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Analysis: Mostly cheer in US-Brazil talks

By
BRADLEY BROOKS, UPI Business Correspondent

RIO DE JANEIRO, Dec. 9 (UPI) -- Mutual assurances and cordial chatter will probably be the order of the day as Brazil's leftist president-elect meets U.S. President George W. Bush for the first time Tuesday.

There is little doubt that when Luiz Inacio Lula da Silva, the newly elected Workers' Party leader of Latin America's largest economy, takes the stage at the White House, the populist leader will appear in a suddenly centrist version.

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The hard-left members of Lula's Workers' Party would love to see the leader roll into town and rail against Bush in regard to the Cuban trade embargo, the horrors of "neo-liberalism" in Latin America and the lack of U.S. attention to the region's economic woes in the past year.

This is unlikely to happen.

While Lula -- as the Brazilian leader is known -- has said he will be "less flexible" when it comes to defending Brazil's national interests than the present administration, he is going to need all the back-slapping he can get in Washington to help himself out on the home front.

Double-digit inflation has reappeared in Brazil. The dynamics of the country's $230 billion debt burden severely restrict movement on fiscal policy and economic targets. This will cause political trouble for Lula when he is forced to decide which social programs to fund and which to cut.

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On top of that, Lula has yet to ease investor fears by unveiling who will take top economic posts in his Cabinet, a situation that is causing growing fears in the markets.

Brazil's currency -- having shed nearly 40 percent of its value this year -- has been falling against the dollar again after stabilizing in the past month. Compounding this is that "international credit" remains an oxymoron for Brazilian companies.

When he takes office on Jan. 1, Lula will be facing a potentially nightmare economic scenario that could well see Brazil become the largest sovereign defaulter in history by the time he enters his second year in power.

For those reasons, Lula is unlikely to be too confrontational with Bush, though he won't be timid. He may even be looking to get relations back on a more amiable track.

It was just a few months ago that Brazil's President Fernando Henrique Cardoso opined that Bush is still "in a learning stage" when it came to foreign policy in Latin America.

Diplomatic courtesy usually requires that a leader not speak the truth so boldly.

Brazil has never been shy about lodging complaints on U.S. trade practices before the World Trade Organization, trade tariffs and barriers being the area where the two countries have their biggest quarrels, and have had for years.

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Brazil arguably leads the developing world in criticizing the trade policies of the United States. Like most emerging economies, Brazil has taken economic hits in sectors where the United States is most protectionist -- on agriculture and steel -- and most vulnerable where Bush wants more liberalization -- in the industrial sector.

To that end, Lula spent last week touring Argentina and Chile, trying to shore up support for the floundering Mercosur trade bloc.

It is Lula's idea that Latin American nations need to join together and meet the United States head on when it comes to talks about the Free Trade Area of the Americas, thus winning more concessions from the Bush team.

While Lula's desire is to see bilateral trade relations between the United States and Mercosur before the FTAA is finalized, he is unlikely to push too forcefully on the subject in this first encounter.

A top priority Tuesday is going to be the reopening of credit lines for Brazil, as suggested Monday by Aloizio Mercadante, a confidant of Lula and a Senator-elect from the Workers' Party who is making the trip to Washington.

But it is hard to be too fiery when you are asking somebody for a loan. Lula is sure to make a passionate case for open credit lines, but he won't be petulant.

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Don't be surprised, though, to see Bush give some good lip service on this front. He is in need of some good press when it comes to relations with Latin America.

"The (U.S.) administration really wants Lula to have success, and Bush will make this clear because he understands that with the precarious situation most of Latin America is in, Lula's failure would have negative repercussions for the world economy and that of America," Peter Hakim, president of the Inter-American Dialogue, told the Estado de São Paulo newspaper Monday.

James Carragher, director of the State Department's Office of Brazil and Southern Cone Affairs, told Estado that he concurs.

"I am certain we are going to agree more than we disagree," Carragher said of the Lula meeting with Bush, though in October he admitted that it is likely the United States will "perhaps" have to work harder to gain Lula's backing on some mulitlateral issues, such as the FTAA.

Michael Shifter, a Latin American political analyst, told the O Globo newspaper that how Bush reacts to Lula on Tuesday will be an important indication of the teamwork the countries can muster on the big issues affecting the Americas -- namely trade.

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"It may be that Lula has very different ideas over, for example, privatization and free trade. It will be important to see if the U.S. is able to accept this different focus and work well with him," Shifter said.

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