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September 4, 2006 7:51 pm

Economy takes back seat in Lula campaign

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As President Luiz Inácio Lula da Silva launches his campaign for re-election next month, his left-leaning PT party has been attracting high-powered criticism for its timidity on the subject of economic reform.

The president’s programme for the election on October 1 was discussed at an unusual conference in São Paulo last week. Appearing before an audience of business people were four former finance ministers: Antônio Delfim Netto, minister during Brazil’s military dictatorship; Mailson da Nóbrega, from the first post-military government in the late 1980s; Pedro Malan, who oversaw Brazil’s economic stabilisation from the mid-1990s under the centrist PSDB; and Antonio Palocci of the PT, who resigned last March after being caught up in one of the corruption scandals that have dogged the present government.

A pretty broad range of views, you might expect – but no. All agreed that growth in Brazil was too slow. There was unanimity, too, on what was needed to speed it up: reduced public spending, especially on pensions; tax reform; independence of the central bank; lower interest rates and other measures to create the conditions for more public and private sector investment.

While hesitating to declare a new consensus, the former ministers agreed that all shades of political opinion were achieving “convergence” on the way forward.

A pity, then, that none of them was present earlier in the week at the launch of President Lula da Silva’s programme for a second term.

Ricardo Berzoini, president of the PT, and Marco Aurélio Garcia, co-ordinator of the programme, insisted there was no need for any further reform of the pensions system, and that spending on the public payroll was in line with requirements.

Mr Lula da Silva has distanced himself from the PT during the election campaign. The party symbol hardly appears during his television campaign broadcasts and the green and yellow of Brazil have replaced the strident red of the PT.

This is partly because he has laid the blame for alleged corruption in his government on party members who, he says, “betrayed” him. He has also moved away from the PT’s leftwing radicalism.

The party’s “directives for a government programme” published in June say that “in leading the transition from a neo-liberal paradigm to a different form of development, the work of the Lula government remains partial, unequal and incomplete”. The language was toned down in the president’s programme for government in 2007-2010, which stresses the need for continuity with present policies.

Yet the former ministers at last week’s conference would find much in the programme of concern. Most of them, for example, would take issue with its dismissal of the achievements of the PSDB government of 1995-2002, which introduced many policies maintained by Mr Lula da Silva. They must also be worried that the document makes no reference whatever to the need to address Brazil’s fiscal problems.

Paulo Bernardo, planning minister, said last week that in January, when the next government begins, an urgent debate would start on how to cut public spending. Asked why that debate was not taking place before the elections, he said that he was not running for office.

The need for debate and action was brought home at the weekend with the release of figures for gross domestic product in the second quarter. Falling short of even the gloomiest predictions, growth was 0.5 per cent up on the previous quarter and 1.2 per cent on the second quarter of 2005. Yet Mr Lula da Silva continued to insist the economy would grow by 4 to 4.5 per cent this year. Most economists regard this as impossible and many have revised their predictions to about 3 per cent.

The lack of debate cannot be blamed entirely on the president’s camp. His main challenger for the presidency, Geraldo Alckmin of the PSDB, is running a lacklustre campaign that has done nothing to dent Mr Lula da Silva’s commanding lead in opinion polls.

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