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Brazzil - Economy - August 2004

Lula Confident in Brazil's Recovery

Brazilian President Luiz Inácio Lula da Silva believes that his country
has begun a new cycle of recovery and growth. Newspapers'
headlines seem to confirm this. For Lula , exporting is
essential for Brazil to obtain financial resources and, mainly,
to protect the domestic economy from fluctuations in the global market.

Gabriela Guerreiro


Picture Brazil's President Luiz Inácio Lula da Silva delivered a national radio and television address commemorating the performance of the Brazilian economy in recent months.

According to the President, there is no questioning the fact that the country has begun a "new and important" cycle of recovery and growth. "All the indicators of our economy show this clearly," he affirmed.

The President presented a series of headlines published in large circulation newspapers with favorable figures on the economy. He particularly highlighted the growth in the number of formal jobs in the country—over nine million in the last six months, according to data from the Ministry of Labor.

The President also celebrated the recent results in the growth rates of the Gross Domestic Product (GDP). "They surprised everyone, especially when compared with the rates of recent years, leaving no doubt about the enormous recovery capacity of our economy when administered with responsibility and firmness."

Lula cautioned, however, that the positive results in the economy "in no way" signify that all the country's problems have been overcome.

Lula reiterated the commitment he assumed when he took office, to succeed in guaranteeing the country's growth in a sustainable fashion, with inflation under control.

"In the President's evaluation, the thermometers that indicate a "solid and lasting" resumption of economic growth are chiefly the increase in sales in commerce, industry, and retail trade, as well as exports.

The President placed special emphasis on Brazil's victory in the World Trade Organization (WTO), in which the developed countries promised the poorer nations to implement reductions in agricultural subsidies.

According to Lula, the country was able to win international respect and admiration in the diplomatic negotiations, thanks to its balanced approach and ability to muster and unite a significant number of developing countries in the negotiations with the wealthier nations.

In the President's opinion, exportation is essential for the country to obtain financial resources and, mainly, to protect the domestic economy from fluctuations in the global market.

Exports and the variety of products offered by the Brazilian market also, in Lula's assessment, provide the country the certainty that Brazil is mastering new technologies.

Lula pointed out that Brazil is currently the world's largest exporter of beef, chicken, sugar, coffee, orange juice, and grains, among other products.

According to the President, the industrial policy determined by the Brazilian government was the result of the process of export growth.

"We can grow much more, but, to do this, we have to become increasingly efficient and competitive," he said.

Infrastructure Lacking

On the other hand, Brazil needs annual investments of US$ 12.6 billion for the country to rebuild its infrastructure, according to a study by the National Confederation of Industry's (CNI) Infrastructure Council.

Brazil's exports this year should attain US$ 90 billion, and the entrepreneurs are worried about problems in getting the country's merchandise to market.

"Highway, rail, and water transport, sanitation, and even electricity infrastructure requires immediate investments on maintenance and expansion," the CNI report alerts.

According to the CNI, "regulatory benchmarks consistent with international experience, legal security, and adequate priority in the government budget are essential elements for this mandatory investment to resume."

In the study the CNI asserts that private investments will only materialize when the laws referring to the regulatory agencies and the Public-Private Partnerships project, both of which are being discussed in the National Congress, are made clear.

The entrepreneurs underscore that the deteriorated state of the country's infrastructure has direct consequences for company balance sheets, since costs are raised, and delivery schedules are jeopardized.

The CNI calls on the government to reorder its budget priorities. "Speeches and appeals for private investment are insufficient by themselves to arouse the interest of companies," the entrepreneurs affirm.

According to the CNI, just to recuperate the energy sector will require annual investments of US$ 6.6 billion.

The CNI points out that various international institutions, such as the World Bank (IBRD) and the Inter-American Development Bank (IDB), as well as the Chinese government, have already offered resources to finance investments in this area, and the National Economic and Social Development Bank (BNDES) and the Federal Savings Bank (CEF) have also expressed the same interest.

Gabriela Guerreiro works for Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lia@radiobras.gov.br.
Translated from the Portuguese by David Silberstein.

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