Lula prepares "New Deal" to help the poor Sunday December 21, 9:48 am ET By Axel Bugge
BRASILIA, Brazil, Dec 21 (Reuters) - President Luiz Inacio Lula da Silva is preparing what could become a "New Deal" for Latin America's largest country as he tackles his main priority of improving the lives of Brazil's millions of poor.
With his first year in office and tough economic reforms under his belt, Lula will now concentrate on creating jobs and expanding his flagship Zero Hunger plan.
"Today we can have loftier dreams," the president said in a speech recently as he wrapped up his first year in office.
To close the huge gap between the country's rich and poor, officials say Brazil's first working-class president will boost state spending, above all on infrastructure projects, to bring down unemployment that the government puts at 13 percent but which analysts say may be much higher.
"What (Lula's) Workers' Party will introduce that is new in 2004 is more government, more government, more government," said Walder de Goes, a political analyst in Brasilia.
"That entails mass public spending in areas like housing, sanitation, big public works, above all construction which uses lots of cheap labor and distributes money immediately. I would call it a small New Deal."
The New Deal refers to U.S. President Franklin Roosevelt's spending on public works in the 1930s to take the United States out of the Great Depression.
Such plans sit well with the Workers' Party, which agonized throughout Lula's first year in power that its traditional defense of social causes had been lost to a drive for tight budgets and high interest rates to beat inflation.
In his move to the center, needed to win over investors and the middle class, the former union leader introduced reforms -- which his party opposed for years -- of the indebted public pension and cumbersome tax systems.
PAYING FOR PUBLIC WORKS
The gamble paid off, making Brazilian assets some of the best performing in the emerging market universe this year and setting the scene for economic rebound in 2004.
"I think Lula has really bet the store on restoring growth," said Peter Hakim, president of the Inter-American Dialogue in Washington. "If that occurs, he is in a very strong position, he'll have an economy that is adding jobs and he'll have more resources."
Lula is betting that he will be able to pay for the big projects with revenues generated by higher growth. He hopes the country of 175 million people will grow by 4 percent next year, up from 0.5 percent in 2003.
But Lula is sticking to tight budget goals agreed with the International Monetary Fund (News - Websites) , so the floodgates of public spending will not open wide.
A poll published on Sunday by the Datafolha Institute showed 41 percent of respondents saw fighting unemployment as Brazil's most pressing problem.
And although the number of people who think his administration is doing a "great" or "average" job has held steady at 83 percent since March, the percentage saying it is doing a "bad" job moved 4 points higher from the end of October to 15 percent in mid-December.
"The dominant question is the outlook for jobs," said Armando Monteiro Neto, head of the National Confederation of Industry.
Lula unveiled a five-year plan in November to bring power to 12 million rural Brazilians now living without electricity. He has also promised three meals per day for all of the Brazil's 45 million poor by the end of his four-year term.
There are plenty of other plans on the drawing board, such as paving a road through the Amazon and building hydroelectric dams and gas pipelines. A massive project to change the course of a northeastern river is even under consideration.
Some observers say many such projects may never take place because of budget constraints.
"The plan is just a letter of intentions and will remain so," said political analyst Carlos Lopes.