MercoPress. South Atlantic News Agency

Lula confirms tight budget policy and minister Palocci

Brazilian president Luiz Inacio Lula da Silva ratified Wednesday the country's “successful” economic policy emphasizing that Finance Minister Antonio Palocci plays a crucial role in its achievement and brushed aside proposals for a laxer fiscal policy to promote growth.

"Palocci is cool. We can't let ourselves be taken by speculations. Palocci is a crucial figure for Brazil. Everybody knows what he means for the Brazilian economy", said President Lula during the official launching of a new oil rig in Rio do Janeiro.

The new rig has a potential extraction of 180.000 bpd which will enable the government owned oil company Petrobras reach a daily production of 1.9 million bpd.

During the ceremony President Lula left oil aside and concentrated in underlining the economic successes of his administration emphasizing that as never before "Brazil now has so many conditions to achieve a sustained growth and become a member of the developed countries club".

Mr. Lula da Silva remarked to reporters that Mr. Palocci "is staying, will remain in his job with my full support", admitting that the idea of "fiscal softness has many followers and sells like hot cakes".

"The basic difference when you are the government is that you abandon the "I believe" option and have to make decisions and respond for them. And you can make and act if the conditions are there", added the Brazilian president.

"I challenge businessmen, analysts, academics to tell me in which other historic moment did Brazil have such an abundance of positive factors as we have nowadays", said Lula da Silva who then mentioned domestic market expansion, exports boom and the low inflation.

Critics of the Lula administration including from inside the ruling coalition argue that the tight budget and money policies, --with interest rates above 18%--, should be replaced by a more flexible approach with the purpose of further helping promote growth. Brazil GDP expanded 4,9% in 2004 and is forecasted to reach 3,2% in 2005.

"We're in the right track with a very good blend of fundamentals that ensure 2006 will be an even better year, with many more jobs created", he concluded.

However this is the third time in a week that Mr. Lula has confirmed Mr. Palocci and his tight money policy in a week.