Brazil's Silva challenged from within his own party

www.sfgate.com BERND RADOWITZ, Associated Press Writer Saturday, February 8, 2003

(02-08) 11:02 PST RIO DE JANEIRO, Brazil (AP) --

President Luiz Inacio Lula da Silva -- a little more than a month in office -- has impressed financial investors, foreign statesmen and an overwhelming majority of Brazilians.

But his plans for putting Latin America's largest country on a path of economic growth and social justice have stirred up opposition from an unexpected side: legislators from his own Workers Party, known as the PT.

Silva, who was inaugurated on Jan. 1, has avoided any direct conflicts with fellow party members.

But several legislators have criticized the first economic policies adopted by the new leftist government as a continuation of the economic "neo-liberalism" of the previous government.

Silva was elected on Oct. 27 in a landslide by an electorate increasingly disenchanted by the government of President Fernando Henrique Cardoso, which capped years of high inflation but was only able to promote sluggish economic growth.

Finance Minister Antonio Palocci drew criticism Friday when he announced the government was hiking its target for the budget surplus before interest payments to 4.25 percent of gross domestic product to stabilize the country's ballooning debt.

"The cuts will hit the working class fully. The measure means less money for the social area and employment," Workers Party Para state Rep. Joao Batista Baba said in remarks published in Saturday's edition of O Globo newspaper.

Rio de Janeiro state Rep. Lindberg Faria said the measure would "touch the milk for children," and foresaw a "tragic end" of Palocci's policies.

A day earlier, Baba had attacked Palocci personally, saying he didn't trust the finance minister anymore, not even in his profession as a physician.

In January, prominent Workers Party Sen. Heloisa Helena voiced her indignation about Silva making former FleetBoston Financial Corp global banking head Henrique Meirelles the new Central Bank President. The PT barred Helena from a nomination session in the Senate to avoid public embarrassment.

The Senator also stayed away from a voting session that elected former President Jose Sarney from the centrist Brazilian Democratic Movement Party as Senate president in exchange for his support of Silva's government.

But while Helena and other leftists are angered by the appointment of fiscal moderates to key cabinet posts, Silva needs their help to push programs through Congress, where he lacks a majority.

Silva, who campaigned on promises to create 10 million jobs, lower interest rates and increased growth, has argued it will take time.

He and Palocci argue that the government needs a tough budget tightening now, to stabilize the economy sufficiently to be able to carry out ambitious social programs later.

At a meeting on Friday with Workers Party state presidents, he demanded that his party unite behind him and reportedly said "a little bit of patience has not harmed anyone yet."

Economists warn that statements by the prominent leftists, which have gained wide media attention in Brazil in the past weeks, could harm the honeymoon Silva and his moderate economic policies have enjoyed with financial investors.

"The PT needs to bring its radicals in line," Nicola Tingas, chief economist at West LB in Sao Paulo, told The Associated Press.

Fears that Silva might have trouble meeting Brazil's debt payments helped push the local currency, the real, down 35 percent last year.

Workers Party President Jose Genoino said Friday the inner party critics had no real backing in the party and should simply be ignored to dry out the media attention they receive.

The suggested tactics of Genoino, a former guerrilla fighter turned moderate, could work, analysts say.

"Only a small group of PT rebel legislators voices its criticism. Most have opted to stay silent as the government is very strong right now," Alexandre Barros, a political risk consultant in Brasilia, told The Associated Press.