- The Washington Times - Tuesday, October 8, 2002

SAO PAULO, Brazil Trade union leader Luiz |nacio Lula da Silva commenced the second round of presidential elections here yesterday, vowing to join forces with all of the country's opposition parties to change the course of Brazilian history.
Mr. Lula, a leftist, won 46.4 percent of the vote in Sunday's balloting, twice as much as government candidate Jose Serra's 23.2 percent. Former Rio Gov. Antonio Garotinho and Ciro Gomes are out of the next round, to be held on Oct. 27, with 17.9 and 12 percent of the vote, respectively.
Wearing his new trademark dark suit, Mr. Lula da Silva, the Workers Party leader, told reporters yesterday that the three weeks leading up to the final vote would be dedicated to rallying Mr. Garotinho and Mr. Gomes who both ran on anti-government platforms to his side.
"Seventy-six percent of the population voted against the current economic model and Brazil's economic dependence," Mr. Lula da Silva said. "We are going to try and win [them] over." His party, he declared, is ready "to change the history of the country."
Mr. Lula da Silva's remarks were unlikely to soothe Brazil's already-agitated markets and international investors jittery about his economic policies. Foreign direct investment has already plummeted, with Brazil falling from second place to 13th place worldwide in the past 18 months.
"Lula will have to explain how you can aspire to a totally different economic model, but at the same time maintain the parameters of the [International Monetary Fund]: low inflation and a high primary surplus," said political scientist David Fleischer at the University of Brasilia.
Mr. Lula da Silva has promised to stick to the conditions of a $30 billion loan from the IMF, most of which is to be disbursed next year, which requires him to stick to a primary surplus of 3.75 percent of gross domestic product, not including debt payments.
The pressure on Mr. Lula da Silva will be enormous, and business leaders believe 2003 will be a rough year for Brazil. The country has had little economic growth and lost a lot of short-term credit from European and U.S. banks, the lifeblood of trade here a situation that could worsen in the next few weeks and next year.
But sitting across kitchen tables here, people insist that they want a change from a center-right government they feel has not addressed the country's deep divide between the very rich and poor, and did not improve the level of health and education. And there is a certain admiration for Mr. Lula da Silva, a self-made man who rose through the ranks of the labor movement.
"He knows the reality of the Brazilian street, and that will carry a lot of weight," said Ronaldo Villalto, a 23-year-old marketing student here, who is convinced that Mr. Lula da Silva will win the second round.
Mr. Lula da Silva and Mr. Serra are expected to battle it out during the next three weeks, the former capitalizing on the lower- and middle classes' disappointment with President Fernando Henrique Cardoso's government, even though it managed to stabilize the country's economy and financial sector.
Although this year Mr. Lula da Silva dropped the fiery anti-globalization rhetoric that marked his three previous attempts to reach the presidency, he will form alliances with other opposition parties and possibly change his tone again.
Some believe that if his line gets too aggressive, he will lose the more moderate voters who backed him in the first round.
"If his speeches get very radical, many will get frightened and move over to Serra," said Pierre Jean Dossa, general representative in Brazil for Natexis Banques Populaires, a French banking group.
Much will also depend on what tack Mr. Serra decides to take. He surprised the markets last week by propounding a more nationalist and protectionist line, talking up the need to control prices for basic goods and emphasizing that the state would have to protect consumers, but he is expected to use his government experience in the upcoming debates to poke holes in Mr. Lula da Silva's political promises.
Although a victory by Mr. Lula da Silva Oct. 27 would be likely to galvanize leftist parties in other Latin American countries that have also been unable to solve the deep social crises they are in, few here expect Mr. Lula da Silva to drag Brazil, an industrial powerhouse, down the path of Venezuela or Cuba.
"Our society is much more politically mature," said Teixiera da Costa, vice president of the Brazilian Center of International Relations and director of the Washington-based group Inter-American Dialogue.
If Mr. Lula da Silva wins the Oct. 27 round and he is expected to win with 60 percent of the vote he will be under two heavy constraints that will give him little room for maneuvering during at least the first 12 months.
He must build a broad coalition in the federal congress, including with the more conservative parties, to be able to govern, which will put a damper on any radical policies.
Also, the budget is going to be very tight, and the quarterly IMF reviews on the new government's fiscal and economic policies will mean that Mr. Lula da Silva will have little left to spend on extensive social programs.
"I don't think they would thumb their nose at the IMF. If they did, then Brazil would go down the drain quickly," said Mr. Fleischer, the political scientist.
Private businesses here are waiting to see whether Mr. Lula da Silva will be able to toss the more radical elements of his Workers Party into the closet and put his famed negotiating powers to use building a consensus between business' and workers' needs something that will be necessary to gain public support for any government.
Mr. Serra, on the other hand, is not given to negotiating and consensus building.
But not everyone is convinced that Mr. Lula da Silva has the ability to lead a country of the size and complexity of Brazil, and dismiss his moderate rhetoric as political marketing.
"He has no credibility and no credit," said Dr. Humberto Torloni, research director of Sao Paulo's Cancer Hospital and former U.N. representative in Geneva.
"If you strip off his clothes, you'll see red underneath."

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