'Lula' worries Brazil's businesses

Much is at stake in Sunday's election for South America's largest economy.

SAO PAULO, Brazil

(AP) - Luiz Inacio Lula da Silva, Brazil's presidential front-runner, has worked to shed his leftist image and reassure the

nation's business that trouble won't befall the continent's biggest economy.

But critics of the former auto plant

worker and union boss, including some business leaders, are wary.

"We need a commander in chief of the economy -- one

who is capable of making his own decisions," said Stefan Salej, a former president of the National Confederation of

Industries. "My biggest fear is Lula's lack of the competence and experience needed to govern Brazil, which will make him

rely too much on advisers."

Silva, for his part, is reaching out to the businesses that once shunned him. Already

holding a commanding lead in the polls ahead of Sunday's election, he picked a textile magnate as his running mate and has

pledged to honor the government's foreign debt.

A growing number of businessmen, however, have endorsed Silva's

candidacy.

"We understand that Lula is the only alternative capable of implementing a government program that will

reduce social inequalities, spur economic growth, create jobs and strengthen the domestic market," said a manifesto recently

signed by more than 600 businessmen.

That's not to say the country's business leaders aren't worried.



While some business leaders have jumped on his bandwagon, many others still fear the prospect of having his Workers

Party in power. They worry it would end eight years of free-market reforms implemented by President Fernando Henrique

Cardoso.

Also at stake is Brazil's ability to reactivate its economy, the biggest in South America, and attract the

foreign capital needed to finance growth. Failure could lead the government to default on $100 billion it owes to foreign

banks.

Worries about a victory by Silva, widely known as Lula, has led investors to drive Brazilian stocks and the

currency, the real, sharply lower in recent weeks.

Silva has run for president three times before. In 1989, he lost

to center-right populist Fernando Collor de Mello. Silva lost again in 1994 and 1998, both times to Cardoso. Now, with

Cardoso legally barred from running for a third term and many Brazilians disillusioned with free-market reforms, Silva's

chances have never looked better.

He leads in the polls with about 49 percent support compared with about 21 percent

for the government-backed candidate, Jose Serra.

Silva can win outright and avoid a runoff only if he gets more than

50 percent. The two other candidates, Anthony Garotinho and Ciro Gomes, were polling at around 18 percent and 10 percent

respectively.

"Lula may have shed a lot of his left wing past, but I don't think the same can be said of many

members of the Workers Party," said Salej.

If Silva wins, though, he'll probably face a divided congress, with his

leftist Workers Party holding a small minority of seats, meaning he'll have to bargain with the right to govern.

One

group backing Silva is the Landless Rural Workers Movement, a leftist group that invades idle land to force the government's

hand on land reform. Silva has told ranchers he is the only candidate that can control the group.

The president of

the industrial group Votorantim, Antonio Ermirio de Moraes, said Brazil needs $25 billion to $30 billion a year in foreign

capital to close its balance of payments deficit.

"Will that money be forthcoming if Lula is elected?" Moraes was

quoted as saying by the Folha de Sao Paulo newspaper. "If the money does not come, the dollar will go through the roof,

inflation will explode and we will be facing a very serious problem," he said.

A Silva win could also hamper plans by

President Bush to implement the Free Trade Agreement of the Americas, a hemispheric bloc of 34 nations stretching from Alaska

to Argentina. Silva has called it an "annexation of Latin America to the United States."

For Kurt von Mettenheim, a

political scientist at the Fundacao Getulio Vargas, one of Brazil's most prestigious business schools, investors and

businessmen should fear the government candidate Serra more than Silva.

"A Workers Party government, he added, "would

be forced to be more cautious and maintain the core policies of the Cardoso administration -- flexible exchange rates, fiscal

restraint and inflation targeting."

http://money.cnn.com/2002/10/05/news/international/brazil_lula.ap/index.htm