Brazil leader's action on economy elicits U.S. praise, allays doubts

www.miami.com Posted on Tue, Jan. 28, 2003 BY TIM JOHNSON tjohnson@herald.com

WASHINGTON - The Bush administration on Monday heaped praise on the month-old government of Brazilian President Luiz Inácio Lula da Silva, rating his administration's early economic policies as sound and applauding its social goals.

''It's a great start,'' said John B. Taylor, the Treasury Department under secretary for international affairs. ``The signs are good, and we are encouraged.''

Uncertainty about the incoming Brazilian leader, known widely as Lula, sparked turmoil in the financial markets last year and fears that the one-time leftist labor leader and the Republican White House would clash on ideological grounds.

But the remarks Monday showed that the Bush administration views U.S. relations with Brazil, the world's ninth-largest economy, as worthy of extensive cultivation.

EMBRACING REFORMS

Taylor, speaking at the U.S. Chamber of Commerce, said da Silva's government has embraced many of the reforms of the center-right government of former President Fernando Henrique Cardoso, reassuring jittery capital markets. The da Silva government has set goals of giving autonomy to the central bank, reforming bankruptcy laws, maintaining fiscal discipline and sticking by a flexible exchange rate, he said.

Joining in the praise was Peter Allgeier, a deputy U.S. trade representative, who told a chamber luncheon that the Bush administration is watching with satisfaction as trade with Brazil increases.

''It looks like we will import more than $15.5 billion worth of goods this year. This makes us the largest export market for Brazil,'' Allgeier said. ``We are edging out the European Union, taking just over a quarter of Brazil's exports.''

Taylor emphasized that the Bush administration looks kindly on the da Silva government's focus on alleviating poverty.

''We're all already quite encouraged by the economic leadership that President Lula and his economic team have shown,'' Taylor said, adding that a focus on ``ending hunger, combating corruption, dealing with drug trafficking [are] very worthwhile, important goals which rightly should be emphasized.''

NO QUICK MOVES

Taylor said the da Silva government has shown signs of fiscal restraint despite high expectations that it would take quick, and possibly deficit-producing, action to create jobs.

''Already [there are] indications that new increases in spending will involve offsets to other kinds of spending,'' Taylor said. ``There's also talk about tax reform.''

An outside international economist with experience in Brazil, John Williamson, of the Washington-based Institute for International Economics, said da Silva has ''handled things very well, very responsibly'' and has even shown abent for international affairs.

''You have Lula going to [the world economic forum of business leaders] in Davos, Switzerland, and competing with [Secretary of State] Colin Powell for headlines,'' Williamson said.