- The Washington Times - Monday, January 1, 2007

BRASILIA, Brazil — The country’s first working-class president is pledging to use his second term to help the nation’s poor with jobs, saying he is committed to boosting an economy hamstrung by high interest rates and low growth since he took office four years ago.

Luiz Inacio Lula da Silva was sworn in to a second four-year term yesterday.

Brazil’s growth has lagged behind the rest of South America, and the sluggish economic performance along with a corruption scandal that dogged his leftist Workers Party put him on the defensive during his re-election campaign.

Mr. Lula da Silva, the son of a poor farmer who gained fame as a union leader resisting Brazil’s 1964-85 military dictatorship, acknowledged over the weekend that his second term could be tougher than his first because Brazilians will expect more from him.

“The second term … is a much stronger and demanding commitment than the first,” Mr. Lula da Silva told reporters Saturday. “And we are committed to doing more, and doing it better.”

Although economic development and easing the divide between the rich and poor are primary goals for Mr. Lula da Silva, he also has vowed to craft policies to spur an annual economic growth of 5 percent — a goal most analysts consider lofty.

Mr. Lula da Silva has promised that he will map out plans for the economy in the days after the inauguration, but investors are betting he will not invoke populist measures that could spook markets.

That stands in stark contrast to Mr. Lula da Silva’s inauguration four years ago, when many financial players were scared he would wreck Brazil’s economy by defaulting on debt.

Instead, he surprised Wall Street by sticking to orthodox monetary policy as his administration invoked high interest rates that stymied growth but brought down inflation and ended the nation’s traditional boom-and-bust cycles.

The nation’s benchmark interest rate has been reduced from a high of 19.75 percent last year but still stands at 13.25 percent, making it tough for businesses to expand.

Brazil will not experience significant job growth until the rate drops much more, said Mark Weisbrot, an economist at the Washington-based Center for Economic and Policy Research.

“They have the highest real interest rates in the world,” Mr. Weisbrot said. “Just think about what the U.S. economy would look at with those interest rates, a depression, and the more interesting question is how Brazil is able to have any job creation at all.”

After growing just 2.3 percent in 2005, Brazil is expected to post gross domestic product growth of 2.8 percent for 2006, and analysts think South America’s largest economy will expand 3.4 percent in 2007 — far below Mr. Lula da Silva’s goal.

Mr. Lula da Silva also was battered by corruption scandals during his first term that forced resignations of members of his inner circle and prevented him from pushing through Congress labor and tax reforms aimed at bringing down the cost of doing business in Brazil.

Another election corruption scandal initiated by members of his Workers Party cost Mr. Lula da Silva a first-round reelection victory on Oct. 1, but he won by a landslide four weeks later.

Analysts said Mr. Lula da Silva won much of his support by expanding the Zero Hunger program that gives 11 million Brazilian families money for food every month if they keep their children in school.

A poll released earlier this month showed that Mr. Lula da Silva has the highest popularity of recent Brazilian presidents, but analysts doubt he has the congressional votes needed to push through extensive pro business reforms.

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