years ago, Brazil was battling with hyperinflation and building
its democratic institutions after 20 years of military regime.
How do you see Brazil in 20 years time?
Lula: I can see
Brazil in the light of what has been happening in recent years
that is, a country that experiences solid growth
together with economic stability and at the same time, a
country that is moving towards the reduction of social and
regional inequalities. This is the result of a macroeconomic
policy based on price stability, fiscal soundness and the
strength of the external account. We are laying out the
conditions for future growth, so that todays growth does
not jeopardize tomorrows growth. It is important to note
that price stability is not only a commitment of this
government, but indeed a requirement of the Brazilian society,
which knows very well its destructive impact on the quality of
life of the people and the states planning capacity. But,
macroeconomic stability is not everything. It is important to
have a pro-growth policy, which is what we are currently doing
with the PAC [the programme to accelerate growth], which is
designed to remove infrastructure bottlenecks and institutional
obstacles that have been in the way and have delayed the
resumption of accelerated economic growth in Brazil. If Brazil
follows its current course, we will be a country with more
opportunities for those who used to be left behind in the past,
with solid institutions, a well-entrenched stability and a
state providing services to all Brazilians.
EM: There is a
kind of paradox. Before your election (October 2002), you were
very critical of the international financial system in general
and of the IMF in particular. Today, investors are full of
praise for the Brazilian economy. Who has changed the most?
Lula: I think
things need to be clarified a bit here. From mid-2002, I made
it clear in a Letter to the Brazilian People that
my government would be committed to economic stability and
respect for contracts. It is true that some financial investors
did not believe it (but only some of them) and adopted a
defensive posture during the transition period between the
previous and the current government. We kept our commitment
and the IMF was an important partner in this initial
period we strengthened stability and laid out the
conditions for sustainable growth.
Actually, we both changed.
Looking over the longer term, I think that the Workers
Party (PT) became more mature in power, we learnt to value
stability and understand its importance for growth. But we
never lost our basic commitment to the improvement in income
distribution. Meanwhile, a lot of financial investors also
changed and started to trust my government. They broke with
past prejudices and accepted that a left-wing party in Latin
America is able to adopt an economic policy that prizes
monetary stability, fiscal balance and respect for contracts,
and that keeps a commitment to reduce inequalities, fight
poverty and fosters inclusion. In the end, it is possible to
combine economic soundness with effective social policies.
EM: Why does
your government still look reticent towards the autonomy of the
central bank? Would not a formal autonomy help speed up the way
towards the investment grade status?
Central Bank of Brazil has always enjoyed the necessary
autonomy under this government. There has been no interference
in the management of monetary policy, which aims at meeting the
inflation target that is defined by the government. We do not
believe that a formal autonomy is a priority right now.
Meanwhile, the investment grade will come as the result of
macroeconomic management and the measures that have been
implemented over the last years.
For an interview with Brazil's finance minister Guido
Mantega, please see "
Brazil turns the other cheek".