BRAZIL: Poll Favourite Seeks to Calm Fears of Debt Default

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, May 14 2002 (IPS) - The presidential candidate of Brazil’s leftist Workers’ Party (PT), Luiz Inacio Lula da Silva, said Monday that he would not declare a moratorium on the foreign debt if he was elected in October.

Brazil’s debt would be honoured, although attempts would be made to renegotiate the terms whenever possible, Lula, the head of Brazil’s leading leftist party, and the front-runner in the polls, told a news briefing for foreign correspondents.

He noted that Brazil’s debt amounted to 230 billion dollars, including 90 billion in public debt.

Speculators and investment risk analysts who raised fears of a foreign debt default in Brazil if the PT won the October elections, prompting several international investment banks to downgrade their ratings for Brazilian bonds, are guilty of “economic terrorism,” according to Lula.

In the latest polls, Lula’s ratings stood at close to 40 percent. Trailing far behind, with around 22 percent, is the governing Brazilian Social Democracy Party candidate, former health minister José Serra.

But Lula stressed that “it is too early” for speculation, as the elections are still five months off.

The more than 110 million registered voters in this country of 162 million will elect a new president, parliamentarians and 26 state governors on Oct 6. If no presidential candidate wins outright in the first round, a runoff will be held on Oct 27.

A PT government would keep inflation down as far as possible, while at the same time working on “improving living standards,” which would require economic growth, said Lula.

Some of the points on Lula’s economic platform, “which is still being designed,” indicate that he would follow an aggressive foreign trade policy, “seeking new markets and fighting in the World Trade Organisation” to defend national interests, while fostering investment in high-employment industries like energy, transport and construction.

“We will attract foreign investors, (but with) something more serious than the high interest rates and privatisations offered up to now,” said Lula, who pointed to Brazil’s vast potential market, which would be equipped with better infrastructure and a better-trained, more highly skilled work force, “to make the country more competitive.”

The government of Fernando Henrique Cardoso has not advanced in those areas, because in 1996 the president decided to put priority on securing reelection in 1998, said Lula.

According to the head of the PT, Cardoso abandoned the country’s infrastructure, while maintaining a fixed foreign exchange rate until the traumatic devaluation in 1999 and the energy crisis of 2001.

Political analysts and creditors have no need to fear excessive public spending by the PT, because in the cities and states it governs, the party has already demonstrated that it follows austere fiscal policies – something that has even been recognised by the Cardoso administration’s economic authorities, he noted.

The Lula who has hit the campaign trail this time around is more jovial and takes more moderate stances, thus surprising the public and the other candidates with whom he debated last Thursday in Brasilia before an audience of hundreds of industrialists.

After tasting defeat in four presidential elections since 1989, the PT candidate’s chances are better than ever, according to the polls, in which he not only enjoys the highest approval ratings, but also the lowest rejection ratings of the four leading presidential candidates.

A “government of negotiation,” with sectorial forums in which ongoing talks would be held, is what Lula proposes in order to achieve “a new social contract” by drawing together the country’s “organised forces” with a view to modifying the country’s development model.

Lula pledged that he would secure approval of the tax reforms that Cardoso was unable to push through parliament, much to the frustration of the business community, which demands a reduction in the heavy taxes that hamper the competitiveness of exports.

Other reforms that failed to make it through Congress under Cardoso, like modifications of Brazil’s labour legislation and social security system, would also be approved, with broad nationwide debate and negotiations between all of the concerned sectors of society, he added.

Lula said that in order to bring about such accomplishments, he would tap the experience built up by his party in its 22 years of existence through the administration of dozens of large cities and several state governments.

PT governments have developed a number of award-winning programmes, such as the “participative budget” and scholarships or family stipends for poor families that keep their children in school.

The PT “is Latin America’s leading leftist party,” unique in the world, “pluralist,” and open to negotiations, due largely to its roots in the labour movement, said Lula, a former head of the metalworkers’ union.

Regarding trade integration in the Americas, Lula said he was in favour of “free trade, as long as the competition is fair and equal.” But that is not the case of the hemisphere-wide Free Trade Area of the Americas (FTAA), which is in the process of being created, he maintained.

The FTAA negotiations do not provide mechanisms for strengthening the weakest countries, nor guarantees for the survival of agriculture and industries that would be threatened by the United States’ greater competitiveness and protectionism, he warned.

In such questions, the FTAA stands in contrast with the European Union, which is the model that should be followed by this region, said Lula.