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Krueger visits Brazil; Ciro Gomes threatens Lula; Uncertainties about World Trade

Krueger visits Brazil

Deputy Director General of the International Monetary Fund, Anne Krueger will be visiting Brazil this coming week where she will be the main speaker in the Latinamerican Econometric Conference to be held July 24th. in Sao Paulo.

Ms. Krueger during her two days visit to Brazil is scheduled to meet President Fernando Cardoso and Economy Minister Pedro Malán In Washington IMF pointed out that Ms. Krueger is in no way related to any particular extension of the current credit that expires next December. Markets have been particularly sensitive about the coming September presidential elections in Brazil and the possibility of an Socialist opposition victory which has forced the country risk to rocket; sovereign bonds to collapse and a general depreciation of the Brazilian currency. President Cardoso and virtually all presidential candidates have accused international "risk agencies" of total ignorance about the functioning of the Brazilian democratic system, plus implying they could have direct "interests" in the volatility of the bond markets. Thomas Dawson, IMF spokesperson when asked specifically about Brazil, indicated that "Brazilians have been faithful, aggressive, and complete in their fulfillment of the current program. We have noted previously, including in this forum, that a broad political spectrum in Brazil has indicated that they remain committed to continuing the sort of polices that have served Brazil to this point, and we look forward to dealing with any future government that is committed to such policies as well".

Ciro Gomes threatens Lula

Ciro Gomes, the presidential candidate of the Workers Front has become the surprise of Brazil's October elections and now is second in the polls behind Mr. Inacio Lula da Silva, and ahead of the ruling coalition's candidate Mr. José Serra.

According to the latest opinion poll released this week by the influential media group O' Globo, Mr. Gomes figures with 22% of vote intention; Mr. Lula dropped from 34 to 33% when a few weeks ago he was comfortably leading by almost 40% and Mr. Serra, handpicked by President Cardoso dropped to third place with 17%. And even more worrying for Mr. Lula, given the fact that the Brazilian presidential election demands a second round if no candidates manage 50% of the vote, for the first time since the current presidential race began, Mr. Gomes would defeat Mr. Lula in the play off, 44% to 43%, according to the same poll. However the campaign officially begins August 6th, two months before voting day, and television time is distributed according to current parliamentary representation, meaning Mr. Serra will have the upper hand, (40%), in a country where television broadcasting, given its vastness and cultural formation, is decisive. Besides president Mr. Cardoso anticipated he will be openly working for his good friend and political crony. To prove it this week Mr. Cardoso liberated hundreds of millions of dollars in public works projects to be mostly implemented by candidates belonging to the ruling coalition. Mr. Gomes in spite of his age, 44, has a vast political experience: he was the youngest mayor of a state capital Fortaleza with 29 years; the youngest governor at the age of 32 in Caerá his birth place, and with 36 in 1994, he became Economy Minister replacing Mr. Fernando Cardoso who was implementing the successful Real stabilization program that enabled him to become president for two periods. In 1998 Mr. Gomes also ran for president and managed 10% of the total vote. This time he's campaigning next to his wife a renowned soap opera television star that attracts thousands. But Mr. Gomes is also described as a hot tempered person and can rapidly turn quiet nasty verbally?. The leading candidate Mr. Lula is running for the fourth time, but his pseudo Marxist populist economic and financial initiatives of the past which he now strongly rejects, still haunt him, and financial markets?.exposing them to the current "turbulence", in IMF jargon.

Uncertainties about world trade

World trade during 2001 contracted in most regions with the exception of emerging economies such as Russia, China, India and African and Middle East countries, according to a report released by the Brazilian Confederation of Industry, based on information from the World Trade Organization, WTO.

The lesser growth of international trade was direct consequence of the slowing down of the world economy beginning in the second half of 2000 and intensifying all along 2001. The volume of world exports in 2001 actually dropped 1% compared to the spectacular 11% increase of 2000, the highest in the last ten years. However emerging economies or in transition, managed to distance themselves from the fragility of the developed world. "The main factors that led these countries to a greater commercial dynamism in 2001 was the increase in direct foreign investments, and the considerable jump in revenue experienced by oil exporting countries", reads the report. For the current year WTO predicts a modest production increase in all main world markets, which should help "with a timid recovery of world trade". But the Brazilian Confederation of Industry report points out that the WTO forecast is based on figures from the first quarter, meaning that the current fraudulent accountancy practices reported in some leading American and European corporations, and the consequent "confidence crisis" in the global financial market, is still unknown and hast to be carefully assessed.