page_title: Luiz Inácio Lula da Silva
section_title: Economy
hierarchical_section_title: Luiz Inácio Lula da Silva / Presidency / Economy
caption_attribution_description: Português: Presidente Lula em revista no 7 de setembro English: President Lula at Independence Day commemoration (2007)
context_page_description: Luiz Inácio Lula da Silva, known as Lula, is a Brazilian politician and former union leader who served as the 35th President of Brazil from 1 January 2003 to 31 December 2010. Lula was a founding member of the Workers' Party and ran unsuccessfully for president three times before achieving victory in the 2002 election. He was then re-elected in 2006.
  During his time in office, Lula introduced sweeping social programs including Bolsa Família and Fome Zero, aimed at combating poverty and lifting the station of the country's working class. As president, Lula played a prominent role in international matters including activities related to the nuclear program of Iran and climate change, being described as "a man with audacious ambitions to alter the balance of power among nations".
  Succeeded by his former Chief of Staff, Dilma Rousseff, Lula left an enduring mark on Brazilian politics in the form of Lulism. He has been called one of the most popular politicians in Brazilian history and while in office was one of the most popular in the world. In 2011, Lula, who was a smoker for 40 years, was diagnosed with throat cancer and underwent chemotherapy, leading to a successful recovery.
context_section_description: As Lula gained strength in the run-up to the 2002 elections, the fear of drastic measures, and comparisons with Hugo Chávez of Venezuela, increased internal market speculation. This led to some market hysteria, contributing to a drop in the value of the real, and a downgrade of Brazil's credit rating.
  In the beginning of his first term, Lula's chosen Minister of Finance was Antonio Palocci, a physician and former Trotskyist activist who had recanted his far left views while serving as the mayor of the sugarcane processing industry center of Ribeirão Preto, in the state of São Paulo. Lula also chose Henrique Meirelles of the Brazilian Social Democracy Party, a prominent market-oriented economist, as head of the Brazilian Central Bank. As a former CEO of the BankBoston he was well known to the market. Meirelles was elected to the Chamber of Deputies in 2002 as a member of the opposing PSDB, but resigned as deputy to become Governor of the Central Bank.
  Silva and his cabinet followed in part the lead of the previous government, by renewing all agreements with the International Monetary Fund, which were signed by the time Argentina defaulted on its own deals in 2001. His government achieved a satisfactory primary budget surplus in the first two years, as required by the IMF agreement, exceeding the target for the third year. In late 2005, the government paid off its debt to the IMF in full, two years ahead of schedule. Three years after the election, Lula had slowly but firmly gained the market's confidence, and sovereign risk indexes fell to around 250 points. The government's choice of inflation targeting kept the economy stable, and was complimented during the 2005 World Economic Forum in Davos.
  The Brazilian economy was generally not affected by the mensalão scandal, which related to vote buying in the Brazilian Congress. In early 2006, however, Palocci had to resign as finance minister due to his involvement in an abuse of power scandal. Lula then appointed Guido Mantega, a member of the PT and an economist by profession, as finance minister. Mantega, a former Marxist who had written a PhD thesis (in Sociology) on the history of economic ideas in Brazil from a left-wing viewpoint, was known for his criticism of high interest rates, something he claimed satisfied banking interests. Mantega was also supportive of a higher level of employment by the state.
  Not long after the start of his second term, Lula's government announced the Growth Acceleration Program (Programa de Aceleração de Crescimento, PAC), an investment program to solve many of the problems that prevented the Brazilian economy from expanding more rapidly. The measures included investment in the creation and repair of roads and railways, simplification and reduction of taxation, and modernization of the country's energy production to avoid further shortages. The money pledged to be spent on this program was considered to be around R$ 500 billion (more than 250 billion dollars) over four years. Prior to taking office, Lula had been a critic of privatization. In his government, however, his administration created public-private partnership concessions for seven federal roadways.
  After decades with the largest foreign debt among emerging economies, Brazil became a net creditor for the first time in January 2008. By mid-2008, both Fitch Ratings and Standard & Poor's had elevated the classification of Brazilian debt from speculative to investment grade. Banks made record profits under Lula's government.
  
  Lula's second term was much more confident; Lula was then not only the undisputed master of popular affection, as the first president to bring a modest well-being to many people, but also in complete control of his own administration. His two leading ministers were gone. Palocci was no longer needed to calm the nerves of overseas investors and Lula had never liked and somewhat feared José Dirceu, a virtuoso of cold political calculation and intrigue. Their joint elimination freed Lula for sole command in Brasilia. When, midway through his second term its test came
caption: Lula and his wife Marisa Letícia review troops during the 2007 Independence Day military parade
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