www.sfgate.com Thursday, January 30, 2003

(01-30) 07:13 PST SAO PAULO, Brazil (AP) --

Two major U.S. banks are pulling back from Brazil, joining a growing number of foreign banks reducing their exposure to South America's largest economy after taking a beating in the markets last year.

J.P. Morgan Chase & Co. said this week it will sell its Brazilian asset management division, J.P. Morgan Fleming Asset Management, to Banco Bradesco for an undisclosed price. About $1.9 billion in assets will be transferred to Bradesco, Brazil's largest privately owned bank

Meanwhile, Bank of America will cut about three-fourths of its work force of 200 in Sao Paulo, eliminating its investment banking operation.

The moves came three weeks after Spain's Banco Bilbao Vizcaya Argentaria sold its Brazilian retail and investment banking operation to Bradesco for $600 million and a 4.5 percent stake in Bradesco.

Volatility in Latin America markets last year was a major reason why the banks decided to scale back. Brazil's currency, the real, lost 35 percent of its value last year while the main stocks index fell 17 percent.

Brazil's interest rates, inflation and unemployment remain high in a sluggish economy despite pledges by the administration of the country's new leftist president, Luiz Inacio Lula da Silva, to maintain sound fiscal policies.

Silva, who took office Jan. 1, has generally pleased investors with the appointment of fiscal moderates to key economic posts and a pledge to honor Brazil's obligations, including massive foreign debt.

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While potential conflict in Iraq took centre stage at this year's World Economic Forum and World Social Forum -- both of which concluded this week -- participants also addressed international trade, the WTO and the next WTO Ministerial in Cancun. The World Economic Forum (WEF) took place in Davos, Switzerland from 23-28 January, while the World Social Forum (WSF), an event originally organised as a response to the former, was held in Porto Alegre, Brazil, on the same dates. The WEF, which brings world leaders, especially corporate representatives, together to address global citizenship and various other global challenges, was organised under the heading of "building trust." The WSF, which aims to unite a diverse body of groups and individuals opposing neo-liberalism and the current form of globalisation -- if not the trend of globalisation itself -- focused instead on the theme of peace.

Brazil's Lula - a bridge between the forums

Brazilian new president and former union leader Luiz Inacio Lula da Silva (also known as Lula), attended the two forums, bringing the same message to both: "another world is possible." He stressed the need to close the gap between rich and poor nations, especially through the eradication of hunger. He also said he saw no reason why parties at both events should not be able to come together and learn from one another, likening them to unions and management. He stated that once they begin a true dialogue, the challenges become less great than when the two sides refuse to talk.

On the issue of trade, Lula -- a leftist previously known for his opposition to the Free Trade Area of the Americas (FTAA) -- stated that Brazil needed to make "extraordinary effort(s)" to increase the nation's international trade, particularly by enhancing exports through diversification of products and markets. He also targeted wealthier nations, however, saying that "all the export effort that [poorer nations] make will be useless if countries continue to preach free trade on one side and practice protectionism on the other side." Dealing with bilateral issues, Lula vowed to enhance the South American Mercosur agreement, create a "more positive" US-Brazil relationship, and make efforts with Europe and Asia.

War and trade

A great deal of concern was voiced this year at the WEF, as participants made links between a possible war with Iraq to higher oil prices and potential continuation of difficult global economic times. At the WSF, other economic concerns in relation to the threat of war were raised. Some activists said that the conflict could hurt developing country bargaining positions at the next WTO Ministerial in Cancun (in September 2003). Martin Khor of the Malaysia-based Third World Network said that a conflict could distract developing nations from planning for the negotiations, and could allow industrialised countries to bring in new issues. Khor felt that the US had previously used 11 September as a tool to pressure other countries to accept its proposals at the last Ministerial in Doha.

Friends of the Earth International (FoEI), with delegations both at the WSF and to the 'The Public Eye on Davos' counter-conference in Davos, argued that the WEF was directly linked to the creation of the WTO and the North American Free Trade Agreement (NAFTA). FoEI stressed that WSF is "vital to formulate alternatives to neo-liberal economic globalisation policies and to review ways to minimise the negative impact of a corporate-led globalisation process."

What business needs, or needs to give

At a WEF event entitled "Next Trade Round: What Business Needs," Niall FitzGerald, Chair of Unilever UK, highlighted global poverty and the necessity to responsibly address this issue. He noted that "there is a rising tide of discontent and anger in the developing world and we need to understand that and address it." FitzGerald stressed the connection between trade and growth and the dangers to trade should the discontent over global resource use and access go unchecked. He went on to say, "If we want to defend prosperity and security, we have to attack poverty. If we don’t we will pay for it. This might be seen as enlightened self-interest, but for me it's a moral issue."

Other participants who were surveyed at the WEF event on the next trade round believed that for the next WTO trade negotiation round to be a success, four key areas must be addressed, including:

• Trade-distorting agricultural subsidies, especially in the EU and US;

• Markets must be opened in developed countries for textiles and other products from developing countries;

• Significant liberalisation of most major service sectors must be agreed, and this must include "the movement of natural persons" or labour mobility from developing countries to the rich economies; and

• Agreement must be reached urgently on adapting the Agreement on Trade- related Intellectual Property Rights (TRIPs) to allow poor countries to acquire cheap medicines, wherever they are available, to tackle AIDS and other health crises.

"100,000 expected at the World Social Forum," CWI BRAZIL, 23 January 2003; "WEF vs. WSF," PRAVDA, 24 January 2003; "Davos Versus Porto Alegre, Round Three," PRESS RELEASE, Friend of the Earth International, 15 January, 2003; "Brazil's Lula: 'Another World Possible," UPI, 23 January 2003; "Dialogue with the President of Brazil on Global Governance," WEF, 26 January 2003; " Remarks from President Lula da Silva of Brazil," WEF, 26 January 2003; "World Social Forum: War on Iraq would Affect WTO Trade Talks," IPS NEWS, 25 January 2003; "Next Trade Round: What Business Needs," WEF, 25 January 2003.

news.ft.com By Raymond Colitt Published: January 30 2003 4:00 | Last Updated: January 30 2003 4:00

Mercosur, the four-nation South American trade bloc, is preparing to broaden its latest tariff proposal in trade negotiations with the European Union, José Alfredo Graça Lima, Brazil's ambassador to the EU, said.

The statement comes during a three-day visit by Pascal Lamy, the EU trade commissioner, to Brazil in an effort to work with the newly elected leftwing government of President Luiz Inácio Lula da Silva to kick start sluggish free trade negotiations.

washingtontimes.com -0-      The left has a new star -- Brazil's President Luiz Inacio Lula da Silva. A recent article in the French daily Le Monde, no less, called him an inspiration for France's recently defeated leftist parties. The headline was: "Can the French left learn from the Brazilian model?" And of course the writer, Socialist Deputy Jean-Christophe Cambadelis, concluded that it can. The election was Lula's fourth attempt and French Socialists would do well to study his perseverance, Cambadelis wrote. Closer to home, the election of Ecuador's Louis Gutierrez, a moderate leftist, was attributed in part to the impact of Lula's sweeping victory, raising the question whether the left is poised for a comeback in Latin America. Lula also won praise for creating the "Friends of Venezuela Group" to help resolve that country's ongoing general strike. Reformist-minded Latin Americans are looking to him for a lead on such continent-wide problems as political corruption and mismanagement. The irony is that he has alienated segments of his own Workers' Party, who think he is watering down his socialist programs. But you can't please all the people all the time. -0-      If Iran, Iraq, and North Korea form an "Axis of Evil" in President Bush's view, does that make Britain, Spain, and Italy an Axis of Good? The leaders of all three countries -- Tony Blair, Jose Maria Aznar, and Silvio Berlusconi -- continue to support Bush's hard-line view of Iraqi leader Saddam Hussein's regime despite rising public opposition in their respective countries to war against Iraq. An eventful week that started with the weapons inspectors' report to the United Nations and Bush's State of the Union speech will end with a flurry of consultations between Bush and the members of the good axis. On Thursday, Berlusconi flies to London for breakfast with Blair on his way to Washington for lunch with Bush. Then on Friday Bush flies to Madrid for talks with Aznar, and goes on to Washington to spend the weekend at Camp David, the presidential weekend retreat. Aznar himself is scheduled to visit Washington, but not until early June. And it may all be over by then. The word is that Blair and Berlusconi will get a preview of Bush's full "secret case" -- the secret intelligence Secretary of State Colin Powell will make public next month, which they have so far only seen in part. -0-      This year around 1,200 U.S. companies will receive windfall checks from the U.S. Customs Service ranging from a few hundred dollars to more than $60 million because American consumers preferred to buy foreign. They can thank West Virginia Democratic Sen. Robert Byrd for this money. It was Byrd who maneuvered through Congress the cumbersomely named Continued Dumping and Subsidy Offset Act of 2000. Cumbersome or not, it is still music to the ears of manufacturers because it is designed to compensate them from revenue lost to foreign imports. The checks are tariffs imposed on their overseas competitors when they manage to convince Washington that the imports are harming their profits. Last year, the number of claims rose to 1,200 from 900 in 2001, when the program was introduced in its present form. Award money increased to $329 million from $230 million in 2001. The bad news is that the bonanza may be short lived. The European Union and eight other countries complained in December 2000 to the World Trade Organization about the act. The WTO ruled in September 2002 that the act was illegal and recommended that it be repealed. Not surprisingly, Washington appealed the decision; the WTO's response is expected later this month. -0-      Bush's fervent support of Taiwan has puzzled many Washington watchers. One factor influencing Bush might be the joint U.S. National Security Agency-National Security Bureau signals intelligence, or SIGINT, facility in Yangmingshan in suburban Taipei. The NSA-NSB base, established in the mid-1980s, allows Washington to intercept Chinese military communications in Nanjing and Guangzhou, permitting the spooks to eavesdrop radio traffic from up to 310 miles away. The base has 10 antenna masts, of which six are high-frequency "Fix-6" or "6 Element" dipole antennas in a circular configuration that can be used for both interception and direction-finding. Seventeen satellite dishes near the antennas allow data to be up-linked directly to the NSA. The base is particularly focused on China's strategic nuclear Second Artillery corps; Taipei fears that they could fire up to 400 Dong Feng-11 (M-11) and DF-15 (M-9) tactical ballistic missiles against the island. These days Yangmingshan is doubly crucial to the U.S. eavesdropping intelligence effort: Washington lost its Hong Kong base when the colony was returned to Chinese sovereignty by Britain.

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By ADALID CABRERA LEMUZ | Associated Press 02/01/2003 Brazilian President Luiz Inacio Lula da Silva speaks at a ceremony in Brasilia Thursday, where he launched his anti-hunger program. The program will provide $14 a month to 1.5 million families. - AP |

BRASILIA, Brazil — The government's long—awaited plan to eradicate hunger in Brazil has triggered a hail of criticism that it's vague, timid and flawed.

The "Zero Hunger" program, announced Thursday by President Luiz Inacio Lula da Silva, fell short of expectations. Only seven of the expected 60 measures were announced, although the government said the rest would come later.

Even Silva seemed to sense that something was missing. A fiery orator, he announced the plan in a subdued speech that drew only polite applause from an audience of 500 politicians and celebrities.

Many expected a more concrete plan from Silva, Brazil's first elected leftist president. At his Jan. 1 inauguration, Silva said his top priority was to eradicate hunger among the estimated 46 million Brazilians - nearly 40 percent of the population - who survive on less than US$1 (3.50 reals) a day.

"The war on hunger is still on paper because no battle fronts were identified, just objectives without specific goals," political analyst Franklin Martins said Friday on the CBN radio network.

Martins said Silva had essentially outlined broad targets such as improving health, education and sanitation "but he didn't say how he plans to achieve them."

Specifically, Silva promised to double funds for school lunches for children aged 4 to 6.

He also pledged to provide $14 (50 reals) a month to 1.5 million families. The first payments are to start next week to 1,000 poor families in Guaribas and Acaua, in the arid northeastern state of Piaui.

But critics questioned how the money will be distributed. Some families will get a kind of debit card to draw funds from a government bank, while others, in the remote interior, will receive coupons similar to food stamps.

Jose Graziano, the federal secretary of food security, said the coupons will be good for almost anything except tobacco, alcohol or soft drinks, and families must produce some kind of proof of purchase.

The demand to ask poor people for receipts would only add another layer of bureaucracy and produce no real gain, Zilda Arns, the chairwoman of the Children's Pastoral group - a respected church group helping poor children - and a member of the new National Council of Food Security, told television cameras.

The government's requirement was not meant to be a control mechanism, but rather an educational measure to direct people on how to use their assistance money in the most efficient way, Graziano said in an interview with O Globo television Friday.

Graziano added that the government intends to give women the role of controlling the program to prevent fraud. "In Guaribas, for example, there are already mothers controlling merchants. We have to believe that this works out," he said.

Yet, it also was unclear how the government would decide who's eligible for the program.

Guaribas Mayor Joao Santos said only about half the town's families would qualify for the program, adding that what the region really needed was more jobs.

Joao Pedro Stedile, a leader of the Landless Rural Workers Movement, said radical changes in Brazil's market-oriented economy were required to end hunger.

"A declaration of good intentions won't resolve hunger," said Stedile, a long-time supporter of Silva.

The program also has received some 3 tons of donated food, but it's not clear how the donations will be collected, stored and distributed. Graziano said details would be worked out later.

"A lot isn't clear," admitted Katia Maia, a public policy advocate for the anti-poverty group Oxfam International. "But it's a long-term project, and this is a big step forward."