Brazil's newest president, Luiz Inacio Lula da Silva, has been sworn into office two months after being elected in a landslide victory. 02/01/2003 02:10 VOA

Tens of thousands of people cheered after the 57-year-old leftist politician and former labor leader was inaugurated Wednesday. Leaders and representatives from around the world, including Cuban President Fidel Castro and Venezuelan President Hugo Chavez, attended the ceremony in Brasilia. Inaugural festivities for the public are happening in the capital.

The new Brazilian president is an elementary (primary) school dropout and worked shining shoes as a boy. He rose from poverty in Brazil to become a prominent labor leader who launched three unsuccessful bids for president before clinching victory in October.

Mr. da Silva, of Brazil's Workers Party, won 61 percent of the vote in October's runoff election. His closest rival, government-backed candidate Jose Serra, received 39 percent support. President da Silva has promised to honor Brazil's financial commitments, keep inflation down and maintain fiscal stability. He says his administration will work with the International Monetary Fund to stabilize Brazil's finances. He has also pledged to create jobs and eliminate hunger.

Mr. da Silva, known widely as "Lula," has warned that difficult times are ahead for the country, and suggested he may not be able to fulfill his campaign promises during a single four-year term. He succeeded Fernando Henrique Cardoso. Brazil is battling high inflation and struggling with foreign debt totaling some $260 billion. In September, the IMF extended a $30 billion loan to Brazil to stabilize the economy amid uncertainty surrounding the election.

By David R. Francis THE CHRISTIAN SCIENCE MONITOR

The U.S. economy enters 2003 in a peculiar pinch - with its growth prospects squeezed by excesses of the past and burdens of the future.

Forecasters see the nation's economy growing a respectable 3.2 percent or so in 2003. For all of last year, too, the economy was expanding. Interest rates remain at 40-year lows.

But don't try to convince ordinary Americans - people who work, save in retirement accounts and drive cars - that hard times are over.

To many, the job outlook still feels bleak, a carry-over from the 1990s when many corporations expanded too fast. Investors, too, haven't returned to bullish ways, waiting instead for boom-time profits to reappear. And shoppers, carrying more debt than ever, are in no mood to party like it's 1999.

Meanwhile, oil and gasoline prices are up sharply from last year - a hint of the economic uncertainties posed by America's showdown with Iraqi leader Saddam Hussein.

All this puts a drag on what most economists still view as a period of economic recovery. Consumer confidence declined sharply in December, largely due to a discouraging job outlook, a private research group reported Tuesday. The New York-based Conference Board said its Consumer Confidence Index dropped to 80.3 from a revised 84.9 in November. Analysts had been expecting a reading of 88.0.

"There is a lot of dourness about the economy," says Brian Wesbury, chief economist for Griffin, Kubik, Stephens & Thompson, a Chicago brokerage house. "I'm not sure why."

But then he cites a list of troubles, from possible war to high energy prices and corporate malfeasance - all factors bothering consumers and business.

The growth rate forecast for 2003 isn't enough to shrink the 6 percent jobless rate soon. That has the attention of President Bush, who plans to propose further tax cuts to stimulate growth.

Consumer spending has been vital in lifting the economy out of the recession that began in March 2001 - a slump that has not been declared officially over.

But now, "households are finally facing up to the fact they are poorer for three years running," says Paul Kasriel, an economist at Northern Trust Co. in Chicago. Burdened with debt and shrunken investments, many consumers are starting to make a greater effort to save. The personal savings rate rose from 2.3 percent in 2001 to 3.9 percent in the first 11 months of 2002.

"If you want to retire before you expire, you have to save more," says Kasriel.

In addition to the stagnant stock market, many families aren't so sure that home values will rise as much as in the past.

The war factor The biggest cloud on the horizon is a possible war with Iraq.

"That will kill our quarter of growth pretty well," figures Cynthia Latta, an economist with Global Insight in Lexington, Mass. "Life gets put on hold while you stay at home watching CNN.'

Retailers are squealing over holiday sales because they have "over-stored," Latta says. Consumer spending in 2002 will have risen about 3 percent after inflation. But retailers have to cut this pie into smaller pieces because they have added stores at an even faster pace.

The threat of war and a month-old strike in Venezuela pushed oil prices above $30, up about 60 percent from a year ago.

If President Bush launches a war against Iraq at the end of January or early in February, the price of oil could shoot above $40 a barrel, hitting economies around the world. Should the war be brief, oil prices could plunge back to $25 a barrel, Latta guesses.

Michael Cosgrove, a University of Dallas economist in Irving, Texas, says it would be politically "expedient" for Bush to resolve both the Iraq and North Korea issues by mid-2003. The result would be a large drop in oil prices - a bigger economic boost than a tax cut. "If these issues linger into 2003 or 2004, that places his re-election in jeopardy," he says.

So far, inflation is not a problem. The consensus forecast is a rise of 2.2 percent in the consumer price index in 2003. That leaves the Federal Reserve free to maintain its relatively easy monetary policy. Most economists do not expect the Fed to raise rates any time before the second half of 2003, when economists anticipate an economic pickup.

Refinancing boom slowing Several factors are restraining growth.

Economists expect the amount of mortgage refinancing to slip perhaps in half in 2003 from the more than $200 billion of activity in 2002. That means fewer householders will have lower mortgage payments.

The amount of economic stimulus from government fiscal policy will also shrink. The shift from a $127 billion surplus in the federal budget in 2001 to a deficit of more than $200 billion this fiscal year gave the economy a shove. But even with a tax cut in late spring or summer, the push will likely not be so great in 2003.

Nonetheless, a federal tax cut could offset a drag on the economy of big state-budget cuts.

Federal tax cuts will enlarge the deficit and the national debt and, in effect, probably reduce the debts of consumers and businesses as they use some of their tax savings to ease financial burdens.

But the growth of salaries and other compensation has slackened. Many workers face larger health-insurance co-payments.

Nor will the U.S. economy get much help from abroad. Most economists see slow 2003 growth in both Japan and Germany, and possibly France and Italy.

Still, most economists consider the 2001 slump a mild one. Martin Sullivan, an economist writing for Tax Notes, a publication for the tax industry, puts figures from this past slump alongside the average of the previous five recessions. The unemployment rate of 6 percent compares with an average of 8.3 percent; a poverty rate of 11.7 percent with a 12.9 percent rate; a median family income of $42,228 with $36,945; and inflation rate of 2.1 percent with 6.3 percent, and an interest rate for a 10-year treasury bond of 4.2 percent with 11.8 percent.

From the International Desk Published 1/1/2003 3:21 PM View printer-friendly version

BRASILIA, Brazil, Jan. 1 (UPI) -- Luiz Inacio Lula da Silva took office Wednesday as the president of Brazil, Latin America's largest country. Known as Lula, the 57-year-old was sworn in at Congress amid cheers from his countrymen.

"I am the No. 1 public servant of my country," Lula said in his speech, according to O Globo newspaper in its Wednesday edition on its Web site.

He said he doesn't believe in sudden changes although the hallmark of his government will be change, according to O Globo, quoting him as saying, "We must walk with thought and solid steps." During his campaign, Lula pledged to reduce hunger in Brazil, a nation of some 170 million, with many of them living in poverty.

Some have doubts regarding Lula's ability to govern, particularly when it comes to dealing with Brazil's $230 billion in foreign debt, and there is speculation as to whether he might default on it.

Lula captured the presidency by winning the runoff election Oct. 27. He is Brazil's first leftist president, and succeeds Fernando Henrique Cardoso.

Posted on Wed, Jan. 01, 2003 By JASON WEBB Reuters

CARACAS, Venezuela - Venezuela began the New Year in a grim deadlock on Wednesday, as leftist President Hugo Chavez said that strikers who have cut off the nation's petroleum lifeblood were doomed to defeat.

The 31-day-old general strike, led by business and unions and supported by most Venezuelans, according to polls, has reduced oil shipments from the world's fifth-largest oil exporter to a trickle in a bid to force the president to quit or call early elections.

But Chavez, a former paratrooper jailed for a coup attempt in 1992 but elected in 1998, was his usual defiant self as he attended the inauguration of Brazil's new president.

"This is a coup d'etat disguised as a strike," he told reporters in Brasilia, where he arrived wearing a dark suit instead of the military-style uniform and red beret he often favors for populist rallies.

"The coup-mongers have a date with defeat," said Chavez, who survived a coup attempt in April, dismissing the strike leaders as "a business elite and a corrupt union elite."

Tens of thousands of opposition supporters fired off fireworks and waved yellow-red-and-blue Venezuelan flags to see off 2002 on Tuesday night in Caracas, in a massive street party that was a show of determination to force Chavez out.

"We all want Chavez to go, preferably through elections," said Maria Pinto, whose family runs a clothing shop that has stayed shut for more than a month in support of the strike.

Although the key to the strike is petroleum in a country so dependent on oil, many other businesses have closed in the wealthier parts of Caracas, giving the tropical city a permanent holiday air.

The opposition accuses Chavez of abuse of authority, economic incompetence and corruption, accusing him of stirring class hatred with his inflammatory rhetoric and arming supporters in the slums.

It says he wants to convert Venezuela -- oil-rich but marked by gaping differences between rich and poor -- into a communist dictatorship.

Economic recession despite high oil prices has contributed to a slump in support for Chavez, whose term is due to run until 2007. But his popularity rating of just under 30 percent is still greater than that of any single opposition figure.

THREAT OF ECONOMIC DISASTER

Many of Venezuela's poor majority say Chavez, a man of mixed race and lower middle-class origins, is the only politician who has ever addressed their concerns.

The strike, overwhelmingly backed by managerial staff from state oil giant PDVSA, threatens economic disaster for a country where 80 percent of exports and 50 percent of government revenues come from oil.

But Chavez has fired PDVSA strike ringleaders and sent troops aboard halted oil tankers.

Lines for gasoline hundreds of cars long are now a common sight in the country. The government says it hopes to get oil production back up to 1.2 million barrels per day over the next week, but the opposition says wells are pumping only about 150,000 bpd, a twentieth of the normal rate.

Chavez is grateful to Brazil's new leader, Luiz Inacio Lula da Silva, like him a left-winger, for approving the sale of Brazilian gasoline to Venezuela. It was the first time the country had imported such fuel in 40 years.

World oil markets, already fretting about a possible war in Iraq, have been seriously unnerved by the strike in Venezuela, which normally supplies about 13 percent of U.S. crude imports. Prices are near two-year highs.

The opposition hopes to hold a nonbinding referendum on Chavez's rule on Feb. 2, but he has said he will pay no attention to the results. He is sticking to a date in August, halfway through his current term, when he says the constitution allows for a binding referendum on his mandate.

The strike has begun to fray at the edges, and smaller firms and restaurants are beginning to open again in Caracas.

Despite signs of frustration in the opposition ranks, leaders have vowed to pile up the pressure against Chavez in January with bolder street protests, including a possible march on the Miraflores presidential palace.

Miraflores has been off-limits to protesters since a coup was triggered in April by a demonstration that ended with 19 people shot to death by gunmen and more than 100 injured. Both government and opposition blamed each other for the killings.

Chavez says his reforms, which include a nationalistic oil strategy, increased state intervention in the economy and cheap credits and land grants for the poor, are aimed at eliminating minority privileges and distributing oil wealth more fairly.

Affirms Fidel on his arrival in Brasilia to take part in the  investiture of President Luiz Inacio Lula da Silva

JOAQUIN RIVERY TUR AND AHMED VELASQUEZ  —Granma daily special correspondents—

BRASILIA, January 1.— President Fidel Castro arrived at the Brasilia Air Base at 8:30 p.m. yesterday at the head of the Cuban delegation to the investiture of Luiz Inacio Lula de Silva as president of Brazil for a four-year period, which commences today.

The Cuban president was received at the airport by Ambassador Rui Cazaes, head of ceremonies at the Foreign Ministry.

The Cuban delegation comprises Felipe Pérez Roque, minister of foreign affairs; Jorge Lezcano, Cuban ambassador in Brazil, who was waiting at the bottom of the landing steps; José M. Miyar Barrueco, secretary of the Council of State; Carlos Valenciaga, member of the Council of State; and José Arbesú, deputy head of the International Relations Department of the Central Committee of the Communist Party.

Arriving on Brazilian soil, Fidel, dressed in khaki fatigues, informed the Cuban press that his left leg felt absolutely fine and that this January 1 would be a historic moment for Brazil.

He added that from now on, that date would not only be an important one for Cuba as it also marks Lula assuming power, thus converting it into a Latin American day.

Before leaving the airport, he signed the Air Base visitors’ book, and then continued on to the Naum Hotel in central Brasilia, where he was received in the lobby with effusive expressions of affection by journalists, employees and guests.

The investiture ceremony starts today at 1:00 p.m. with a salute in the Foreign Ministry to Fernando Henrique Cardoso, the outgoing president.

At 2:30 p.m. the new president, accompanied by Vice President José Alencar will leave from Brasilia Cathedral for the Congress building.

The ceremony of commitment to the Constitution before Congress is scheduled for 3:00 p.m. and an hour and a half later, the Presidential Sash will pass from Cardoso to Lula, and ministers will take possession in the Planalto Palace.

At 6:00 p.m. Lula will travel from the Palace to the Cathedral to salute the people.

Subsequently, it is the turn of the foreign delegations to salute the new president in Alborada Palace, his official residence.

In the last few days before his arrival, people in the streets were constantly asking the Cuban journalists if Fidel was coming, and now the president is once more on Brazilian soil and full of energy.