September 22, 2009

THATCHERISM WITH A BEARD:

'The Most Popular Politician on Earth': For nearly seven years, he's done a spectacular job as Brazil's president. But can Lula resist the temptation to throw it away? (Mac Margolis, 9/22/09, Newsweek)

To convince lenders Brazil was serious, Lula increased the "primary budget surplus"—the money the government puts aside every year to pay debt and interest—and boosted lending rates to a scorching 26 percent a year, throttling growth in order to kill inflation. He also kept government wages and pensions under control. "The unions and many people in the party hated it," says Ricardo Kotscho, a friend and former press aide.

International money men still weren't sure. "We knew he'd been a union leader and the president of a political party. What I really wondered was if he had the guns to be president," says former World Bank president James Wolfensohn. So Wolfensohn sent out a feeler, offering to dispatch a team of experts to brief Lula's government on the key issues facing the international economy and Latin America. He didn't know how the new president would respond. "A lot of leaders throw the presidential seal at you," says Wolfensohn. "But Lula lapped it up. He was like a piece of blotting paper. He realized he had a major job to do and that running an election was different from running a country. For me, it characterized the man."

Da Silva has operated that way ever since, putting pragmatism ahead of ideology and, for the most part, fiscal restraint over the quick fix. "No one in their wildest dreams would have thought Lula would behave the way he has," emerging-market investment guru Mark Mobius, of Templeton Asset Management, told me a year ago. Now Templeton has $5 billion in Brazil, more than it does in China. For sure, Lula had plenty to work with. With a web of hydroelectric stations and half its fleet of cars running on clean-burning sugar-cane ethanol, the country has long been the benchmark in renewable energy. Clever agronomists have turned the harsh tropical backlands into a breadbasket, exporting more beef, soybeans, and frozen chickens than any other nation. But Lula also added value by stumping for Brazilian brands abroad. "We had to make it clear that Brazil is not a minor country," he says. "Brazil has the Amazon [rainforest], but also makes airplanes and cell phones." And just as his labor rallies once galvanized the hardhats in São Paulo, his aggressive diplomacy has rallied poorer nations to demand free trade and a new deal in the international economy.

His real genius, however, has been his ability to sell unpalatable reforms to a largely poor population that looked to him as something of a savior. "Lula's popularity helped him make risky decisions that often required sacrifices," says José Dirceu, a former Workers' Party commander who fell to a corruption scandal. More important, unlike the supremos and populist demagogues who abound in Latin America, he did it playing by the rules. "Lula's respect for democracy and elections is a big plus," says former Treasury chief Joaquim Levy. "Very often he has been able to translate key values of democracy in ways that make them more concrete to people." The president still has his work cut out for him, and not much time left to accomplish it. "This is a country that has suffered from low self-esteem," he says. "Brazil needs to recover its pride. And I think things are happening. I hope those who come after me can work to transform Brazil into a great economy."

Posted by Orrin Judd at September 22, 2009 7:05 AM
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