In a rare interview with a foreign media outlet, Lula -- as he is known -- told the Argentine television station Todo Noticias late Wednesday that taking loans from the International Monetary Fund wouldn't help either Brazil or Argentina escape the economic crises in which they wallow. Lula also criticized U.S. President George W. Bush's foreign policy in Latin America.
"I don't think that taking loans from the IMF or from whomever is going to give either Brazil or Argentina an economic exit," Lula said. "I didn't validate the agreement President (Fernando Henrique) Cardoso signed with the IMF. The central government is going to use $6 billion and afterward we will decide if we will take the rest or not."
Last month, Brazil signed a $30 billion loan package with the IMF -- the largest in the fund's history -- but the agreement stipulates that only $6 billion of that can be withdrawn this year. The release of the remainder depends upon whether Brazil's next president -- who will take office on Jan. 1 -- abides by specific economic targets, such as maintaining a primary budget surplus that is at least 3.75 percent of gross domestic product.
"I think that our recovery will start with increasing the productive capacity of industry, in agriculture, with the potential of tourism and with growth in the service sector," Lula said, adding that the turnaround won't come about simply because the IMF is giving cash to Brazil.
In Thursday's market action, his words were countered somewhat by an election poll published Thursday in the newspaper Folha de São Paulo, which showed him slipping 2 percentage points to 39 percent. The market's favorite candidate -- Jose Serra -- held steady in the poll with 24 percent.
At mid-day, the main stock index -- the Bovespa -- was down 0.63 percent at 9,445. The benchmark 8-percent bond due in 2014 fell 0.06 cents on the dollar to 55.16, yielding 22.41 percent. The currency fell hard, losing nearly 2 percent to 3.4 against the dollar, nearing historic lows.
In the interview, Lula also questioned the good that a Free Trade Agreement of the Americas -- or the FTAA, which the U.S. is eagerly pushing -- will do for Latin America, saying the pact will favor the United States.
"I am a defender of free trade, but I want equality in the participation," Lula said. "In the way that the FTAA has been proposed, the truth is that it isn't a policy of integration, it is a policy of political annexation."
Lula said South American countries must more to strengthen the Mercosur trade bloc -- which has its roots in commercial agreements Brazil and Argentina, the continent's largest economies -- signed in the late 1980s. In 1991, Paraguay and Uruguay asked to join the agreements, and Mercosur was born.
"For us, Mercosur is indispensable. We need it to have the capacity to negotiate within the FTAA," Lula said. "Mercosur will only give results when we create multilateral institutions that can strengthen the region politically, culturally and economically."
Lula said Latin American nations should join forces more often to negotiate with the United States and IMF.
"I think that each country has to negotiate its own interests, and if it is possible, to negotiate those interests jointly," he said.
"Regrettably, the elite leaders of Argentina and Brazil have preferred to act as adversaries and not as partners. Either we think collectively, or Argentina and Brazil are going to have many more difficulties."
On Bush's foreign policy in the region, Lula said it is simply following an historic trend.
"The Americans have never given importance to Latin America. I think Bush even less so," Lula said. "There is a certain negation of the region, because the leaders are very servile to American policy. I intend to maintain diplomatic relations with the U.S., but with the courage to fight against the abuses of the tariffs that the Americans impose upon agricultural products, for example."