Brazil's Lula: Displeasing Greeks and Trojans

Lula is clearly trying to pull off a delicate balancing act. He is adhering

to IMF policies to stave off
capital flight and keep economic pressures
from abroad at bay while carrying out some limited reforms
and staking
out political and trade policies that he hopes will give Brazil more
independence and
stimulate economic growth in the long run.

by:
Roger Burbach

After nearly six months in office President Luiz Inácio Lula da Silva is encountering opposition from within
his own party while he stakes out foreign policy positions that challenge the Bush administration. As Emir Sader,
a political analyst at the State University of Rio de Janeiro, proclaims: "The government has adopted a fairly
traditional economic approach that arouses the ire of some in Lula’s Workers Party, while he is using Mercosur, the
South American trade bloc, to confront the Bush administrations’ efforts to impose its commercial agenda on the region."

Within the Workers Party some prominent members have publicly rebuked Lula for failing to break with the
austerity measures imposed on Brazil by the International Monetary Fund. To comply with the IMF’s demands to
balance the budget and make payments on Brazil’s huge international debt, Lula is maintaining a budgetary surplus
that cuts into the country’s ability to sustain some social programs, such as the country’s social security system
that is on the brink of bankruptcy.

Critical of Lula’s economic team in general, Senator Heloísa Helena of the Workers Party is leading the
charge against government proposals to tax the income of some of the social security pensioners to bolster the fund.
As a consequence she and a handful of party congressional members are threatened with expulsion from the party.

In late May, the second highest-ranking official of the IMF, Anne Krueger, came to Brazil and praised Lula
"for his sound economic policies." Prior to her arrival the government drew down part of an IMF credit negotiated
last year under the previous government of President Fernando Henrique Cardoso. Marcos Arruda of PACS, a
non-governmental research center in Rio de Janeiro, declares: "Lula’s economic team by pursuing IMF-imposed
policies is gutting social payments not just for the retired, but also for the disabled and the poorer families as well."

The pursuance of orthodox economic policies has also pushed up official unemployment to 12 percent
while domestic interest rates stand at 26.5 percent, among the highest rates in the world. In São Paulo, Brazil’s
largest city, unemployment has reached 20 percent.

To Lula’s credit, he has stood by his commitment to tackle the hunger and malnutrition that afflicts over 30
percent of the country’s population. On his first day in office he launched the anti-hunger program, known as "Fome
Zero." At the same time he cancelled military plans to buy advanced aircraft in order to use the funds for social programs.

As of June, pilot projects to fight hunger are well underway throughout the country, especially in the
Northeast, which is experiencing drought and has the largest proportion of poor and malnourished people in Brazil. Unlike
social programs for the poor in the United States that make people jump through bureaucratic hoops and participate
in work programs to receive needed assistance, the Brazilian plan allows the poor to fill out simple forms and
receive plastic cards to go to the local supermarket to purchase a canasta of food each month. "We promote the
involvement of the poor, not their humiliation," says Frei Betto, a theologian who helped design the anti-hunger program.

Some in the Workers Party are also criticizing Lula for continuing negotiations for Brazil’s entry into the
Free Trade Area of the Americas (FTAA), a trade initiative pushed by Washington that is aimed at turning all of the
Americas, from Alaska to Patagonia, into a huge free trade zone by 2005. However, Lula has staked out positions on
trade and foreign policy that are at variance with the interests of the Bush administration.

In Latin America he is one of the most vocal critics of the Iraqi war, proclaiming that the United States
"showed a total disrespect for Iraq and the rest of the world," and "it does not have the right to decide for itself what is
good and what is bad for the world."

Regarding the FTAA, Lula has repeatedly made it clear that the United States itself must cease protecting
its own markets if it wants Brazil to join the trade zone. As the world’s largest orange juice exporter, Brazil is
demanding that Bush drop the trade barriers that protect the large orange producers in Florida where his brother Jeb Bush
is governor. Also a major steel exporter, Brazil is denouncing US restrictions imposed on steel imports last year
by the Bush administration.

In an effort to prevent the United States from imposing its trade agenda on Latin America, Lula is insisting
that the U.S. trade representative, Robert Zoellick, negotiate with the Mercosur bloc comprised of Brazil, Argentina,
Uruguay and Paraguay. With the election of a left of center government in Argentina lead by Nestor Kirchner, the two
largest economies in the bloc are even discussing a common monetary union. When Lula attended the inauguration of
Kirchner in late May he proclaimed: "If we work together we have good conditions to fight against the protectionist
barriers of the rich countries, and to struggle in international forums for an end to hunger." In a direct attack on Bush’s
unilateralist foreign policy, Lula added, "we need to support multilateralism" in the world community.

Already Lula’s government may be facing the ire of multilateral institutions. The World Bank told Brazil in
January it would provide $5 billion to support its anti-hunger program. But Francisco Menezes, a specialist in
agricultural and hunger issues at the research center IBASE, notes, "the World Bank has promised a lot and delivered
little. It appears to be moving in lockstep with the Bush administration to extract concessions from the government."

One reason for the World Banks’ reticence to assist the anti-hunger program may be that Lula suspended
the Land Bank set up in the 1990s by the World Bank to support "market-oriented agrarian reform." Under the Land
Bank peasants were compelled to pay for plots of land at relatively high prices and if they missed payments their
lands were confiscated. As Fernando Moura, a spokesman for the Landless Movement declares: "While we are
hoping Lula will be more forceful in backing our demands for an accelerated agrarian reform program, the suspension
of the Land Bank is a positive step. We can now push for agrarian reform based on cooperation, not on market
competition that only favors the big landowners."

Lula is clearly trying to pull off a delicate balancing act. He is adhering to IMF policies to stave off capital
flight and keep economic pressures from abroad at bay while carrying out some limited reforms and staking out
political and trade policies that he hopes will give Brazil more independence and stimulate economic growth in the long
run. As Menezes states: "The Workers Party won the elections but the social and economic forces affecting Brazil
changed little. The government appears to have little leeway to implement profound changes for now. Our best hope is
that once the economic situation is stabilized, Lula will be able to implement more radical reforms."

Marcos Arruda argues for a somewhat different tack for transforming the country’s politics: "To move against
anti-social policies like those of the IMF we need to mobilize. The real alternative is pressure from below, from the
landless, the poor, students, workers, the unemployed and many others who are left out. The way to open up space for
Lula to adopt more progressive policies is to mobilize so that domestic and international consciousness can begin
to check the power of big capital and institutions like the IMF."

Roger Burbach is director of the Center for the Study of the Americas (CENSA) and has written extensively
on Latin America and globalization. His next book, "The Pinochet Affair: State Terrorism and Global Justice," will
be released by Zed Books in the fall. He can be reached at
censa@igc.org

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