Brazil non-profits see Lula missing social goals
BRASILIA, Brazil, Dec 4 (Reuters) - Brazil's President Luiz Inacio Lula will fail to achieve social goals and expose the nation to future financial shocks if he sticks to orthodox economic policy, Brazilian social groups said on Thursday.
Reuters, 12.04.03, 3:28 PM ET
Organizations allied to the international Social Watch forum said Lula had shown courage abroad in areas like trade, but designed economic policy for international investors, failing to deliver jobs, stability and redistribute wealth.
"The probabilities are not in favor of success," said Fernando Carvalho, an economics professor at the University of Rio de Janeiro, at the launch of Social Watch's Brazil report. "If Brazil is very lucky we can suffer less, if we are not we may pay a very high price."
The election last year of Lula, a former union leader, raised hopes Brazil would finally cut high rates of illiteracy and poverty after decades of neglecting social programs in one of the world's most economically inequitable nations.
His election also raised investor fears Brazil's first working-class president might ditch fiscal controls to raise social spending and pursue economic growth.
After Lula took office in January he cut social spending to more than comply with a 4.25 percent primary budget surplus target and show fiscal responsibility. He allowed interest rates to be raised to a four-year high to combat inflation created by fears of his election.
The groups said instead of allowing rate hikes Lula should have asked union allies for wage cuts to control consumer prices. The rate rises caused unemployment to hit a 20-month high of 13 percent in June, a level from which it has hardly budged.
Instead of agreeing to a 4.25 percent surplus target in a new one-year IMF loan, they said Lula should have pushed for a lower target to allow greater social spending.
Carvalho said Lula had to adopt some kind of capital controls to prevent the kind of capital flight that hit Brazil practically every year between 1995 and 2000 due to either external or internal financial shocks.
Lula has argued that without fiscal discipline and orthodox policies Brazil cannot balance accounts and attract investment for sustainable growth needed to fund social programs.
"There is no possibility of carrying out social policy with this kind of economic policy," said Iara Pietricovsky of the Institute of Socioeconomic Studies. "We are prisoners to the international financial system."
Copyright 2003, Reuters News Service