The German Industry used to believe Lula would be disastrous for the economy. They now celebrate their error of judgment. DW-WORLD interviewed, in Ludwigshafen, the presidents of DaimlerChrysler Brazil and of BASF South America.

Ben van Schaik: "There is total surprise. Lula has been keeping his word."

Ben van Schaik is the new "promoter" for Brazilian President Luiz Ignácio Lula da Silva. Speaking to German executives and Mercosur representatives at the Ludwigshafen Chamber of Commerce and Industry, the president for DaimlerChrysler Brazil and Latin America revealed to be excited about the first few months of the Brazilian Labor Party's government.

"There is total surprise. And to think that just a year ago, before the elections, we used to be very critical and skeptic about Lula, although he had promised to guarantee Central Bank independence and that he would pay the debt with the IMF. To everyone's surprise, he has been keeping his word. And he is even promoting the reforms (tax and Social Security) daringly, and that was unexpected," said Schaik, who is also the chair of the Brazilian-German Chamber of Commerce, in São Paulo.

The president of the BASF Latin America Group supports this evaluation. "We were positively surprised," said Rolf-Dieter Acker, who also highlighted Lula's responsible management of the economic policy and of the reforms. "If he continues on this path, he will be successful," added the executive, who sees huge potential in Brazil for new chemical industry investments. According to Acker, the Brazilian trade deficit in this sector was $6.5 billion in 2002.

To the two executives, not even the recent occupation of a plot of land belonging to Volkswagen by the so-called "roofless" is reason for concern. "Protests are common in all democratic countries, and not only in Brazil. It is important to solve these types of acts relatively quickly to reestablish the legal order," said BASF's president to DW-WORLD.

Acker believes there is no threat for companies. van Schaik does not discard the possibility of future occupations, but he doesn't believe large-scale invasions will happen. To DaimlerChrysler's President, this type of protest hinders Brazil's image abroad, particularly when it takes a long time to solve them.

Few investments, in spite of the optimism

Although they foresee a strong growth recovery in Brazil next year, neither German conglomerate plans to make large investments in the country. In the past three years, BASF invested $250 million to enhance its capacity, but the new installations remained idle due to economic stagnation. Acker claims the priority is to take advantage of this existing capacity in the new growth phase.

The "good winds" in the Brazilian economy will also have little influence in DaimlerChrysler's plans. The group will maintain its average yearly investments between $100 and $200 million. In 2004, the car maker will launch new equipment and components for buses and trucks and, in 2006, the Juiz de Fora plant will start manufacturing the four-door version of the small Smart. As is the case for the Classe A and C, the new model will be exported to the USA due to its high cost for the Brazilian consumer (18 thousand Reais).

Investments for the remaining DaimlerChrysler plants in South America are frozen, however. In Venezuela, "you still can't see the light in the end of the tunnel," claims van Schaik. Furthermore, insofar as Argentina is concerned, the Dutch says the company will have to wait, in spite of the incipient economic recovery. "You can't notice any growth yet," he remarked. BASF's president seems more optimistic. To Acker, Argentina, Chile, Peru and the remaining South-American countries are showing signs of growth.

Marcio Weichert, special envoy to Ludwigshafen