Posted on 05/18/2002 3:12:52 AM PDT by Cincinatus' Wife
RIO DE JANEIRO, Brazil - Socialist Luiz Inacio ''Lula'' da Silva lost Brazil's last three presidential elections, but his wide lead ahead of elections in October this year is already causing investor panic.
The radical leftist has a record of late campaign fades. But in a reversal of fortune this year, it is the ruling party that finds itself in disarray, and a few analysts are now contemplating what until recently was unthinkable -- that da Silva may finally win the presidency.
President Fernando Henrique Cardoso ends his second four-year term this year and had sought to preserve his open-markets legacy by tapping Health Minister Jose Serra as a ''continuity'' candidate.
Most analysts still believe the government party will mount an 11th-hour push to grasp victory, as it has done in the past. But Serra has been badly hurt by a recent article in the newsmagazine Veja alleging that Serra's friend and former campaign treasurer Ricardo Sergio sought about $90 million in bribes during the sale of state companies. Sergio called the report ``a gross lie.''
BRIBERY COMPLAINTS
Brazilian congressmen and prosecutors were obliged to begin investigating the allegations because both the current education minister and a former communications minister confirm that a prominent businessman complained to them about the alleged bribes.
Brazilian media are awash in rumors of greater scandals involving wiretaps and top politicians. As a result, Serra is under pressure to step aside in hopes of finding another ''continuity'' candidate while sympathy grows for da Silva, a longtime leftist and head of the Worker's Party, known by its Portuguese letters PT.
''The corruption accusations are not only on Serra's doorstep but in his back pocket,'' said David Fleischer, a political scientist at the University of Brasilia. He added, ``There is sentiment [among Brazilians] for giving the PT a chance.''
Sergio was campaign treasurer during Serra's 1994 Senate race and his failed 1996 bid for mayor of Sao Paulo. The allegations against Sergio are damaging to the governing coalition because of the implication that nearly $90 million in bribes during the sale of state companies might have made its way into the campaigns of prominent politicians.
Brazil, which is South America's largest country, jockeys with Mexico for the title of largest economy in Latin America. U.S. foreign investment in Brazil has more than doubled since 1994, when President Cardoso took office. In 2000, Brazil attracted a record $30 billion from foreign investors.
In the past, an early lead by da Silva would not have sparked much concern from investors. But Serra's misfortunes and infighting among major parties in Cardoso's ruling coalition have allowed ''Lula,'' as he is universally known, to garner about 40 percent of the vote in recent polls.
Those numbers approach the threshold needed for a first-round victory in October, avoiding the runoff election where Lula lost before.
LULA LEADS IN POLL
In a national poll released April 29, Lula garnered 37.9 percent of the vote compared to Serra's 16.1 percent. The previous closest challenger to Lula was Maranhao Gov. Roseana Sarney, daughter of Brazil's ex-President Jose Sarney. She quit in mid-April amid reports of millions of dollars in unexplained cash found in her husband's office and dedicated for her campaign.
One week after the poll was released, Goldman, Sachs & Co. recommended to investors that they reduce holdings in Brazil and transfer investments to Mexico. Ironically, such a move could benefit Lula if it contributes to the economic slide.
With Argentina in default and near political and economic collapse, the possibility of a stark change of leadership in Brazil suddenly makes the U.S.-sized country of 200 million seem risky for investments.
Lula has long been a critic of the United States, visited Fidel Castro in Cuba in late 2000 and promises greater taxation of the rich and more equitable distribution of wealth. He is expected to investigate allegations that banks assisted the wealthy in massive tax fraud.
Investors fear ''that after three presidential bids Lula has finally discovered how to present himself to the moderate left, winning him enough support for a first-round victory,'' the company's report said.
Kent Hargis, the report's author, expected even greater uncertainty in Brazil.
''The risk is that Lula rises further in the polls in the next couple of months. This will create a lot of political uncertainty,'' he said, adding that this will keep interest rates high, slowing economic recovery precisely when the ''continuity'' candidate needs it in the last months of campaigning.
AIM OF REFORMS
Brazilian Finance Minister Pedro Malán has called on candidates, meaning Lula, to be clear about their economic policies to avoid scaring investors and damaging the economy.
Speaking on the condition of anonymity, a Cardoso aide said reforms such as a fiscal responsibility law that reins in state and federal spending provide certainty to investors regardless of candidates' positions.
''Markets hate uncertainty, but whoever is the new president is going to be a new face, so there is a learning process there,'' the official said. ``But the main thing is to focus on the fundamentals of the economy. And the fundamentals are solid.''
May 2, 2002 - U.S. Brazil watchers doubt leftist candidate will win
Brazil is really just a huge banana republic.
Translation: He's a slick Commie b*stard and a successful demagogue.
He is not a clown but a dangerous man. The Brazilian public is comfortable with him; his radical rhetoric is old hat to them now.
If he slips in to the Presidency, the consequences would be far worse than those of Allende in Chile, or God forbid, of another Peron in Argentina.
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