Knight Ridder News Service
  October 29, 2002

  Lula: Hard financial road ahead

Brazil will pay off debts, he pledges


SAO PAULO, Brazil - A day after being elected president of Latin America's largest democracy, Luiz Inácio Lula da Silva sounded a conciliatory tone toward financial markets and asked Brazilians not to expect too much too soon.

  ''As we said in the campaign, our government will honor contracts established by the government. We will not lose control of inflation and . . . we will maintain . . . a position of fiscal responsibility,'' da Silva, the first Brazilian president to be elected from a leftist party, said Monday.

  Da Silva plainly was trying to reassure Brazilians and foreigners that Brazil would be safe in his hands, despite his history as a union radical and leftist political leader. Brazil has been driven to the brink of a financial crisis by investors pulling their money out of the country, at least in part because of fears that da Silva would win the election and overturn existing economic policy.

  On Monday, da Silva outlined his goals for the next four years, saying he had a clear mandate to create a new economic and social model for Brazil. But he also warned his countrymen about expecting dramatic changes after he takes office Jan. 1. Budget cuts in his first year will make it hard, he said, to spend more on social programs.

  ''The hard road facing Brazil demands austerity in the use of public funds,'' da Silva said, pledging creative use of existing monies and saying he would tap state
  development banks to start as many job-creation programs as he could.


  Da Silva stressed that he would honor all debt-repayment commitments made by President Fernando Henrique Cardoso and promised he would not tolerate inflation. Brazil had runaway inflation in the 1980s and early 1990s, until the Cardoso era.

  Aides had said da Silva wanted to review the $30 billion loan agreement that was extended earlier this year by the International Monetary Fund to shore up Brazil's economy. On the campaign trail, da Silva frequently blasted the IMF and other multilateral institutions such as the World Bank and the Inter-American Development Bank.

  But on Monday he called on those institutions to help Brazil with its economic crisis.

  ''Brazil will do its part to get past this crisis, but it is essential that beyond support [for the government], the multilateral organizations . . . reestablish financing for
  [Brazilian] companies and international commerce,'' da Silva said.

  Brazil's currency, the real, traded steadily Monday as investors waited for news of da Silva's economic team. Aides have leaked several market-calming items, including a promise to create an autonomous central bank that would largely remove politics from monetary policy. Da Silva meets with Cardoso today, and afterward is scheduled to announce his transition team. Investors hope it will give a clear idea of his economic team and outlook.

  Da Silva received congratulatory calls from world leaders Monday, including Cuban dictator Fidel Castro and President Bush. Despite criticism of the United States during the campaign, da Silva spokesman Andre Singer said Monday that bilateral relations with the U.S. would remain strong.


  ''We want to have the best relationship possible with the United States. It's a very important country and, besides that, the United States is our most important
  commercial partner, so we want to keep that relationship,'' Singer said. ``But what we are going to do is negotiate hard in defense of our interests as the United States has done all the time.''

  Da Silva also said he was creating a special secretariat for social emergencies that would have combating hunger as its mission, and that hunger would be a benchmark for measuring his success in office.