, illiteracy, life expectancy and school enrollment.

It is also the home state of former Brazilian president Jose Sarney, who backed Silva during his presidential campaign. Silva spokesman Andre Singer would say only that Maranhao would be discussed at a press conference scheduled for Thursday evening.

The government also says it will maintain anti-hunger programs developed by Silva's predecessor, Fernando Henrique Cardoso, including a project that gives families up to $13 per month for food as long as their children stay in school.

Another program gives up to $13 a month to poor families with pregnant women or breast-feeding mothers.

Earlier this week, Brazilian supermodel Gisele Bundchen opened Sao Paulo Fashion Week in Brazil's largest city by donating $29,000 to Silva's anti-hunger effort.

Silva's program has also received a little over 3 tons of donated food _ including milk, soybean oil, rice, beans, wheat, flour and corn, said Luiz Roberto Baggio, a program coordinator. Guidelines are not in place yet for how to distribute those goods.

After he was inaugurated, Silva delayed putting in place a plan to spend $400 million on new jet fighters to upgrade Brazil's antiquated air force planes. His aides said anti-poverty programs were more important.

washingtontimes.com By Carmen Gentile UPI Latin America Correspondent

     SAO PAULO, Brazil, Jan. 30 (UPI) -- Brazil Thursday officially launched its aggressive hunger-eradication program, which will attempt to feed 10 million Brazilians in the next few years. Top Stories

     The program -- dubbed "Zero Fome" (Zero Hunger) -- is months in the making and has been President Luiz Inacio Lula da Silva's No. 1 priority since he assumed office Jan 1.

     Brazil's new, leftist president -- the nation's first in almost 40 years -- campaigned on a platform that called for widespread social reform in Brazil, where the economic divide between the wealthy and poor is one of the largest in the world.

     A former metalworker and union leader, Lula, as he is known, himself grew up in a Sao Paulo "favela," or slum, and quit school as a young boy to work and help his family make ends meet.

     At Zero Fome's outset, Brazilians deemed poor enough to qualify for program benefits -- those earning about a dollar or less a day -- will receive a magnetic card that will enable them to withdraw funds to purchase food at select stores and distribution centers.

     "We need to defeat hunger, poverty and social exclusion," said Lula Thursday from the capital, Brasilia. "Our war is not going to kill anyone ... it will save lives."

     The effort won't be easy, however, considering the dismal poverty statistics and budget constraints Lula faces in 2003, as there is little room to allocate additional funding for the program. According to government statistics, an estimated 45 million out of 175 million Brazilians are malnourished.

     In an effort to supplement Zero Fome's financial needs, Inter-American Development Bank President Enrique Iglesias said earlier this month that the IDB would allocate $12 billion to fund this and other projects.

     The United States has also pledged between $6 billion to $10 billion over the next three years. Several members of the European Parliament also pledged their support Thursday for Lula's initiative and called for the European Union to create a fund for combating hunger and misery in developing nations.

     Lula recently returned from a week in Europe where he met with German and French leaders and attended the World Economic Forum in Davos, Switzerland.

     Though the meetings were dominated by talk of a possible confrontation with Iraq, the Brazilian leaders used the opportunity to plug Zero Fome and called on industrialized nations to make the battle against hunger the world's top priority.

     While lauded by many, Lula's plan for eradicating hunger has come under some fire for being too reactionary to the poverty situation and for indulging in the type of populist ideals that prompted the military to seize power in 1964.

     Others have condemned the program mentioning the possibility of corruption when determining who receives assistance and the possible birth of a black market for federal food cards.

     Lula answered some of his critics Thursday saying that the program is not just about feeding Brazil's hungry but part of a larger effort to improve the lives of impoverished segments of society.

     "These emergency donations are necessary, but everybody knows that they will not put an end to the problem," he said. " It is necessary to give someone fish and then teach him how to fish."

www.forbes.com Reuters, 01.30.03, 4:21 PM ET

NEW YORK, Jan 30 (Reuters) - Investment bank Morgan Stanley said on Thursday it raised its recommendation on Brazilian sovereign bonds to outperform from market perform amid optimism for the legislative agenda of the country's new government.

Morgan Stanley said in a report it advised clients to move their positions to overweight from market weight, a move that comes on the heels of last week's nomination of ex-president Jose Sarney, an ally of new President Luiz Inacio Lula da Silva, to head the Senate.

After weeks of negotiations, the deeply divided Brazilian Democratic Party (PMDB) agreed on Sarney as its candidate, a move likely to bolster congressional support for Lula's agenda of economic reforms. Lula, who ran on the Workers Party (PT) ticket, took office earlier this month.

"The recently sealed agreement between the PMDB and the PT provides positive prospects for the new administration's congressional agenda," said Morgan Stanley.

The decision comes as investor fears about the economic fallout of a possible U.S.-led military strike on Iraq weigh on emerging markets. Despite the uncertainty over Iraq, Morgan Stanley said it still was moving to buy Brazil.

"Brazil and Latin American assets are currently participating fully in the global sell-off in risky assets. To the degree that it is Iraq-related, we expect that this sell-off will be temporary and we are buying Brazil heading into it," it said.

Morgan Stanley said it also raised Venezuela to market perform from underperform, thanks to the prospects for a solution to a two-month-old general strike, the government's efforts to maintain reserves through capital controls and increased oil output.

Foes of Venezuelan President Hugo Chavez are staging the work stoppage in a bid to force the leader's resignation or spawn new elections. The strike has strangled oil production, the government's chief source of revenues, and raised concerns the nation may be left without enough cash to pay its debts.

Morgan Stanley said that as the strike loses steam, it expects the opposition to reach an agreement with Chavez for an August referendum on his rule, a move that Chavez may concede to because of international pressure.

This, along with the government's plans for a single fixed exchange rate and a recovery in oil output sufficient to keep the government and state oil giant PDVSA from defaulting on its debt, support the move to market weight, the bank said. (Reporting by Susan Schneider; Editing by Stuart Doughty; Reuters Messaging: susan.schneider.reuters.com@reuters.net, tel: +1 646 223 6319)

www.forbes.com Reuters, 01.30.03, 4:02 PM ET By Todd Benson

SAO PAULO, Brazil, Jan 30 (Reuters) - Brazil's currency strengthened on Thursday as investors waded back into the market after a recent spate of losses, encouraged by fresh data showing the country's fiscal health on the mend.

Stocks, however, backtracked as investors, spooked by the possibility of a U.S.-led war against Iraq, took profits following Wednesday's 3 percent surge.

"The outlook here is fine, the problem is the market climate abroad right now," said Tomas Taterka, a stock broker at Concordia brokerage in Sao Paulo. "When you've got a war looming, investors are going to cash in profits every chance they get, and that's what happened today."

After jumping more than 1 percent in early trading, the Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index slipped 1.04 percent to 10,750.7 points in choppy trade.

In the currency market, the Brazilian real gained ground against the dollar for the second straight day, firming 1.1 percent to 3.56 to the greenback.

The gains came as the government posted a record primary budget surplus of 52.4 billion reais ($14.7 billion) in 2002, easily beating its target agreed on with the International Monetary Fund for the fourth year in a row.

The surplus, which excludes debt servicing costs, was the equivalent of 4.06 percent of gross domestic product, leaving the new government of President Luiz Inacio Lula da Silva with ample room to shoot for a higher number, traders said.

"The 4.06 number was very good," said Gustavo Alcantara, a fund manager at Banco Prosper in Rio de Janeiro. "That means the government can easily raise the target to above 4.5 percent without resorting to a harsh fiscal shock."

Lula's finance minister, Antonio Palocci, said on Wednesday the government intends to raise its primary surplus target for 2003 to above the current 3.75 percent of GDP goal mandated by a loan agreement with the IMF.

By increasing the surplus, the Lula administration would be sending a signal to investors that it is taking the necessary steps to reduce Brazil's hefty debt-to-GDP ratio, which ended 2002 at 56 percent.

In the stock market, losers outpaced winners by a ration of 35 to 13, while six shares settled unchanged. Final trading volume was modest, totaling 404.9 million reais.

Bellwether stock Tele Norte Leste Participacoes (Telemar) <TNLP4.SA>, Brazil's biggest fixed-line telephone company, led the market lower. Telemar shares skidded 1.52 percent to 26.50 reais.

Long-distance carrier Embratel Participacoes <EBTP4.SA>, the Brazilian unit of troubled telephone giant WorldCom Inc. <WCOEQ.PK>, was among the few stocks settling on the upside.Embratel shares, among the most volatile at the exchange, shot up 3.77 percent to 3.58 reais.

In the banking sector, stock in Banco Bradesco <BBDC4.SA>, Brazil's No. 1 private bank, retreated 2.42 percent to 9.68 reais despite news it had offered 50 million euro bond.

Among exporters, shares in mining giant Companhia Vale do Rio Doce (CVRD) <VALE5.SA> settled unchanged at 89.50 reais after the company announced it would pay a minimum of $400 million in dividends in 2003.

news.ft.com By Raymond Colitt in São Paulo Published: January 30 2003 19:19 | Last Updated: January 30 2003 22:12

President Luiz Inácio Lula da Silva on Thursday launched an ambitious campaign to eradicate famine in Brazil, his first big policy initiative to tackle the country's infamous social inequalities.

"It is much more than an emergency donation of food. We need to attack the causes of hunger, to give fish and teach how to fish," Mr Lula da Silva said.

The success of the government's flagship welfare programme will be key in sustaining the popularity Mr Lula da Silva requires to implement much-needed structural reform to alleviate Brazil's economic problems. Reducing social inequalities, the president has argued, is not only a moral obligation but also essential to maintain political stability.

José Graziano, the government minister charged with the programme, said a pilot project would begin next week in the drought-plagued north-eastern state of Piauí, one of the country's poorest. Families would receive electronic debit cards with which they can withdraw R$50 each month from public banks to buy food.

He also announced an increase of funds for day care centres and school lunches. The programme, which is to include numerous welfare projects such as job training and scholarships, will rely heavily on local community organisation for its implementation and control.

The programme is to be funded by the government, multilateral lending agencies and corporate donations.

Mr Lula da Silva has earned applause at home and abroad for his emphasis on hunger eradication. Many people have donated food and celebrities, such as super model Giselle Bundchen, have given money. Unlike sub-Saharan Africa, famine in Brazil is localised and the food supply is ample. But since taking office a month ago, Mr Lula da Silva has found that implementing policies to eradicate famine is no easy task.

"The programme is as complex as the enemy [hunger] it tries to conquer," Mr Lula da Silva said on Thursday. "It won't be eliminated over night."

Surprisingly, the anti-famine programme has generated con siderable controversy, particularly over who is to benefit and who is to control government aid.

Defining and identifying target populations has been difficult because of diverging statistics and methodologies, and politically sensitive due to competition among constituencies. Some 10m people are considered undernourished and 45m as living under the poverty line.

Some analysts cautioned that a broad-focused project, a large target population and unnecessary bureaucracy could dilute the impact of the project.

Critics even within Mr Lula da Silva's Wokers' party (PT) have opposed restricting the use of aid for food purchases, arguing family needs vary substantially. The more restrictions are imposed, the bigger the chance for fraud and the more difficult and costly control of the programme becomes, they say.

The government will launch an advertisement campaign in coming days in an effort to generate public awareness and involvement.