MercoPress. South Atlantic News Agency

Lula's 100 first days

Brazilian president Luiz Inacio Lula da Silva whose administration this week reached its first one hundred days said in a national message that his tough policies avoided a “major economic disaster”.

Mr. Lula da Silva has been praised by the banking and financial sector for his prudent handling of the economy but has been severely criticized from groupings in his own Workers Party who question the lack of policies to stimulate expansion and the creation of jobs as promised during the campaign.

In his first one hundred days Mr. Lula da Silva further pruned budget expenditure in 4 billion US dollars, raised the basic interest rate and targeted an even higher fiscal surplus, all decisions resisted by the left wing groups of his won party.

But in this period the value of the US dollar in the Brazilian market dropped from 3,60 to 3,20 Reales helping to alleviate the indexed foreign debt; for the first time in months the country risk dropped below the 1,000 points benchmark after having reached 2,000 during the second half of 2002.

However analysts agree that many of Mr. Lula da Silva's promises such as reducing unemployment may not be achieved this year with current interest rates, above 27,5% with inflation anticipated in the range of 10%.

"There are no reasons to believe economic growth in 2003 will be stronger than in the two previous years, since interest rates are exceptionally high, the tax component has also grown and workers incomes have dropped", said Professor Anselmo Luiz Dos Santos from the University of Campinas.

The Lula da Silva administration recently lowered the expansion forecast for 2003 from 2,8% to 2,2%. In 2002 the Brazilian economy grew a very modest 1,52%.

Opinion polls indicate that the major concern of Brazilians is the lack of sufficient jobs, an issue economists agree can only be achieved with an economy expanding at over 3,5% annually. Actually most Brazilians interviewed believe unemployment, as happened in January and February will increase.

In 2002, electoral year, basic interest rate in Brazil was 25% and inflation jumped to 12,53% the highest since 1995, with unemployment reaching 11,7%. Per capita income in 2002 dropped 3,8% for the third consecutive year.

Brazilian Economy Minister Antonio Palocci has insisted that for Brazil to begin a period of expansion inflation must be rooted out and debt/GDP ratio must be below 50%.