<a href=www.falkland-malvinas.com>Mercosur Thursday, 03 April

After three months in office, leftist President Luiz Inacio Lula da Silva enjoys widespread popularity, according to a opinion poll released Wednesday.

The survey by the respected polling company Ibope found that 75 percent of respondents approve of Silva's government, while 13 percent disapprove.

Silva, a former union boss, was elected last October with 61 percent of the vote in a runoff against former Health minister Jose Serra. He took office Jan. 1.

Silva's personal rating was even higher. Fully 80 percent of people questioned said they had confidence in the president, while 16 percent said they didn't.

Still, few expect a quick turnaround for the economy, which grew just 1.5 percent last year. The survey found that 61 percent of Brazilians think inflation will rise, while 56 percent expect unemployment also will grow.

Ibope, which conducted the survey for the National Confederation of Industries, interviewed 2,000 people in 145 cities across the country and gave the margin of error as 2.2 percentage points.

<a href=news.ft.com>Financial Times By Richard Lapper, Latin America Editor, in São Paulo Published: April 3 2003 5:00 | Last Updated: April 3 2003 5:00

Brazilian financial markets surged higher early yesterday amid optimism that the government would win congressional support for plans to give greater autonomy to the central bank.

The legislation - which was to be presented to the legislature late yesterday - is the first of a raft of radical reforms designed to reinforce the government's commitment to fight inflation and increase economic productivity.

Reforms of Brazil's inefficient tax system and costly public sector pension regime will also be presented to congress later this month.

The Real gained 1 per cent in early dealing and was trading at about R$3.27 to the dollar by midday in São Paulo. Stocks rose by nearly 3 per cent and Brazil's international bonds consolidated recent strong advances.

Late on Tuesday the average yield spread over US Treasuries - the most widely used measure of political risk - fell below 1,000 basis points for the first time since May last year. Yesterday saw further falls, with average yields down by about 15 basis points to 9.74 per cent by mid-morning.

The government was expecting to win a big congressional majority in favour of a constitutional change that would pave the way for legislation altering the statutes of the central bank.

The proposal has been controversial both within the governing Workers' party (PT) and among its smaller leftwing allies. But party leaders have apparently persuaded opponents to stick with the government line.

Yesterday Luciana Genro, one of the more outspoken of about 30 deputies on the PT's left wing, said she and her colleagues would vote in favour of the constitutional change. Ninety two of the 513 deputies in the lower house are members of the PT. The bank and other reform proposals are supported by centre-left, centrist and rightwing opposition parties.

Luiz Inácio Lula da Silva, Brazilian president, has opted to bring forward reform proposals because of uncertainty over the war in Iraq. The decision means that an extensive process of consultation with trade unions, business leaders and other groups has been curtailed.

Even so, congressional debates are expected to take many months and analysts do not expect final approval of the laws until next year at the earliest.

Graham Stock, head of sovereign strategy at JP Morgan in New York, said that investors had been encouraged by the way the government had dealt with the left but was not expecting rapid approval of the reforms. "Euphoria [in the markets] is not excessive," he said.

<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.

Reuters, 04.02.03, 5:54 PM ET BRASILIA, Brazil, April 2 (Reuters) - Brazil's lower chamber of Congress approved on Wednesday a bill changing the legal framework of the financial system which could pave the way for Central Bank autonomy, lawmakers said. The approval of the so-called constitutional amendment marked an important political victory for the centre-left government of President Luiz Inacio Lula da Silva as it showed it can mobilize lawmakers on key votes, boding well for key economic reforms. The lower house voted by an impressive margin of 442 lawmakers favoring the bill and 13 against, underscoring the Lula government's capacity in this vote to win large support from its coalition allies and opposition lawmakers. The Senate has already approved the bill. Wednesday's bill allows for changes to the legal framework of Brazil's financial system under the constitution -- a necessary precursor to any legislation giving the Central Bank operational autonomy later on. The government has not detailed when, or what proposals it will make on changing the bank's status, but some analysts say Brazil's Central Bank has one of the least independent institutional frameworks in Latin America.

Reuters, 04.02.03, 4:37 PM ET In SAO PAULO story headlined "Brazil paper and pulp sector hot for loans to grow", please read in fifth paragraph ... at least $1 billion ... instead of ... at least 1 billion reais ($302 million) ... (corrects figure to dollars from reais). A corrected version follows: By Cesar Bianconi SAO PAULO, Brazil, April 2 (Reuters) - Brazil's paper and pulp sector is at almost full capacity and the industry is looking to the National Social and Economic Development Bank (BNDES) for help to fund their expansion. The hunt for financing has also taken on a new urgency as pulp prices are on the rise. The price of a tonne of pulp has risen 17 percent since the start of the year to $540 in April. The Brazilian Paper and Pulp Association (Bracelpa) says that is due to poor weather in the Northern Hemisphere that has slowed the delivery of timber to plants. Top executives say the U.S.-led war in Iraq has not spoiled the party in Brazil either. "So far we are not feeling any significant direct impact (from the war)," Miguel Sampol Pou, the director-general of leading paper company Klabin <KLBN4.SA>, told Reuters. "We have our sales volumes sewn up. There has only been a slight rise in freight costs to some destinations." Bracelpa President Osmar Zogbi, who is preparing a sector outlook for the government of President Luiz Inacio Lula da Silva, says the sector requires annual investment of the order of at least $1 billion. "We are finishing a study of the next 10 years, showing what investments are necessary, the potential, the opportunities, the obstacles," he said. "It will be delivered at the end of April, depending on Lula's schedule." Bracelpa expects annual Brazilian paper production to rise to 8 million tonnes in 2003 from 7.7 million tonnes in 2002, and pulp production to increase to 9 million tonnes from 8 million tonnes, but forecasts weakness in demand in Brazil. "The local market for paper is a little weaker than it was last year, which is why the companies have made a big export drive," Zogbi said. A recent study by the Institute of Study for Industrial Development, or Iedi by its Portuguese acronym, said the paper and pulp sector would be the recipient of the greatest investment in the industrial sector. Unibanco paper sector analyst Simone Risoto said time was not critical but that the clock is ticking closer to when the industry will be operating at full capacity. "I don't know if it will reach the limit in 2003, so it isn't a problem yet, but it could become one," she said. ARACRUZ AND SUZANO HEAD TO TO BNDES Calos Lessa, the new president of the BNDES, which has loaned 2.4 billion reais to paper and pulp firms over the past two years, has made it clear that the bank will offer credit to sectors that generate revenue and are close to their output capacity. Aracruz Celulose <ARCZ6.SA> (nyse: ARA - news - people), the world's biggest producer of bleached eucalyptus pulp, is currently studying building a $1 billion plant in the northeastern state of Bahia in a 50-50 venture with Finland's Stora Enso <STERV.HE>. The Brazilian company has started negotiations with the BNDES for a loan that will add to its own cash and external financing to help pay for its stake in the Veracel plant. "I am going to begin those talks because the BNDES has gone through changes," said Carlos Aguiar, the president of Aracruz, adding that the deal was expected by the end of June. "I think Veracel means everything the new government wants: exports, jobs, and a foreign partner," he said. The company's pulp is used to make a variety of paper, from letter-writing pads to toilet tissue. Rival Suzano <SUZA4.SA>, which invested $150 million to expand a plant over the past two years, says it is carrying out a feasibility study on an $800 million plant. Murilo Passos, the company's director, told Reuters the "relationship with the BNDES is very good. We have some projects with the bank."