Fri, Jun 23, 2006 - Page 7 News List

Brazil's Silva defying expectations

AP , RIO DE JANEIRO

Cars bound for Germany and Argentina line the docks, helping to boost Brazil's booming trade surplus. The country has declared itself self-sufficient in energy and its currency is beating up on the US dollar. Meanwhile, a corruption scandal is rocking the government.

Brazilians expected a lot from President Luiz Inacio Lula da Silva, but certainly not this.

When he was elected in 2002, many Brazilians saw Silva as a bastion of political integrity but feared he would take their South American country in the direction of Fidel Castro's Cuba.

It's clear that neither set of expectations panned out.

Silva hasn't redirected foreign debt payments to benefit the poor and his policies have remained market-friendly, despite his opposition to the US-defended Free Trade Area of the Americas.

Silva has concentrated on paying Brazil's debts and could use a second term to warm ties with Washington.

Meanwhile, charges of corruption and vote-buying in Congress have tarnished the previously spotless image of Silva's Workers Party, know by the initials PT.

Analysts and polls suggest Silva will probably win a resounding re-election in October. But they say a wary public will keep a close eye on him during his second term.

Silva rose to power in the 1980s through the metalworkers union in Sao Paulo, the country's industrial and financial center. He became the voice of the Brazilian left, calling on the government to suspend its debt payments to the IMF.

When Silva won the presidential elections in 2002, he pledged to use debt repayment funds to help Brazil's poor and get tough with the IMF and the World Bank. He said he would rather die than do what his predecessor had: slow the economy to keep inflation under control.

Then he did exactly that, ordering his finance minister to maintain a strict fiscal policy and keeping interest rates sky-high to attract foreign capital and slow inflation.

But Silva's popularity started to unravel last year, when a former government-allied Congressman denounced a kickback scheme involving more than US$23.4 million in undeclared bank loans taken by officials of the PT.

The scandal included an alleged bribes-for-votes scheme, in which the government supposedly paid allied legislators to back its bills in Congress. A congressional ethics probe found no proof of the deal, but the popularity of Silva and the PT plunged.

But his popularity rebounded on the strength of the economy, and analysts said the high returns on investments led foreigners to ignore the crisis altogether.

"He was armor-plated," said David Fleischer, a political scientist at the University of Brasilia. "He's a Teflon president."

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