Brazil's Lula embarks on reform programme

Lula's election raised great hopes of social change

By Stephen Cviic BBC regional analyst

It has been three weeks since Brazil's new president, Luiz Inacio Lula da Silva - known as Lula - was sworn in amid scenes of jubilation in the capital, Brasilia.

Financial markets were nervous about Lula's presidency

As the country's first left-wing leader for 40 years, Lula has raised great hopes of social change.

But his first practical steps have reassured the financial markets that he is not going to abandon fiscal responsibility.

Before Lula took office, there were some foreign observers who questioned whether his commitment to economic stability was genuine.

Soothing the markets

They remembered his past hostility to the International Monetary Fund and his opposition to the economic reforms of the previous government.

Lula plans to hand out property titles to millions of shanty town dwellers

But Lula's first three weeks in power have demonstrated beyond doubt that he intends to run a tight ship.

His Finance Minister, Antonio Palocci, has soothed the markets with talk of autonomy for the Central Bank and plans to raise the budget surplus.

The new president is making little effort to appease left-wingers in his own party, but he does want to reassure ordinary voters that he is committed to social reform, which is why he has already been on a tour of shanty towns in north-eastern Brazil.

He has a genuinely radical plan to hand out property titles to millions of people who live in slums.

If it happens, this will be a move of major significance.

Reforming the state

But there may be legal obstacles.

Most important of all, Lula seems determined to reform the Brazilian state, whose spending is skewed towards the middle class rather than the poor.

The government's plans for changes in the pension system have already provoked alarmed reactions from various traditionally leftist interest groups, including civil servants.

But the fact that everybody is talking about pension, tax and labour reforms means they believe the government is serious about them.

And most observers would agree that is a good sign.