In the week following the ceremony, Brazil’s currency, the real, improved 6 percent in value against the U.S. dollar, compared with a slump in 2002 of 35 percent. While generated by the deep economic crisis in Brazil and the immediate region, which includes Argentina, last year’s decline of the country’s currency also registered the nervousness of big investors about the election, and about the raised expectations among workers and peasants that would accompany a victory of da Silva’s Workers Party.

Da Silva won the October 27 election with 61 percent of the vote--the biggest margin ever in the history Brazil’s presidential elections.

Those increased expectations were reflected at the inauguration. An estimated 200,000 people turned out for the event, in contrast to turnouts of barely more than one-seventh that number to celebrate past victories of the big-business parties in previous elections. Masses of people jammed a park outside the Congress building, dancing and chanting "Lula! Lula!" Da Silva made a point of hosting Cuban president Fidel Castro and Venezuelan president Hugo Chávez, political leaders demonized by Washington, in the course of his New Year’s inauguration.

Among the 119 national leaders who attended the event, Washington sent trade representative Robert Zoellick--a relatively lowly official. Weeks earlier Zoellick had told the Miami Herald that if Brazil did not want to accept the imperialist-sponsored Free Trade Area of the Americas (FTAA) pact, then it could "take the southern route to Antartica."

Alongside his campaign reassurances to the capitalists, da Silva had also verbally taken his distance from the FTAA, describing it as "tantamount to annexation of Brazil by the United States."

In its initial statements the new government continues to present itself as a voice of the millions of impoverished and combative working people of town and country. By and large, however, the Brazilian rulers and their imperialist masters have cautiously endorsed its initial moves.

"Today we have grounds for optimism," said Marcelo Mesquita, an analyst for the U.S.-based UBS Warburg in Rio de Janeiro. "For all its life the Workers Party preached default on the debt," he said. "But now the markets are convinced that there will be no default."

The New York Times editors warned that despite such positive judgments by voices of big business, Brazil "remains vulnerable to international investors’ sentiments and one wrong move by Mr. da Silva’s economic team could wipe out the current good will."  
 
Lula visits the White House
Three weeks before the ceremony Lula met with U.S. president George Bush in Washington. White House spokesman Ari Fleischer described as the meeting as "very constructive and positive" for working out joint agreements on business relations between the two countries. For his part da Silva appealed to Bush to encourage U.S. banks to increase lending in Brazil.

Da Silva has reinforced the favorable impression on big business by appointing prominent capitalist figures to his policy team, both before and after election day. They take their seats alongside the seven trade union leaders in the cabinet of 29. Luiz Fernando Furlan, president of Sadia SA, Brazil’s largest chicken and food-processing company, was named minister of trade and industry. Roberto Rodrigues, the new minister of agriculture, is a soy and sugarcane businessman and head of the Brazilian Association of Agribusiness, which includes dozens of domestic and multinational commodity giants. The new foreign minister is Celso Amorim, who is currently Brazil’s ambassador to the United Kingdom.

All three strike a nationalist stance in trade negotiations and on other matters, reported the December 16 Financial Times. The London-based paper stated that they "have been outspoken critics of farm trade restrictions and subsidies by industrialised nations," and that their appointment underscores "da Silva’s pledge in Washington last week to drive a hard bargain in trade negotiations with the U.S., the European Union and within the World Trade Organization."

Da Silva appointed Henrique Meirelles as new president of the Central Bank. Meirelles had been elected to Congress with the Social Democratic Party and is a former executive at FleetBoston. The choice was applauded by outgoing president Fernando Henrique Cardoso as well as the departing bank chief.

"Fiscal responsibility," cutting government spending on health, education, and other social services, is a priority for foreign investors in Brazil, the Wall Street Journal noted in its January 9 issue. The New York paper cheered, in particular, da Silva’s decision to block the transfer of $26 million in tax revenue to the state of Rio de Janeiro after it defaulted on debt payments to the federal government.

With this move, the Journal stated, the new president indicated that he has reversed his earlier opposition to the Fiscal Responsibility Law, which is aimed at enforcing austerity measures. Government workers in a number of states are still waiting for their December paychecks and bonuses. Da Silva is also promising "pension reforms" that the previous administration was unable to impose.  
 
Rise in minimum wage restricted
The Financial Times reports that Workers Party leaders have indicated that the new government would increase the monthly minimum wage "only to the extent that it would allow inflation control" and the maintenance of a targeted budget surplus.

In spite of the government’s course, a default on the national debt looms as a threat amid the crisis of the country, region, and continent. A record $30 billion dollar loan from the International Monetary Fund (IMF) in August has done nothing to stem the decline of the Brazilian economy, the largest in Latin America. The government debt has risen from 30 percent of the gross domestic product in 1994 to more than 60 percent, today standing at $260 billion.

Trade between Brazil and Argentina, the two largest members of Mercosur, the South American common market, dropped 50 percent last year. Adding to the financial instability and capitalist nervousness is the level of interest rates, which has reached 21 percent. Consumer prices have increased by more than 10 percent this year, and wholesale prices by more than double that.

Nor has the withdrawal of foreign investment that marked the election campaign period come to a halt. Foreign banks sold almost $5 billion in assets last year, causing the first decline in investment in Brazil’s financial system since 1994. U.S. banks such as J.P. Morgan Chase, Bank of America, and Citicorp have led the selloff, cutting their "exposure" by up to 50 percent. They have been joined by Germany’s second largest bank, Crédit Lyonnais of France, and Banco Fiat, the finance unit of the Italian car company.  
 
 
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