Brazil's Lula pledges economic growth in 2nd term

BRASILIA (Reuters) - President Luiz Inacio Lula da Silva pledged on Monday during the inauguration of his second four-year term to unlock Brazil's economic growth potential without reneging on fiscal discipline or social welfare programs.

The former union leader won a landslide run-off election on October 29 despite a series of corruption and dirty tricks scandals involving his ruling Workers' Party in the past two years.

"Brazil cannot continue like a beast behind an invisible steel cage," Lula said in an address to Congress after taking the presidential oath. "We will unlock Brazil to grow faster."

With average growth of only about 2.6 percent during the past four years, Brazil is the economic tail light among fast-growing emerging markets like India and China. Tight monetary and fiscal policies sent financial markets soaring during Lula's first-term but helped brake growth.

Lula said in his congressional address that he would cut red tape, provide tax incentives for private investment and boost public investment.

Lula said an economic stimulus package later this month would be followed by measures to expand infrastructure projects and improve regulatory frameworks.

Investors often complain about red tape, legal uncertainty and government intervention in industry regulators.

Critics say Lula has not agreed to slash large government expenditures, which economists say are the principal obstacle to lower stifling taxes and interest rates.

The charismatic former factory worker is still hugely popular among Brazil's 185 million people. An opinion poll in December showed they consider him the country's best president ever.

"He made mistakes but I support him because he's done more for the common people than any other president," said Antonio da Silva Lima, a 30-year-old gardener, who earns in a month what his employer earns as judge in a day.

Monday's festivities lacked the excitement that marked the inauguration of Brazil's first working-class president four years ago, as supporters remembered numerous high-profile scandals. These included alleged pay-offs of congressmen and led numerous Lula aides to resign.

"He needs to keep a closer eye on some of his advisors and not delegate key political negotiations," said Percivaldo Junior, a 47-year-old health worker waiting outside Congress.

The low-key celebration, which took place during a steady rain, drew an estimated 10,000 spectators -- a fraction of the huge crowds in 2003.

A divisive election campaign had pitted Lula's mostly poor supporters against his conservative rival's wealthier voters.

Lula on Monday said his efforts to redouble economic growth would neither exclude strict fiscal discipline nor slow the expansion of social welfare programs.

"I will continue doing what any mother would -- take care first of the most needy," he said.