Brazilian Leader Wins Faith of the Poor and Rich

Walking a tightrope between the expectations of the poor and the demands of the elite that manage this country’s wealth, the man Brazilians now call President Lula is proving to be quite an acrobat.

Just over 100 days into his presidency, former trade union leader Luiz Inacio Lula da Silva has retained the loyalty of the more radical elements of his Workers’ Party.

At the same time, he has won over the nation’s financial community and the gurus who feared he might run Brazil’s economy into the ground.

Instead, inflation is down, if only slightly.

Investment is flowing back into the country, despite fears that the war in Iraq would plunge it into recession.

And the national currency, the real, has rallied strongly against the dollar.

Even the International Monetary Fund, a capitalist boogeyman to most of the Workers’ Party, has praised the president’s stewardship of the economy.

“First, I am enthusiastic, but it is better to say I am deeply impressed by President Lula,” IMF Managing Director Horst Kohler said last week.

The voters who gave Lula a landslide victory in October are showing only a few signs of impatience with the new government’s slow progress in keeping its most important promise: to wipe out hunger and reduce poverty.

Last month, the Landless Workers Movement, for years a political ally of the Workers’ Party, resumed its takeovers of large plantations by occupying farms in six Brazilian states in its first such actions in a year.

The group said it wants to see the government take “energetic measures” toward agrarian reform.

“It’s clear things are not taking off with this new government, and that’s why we will keep up the pressure,” said Mario Lill, a member of the landless movement’s national coordinating committee.

Still, a recent poll by the Ibope research firm showed that more than 80% of Brazilians trust Lula. Another poll, on April 2, showed support for his government had risen to 64% (he won the election with 62% of the vote).

The Workers’ Party delegation in Congress voted solidly this month for a reform long sought by the international financial community -- a bill to pave the way for the independence of the country’s Central Bank. The measure passed by a vote of 442 to 13.

Lula even won the acquiescence of the party’s Maoists and Trotskyits, though 30 lawmakers later signed a petition opposing the bank’s autonomy.

Having inherited a $250-billion foreign debt, Lula’s government has cut public spending to meet an IMF budgetary target agreed to by his predecessor last year.

The government has embraced many of the orthodox economic policies that Lula’s party lambasted for decades.

“The [government’s] macroeconomic policy is very clear, coherent and solid,” said Paulo Leme, director of Goldman Sachs in Brazil.

“Fiscal solvency and [budget] reductions were essential for stabilizing the economy and returning to growth. This has been accomplished in a firm and decisive manner, and the effects were seen very quickly.”

Brazil’s country risk rating -- a measure of the strength of its bonds -- has dropped from 2,400 to 900 points, a sign that investors think Lula’s government is turning the corner on the country’s fiscal crisis.

“Brazil’s economic situation was seen with increasing skepticism. Now money is flowing back into the country,” said Antonio Machado of Opportunity Asset Management, which is based in Rio de Janeiro. “The main risk today is inflation.”

The monthly rate of inflation was 1.23% in March, the lowest rate since September.

Lula’s government has kept inflation at bay by raising interest rates to sky-high levels -- the prime rate reached 26.5% in February.

But those same rates threaten to slow the economy. The government recently lowered its growth forecast for 2003 to 2.2% from 2.8%, although many economists believe the economy will grow only 1.4% to 1.8%.

To combat the worst effects of the economic slowdown, the government has tried to move forward on its “zero hunger” program -- only to stumble on numerous bureaucratic obstacles.

Checks written to the program by Brazilian celebrities remained uncashed for months because the government was slow to open a bank account.

Now the government is moving to scale back the program, which has yet to begin feeding the poor.

“It’s true that we’ve had some problems at the start,” Lula acknowledged last week.

“But it’s a complex program that implies structural change. That’s why it’s never been done before.”

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Tobar reported from Buenos Aires and Gobbi from Rio de Janeiro.