Leftist Leader Elected To Head Latin America's Largest Country Reuters POSTED: 1:33 p.m. EST January 3, 2003

BRASILIA, Brazil -- Brazil's President Luiz Inacio Lula da Silva hosted meals for fellow leftists Hugo Chavez of Venezuela and Cuba's Fidel Castro Thursday as his government pledged responsible economic policies on its first working day.

During his first morning in the Planalto presidential palace, Lula had breakfast with Venezuelan firebrand Chavez, who together with Castro has cheered the election of a leftist to lead Latin America's largest country of 170 million people.

In the evening Lula dined with Castro, a long-time friend, at a presidential ranch on the outskirts of Brasilia.

Lula, the first Brazilian president elected from a leftist party, was sworn in Wednesday. Jubilant supporters hope he will be able to help Brazil's millions of poor.

While Lula has promised to reduce the gap between rich and poor, analysts said his decision to break bread with prominent leftists on his first day in office did not signal future rocky relations with the United States, like Chavez and Castro have.

"This has no significance," said political analyst Ricardo Caldas from the University of Brasilia. "As he made many concessions to conservatives in the naming of his Cabinet, this is just for internal consumption."

Lula also met with several other foreign leaders who had come for his inauguration, including Sweden's prime minister and Portugal's president.

While Castro has long attracted the ire of the United States, a lengthy general strike to oust the Venezuelan president is of more immediate concern to Washington. The populist Chavez faces a crippling work stoppage at home by opponents who say he has destroyed the economy.

Venezuela's troubles have helped send oil prices close to two-year highs as the strike cut deeply into fuel supplies to the United States from the world's fifth largest oil exporter.

At Chavez's request, Brazil has sent an oil tanker to Venezuela loaded with fuel, outraging the striking opposition.

The populist Chavez said he was impressed with Lula's "zero famine" policy, which Lula has made his top priority to help Brazil's estimated 54 million poor.

"Change is the key word, he (Lula) said," Chavez told journalists after the breakfast meeting. "Change, agrarian reform, social justice."

Cuba's Castro described his dinner with Lula as a "family meeting to remember the first time I visited him."

"He has a very nice family which is very humble and very hospitable," Castro added.

Great Challenges Ahead

But for all the hopes of Latin American leftists that Lula will take South America's largest country toward greater social justice, he faces great challenges.

First of all, Lula won the presidency this time after sharply moderating the socialist rhetoric he espoused in three failed presidential bids, including respecting strict fiscal goals included in a $30 billion IMF loan deal.

He also inherits an economy hobbled by low growth, rising inflation, high interest rates and investor concerns over Brazil's $260 billion debt burden.

Antonio Palocci, who took up his post as Lula's finance minister Thursday, promised there would be no surprises in economic policy but that the government would maintain tight spending, low inflation policies and a floating exchange rate.

"We are not going to reinvent the basic principles of economic policy," he said as he formally replaced Finance Minister Pedro Malan. "In a country like Brazil, lasting stability only comes with the conquest of sustained growth and social stability."

Palocci's comments attracted nearly as much support from business leaders as Lula did from Chavez and Castro.

"This is just what Brazil needs, he is 100 percent correct and it is up to everybody to help him achieve this as soon as possible," said Benjamin Steinbruck, head of a major Brazilian steel firm.

Lula has promised to boost growth and lower interest rates but with some investors still wary of the former union leader it will be no easy task, especially since it would take time to get key reforms of the pension and tax systems through Congress.

Still, financial markets rose on the first trading day of the year, cheered by Lula's inauguration speech on Wednesday of the need for reforms, as well as greater social policies.

Is Lula the FDR of Brazil? By Benjamin Lessing Web Exclusive: 1.3.03

RIO DE JANEIRO, BRAZIL -- Since his election victory in October, Brazilian President Luiz Inácio Lula da Silva aka Lula had been saying that he wanted his inauguration to be a popular affair, "for the people." If Wednesday's ceremony was an early test of promise keeping, he did pretty well. His organizers descended last week on Brasília, erecting three stages, seven Jumbotrons, numerous sound towers and a massive green-and-yellow band shell (which would soon play host to a roster of pop stars and regional musicians). That and the official, omnipresent "Inauguration of Lula President" logo -- vaguely Pepsi-like -- fused with Oscar Niemeyer's futuristic architecture in Brazil's capital to create a kind of high-modernist-cum-Lollapalooza feel. Or was it Woodstock? When the crowd spilled into the reflecting pools in front of the Brazilian Congress and started a generalized bathe-in, it was hard to tell. As a morning drizzle gave way to a hot summer sun in the afternoon, Lula made his long-awaited entrance atop the much-ballyhooed presidential Rolls Royce -- which later stalled on an up-ramp and had to be pushed by dark-suited members of Lula's security detail. The former union leader was right at home in the crowd, playing it cool when an avid supporter broke through the security line and managed to hug him -- and even posed for a photo with a random well-wisher who had slipped around the back of an armed guard.

It has been almost 30 years since an elected Brazilian president left the office to another elected president. On Wednesday, all the campaign cries of inexperience and incompetence seemed long forgotten; Lula stuck to the sober presidential persona he honed during the 2002 election, giving Congress a 45-minute account of his major policy initiatives ("Zero Hunger," agrarian reform, anti-corruption and job creation) that was detailed but reserved. Except for a brief show of emotion -- when he promised not to waste a "rare moment of national will" -- the normally engaging speaker read from his notes without looking up. But if Lula seemed a bit cooped up while stuck inside the presidential palace with every politician in the country, his regular-guy bonhomie showed through when he stepped out onto a second-floor dais to address the cheering crowd.

"I'm the most optimistic guy on the face of the earth," he said, in reference to the many problems he will face in the coming months. "I am realizing an old dream, a dream of generations and generations who fought and lost . . . . Viva Brazil! And see you tomorrow!"

Lula's two speeches, and the difference between them, go much deeper than the leftist-in-centrist's-clothing story that much of the international press has picked up on. Contrary to the morbid reveries of some right-wing shoe bangers, Lula is not lying in wait to abolish private property, renationalize Brazil's industries or form a "new axis of evil" with Hugo Chavez and Fidel Castro (both strongmen were in attendance, but a couple of irreverent finger-and-thumb "L" salutes were the limit of their mischief making). Nor is he saying one thing to the political elite and something else to the people. Rather, he is trying to bring about, through a handful of optimistic and creative new federal programs, not only an economic recovery but a sea change in the nature of Brazilian society -- from a polarized, insider's capitalism to an inclusive, participatory capitalism.

Sound familiar? Is it only coincidence that Lula's first action as president will be to introduce a New Deal-style food-stamps program? Or that agrarian reform, the longtime dream of Lula's Workers' Party, was key among Franklin Delano Roosevelt's original proposals? Elio Gaspari, a columnist for the Rio daily newspaper O Globo and an American-history buff, doesn't think it's a coincidence at all. In a wonderful article he wrote shortly after Lula was elected, Gaspari imagined old FDR writing a letter from beyond the grave to young Senhor da Silva. FDR tells the story of how the defeated Herbert Hoover, with the backing of his banker and capitalist friends, urged Roosevelt to make certain "commitments" to calm the financial markets. Bernard Baruch and Joseph Kennedy also recommended austerity. "What they wanted was to break the legs of the New Deal," says Gaspari's FDR. "That's when I got ticked off. America needed to produce and Americans needed to consume. Get out of the crisis by getting back to basics. Something like your proposal that all Brazilians should eat three times a day."

At times during the election, it seemed that Lula's most important campaign turf was Wall Street. Interest rates soared, the real plunged; some investment banks published a running "Lula Index" based on his poll results. Since winning, things have calmed down a bit, but Lula still faces fierce inflation, high interest rates and a weak real. These symptoms reinforce one another, and they are so heavily influenced by perception and future expectations that it is hard not to heed the chorus of Brazilian and international economists urging fiscal austerity as the only means of instilling confidence in the capital markets. But commitment to austerity and tight fiscal policy were the main ingredients of outgoing President Fernando Henrique Cardoso's economic policy -- the perceived failure of which prompted so many Brazilians to take the plunge and vote for Lula. That is why Gaspari is right to remind Lula of FDR's courage to stand by a mandate for change.

To be sure, the comparison between Lula and FDR may be a bit rose colored. Even some petistas -- members of Lula's Workers' Party -- admit that serious agrarian reform will be difficult, if not impossible, to implement. Some secretly worry that Lula's talk on trade is merely warmed-over import substitution all over again. And everyone dreads a return to the devastating hyperinflation of the 1980s. Furthermore, Lula's anti-corruption program is ambitious and certainly much needed, but it could turn out to be politically isolating.

But perhaps the grandest problem facing Lula is that -- though he has proclaimed the death of the neoliberal model -- there is as yet no new, comprehensive theory to take its place and orient his policy proposals, at least in the way that John Maynard Keynes' quiet revolution in economics gave a theoretical grounding to FDR's New Deal.

Still, it's important to remember that many of the New Deal's most innovative programs were canceled after only a year or two. Even its most successful elements had a limited impact on the economy as a whole. In hindsight, it was war production, not the Works Progress Administration, that got us out of the Great Depression. Yet the New Deal as a whole is remembered largely as a success, and rightly so. As Paul Krugman argued in his recent New York Times Magazine article, the long-term effect of the New Deal and World War II was not only a concentration of national income in the middle-income brackets -- a great flattening of the income-distribution curve -- but a deep change in our ideas and mores. Excess and opulence in the face of poverty and destitution fell out of fashion. In its place rose the 1950s suburban dream: a nice neighborhood of good, hard-working citizens, a car in every garage and two kids in every prefabricated house. Whatever its shortcomings, it was a national self-image that emphasized community and inclusion over individual acquisitive power.

At a time when our president and the Wall Street establishment seem dead set on rolling back our national mores to the good old sweatshop-and-soup-kitchen days, it is worthwhile to reflect on the plight of a country whose socioeconomic profile is something out of a Sinclair Lewis novel. According to the petistas, some 44 million Brazilians -- a whopping 21 percent of the population -- live below the poverty line. And most of them are spread across nonmetropolitan regions with little economic opportunity. Unemployment is high, but sometimes finding work isn't enough: The minimum wage is about $60 per month, and many informal jobs don't even pay that much. Meanwhile, the top 20 percent of the population enjoys more than 60 percent of the nation's income, compared with only 3 percent for the bottom quintile (the respective U.S. figures are 44 percent and 4 percent). What is most shocking to outsiders, though, is the proximity with which the very poor live to the very wealthy. Even in chic parts of Rio such as Ipanema and Leme, with their designer stores, exclusive boutiques and pricey eateries, homeless mothers and children comb the streets, tearing open trash bags, scavenging for half-rotten fruit and scraps of meat. It is a sight so common that many residents hardly notice it any more.

Brazil has struggled with poverty throughout its history. The Portuguese colonial vision of society -- that a lucky few would exploit the impoverished and disenfranchised masses to extract the country's riches -- has never been systematically put to rest. Many Brazilians still see miséria as unavoidable, and, sadly, opulence in the face of destitution has not yet gone out of fashion. Lula is out to change all that. By making his Zero Hunger project the centerpiece of his first 100 days, he has elevated it from a simple relief program to a historic proposition to the Brazilian people. On Wednesday, he said: "Brazil knew the riches of the sugar plantations . . . but it didn't conquer hunger; it proclaimed its independence and abolished slavery, but it didn't conquer hunger . . . . It discovered the treasures of gold and of coffee… it industrialized and forged a diverse productive capacity, but it didn't conquer hunger. This can't go on. As long as one of our brothers or sisters goes hungry, we have more than enough reason to cover our heads in shame."

Given George W. Bush's soft spot for agricultural subsidies, it seemed a bit of a stretch when he gave his full support to the Zero Hunger project after Lula's stateside visit in December. Then again, it seemed a bit of a stretch when Lula returned to Brazil calling Bush a "good comrade." But even if it was calculated, Bush's backing and his warm Washington welcome have helped calm the markets and given Lula some breathing room. It could have been otherwise: The paranoid voices of the anti-Castro establishment -- for whom having once fought against a pro-U.S. military dictatorship marks one forever as a diehard communist rebel -- strongly urged Bush to sink Lula by branding him a terrorist and denying him a travel visa to visit the states. Heeding such demented alarmism would have been more than just boorish; it would have played into the hands of those who accuse the United States of demagoguery. Of course, we may yet resort to demagoguery when the Free Trade Area of the Americas negotiations begin to heat up in 2005. But with all this hope in the air here, I harbor a hope of my own: that someone, somewhere in wonkdom will realize that what Lula wants, what he admires us for, is neither our wealth nor our hegemony, but the basic decency of our society; that his quest for a new Brazil is, in the best sense, American.

Benjamin Lessing is a writer living in Rio de Janeiro, Brazil.

GEORGE GEDDA, Associated Press Writer Friday, January 3, 2003

(01-03) 15:42 PST WASHINGTON (AP) --

The Bush administration on Friday brushed aside suggestions that Brazil's new leftist president is ready to form an alliance with leaders from Venezuela and Cuba.

Brazilian President Luiz Inacio Lula da Silva displayed friendship toward Presidents Hugo Chavez of Venezuela and Fidel Castro of Cuba in the aftermath of Silva's inauguration on Wednesday.

Chavez has even dubbed the troika a Latin American "axis of good." Silva had breakfast with Chavez on Thursday and dinner with Castro that night. Beforehand, Castro said Lula's election augured well for Cuban-Brazilian relations.

Responding to the suggestion of an axis unfriendly to the United States being formed, State Department spokesman Richard Boucher said, "Let's get serious. These are three different leaders with different nations and different interests."

"We have an excellent relationship with Brazil, and we look forward to building on that relationship," Boucher said.

He also said both Venezuela and Brazil share the democratic values enshrined in hemispheric agreements.

In contrast, he said, "Cuba remains a stark exception to those values."

He said the United States can cooperate with Brazil and support a democratic path in Venezuela as it faces the challenge of overcoming deep political divisions.

Shortly after his election in October, Silva told an interviewer the Cuban revolution, now 44 years ago, held little appeal for Brazilians nowadays.

Michael Shifter, an analyst at the Inter-American Dialogue research group, said Silva's display of friendship toward Chavez and Castro was a means of making a gesture to his leftist supporters at home.

"Having meetings with Chavez and Castro is a way to satisfy his base for now," Shifter said. "I can't imagine him going in the direction that Chavez and Castro have gone."

Shifter said Silva's statements and his appointments to key economic posts suggest that his economic policies may be similar to those of his predecessor, Fernando Henrique Cardoso.

One test of Brazil's relations with Venezuela could be Silva's response to Chavez's request for technical experts from Brazil's state-owned oil company to replace some of the 30,000 Venezuelan state oil workers who have joined a crippling nationwide strike.

President Bush dispatched U.S. Trade Representative Robert Zoellick as his personal representative at the inauguration.

The selection was seen by some Brazilians as a snub because Zoellick suggested last October that Brazil's only trading partner would be Antarctica if it did not join a proposed hemispheric free trade zone.

Silva responded by calling Zoellick "the sub secretary of a sub secretary of a sub secretary" during his election campaign. Zoellick is a member of Bush's Cabinet.

Zoellick is expected to have extensive dealings with Brazil as part of Bush's goal of a hemispheric free trade agreement by January 2005.

U.S. Brushes Off Talk of 'Axis of Good' By GEORGE GEDDA Associated Press Writer

WASHINGTON (AP)--The Bush administration on Friday brushed aside suggestions that Brazil's new leftist president is ready to form an alliance with leaders from Venezuela and Cuba.

Brazilian President Luiz Inacio Lula da Silva displayed friendship toward Presidents Hugo Chavez of Venezuela and Fidel Castro of Cuba in the aftermath of Silva's inauguration on Wednesday.

Chavez has even dubbed the troika a Latin American ``axis of good.'' Silva had breakfast with Chavez on Thursday and dinner with Castro that night. Beforehand, Castro said Lula's election augured well for Cuban-Brazilian relations.

Responding to the suggestion of an axis unfriendly to the United States being formed, State Department spokesman Richard Boucher said, ``Let's get serious. These are three different leaders with different nations and different interests.''

``We have an excellent relationship with Brazil, and we look forward to building on that relationship,'' Boucher said.

He also said both Venezuela and Brazil share the democratic values enshrined in hemispheric agreements.

In contrast, he said, ``Cuba remains a stark exception to those values.''

He said the United States can cooperate with Brazil and support a democratic path in Venezuela as it faces the challenge of overcoming deep political divisions.

Shortly after his election in October, Silva told an interviewer the Cuban revolution, now 44 years ago, held little appeal for Brazilians nowadays.

Michael Shifter, an analyst at the Inter-American Dialogue research group, said Silva's display of friendship toward Chavez and Castro was a means of making a gesture to his leftist supporters at home.

Having meetings with Chavez and Castro is a way to satisfy his base for now,'' Shifter said. I can't imagine him going in the direction that Chavez and Castro have gone.''

Shifter said Silva's statements and his appointments to key economic posts suggest that his economic policies may be similar to those of his predecessor, Fernando Henrique Cardoso.

One test of Brazil's relations with Venezuela could be Silva's response to Chavez's request for technical experts from Brazil's state-owned oil company to replace some of the 30,000 Venezuelan state oil workers who have joined a crippling nationwide strike.

President Bush dispatched U.S. Trade Representative Robert Zoellick as his personal representative at the inauguration.

The selection was seen by some Brazilians as a snub because Zoellick suggested last October that Brazil's only trading partner would be Antarctica if it did not join a proposed hemispheric free trade zone.

Silva responded by calling Zoellick ``the sub secretary of a sub secretary of a sub secretary'' during his election campaign. Zoellick is a member of Bush's Cabinet.

Zoellick is expected to have extensive dealings with Brazil as part of Bush's goal of a hemispheric free trade agreement by January 2005.

VOA News 03 Jan 2003, 22:23 UTC

The United States has dismissed a call for the creation of a new mediating group to help Venezuela resolve its ongoing political crisis.

State Department spokesman Richard Boucher told reporters in Washington Friday that current mediation efforts by the Organization of American States (OAS) should suffice.

Mr. Boucher also said the OAS is uniquely positioned and equipped to address what he called Venezuela's crisis of democracy.

On Thursday, Venezuelan President Hugo Chavez said he favored the creation of a "Friends of Venezuela" group to help end the crisis that has paralyzed the country's key oil sector.

President Chavez did not name the countries that would be involved in the proposed group, but said he expected them to represent Latin America, Europe and the Organization of Petroleum Exporting Countries (OPEC). Venezuela is a member of the OPEC cartel.