We are now six months into Lula's presidential term. Since his election last October, Lula's PT administration
has concentrated on gaining credibility abroad both diplomatically and within the international financial community. Its
performance in this regard has been more successful than Lula's detractors predicted. By not doing what he had said he would
do during his last campaign and his three previous attempts to become president, as well as his time in the opposition, Lula
has surprised most observers including this one. Pragmatism has reigned as creditors are opening their coffers as Lula
strives to right the many wrongs that prevail in Brazil.
However, by acting in a responsible fashion, he has alienated many factions of his own Workers' Party, the PT.
These radical far-left elements are receiving a cold shoulder from Lula and the PT big shots. They may eventually be booted
out of the party or leave voluntarily. It is my impression that the smart government leaders, especially José Dirceu and
Antônio Palocci, are fully aware of the fact that a moderate realistic stance with regard to the IMF and foreign creditors pays off.
Although Brazil is far from out of the woods and continues to need massive foreign credit to pay off maturing loans and finance
the current account deficit, no one mentions a possible default on foreign debt, something that was thought of as a nearly
sure thing during the months leading up to the election. It now looks as if a renewal of an IMF agreement will be quite
possible when the current one expires in December, should Brazil think it useful. The primary budget surplus is ahead of target
for the first five months of 2003.
This "excellent economic performance" has been accomplished by reducing government expenditures for such
essential services such as highway maintenance, public health and education. Tax revenues are actually down from last year due
to the stagnant economy. Government payrolls have not been reduced and the social service deficit has increased, making
the reforms now before Congress urgently required. Efforts to stimulate the economy are beginning to surface. It remains to
be seen if these measures will be made to function or if it is just more hot air.
Lula is a gifted extemporaneous speaker. He grasps nearly every opportunity to make short pointed speeches at the
many public events where he is invited to participate. In between his international trips, Lula manages to get all over this huge
country to appear publicly. One wonders when he has time to think, plan and delegate responsibility for the execution of the
many programs, such as Zero Hunger, job creation, help for small and medium sized farmers, cheap credit for the low income
masses and informal business people as well as agrarian reform that have been announced.
In a more serious country, Lula's recent remarks deriding the legislative and juridical branches of the government
could be a cause of grave concern. Judges and congressmen took offense when he recently said that only God and not these
elements could keep Brazil from reforming itself.
The projects to reform the pension and tax systems are slowly working their way through various committees in the
Chamber of Deputies. Congress will meet in a special session during July to in principle accelerate the process. Progress may be
retarded because of the congressional investigation of irregular foreign remittances of over US $30 billion involving accounts in
the Banco do Estado do Paraná, which has since been privatized.
The opposition to the much-needed changes in the government pension system comes from those who will be
adversely effected, a small but extremely vocal minority of the population. Led by the Chief Justice of the Supreme Court,
Maurício Corrêa, Brazilian magistrates are against the reform that would diminish significantly their cushy retirement benefits.
One prominent judge has warned that corruption will increase if judges are not able to retire with full pay at a
relatively young age. The rational is that if they are put on an equal footing with other mortals, judges will have to resort to other
methods to insure a nest egg for when they step down. Lula has pointed out the injustice in the current system that allows a judge
to retire with full pay whereas a cane cutter will be lucky if he receives $100 a month when he is 60, if he lives that long. It
will be up to those in Congress to vote the necessary measures to at least begin to solve this problem that besides being
unjust also causes huge deficits that are financed by government borrowing that in turn keeps interest rates sky high.
A festering situation that so far seems not to have attracted attention internationally is that of "Land Reform." Clashes
between the landless people that are being mobilized by extremists and proprietors of farms and ranches that are being illegally
invaded are bound to happen. The most organized group, the Cuban-tutored MST (Movimento dos Trabalhadores Rurais Sem
TerraLandless Rural Workers' Movement) has invaded privately owned productive property in parts of São Paulo State,
Paraná, Rio Grande do Sul, Minas Gerais and Pernambuco.
A giant tent city with over a thousand families has sprung up on a state highway right of way in the western part of
São Paulo State in an area known as Pontal do Paranapanema. José Rainha Jr., one of the most extreme leaders who has
never worked on a farm and has spent some time behind bars, has promised to have 20,000 people there eventually. Their
gripe is that the government is acting too slowly in doling out land. The presence of all these people has put a strain on the
small towns nearby that have limited public services. Where their food is coming from is a mystery, but it may be from the
Zero Hunger programs that Lula's people talk about.
This potentially explosive situation has finally attracted Lula's attention. For years the MST and other Robin Hood
inspired organizations supported Lula. During the presidential campaign, their aggressive actions were suspended in order to not
blemish Lula's "Love and Peace" image. But before there is more bloodshed (so far just ten people have lost their lives in
scuffles) a truce would help. João Pedro Stedile, the national leader of MST, has said that the invasions will continue.
In Pernambuco, the MST led by Jaime Amorim, has begun to divide up the land of Engenho Bonito, a sugar
operation occupied illegally by 80 families for seven years, claiming that the government is too slow in acting. By taking the law
into their own hands, they have set a dangerous precedent that leaders in São Paulo have threatened to follow.
Lula has promised to meet with the leaders of these movements July
7th in order to negotiate a plan that will satisfy
them. The President has enlisted the help of his most trusted senior advisor, José Dirceu and another PT heavyweight Luiz
Dulce to handle the matter as the man in charge, Agrarian Development Minister Miguel Rosseto, seems to have failed in his
duties. Rosseto's appointment was controversial in the first place due to his past connections with the MST. Unless they exert a
firm hand against their former supporters, the PT may fail in this first major test of their true ideological convictions.
There are no pat solutions to this problem. It is a complex situation. Lula's spokesmen have stated that they wish to
continue the land distribution program within the law and the capacity of the limited financial and human resources available.
Men like Rainha and Amorim are just asking for trouble as they incite poor ignorant people to disobey law and order and
create ill feeling among the social classes. It behooves the government to enforce the law and not coddle these groups whose
ambitions go far beyond helping poor people have their own plot of land.
Various associations of productive land owning farmers have also asked for equal treatment and an audience with
Lula. It should be kept in mind that agriculture is largely responsible for Brazil's favorable trade balance. Armed guards have
been hired to look after property in the Pontal region. Farmers are marching in Rio Grande do Sul to protest the illegal
invasions. If law and order do not prevail and a truce is not worked out soon, unpleasant consequences may ensue.
São Paulo, June 29, 2003.
Richard Edward Hayes first came to Brazil in 1964 as an employee of Chase Manhattan Bank. Since then, Hayes has
worked directly and as an advisor for a number of Brazilian and international banks and companies. Currently he is a free lance
consultant and can be contacted at email@example.com