Lula Spurns Using Brazil's Backyard Clout to Curb Chavez as Trade Mounts

Brazilian President Luiz Inacio Lula da Silva has used his stature to play peacemaker on Iran. Closer to home, he has shown little appetite for wielding his clout with Venezuela’s Hugo Chavez to repair a rupture with Colombia.

Lula travels today to Caracas and Bogota in a bid to ease tensions over accusations Chavez, 56, is harboring Marxist rebels from Colombia. He is unlikely to end the row and whoever succeeds Lula in October elections will have a tougher time confronting Chavez, said Michael Shifter, president of the policy group Inter-American Dialogue.

“There’s been a lot of indulgence of Chavez and this was a chance to draw some lines, because Lula is one of the few leaders that has any influence over Chavez,” Shifter said from Washington. “It’s clear Chavez is becoming more radical and it’s hard to get a sense Lula has gone as far as he could.”

Chavez broke off diplomatic relations with Colombia and put troops on high alert last month after outgoing President Alvaro Uribe, 58, accused him of turning a blind eye to rebels using his country to stage cross border attacks. Lula, without commenting on the merits of Colombia’s charges, downplayed the exchange as a “verbal conflict” between the two leaders.

He has also remained silent over concerns Chavez’s socialist revolution is becoming more authoritarian, Shifter said. A February report by the Washington-based Organization of American States said Chavez’s government regularly constrains free expression by punishing opponents, attacking the media and arbitrarily removing judges.

Economic Interests

Lula, the leader of Latin America’s biggest economy, may be hesitant to be seen as interfering in Venezuela as business ties between the countries grow, said Elsa Cardozo, an analyst in international affairs at the Metropolitan University in Caracas.

“There are lots of economic interests that form part of a complicated diplomatic approach by Brazil to avoid confrontation,” she said.

Since Lula took office in 2002, exports to Venezuela jumped 494 percent to $3.6 billion last year, while investment by Brazilian companies there has more than doubled to $183 million in 2008.

The two leaders, who meet quarterly, agreed in 2006 to jointly build an oil refinery in Brazil. Lula has pushed for Venezuela’s entry into the Mercosur trade bloc, where it would join Argentina, Brazil, Paraguay and Uruguay. State-controlled bank Caixa Economica Federal, based in Sao Paulo, opened its first overseas branch in Caracas.

Just Like Thatcher

After Venezuelans voted in a referendum last year to remove presidential term limits over opposition complaints that the move amounted to a power grab, Lula said Chavez’s ambitions to stay in office were as democratic as the 12-year rule of U.K. Prime Minister Margaret Thatcher. Chavez, who took office in 1999, said in May that his government will work during the next 20 years to install a socialist state by 2030.

While condemning U.S. plans to increase its military presence in Colombia, Lula has remained silent on evidence that Chavez’s government is funneling money and weapons to Colombia’s largest rebel group. Uribe’s government last month presented photographs and satellite images that it says point to the presence of as many as 1,500 rebels in Venezuela.

Uribe, in a written statement, “deplored” what he said was Lula’s “ignoring” of the regional security threat. Chavez said the accusations were a U.S.-backed conspiracy to destabilize his government.

Ideological Affinity

Lula, 64, stepped into the controversy over Iran’s nuclear program in May by brokering an offer by the Islamic republic to stop enriching uranium. Brazil then voted against a United Nations Security Council resolution to toughen sanctions against Iran.

Lula’s defenders say the former union leader has been a moderating influence on Chavez. Anti-American elements of Lula’s Workers Party, some of whom feel estranged by his pro-market economic policies, also back his embrace of Chavez.

Lula’s opinion matters to Chavez, although it may not be enough to hold him in check, Shifter said.

“No other leader has the same credibility among the left in Latin America except Fidel Castro,” he said, referring to the Cuban revolutionary.

Chavez’s actions must be understood in the light of a 2002 coup that removed him from power for several days, according to Antonio Patriota, Brazil’s deputy foreign minister.

“If there are imperfections in Venezuelan democracy we cannot ignore that the opposition didn’t follow the rules,” Patriota said in an interview in Brasilia. “Brazil has tried to not contribute to this polarization.”

Nationalizations

Lula’s close relations with Venezuela have helped Brazilian companies win business even as Chavez nationalizes some of their domestic and foreign competitors.

Brazilian companies including Salvador-based construction firm Odebrecht SA are participating in infrastructure, petrochemical and oil projects worth $7 billion over the next five years, said Fernando Portela, president of the Brazilian- Venezuelan Chamber of Commerce in Caracas. Brazil may surpass Colombia as Venezuela’s third-biggest trading partner this year, he added.

Whoever succeeds Lula is unlikely to be as warm to Chavez, said Rafael Cortez, a political scientist at Tendencias Consultoria Integrada in Sao Paulo.

Lula’s chosen heir, former cabinet chief Dilma Rousseff, lacks her mentor’s stature on the international stage, he said. Her main rival, former Sao Paulo Governor Jose Serra, said last month that Chavez is a threat to the region and called Colombia’s accusations well-founded.

“Lula is a global sensation,” Cortez said. “He took presidential diplomacy to a level that neither Serra nor Dilma have enough political weight to continue.”

To contact the reporter on this story: Iuri Dantas in Brasilia at idantas@bloomberg.net; Charlie Devereux in Caracas at cdevereux3@bloomberg.net

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