Centcom BriefingBrazil's Lula Scores with Voters and Investors

<a href=reuters.com>Reuters Wed April 2, 2003 06:33 PM ET By Axel Bugge

BRASILIA, Brazil (Reuters) - Almost 100 days into his administration, Brazilian President Luiz Inacio Lula da Silva rode tall on Wednesday as investors poured money into the economy and voters strongly endorsed him in a poll.

Brazil's first elected working class president has faced criticisms for being slow to implement his flagship social policy "Zero Hunger" and to mobilize Congress for key reforms, but as he entered his fourth month his popularity was high.

Lula scored a major victory on the legislative front as well after Congress approved a bill late Wednesday that could pave the way for Central Bank independence in a vote bolstering the center-left government's chance to pass other key reforms.

"The positive evaluation is large," said Armando Monteiro Neto, head of the National Industry Confederation, which commissioned the poll. "There is a perception that the government can act to fight the problems."

The survey, carried out by the Ibope polling agency, showed that 64 percent of respondents would vote for Lula if elections were held today, up from 61 percent of the electorate that voted for the former metal worker in his October landslide. He took office on Jan. 1.

ECONOMIC OPTIMISM

The support showed that little progress in bringing about the ambitious changes he promised in his campaign, like generating millions of jobs and delivering three meals every day to every Brazilian, has not dented his support.

"The people will have more patience with him (Lula) than other leaders," said Carlos Lopes, a political analyst with the Santa Fe consulting firm in Brasilia.

While Wednesday's poll showed Brazilians consider economic challenges such as unemployment and the fight on poverty as their top concerns, Lula was rewarded with further gains in financial markets due to his handling of the economy.

Stocks were up 2.4 percent and the local currency rose 1.6 percent to its highest level since mid-January as investors bet on the improving prospects of Brazil's economy. In another good sign, spreads on Brazil's bonds to U.S. Treasuries were at their lowest levels since May last year.

"I think the economic scenario is very positive," said Maria Lucia Camargo, chief economist at Banco Sudameris.

Economic prospects could be boosted by Wednesday's Congress vote as well, as it improves the prospects for reforms of the debt-ridden public pension and cumbersome tax systems that are key to underpinning long-term growth in Brazil.

Optimism was underscored in recent days by data showing a surging trade surplus, reducing reliance on foreign capital at a time of uncertainties due to the Iraq war, and cost cutting have all ensured Brazil met strict IMF-agreed fiscal targets.

Inflation expectations also appear to be subsiding after two interest rate hikes. These are no small feats for a government that many feared would mismanage the economy.