Fórum Defesa Brasil

'The Most Popular Politician on Earth'
For nearly seven years, he's done a spectacular job as Brazil's president. But can Lula resist the temptation to throw it away?
By Mac Margolis
Sep 22, 2009


Eraldo Peres/AP

He grew up so poor, he didn't find out what bread was until he was 7. That was Lula's age when he climbed onto a flatbed truck with his Brazilian dirt-farmer family and all their possessions and made the 1,900-mile journey from the country's northeastern dustbowl for a life in the slums of São Paulo. He dropped out of school in the fifth grade, shined shoes on the street, and went to work in a factory at 14, losing a finger to a lathe in an accident on the graveyard shift at an auto-parts plant. Eventually he rose through the rank and file to become an internationally respected union leader. A military junta ruled Brazil back then, and strikes were illegal, but he defied the generals and the bosses and practically shut down the continent's industrial powerhouse in the name of the steelworkers.

He's in New York this week to kick off the 64th session of the United Nations General Assembly. The cameras may focus on the embodiment of American cool, Barack Obama, or on flamboyant autocrats and chest thumpers like Iran's Mahmoud Ahmadinejad and Venezuela's Hugo Chávez, but the biggest star on hand will be the blunt, bearded onetime lathe operator: Brazil's president, Luiz Inácio Lula da Silva. After nearly seven tumultuous years in office, the man everyone calls Lula continues to enjoy an approval rating above 70 percent. That would be a remarkable feat anywhere, never mind in a continent where presidents are a disposable commodity. "That's my man right there," Obama greeted him at the G20 summit in London in April. "The most popular politician on earth."

How da Silva earned such acclaim says plenty about how wealth and power are shifting in this postcrash age. With his leadership, Brazil has withstood the global crisis better than almost any other nation: not a single bank went under, inflation is low, and the economy is growing again. "People doubted it when I said we would be the last to fall into recession and the first out," Lula told NEWSWEEK in an exclusive interview. "But just wait and see, this December. We are going to create a million jobs this year." That's not as good as it may sound: a million jobs would only just about replace the jobs his country has lost since October 2008. But Brazil is looking pretty good compared with most places; it's outpacing Russia and joining India and China—the other big emerging powers tagged collectively BRICs—to lead the way back to global economic growth. Gone are the days when, as Goldman Sachs chief economist Jim O'Neill jokingly recalls, "people told me I put the B in BRICs to make the acronym sound better."

Brazil's man of the moment says he couldn't give a fig for the polls. "If you have flawed policies and try to sell them with false publicity, your ratings won't last," he says. But the question now is whether he can continue to parlay his own star power into gains for Brazil—and, more pointedly, whether he is about to throw away much of what he has accomplished as president. He has just 15 months to go in office, and his favored successor, chief of staff Dilma Rousseff, has little national name recognition and none of her boss's charm. Despite his overwhelming popularity, recent polls say she's running a distant second and losing ground to the opposition's choice, São Paulo Gov. José Serra. "Lula's aura is not transferable," remarks Donna Hrinak, a former U.S. ambassador to Brazil. To compensate, the former labor firebrand has begun doing just what his critics feared when he first took office in 2003: tightening government control of the economy, looking the other way when key allies are caught with their hands in the public till, and spraying money about with abandon.

In the name of helping poor and working-class Brazilians—but with a close eye on next year's election—da Silva has repeatedly pumped up the minimum wage (up 67 percent since 2003, nearly 40 percent over the pace of inflation) and is boosting government pay and pensions, a move that can only add to the next administration's troubles. "We have to give a little more to those who earn less," Lula says. Yet that's the sort of populist talk that gives many the chills. "The risk is the legacy of fixed expenditures and budget commitments that Lula will leave for the future," warns former finance minister Mailson da Nóbrega. The public payroll is growing at more than 10 times the rate of public investment in roads, bridges, and ports. Meanwhile, da Silva has done nothing to ease the country's total tax burden, the highest in the emerging markets at 36 percent of GDP. And when Senate leader and former president José Sarney, who controls a key block of votes in the allied Brazilian Democratic Movement Party, came under fire for handing out jobs to cronies and kin, Lula rushed to his defense, saying Sarney "could not be treated like an ordinary person"—an odd choice of words, coming from a man of the people.

Still, if there's one constant truth about Lula, it is that things are subject to change. "I am a walking metamorphosis," he likes to say, quoting the 1970s Brazilian cult singer Raul Seixas. On the surface, he bears no more than a faint resemblance to the roughcut union man of 30 years ago, or even to the politician he became in the '80s and '90s, stumping for the poor and forgotten till he went hoarse. The once black curls and unkempt beard are neatly trimmed now and shot through with gray. In place of his old stained workshirt and denim bell-bottoms, he dresses in smart suits tailored to flatter his barrel of a body. His lifelong lisp has lessened, and long hours of practice have refined his shop-floor grammar and vocabulary. The man who took office saying he would be content to improve the lot of the Brazilian poor is now convinced of Brazil's mission to transform the world. "Brazil is a country with solid, democratic institutions," he says. "We have shown nations some lessons about how to confront the economic crisis."
And yet in deeper ways he's the same as ever. He still speaks in the sandpaper basso profundo that electrified his fellow metalworkers. And for all his polished manners and fine clothes, nothing vexes Lula more than being trapped in his office. "He gets nervous when he spends too much time at his desk," says his cabinet chief, Gilberto Carvalho. "He says, 'I need to get out and travel, and meet people.' His connection is with the little guy." The president likes nothing more than to ditch protocol, go off script, and (to the despair of his security detail) wade into an adoring crowd. Nevertheless, to his credit, he has resisted his followers' urgings to amend the Constitution so he can seek a third term and warns against the false high of celebrity. "Popularity is like blood pressure," he says. "Sometimes it's high and sometimes it's low. What you need is to keep it under control."

That's a skill he acquired the hard way. Starting in 1989, he ran for president three times, surging in early polls only to hit a wall on voting day. By the late '90s he was on the verge of quitting politics. Instead, he did something bolder: he remade himself. He stopped his fist-waving harangues, climbed into a suit, and hired a speech coach and a marketing wizard. More important, he tempered his leftist politics. The turning point was June 2002. He was ahead in the polls, but Brazil's economy was tanking—largely, it seemed, because investors were spooked by the prospect of President Lula. He responded with a "Letter to the Brazilian People," pledging to honor contracts, pay down the country's debts, abide by the International Monetary Fund's requirements, and generally play by the rules of the market. It was the gamble of his career, the political equivalent of tacking into a hurricane. Hardliners from his Workers Party (PT) accused him of betraying and caving in to bankers and capitalist carpetbaggers. Business executives were also wary: could the "new" Lula be trusted? Investors sat on their hands.

He won by a landslide, but the hard work had only begun. The pre-election financial turmoil had gutted economic growth and forced a steep devaluation of Brazil's currency. "It wasn't easy," recalls Lula. "We had no foreign credit. Our [hard currency] reserves were extremely low. Inflation was showing strong signs of resurgence. The economy was gridlocked." But an even bigger challenge was to live down the hard-left image he and the ruling PT had acquired over the years. "We took office amid a huge crisis of mistrust," says Carvalho, his cabinet chief and a longtime friend. "We were a minority in Congress. The press was skeptical." After all, Carvalho allows, "Until then everything we'd stood for was not paying the foreign debt, raising salaries. It would have been a disaster."

To convince lenders Brazil was serious, Lula increased the "primary budget surplus"—the money the government puts aside every year to pay debt and interest—and boosted lending rates to a scorching 26 percent a year, throttling growth in order to kill inflation. He also kept government wages and pensions under control. "The unions and many people in the party hated it," says Ricardo Kotscho, a friend and former press aide.

International money men still weren't sure. "We knew he'd been a union leader and the president of a political party. What I really wondered was if he had the guns to be president," says former World Bank president James Wolfensohn. So Wolfensohn sent out a feeler, offering to dispatch a team of experts to brief Lula's government on the key issues facing the international economy and Latin America. He didn't know how the new president would respond. "A lot of leaders throw the presidential seal at you," says Wolfensohn. "But Lula lapped it up. He was like a piece of blotting paper. He realized he had a major job to do and that running an election was different from running a country. For me, it characterized the man."

Da Silva has operated that way ever since, putting pragmatism ahead of ideology and, for the most part, fiscal restraint over the quick fix. "No one in their wildest dreams would have thought Lula would behave the way he has," emerging-market investment guru Mark Mobius, of Templeton Asset Management, told me a year ago. Now Templeton has $5 billion in Brazil, more than it does in China. For sure, Lula had plenty to work with. With a web of hydroelectric stations and half its fleet of cars running on clean-burning sugar-cane ethanol, the country has long been the benchmark in renewable energy. Clever agronomists have turned the harsh tropical backlands into a breadbasket, exporting more beef, soybeans, and frozen chickens than any other nation. But Lula also added value by stumping for Brazilian brands abroad. "We had to make it clear that Brazil is not a minor country," he says. "Brazil has the Amazon [rainforest], but also makes airplanes and cell phones." And just as his labor rallies once galvanized the hardhats in São Paulo, his aggressive diplomacy has rallied poorer nations to demand free trade and a new deal in the international economy.

His real genius, however, has been his ability to sell unpalatable reforms to a largely poor population that looked to him as something of a savior. "Lula's popularity helped him make risky decisions that often required sacrifices," says José Dirceu, a former Workers' Party commander who fell to a corruption scandal. More important, unlike the supremos and populist demagogues who abound in Latin America, he did it playing by the rules. "Lula's respect for democracy and elections is a big plus," says former Treasury chief Joaquim Levy. "Very often he has been able to translate key values of democracy in ways that make them more concrete to people." The president still has his work cut out for him, and not much time left to accomplish it. "This is a country that has suffered from low self-esteem," he says. "Brazil needs to recover its pride. And I think things are happening. I hope those who come after me can work to transform Brazil into a great economy."

The economic crash put Lula's skills as a persuader to the test. "It was frightening," da Silva recalls. "We had no credit, no money in September, October, November, December, January, February, and March." But instead of lurching to the left, his instincts took him to the center, steeling him against populist pressures. He gave the central bank a free hand to control inflation, even at the price of curbing growth. "We knew there were no miracles," he says.

Still, the crisis inflamed Lula's old rancor over "savage capitalism" and the folly of the free market. He blamed the subprime market mess on "white-skinned, blue-eyed" bankers and ridiculed the champions of deregulation and the "minimal" state. "In the '80s and '90s it was fashionable to deride the state," he says. "But in the blink of the eye, the [free] market nearly bankrupted the world. And who did they go to for a bailout? The state." This is not as fierce as it sounds. While Lula roundly denounces his predecessor's sell-off of state-owned industries, he made a point not to reverse the process after taking office. "I think privatization was a mistake, but I had to work to do," he says. "I couldn't afford to spend my mandate fighting with the old government." Clout, not dogma, is what fuels Lula.

Clearly part of this is realpolitik as Lula works to cement Brazil's preeminence. "As the dominant economy in the region, Brazil has to be comprehending of its neighbors," he says. "It's like the relations of father to son." He even defends the ham-fisted rule of Venezuelan strongman Hugo Chávez. "Give me one example of how Venezuela is not a democracy!" he demands. But Lula's larger ambition is to assert Brazil's place on the world stage. He makes no secret of his own national pride. Back in 2003, the G7 nations finally opened up their annual gathering to some of the less-wealthy countries, and Lula was among those invited. He stood before the meeting in France and marveled at how unlikely it was that he, a peasant's son, was now addressing some of the most powerful people on the planet. Then he turned the tables: why not hold the next G7 meeting in Brazil, he challenged. "After all, in 20 years maybe only three of you will still be around." Not everyone was amused. But no one missed the point.

Correction: The original version of this story said Obama's "That's my man" comment was made at the Summit of the Americas; it was actually made at the G20 meeting in London.

2009

'Reason With Him'

Brazil's charismatic Luiz Inácio Lula da Silva on Brazil, trade, and how big countries should act.
By Mac Margolis
Sep 22, 2009 | Updated: 6:49 a.m. ET Sep 22, 2009


It's a long way from Brazil's starving northeast to the United Nations General Assembly hall, but Brazilian president Luiz Inácio Lula da Silva knows every step of the way. The peasant's son, who fled the dustbowl and hoisted himself up by his own overalls through the São Paulo industrial belt to head Latin America's largest nation, is now the heralded leader of a regional powerhouse and a self-designated spokesman for emerging nations across the world. On the eve of the U.N. general assembly, where Lula will kick of the debate, the 64-year-old Brazilian leader talked to NEWSWEEK's Mac Margolis about Brazil's rise to the world stage, the new deep-sea oil deposits, the international economic crisis, and what poor countries can teach the superpowers about responsible economic development.

MARGOLIS: When you took office, Brazil was regarded as an underachiever, and the last among the BRIC nations. Now Brazil is considered a star among emerging markets. What's happened?
Lula: No one respects anyone who doesn't respect themselves. And Brazil always behaved liked a second-class country. We always told ourselves we were the country of the future, the world's breadbasket. But we never transformed these qualities into anything concrete. In a globalized world you cannot sit still. You have to hit the road and sell your country. So we decided to make strengthening Mercosul (the South American trading bloc) a priority, and deepened our relations with Latin America in general. We prioritized trade with Africa and went into the Middle East aggressively. Our trade balance today is highly diversified. This helped us cushion the blow of the economic crisis. We suffered far less than all those countries that concentrated all their trade in one economic bloc or another. All of this created a bond between Brazil and other countries and today we are on equal footing in international relations. At the same time I believe developed nations began to realize that the world situation was so serious that they would not be able to solve all the problems by themselves. Brazil was first invited to the G8 summit (of rich nations) in 2003. Now these are established relations. We are calling for reform of the U.N. Security Council. We haven't achieved that yet, but we will.

Has Brazil's success in navigating the economic crisis changed investors' views?
I'll give you an example. At the beginning of the crisis, the head offices of the car industry ordered everyone to lower production, lower inventory, and remit their reserves. Later they called on the Brazilians to explain to them what miracle they had performed to revive their markets so quickly. There was no miracle. We had a strong domestic market. We had consumers who wanted to buy cars. We reduced part of the sales tax and asked the companies to offer consumers credit on affordable terms. And the result is that we are beating record after record in car sales in Brazil. It's the same case with refrigerators, stoves, washing machines, and with computers and housing construction. If all the countries had done this as quickly as Brazil and China did, certainly the world could emerge from the crisis more rapidly. Already we're beginning to see signs of recovery. If I told you that this year we are going to generate a million jobs you probably wouldn't believe me. But just wait for the numbers in December on how many jobs in the formal sector we will create.

What are the lessons for other countries?
The great lesson or everybody is that the state has an important role to play, and has great responsibility. We don't want the state to manage business. But it can be an inducer of growth and can work in harmony with society. In Brazil, thank God, we had a solid financial system and public banks with an important role in offering credit. And these were the banks that made sure the crisis here was not as bad as it was in other countries.

Wasn't it also because the Brazilian market was strong?
This is the merit of hard work, by the private sector and the government. I don't accept the idea that when things go well, the merit goes to the private sector and that when things go wrong, it's government's fault. No one in this country has taken a more active role than I have in selling Brazilian goods. No one boosts Brazilian companies more than I have. That's how we build a great nation.

You often criticize the privatization process. But thanks to the sale of state companies even the poorest Brazilians have cell phones, and former public companies like Vale have become world-beaters under private ownership.
But the state could have done the same things.

Except that it didn't.
It didn't because the Brazilian elite used public companies for their own ends. When you do that , any company will go broke, anywhere in the world. I think the privatizations were a mistake. Before I came to office, Petrobras was investing R$250 million ($139 million) in prospection. Today we are investing nearly $560 billion in R&D a year. The discovery of oil in the pre-salt layers deep below the ocean floor was not blind luck. It was the result of investment. All that was needed was to have invested correctly. But I am not one to keep rehashing the past. You've never heard me talk about renationalizing a company. What's done is done and let's move on.

Can Brazil maintain its commitment to clean energy with all the heavy investments required to recover the pre-salt oil?
We are going to use money from oil to help exploit clean energy. The two (oil and renewables) are not incompatible. Brazil is one of the few countries with a huge potential for clean, renewable energy. Petrobras created a biofuel company last year. We are working on developing hydroelectric platforms that will simply use the flow of the river to create energy. Workers will helicopter into the power station as they would to an offshore drilling platform. The platforms will be surrounded by forest to reduce environmental impact. Brazil has a responsibility to show the world that it is increasingly viable to use energy that doesn't pollute the world. Our energy matrix will become steadily cleaner.

Will Brazil agree to emissions reductions for greenhouse gases in the next round of climate-change talks in Copenhagen?
We want to build with other countries a proposal that is compatible with our respective capacity to meet commitments appropriate to each country. Brazil will support the creation of a fund for encourage carbon sequestration in the poorest nations, but Brazil will also demand that the rich world lowers its emissions of greenhouse gases. We need to take measure of each nation's historic emissions so that each of us pays according to its own responsibility.

But will Brazil commit to reduction targets?
Brazil will commit to reaching a broad agreement, and if this agreement contains emission targets, Brazil is willing to comply. But I want to see if the other nations will also meet their reduction targets.

Why do you want to increase state control of the oil industry when the current system of farming out concessions to the private sector has worked?
This new production-sharing model we are proposing to Congress is the dominant system in the world today. The only reason to maintain a concessionary system, which is kind of a risky contract, is if a country is not certain it will find petroleum and wants to share the risk [of prospecting]. But when we know that the oil is there, and that oil is a state resource, why should we grant [foreign companies] concessions? But you can bet that the world's biggest oil companies will be interested in investing in Brazil's pre-salt projects under the new rules.

The Mercosul trading bloc, which Brazil leads, only allows full democracies that respect human rights as members. Does Venezuela qualify?
Give me one example of how Venezuela is undemocratic.

Thirty-four radio stations closed by the government in one weekend. Repression of independent trade unions and government persecution of political rivals. Gangs linked to the government of Hugo Chávez vandalizing the only independent television broadcaster.
That's not the government's version.

Is there any doubt?
Let's be frank on one thing. First, each country establishes the democratic regime that suits its people. It's a sovereign decision of every nation. I never questioned the fact that, in a parliamentary system, the prime minister can stay in power for 15 or 18 years. Now [Alvaro] Uribe is backing [a constitutional amendment to allow] a third mandate. I haven't heard anyone criticize Colombia for that. Why don't I want a third mandate? Because, what's valid for me is also valid for my opponents. Today I want three terms, tomorrow they'll want four. That's why I say you can't toy with democracy. Two terms and eight years in office is a reasonable time to govern a country. And let's be honest. The Venezuelan elite wasn't exactly a rose garden. Remember that Chávez was the victim of a coup. You can't expect him to forget that so soon. They kidnapped the man just like they kidnapped [Honduran president Manuel] Zelaya. We can't allow this to continue happening in Latin America. Chávez will have to abide by the rules of Mercosul. Mercosul has defined rules.

Yes but Mercosul's rules say that for a country to join the common market it must already respect the rules of democracy and human rights.
Chávez was tested in four elections in the last 10 years, and the Venezuelan people are learning. We are a colonized continent. Most countries in the region spent the 20th century in poverty. Venezuelan oil enriched half a dozen people while the rest of the people remained poor. This is the first time this oil [money] is being used to increase the participation for the people. Right or wrong, the Venezuelan people will judge.

Is democracy only elections?
Elections are a great indicator of democracy. Democracy in fact means institutions that work properly, and I am working to strengthen Brazilian democracy. Each country has to build the democracy it wants. I have no doubt that Latin Americans are living one of the richest moment of democratic management in our history.

As Brazil takes on a larger international role, many people are wondering why the country remains so silent about countries whose regimes are not democratic?
If we look at human rights literally, then all nations commit errors, including the U.S. Where are the human rights at Guantánamo [prison]? All countries have problems. Only peace and democracy will be capable of guaranteeing the economic growth needed to better the lives of the poor majority. Once in a while, people ask me: Lula, are you a leader in Latin America? I say, no. No one chose me to be leader. But I am absolutely certain that Brazil's relations with Latin America never has never been so clear, transparent and honest as it is today. When Paraguay gets nervous over Brazil, I have to understand Paraguay. I cannot be aggressive if Paraguay yells at me. Brazil has far more power and wealth. It's like the relationship of a father and son. A father doesn't hit his child every time his child yells at him. He tries to reason with him. That's how big countries have to act.

2009

Transformers
When leaders radically remake their countries.


The invention of a nation: Deng Xiaoping (left), Margaret Thatcher (center), and Alvaro Uribe transformed their countries in a relatively short span.
By David A. Graham
Sep 22, 2009


Brazil's Luiz Inácio Lula da Silva comes to the U.N. this week as arguably the world's most popular leader—Barack Obama thinks so, at least. Lula's popularity stems from the huge changes he has made to Brazilian society, especially in bringing greater socioeconomic equality, and stewarding the economy. But he isn't the only leader to reinvent his country's political and national culture in a relatively short time. Here are some postwar leaders who wrought drastic social, economic, or political change during their time in office.

Leader: Luiz Inácio Lula da Silva
Country: Brazil
Years in office: 7
Lula's own remarkable journey—from destitute childhood to labor rabble-rouser to "the most popular politician on earth"—parallels the momentous changes he has brought to Brazil as the country' first leftist president since a military dictatorship took hold in 1964. (Democracy returned in 1985.) His Workers' Party has strong support among the poor, a result of Lula's programs to correct entrenched inequalities in Brazilian society, including a minimum wage safely above inflation and a grant program for poor families. Unlike his fellow leftist and Venezuelan neighbor Hugo Chávez, however, his stewardship of the economy has weathered the financial crisis well. Brazil was only grazed by the collapse, and it no longer looks like the little sibling among its BRIC brethren, Russia, India, and China.

(...)

G20 e FMI depois de Pittsburgh

“A CÚPULA em Pittsburgh foi um momento decisivo em termos de G20 e de FMI.

O Brasil, atuando em conjunto com os outros Bric, e em estreito diálogo com os Estados Unidos, obteve vitórias importantes.

Posso assegurar, leitor: não deixamos passar a oportunidade a que me referi no artigo da semana passada.

No meu entender, foram dois os resultados mais importantes:

• a formalização do G20 como principal instância econômica;

• e b) o acordo sobre a transferência de poder decisório no FMI.

….A designação expressa do G20 como principal foro para a cooperação econômica internacional consagra o que já vinha ocorrendo. Formaliza-se a substituição do G7 pelo G20 em matéria econômica.

…Uma palavra final sobre a atuação do Brasil em Pittsburgh.

A delegação brasileira foi das mais influentes.

O trabalho começou bem antes de Pittsburgh e exigiu difíceis negociações nas quais os Bric tiveram papel central. A mediação dos EUA foi crucial para vencer a resistência dos europeus, os principais interessados na preservação do status quo.

Mas posso dizer tranquilamente: a contribuição do Brasil foi fundamental. Escrevo essa frase com orgulho, e paro um pouco para pensar.

Bem sei, leitor, que o brasileiro é um pobre e humilde ser, que duvida de si mesmo e da sua capacidade. É o célebre complexo de vira-lata, apontado por Nelson Rodrigues. Isso é muito verdadeiro, eu sei.

Mas, ouso dizer: o brasileiro está mudando e vai aos poucos deixando para trás suas velhas e arraigadas inseguranças.

Brasil anuncia-se como credor do FMI
19h48m

O ministro da Economia, Guido Mantega, anunciou hoje formalmente que o Brasil é credor de 10 mil milhões de dólares em bónus do Fundo Monetário Internacional (FMI).

Trata-se da primeira vez na história que o Brasil deixará a condição de devedor para assumir o papel de credor da instituição financeira internacional.

O anúncio foi feito pelo ministro brasileiro, durante encontro com o director-gerente do FMI, Dominique Strauss-Kahn, na Turquia, informou a estatal Agência Brasil.

Guido Mantega oficializou a decisão do Governo brasileiro de assinar um Acordo de Compra de Notas (ACN) com o FMI, no valor de 10 mil milhões de dólares (6,82 mil milhões de euros).

Em Abril deste ano, o FMI convidou o Brasil a fazer parte dos países credores da organização multilateral e o governo brasileiro aceitou a proposta.

A operação da aquisição de bónus do FMI é lastreada em Direito Especial de Saque (DES), uma espécie de moeda do fundo, com juros pagos trimestralmente, baseados na taxa estabelecida pela instituição.

Essa taxa de juro é a média ponderada das taxas de juros de curto prazo dos Estados Unidos, da Zona do Euro, do Japão e Reino Unido, e actualmente está em 0,25 por cento.

O Ministério da Economia salientou num comunicado que o Brasil, apesar da crise económica global, não precisa de apoio financeiro do FMI e está em condições de emprestar recursos à instituição.

O comunicado sublinhou que o ACN é parte da decisão de ampliar a capacidade de empréstimo do FMI, conforme acordo dos líderes do G20.

US rivals 'plotting to end oil trading in dollars'

• Gold could be used as a temporary replacement for the dollar, Independent claims
• Story denied by Russia, Saudi, UAE, Kuwait


Oil trading - New York Mercantile Exchange

Oil could soon be priced in euros or Chinese yuan, the Independent claims. Photograph: Justin Lane/EPA

China, Russia, Japan and several of the most powerful Gulf States are actively plotting to end the decades-old practice of buying and selling oil in dollars, the Independent claimed today.

The newspaper said the plan is for the US currency to be replaced for trading oil by a basket of currencies, including the Japanese yen, the Chinese yuan, the euro, gold and a new, single currency for the Gulf states. If executed, the move would be a significant blow to the dollar's position as the premier world currency and would potentially threaten America's position as the world's leading economy.

According to the Independent, gold could be used as a temporary replacement for the dollar while the new currency basket was implemented.

"Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars," it claimed.

"Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018," added.

The dollar fell by around 0.4% against a basket of other currencies following the report. This pushed gold to a new all-time high of $1,035 per ounce.

The report was swiftly denied by several of the world's biggest oil producers. Muhammad al-Jasser, head of the Saudi Arabian central bank, claimed it was "absolutely incorrect", while Russian finance minister Dmitry Pankin and a Kuwaiti oil minister both denied discussing a move away from the dollar.

A source within the United Arab Emirates central bank also told Reuters that it would be sticking with the greenback.

A flawed system?

But analysts believe that the dollar's long-term future as the currency for oil trading is indeed in doubt.

"China, Russia and many Middle East countries already have large dollar reserves. They want to stop them getting higher, and may even want to start diversifying them into other currencies," pointed out David Hart, oil and gas analyst at investment bank Hanson Westhouse.

For years, economists have speculated about how long oil would continue to be traded in dollars. Critics argue that the current system is flawed; oil importers are forced to buy dollars to pay for their fuel, while exporters are left with billions of dollars which they often hold in reserve or reinvest in the US economy. The result, they say, is that the dollar's position as the global reserve currency is reinforced. Thus, the US economy is supported as any devaluation would cause damage across the world. Most of China's $2tn (£1.24tn) of foreign currency reserves are in dollars, for example.

Hart said that it is inevitable that the dollar's dominance over the oil market will be broken eventually, possibly sooner than 2018. He believes the transition would happen slowly, rather than a sudden switch.

"Let's face it, bilateral trade between China and these other countries is growing, so you can see why there is interest in matching up the currencies," said Hart. "If China and Russia are trading oil, why would they want to do that solely in dollars?"

Hart also pointed out that America would probably then be forced to raise interest rates to make its US Treasury bonds more appealing to investors.

David Buik, veteran City commentator, argued that moving oil trading away from the dollar would be "radical by any standards".

But, he said: "Let's be candid, it's not going to happen. Saudi Arabia is very dependent on the US for trade oil, defence and there is no way Saudi will stab the US in the back by pulling support away."

In 2000, Iraq broke away from the dollar's dominance and began selling its oil in euros.

Há risco de faltar produtos no Natal, diz FGV
03/12 - 08:53 - Agência Estado



O risco de faltar geladeiras, máquinas de lavar, aparelhos de ar-condicionado, ventiladores, liquidificadores e automóveis neste Natal existe e não é desprezível. Um levantamento dos estoques da indústria feito, a pedido do Grupo Estado, pela Fundação Getúlio Vargas (FGV) com base em dados da Sondagem Conjuntural da Indústria de Transformação revela que em três de quatro segmentos de bens duráveis pesquisados em novembro o nível de estoques era insuficiente para atender à demanda.

De acordo com o levantamento, indústrias que respondem por 34% das vendas anuais de eletroportáteis, que incluem ventiladores, liquidificadores, aspiradores de pó, por exemplo, informaram no mês passado que estavam com volume de estoques insuficientes e nenhuma das empresas tinha estoques excessivos. "Neste caso já está faltando produto", observa o coordenador técnico da pesquisa, Jorge Ferreira Braga. Em novembro de 2007, por exemplo, um ano tido como normal e que pode ser usado como base de comparação, empresas que respondiam por 3% do faturamento desse segmento estavam nessa condição.

A Mondial, fabricante de eletroportáteis, confirma a falta de estoque. "Estamos produzindo e entregando ventiladores no mesmo dia", conta o diretor comercial, Giovanni Marins. O planejamento inicial da empresa era iniciar novembro com 200 mil peças em estoque, mas ela começou o mês sem produto. O motivo do desequilíbrio foi um fim do verão 2008/2009 muito quente e a crise de crédito que fez com que o varejo não formasse estoques.

Segundo Marins, a situação é mais crítica no caso dos ventiladores, mas os estoques também estão abaixo do normal para liquidificadores, batedeiras, entre outros eletroportáteis. Tanto é que para equilibrar a oferta com a demanda, a fábrica da empresa que fica em Conceição de Jacuípe (BA) trabalha hoje em quatro turnos, 24 horas por dia. Menos crítica que os eletroportáteis, mas também preocupante, é a situação dos estoques da indústria de linha branca e de automóveis - ambos setores beneficiados pelo corte do Imposto sobre Produtos Industrializados (IPI).

Segundo o estudo, empresas que respondem por 5% das vendas anuais de geladeiras e máquinas de lavar, por exemplo, declararam ter estoques insuficientes. Em novembro de 2007, para a totalidade do setor os estoques estavam normais. No caso dos veículos, as montadoras que representam 4% das vendas do setor informaram que os estoques eram insuficientes. Curiosamente, os estoques das TVs estavam normais. As informações são do jornal "O Estado de S. Paulo".