Lula
Editorial
Stabroek News
November 6, 2002
Some fifty years ago a small boy, six years old, in the care of his mother made the thousand-mile journey in the back of a lorry from the village in North Eastern Brazil, a region adjoining Guyana, where he had been born in a destitute village to the bustling city of Sao Paulo. He started working there at the age of twelve as a shoe shine boy, later he became a metal worker and leading trade unionist. His name is Luiz Inacio “Lula” da Silva and on Sunday, October 27 he was elected, in a landslide, President of Brazil. He will take office in January.
He will need all the courage and toughness which has characterised his life to tackle the immense problems of Brazil. The sheer magnitude of the task is indicated by Brazil’s vital statistics. It is one of the five giant countries of the world (the others being the USA, Russia, China and India). It is the largest economy in Latin America and the eighth largest in the world. Brazil is the fourth most populous democracy (115 million voters) after India, the USA and Indonesia. Of its 170 million people it is estimated that 60% are at or below the poverty line.
Lula da Silva will be succeeding Fernando Henrique Cardoso who provided Brazil with eight years of political stability and moreover achieved world wide recognition as a statesman. Why then did Brazilian voters forsake Cardoso’s centre-right coalition candidate and swing so heavily behind Lula, the Workers Party candidate, giving Brazil its first left-wing government in some forty years.
It is surprising as Cardoso’s achievement is considerable but a high price was paid for it. According to the Economist (Oct 5)during his regime, infant mortality has fallen sharply. Nearly all Brazilian children go to primary school. Land reform has been effective in the resettlement of a huge number of families. However the Achilles heel has been Cardoso’s neo-liberal policies under the tutelage of the I.M.F. His major achievement was the dramatic reduction in inflation. Inflationary prices had imposed a daily escalating “tax” which fell most heavily on the poor. Cardoso brought inflation down to nearly zero by attracting huge foreign investment by offering reportedly the highest interest rates in the world. Capital inflows rose from 42 billion in 1995 to 200 billion in 1999. But the downside of the opening up of the economy and the consequent huge investment inflows into the economy were predictable. While exports rose about 50% imports tripled. Balance of payments went from a surplus of 15 billion in 1992 to an 8 billion deficit in 1997. Cardoso achieved monetary stability but there was inadequate economic growth and job creation.
Cardoso’s policies thus failed to make sufficient impact on Brazil’s massive structural unemployment which is increased by 1.5 million young people coming on to the job market each year.
The Cardoso regime also failed to modernise the justice system and to maintain law and order in large parts of the great cities and in the countryside.
Lula has been quick off the mark since his victory. He has announced the appointment of a group to work on the abolition of poverty and has stated that his objective is to ensure that by the end of his term, every Brazilian will have three good meals each day.
But will he be permitted to implement his programme? Traditional ruling groups and middle classes in Latin America have been able to ensure that left-wing and populist regimes do not stay in power for long, the only exception perhaps being the Peronists in Argentina. Witness what is now happening in Venezuela. It will not help that Lula is known to have maintained communication with both Castro and Chavez.
Leaving aside such wider constraints there are other specific institutional factors which may act as a brake on his efforts. This was Lula da Silva’s fourth attempt to win the Presidency and when it appeared that he would succeed there was an immediate so called “crisis of confidence” with the Real, the Brazilian currency, rapidly losing value. It was immediately recalled that during previous contests Lula had declared that he would renege on Brazil’s huge national debt - a step which would have had far reaching disruptive consequences for US banks and investors and global monetary arrangements. In view of the imminence of a Lula victory and the current economic crisis the IMF, under US tutelage, granted Brazil, reportedly before Brazil had formally applied, loans totalling $30 billion of which $6 billion was made immediately available “so that Cardoso could complete his term in office without having to declare a debt moratorium”.
At the same time the IMF made it plain that the remainder of the loan will only be available if the new President accepts the IMF conditions. Confronted with this situation Lula gave the necessary assurances on debt-repayment. He even formed an alliance with a small right-wing party. And to symbolise his change of heart he abandoned his workman’s overalls for a smart business suit.
Another set of constraints derive from the peculiarities of Brazil’s electoral system. Although Lula won a landslide victory his party has apparently won only two of the 27 governorships. Moreover and more importantly his party will be in the minority in congress where it will confront the centrist-right coalition formed by Cardoso. In other words his presidential mandate will be virtually subject to a congressional veto.
Even Cardoso often could not get his own centre-right coalition to pass key legislation and had to resort to decrees. Emir Sader, Professor of Political Science at the University of Rio de Janerio, describes the ensuing situation as follows:
“More than any other Brazilian president, including those that served under military rule, Cardoso governed by provisional measures, even though he had a parliamentary majority. In practical terms, with the backing of the National Congress, presidential (i.e. Cardoso’s) decrees acquired the force of law”.
Government by decree is an option which might not be as easily available to Lula.
Despite the constraints mentioned above there is one major policy matter on which Lula is likely to take a strong stand which will bring him into confrontation with Washington. His government may withdraw from or put a brake on the negotiations for the establishment of the Free Trade Area of the Americas (FTAA). There seems to be strong hostility among the Brazilian people to the FTAA. The Brazilian Catholic Bishops’ Conference conducted a referendum on it which showed that there was overwhelming hostility to it. Misgivings about the FTAA run across the political spectrum. Thus it will be recalled that Cardoso at the Quebec Western Hemisphere Summit in April 2001 had strongly attacked aspects of the FTAA. Lula da Silva has made no secret of his position as he had made opposition to the FTAA a main plank of his campaign. The FTAA as it is, Lula stated, “does not mean integration but the annexation of the Latin American economies to the economy of the USA”.
The political tide is nevertheless on Lula’s side. Increasingly in Latin America, the Washington Consensus on which neo-liberal policies such as those of Cardoso are based are under deep challenge. The consensus puts the emphasis on the primacy of market forces, privatisation of state-owned businesses and foreign trade liberalisation. The consensus is promulgated and enforced by that triad (one must not say axis) of institutions, the IMF, the World Bank and the WTO. However the year-long turmoil in Argentina with its immense human costs and the teetering crises in Uruguay, Peru and Ecuador are leading to the questioning and rejection of the principles which emphasise free trade and the reduction in the responsibilities of the state.
At present there are two Presidents, Vicente Fox of Mexico and Ricardo Lagos of Chile, who are committed to free market reforms, or to put it another way neo-liberal principles or the Washington Consensus.
But in view of the economic crisis engulfing or creeping up on so many Latin American states it is likely in the future that more leaders like Lula da Silva will emerge.
The US may well find that while it encircles Asia with military concentrations, it has lost in its own backyard the battle of economic ideas as to how one organises the economies of states for economic growth and development.