Brazilian president moves to reassure

Da Silva says his regime will responsibly honor all debts, control inflation

October 29, 2002|By KNIGHT RIDDER/TRIBUNE

SAO PAULO, Brazil - A day after being elected president of Latin America's largest democracy, Luiz Inacio Lula da Silva sounded a conciliatory tone yesterday toward financial markets and asked Brazilians not to expect too much too soon.

"As we said in the campaign, our government will honor contracts established by the government. We will not lose control of inflation and ... we will maintain ... a position of fiscal responsibility," said da Silva, the first Brazilian president to be elected from a leftist party.

Da Silva plainly was trying to reassure Brazilians and foreigners that Brazil would be safe in his hands, despite his history as a union radical and leftist political leader.

Brazil has been driven to the brink of a financial crisis by investors pulling their money out of the country, at least in part because of fears that da Silva would win the election and overturn existing economic policy.

Da Silva outlined his goals for the next four years, saying yesterday that he had a clear mandate to create a new economic and social model for Brazil. But he also warned his countrymen about expecting drastic changes after he takes office Jan. 1. Budget cuts in his first year will make it hard, he said, to spend more on social programs.

"The hard road facing Brazil demands austerity in the use of public funds," da Silva said.

Da Silva stressed that he would honor all debt-repayment commitments made by President Fernando Henrique Cardoso and promised that he would not tolerate inflation. Brazil had runaway inflation in the 1980s and early 1990s, until the Cardoso era.

Aides had said da Silva wanted to review the $30 billion loan agreement extended earlier this year by the International Monetary Fund to shore up Brazil's economy. On the campaign trail, da Silva frequently blasted the IMF and other multilateral institutions such as the World Bank and the Inter-American Development Bank.

But yesterday he called on those institutions to help Brazil with its economic crisis.

"Brazil will do its part to get past this crisis, but it is essential that beyond support [for the government], the multilateral organizations ... re-establish financing for [Brazilian] companies and international commerce," da Silva said.

Brazil's currency, the real, traded steadily yesterday as investors waited for news of da Silva's economic team. Aides have leaked several market-calming items, including a promise to create an autonomous central bank that would largely remove politics from monetary policy.

Da Silva meets with Cardoso today and afterward is scheduled to announce his transition team. Investors hope it will give a clear idea of his economic team and outlook.

Da Silva received congratulatory calls from world leaders yesterday, ranging from Cuban dictator Fidel Castro to President Bush. Despite criticism of the United States during the campaign, da Silva's spokesman Andre Singer said bilateral relations with the United States would remain strong.

"The first year of my government will have combating hunger as its seal," da Silva said, promising that at the end of his term all Brazilians will have three meals a day. Of Brazil's 170 million people, more than 40 million live in poverty.

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