March 16 (Bloomberg) -- Brazilian President Luiz Inacio Lula da Silva said countries seeking to help their economies weather the global slump must avoid turning to protectionist policies.

“Protectionism is a drug that provides temporary relief, but in the end leads to major crisis,” Lula told investors in New York today.

Lula’s speech to bankers and business leaders was his most high-profile defense to date of free trade, which he says is necessary to protect jobs in poor countries beset by the global crisis. The former union leader urged the U.S. to jumpstart the stalled Doha round of global trade talks and reduce its tariffs for sugar-cane based ethanol, of which Brazil is the world’s largest producer.

Lula, who met with U.S. President Barack Obama over the weekend, is in New York today along with Finance Minister Guido Mantega, Cabinet Chief Dilma Rousseff and other Brazilian officials to reassure investors as growth in Latin America’s largest economy evaporates.

Trade Barriers

Lula intensified criticism against rich nations’ trade barriers after a plunge in commodity prices and falling demand for Brazilian products abroad curtailed the country’s exports. Brazil also protested against the Buy American clause the U.S. Congress included in the stimulus package passed last month.

Since Lula took office in 2003, sales abroad have almost tripled to $198 billion last year, powering economic growth that until the fourth quarter was the fastest in more than a decade. This year, exports are expected to fall for the first time in a decade, by as much as 20 percent, according to the government.

The New York gathering takes place after Brazil’s central bank lowered the benchmark interest rate last week by 1.5 percentage points, the steepest cut in five years, to 11.25 percent to help revive the economy. Brazil’s gross domestic product shrank 3.6 percent in the fourth quarter from the previous three-month period.

Talking to investors, Cabinet Chief Dilma Rousseff emphasized earlier today that the Brazilian economy will resume growth this quarter. Growth will accelerate in the second quarter, Rousseff said without elaborating.

No Oversight

Lula reiterated his criticism of advanced countries, blaming what he calls their lax financial regulation for precipitating a crisis that the World Bank estimates may open a $700 billion financing shortfall this year for low-income countries.

He called on international lenders, such as the International Monetary Fund, to lend more to poor countries and said the organization should be more “democratic.”

“It is crucial that multilateral organizations help unblock the flow of credit required to jumpstart world trade, especially in developing countries,” Lula said.

Lula also said Brazil and the U.S. will suggest the end of tax havens, which he said are “major allies of all forms of international organized crime.”

“Our proposals, which I brought up with President Obama the day before yesterday, are being discussed with other friendly countries. They will include recommendations for abolishing tax havens,” Lula said.

The Bovespa is up 4.8 percent this year compared with a 15 percent drop in the Standard & Poor’s 500 Index and 0.3 percent decline in MSCI’s Latin America index. The real strengthened 2 percent against the dollar over the same period.

Lula also urged the U.S. to end its 47-year-old embargo of Cuba, one of the few issues on which the region stands united. Obama plans to attend the fifth Summit of the Americas next month in Trinidad and Tobago.

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

Last Updated: March 16, 2009 17:01 EDT