TOPICS > Economy

Lula: ‘Blue-Eyed’ Bankers and Emerging Markets

September 24, 2009 at 12:00 AM EDT
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Paul Solman interviews Brazil's President Luiz Inacio Lula de Silva at the G-20 about the role of developing nations in the global economy, the state of Latin American politics and controversial comments the Brazilian leader recently made about the role of "blue-eyed bankers" in the financial meltdown.

JIM LEHRER: Now the gathering of major economic powers at the G-20 meeting in Pittsburgh, a year after the financial crisis. Our economics correspondent, Paul Solman, is there.

As world leaders began arriving today and protests took place outside, Paul spoke with Brazil’s president about economic matters and the political standoff in Honduras, that latest development being the ousted Honduran president taking refuge in the Brazilian embassy. That’s where Paul’s conversation begins.

PAUL SOLMAN, NewsHour Economics Correspondent: President Lula da Silva, thank you very much for joining us. How did the deposed Honduran president, Manuel Zelaya, wind up in the Brazilian embassy in Honduras? And did you have anything to do with it?

LUIZ INACIO LULA DA SILVA, President of Brazil (through translator): Well, he had to stop in some embassy. I believe that our concern is not to know which embassy he’s in or how he got to the embassy, because I received information already in New York City. That’s when I found out.

The fact of the matter is that you have someone that overthrew the president in power now, someone through the coup d’etat. The democratically elected president was overthrown. And it’s fair that the elected president wants to go back to his post.

And those that participated in the coup d’etat, if they want to be president, they should run for the next elections, and we cannot accept or allow any coup d’etat experience in Latin America.

PAUL SOLMAN: Are you doing anything to get him out?

LUIZ INACIO LULA DA SILVA: Well, what we want is that Honduras should go back to a normal situation. The Brazilian government expects that there should be no violation against the Brazilian embassy, of our territory.

It’s not the first time in the world’s history that people that are being persecuted and want refuge in foreign embassies, they are refugees. The normal fact in Honduras is to be in the presidency people that were not elected for the presidency, that’s the abnormal fact.

PAUL SOLMAN: Does the prominence of this G-20 meeting mean that emerging economies, like Brazil’s, are finely getting their due?

LUIZ INACIO LULA DA SILVA: Well, I believe that it is very difficult in the world of today for you to continue with G-8 only without taking in account the importance of Brazil, China, India, many in the world economy, because we are great consumers, large consumers, and we’re also becoming great producers, and also because we were better prepared than the rich countries for this crisis.

This is the first global crisis that doesn’t start in poor countries and it was caused by the rich countries. And the institutions, like IMF, World Bank, that new — supposedly everything, when the crisis happened in Brazil, in countries like Brazil, now they don’t know nothing when the crisis happened in the U.S.

And so it’s necessary for us to take advantage of this crisis and do things the right way, to have — the financial system has to be regulated. We have to end with the tax havens. And it’s necessary that the central banks in the world should control a little bit the banks’ financing, because they cannot bypass a certain range of leverage.

And so I believe that today, if you want me to be sincere, I believe that there’s no other — more any reason for a G-8 group or any other “G.” I believe that we should guarantee that the G-20 should be now an important forum to discuss the major economic issues of the world.

Regulation boosted economy

Luiz Inacio Da Silva
President of Brazil
Since we have sound and solvent state-owned banks, we have Bank of Brazil, which is the largest bank in Brazil, the federal savings bank...we're much more in a comfortable situation.

PAUL SOLMAN: Brazil hasn't been badly hurt by the economic crisis. Is that because you so heavily regulated your banking sector after your last economic crisis of the 1990s? And would you have other countries do what you did? Should the U.S. do what you've done?

LUIZ INACIO LULA DA SILVA: Well, that's why, too, it's true. You know, we have a financial system that is highly regulated, that the Brazilian financial system cannot leverage more than 10 times its net worth. And here in the U.S., they reached 35 times their leverage of the net worth of the banks here.

When the crisis came, Brazil was already in a good stage. And the Bank of Brazil, which is a state-owned bank, bought some stakes and bought some private banks, took over some private banks, so that it could have more money to finance the car industry, to buy -- for people buy used car, because the credit crunch, credit vanished all around the world. There was a credit crunch in Brazil and the rest of the world.

Since we have sound and solvent state-owned banks, we have Bank of Brazil, which is the largest bank in Brazil, the federal savings bank, which incentives and finance low-income housing project, we have the national development bank that finances development projects, so we're much more in a comfortable situation.

And when the crisis came, we still announced a program that will construct 1 million houses for low-income brackets of the population. And we gave tax breaks for electrical appliances, cars, computers, refrigerators. And so the economy, because of these tax breaks that have suffered three or four months with the crisis, in March, last March, started to recoup, and now it's going very well.

PAUL SOLMAN: You told the BBC recently, "The rich were responsible for this crisis, the blue-eyed bankers." You weren't going to allow them to blame the poor of the world. What did you mean? Doesn't everybody blame the bankers no matter what their eye color?

LUIZ INACIO LULA DA SILVA: I'm married with a woman that has blonde hair and blue eyes. The problem is that, when I gave this interview, I was with Gordon Brown, he was in Brazil, and there was a persecution going on to the immigrants, especially in Europe, the blacks in Europe, the Latinos. And I said very clearly the crisis was caused not by blacks or by Latinos; the crisis was caused by the bankers that have blue eyes.

PAUL SOLMAN: So you wanted to make sure that there wasn't a conflation or mistake, that people say, "Hey, let's keep out the immigrants because we're having economic trouble, because it wasn't their fault"? That was your point?

LUIZ INACIO LULA DA SILVA: Yes, that was my point, because it's a false idea or concept that, when there's a crisis pop up, you put the blame on the immigrants and you play the immigrants against the people of that country where they are.

Shared burden on climate change

Luiz Inacio Da Silva
President of Brazil
I'm not putting the blame on anybody. What we want is to find a solution for the future, because what is at stake is not my life anymore or for my generation, but for my grandson.

PAUL SOLMAN: Given the importance of the Amazon in taking the carbon out of the atmosphere, are you willing to compromise more on global warming, as China's President Hu now seems to be, instead of just, as you have in the past, largely blamed the developed world, or at least said we have to take action first?

LUIZ INACIO LULA DA SILVA: I'm not putting the blame on anybody. What we want is to find a solution for the future, because what is at stake is not my life anymore or for my generation, but for my grandson and for the life of my sons and daughters and grandsons.

So what happens is the rich countries should have a fund, such great a fund to offset the poor countries, to compensate those countries that still have forests to conserve. But each one of us, we have to assume responsibilities, either for the amount of greenhouse gas emissions, a fact that we are all reliable and each country has their own responsibility, and also for carbon sequestration.

PAUL SOLMAN: When you were elected -- and this is the last question -- the world was afraid, as I mentioned earlier, that you were a left-wing demagogue. What happened?

LUIZ INACIO LULA DA SILVA: Well, I believe that there was a lot of bad faith and a lot of prejudice against my figure. There was a cast of Brazilian politicians that imagined that a lathe operator coming out from a plant would not have the competence to govern, rule Brazil.

And I had to prove -- and I have to prove every day at every minute that I have more competency then them to rule Brazil, because I have much more commitment with the country, because I know better my country, because I know more of the people.

And for another reason, too, because any other president of the republic in Brazil, when he leaves the presidency, he'll come to New York City, he'll go to Paris, to London, and stay two or three years studying, and then after four years, he goes back again to Brazil. If it goes strong, the same thing -- he'll do the same thing.

Only in my case, when my presidency ends, I will go back to my home industrial city town, 800 meters from my local trade union that projected me my political life. And if I fail, when I go back to my hometown, it's going to take another century for another worker, another member of the working class to reach the presidency, because they're going to say that the workers do not have the competency to run a country.

PAUL SOLMAN: President Lula da Silva, thank you very much.


Tensions flare outside the G-20

Joseph Stiglitz
Columbia University
What goes on behind those closed doors will affect the lives of all of us all over the world.

JIM LEHRER: Paul also spent some time talking to people with a different view of this big meeting and the proposals being discussed. Here's his report, his coverage of the G-20, as part of his project, "Making Sense of Financial News."

A note: He completed this story before protestors and police clashed on the streets of Pittsburgh. A few hundred people demonstrated. Police fired tear gas, but there were no major injuries or arrests.

SPEAKER: Dr. Joseph Stiglitz...

PAUL SOLMAN: At an inner-city Pittsburgh church, the World Bank's former chief economist, now a hero of economic skeptics. Joe Stiglitz was here to blast the G-20, about to convene amidst heavy security just a few miles away.

JOSEPH STIGLITZ: What goes on behind those closed doors will affect the lives of all of us all over the world.

PAUL SOLMAN: An activist with Noble Prize street cred, Stiglitz has written a critique for this G-20 conference charging the GDP, total output, has become a lousy measure of economic well-being by failing to account for growth's costs.

JOSEPH STIGLITZ: Let me just give you one example. Thirty years ago, we weren't talking about climate change. Environmental degradation was not as important as it is today.

PAUL SOLMAN: The September heat in the Pittsburgh pews almost seemed to make the case for him. But Stiglitz has another problem with GDP as a measure, that growth in total output masks growing inequality, which, as it happens, was the theme of the tent city next door.

JOSEPH STIGLITZ: GDP has been going up per capita, but most Americans are actually worse off, so median household income is actually falling.

PAUL SOLMAN: Meanwhile, however, reviving world gross domestic product remains the key objective of the G-20. The delegates gathering downtown had various proposals for that revival: tougher regulation of bank capital requirements, executive pay, and global finance in general; rebalancing the world economy so the U.S., for example, is no longer the consumer of last resort, nor China the world's only saver.

But it all seemed pretty abstract to the protestors next door to the church.

This is an unemployment tent city.

'Bail out the people'

Will Hearst
G-20 Protestor
There shouldn't be an agency like the G-20 deciding the fate of the world's future when the United States itself can't take care of its own people here.

CASEY CAPITOLO: That's right. This is "Bail Out the People" movement, which is people from all over the country who say that the recovery cannot happen without jobs.

PAUL SOLMAN: Now, admittedly, these people didn't look like your usual economic experts, but they certainly were earnest enough when asked why they were here.

PROTESTOR: I'm here to protest global capitalism, and the bank bailouts, and what the G-20 is doing, and the decisions they're making.

WILL HEARST: There shouldn't be an agency like the G-20 deciding the fate of the world's future when the United States itself can't take care of its own people here.

PROTESTOR: Really, you know, I think it's a horrible thing that so many decisions are made without the input of the people that they affect.

PROTESTOR: They're going to choose who's hungry, who's homeless, who's jobless.

PAUL SOLMAN: But isn't it a good idea to have an organization where India, China, the United States, Europe, all together trying to figure out how to coordinate things?

PROTESTOR: I mean, I could throw out a lot of things that have, like, become, like, cliched statements, like ending global capitalism and all that, which, ultimately, like, I am for, and if there was a button that could just, like, wipe the whole thing out, yeah. But, man, I always blow it in front of the camera.

PAUL SOLMAN: But one of Sid's fellow travelers didn't think he'd blown it at all.

PROTESTOR: If everything was to fall apart and we started over again, I think we could accomplish a lot more, because we'd have a system that actually addressed the needs of all the people here.

PAUL SOLMAN: In the end, Will Hearst brought it all back home to Pittsburgh, host to the G-20 this time around.

WILL HEARST: There's a huge gap between people who live here, the working class of America, who live in these slums, and the wealthy elite who are members of the G-20 who are deciding the future of these people and billions more in the third world.

PAUL SOLMAN: That's a view deeply at odds with the self-image of the delegates downtown, of course, especially those with slums aplenty back home, who would say that the G-20 is an opportunity, at long last, to address the economic plight of their people, too.

JIM LEHRER: We have more on the G-20 meeting on our Web site, You can find out if the summit will endorse regulatory reforms or not, and you can learn how the economies of member nations are doing in the recession.