MercoPress. South Atlantic News Agency

“We miss Malán”

Only forty days have elapsed since the most hated of all former Brazilian president Fernando Cardoso's ministers Pedro Malán left office, but trade union and business leaders are already saying they “miss Mr. Malán”.

Known for his intransigence regarding prices, salaries and interest rates Mr. Malán was in permanent confrontation with labour and business. But compared to his successor, Antonio Palocci, belonging to the supposedly left wing Lula da Silva administration Mr. Malán is but a mere pale maiden.

Since taking office Mr. Palocci froze a long military shopping list; raised the Brazilian prime rate from 25 to 25,5% clearly indicating foreign investors where his priorities stand; he then said that resources for the Lula da Silva's darling program "Zero hunger" will only be forthcoming after all other commitments have been honoured, and finally last week announced that Brazil's Gross Domestic Product, GDP, primary surplus target is 4,25%, equivalent to 20 billion US dollars in budget savings.

A surplus target far exceeding the 3,75% agreed by former president Cardoso and the International Monetary Fund.

The primary budget surplus, --that excludes debt service--, is closely watched by Wall Street as an indicator of the country's ability and determination to pay its net public debt of 881 billion Reales, equivalent to 244 billion US dollars and 56% of GDP. Roughly 80% of Brazilian public debt is linked to the US dollar or domestic interest rates, meaning that local currency depreciation and a rise in interest rates automatically increase the country's debt burden.

"The message is very clear, the Lula da Silva administration is committed to recover international credit and bring down its country risk-grading", indicated Paulo Freitas from the Bank Employees union.

"With the current tax level in Brazil, (36%, the world's third highest), we are forced to make savings in government spending and improve the money value of expenditure", explains Mr. Palocci a former Trotskyite student militant.

"A strong fiscal policy can only have positive effects on the economy. It does not favour bubble growth but rather sustainable long term growth", emphasizes the man who is now the most reviled and hated member of Lula da Silva's cabinet.

As a former mayor of the city of Ribeirao Preto Mr. Palocci imposed a fiscal discipline unknown in inflation ridden Brazil and even privatized the local telephone system even before former president Cardoso dared to openly explicit such a policy.

However Mr. Palocci and Central Bank president Henrique Meirelles policies have not gone undisputed to the interior of the ruling Workers Party with radicals demanding their immediate dismissal and expulsion. So far Mr. Lula da Silva and the pragmatics dominate the party's ruling and decision making bodies and have invited fundamentalists to participate in "conciliatory discussions".

A difficult and tactful game for Mr. Lula and his team, who must manage a precise balance between electoral promises and the facts of reality, no wonder so many "miss Mr. Malán".