Officials say Brazil can cope with war

www.upi.com By Carmen Gentile UPI Latin America Correspondent From the International Desk Published 2/11/2003 5:47 PM

SAO PAULO, Brazil, Feb. 11 (UPI) -- Brazilian officials said Tuesday that the federal government was prepared to deal with economic and political hardships that might arise from a possible U.S.-Iraq confrontation.

"We have to work toward creating the best possible scenario and not the worst one so that we don't take unnecessary measures," said Jose Dirceu, Brazilian President Luiz Inacio Lula da Silva's chief of staff.

Dirceu went on to assure Brazilians that the president and the cabinet were prepared for the likelihood of a U.S. showdown with Iraq, although he didn't specify what measures Brazil would take.

On Monday, Minister of Finance Antonio Palocci issued assurances that a conflict wouldn't not disrupt Brazil's economy.

"It is evident that there are always uncertainties in the case of a war," said Palocci. "But we are working hard to achieve our goals," he added, referring to the new budget surplus goal of 4.25 percent of the gross domestic product, up from 3.75 percent.

On the same day Palocci touted the nation's ability to weather a possible war, Brazil announced drastic cuts in its budget for 2003 to the tune of almost $4 billion to meet the surplus goal.

Visiting International Monetary Fund officials praised the move while evaluating Brazil's level of compliance with a $30 billion bailout awarded last August.

Still, Palocci did admit that a war would unnerve investors and make the international situation more complex for Brazil. But he added that there was no reason to think Brazil's economic outlook would change, even during prolonged conflict.

Despite the administration's professed preparedness for a war, South America's largest country and economy has already experienced the impact of flagging global markets shaken by fears of a U.S. war with Iraq.

Its currency -- the real -- had been making small gains against the dollar until the prospect of war was ratcheted last week up by U.S. State Department Secretary Colin Powell's presentation to the U.N. Security Council. Powell claimed that Iraq was hiding chemical and biological weapons capabilities from U.N. inspectors in Iraq.

Lula, who won a landslide victory in October on a campaign touting "Peace and Love," countered the U.S. war drums by voicing his ardent support for the United Nations and its role in preserving "international peace and security."

"The resolutions of the Security Council should be faithfully carried out. International crises, such as the one in the Middle East, should be resolved by peaceful means and through negotiation," said Lula in a speech last week.

In the same address, he also urged the Iraqi government to accept the measures determined by the U.N. Security Council and expressed his administration's concern over the possible use of force by any U.S.-led force.