Brazil - Leadership

Lula's presidential campaign platform called for increased social spending to help alleviate Brazil's historic problems of urban poverty and marginalization of the rural population. Brazil has one of the worst income distributions in the world, with levels of inequality worse than most third-world countries. The state has also been very ineffective in building a social safety net, as patronage and corruption have taken a heavy toll on the government's budget. Lula promised to increase spending for education and health care, paying particular attention to programs that would reduce hunger. Lula's "zero hunger" commitment seeks to eliminate hunger in Brazil in four years (by 2006). The first target groups of the program will be children and rural families. Lula has also vowed to reduce military spending. In fact, as soon as he took office, he froze a number of military acquisitions and sought to redirect those funds to social spending. In terms of economic policy, Lula has been hard-pressed to reassure the financial sector and foreign investors that he will not change the policy program adopted by his predecessor, Fernando Henrique Cardoso. Fearing a return to years of high inflation and economic volatility, international financial lending institutions have pressed Lula for his commitment to a balanced budget and his pledge not to tinker with the exchange rate. Brazil owes US $230 billion to foreign banks, almost twice as much as when F. H. Cardoso first became president in 1994. Thus, the government budget is constrained by the need to finance the interest and repayments of foreign debt. Yet, Lula has made it clear that he will seek to balance the need to maintain macroeconomic stability with his commitment to use government resources to alleviate poverty and provide opportunities for the large number of Brazilians who lack access to education, basic health care, and employment. He will need to show his leadership to successfully balance the demands for more social spending with strict fiscal responsibility.

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