Brazil's Path

Discussion in 'Globalization' started by Motion, Jun 23, 2006.

  1. Motion

    Motion Senior Member

    Brazil's president has defied expectations

    Associated Press

    RIO DE JANEIRO, Brazil - Cars bound for Germany and Argentina line the docks, helping to boost Brazil's booming trade surplus. The country is winning praise from lenders and investors, and its currency is beating up on the U.S. dollar. Meanwhile, a corruption scandal is rocking the government.

    Brazilians expected a lot from President Luiz Inacio Lula da Silva, but certainly not this.

    When he was elected in 2002, many Brazilians saw Silva as a bastion of political integrity but feared the former shoeshine boy and grade-school dropout - the antithesis of Brazil's traditional well-heeled leaders - would take their South American country in the direction of Fidel Castro's Cuba.

    As Silva prepares to announce his re-election bid this weekend, it's clear his first term has defied those expectations. And despite charges of corruption and vote-buying in Congress that have tarnished the image of Silva's Workers Party, the president has emerged with his support mostly intact.

    Analysts and polls suggest Silva will likely win a resounding re-election in October. But they say a wary public will keep a close eye on him during his second four-year term.

    "Lula will probably win in the first round," said David Fleischer, a political scientist at the University of Brasilia. "He's lost support in the middle class, but he's very strong among the poor."

    His image as an advocate for the poor endures, despite his moderate policies.

    Silva hasn't redirected debt payments to benefit the poor as he once pledged, and he has remained market-friendly, despite his opposition to the U.S.-defended Free Trade Area of the Americas. Also, his relationship with leftist Venezuelan President Hugo Chavez, a leading U.S. opponent, cooled this year when Chavez's allies in Bolivia nationalized natural gas fields at the expense of Brazilian company Petroleo Brasileiro SA, or Petrobras.

    Silva has concentrated on paying Brazil's debts and could use a second term to warm ties with Washington. He called President Bush on Monday to discuss expanding international trade and steps toward energy self-sufficiency, the White House said.

    Silva rose to power in the 1980s through the metalworkers' union in Sao Paulo. Instantly recognizable by his guttural voice, his gusty laugh and the absence of his little finger due to a machine-press accident, Silva became the voice of the Brazilian left, calling on the government to suspend its debt payments to the International Monetary Fund.

    He ran for president - and lost - in 1989, 1994 and 1998.

    When Silva finally won in 2002, he pledged to divert debt repayment funds to help Brazil's poor and get tough with the IMF and the World Bank. He said he would rather die than do what his predecessor had: slow the economy to keep inflation under control.

    Then he did exactly that, ordering his finance minister to maintain a strict fiscal policy and keeping interest rates high to attract foreign capital and slow inflation.

    "It was more important for Brazil to have a serious monetary policy than street protests against the IMF. Silva understood that," said Alexandre Barros of the Early Warning consulting firm in Brasilia.

    Silva quickly raised the minimum wage to the equivalent of $156 a month, and he remained popular with lower-class Brazilians by playing soccer on the presidential lawn and unwinding over drinks at barbecue parties with friends.

    But his policies drifted increasingly toward the right, and soon even his avowed foe - the World Bank - was praising his "Bolsa Familia" program, which pays poor families to keep their children in school, calling it a model for poor nations.

    In 2005, Brazil posted a record trade surplus of $44.76 billion - up from $33.66 billion in 2004. The increase was due mostly to strong global demand for Brazilian soybeans and iron, but Silva got the credit for economic savvy.

    In December, Brazil paid off its $15.5 billion debt with the IMF early to save on interest. Silva shrugged off charges that he was consorting with the enemy.

    But his popularity weakened in June 2005, when a congressman denounced a kickback scheme involving more than $23.4 million in undeclared bank loans taken by officials of Silva's party.

    The scandal included an alleged bribes-for-votes scheme, in which the government supposedly paid allied legislators to back bills in Congress. An ethics probe found no proof, but the popularity of Silva and his party took a plunge.

    Silva's longtime friend and powerful chief of staff was expelled from Congress. Other top officials quit. While denying knowledge, Silva said the scandal was an "incalculable error" by the party.

    But Silva's popularity rebounded on the strength of the economy, and analysts said high returns on investments led foreigners to ignore the scandal altogether.

    "He was armor-plated," Fleischer said. "He's a Teflon president."
  2. Motion

    Motion Senior Member

    I get the feeling more Latin American countries will be moving in a similar direction as far as managing their economies. I read in an interview with Brazil's president and he explained that Brazil has pretty much tried everything else as far as socialism,neo-facism and military rule which all failed,so they pretty much had to move towards market reforms.

    Brazil Economy May Expand 4.5% This Year, Kawall Says

    June 19 (Bloomberg) -- Brazil's economy, Latin America's largest, may grow as much as 4.5 percent in 2006, faster than the latest central bank estimates, as falling interest rates spur demand, Treasury Secretary Carlos Kawall said...

  3. Motion

    Motion Senior Member

    Another thing to take note of with Brazil's president is that he seems to have largely stayed with the economic policies of "the Washington Consensus" that were,or supposedly put in place and followed by various Latin American countries in the 90's. This Washington Consensus was said to have ruined the economies of many countries in Latin America that follwed it,but some others have pointed out that these policies weren't followed correctly by many of those countries.

    " In other countries, the Washington Consensus seems alive. The idea that Latin America is trending left owes much to the victories of Lula da Silva in Brazil in 2002 and Michele Bachelet in Chile earlier this year. But Lula has followed responsible economic policies, and Brazil has provided constructive leadership in the Doha round of world trade talks. "

  4. gardener

    gardener Realistic Humanist

    Too bad he doesn't have to disclose his stock portfolio, that might explain why his sympathies have shifted towards the Bush Administration, and away from helping the poor in his own country.
  5. Motion

    Motion Senior Member

    How is Lula not helping the poor? He has wide support from them.
  6. Motion

    Motion Senior Member

    " Latin Americans are fed up, some say, with the "Washington Consensus" of free markets and fiscal discipline, which has failed to erase all their poverty and inequality, and as a result their governments are reverting to protectionism, state ownership of industries and unlimited social spending.

    But judging from the victory of my social-democratic National Liberation Party in Costa Rica's Feb. 5 elections, our country didn't get the message that all of Latin America is veering to the old-line left. And the truth is, neither did most countries in the region.

    The governments of most South American and all Central American nations are strikingly moderate, a radical change from the ideological polarization I encountered when I was first elected president 20 years ago. We may believe in the state's responsibility to alleviate the crushing poverty that afflicts 40 percent of Latin America's population, but most of us also affirm that there is no better cure for that poverty than a stronger, more globally integrated economy.

    I expect that Costa Rica will soon reaffirm its dedication to open markets by ratifying the Dominican Republic-Central America Free Trade Agreement with the United States, which the six other signatory nations have already approved. Chile has signed bilateral trade agreements not only with much of the Western Hemisphere but also with the European Union, China, South Korea and Singapore as well.

    Domestic economic policies in the region also trend away from socialism. In January the International Monetary Fund praised Brazil's "firm adherence to prudent macroeconomic policies," most notably debt reduction and a floating exchange rate -- hardly a leftist tack. Brazil is also considering allowing competition with its state-owned reinsurance monopoly, a reform Chile has already implemented. "

    The writer was president of Costa Rica from 1986 to 1990 and won the Nobel Peace Prize in 1987. Last month he was elected to a second term as president.

    Washington Post

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