- The Washington Times - Monday, August 26, 2002

The same polls that have leftist Brazilian presidential candidate Luiz Inacio Lula da Silva smiling are causing heartache for investors at home and abroad.
Six weeks before presidential elections in Brazil the world's 10th-largest economy the 57-year-old leftist is comfortably ahead and vowing to shake up market-oriented economic policies, which he blames for a widening gap between rich and poor.
Mr. Lula has vowed those economic policies will change "from the first day" of his time in office if he wins the Oct. 6 ballot. "That promise is sacred," he said after a meeting last week with outgoing President Fernando Henrique Cardoso.
That is not what the domestic and international investors want to hear.
Shaken by the fall of the Brazilian currency, the real, and the threat of economic contagion from neighboring Argentina and Uruguay, markets are concerned that the Workers Party (PT) candidate could further upset the economy or even default on Brazil's $250 billion public debt.
A surprisingly large $30 billion loan package handed over by the International Monetary Fund this month has briefly soothed the Brazilian markets.
But longer-term decisions by international investors will depend largely on the next government's actions and the way those actions affect the confidence of local players, financial analysts say.
As part of the IMF package, 80 percent of which is to be disbursed in 2003, Mr. Cardoso's government has agreed to run a budget surplus excluding debt payments of 3.75 percent of economic output.
But Mr. Lula, who leads the polls for the first round of the presidential election by nine percentage points, is angry at what he sees as the government's failed economic model.
"It is imperative," he said in a letter he handed Mr. Cardoso and distributed to the press, "that we not allow our strategic foreign exchange reserves to be consumed."
He also complained that an initial $6 billion disbursement under the IMF program was not enough to pull Brazil out of its economic doldrums.
He has, however, expressed his support for the deal, which he has described as "inevitable."
Born the seventh of eight children in a poor family, Mr. Lula began working when he was 12. By the age of 18, he was a factory lathe operator and soon became a union leader pushing for democracy under Brazil's military rule.
Popular among the workers, Mr. Lula in the late 1970s successfully challenged the government by organizing a series of strikes demanding better pay for factory employees. In 1980, he became one of the founding members of the left-leaning PT.
This is Mr. Lula's fourth attempt at the presidency. He has lost twice to Mr. Cardoso, in 1994 and 1998, with 32 percent of the vote.
So far, the firebrand politician and his running mate, successful industrialist Jose Alencar, have rejected talk of nationalizing crucial industries or of renegotiating or even defaulting on the country's $250 billion debt.
Such proposals in past campaigns were blamed for causing otherwise supportive voters to become nervous and shy away on election day.
This time around, Mr. Lula is focusing more on the enormous gap between the rich and poor, a social problem that Mr. Cardoso has failed to address while he implemented free-market policies and maintained relative political and economic stability for the past eight years.
Blaming Mr. Cardoso's policies for the country's economic problems, Mr. Lula has pledged to control inflation and slash interest rates while stimulating growth and employment.
His three main proposals are a mini-tax reform, setting up export lines of credit and reactivating international lines of credit to Brazilian companies.
Pounding to catch up with Mr. Lula is 44-year-old Ciro Gomes of the center-left Working Front party, a career politician who, despite earlier criticism, has committed to the IMF deal, including the 3.75 percent primary surplus target.
One poll, taken by Datafolha in mid-August, shows Mr. Gomes behind Mr. Lula by 10 points going into the first round of voting. If neither candidate wins an outright majority, the rivals will face each other in a second round Oct. 27.

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