- The Washington Times - Tuesday, July 16, 2002

RIO DE JANEIRO During his first bid for the Brazilian presidency in 1989, former union leader Luiz Inacio Lula da Silva addressed a rally wearing a baseball cap and a T-shirt that bore the slogan: "Today, I am not a happy man."

Seeking to become the first popularly elected president in almost three decades, Mr. Lula delighted the partisan crowd of unionists, leftists and Workers Party cadres with a characteristically passionate speech.

But as Mr. Lula recently recalled, no matter how enthusiastic the response, someone always was trying to get him to tone down his fiery campaign speeches.

"When I came down off stage once, a woman came up to me and said, 'Lula, you scared me. Couldn't you say the same things, but be a bit less aggressive?'" the Workers Party leader said.

"Look at me today. I am not wearing a cap or a T-shirt. I am dressed in a suit and tie, and I can say that today, I am a happy man."

Thirteen years after he lost his first presidential campaign and four years after losing his third, Mr. Lula, 56, is going for a final shot at the presidency.

As the story about his attire illustrates, he is a different man this time.

The former shoeshine boy and metalworker from Brazil's impoverished northeast has matured into a more polished politician, the gruff countenance replaced with a smile and the angry rhetoric replaced with a milder message.

"The Workers Party and Lula have mellowed," said David Fleischer, a professor of politics at the University of Brasilia and editor of the journal Brazil Focus. "They've toned down their proposals. They are willing to play the game."

The new approach unquestionably has had a decisive effect on Mr. Lula's campaign.

With less than three months to go before voters make their choices Oct. 6, opinion polls give the party's honorary president about 40 percent of the vote more than double the percentage of Jose Serra, the candidate of President Fernando Henrique Cardoso's Brazilian Social Democratic Party.

If no candidate wins an absolute majority in the first round, a runoff will be held Oct. 27.

Early this month, a third candidate, Ciro Gomes of the Populist Socialist Party, who is backed by a coalition of small leftist parties, tied Mr. Serra for second place in media polls. This raises the likelihood that if Mr. Lula doesn't win outright Oct. 6, two leftists could be on the final ballot three weeks later.

Mr. Lula is confident that this will be his year. Since gaining visibility by leading a series of strikes in the late 1970s and helping found the Workers' Party in 1980, he has come a long way.

In addition to having guided the leftist party known by its Portuguese initials, PT toward the political center in recent years, he also has managed to maintain the integrity and common touch that won him a reputation as one of Brazil's most honest politicians.

His opponent Mr. Serra is a former health minister whose candidacy is floundering thanks to widespread discontent with the ruling Social Democratic Party and his lack of charisma.

The discontent centers on the government's inability to provide jobs, bridge the yawning gap between the country's rich and poor or stop the violence that is turning Brazil's cities into war zones.

Mr. Lula has made these issues his priorities, promising, among other things, to introduce a food-stamp program to help feed the 44 million Brazilians living in poverty and invest $35 billion to build 6 million low-cost houses. He also says he will reduce Brazil's exorbitant interest rates to stimulate growth that has averaged 2 percent during Mr. Cardoso's eight years in office.

What has caused the most concern, however, is his economic strategy.

Investors fear that under the suit and tie still may beat the heart of a radical unionist the candidate who in 1989 campaigned on a promise to default on Brazil's foreign debt.

Mr. Lula has moderated that position, telling foreign journalists last month: "If we want to be respected, we must honor the agreements we have." But investors still are worried.

Morgan Stanley, Merrill Lynch, ABN Amro and Santander downgraded their ratings of Brazil in May, and Moody's Investors Service changed from "positive" to "stable" its outlook on the country's debt.

Brazil's rating of investment risk in developing countries surpassed those of Ecuador and Nigeria in June, and the real fell last week to its lowest level ever against the dollar.

Although few people believe that Brazil will go the same way as Argentina Brazil's debt is growing, but most of it is internal political analysts say many people are worried because they don't know how a Lula government would handle the world's eighth-largest economy.

That, say the analysts, is partly because they do not believe that Mr. Lula has truly changed and partly because what they hear from him is different from what they hear from other voices in the Workers Party.

The program of government passed at the PT's last congress in December, for example, said the party "will represent a break with the current economic model" and promised to "suspend or re-evaluate the privatization program."

Officials have yet to explain exactly what those statements imply, and until they do, investors fear the worst, said Christopher Garman, a political and economic consultant with the Sao Paulo firm Tendencias.

"Investors realize that the party is more radical than the party leadership, and they wonder who, if he gets elected, Lula is going to pay attention to," Mr. Garman said.

"The PT has emphasized the necessity of maintaining the low inflation policies that Cardoso has established, and in a certain sense that's a significant advance. [But] what really gets investors is that these generic comments in favor of maintaining macroeconomic stability [dont jibe] with a number of policy proposals that he has."

Mr. Lula sought to calm fears by picking as his running mate Jose Alencar, a pro-business senator who owns one of the country's biggest textile companies, and last month Mr. Lula vowed that, if elected, he would maintain the government's fiscal targets during a transition period.

The offer was praised as politically mature by Mr. Cardoso and his economic team, but it was not enough to soothe the doubters. That could be because the economic worries are exacerbated by political concerns, analysts say.

Mr. Lula himself has little administrative experience. He has held elective office only as a federal lawmaker at the end of the 1980s. Although the PT has extensive and relatively successful experience running municipal and state governments, it has little chance of gaining a majority in Congress and would have to negotiate to get even the most basic legislation through parliament.

Passing such important measures as tax and social security reforms, which require a three-fifths majority, would be even more of a struggle.

Under the circumstances, winning the confidence of the business sector would be a challenge for any politician. It is therefore only natural, said former Central Bank President Gustavo Loyola, that investors are anxious at the prospect of seeing Mr. Lula at the controls, no matter how much he may have changed.

"If it were a plane, the United States would be a Boeing. No one cares about getting to know the pilot," Mr. Loyola said. "We are one of those little one-engine propeller planes that transports miners across the Amazon. Before getting on board, any responsible person wants to know who is flying the plane."

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