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Brazil: On the Brink

Will a new administration help Brazil to get back on its economic feet?

October 4, 2002

Will a new administration help Brazil to get back on its economic feet?

Brazilians go to the poll in uncertain times. The country just received a record $30 billion IMF loan. Many in Brazil and abroad have been very critical of the aid package. Especially the leading presidential candidate Luiz Inacio Lula da Silva has been outspoken. Our Read My Lips feature zooms in on what is at stake.

Is Brazil just the latest Argentina-like economic disaster?

“The situation in Brazil is nothing like that in Argentina, where the country was plundered by its ruling classes.”

(German Finance Minister Hans Eichel, August 2002)

What economic significance do Brazil's elections have?

“Investors fear earthquakes, droughts and elections, that is natural. And it is our duty to take the necessary measures to prevent election turbulence.”

(Cristovam Buarque, former governor of Brasilia, June 2002)

Why is the $30 billion IMF loan crucial for both the lender and the donor?

“If it fails, it will destroy not only Brazil’s fragile economy — but also the IMF’s raison d’être.”

(Financial Times editorial, August 2002)

What do Brazilians think of the IMF loan?

“We have to commemorate that Brazil has increased its debt by $30 billion. We’re being tricked into thinking that we are being saved by international money.”

(Ciro Gomes, 2002 Brazilian presidential candidate, August 2002)

How did U.S. Treasurer Paul O'Neill look at the package?

“Throwing the U.S. taxpayers’ money at a political uncertainty in Brazil doesn’t seem brilliant to me.”

(Paul O’Neill, U.S. Secretary of the Treasury, July 2002)

Any surprise about this reaction in Brazil?

“I think Americans never attached much importance to Latin America. I think Bush even less — mainly because our leaders have been very servile to U.S. politics.”

(Luiz Inacio Lula da Silva, Brazilian presidential candidate, September 2002)

And how in turn did U.S. President George Bush judge Brazil's economic outlook?

“Brazil has demonstrated its ability to use international monetary assistance effectively — and they have sound economic polices in place.”

(U.S. President George W. Bush, July 2002)

Do other people share this view?

“It is very positive that — in Brazil and other developing countries —there is a recognition that fiscal discipline should be restored.”

(Joseph Stiglitz, former World Bank Chief Economist and Nobel Prize laureate in economics, September 2002)

What does one of Brazil's leading contenders think about NAFTA?

“An annexation of Latin American economies to the economy of the United States.”

(Luiz Inacio Lula da Silva, Brazilian presidential candidate, September 2002)

Should that be of concern for the markets?

“If Brazilians want to jump into the socialist fever swamps, they will default — sooner or later.”

(Wall Street Journal editorial, August 2002)

Do other candidates have a more positive idea about the United States?

“America talks constantly about free trade. But when it comes to practice, it is protectionist.”

(Jose Serra, Brazilian presidential candidate, March 2002)

Yet, why should Brazil take note of U.S. politics?

“The only way to be taken seriously is to play the game the United States plays.”

(Young Brazilian supporter of Luiz Inacio Lula da Silva, Brazilian presidential candidate, September 2002)

Any words of wisdom from the incumbent President of Brazil?

“Genuine solidarity does not mix with poverty — which is in itself unsustainable.”

(Brazil’s President Henrique Cardoso, April 2002)

Finally, what did the crisis teach Brazilians?

“We have learned as a society what needs to be done.”

(Arminio Fraga, Brazil’s Central Bank governor, August 2002)