The Brazilian Economy and Da Silva's Tightrope

Brazilian President Luiz Inacio "Lula" da Silva says Brazil's policies of cutting government spending and debt are reducing the country's vulnerability to global financial crises and spurring the fastest economic expansion in a decade. Although growth rates above 6 percent in the second and third quarters of 2004 are reasons for optimism, current global economic conditions will put continued growth in jeopardy. The increasing weakness of the dollar, forecast to persist into 2005, is putting Brazilian monetary authorities in a bind, forcing them to walk a fine line between fighting inflation and maintaining exchange rates that favor exports and debt repayment. These complications will see da Silva's approval ratings drop, but should not endanger his immediate political future.