Tuesday, March 4, 2003
Lula warns that reforms will take time
Posted by sintonnison at 11:23 PM
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brazil
news.ft.com
By Raymond Colitt
Published: March 3 2003 18:32 | Last Updated: March 3 2003 18:32
In four attempts over the last 14 years to win presidential elections, Luiz Inácio Lula da Silva was seen as too radical to govern Brazil. Now that he is in office, he is concerned at being seen as too conservative.
Having run on a platform of far-reaching social and economic change, Mr Lula da Silva has come under fire from critics on either extreme of the political arena. Austere economic policies including tough budget cuts and tight monetary policy, they say, are a continuation of the government of Fernando Henrique Cardoso, his social democratic predecessor.
In response, Mr Lula da Silva has gone out of his way in recent weeks to justify economic austerity and explain that his plans for a more equitable society will take time. Behind the message is an attempt to manage enormous expectations and sustain his popularity.
Last week the Lula da Silva administration fired back at critics with an advertising campaign on national television and radio that sought to justify his gradualist approach during the first two months in office. Comparing Mr Lula da Silva's reform plan with the restoration of a house, a young actress against the backdrop of a Brazilian flag said: "You cannot tear down all the old walls at once. You need a lot of patience and care." The one-minute television spot continued: "President Lula's commitment is not with haste but profound change with security and serenity."
Earlier in the week, Mr Lula da Silva sought to rebuff criticism that too much debate within his government was delaying proposals for structural reforms. "Structural reform will happen but it's like harvesting fruit," he said. "You cannot be hurried and pick it while it is still green. The people will taste it, not like it and spit it out."
During an unusual visit to congress in February, Mr Lula da Silva sought to blame recent interest rate rises and draconian budget cuts on the threat of war in Iraq. Yet in the attempt, the Brazilian president sounded more of a continuity man than an agent of change, repeating almost verbatim the same justification Mr Cardoso had given congress in 1999.
"Basically his words are the same as ours a few years ago," says Tasso Jereissati, a prominent senator in PSDB, the social democratic party. "I think it's great that Lula speaks our language," he mocks.
The PSDB launched its own media campaign, belittling Mr Lula da Silva's policies - particularly his flagship "zero hunger" social programme - as a continuation of their own. "The battle against hunger is not starting from zero," said José Anibal, PSDB president, in an advertisement also aired on national television. The PSDB's broadcast sought to showcase the party's achievements in education, housing and health during its eight years in government.
Radicals within Mr Lula da Silva's own Workers' party (PT) have been equally disappointed with their leader's about-face. A handful publicly criticised his choice of central bank chief, interest rate rises, and reform plans to cut social security and labour benefits.
Mr Lula da Silva's public relations management in coming months will be the key to selling his ambitious legislative agenda to congress and the general public. For now, many are still giving him the benefit of the doubt and his new image as a moderate reformer seems to have worked for public opinion.
"The PT came into government with a number of untested projects and ideas but quickly had to adapt them to the adverse economic reality of the country," says Walder de Goes, a Brasilia-based political analyst. "It was inevitable this would trigger criticism but I think they are handling it well. I give Lula's honeymoon a year, which is more than many other presidents had."
Colombia's Ecopetrol makes major oil find
Posted by sintonnison at 11:21 PM
in
Colombia
www.upi.com
By Owain Johnson
UPI Business Correspondent
From the Business & Economics Desk
Published 3/4/2003 1:55 PM
CARACAS, Venezuela, March 4 (UPI) -- Colombia's state-owned oil producer Ecopetrol has announced a record discovery of crude oil deposits, which amounts to up to 200 million barrels of light crude in the north of the country near the Venezuelan border.
The Minister of Mines and Energy, Luis Ernesto Mejia, hailed the find and said Tuesday that it would be "extremely positive" for the economy.
U.S.-based multinational Occidental Petroleum, or Oxy, had done several joint surveys with Ecopetrol in the region, known as the Samore Exploration Block, in recent years, but recently abandoned the project after failing to locate any oil.
Ecopetrol later decided to proceed on its own and was rewarded with the large find.
Ecopetrol President Isaac Yanovich did warn that "it is still impossible to determine the size of the deposit" but confirmed the company expected reserves of about 200 million barrels.
It will take about two weeks to confirm the size of the deposit and the quality of the crude.
"The most important aspect of this discovery is that this is 100 percent an Ecofuel project," Yanovich said. "That means that the reserves and the production based on those reserves will belong entirely and exclusively to the nation."
The government gave Ecopetrol and Oxy joint rights to exploit the Samore Exploration Block in 1991, when analysts estimated the region could hold up to 1.4 billion barrels of crude.
The project proved a costly failure for the U.S. company, which faced enormous hostility from the local U'wa indigenous community and constant security threats from leftist rebels in the area.
These factors prevented Oxy from beginning drilling in the area for close to a decade. By May 2002, the company had invested $100 million and drilled a 12,000-foot well known as Gibraltar 1, but had only discovered gas deposits.
At that point, Oxy, which had faced repeated guerrilla attacks on its crucial Cano Limon pipeline, cut its losses and handed the prospecting rights back to the Colombian authorities.
Ecopetrol restarted exploration in the area in November with an additional investment of about $10 million. The company hit crude at Gibraltar 1 at 12,050 feet, just 50 feet further down than Oxy had drilled.
Mejia said that it would cost about $150 million to begin production at the site.
The discovery couldn't have come at a better time for Colombia. Experts had warned recently that the country would be forced to import hydrocarbons within 14 months, as falling productivity and exploration meant Ecopetrol's output wasn't keeping pace.
Colombia was a net importer of hydrocarbons between 1975 and 1986 -- when it became self-sufficient. By reducing the need for imports, the find will help the trade balance and the profits its generates for the state-owned firm will help the fiscal balance.
Although oil is Colombia's top export commodity, the industry has often been overlooked internationally, partly because of its vulnerability to rebel groups.
Colombia's leftist guerrillas consider oil companies legitimate targets. Foreign oil workers run the risk of kidnap and companies frequently pay "taxes" to prevent damage or destruction of their installations and pipelines.
But as Ecopetrol's find demonstrates, there's great potential for major discoveries in Colombia. Unlike its neighbor Venezuela, about 70 percent of Colombia's sedimentary areas have yet to be properly explored. Only seven of its 18 sedimentary basins are being commercially exploited.
If the authorities can improve security, the country would be well-placed to benefit from the U.S. government's desire to diversify oil imports, particularly as Colombia isn't an OPEC member and faces no output ceiling.
After Carnival, Brazil's Lula Faces Crucial Test - he says: a house is renovated not by destroying it, but by reconstructing it wall by wall
Posted by sintonnison at 11:17 PM
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brazil
reuters.com
Mon March 3, 2003 12:36 PM ET
By Axel Bugge
BRASILIA, Brazil (Reuters) - The end of annual Carnival celebrations this week will mark an important testing period for Brazil's new President Luiz Inacio Lula da Silva.
The country traditionally comes back to life after slumbering between New Year's Day and the pre-Lenten festival, and Lula, who was inaugurated on Jan. 1 as the country's first elected working-class leader, will face his first real challenges as public attention refocuses on politics.
His government has sought to encourage Brazilians to be patient by running television advertisements that explain a house is renovated not by destroying it, but by reconstructing it wall by wall. Analysts say this campaign aims to make it easier for him to undertake unpopular measures.
"I think people are getting the notion that things are going to be harder than expected," said Christopher Garman, a political scientist at the Tendencias consultancy.
Political analysts estimate that Lula, who enjoys strong popularity, has six months to a year before his charm with voters fades. His first tasks are likely to be reforms of the country's antiquated pension and tax systems, a program that may be tough to sell to Brazilians.
Since taking over the helm of Latin America's largest country, the Workers' Party government has taken tough economic measures such as sharply cutting spending and hiking interest rates to contain rising inflation, which is subduing growth.
Those moves have won favor for the former metals worker among investors, but they have also irked some members of his party who accuse him of following the previous government's policies.
And the moves are probably not quite what Lula had in mind when he promised during his election campaign to create millions of jobs and fight one of the world's worst income distribution gaps.
But the former firebrand labor leader knows that steering of his party toward the center and embracing market-friendly policies not only ensured him electoral victory but also meant he would have to defend such policies in government.
GREATEST EXPERIMENT IN HISTORY?
Vinod Thomas, the Brazil country director of the World Bank, which has thrown its weight and millions of dollars behind Lula's "Zero Hunger" program to feed the country's estimated 40 million poor, summed up the test Lula faces.
"Brazil is carrying out one of the greatest experiments in history of pursuing a bold social program with fiscal responsibility in an unusually tough external environment," he said.
Lula is spending Carnival on a farm with his family, and after festivities wind midweek, the time to deliver on the "experiment" will come.
According to Carlos Lopes, a political scientist at the Santa Fe Ideias consultancy in Brasilia, the Lula government appears to still be testing the waters. "This government has shown a certain worry about concretely doing things," he said.
In a traditional switch of many "new left" governments around the world, Lula has pledged to overhaul the debt-ridden public pension and cumbersome tax systems, reforms his Workers' Party opposed for years.
As public pensions sap $15 billion a year from government coffers, any reduction in costs would send a powerful signal to markets that Brazil's $250 billion debt burden -- which has been a persistent concern for investors -- can be contained.
Lula dedicated much time to the reforms during his first weeks in power, including establishing a special council of business, labor and social leaders to advise him and held a meeting with Brazil's powerful governors, who backed his push.
But despite his success in turning around strong popular opposition to these reforms dating from the center-right government of former President Fernando Henrique Cardoso, Lula has been slow off the starting blocks with concrete proposals.
Garman points out that Cardoso had legislative proposals on key issues ready in the second month of his rule.
Many observers agree that a quick success on these reforms could give him the space to turn to his social agenda.
HUGE POPULARITY
Still, despite high interest rates, high inflation, high unemployment and low growth, Brazilians adore him.
A poll at the end of January showed 78 percent of respondents expected Lula to do a good or great job, up from 71 percent in November. Nearly 70 percent in the same poll saw him living up to his campaign promises.
"He'll have a significant amount of time, this popularity won't evaporate this year," predicted Garman.
Carlos Pio, a politics professor at the University of Brasilia and partner at the Augurium consultancy, said Lula will probably decide to push votes in Congress "straight after Carnival," paving the way for the key reforms.
Even if all the largest centrist parties in Congress support reforms -- as they did when they were in power for eight years -- Lula should seize the moment to move quickly as waiting carries risks, analysts say.
For one, Brazil's Congress is infamous for moving at a snail's pace, meaning full passage of pension and tax reforms may not happen until well into the second half of the year.
"I am optimistic on the politics but pessimistic on the timing of reforms," says Garman.
One way to speed up the reform process would be to bring the largest centrist party in Cardoso's coalition into the government through talks which are intensifying. Inclusion of the Brazilian Democratic Party in the government would give it a healthy congressional majority which it now lacks.
The success of such talks, in turn, could depend on the extent to which Lula's government can escape being perceived as just continuing the tough economic measures of Cardoso's reformist, free-market administration.
"To what extent does this government have the force to carry out the policies of Fernando Henrique Cardoso?" asked Pio. "In six months that could become a risk. High expectations can fall rapidly."
Oil Soars As Turkey Mulls Vote on U.S. Troops
Posted by sintonnison at 11:11 PM
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oil
www.morningstar.ca
4 Mar 03(3:35 PM) | E-mail Article to a Friend
By Andrew Mitchell
NEW YORK (Reuters) - Oil prices rose nearly 3 percent on Tuesday as the United States stepped up its military build-up in the Gulf and dealers speculated Turkey would ultimately agree to allow U.S. troops to use its territory as a launchpad in any attack on Iraq.
U.S. light crude rose $1.01, or 2.8 percent, to $36.89 a barrel, about three dollars below 12-year highs hit late last week. In London, Brent crude settled 61 cents higher at $33.09.
The gains marked a rebound from sharp losses on Monday after the Turkish parliament voted against allowing U.S. troops to use Turkish bases for a possible attack on Iraq, the world's eighth biggest oil exporter.
Turkish Foreign Minister Yasar Yakis indicated on Tuesday the government was considering a new parliamentary motion to approve the deployment of U.S. troops.
"It's fair to say that a lot more pressure is being put on Turkey," said Rob Laughlin of GNI-Man Financial.
Oil prices have risen 20 percent since the start of the year on fears that war in Iraq could upset supplies from the Middle East which pumps a third of the world's oil.
U.S. President George W. Bush has said the United States will oust Iraqi President Saddam Hussein by force if he did not surrender his alleged weapons of mass destruction.
The Pentagon announced it is sending 60,000 more troops to the Gulf, to join a massive build-up of more than 250,000 U.S. and British forces already in the region for a possible war with Iraq.
Washington wants U.N. Security Council support for possible military action, but France, Russia and China -- three of the council's five veto holders -- say U.N. arms inspectors in Iraq should be given more time.
Russian Foreign Minister Igor Ivanov said on Tuesday that his country will not support any measure leading to a war in Iraq and may wield its veto power at the Council for that purpose.
Chief U.N. weapons inspector Hans Blix will give his next briefing to the U.N. Security Council on Friday.
STOCKPILES LOW
Anxiety about possible disruption of oil supplies should war be declared is all the more acute because fuel stockpiles in the United States -- which consumes a quarter of global oil supply -- are already at perilously low levels.
Crude stocks are at the lowest level since 1975 after an oil strike in Venezuela drained inventories. Supply reports to be published on Wednesday are expected to show a further draw on stocks after recent Arctic weather in the United States.
Meanwhile, U.S. households are facing all-time high heating oil and natural gas prices strengthening concern that rising energy costs could further sap an anemic economy.
OPEC officials have pledged that the Organization of the Petroleum Exporting Countries, which meets in Vienna next week, would abandon its production quotas and pump at will in the event of war.
Leading OPEC producer Saudi Arabia already is pumping nine million barrels per day of its 10.5 million bpd capacity and most others in the cartel have no spare production.
If OPEC has insufficient spare capacity, consumer countries represented by the Paris-based International Energy Agency have said they will release emergency strategic reserves for the first time since the 1991 Gulf War.
The chairman of the world's biggest oil company Exxon Mobil said on Tuesday the United States could release emergency crude reserves if there is war with Iraq, depending on the extent of disruption to oil supply.
"It's clear if there's going to be a war, then Iraq is going to stop exporting," Lee Raymond told analysts in New York.
U.S. Energy Secretary Spencer Abraham said last week that the United States was prepared to act quickly to release emergency crude oil reserves if needed to offset a severe disruption to Middle East supplies.
AES Defaults Again on a Brazil Payment
Posted by sintonnison at 11:09 PM
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brazil
www.nytimes.com
By BLOOMBERG NEWS
ARLINGTON, Va., March 3 (Bloomberg News) — The AES Corporation, which generates power in 32 countries, said today that a unit defaulted on a $330 million payment due a Brazilian government bank, and the lender may take AES's stake in Latin America's largest electric utility.
The bank can demand immediate payment of $605 million after refusing to extend Friday's deadline, AES said. AES also missed a $35 million payment in January. The debt is backed by the AES stake in Eletropaulo Metropolitana, São Paulo's utility.
AES, which is based in Arlington, wants the bank to restructure its Brazilian debt, saying Eletropaulo has not generated enough cash to make the payments after the decline of Brazil's currency. President Luiz Inácio Lula da Silva faces political demands that he consider reclaiming the utility, part of a sell-off of state assets that attracted investment of $150 billion in the 1990's.
The Brazil National Bank for Economic and Social Development refused to postpone the payment.