Lula at the Halfway Point

Sep 1, 2004

The government's reform agenda is bogged down in Congress. Luckily for President Luiz Inácio Lula da Silva, economic recovery is boosting his support.

A slow day in the Senate.

Thanks to Lula's determination to resist the temptation of resorting to irresponsible policies, Brazil is now beginning to enter a virtuous circle of growth. This has significant political implications as Brazil's first left-wing government enters the second half of its four- year mandate and begins preparing the ground for reelection in 2006. Continuing economic recovery is the key to Lula's success. Nonetheless, there are some important decisions the government must take soon which could impact the outlook for growth.

There is no sign that Lula will relax the government's orthodox economic policies. Proof of Lula's commitment to fiscal orthodoxy was his decision to over-comply with fiscal targets, to set a realistic ceiling for the minimum wage and to continue backing his finance minister, Antonio Palocci. Lula backed Palocci even as he came under heavy fire from within the governing coalition. Now that the...

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