2003/12/04
Brazil non-profits see Lula missing social goals
Reuters News Service
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
The REUTERS
report below was published by Forbes in its website:
http://www.forbes.com/home_europe/newswire/2003/12/04/rtr1169884.html
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