Economic Discord Begins to Emerge In Brazil's Cabinet
RIO DE JANEIRO -- One of the major triumphs of Brazilian President Luiz Inacio Lula da Silva's first year in office was coordinating a coherent economic policy from a highly diverse team, including former leftist radicals, industrialists and an ex-banker.</br></br>But in year two of Mr. da Silva's tenure, notes of discord within the administration are becoming increasingly evident, rattling markets at a delicate moment: The U.S. Federal Reserve has signaled an interest-rate policy shift that is creating a less favorable backdrop for emerging markets.</br></br>Brazil's policy makers recently have issued conflicting statements on interest-rate policy, the extension of an Amazon free-trade zone, a public-sector hiring program and other matters. On Wednesday, Central Bank President Henrique Meirelles, a former FleetBoston Financial Corp. banker who has faced sniping from elsewhere in the government over his hawkish anti-inflationary stance, felt compelled to publicly address rumors of his impending resignation, which he dismissed as "nonsense."</br></br>Mario Mesquita, chief economist at ABN AMRO Brazil, wrote yesterday that "the buildup in political noise surrounding economic policy and key policy makers seems to be getting out of hand."</br></br>One camp within the government, which has held sway until now, emphasizes eradicating inflation to please financial markets; the other camp, which is becoming more vocal with municipal elections scheduled later this year, puts greater emphasis on priming growth to more quickly satisfy Brazilian workers.