ens-news.com By David Dudenhoefer

BRASILIA, Brazil, March 3, 2003 (ENS) - A recent cut in Brazil's federal budget of 14.1 billion reals (nearly US$4 billion) could make it difficult for the country's Environment Ministry to maintain its varied programs.

Last month the administration of President Luiz Inacio Lula da Silva, popularly known as Lula, announced a "temporary" cut of nearly 23 percent from the federal budget for 2003, promising that funds would be reinstated if the economy improves. The Environment Ministry's budget was slashed by almost 57 percent, from approximately 786 million reals (US $220 million) to 340 million reals (US $95 million), although the ministries of Health, Education, and a new program to combat hunger suffered only minor cuts.

Lula, the leader of Brazil's left leaning Workers Party, assumed the presidency on January 1 amidst widespread popular celebration. He has since surprised supporters and critics alike by adopting neo-liberal economic policies. While members of the international environmental community praised Lula's appointment of activist Marina Silva to head the Environment Ministry, the recent budget cut will hinder her to ability to institute change. She has until mid-March to come up with a new budget for the ministry.

The Lula administration cited several reasons for the budget cut, but observers note that it is closely linked to a decision to raise the target for the country's budget surplus from 3.75 percent of gross domestic product - a level demanded by the International Monetary Fund last year - to 4.25 percent of gross domestic product.

Lula may have little choice since he needs to boost the value of Brazil's national currency, the real, which fell significantly against the dollar once it became clear he would win the presidency. Brazil is scheduled to pay more than $7 billion of its foreign debt this year, much of which is pegged to the U.S. dollar.

"It's very bad for a new administration to begin by the cutting budgets," said Adriana Ramos, a public policy expert at Brazil's Instituto Socioambiental. Though she admitted that the Lula administration is in a difficult position, she lamented the decision to continue a trend established by the previous government, which cut the Environmental Ministry's budget several years in a row.

Ramos claimed this budget cut is not as severe as it appears, since the original 2003 budget allocated much more money for the Environment Ministry than was spent the previous year. She explained that after the cut, the ministry's budget is only about 15 percent less than what it spent in 2002.

Seasonal rainforest in bloom in eastern Brazil (Photo courtesy U. Texas-Austin) Many people might consider $95 million insufficient funds for natural resource management in a nation the size of the United States minus Alaska. However, many of Brazil's major environmental projects receive significant funding from foreign governments and international organizations.

Ramos said a priority for the ministry is to prevent the budget cut from effecting bilateral projects that require the Brazilian government to match foreign contributions.

"If Brazil doesn't pay its part, it won't be able to use the foreign funds," she said. "By guaranteeing its matching funds, [the ministry] can guarantee that most of its programs will be maintained."

Ramos said that the current situation presents a special challenge for nongovernmental organizations. "We need to get resources from other sources, such as international cooperation and private enterprise," she said.

While some countries have cut foreign aid to Brazil in recent years, on the grounds that it is in better shape than many African and Asian nations, Ramos noted that her country still needs help to protect its vast natural resources.

"The conservation of biodiversity and environmental services in Brazil is a global concern," she said.

www.theatlantic.com D.C. Dispatch | March 4, 2003

Some of our allies act like spoiled teenagers who badmouth their parents while they're living off of them by Stuart Taylor Jr. .... Imagine President Bush responding as follows to the latest rebuffs from France, Germany, South Korea, and others and to the stunning surge of anti-Americanism around the world: "Enough. The American people are weary of holding the world's rogue regimes and barbarians at bay in the face of sneers and obstructionism from faithless 'allies' such as France, Germany, and South Korea, who owe their freedom to America. So I have decided, with a heavy heart, to acquiesce in the profoundly misguided but implacable demands of world opinion and to end our efforts to disarm Iraq and liberate its oppressed people. From this point forward, my policy will be to defend the United States and our true friends. We will pull our troops out of Germany, the Persian Gulf, and South Korea. We will disengage from NATO and the United Nations. I will urge Congress to invest the savings in airtight border controls and missile defense. And I will begin a crash program to end U.S. reliance on Persian Gulf oil. "We will leave our critics to deal as best they can with nuclear-armed North Korea; with soon-to-be-nuclear-armed Iraq, Iran, and maybe Libya, Syria, and Indonesia; and with the nascent black market in doomsday weapons for terrorists. It has become clear that the United States and our friends cannot long prevent the spread of such weapons while nations such as France and Germany undermine our efforts and trade with our enemies." How would the French, Germans, Arabs, South Koreans, Chinese, and other America-bashers like that? It would be only a matter of time until Iraq or Iran, or both, took over the entire Persian Gulf region. That would send oil prices to unprecedented levels and drag European, Arab, African, and Asian economies into recession or depression—and it would mean the bloody subjugation of the region's Arab peoples. Islamist terrorists, bent on destroying Western civilization, would find it far easier to attack targets in Europe than in the newly fortified United States. With North Korea's million-man army poised to sweep through Seoul and beyond, South Korea would face blackmail to unite on terms dictated by the North's Stalinist regime. China would soon find itself facing two nearby nuclear threats, as Japan would rapidly go nuclear to defend itself against North Korea. The point of this exercise is not to suggest that the time for such a lurch into isolationism has arrived. Not yet, at least. Pique is not a policy. And an unpoliced, anarchic world would be an economic and national security disaster for the United States as well as others. The point is to underscore how the Europeans, South Koreans, and others who have become so anti-American depend on American power—unthinkingly, ungratefully, and completely—for their well-being. Abdicating their own responsibilities to help maintain world order, they are free riding, as my colleague Clive Crook noted last week, on the same U.S. polices that they publicly denounce. Like a spoiled teenager who expects her parents to support her even though she refuses to do any work around the house and constantly mouths off to them, these nations enjoy the benefits of U.S. global policing while refusing to share in the costs and trashing the policeman. Take the views of many anti-war Europeans that Iraq should not be invaded but "contained." By whom? France? Germany? Belgium? They could not contain the two-bit Serbian tyrant, Slobodan Milosevic. And they have been no help—indeed, they have been a great hindrance—in containing Iraq. They want the U.S. to do it, through a costly, draining, long-term commitment of American forces. At the same time, they bash the U.S. for the military pressure and economic sanctions—"starving Iraqi babies"—that undergird containment. The ignorance and hypocrisy of the European free-riders is perhaps best illustrated by their clamoring that Bush is bent on a greed-driven "war for oil." But Bush could get a lot more cheap oil, a lot sooner, by joining the long-standing French-Russian push to lift the sanctions on Iraqi exports than by spending vast sums and betting his presidency on an invasion and occupation of Iraq. No American leader would dream of invading but for Saddam's persistence in seeking weapons of mass destruction. If Bush's goal were to grab an oil-rich colony for his corporate buddies, Venezuela would be a much easier target. It's true that the vast oil reserves in and near Iraq help drive U.S. policy—but not in a way that justifies European or Arab sneers. It is oil that brings Saddam enough money to buy and build weapons of mass destruction. And the regional hegemony he seeks would enable him to raise prices to extortionate levels. Every other nation in the world has at least as strong an interest as the United States does in denying Saddam such a stranglehold on the global economy. The tidal wave of anti-Americanism has multiple wellsprings, of course. Critics are understandably resentful of the Bush administration's arrogant demeanor; its disdain for international institutions, agreements, and diplomatic niceties; and its unqualified support of Israel's Ariel Sharon and his expansionist settlement polices. And they're understandably attached to a U.N.-centered vision of international law that has worked well enough in Western Europe—ever since America liberated and rebuilt the place—but is useless against terrorists and rogue regimes with weapons of mass destruction. Mix in German pacifism; Russian insecurity; French ego and cynicism; Arab self-pity, paranoia, and envy; and near-universal resentment of the world's only superpower. But underlying them all is the implicit calculation that the safest course for European nations (and others) is to obstruct American policies while free riding on American power. This calculation rests on two assumptions that may prove to be catastrophically wrong. The first is that as long as Paris and Berlin appease the Arab world and Europe's own militant Muslims, it will be New York and Washington—not Paris or Berlin—that are targeted for destruction by any weapons of mass destruction that jihadists obtain from Iraq or other rogue regimes. The second is that Europe need not share in the costs and risks of keeping rogue regimes in check, because Uncle Sam will do it for them. Similarly, most South Koreans have lulled themselves into assuming that the North will not attack them and that its nuclear buildup is America's problem. They seem to have forgotten that the main reason they are not under the boot of the Stalinist North already is that the United States rescued them 50 years ago and still protects them with 37,000 troops and the nuclear umbrella. Or perhaps they assume the U.S. will protect them no matter how much they spit on us. This assumption may be correct in the short run. Viscerally satisfying as it might be for the United States to offer North Korea a trade—you abandon nukes, we abandon South Korea—the North would no doubt sign the deal, do its best to take over South Korea, and then resume its nuclear buildup. All of this is somewhat analogous to the American public's isolationism while Hitler's armies were marching through Europe. Not our problem, Americans thought. Let England and the Soviet Union fight Germany. That seemed the best way to stay out of the war. But only in the short term. As President Franklin Roosevelt understood long before Pearl Harbor, German (and Japanese) aggression would eventually threaten America too. So FDR did all he could to change public opinion and help Britain fight the war. European or South Korean leaders with a long view would likewise see their own nations' interest in standing with America against the rogue states and barbarians. The reason is that even the American "hyperpower" probably lacks the will or the strength to carry the burden of world security for much longer, with little help from anyone but Britain, and in the face of increasingly widespread anti-Americanism. And unless someone stops the spread of doomsday weapons, anti-Western jihadists are probably within five to 15 years of obtaining enough of them—from Iraq, North Korea, or elsewhere—to endanger civilization as we know it. Jacques Chirac and Gerhard Schroeder should ask themselves: After New York and Washington and London have been destroyed or depopulated, how long before Paris and Berlin meet similar fates? It may be too much to expect the European and Arab publics, who are fed grotesque caricatures of Bush and America by their media and intelligentsia, to grasp their own interests in helping the United States defang Iraq. But wise leadership is about seeing one's national interest in the long term, and educating public opinion instead of pandering to it. The superficially clever Chirac and Schroeder are not wise leaders. They are fools. And they are helping to bring the world closer to a dark era of nuclear anarchy.

sg.biz.yahoo.com Tuesday March 4, 2:00 AM By Mike Esterl Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--U.S. stock and bond prices continue to part ways, but the divergence is proving far more dramatic in emerging markets.

Emerging market debt gained 3.6% in February, according to the J.P. Morgan Emerging Markets Bond Index Plus, pushing year-to-date returns to 5.5%. That easily outstrips profits posted in the U.S. sovereign debt market, which advanced 1.7% last month and is up 1.4% so far in 2003, according to the Lehman Brothers U.S. Treasury Bond Index.

Investors in emerging market equities, by contrast, had a rougher February than their domestic counterparts in the U.S. After a mild downturn in January, emerging market stocks fell 3.2% in dollar and local currency terms last month, worse than the 1.7% decline in U.S. equities, according to Morgan Stanley's MSCI index.

The latest data show that heady profits - and losses - are being booked in the volatile asset class again this year even as many global investors stick to the sidelines amid uncertainty over whether the U.S. will invade Iraq.

Market participants say the Iraqi overhang is stoking fears of another U.S.-led economic downturn amid a low-inflation environment, which is good news for bonds but bad news for stocks.

"The concern is about somewhat weaker growth. The concern is not about solvency," said Jose Barrioneuvo, head of emerging market strategy at Barclays Capital.

Brazilian bond prices, which plunged last year amid mounting solvency fears after neighboring Argentina defaulted on most of its $141 billion in public debts at the end of 2001, are rallying sharply this year, with bondholders posting a 7.5% return in February and 13% so far in 2003, according to J.P. Morgan's EMBI+.

Brazil's solvency concerns have been put on the back-burner in recent months, after the country secured a $30 billion emergency loan package from the International Monetary Fund last August. The new government has meanwhile been busily raising interest rates and preaching fiscal austerity since taking office Jan. 1 - all of which tends to stunt economic growth in the short term but is good for paying the bills.

Not surprisingly, investors in Brazilian equities aren't having as much fun as their fixed-income peers. The country's stocks dropped 4.1% in February and are down 8.1% in dollar terms so far this year, according to Morgan Stanley's MSCI. The numbers aren't much better in local currency terms, with prices in reals down 3.0% in February and off 7.3% in the year to date.

Emerging market stocks, hundreds of which trade on the New York Stock Exchange and Nasdaq, often take their cue from U.S. equities. Major U.S. stock indexes have posted three straight years of declines, casting a big shadow globally.

But while initial public offerings of emerging market shares have dried up since the Nasdaq bubble burst in early 2000, sovereign debt issuers continue to find a market. Mexico has issued $3 billion in sovereign debt in U.S. capital markets so far this year, and several smaller Latin American countries have also been able to issue new debt in January and February after a busy December.

In a survey of its emerging market fixed-income clients published last week, J.P. Morgan said cash balances fell to 3.1%, below a historic cash balance of 4.2%.

Even with Iraq-related uncertainties keeping investors generally wary, many global bond players are having a tough time turning down juicy yields at a time when U.S. Treasury spreads have narrowed to their lowest levels in decades.

Despite strong recent gains, emerging market bonds as a group are still trading at around 700 basis points above U.S. Treasurys. That means an investor can play it safe and earn a yield of less than 4% on 10-year Treasurys or take a chance on comparably dated emerging market paper that's paying close to 11%.

Nigerian bonds rallied 7.6% in February - the top performer in the EMBI+ - but still trade at a little more than 1500 basis points above Treasurys. The African country, which signaled last year it might skip some debt payments but stayed current in the end, is a major producer of oil, a hot commodity these days.

Anton Pil, head of fixed-income at JPMorgan Private Bank, said some investors are also viewing the U.S. corporate bond market as too pricey after debt spreads recently rallied to their tightest levels in half a year - providing further impetus for inflows into emerging market debt.

"I would expect to see that continue unless there's another significant increase in risk aversion, which isn't evident right now," said Pil, whose group advises high net-worth individuals.

As in the U.S., the disparity between the performance of bonds and stocks in emerging markets has a bit of a history. Emerging market bonds returned a whopping 14% last year, according to the EMBI+. Emerging market stocks, by contrast, dropped 8.0% in dollar terms and 9.1% in local currency terms in 2002, according to the MSCI.

Allan Conway, an emerging markets portfolio manager at WestAM, says his fund shifted some of its Brazilian equity allocations into debt last year to take advantage of attractive bond valuations.

WestAM remains cautious on Brazilian equities. But it continues to see interesting opportunities in the country's bonds, as President Luiz Inacio Lula da Silva toes a tight fiscal line and Brazil's ratio of debt to gross domestic product slips back below 60%.

"It's certainly not inconceivable seeing spreads contract by another 100 or 200 (basis points) if (Lula) keeps doing the right things," said Conway, who's based in London.

Brazilian debt was trading hands at 1163 basis points over U.S. Treasurys on Monday, according to the EMBI+.

-By Mike Esterl, Dow Jones Newswires; 201-938-4026; mike.esterl@dowjones.com

www.catholicnews.com

MIAMI (CNS) -- The people of Venezuela are suffering under the government of President Hugo Chavez, and the Catholic Church is suffering along with them, according to Archbishop Diego Padron Sanchez of Cumana. The Venezuelan archbishop, in Miami for a continental congress on catechesis, commented on the political unrest in his homeland during an interview with The Florida Catholic, Miami archdiocesan newspaper. "We do not even have the freedom to express ourselves," Archbishop Padron said, referring to the curtailing of civil liberties. The church has been the object of "rejection, of strong criticism. Offenses have been committed. Right now, it tends to be marginalized. We do not matter," the archbishop said. Government funding for Catholic schools and charitable agencies arrives late and often is less than what had been agreed upon, he said. But it is the people who are truly suffering, the archbishop said. Violence and corruption have increased and jobs have disappeared, to the point that fewer than 20 percent of the people currently support Chavez.

abcnews.go.com March 4 — By Carlos DeJuana

RIO DE JANEIRO, Brazil (Reuters) - Rio de Janeiro's famed Carnival parade came to a close at dawn on Tuesday after tons of body glitter and 20 hours of samba dazzled millions of viewers in Brazil and beyond.

Under threat from drug gangs that terrorized Rio last week, the two-day competition between 14 samba schools took place under its heaviest security yet as 3,000 army troops were called in to back up 30,000 police safeguarding the city.

It was the first time the army had to be deployed to help keep the city safe during the annual bash, an anything goes farewell to sin that ushers in the 40 days of Lent.

But the military presence did little to spoil the globally broadcast party, which was expected to draw nearly 400,000 out-of-town visitors, including 40,000 foreigners.

"You don't think you're going to make it, and then you hear all those people screaming and you get another burst of energy and just keep going," said Larry Karpen, a 34-year-old New Yorker who spent $125 to don a costume and parade before 70,000 cheering fans in Rio's massive "Sambadrome" stadium.

Decked out in elaborate, shimmering costumes, or as little as possible to avoid breaking the no-nudity rule, thousands of revelers in each samba school parade down a 700-yard (635 meter) runway backed by a thundering drum section and giant floats.

Each group is made up of about 4,000 people, many of whom have spent months rehearsing, and has 80 minutes to finish the course. They are judged on criteria including music, percussion, costumes, floats, originality and enthusiasm.

SOCCER AND VIOLENCE

This year's themes ranged from Brazil's African roots to its other national pastime, soccer. The Beija-Flor school used the event to denounce the poverty and violence rife in Brazil.

Beija-Flor's floats depicted smoky visions of hell, a violent car-jacking, hungry prisoners in squalid jail cells and, at the end, a massive likeness of Brazil's popular new president, Luiz Inacio Lula da Silva, who has promised to fight hunger and bridge the country's gaping income disparities.

"What we're telling is the story of humanity, and to do that we have to talk about what's going on in Brazil," said Beija-Flor's director, who is known simply as Laila.

Although purists complain Carnival has become too commercial as companies sponsor schools in exchange for what they say are ads disguised as samba themes, those who take part in the parade swear it is a one-of-a-kind experience.

"It was my first time but it won't be my last. I adored it," gushed Thais Nogueira, a 23-year-old drag queen and "Miss Gay Brazil" who paraded with the Unidos da Tijuca school.

The winning school will be announced on Ash Wednesday, when the festivities across the country officially come to a close.

Like every year, some sporadic violence flared up outside the Sambadrome and in the block parties that take place across a city as known for its crime as it is for its natural beauty.

Six people were shot and one was killed by police outside the stadium on the first night of parades after thieves swept through the area and assaulted passers-by. But police said the second night went off without any reported problems.

Over the weekend, an American tourist was shot in the leg while being mugged, but has already left the hospital.

Still, the incidents were a far cry from the coordinated attacks that rocked Rio last week, when drug gangs torched buses, set off firebombs and shot at police. Eleven people died in the violence.

Hoping to keep the city safe even after the tourist hordes go home, Rio's state authorities have asked that army troops remain in the city until month's end.

"People are scared, and they see an extra protection in the troops," said Jose Quintal, Rio's state security chief. (Additional reporting by Todd Benson)