Reuters May 25, 2003

Brazil's Lula lays down the law with party radicals

By CARLOS A. DeJUANA

SAO PAULO, Brazil - A handful of boisterous left-wing lawmakers from President Luiz Inacio Lula da Silva's own party have become one of the Brazilian leader's biggest headaches since he took office five months ago.

Their opposition to Lula's centrist, market-friendly policies has become so loud that it appears at times Lula's biggest opposition comes from within his own Workers' Party.

Tired of their antics, Lula is laying down the law.

The party last week suspended two lower house lawmakers after they released 1987 videotape of a Lula speech in which he denounces some of the policies he is now proposing.

Dubbed the "radicals" by the press, the group accuses Lula and his economic team of breaking with his party's traditional policies and pandering to foreign and local investors.

"The (Worker's Party's) prompt response against them is a further indication that the party's tolerance toward the radicals is running low and further demonstrations of defiance will be dealt with accordingly," said investment bank Dresdner Kleinwort Wasserstein in a report Friday.

Their latest rallying cry has been Lula's pension reform proposal, which would slash and tax benefits for retirees who worked for the state and increase the retirement age.

Investors view the reform as a critical step toward putting the government's finances, which includes a $250 billion debt, in order. It is so important to Lula that he personally delivered it to Congress last month.

But state workers and pensioners also make up a large part of the Workers' Party's voting base and the radicals have wasted no time in opposing many of the plan's main points.

REPORTEDLY FURIOUS

This week, Lula was reportedly furious when lawmakers Joao Fontes and Luciana Genro released the video tape showing him denouncing attempts to reform the pension system 16 years ago. The Estado de Sao Paulo newspaper reported Lula plans to have a "frank" talk with them next week.

Already, three congressmen have been called to appear before the party ethics committee to account for their actions.

"It's not just that they say they're not going to vote (for the reform). It's a group of things they have done the last months that characterize a break with the party," said a high-placed source at the party who asked to remain anonymous.

The radicals contend they are simply being true to what the Workers' Party has always defended and promised.

"If anyone is disrespecting the party, it isn't us," said Joao Batista Oliveira, a congressman from Para state who sports a pony-tail and is one of those scheduled to go before the ethics committee next month. "We can't say one thing to workers during the election and do another when we are governing."

Hugely popular, Lula can afford to take on the radicals, who make up less than a third of his party. But political analysts say he must also play hard ball to ensure their opposition to his reforms does not become a governing problem.

This week Lula reportedly had to ask his vice president to cool his critiques of their economic team, which has held interest rates at four year highs, much to the disappointment of Brazilian industry.

"Lula's government is made up of a large inter-party alliance," said Amaury de Souza, a political analyst at MCM Consultores. "It's obvious that if there is dissent within the Workers' Party, it will contaminate other parties, and they won't feel as much pressure to vote with the government."