www.timesdaily.com By HAROLD OLMOS Associated Press Writer January 14. 2003 2:23AM

After only two weeks in office, Brazil's new president is indicating he is ready to shepherd through big changes - both at home, where he's raising hope for the poor, and abroad, where he wants his nation to take a greater role in international affairs.

Luiz Inacio Lula da Silva is scheduled to meet Wednesday with other Latin American leaders in Ecuador to form a "Group of Friends of Venezuela" aimed at resolving the crisis that has divided that country and crippled oil production in the world's fifth largest petroleum exporter.

Before leaving for Quito, Silva plans to meet with Argentina President Eduardo Duhalde in Brasilia to discuss regional trade and the terms of a proposed hemispheric free trade zone.

Such an intense international schedule for a president inaugurated on Jan. 1 is unprecedented in Brazil, where diplomatic efforts traditionally proceed at a snail's pace.

"He is creating a sense of movement," said Stephen Haber of the Hoover Institution at Stanford University. "He has promised lots of change, and if he sits around and doesn't do much in the first 100 days, those expectations are dashed."

Analysts say Silva's rapid pace is even more striking coming so soon after last week's two-day trip to desperately poor areas in the country's northeast as part of his goal of reducing the hunger that affects between 20 and 44 million people in the nation of 175 million citizens.

"This activism in Brazil's diplomacy is new," said William Goncalvez, a political analyst at the Federal University of Rio de Janeiro.

But it seems in line with Silva's pledge to bring about changes for how Brazil is viewed domestically and internationally, and in keeping with signs in recent years that the country wants to play in the major leagues of foreign policy while developing new programs to help the country's poor.

In late December, Silva sent one of his closest aides to Venezuela on a fact-finding mission that developed into the idea of creating a group of Latin American and European countries to assist mediation already under way by the Organization of the American States.

Foreign Minister Celso Amorim said Monday that Silva is concerned about Venezuela and wants neighboring countries to help find a peaceful solution to the strike aimed at ousting Venezuelan President Hugo Chavez.

Some analysts believe Silva is also shaping a message to Washington - suggesting that the United States cannot impose its policies in the region.

"His goal is to signal that Brazil intends to be a leader, which given its economy and population makes perfect sense," Haber said. "To the United States he is signaling that we are going to have an activist foreign policy not dictated by you to us."

But Silva is well aware that he must maintain an image showing he is dealing with pressing domestic issues. Just days after being inaugurated, he delayed for at least a year a $760 million plan to order 12 jet fighters needed by Brazil's air force.

In doing so, Silva made it clear that his main funding priority for Brazil is the hunger eradication program.

He even suggested that young Brazilian diplomats should regularly visit the Brazilian slums known as favelas - so they will learn about poverty firsthand and can better defend Brazil's interests abroad.

www.forbes.com Reuters, 01.13.03, 3:50 PM ET

SANTIAGO, Chile, Jan 13 (Reuters) - Chile's peso <CLP=> firmed slightly on Monday, following the strengthening Brazilian real currency and Brazilian bonds, traders said.

The currency closed at 711.20/711.70 per U.S. dollar, an appreciation of 0.31 percent compared to 713.40/713.90 on Friday. The real held firm at 3.3 per dollar in early trade. The Brazilian currency is closely watched in Chile.

"Brazilian bonds have gained, which combined with stable markets has led to a strengthening in the peso," said Rodrigo Videla, finance manager of Tanner brokerage.

Brazilian bonds have strengthened since leftist President Luiz Inacio Lula da Silva took office on Jan. 1, buttressed by his pledges to stick to tight fiscal policy.

However traders said the peso's rise was somewhat curtailed by ongoing fears of rising oil prices due to the tense situation in the Middle East and the strike in the world's fifth oil-producing nation, Venezuela. Chile imports more than 80 percent of its crude.

"The markets of Brazil, Argentina and the United States are stable. What is still pressuring (the peso) is the tension over Iraq," said Videla.

Videla predicted that the currency would continue fluctuating between 710 and 715 pesos per dollar as long as there was tension over Iraq.

www.forbes.com Reuters, 01.13.03, 3:50 PM ET

SANTIAGO, Chile, Jan 13 (Reuters) - Chile's peso <CLP=> firmed slightly on Monday, following the strengthening Brazilian real currency and Brazilian bonds, traders said.

The currency closed at 711.20/711.70 per U.S. dollar, an appreciation of 0.31 percent compared to 713.40/713.90 on Friday. The real held firm at 3.3 per dollar in early trade. The Brazilian currency is closely watched in Chile.

"Brazilian bonds have gained, which combined with stable markets has led to a strengthening in the peso," said Rodrigo Videla, finance manager of Tanner brokerage.

Brazilian bonds have strengthened since leftist President Luiz Inacio Lula da Silva took office on Jan. 1, buttressed by his pledges to stick to tight fiscal policy.

However traders said the peso's rise was somewhat curtailed by ongoing fears of rising oil prices due to the tense situation in the Middle East and the strike in the world's fifth oil-producing nation, Venezuela. Chile imports more than 80 percent of its crude.

"The markets of Brazil, Argentina and the United States are stable. What is still pressuring (the peso) is the tension over Iraq," said Videla.

Videla predicted that the currency would continue fluctuating between 710 and 715 pesos per dollar as long as there was tension over Iraq.

Brazzil Politics February 2003 www.brazzil.com

All is not as rosy as financial markets would have us believe. Congress practically will be in recess until after Carnaval (March 1st to 4) and facing the reality of governing may be postponed for a while.

Richard Hayes

Since Lula's colorful inauguration January 1st, statements by the incoming Finance Minister, Antônio Palocci and the new central bank president, Henrique Meirelles, have helped to strengthen the real and quotations for Brazilian assets. They repeated intentions to continue fiscal and monetary austerity and control inflation. Brazilian banks and blue chip companies are expected to raise nearly US 1 Billion in international credit markets this month, which has contributed to a semi euphoric reaction on the part of market players.

So far the government has not indicated that a bond issue is in the mill. But it would not surprise me if Meirelles, who must be sifting through offers of eager investment bankers seeking arrangement fees, takes advantage of this window of opportunity, which can slam shut again at the first sign of disillusion on the part of observers, most of whom still maintain an attitude of silent skepticism.

With congress in recess until mid February when they will meet to elect the presidents of the two houses before taking another break until after Carnaval, facing the reality of governing may be postponed for a while. Before Christmas, federal legislators voted themselves a 54 percent increase in salaries and other benefits. This has caused state and municipal representatives of the people to think about increases for themselves.

Now measures are proposed to allot more funds to the congressmen and senators to maintain their offices in their home states. Perhaps measures to give a raise to Lula and other members of the executive branch of government will be introduced. Lula now earns about 75 percent of what a congressman takes home. This foolishness will make it difficult for the government to resist the clamor for salary increases on the part of employees at all levels.

Not much notice was taken of the fact that the only two heads of state attending the swearing in ceremonies that actually met in private for meals with Lula were Hugo Chavez and Fidel Castro. Chavez seeks help from Petrobras to break the strike of Venezuela's government owned oil company that is crippling the country. Fidel has promised cooperation in Brazil's "social revolution" in the areas of public health and education where Cuba has done well by Latin American standards. I doubt if Lula, a union man, will allow Petrobras to act as a scab in Venezuela. There is a big difference between sending technical people to help out at PDVSA, something that Chavez would like, and selling them a tanker load of gasoline, which was done in December.

Lula has installed his ministers and heads of important secretariats and big government entities such as Petrobras, Caixa Econômica Federal, Banco do Brasil, BNDES etc. He created three new ministries and a few special commissions in order to accommodate people of his own PT (Partido dos Trabalhadores—Workers Party) and allies seeking employment. He also plans to resurrect SUDENE and SUDAM, two inefficient regional development agencies that were always riddled with corruption and favoritism in the past. FHC managed to scuttle these organs. Lula's perhaps well meaning efforts to help develop the backward northeast and Amazon regions may only result in more money thrown away in salaries of cohorts.

All for Hunger Fight

The festivities in Brasília on New Year's Day displayed a lack of decorum but the PT and Lula had their way. Lula, who likes rubbing shoulders with the people, has developed bursitis in his right shoulder. That plus concern on the part of his security forces may minimize these occurrences in the future. Lula's speech, only one of a series of long-winded orations, concentrated on his battle to eliminate hunger. No details as to how this worthy goal might be attained are yet available.

Lula made it public that the purchase of 12 new jet fighters to replace the aging Mirage fleet, will be postponed in order to use these funds to combat hunger. The foreign press picked this up saying that Lula is wisely trading guns for butter. Local commentaries have pointed out that the US$ 760,000,000 earmarked for the purchase of new planes is not in the budget and in fact does not exist.

The planes were to be financed by the yet to be chosen suppliers who would have to purchase an equal amount of Brazilian products to compensate. The Air Force was taken completely by surprise, but the new commander of the FAB (Força Aérea Brasileira), brigadeiro Luiz Carlos Bueno, stoically accepted the measure saying that it is up to the government to determine priorities. I think we have not heard the end of this first act of demagogy on Lula's part. He probably was not informed on the details of the planned purchase to replace the fleet based in Anápolis, state of Goiás, that must be retired in 2005.

During his campaign for election, Lula and the PT actively courted the military. This seems ironic since Lula and many of his "comrades," as he has instructed people in the government to call one another, were locked up for subversion and other charges during the 21 year period of military rule. His more moderate stance, staged by Duda Mendonça Lula's campaign manager, plus promises to pay more attention to the needs of the three arms, managed to gain tacit support from this important part of Brazilian society.

Army for All

Since the election and Lula's taking office, the minister of defense, José Viegas Filho, who was not a man that the military wanted in the post, along with other ministers has volunteered the use of the army and its bases for non military purposes. The minister of sports wants to use bases for sports activities. The man in charge of the Zero Hunger program has enlisted the help of the armed forces to distribute food. The minister of education wants their help to eradicate illiteracy. The justice minister wants them to assume the role of policing Brazil's borders currently performed as stipulated in the constitution by the federal police that falls under the jurisdiction of the ministry of justice.

Then there is the matter of road construction and maintenance of federal highways that the transport minister is requesting help from the military. It remains to be seen how all this will set with the military. Those on active duty cannot speak out, but through the retired and reserve officials, their discontent can be eventually felt. In my opinion, Lula would be wise to not neglect the armed forces whose budgets were drastically curtailed during the FHC years.

Lula has yet to confirm or negate the recent declaration of the minister of science and technology. In an interview with BBC, minister Roberto Amaral ambiguously stated that Brazil should be capable of making an atomic bomb. The International Agency for Atomic Energy that has its hands full with North Korea and Iraq at the moment was surprised. Foreign minister Celso Amorim is doing his best to clarify Amaral's stupid remarks. But in a matter of such gravity, it is up to the president to come out and deny such intentions and fire the incompetent minister who should have kept his mouth shut. Amaral is in the hospital being treated for pneumonia and could resign for health reasons saving Lula the trouble.

All is not as rosy as financial markets would have us believe. But Brazil is looking to Lula to bring about a better life for its citizens. It is too early to judge how this will all work out. We are in summer and many people are on vacation so things are still not running at capacity. The next two or three weeks will give us a better idea if Lula is up to the task that 62,000,000 Brazilians bestowed upon him.

Richard Edward Hayes, and his wife Jane, first came to Brazil in 1964 as an employee of Chase Manhattan Bank. During the past thirty-eight years, Hayes has worked directly and as an advisor for a number of Brazilian and international banks and companies. Currently he is a free lance consultant and can be contacted at 192louvre@uol.com.br

This article appeared previously at the Globond site - www.globond.com.br

Brazzil Politics February 2003 www.brazzil.com

All is not as rosy as financial markets would have us believe. Congress practically will be in recess until after Carnaval (March 1st to 4) and facing the reality of governing may be postponed for a while.

Richard Hayes

Since Lula's colorful inauguration January 1st, statements by the incoming Finance Minister, Antônio Palocci and the new central bank president, Henrique Meirelles, have helped to strengthen the real and quotations for Brazilian assets. They repeated intentions to continue fiscal and monetary austerity and control inflation. Brazilian banks and blue chip companies are expected to raise nearly US 1 Billion in international credit markets this month, which has contributed to a semi euphoric reaction on the part of market players.

So far the government has not indicated that a bond issue is in the mill. But it would not surprise me if Meirelles, who must be sifting through offers of eager investment bankers seeking arrangement fees, takes advantage of this window of opportunity, which can slam shut again at the first sign of disillusion on the part of observers, most of whom still maintain an attitude of silent skepticism.

With congress in recess until mid February when they will meet to elect the presidents of the two houses before taking another break until after Carnaval, facing the reality of governing may be postponed for a while. Before Christmas, federal legislators voted themselves a 54 percent increase in salaries and other benefits. This has caused state and municipal representatives of the people to think about increases for themselves.

Now measures are proposed to allot more funds to the congressmen and senators to maintain their offices in their home states. Perhaps measures to give a raise to Lula and other members of the executive branch of government will be introduced. Lula now earns about 75 percent of what a congressman takes home. This foolishness will make it difficult for the government to resist the clamor for salary increases on the part of employees at all levels.

Not much notice was taken of the fact that the only two heads of state attending the swearing in ceremonies that actually met in private for meals with Lula were Hugo Chavez and Fidel Castro. Chavez seeks help from Petrobras to break the strike of Venezuela's government owned oil company that is crippling the country. Fidel has promised cooperation in Brazil's "social revolution" in the areas of public health and education where Cuba has done well by Latin American standards. I doubt if Lula, a union man, will allow Petrobras to act as a scab in Venezuela. There is a big difference between sending technical people to help out at PDVSA, something that Chavez would like, and selling them a tanker load of gasoline, which was done in December.

Lula has installed his ministers and heads of important secretariats and big government entities such as Petrobras, Caixa Econômica Federal, Banco do Brasil, BNDES etc. He created three new ministries and a few special commissions in order to accommodate people of his own PT (Partido dos Trabalhadores—Workers Party) and allies seeking employment. He also plans to resurrect SUDENE and SUDAM, two inefficient regional development agencies that were always riddled with corruption and favoritism in the past. FHC managed to scuttle these organs. Lula's perhaps well meaning efforts to help develop the backward northeast and Amazon regions may only result in more money thrown away in salaries of cohorts.

All for Hunger Fight

The festivities in Brasília on New Year's Day displayed a lack of decorum but the PT and Lula had their way. Lula, who likes rubbing shoulders with the people, has developed bursitis in his right shoulder. That plus concern on the part of his security forces may minimize these occurrences in the future. Lula's speech, only one of a series of long-winded orations, concentrated on his battle to eliminate hunger. No details as to how this worthy goal might be attained are yet available.

Lula made it public that the purchase of 12 new jet fighters to replace the aging Mirage fleet, will be postponed in order to use these funds to combat hunger. The foreign press picked this up saying that Lula is wisely trading guns for butter. Local commentaries have pointed out that the US$ 760,000,000 earmarked for the purchase of new planes is not in the budget and in fact does not exist.

The planes were to be financed by the yet to be chosen suppliers who would have to purchase an equal amount of Brazilian products to compensate. The Air Force was taken completely by surprise, but the new commander of the FAB (Força Aérea Brasileira), brigadeiro Luiz Carlos Bueno, stoically accepted the measure saying that it is up to the government to determine priorities. I think we have not heard the end of this first act of demagogy on Lula's part. He probably was not informed on the details of the planned purchase to replace the fleet based in Anápolis, state of Goiás, that must be retired in 2005.

During his campaign for election, Lula and the PT actively courted the military. This seems ironic since Lula and many of his "comrades," as he has instructed people in the government to call one another, were locked up for subversion and other charges during the 21 year period of military rule. His more moderate stance, staged by Duda Mendonça Lula's campaign manager, plus promises to pay more attention to the needs of the three arms, managed to gain tacit support from this important part of Brazilian society.

Army for All

Since the election and Lula's taking office, the minister of defense, José Viegas Filho, who was not a man that the military wanted in the post, along with other ministers has volunteered the use of the army and its bases for non military purposes. The minister of sports wants to use bases for sports activities. The man in charge of the Zero Hunger program has enlisted the help of the armed forces to distribute food. The minister of education wants their help to eradicate illiteracy. The justice minister wants them to assume the role of policing Brazil's borders currently performed as stipulated in the constitution by the federal police that falls under the jurisdiction of the ministry of justice.

Then there is the matter of road construction and maintenance of federal highways that the transport minister is requesting help from the military. It remains to be seen how all this will set with the military. Those on active duty cannot speak out, but through the retired and reserve officials, their discontent can be eventually felt. In my opinion, Lula would be wise to not neglect the armed forces whose budgets were drastically curtailed during the FHC years.

Lula has yet to confirm or negate the recent declaration of the minister of science and technology. In an interview with BBC, minister Roberto Amaral ambiguously stated that Brazil should be capable of making an atomic bomb. The International Agency for Atomic Energy that has its hands full with North Korea and Iraq at the moment was surprised. Foreign minister Celso Amorim is doing his best to clarify Amaral's stupid remarks. But in a matter of such gravity, it is up to the president to come out and deny such intentions and fire the incompetent minister who should have kept his mouth shut. Amaral is in the hospital being treated for pneumonia and could resign for health reasons saving Lula the trouble.

All is not as rosy as financial markets would have us believe. But Brazil is looking to Lula to bring about a better life for its citizens. It is too early to judge how this will all work out. We are in summer and many people are on vacation so things are still not running at capacity. The next two or three weeks will give us a better idea if Lula is up to the task that 62,000,000 Brazilians bestowed upon him.

Richard Edward Hayes, and his wife Jane, first came to Brazil in 1964 as an employee of Chase Manhattan Bank. During the past thirty-eight years, Hayes has worked directly and as an advisor for a number of Brazilian and international banks and companies. Currently he is a free lance consultant and can be contacted at 192louvre@uol.com.br

This article appeared previously at the Globond site - www.globond.com.br