Brazil's president-elect, Luiz Inacio Lula da Silva, is scheduled to meet President Bush in Washington on Tuesday for a one-on-one encounter viewed by observers in Latin America as an opportunity for the former hard-line leftist to fortify his new image as a matured leader capable of taming a brewing economic crisis.
Lula will take the reins of power on Jan. 1 with his country immersed in economic difficulties. Brazil's currency and bonds have suffered steep losses this year while inflation, in check for almost a decade, is again on the rise.
Against that background, fears abound in international financial circles that Lula, who won a landslide victory in October after three failed bids for the presidency, could mismanage Latin America's largest economy, and the eighth largest in the world, at a delicate moment. That could lead Brazil into a renegotiation or default on its $260 billion debt, a crash that would likely reverberate across a region still suffering from an economic collapse in Argentina this year.
Lula is racing to ease those fears. Analysts and leaders of his Workers' Party say he will seek to convey to Bush in their first meeting that his plans to take a more "socially minded" approach toward the economy will not disrupt Brazil's relations with foreign investors.
At the same time, Lula is expected to differ with Bush on some key issues.
On free trade, for instance, he appears to be emerging as the leading voice of Latin America's renovated and revitalized left. Party officials insist Lula's new administration will take the lead in opposing Washington's plan to forge a massive Free Trade Area of the Americas by 2005 if the United States does not agree to sharp concessions on trade barriers facing Latin American agricultural products. Washington has so far resisted such concessions, and the issue is likely to be among the thorniest of those confronting Lula and Bush on Tuesday.
Lula has also voiced serious opposition to other U.S. policies in Latin America, including Washington's stepped-up involvement in Colombia's civil war. But observers said they expected the first meeting between the two to be relatively cordial, with most points of contention being only superficially addressed before Lula takes office.
Workers' Party sources say the 57-year-old leader is assembling a moderate cabinet likely to largely shut out the party's hard-line leftist minority, including several leaders who maintain close ties to President Fidel Castro and Cuba. Financial analysts have responded favorably to reports of the likely appointment of Antonio Palocci, a moderate who pioneered several privatization projects as mayor of Ribeirao Preto, as economy minister. Top party adviser Jose Dirceu, a top adviser to Lula and a former leftist who persuaded Lula to shift to the center during the campaign, is also seen as a virtual shoo-in to become chief of staff.
In another sign that Lula is trying to set a moderate tone, he is expected to replace the current president of Brazil's Central Bank, Arminio Fraga, with someone who would be equally welcoming to foreign investors.
"I think Lula is showing us that he realizes social change can't happen overnight and that there is a new, global reality in which, like it or not, you have to balance the speed of economic change with the realities of financial markets," said Alexandre Barros, a political and economic analyst in Brasilia.
The direction in which Lula is moving his developing administration has won early praise from the International Monetary Fund, which expressed optimism after meeting with Lula and his staff in Sao Paulo on Saturday.
"We agreed that strong sustainable growth is indispensable to reconcile social equity objectives with the realities of sober economics," Horst Kohler, the IMF's managing director, told reporters after the meeting. "I was particularly impressed with Lula's dedication to fight corruption and thus create a good investment climate in Brazil."
But it has not been easy for Lula to cement his image as a pragmatist.
He has been trying to woo such free market advocates as MIT-trained economist Pedro Bodin to take over for Fraga, with whom Bodin worked closely during the early 1990s at Brazil's Central Bank. But sources close to the talks say Bodin and several others being considered for the job have been hesitant. Although Workers' Party sources and news reports out of Brazil suggest Bodin or another free market exponent may ultimately accept, lingering questions about the sincerity of Lula's shift to the center have delayed his new administration for weeks.
"We are dealing with some people who have historically come from a different ideology than that of the PT," said one party source, who asked not to be named, in reference to the Workers' Party. "But it's fair to say that the party is not the same party it was in the past. The PT is still left-leaning, but Lula has shifted us to the center, and those who advocate a more militant leftist approach within the party have mostly been marginalized."
Not surprisingly, Lula's move toward forming a relatively moderate government hasn't sat well with hard-liners in the party, several of whom have lashed out at Lula.
"The economic team must reflect the people's desire for change, not the nervousness of the market," one senator, Heloisa Helena, told reporters last week.
His comments illustrate the balancing act Lula has been forced to play. Even as he attempts to forge a government that will not panic foreign investors, he is also trying not to look like a sellout to millions of Brazilians to whom he promised economic change. He has tried to do the latter by announcing important social programs for his upcoming administration, including "Hunger Zero," an effort to offer emergency food aid to the neediest Brazilians.