Brazil: President Luiz Inacio Lula Da Silva Begins Second Year in Office

NotiSur - South American Political and Economic Affairs, January 16, 2004 | Go to article overview

Brazil: President Luiz Inacio Lula Da Silva Begins Second Year in Office


In his first year in office, Brazilian President Luiz Inacio Lula da Silva has won over many of those who predicted disaster for the country if he were elected, and he has maintained strong public approval among Brazilians. The coming year may test whether he can keep their support and use his image as a strong national and international leader to make a difference in the lives of Brazil's poor majority.

Lula has displayed a pragmatism few expected, and he has become an acknowledged leader among developing countries. The unpolished trade unionist has become a statesman whose moderate economic policies pleased the financial markets as well as the International Monetary Fund (IMF) even as they brought criticism from some members of his own party.

Nevertheless, Lula remains very popular, with ratings holding steady at 70%, nearly 10 points higher than his share of the vote in October 2002.

"People don't just admire his biography or respect his political trajectory, they genuinely like and trust Lula in a way that has no precedent for a Brazilian president," said Marcos Coimbra, director of Brazilian polling firm Vox Populi. "Despite everything, he ends the year with more credibility and political capital than he started with, because he has shown that someone with his background is capable of running the government."

The turmoil that analysts predicted if Lula won the elections did not occur. In 2003, his administration's conservative economic policies, involving even tighter fiscal and monetary adjustments than those demanded by the IMF, were successful in reducing inflation, stabilizing the exchange rate, and balancing current external accounts.

Lula promises better future in end-of-year speech

On Dec. 18, 2003, in a nationally televised address, Lula defended the pro-market policies, saying the sacrifices Brazilians had made in 2003 would be repaid with sustained economic growth.

"Many believed, and with reason, that Brazil would not survive the crisis," said Lula. But now, "the time of uncertainty has passed." Listing his government's achievements--falling interest rates, expanding exports, a stable currency, he added, "We have reversed the worst expectations. We have won back confidence in our economy and in the capacity of this country to grow....Brazil has found its path--2004 will be much better than 2003."

Explaining to Brazilians why their economic sacrifices were needed, Lula said, "The bitter decisions were taken consciously and with an eye on the future."

Economic indicators good, social indicators less so

Brazil had an unprecedented trade surplus in 2003 of more than US$24 billion, as exports grew 20% to more than US$72 billion. That enabled the country to achieve a US$3 billion surplus in its current accounts. Inflation also dropped from 12.4% in 2002 to 8.5% for 2003.

Six months ago, Lula said Brazil was about to witness a "spectacle of economic growth," but that did not happen. The year ended with GDP growth at just 0.2%, which meant a drop in per capita GDP, since the population is growing at a rate of 1.4% a year. GDP growth of 3.5% is projected for 2004. But economists on the left say that level of growth is unlikely if the government does not modify its economic policies, while others say that even 3.5% growth would be insufficient to bring down unemployment.

During the year, the chronic unemployment rose by about one percentage point to 12%, and poverty still engulfs 30% of the population. Lula's Zero Hunger (Fome Cero) assistance program, the centerpiece of his social platform, reaches 1.3 million families, but it should reach 50 million (see NotiSur, 2003-02-21). The agrarian reform demanded by millions of landless campesinos has been stalled because the administration has considered other reforms more urgent.

Despite setbacks, Lula's first year has had its triumphs.

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