TITLE

Feeling the Pressure

AUTHOR(S)
Margolis, Mac
PUB. DATE
May 2004
SOURCE
Newsweek (Pacific Edition);5/24/2004 (Pacific Edition), Vol. 143 Issue 21, p32
SOURCE TYPE
Periodical
DOC. TYPE
Article
ABSTRACT
On Sunday, May 9, the New York Times published a story on Brazilian President Luiz Inácio Lula da Silva's alleged drinking habit. The president was not amused. Brasilia quickly branded the story as "libelous, lying, yellow journalism," and the Brazilian ambassador to Washington fired off a terse protest letter to the Times. Then came a backlash from lawyers, constitutional scholars, journalists and diplomats. Brazilian newspapers blasted the government's harsh reaction as both arbitrary and authoritarian. Lula's foes in Congress had a feast. Lula, the former union leader turned pragmatist, has achieved some notable successes in a short period of time: exports are soaring, inflation has been held in check (under 6 percent), key pension- and tax-reform bills have been passed and the government is sticking with its commitment to fiscal austerity--necessary to produce a budget surplus that is a vital sign of responsibility to international investors. Lula's dilemma is both simple and serious: as the Sao Paulo-based consultancy A.C. Pastore & Associados put it last week, he's taking "strong political flak" for spending too little on social programs at a time when Brazil's economic outlook is slowly weakening. While Brazil's large foreign debt is manageable, it's pegged to always unpredictable interest rates. The gathering signs of an impending hike in U.S. rates have already pushed up the premium on Brazilian bonds--a trend that could eventually cause investors to flee, dumping their emerging-market securities. Poverty and unemployment pressures are nothing new in Brazil or Latin America, of course. Public-sector employees, the bedrock of Lula's Workers' Party (the PT), are now pressing their demands, too. In Congress, where Lula must patch together a fragile working majority at every vote, the government's putative allies on the left are often the biggest stumbling block.
ACCESSION #
13201859

 

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