news.ninemsn.com.au 14:26 AEST Sun 2 Mar 2003

AFP - Thousands of masked revellers let loose to a samba beat in the streets of Rio as the first Carnival watched over by Brazil's military for safety's sake hit its frenzied stride.

The muted military shades of armoured vehicles were juxtaposed with the usual flashy carnival fashions, from sequined bikinis to feathered headdresses on the heels of carnival's official start on Saturday.

The eastern military command declined to say precisely how many troops are out in force, days after a wave of violence by drug gang members, including bus torchings and intimidation, sent authorities scrambling to ensure the 400,000 foreign and Brazilian partygoers expected are not caught in the crossfire.

President Luiz Inacio Lula da Silva on Thursday gave the green light to send in 3,000 army troops to try to ensure safe streets for the week of frenzied parties, which already was being minded by 38,000 police officers.

It is the biggest show of force Rio de Janeiro has seen since it hosted the Earth Summit in 1992, when 150 heads of state and government converged on the UN meeting.

Earlier in the week, gangs torched about 30 buses, threw homemade bombs at shop fronts and forced several businesses and schools to close.

Authorities said it was a coordinated bid to get a drug baron freed from a prison outside Rio.

Frightened shop owners had closed their doors in some 20 neighbourhoods here on Monday under threats from gang members, as police patrolled the city trying to bring order back to the streets.

www.time.com March 10, 2003 | Vol. 161, No. 10 BY TIM PADGETT AND ANDREW DOWNIE | BRASILIA

The carnival celebration that sambas through the streets of Rio de Janeiro this week is traditionally a showcase of coordinated public spirit. Class divisions give way to elaborate, egalitarian parades involving millions of people and months of preparation. But this year even Carnival became a reminder of Brazil's poverty-driven violent crime, as drug gangs spread terror through Rio's streets last week on the eve of the big party, killing at least 10. It was one more loud warning that to maintain order over the long term, Brazil has little choice but to tackle its epic social inequality, which is the worst in Latin America, if not the world.

Brazil's fractious and venal political system is usually the last place to look for real leadership on this or any other issue. But these days, alongside images of the Rio bloodshed, there's an uncommon sight that even Brazilian politicians apparently can't ignore: the nation's World Cup-champion football team Sporting Fome Zero (Zero Hunger) T shirts in support of leftist President Luiz In á cio Lula da Silva's ambitious antipoverty program. The team's gesture reflects, for the moment anyway, a rare sense of unified national purpose in Brazil. Last week's headlines also included all 27 of the country's state governors pledging to help Lula and his Workers' Party (PT) achieve crucial tax and pension reforms that will make it easier to fund his social projects — and even Brazil's dysfunctional Congress looks poised to cooperate. "I have to prove I'm capable of doing what previous Brazilian Presidents couldn't," said Lula, who took office Jan. 1. Lula's challenge is to make Brazilian government — which oversees Latin America's largest economy and the world's tenth-largest — work. If he can make that happen, he'll achieve something even more remarkable: a leftist Latin American government that works.

Lula, 57, is pursuing his own, more poverty-focused version of the Third Way, the socialist-capitalist hybrid once touted by European leaders like British Prime Minister Tony Blair. His ultimate goal is to improve the lives of the poor as well as the rich — something the free-market reforms that swept Latin America in the 1990s failed to do — and he's betting that fiscal responsibility will yield more wherewithal to fund a Brazilian "New Deal" that includes everything from hunger eradication to land titles for squatters. This mix of ideologies is also evident in Lula's cabinet. The President himself is a high school dropout, former metalworker and labor union leader, but his handpicked Central Bank president, Henrique Meirelles, is a Harvard graduate and former president of BankBoston. Welfare Minister Benedita da Silva rose from a squalid Rio de Janeiro favela, or slum, and was Brazil's first black female Senator, while Vice President José Alencar is a textile multimillionaire from the right-wing Liberal Party. Culture Minister Gilberto Gil, a pop music star, sports dreadlocks; Chief of Staff José Dirceu wears power suits and helped guide Lula from labor socialist to the more centrist "Brazilian Blair," as Brazilian and Wall Street pundits have taken to calling him.

So far the mix of social crusade and fiscal discipline has won Lula an 84% approval rating — even though he has yet to score a real achievement — and unexpected applause from Wall Street, where frantic fear of him during last year's election campaign helped push Brazil's currency, the real, down by more than 50% against the U.S. dollar. "The left in Brazil has learned the hard way," says Meirelles, referring to decades of populist economic catastrophes that were finally halted by Lula's predecessor, Fernando Henrique Cardoso.

While the markets are now more cheerful about Lula, the PT's radical wing (more than a quarter of the party) seems devastated by his move to the center. They've groused especially loudly about Meirelles and Finance Minister Antonio Palocci, a physician who, as a PT mayor in the '90s, engineered a very unsocialist privatization of local utilities. Both men have pledged to adhere to strict economic targets that the International Monetary Fund set last year in return for a $30 billion loan to Brazil. Senator Heloísa Helena, part of a PT group that wants Brazil to default on its $208 billion foreign debt, says she is "sad and disillusioned" by the government. "Did we win," she asks, "just to be the good little boy for international bankers?"

But Chief of Staff and former PT president Dirceu — who as a radical student leader was exiled to Cuba from 1969 to 1974 by Brazil's military rulers before slipping back into the country with a surgically altered face — has made it clear, with a somewhat high hand, that party discipline now means not criticizing Lula directly. Because it took Lula and the PT 22 years and four elections to win the presidency, says one Lula friend, "he's more cautious about not flaming out and screwing up" like so many Latin lefties before him. In a closed-door meeting last month, Lula warned regional PT leaders, "We can't fail in this economic situation."

Dream Team Lula hopes his diverse cabinet will get the right mix of policiesHenrique Meirelles The Harvard-educated Central Bank president hopes to get inflation down to single digits Jose Dirceu An ex-radical, Lula's chief of staff has guided the President from the far left to a more centrist position Antonio Palocci A former mayor, the Finance Minister has pledged to keep to strict IMF targets Jose Graziano Da Silva As Food Security Minister, the former economist will run Lula's Zero Hunger project Benedita Da Silva Born in a Rio slum, Da Silva is set to help Brazil's poor as the new Welfare Minister

Lula realizes that an erstwhile socialist has to work that much harder to prove he's a market-friendly President. Revenue gaps recently forced Palocci to slash $4 billion from the $75 billion budget (Brazil's most austere in a decade), while Meirelles raised interest rates 4.5 points to 26.5% in hopes of keeping 2003 inflation to single digits. Lula won praise across the political spectrum when, instead of trying to please everyone, he postponed the purchase of fighter jets in order to boost funding for Zero Hunger.

Perhaps the most important — and most immediate — steps that Lula needs to take are pension and tax reform. Brazil has a millstone public bureaucracy: its salaries and pensions take more than 8% of the nation's $1 trillion gross domestic product. Reining in the corrupt pension system, simplifying Brazil's baroque tax code and combatting massive tax evasion could help Lula drop interest rates and free up at least $5 billion — more than half of Brazil's entire education budget — for projects like Zero Hunger. "This government's macroeconomic approach has been impeccable," says Paulo Leme, head of emerging market analysis at Goldman Sachs in New York, noting wryly that the PT used to oppose pension reform. "They understand now that what causes poverty in Brazil is the excessive size of the state."

Will Brazil's Congress understand that too? Lula's bond with the governors, who wield considerable influence over their congressmen, was a critical stroke. But the PT holds only 14 of Brazil's 81 Senate seats and 91 of the lower chamber's 513. In a bid for the support necessary to pass the reforms more quickly, Lula took the risky decision to back former President José Sarney for president of the Senate. Many in the PT view Sarney as a crony of the oligarchs who control the country's impoverished northeast. But the votes to be mined inside the progressive wing of Sarney's Brazilian Democratic Movement Party were too much to resist. Either way, Lula insists that what also leaves a third of Brazilians in poverty, and an estimated 46 million hungry, is gross inequality: 20% of the population receive 70% of the nation's income, while 3% hold almost two-thirds of its almost half a billion hectares of arable land. Lula is careful not to declare a soak-the-rich crusade, and his hesitancy to come out for stiff progressive taxation makes his party's left wing crazy. And it's too soon to tell whether his four-year, $1.5 billion Zero Hunger program will be enough to make good on his promise to the poor. It is his presidency's one indulged, untouchable priority. He has made it a special umbrella ministry, coordinating 60 programs, that is not unlike the new U.S. Homeland Security Department. "This is like war mobilization for us," says special Food Security Minister José Graziano da Silva, an economist and longtime Lula adviser. In addition to food relief, the ministry is charged with attacking the causes of Brazil's malnutrition, such as laughable rural infrastructure and the nation's paltry $60 monthly minimum wage, which Lula hopes to double by the end of his term in 2006.

More important, Graziano and ministers like Benedita da Silva say they're kiboshing the waste, inefficiency and indifference of Brazil's social-welfare programs, converting them from political patronage rackets to engines of economic growth.

Zero Hunger, says Graziano, "is meant most to raise the productive capacity of poor Brazilians." It includes churches, NGOs and, significantly, the private sector: Nestlé of Brazil, for example, will donate 1 million kg of food and 248 small homes to the program this year.

Graziano concedes that Lula will stand or fall on this issue when he faces re-election in 2006; but he declined to pinpoint a gauge for success. Still, says Walder de Goes, a prominent political analyst in Brasília, "If Lula achieves most of the goal of Zero Hunger his presidency will be a success — it will have changed the culture of inequality here. There's no example of change like this in our history."

But De Goes fears economic factors beyond Lula's control — global recession, war in Iraq — could keep him too cash-strapped to succeed. "This year all he can do is muddle through, but starting next year he has to produce real results," says De Goes, who wonders if Lula and his inexperienced team can manage that kind of pressure, especially when so many other Brazilian crises — like violent crime — can't wait either.

Financial analysts like Leme also worry that Meirelles, despite the rate hikes, isn't taking the perennial Brazilian threat of inflation seriously enough. But Meirelles argues that "we're not in recession, growth should be above 2% this year and we've lowered the current account deficit from 4.6% to 1.7% of GDP. We can handle the shocks." At the Davos Forum in January, Meirelles, a dancing enthusiast, slipped on the ice and broke his ankle. He can't samba this week — but if that's the only setback the government has suffered so far, Lula might be able to enjoy his Carnival after all.

With reporting by Sol Biderman/São Paulo

www.theage.com.au Monday 3 March 2003, 08:05AM

Officials in Rio have promised to keep tens of thousands of police and soldiers on the streets to safeguard partygoers, performers and tourists enjoying Carnival from any replay of the violence that wracked Rio last week.

Thousands of extravagantly costumed people filled Brazil's famous Sambadrome, whirling to a frenetic samba beat under the summer sun, while military police patrolled the streets in an unprecedented show of security during Rio's world-famous party week.

"These patrols will be kept in place as long as necessary," Rio state Governor Rosinha Matheus said, warning that they would shoot anyone trying to reignite last week's gang violence.

"The drug traffickers are facing the police and risking death. If that's what they want, that's what they'll get. There will be armed conflict, and if someone has to die, so be it," she said in an interview published in the Jornal do Brasil's Sunday edition.

The security deployment is the biggest show of force Rio de Janeiro has seen since it hosted the Earth Summit in 1992, when 150 heads of state and government converged on the UN meeting.

President Luiz Inacio Lula da Silva on Thursday gave the green light to send in 3000 army troops to try to ensure safe streets for the week of frenzied parties, which was being minded by 38,000 police officers.

Earlier in the week, gangs torched some 30 buses, threw homemade bombs at storefronts and forced several businesses and schools to close. Authorities said it was a coordinated bid to get a drug baron freed from a prison outside Rio, and a protest over prison conditions.

"The bandits were unsatisfied by the ending of privileges in prisons," Matheus said.

Near the Sambadrome, in downtown Rio, another kind of tension was palpable today -- the nerves of performers preparing for the final annual showdown. Over two nights, some 50,000 performers from 14 samba schools will parade before 65,000 spectators.

Parade themes this year include theatre, soccer, pirates and the history of blacks in Brazil. One group has taken on a particularly challenging theme -- organ donation.

Performers are strictly judged in 10 categories, including costumes, rhythm, and originality. A ripped costume, a loose sandal, the blocked wheel of a carriage -- even the smallest detail can cost a coveted victory in the samba showdown.

Leaders were holding last minute rehearsals and helpers were putting the finishing touches on the heavy headdresses of scantily clad models, dancers and actresses hoping to dominate the limelight.

Matheus urged participants and partygoers to forget fear and revel in the festivities.

"They wanted to shut down all business during the week. They didn't achieve that," she said of the instigators of last week's violence.

Asked if she was afraid, the governor replied: "Afraid? Me, no. Anyone could be attacked. If we are prisoners to fear, no one would do anything."

www.heraldsun.news.com.au From correspondents in Caracas 03mar03

A CAR bomb has exploded just blocks away from a Chevron office in a Venezuelan oil field, officials said. Local firefighter chief Ali Gil said nine people, among them a local strike leader, were injured in the blast at the Maracaibo field.

The car, which was said to be "full of explosives", was parked outside the home of Antonio Melian.

He participated in the crippling oil workers' strike designed to oust President Hugo Chavez, and police described him as "a very controversial figure" in the area.

The two-month strike ended in February after slowing oil production and exports to a trickle. Production has since revived.

Wreckage from the car was thrown about 150 metres, hitting neighbouring houses, local media reported.

The attack came five days after a double blast rocked the capital, injuring four and causing damage to surrounding buildings. The bombs exploded within a 15-minute interval, first near the Spanish Embassy and then in the vicinity of the Colombian consulate.

Maracaibo is the capital of Zulia state, located about 500km north-west of the capital on the border with Colombia.

www.planetark.org USA: March 4, 2003

WASHINGTON - Dwindling fuel supplies and soaring prices of crude oil and natural gas have President George W. Bush "greatly" concerned about U.S. energy costs, the White House said last week.

Jitters about a potential U.S. military strike against Iraq, a cold snap in Eastern states and a curb in oil imports from Venezuela have boosted energy costs.

Average U.S. retail gasoline prices may surpass a record $1.71 per gallon as the busy spring driving season approaches, according to federal energy forecasters.

"There has been a confluence of factors involving both the cold weather and a shortage of supply that have led to an increase in prices that concern the president greatly," White House spokesman Ari Fleischer told reporters.

Fleischer said the cost of energy remained "a very important issue" for both the president and the U.S. Congress, which is drafting a broad bill to encourage more energy production and conservation measures.

"There is a cyclical nature to some of this and we have seen the prices go up and down before," he added.

U.S. oil prices fell last week to $36.30 a barrel after a roller coaster ride that saw crude brush $40 a barrel the previous day, with the looming prospect of war in Iraq underpinning the market amid heated debate at the United Nations. A U.S. attack on Iraq, the world's eighth largest oil exporter, is opposed by Russia, China and France.

U.S. gasoline prices were up 54 cents a gallon this week from a year ago, according to federal data. Heating oil was up 59 cents and natural gas prices are four times higher than this time last year.

PRICE-GOUGING ALLEGATIONS

The price jump has prompted some Democrats to demand a probe into whether oil companies were taking advantage of fears of a war with Iraq to gouge consumers at the gasoline pump.

Sen. Charles Schumer, a New York Democrat, last week said U.S. Energy Department data showed major oil refineries were producing less gasoline than normal for this time of year.

U.S. refineries are operating at 87.5 percent of capacity, far below the five-year average of 92.3 percent, according to the department.

"This is a matter of simple economics," Schumer said. "Keeping supplies low raises prices and costs to drivers."

Oil companies deny they are doing anything wrong, arguing that crude inventories have fallen to the lowest levels since the 1970s, making it difficult for refineries to keep production above historical levels.

Democratic presidential candidate Sen. Joseph Lieberman of Connecticut denounced the White House's refusal to release heating fuel from the government's stockpile. A large number of Northeastern consumers use heating oil to heat their homes.

He called Energy Secretary Spencer Abraham "insensitive" for his comments earlier this week that Northeast consumers were not suffering enough from high prices or a supply disruption to use the 2 million-barrel heating oil reserve.

CRUDE OIL STOCKPILE

Some lawmakers and consumer groups have also urged the Bush administration to release oil from the U.S. emergency crude oil stockpile to rein in prices.

However, the administration has repeatedly said it would tap the 599 million-barrel Strategic Petroleum Reserve only for a severe disruption in crude supplies, not to control prices.

At a congressional hearing, lawmakers complained to Abraham that the more consumers had to spend on their heating bills or to fill up their car tanks, the less money they would have to buy the goods that keep the U.S. economy humming.

Businesses are also suffering because the cost of shipping products rises in tandem with trucking diesel fuel prices.

Chemical makers, manufacturers and other industrial plants have also been hit hard by natural gas prices, which climbed to record highs this week.

The spot market price for natural gas rose this week to $18.50 per million British thermal units, up five-fold from the average 2002 price. For every $1 rise in natural gas prices, the chemical industry faces about $1 billion in extra costs, according to the American Chemistry Council trade group.

A giant ethylene plant in Louisiana that makes plastics was recently closed and moved to Germany, where natural gas prices are cheaper and supplies are more predictable, the group said.

(Additional reporting by Patricia Wilson). Story by Tom Doggett