Spotlight By Roger Burbach* 29 October 2002

Elected in a landslide victory with over 61 per cent of the vote, Luis Inacio Lula da Silva will become president of Latin America's largest country, with 175 million inhabitants, on 1 January 2002. Lula, as he is commonly known, received three million more votes for president than George W. Bush did in the United States in 2000.

Leonardo Boff, a progressive theologian in Brazil, declares that Lula's triumph "represents the victory of a project from below, one of the poor". Lula's first act as president-elect was to create the Secretariat for Social Emergencies. Its primary responsibility is to end hunger and malnutrition among more than 20 million Brazilians. "If at the end of my presidential mandate every Brazilian has three meals a day then I will have realized my life's mission," Lula proclaimed.

This was Lula's fourth run for president. In this campaign he abandoned much of the leftist platform of previous campaigns, forging an alliance with more centrist political forces. This shift is symbolized by his choice of vice-president, Jose Alencar, who is Brazil's largest textile magnate and a leader of the centrist Liberal party. Alencar declares that the alliance is the product of a "novel political society", reflecting a new social pact, "where Lula represents labour and I represent capital". Asked why he accepted the position of vice-president, Alencar said: "In the history of civilization labour came first, and then capital. And also in my personal history... [I]t was labour that built my capital."

But it is an open question whether the United States and international bankers will adopt as enlightened a position as Alencar. Brazil has a public debt of 240 billion US dollars, the largest in Latin America. In the run up to the election on 27 October, foreign capital began to flee Brazil, leading to a depreciation of the country's currency, the Real, by over 40 per cent. Much of Lula's campaign questioned the free trade policies launched under the "Washington Consensus" during Ronald Reagan's administration in the 1980s. The consensus has meant not only the opening of Latin American markets to US trade, but also the privatization of state enterprises and the slashing of social spending in health and education.

According to a Brazilian financial advisory firm, ABM Consulting, the 10 largest banks in Brazil, including Citibank and BankBoston, earned returns of 22 per cent on their holdings in Brazil in 2001 compared to 12 per cent on a global level. George Soros, a forward-thinking international financier with significant holdings in Brazil, declares: "The system has broken down," it "does not provide an adequate flow of capital to countries [like Brazil] that need it and qualify for it."

The Bush administration, in its initial response to Lula's victory, declared that it "looks forward to working productively with Brazil". But, even before Lula's victory, the US under secretary of the treasury, Kenneth Dam, stated, "we have a contingency plan" if Brazil declares a moratorium on its international debt.

Dam provided no details, but the International Monetary Fund (IMF), the leading financial institution backing the position of Washington, moved to lock the future government of Brazil into an economic straightjacket when it lent 30 billion US dollars to the outgoing government of Fernando Henrique Cardoso, in an attempt to prop up the Real. Only 6 billion US dollars will actually be spent under Cardoso, while the remainder will be released to the incoming government if it has a budget surplus of 3.5 per cent. No government in South America has achieved such a surplus in recent years.

Right-wing pundits and policy strategists in the United States have already begun to criticize the Lula government. Constantine Menges, a Senior Fellow of the Hudson Institute who served as the Latin American adviser in the National Security Council under Ronald Reagan, recently released a study entitled "A strategic warning: Brazil". In it, he decries the "Castro-Chavez-Lula axis", referring to Fidel Castro of Cuba and populist President Hugo Chavez of Venezuela. Menges argues that these countries are "capable of pushing other South American countries to the left and establishing a dangerous alliance with communist China, as well as with Iran and Iraq, two terrorist countries". This would constitute a gigantic "South American left bloc", which would have a domino effect in countries like Colombia, Bolivia, Ecuador and Argentina.

While Lula certainly is not intent on provoking the United States by consorting with Iraq, he is looking to other Latin American countries to strengthen an independent economic stance and to expand regional trade agreements. His first international trip will be to Argentina, which has defaulted on its international debt and is Brazil's leading partner in the regional trade bloc known as Mercosur.

Lula has made it clear that he will not support the trade initiative of the Bush administration, the Free Trade Area of the Americas (FTAA), unless the United States abandons trade policies that discriminate against Brazil. Among other provisions, the FTAA advocated by the United States envisions the protection of Florida orange juice interests and Midwest soybean producers along with US steel exporters. Brazil is the world's largest exporter of orange juice, a leading exporter of soybeans and also exports large quantities of steel. (Interestingly, Lula began working in the metallurgical industry when he was just 14 years old.)

If there is one position Lula consistently articulated in this presidential campaign, it was his call for "expanding Brazil's productive capacity". In his last presidential debate with Jose Serra, who represented the outgoing government, Lula stated: "Brazil is a great country. It has enormous resources that we have not even begun to turn to the benefit of our people." The day after his election Lula proclaimed that budgetary restrictions would not prevent him "from expanding social programmes", decreasing unemployment and "expanding educational opportunities for Brazil's poorest".

*Roger Burbach is co-editor, with Ben Clarke, of September 11 and the US War (City Lights, 2002), and author of the forthcoming book The Pinochet Affair: Globalizing Human Rights. He is director of the Center for the Study of the Americas (CENSA) in Berkeley, California, USA.

Francisco José Moreno and Alejandro Eggers Moreno Pacific News Service Wednesday, Nov. 6, 2002

Calling Brazil's new president a leftist is far too simplistic, write PNS contributors Francisco José Moreno and Alejandro Eggers Moreno. In fact, the former metal worker's election is a clear demonstration of the changing face of Latin American politics, where nationalism and globalization are becoming more important terms than "left" and "right."

Headlines across the world shout about Brazil's new "leftist" president. But Luis Inácio Lula da Silva won a landslide victory in Latin America's largest economy by blurring traditional ideological boundaries and forming a broad-based, nationalist coalition of Brazilians ready to take on U.S. economic priorities and global financial institutions.

Lula's success is a clear demonstration of the changing face of Latin American politics. The traditional struggle between conservatives, backed almost unanimously by business and financial leaders, against socialists or populists supported by the working class is giving way to a new conflict. This conflict is between those committed to preserving national interests and those willing to accede to the demands of international financial institutions.

During the course of the campaign, Lula softened his staunch left-wing views and moved toward a more moderate, business-friendly position. He chose Jose Alencar, a millionaire textile magnate, as his running mate. He promised to uphold Brazil's international commitments and rejected a moratorium on foreign debt. He sought and won the support of numerous business and financial leaders, and proposed the formation of a Council of Economic and Social Development with representatives from business, trade unions and other sectors of society to negotiate a new social contract.

At the same time, Lula did not deny his dislike for the finance-oriented market policies driven by the International Monetary Fund (IMF) and other global institutions. He repeatedly denounced the current economic system and insisted he would under no circumstances support the U.S.-backed Free Trade Agreement of the Americas, claiming the proposed hemispheric free-trade zone would essentially signify the American annexation of Brazil's economy. Global free trade models, he said, would only become viable when all countries have equal opportunities and conditions to become competitive.

This is how did Lula managed to reconcile his seemingly leftist economic views with his newfound friendliness toward business leaders.

The demands of the international financial community over the past decade, specifically the strong emphasis on finance over production, has put Brazil in the position where the interests of most local businessmen, many local investors and middle-class professionals are beginning to coincide with those of the workers. The IMF-backed policies of recent years have been designed to pour money into the country, regardless of how it is used or distributed.

As a result, most of the money has turned to profits for foreign corporations or gone to the richest Brazilians, and much has been taken out of the country for investment elsewhere. Little attention has been paid to actually strengthening the ability and capacity of the Brazilian economy itself, leaving in the lurch all but the largest businesses, all the workers and most of the professionals who serve them.

So when Lula talks about how Brazil's problems go beyond its debt and that the country needs to focus more on boosting imports, creating jobs, and stimulating local business, he speaks for a wide range of Brazilians, employers and employees alike.

He reframed the election from a contest between the left and the right to a struggle over who gets to determine Brazil's future – the U.S.-led global financial community, or Brazil.

It is not difficult to explain how Lula secured such a large percentage of the vote. Unlike other recently elected leftist leaders in the region – Hugo Chávez in Venezuela, for example – Lula's popularity does not stem from a personality cult or an overwhelmingly destitute population desperate for any kind of change. He has been very clear that he has no interest in a Chávez-style popular revolution, and there is no indication that Brazilians would have any interest in such a change.

Lula managed to gain the support of his old enemies because he is no longer seen as protecting the poor against the abuses of businesses, but as protecting Brazil against the abuses of the United States and the financial policies it sponsors. Yet Lula's blurring of traditional liberal-conservative ideological distinctions in favor of a common nationalistic outlook is not limited to Brazil. In Argentina, for example, the financial crisis has polarized the country into pro- and anti-IMF camps, the latter including workers and business owners.

As Latin America continues to reject the economic model that has been foisted upon it during the past decade, politics will increasingly take this form in the rest of the region.

FRANCISCO JOSE MORENO, Ph. D., President of the Strategic Assessments Institute; former Vice-President of Philip Morris International; former Professor and Chairman of the Political Science Department at New York University; former Lecturer in Economics at the University of California, Berkeley; author of three books and over 30 academic articles; has served as adviser to two European Prime Ministers and four Latin American Presidents.

ALEJANDRO EGGERS MORENO, (Groton and Stanford) Vice-President of the Strategic Assessments Institute; contributor to the Christian Science Monitor and the Pacific News Service; former correspondent of the Información Newspapers.

E-mail: sai@strategicassessments.com

This article appears in the November 8, 2002 issue of Executive Intelligence Review. by Our Special Correspondent www.larouchepub.com

The electoral victory of Workers Party (PT) Presidential candidate Luiz Inácio "Lula" da Silva, with more than 50 million votes—the greatest proportional vote in Brazil's history—confirms what had been evident from the first round of the elections: that the nation is avid for a change from the neo-liberal, monetarist economic model, which has been in force since 1990 and has brought about a state of public calamity: the highest unemployment in history, the destruction of the public and private patrimony, the abandonment of the main urban centers to organized crime, and the trapping of the nation in an out-of-control debt bubble, increasingly dollarized, which has brought Brazil—with its $500 billion in total foreign obligations—to the brink of default.

The big question now, is whether the Lula government will represent a genuine transformation, or if all the hope his candidacy has engendered will be betrayed by continuing the policies of the previous administrations, albeit with a "social democratic" façade. Worsened by the terminal crisis of the international financial system, this would be a bitter deception.

No Compromise Possible

As is widely known, all of the campaign promises of the President-elect, especially those related to the generation of 10 million jobs, recovery of industrial and agricultural capabilities, reinforcement of social programs, and an increase in wages, are openly contradictory to the commitments and agreements made with the International Monetary Fund (IMF) and the international creditor banks. Today, for example, the liquid debt of the public sector is nearly 65% of the Gross Domestic Product, which means that merely servicing that debt will wipe out any effort to direct the resources of the national budget into the promised projects for recovery. The commitment to continue with the IMF's policies of fiscal austerity means complying with the new demands to raise the primary budget surplus (all of the budget excluding debt payments) to a level equivalent to 5% of GDP, a dramatic increase in sacrifice required, from the current level of 3.8%.

Thus, any effort to fulfill Lula's campaign promises will necessarily lead to a rupture with the collapsed world monetary system, and with the whole system of globalization. As several political analysts in Brazil have already noted, the only way that the new President will not disappoint his electorate, would be that he step forward as the true leader of the nation, and announce the impossibility of maintaining the genocidal agreements with the IMF and the sacrifice which that would mean for the population.

If Lula opts for temporizing, and imposes even greater fiscal austerity, however, he will compromise the social stability of the country, since there is no way that his promises can be met through submission to a so-called "globalization with solidarity"—a euphemism for trying to accommodate the Marxist belief structure of important sectors of the PT, within the hegemonic global order.

London and Wall Street are applying brutal pressure upon Brazil, demanding that the President-elect immediately name his finance minister and central bank president, and that the team make clear that it will implement an even more harsh austerity than the outgoing Cardoso government could. As the investment firm of Morgan Stanley bluntly put it: "Delays in the commitment to a more severe fiscal policy will negatively affect the market." Because there "is a very real risk of default," the London Times editorialized on Oct. 30, Lula must use his broad base of support to "sell difficult reforms" to both the elites, as well as the impoverished millions who voted for him. So, too, the same day, the Washington Post threatened that if Lula follows the wrong policies, he could "trigger a messy debt default [which] would be a disaster for Brazil, and especially for Mr. Da Silva's supporters."

Yet, if a break with the system is not concretized by the new government in its first few months, the disillusion of the electorate will be as great, and as resounding as Lula's election victory itself. It will leave the country at the mercy of the radicals within the Workers Party, and of Jacobin groups such as the Landless Movement (MST), which, together with a constellation of non-governmental organizations and groups linked to the World Social Forum, will unleash the hordes which Italian terrorist Antonio Negri speaks of in his book Empire, the bible of the Pôrto Alegre World Social Forum. MST leader João Pedro Stedile interprets Lula's election victory as a product of "the people's mobilization," and has already announced that he will mobilize his base to keep up the pressure on the next government. Behind the demagogy, is a project to finish the destruction of the sovereign nation-state, in submission to the emergence of an Anglo-American world empire.

It is important to note that the strategy of the international financial oligarchy is to intentionally provoke chaos, as a means of bringing about the disintegration of the nation-state and its institutions. The international creditors are fully aware that their efforts to collect a debt which is physically uncollectable, will unleash chaos. And they have their controlled movements, such as the MST, to guarantee these results.

A Mandate to Save the Nation

The "Utopian" faction inside the U.S. government has circulated the rumor that, with Lula's election, Brazil will join an Ibero-American "axis of evil," which includes Cuba and the Venezuela of Hugo Chávez. But Brazil is not Venezuela, and Lula is not another Chávez—no matter how they both dub themselves leftists. Chávez is a philosophical fascist, with his expressions of extreme Jacobinism and his explicit defense of Carl Schmitt, the brains behind Adolf Hitler's "legal system." Lula is something else: He has formed a broad national coalition, which undoubtedly includes radical Chavista elements (the MST, for example), but which also includes genuinely nationalist elements—and what direction this coalition will ultimately take has yet to be defined.

No one, either inside or outside Brazil, should fool themselves about the real message delivered at the polls: The Brazilian electorate voted for a political figure who embodied the aspiration for a decisive change from the status quo, and not specifically for a political party, much less for the radical factions inside the PT. This is clearly seen in the defeats suffered by the PT in gubernatorial contests for the most important states in the country, above all, the largest: São Paulo, Minas Gerais, Rio de Janeiro, and Rio Grande do Sul.

The defeat of the PT in its bid to re-elect its governor of Rio Grande do Sul, is particularly significant, because that state became the headquarters of the World Social Forum under the PT, and that is where the MST conducts its most bellicose actions.

Likewise, the record, 1.56 million-person Congressional vote for Dr. Enéas Carneiro, a nationalist who has campaigned unwaveringly for 13 years on the grounds that Brazil can only survive and develop if it breaks with the IMF, reflects the same message. Dr. Enéas, who hosted Lyndon LaRouche's visit to São Paulo in June, is no Jacobin. As he told Folha de São Paulo, on the eve of the second election round: "I will be on the side of the President, whoever is elected, in everything which favors the population, and against all those actions which are against its welfare.... The polarity today is between the globalized world and the sovereign nation-state. My group defends the existence of the sovereign nation-state, and this will be our fight."

And so the new President was sent the following message: The country hopes that the necessary break with the neo-liberal economic model will not mean a new Jacobin-style "French Revolution," but rather a defense of the sovereign nation-state. This historic crossroads cannot be avoided, for it is the same that today faces the entire world. It is necessary that the President-elect understand this message well, for Brazil to maintain even minimal institutional stability over the coming months.

BY CARLOS A. DEJUANA Reuters www.bayarea.com SAO PAULO, Brazil - Luiz Inacio Lula da Silva makes his first trip abroad as Brazil's president-elect this week, traveling to Argentina and Chile to strengthen regional ties before a U.S. visit a week later.

A little more than a month after his election victory, the trip will be a test of whether the former union leader can recreate his surprising success at home on the international front. He leaves for Buenos Aires on Sunday night.

Throughout his campaign Lula stressed the importance of rebuilding trade links between Brazil and its Latin American neighbors, which are comparatively small and have been hit recently by economic and political turmoil.

"It's a reaffirmation, a reconsolidation of the entire regional trade bloc," said Marcelo Salomon, chief economist at ING Bank in Sao Paulo.

Lula and a small team of advisors are scheduled to meet with Argentine President Eduardo Duhalde on Monday and Chilean President Ricardo Lagos on Tuesday. He will meet with President Bush on Dec. 10.

FREE TRADE NEGOTIATIONS

At the heart of Lula's determination to strengthen South American ties is the desire to put up a common front against the United States in negotiations to create a free trade area that would stretch from Alaska to Argentina.

Lula has made it clear that Brazil, which is by far the region's largest economy and the linchpin in the proposal, will fight a tough battle to make sure its exporters get as good a deal as U.S. companies. Brazilians have long been irked by U.S. tariffs that put limits on key exports such as orange juice, sugar and textiles.

But cementing trade ties with some neighbors like Argentina will be difficult given the region's economic woes and political instability. Argentina, whose economic crisis the past two years battered Brazil and Paraguay and crippled the Uruguayan economy, will have elections in April of next year.

And trade relations between those four countries that make up the Mercosur trade bloc have already been strained by ongoing commercial spats.

Brazilian exports to Mercosur fell by more than half to $2.7 billion, or 5 percent of the total, in the 10 months to October this year compared with a year earlier.

Still, analysts say a united bloc will give the region more leverage in the negotiations.

"What (Lula) wants to say is that Mercosur is important and that, despite the difficulties, it's going to continue to be important, and that's key in trade talks with the European Union and United States," said Ricardo Caldas, a political scientist at the University of Brasilia.

RIDING HIGH AT HOME

At home, Lula has been beating expectations, say analysts.

Lula and his transition team have proved to be more fiscally conservative than expected by anxious investors, fueling a small recovery at Brazilian markets that were earlier battered by worries the former metalworker would mismanage the economy.

The benchmark Bovespa stock index rallied 3.4 percent in November, and the country's much maligned currency, the real, has been trading steady since the election after taking a beating for months.

Moreover, Lula has struck governability deals with political rivals and held off the radical wing of his leftist Workers' Party, known as PT, pleasantly surprising even his harshest critics.

"One of the key challenges for the PT government will be overcoming the credibility deficit they have with the market, and they have been doing that very well," said Christopher Garman, a political analyst at Tendencias, a Sao Paulo consulting firm.

Fri January 3, 2003 02:11 AM ET www.worldtribune.com

BRASILIA, Brazil (Reuters) - Brazilian Finance Minister Antonio Palocci kicked off his first day on the job on Thursday with an impassioned pledge to fight poverty and promised to unveil market-friendly economic targets next week.

Speaking at ceremony to mark his assumption at the ministry, the former physician said Brazil lived "the paradox of a state that spends a lot, but in which few benefit."

Palocci promised his ministry would improve the management of the country's public finances to begin alleviating the poverty that afflicts almost one in three Brazilians.

Seeking to assuage investor concerns the new left-wing government will stray from the path of orthodox economics, Palocci reiterated his commitment to prudent policies.

"We are going to preserve fiscal responsibility, the control of inflation and our floating exchange rate. We are not going to reinvent the basic principles of economic policy. We, in fact, have a much more ambitious project: to reinvent the Brazilian state and its place in society," Palocci said in his first speech as the new economy chief.

Palocci, who like many in the new government sports a beard, said the ministry would unveil its economic targets for 2003 next week.

"Those goals will make clear our commitment to a responsible and consistent administration of budgeted funds," said the former Trotskyite.

"THE NECESSARY SURPLUS"

Brazil is expected to have ended 2002 with a healthy fiscal surplus that should beat the 3.75 percent of gross domestic product mandated under its $30 billion loan agreement with the International Monetary Fund.

But its nominal budget balance, which includes hefty debt payments, is running in the red, meaning the government must make up the difference by issuing debt that in turn further skews the fiscal balance and worries investors.

Palocci was adamant about the new government's commitment to keep its debt payments under control.

"We will pursue the primary surplus necessary to guarantee without a doubt the sustainability of Brazil's public debt," he said.

On Wednesday, Palocci named a Cabinet that includes a mix of career economists and current government officials.

His deputy, Executive Secretary Bernard Appy, is a 40-year-old economist who used to advise the Workers' Party at Congress. Otaviano Canuto, the secretary for international affairs, is a professor at the University of Campinas and University of Sao Paulo specializing in foreign finance.

Secretary for Economic Policy Marcos Lisboa, 38, holds a doctorate in economics from the University of Pennsylvania and teaches at the well-respected Fundacao Getulio Vargas think tank.

Jorge Antonio Deger Rachid will become head of the income tax department, where he was the deputy secretary under the previous administration.