By Ian Campbell UPI Chief Economics Correspondent www.washtimes.com

     His family was poor. He did not finish secondary school. He was a metal worker. In many respects Luiz Inacio da Silva, universally known as Lula, who is likely to win the presidency of Brazil later this month, reflects his countrymen far more than previous Brazilian presidents. The question is whether one of their own will do his poor countrymen any good. Top Stories • Congress approves resolution • Manassas killing was sniper • Democrats hit GOP on 'bumpy' economy • Motorists taking cover at filling stations • Stewart's new ads puzzling • Israelis rule out open trial • Heritage duo had right stuff

     Lula's left-wing politics reflect the harsh lives of ordinary Latin Americans. It is the current, outgoing Brazilian president, Fernando Henrique Cardoso, who is more typical of the region's leaders. An academic and author of a famous book on Latin American development before becoming a politician, Cardoso, a social democrat, hails from the educated minority that runs Latin America.      Most observers would judge that Cardoso did a goodish job as president. Inflation was slashed from thousands of percent to less than 10 percent. Some of the worst fiscal nonsense has been cleaned up, at the federal, state and even municipal level. The economy has grown, though no more than slowly. But the poverty of most Brazilians has not been eased; about that there can be no question.            That creates a problem. Who or what do we blame?            In the eyes of the poor, the conquest of inflation was something good, for high inflation tends to hurt the poor more than the financially sophisticated, dollar-rich rich, with their second homes in Miami and their stock accounts on Wall Street. But the poor would not judge that privatization and deregulation and opening up the economy to foreign trade have helped them. In the slums that surround the big cities or ascend the steep hills of Rio de Janeiro, and in the dirt poor countryside, grinding poverty prevails. What might Lula do about that?            There are ironies here.            Having taken 46 percent of the vote in the first round of the election Sunday, Lula appears poised for victory in the runoff Oct. 27 -- his fourth attempt to win the presidency. But in order to get to this point he has had to don a suit and tie and tone down his left-wing rhetoric and express his approval of some of those changes, such as privatization, from which the poor have so far drawn little benefit.            Soon it may be the poor, rather than the middle class, who are asking whether Lula's colors have changed.            But the deepest irony of all, and the most troubling, is that there is only one way for Lula to help the poor and that is to do what Cardoso did better -- just as Cardoso's chosen successor, Jose Serra, who faces Lula in the second round run-off, promises to do.            Many in Brazil and many critics of free markets outside Brazil blame "globalization" or the "Washington consensus" or "neo-liberalism" for the failure to improve the lot of the poor in Brazil and the rest of Latin America. What the critics tend to recommend are policies that, if suggested for domestic consumption in the United States or Europe, would generally be decried -- and with reason. Close off Brazil's markets, they say, so that local jobs can be protected against the might of foreign competition. But it's been done before, for decades, has never worked and helps more than anything else to explain why Latin America is where it is now.            The poverty of the region reflects protectionism, which was a by-product late in the 19th century of government tariffs on imports and, since World War II, a conscious policy tool. Protected markets, state monopolies, government industries: This was the way to develop, Latin America decided. What it led to was inefficiency, lack of competitiveness, small, weak economies, and, ugliest of all, corruption that enabled a small number to prosper from what wealth there was while the majority remained low-paid, uneducated, without opportunity: poor.      It is opportunity that the poor need. The way to bring it to them is to continue unraveling the entangling web woven in Latin America for at least decades and perhaps centuries.      The poor need the education Lula himself was denied. They need health care. These should be priorities for Lula. But to provide them will require government spending. And here we have the crunch seen traditionally as that between left and right but which, in reality, ought to unite both against privilege, special interests and corruption.      Brazil's government is permanently in deficit. It pays benefits, such as lucrative pensions, not to the poor but to wealthy people who have served as senior civil servants. The pensions deficit absorbs about 4 percent of GDP. The government is obliged permanently to issue debt at very high interest spreads on which investors and banks, mostly Brazilian ones, make very high profits. Brazil's bankers are not poor; some of them count among the world's richest citizens.      Lula would have the money to help the poor without causing the government's budget to explode or defaulting on debt, if he attacked the privileges the state grants to the rich, cut bureaucracy and unproductive jobs in the state sector, and stopped feeding excessive interest payments to banks because the state cannot get its finances in order.      By cutting Brazil's very high public spending, Lula could at last get fiscal finances under control. Interest spreads on government debt, which have climbed now to over 20 percent above the rates on U.S. Treasuries, because of the radical Lula's likely election success, could be slashed if Lula turned out to be a wise radical, one who spends government money where it is needed, not where it does no more than make the middle class still more comfortable.            Could Lula do this? He could, but it seems unlikely that he will. It is more likely that he will find he has no money to devote more to the poor and no will to cut away at the perquisites of the middle class.            And if he grows frustrated, simply spends more rather than spending better, then the market will quickly take fright, the debt will become unmanageable, and default and financial crisis and recession and currency collapse and inflation and worse poverty will follow, just as they have done in Argentina.            Lula is a man of the poor. His sincerity does not seem to be in doubt. His policies are. We do not expect him to help the poor but hope he does.      -0-      Comments to icampbell@upi.com.

By Roger Burbach, AlterNet October 29, 2002

On Jan. 1, 2003, Luis Inacio Lula da Silva – elected in a landslide victory with over 61 percent of the vote – will become president of Latin America's largest country. 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," proclaimed Lula.

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, 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 labor and I represent capital."

Asked why he accepted the position of vice president, Alencar notes: "In the history of civilization labor came first, and then capital. And also in my personal history...it was labor 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, the largest in Latin America. In the run up to the election on Oct. 27, foreign capital began to flee Brazil, leading to a depreciation of the country's currency, the Real, by over 40 percent. 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 U.S. 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 percent on their holdings in Brazil in 2001 compared to 12 percent 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."

In its initial response to Lula's victory, the Bush administration declares it "looks forward to working productively with Brazil." But even before Lula's victory, the U.S. 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 loaned $30 billion to the outgoing government of Fernando Henrique Cardoso in an attempt to prop up the Real.

Only $6 billion will actually be spent under Cardoso, while the remainder will be released to the incoming government if it has a budget surplus of 3-and-a-half percent. 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 the study: "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 U.S. 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 programs," decreasing unemployment and "expanding educational opportunities for Brazil's poorest."

Roger Burbach is co-editor, with Ben Clarke, of "September 11 and the U.S. 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, Calif.

www.nybooks.com

Calgary Herald Saturday, January 04, 2003

Brazilian President Luiz Inacio Lula da Silva plans to keep Petroleo Brasileiro SA exploring for new oil reserves at home and abroad, as the state-run producer strives to end the country's dependence on imports.

Petrobras' new president, Jose Eduardo Dutra, said he would stick to company plans to spend $32 billion to boost oil output by almost half by 2006. Petrobras also will increase efforts to add reserves outside of Brazil, he said.

"This company has a strategy and it will be followed," Dutra said in a news conference. "We plan to complete our $32-billion expansion."

Lula, who took office Jan. 1, wants to use Latin America's largest publicly traded company to help meet his economic goals such as creating jobs, boosting demand for Brazilian goods and services and to contain inflation.

Petrobras produces about 1.7 million barrels of oil a day and is expanding output to reduce the country's oil deficit. Brazil today imports about 20 per cent of the oil it consumes.

The new government also plans to offer subsidies, low-priced credit and other incentives for local contractors to bid competitively on offshore oil platforms and other Petrobras projects, said Dilma Rousseff, Brazil's new mines and energy minister.

"This government is interested in strengthening national industry," Rousseff told a news conference. "We need to develop an industrial policy."

© Copyright  2003 Calgary Herald

Brazzil.com Politics January 2003

So far so good, but the new President is untried as a national leader and we do not know how he will cope with the constant crises which mark Brazil. Lula has little patience for the ins and outs of politics and seems incapable of sticking to a script. And he has to stop being a man of the people and become the leader of the people.

John Fitzpatrick

No sooner had Fernando Henrique Cardoso handed over the presidential sash to Luiz Inácio Lula da Silva on New Year's Day (knocking his own glasses off in the excitement as he did so) than he headed for the airport and set off for Paris. The haste with which he left Brasília makes one wonder whether he knows something the rest of us don't. Perhaps his abrupt departure after eight years may have been meant to show the Brazilian people that they are on their own now with Lula and his team. Since it is unlikely that Lula would seek any advice from his predecessor it may not matter that Cardoso practically fled, but the manner in which he departed leaves a rather sour taste in the mouth.

We are now in the hands of Lula and for the sake of Brazil let us hope he learns fast because the honeymoon is over. Electors will no longer be satisfied with the ear-to-ear grins and the tearful descriptions of his life and hard times with which he has been regaling them since his victory in October.

Behind the scenes the PT team has been busy assembling a government. This is obviously a complex process and appears to have been handled fairly well. At the same time, failing to win over the PMDB, the largest party in the Congress, was a setback. However, the PMDB is as greedy for power as any other party and this door has not been completely slammed shut. In the months to come we will start seeing shifting political alliances as the familiar mosaic of Brazilian politics shapes and reshapes itself. Despite the grouping of disparate parties in his election coalition, Lula's government is top heavy with PT members.

The key ministers have started outlining their priorities in line with the PT's electoral program. The focus will be on ending social inequality although with no drastic action such as defaulting on international or domestic debt obligations. Finance Minister, Antônio Palocci, has said the right things and pledged to reform the scandalous situation in which millions of former civil servants, some only in their 40s or early 50s, enjoy generous inflation-linked pensions, mainly paid for by those in the private sector who have no such cushion to fall back on.

In the first few days of the new administration we have already seen some changes. For example, the state-owned oil company Petrobras, the largest company in South America, has had its board shaken up. The new chairman is a PT senator from the Northeast and the advisers include Finance Minister Palocci and Lula's chief of staff, José Dirceu. Moves have already been made to reduce the effects of oil price increases on the final consumer by tinkering with taxes. (To be fair here, even the Cardoso government interfered in Petrobras's pricing policy at times, although it left the company in the hands of professionals rather than politicians.)

The new energy minister has spoken against further privatizations in the sector and of the need for more investment and lower prices. The defense minister announced that Lula had suspended for a year a multi-million dollar contract to renew the Air Force's fleet of fighter planes. According to the minister, priority would be given to fighting hunger.

So far so good, but your correspondent is still apprehensive and a bit fearful of what lies ahead. Lula is untried as a national, as opposed to a party, leader and we do not know how he will cope with the constant crises which mark Brazil and the day-to-day political bargaining in Congress. One must hope Lula will stick to the script and let his team, which appears to be fairly competent, get on with things. The problem is that Lula has little patience for the ins and outs of politics and seems incapable of sticking to a script. An example of the Lula style was the casual manner in which he announced the name of his finance minister during a visit to Washington in December. This was the key appointment eagerly awaited in Brazil yet Lula tossed it out to some journalists as though he was making a banal comment on the weather.

The inaugural ceremony itself showed the perils of this informality. By bussing in hundreds of thousands of supporters from all the country, the PT enlivened the dreary avenues and concrete squares of Brasilia but gave the security forces a headache they could have done without. Lula's open-top car was soon swamped by well wishers, one of whom even managed to jump inside and give Lula a hug.

Later, even when the security had been beefed up, a young woman still managed to get through and Lula posed for a picture with her. Presumably one of the bodyguards took the picture. During the inaugural ceremony in the Congress, House representative Severino Cavalcanti, from Pernambuco, whose constitutional role was to wind up the ceremony, started speaking off the cuff and congratulated Lula, who was born in the Northeast, as though they were in a bar.

None of this mattered to Lula, who said at one point, "Vamos quebrar o protocolo, mas nem tanto, hein?" ("We'll break with protocol, but not too much.") Afterwards, Lula allowed every Tom, Dick and Harry congressman to give him a hug and slap on the back and even gave autographs. One wonders what Fernando Henrique Cardoso was thinking as he watched this display, while awaiting the arrival of Lula at the Planalto Palace to receive the sash of office. OK, it was Lula's big day but he will soon have to stop being a man of the people and become the leader of the people.

Finally, it was disappointing to see that no major democratic leader took the pains to turn up at the ceremony. If George Bush was busy planning to invade Iraq then why did he not send his vice-president? In recent years the French, German and British government leaders have all visited Brazil and pledged to support the country's maturing democracy and efforts to get a fairer deal in international trade. But where were they on New Year's Day?

At least the American trade secretary, Robert Zoellick, the man Brazilians love to hate, attended. The result of this pitiful turnout was that two high-profile despots, Fidel Castro of Cuba and Hugo Chavez of Venezuela, were the main "guests of honor." A sorry sight indeed when, for the first day since the return to democracy in Brazil, one elected president passed power over to another elected president.

John Fitzpatrick is a Scottish journalist who first visited Brazil in 1987 and has lived in São Paulo since 1995. He writes on politics and finance and runs his own company, Celtic Comunicações—www.celt.com.br, which specializes in editorial and translation services for Brazilian and foreign clients. You can reach him at jf@celt.com.br

© John Fitzpatrick 2002

You can also read John Fitzpatrick's articles in Infobrazil, at www.infobrazil.com