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SAO, PAULO, Oct. 24.
As
the countdown to Brazil’s final round of elections begins, it is
no-holds-barred campaigning on television. With Luis Inacio da Silva of
the Workers Party (PT) widening his lead in the polls over Jose Serra
of the Social Democratic Party of Brazil (PSDB), the reigning coalition
is throwing everything, including the kitchen sink, at the former metalworker.
Some television spots depict states and cities governed by the PT as garbage
dumps, complete with scavengers and dogs. Others cut from da Silva-- more
popularly known as Lula--delivering a militant speech to workers to him
charming businessmen with more moderate message, followed by the question
“Who is the real Lula?” Then there is unadulterated scaremongering:
Serra warning the electorate that Lula’s economic policies are similar
to those of President Hugo Chavez in neighboring Venezuela, which is in
the midst of bitter class warfare and on the brink of civil war.
But Lula gives as good as he gets. Clinton-like, he ties around his opponent’s
neck the collapse of the Brazilian economy during President Fernando Henrique
Cardoso’s administration, which Serra has served as Planning Minister.
Pounding on the government’s record, he forces Serra to run what
one commentator has called a “schizophrenic” campaign, unable
to defend Cardoso’s policies yet unable to distance himself from
them.
Perhaps as decisive as substance in the electoral homestretch is Lula’s
telegenic edge: in contrast to the boring Serra, the ex-factory worker
is perfect for the medium, down to the mischievous wink that establishes
an intimate tie between him and the viewer.
The atmosphere in this country of close to 175 million is electric as
it awaits something truly historic. According to Candido Grzybowski, head
of a social policy think tank in Rio de Janeiro, Lula’s victory
would represent a “new stage of the national project, where the
poor, the marginalized, the workers become the driving force in the rebuilding
of the nation.” Citing the Italian thinker Antonio Gramsci, he says,
“There are times when an individual becomes himself the project.
This is one of those times.”
Origins
Starting out as an impoverished migrant from the Northeast, Lula entered
political life as the feisty head of a metalworkers’ union in San
Bernardo de Ocampo, one of the proletarian strongholds in the vast Sao
Paulo industrial belt. Persecuted by the military government, he came
into prominence as a mass leader at a time when social struggles were
gathering the momentum that would eventually displace the dictatorship
and establish social movements as a key actor in Brazilian political life.
The PT, which Lula helped found in 1980, was one of the points of confluence
of the struggles of workers, peasants, urban poor, the progressive intelligentsia,
and Church activists.
Over the last 22 years, the PT under Lula’s leadership has developed
a distinctive elan, one that combines the fervor of an insurgent movement
with the hardnosed pragmatism of an electoral party. It is perceived as
a non-traditional party that is solidly rooted in the masses and uncorrupt.
It is seen as innovative, with its experiment in “participatory
budgeting” in the city of Porto Alegre widely known not only in
Brazil but the world over. It is also seen as tough on crime and drugs:
the PT Governor of Rio de Janeiro Benedita da Silva has probably swung
many urban voters to Lula’s side with her uncompromising war against
Rio’s powerful drug lords, who have retaliated by sending motorcycle
gangs to shoot up government offices and shopping centers and threatening
to kill her.
Unlike other parties on the left, the PT is seen as non-doctrinaire and
flexible. “The party started out quite sectarian,” recounts
Kjeld Jacobson, head of the international relations department of the
Central Federation of Workers (CUT). “But it soon learned that to
win elections it had to make alliances. Without these alliances, the most
you could get was only one third of the vote, so if you wanted to win
elections, you had to win the center.”
The PT “formula” has been immensely successful, with the party
not only winning governorships in key states and cities but also becoming
the party with the largest number of deputies in the Federal Chamber of
Representatives, today claiming 99 out of the 500 members of that body.
As important as winning elections is the experience gained in mastering
the intricacies of legislation and managing Brazil’s unwieldy municipalities,
cities, and states. As it prepares to conquer executive power, the PT,
contrary to the propaganda of the Cardoso government, is a tested force.
Altering the Political Landscape
In the current elections, the PT’s sophisticated—some would
say, opportunistic—alliance-building has altered the political landscape.
One result is the fragmentation of the political and economic establishment.
The PT vice presidential candidate, Jose Alencar, is a textile entrepreneur
who has headed up the Federation of Industries of the state of Minas Gerais.
Critical backing for Lula comes from the Liberal Party, which is dominated
by Christian evangelicals, who make up 12.5 per cent of the population.
Among the key Lula backers are well-known politicians from the center-right
and right, like former President Jose Sarney and the notorious hardline
conservative kingpin from the Northeast Antonio Carlo Magalhaes.
Lula’s success in winning over key sectors of the business, says
Jose Correa Leite, a leader of the civil society movement ATTAC, stems
from his ability to convince them that he will inaugurate a new era of
“national capitalist development” that would protect and reconcile
their interests with those of the lower classes. Taking advantage of the
cross-class distress caused by eight years of neoliberalism, Lula has
managed the feat of uniting the peasants, urban poor, workers, middle
class, and fractions of the elite behind a distinctly non-radical program
of reviving the Brazilian economy via an expansion of domestic demand
and stimulating national industries. Indeed, during the campaign, the
details of the program have been given less prominence by the PT than
the spirit of a civic cross-class nationalism that is captured in the
main campaign slogan “For a decent Brazil.”
Such broad cross-class electoral alliances are not unique in the history
of Brazil and Latin America. What is distinctive this time, according
to PT partisans, is that the center of gravity of the alliance lies in
the lower classes and marginalized groups
Still, there are those in the Lula camp who wonder if this is in fact
the case, who miss the strong laborist bias of the old PT, and who speak
apprehensively about Lula’s “capitalist-worker alliance.”
Like everybody else in the party, however, their doubts are, for the moment,
happily suspended in anticipation of a Lula victory.
The
Neoliberal Debacle
To many, Lula’s being at the cusp of power stems partly from what
prominent Brazilian political scientist Emir Sader describes as the “resounding
collapse” of the economic project of Fernando Henrique Cardoso,
the distinguished left-wing intellectual who transmogrified into a proponent
of neoliberalism, friend of transnational corporations, and ally of the
United States. So great is Cardoso’s loss of credibility that even
his party’s candidate has rarely asked him to make a campaign appearance
for him. According to University of Rio de Janeiro economist Reinaldo
Goncalves, a comprehensive index that takes into account key items like
the public debt, external debt, inflation, inequality, and unemployment
would “unambiguously show that the economic record of Cardoso is
the worst among all of the country’s 24 chiefs of state.”
Under Cardoso, the external debt of the country has more than doubled,
from $148.2 billion when he assumed office in 1994 to $400 billion today.
This has its origins in the president’s famous Plano Real, which
pegged Brazil’s currency to the dollar in an effort to flight inflation
was well as attract foreign investment to Brazil. The strategy seemed
to work in the first few years, with inflation brought under control and
with total capital inflows more than doubling between 1994 and 1996. But
as economist Geisa Maria Rocha shows in painful detail in a brilliant
article in the latest issue of New Left Review, Cardoso’s early
triumphs were pyrrhic. The pegged currency quickly became overvalued as
the dollar gained strength in the mid-1990’s, resulting in an erosion
of the erosion of the competitiveness of Brazil’s exports. In the
context of the trade liberalization that was pursued simultaneously in
accordance with neoliberal, free-market doctrine, the overvalued real
triggered a flood of imports that produced a yawning trade deficit that
needed more and more foreign capital to finance it. This meant higher
and higher interest rates to attract foreign capital.
When Brazil was “infected” in late 1997 by the Asian financial
crisis, interest rates hit the roof—rising to 50 per cent in October
1998 as the government, with the International Monetary Fund’s encouragement,
sought to prevent foreign capital from leaving Brazil. Simultaneously,
the authorities spent $50 billion defending the overvalued real from speculative
attack before finally giving up the dollar peg and watching helplessly
as the real quickly lost over two-fifths of its value against the dollar.
It was downhill for the real from there. Recently, with foreign investors’
fears of Lula’s candidacy, renewed speculative pressure speculation
has driven down the real to 4 four reales to one dollar, from 1:1 in 1994.
The Underside of Globalization
Cardoso’s monetary policy was part of a bigger policy package aimed
at globalizing Brazil’s economy. Reinaldo Goncalves says that instead
of pursuing a “discriminating process of relating to the world economy,”
Cardoso opened up uncritically and simultaneously in the key areas of
finance, trade, technology, and investment. In all four areas, Brazil
came out the loser.
The situation in investment was paradigmatic. The liberalization of the
foreign investment law and the privatization of state enterprises brought
in $1.8 billion in net foreign direct investment in 1994 to $30 billion
in 2000. The foreign investment boom put Brazil the country in sixth place
among developing countries in terms of penetration by transnational corporations,
with transnational corporations now accounting for 40 per cent of Brazilian
exports.
But what seemed a few years ago to be part of the solution has now become
a major part of the problem, in the view of many Brazilians economic analysts.
With so much of local production coming under the control of transnational
corporations, control of decisions over national production has passed
to the hands of enterprises that respond more to international conditions
of profitability than to the needs of the local economy. Thus has emerged
the great paradox of the Cardoso period: the dominance of foreign capital
has not led to greater fixed capital investment, greater international
competitiveness, and greater technological innovation. Indeed, UNCTAD
Secretary General Rubens Ricupero claims the transnationalization of the
Brazilian economy has been accompanied by deindustrialization.
The massive entry of foreign capital has led, according to Geisa Maria
Rocha, not to a strengthening of domestic capital in association with
foreign capital but to its displacement. While certain sectors of finance
capital and big industrial capital benefited from association with foreign
capital, the greater part of the local industrial elite and medium and
small industry that have serviced principally the domestic market have
seen their fortunes sink. Enter Lula, who has cleverly captured the Brazilian
industrial sector’s discontent by using the high interest rates
as a symbol of the dire state of the Brazilian industrial sector. As the
campaign hits the homestretch, Lula constantly tells his audiences that
it is time to lift a “blind” policy that foists 20 per cent
interest rates that “strangle” the economy while benefiting
only the few foreign and local interests that are the main prop of the
Cardoso-Serra dispensation. Under Cardoso and the IMF’s watchful
eye, Serra is tongue-tied.
Tight Space
Yet inspite of the populist rhetoric, the Lula camp is cautious when asked
about its short-term economic strategy. The reality of the crisis brought
on by neoliberalism, Antonio Prado, the executive coordinator of the PT’s
electoral program, tells us, is that “there is little room for maneuver
in the short-term.” This means “we’ll have to continue
some of the current administration’s policies like inflation targeting,
the floating exchange rate, and raising the budget surplus in the first
year.”
Indeed, the IMF has practically imprisoned the future Lula government
by warning that the remaining $24 billion of the $30 billion emergency
loan negotiated with the Fund in August will not be released unless government
continues the stringent conditions agreed to by the Cardoso government.
To prevent a massive capital flight that would destabilize the economy,
Lula said he will live up to the conditions demanded by the IMF, just
as earlier he had agreed to honor Brazil’s foreign debt obligations.
Given the prominence he has given to the interest rate issue, however,
Lula will not be able to avoid taking a stab in this direction, even in
the first year. Interestingly, the key initiative he plans to set in motion
to achieve this is one that he shares with his rival Serra: an aggressive
export program to trigger a rise in earnings that would allow interest
rates to drop, enterprises to borrow, and investment to resume. This strategy
out of the crisis is, the economist Goncalves points out, fraught with
difficulties and dangers since not only have Brazil’s industries
lost competitiveness but the international economy is currently marked
by deflation, recession, and overcapacity.
Lula’s Restless Base
No major redistributive program is planned for the first year of a Lula
government owing to the crisis and the simple lack of resources. The question
is: will Lula’s main base of workers and peasants cooperate? Public
employees have not had their wages raised for eight years, and land reform
is at a standstill. Prado of the Lula campaign says, “we are confident
the workers’ civic consciousness will prevail and they will agree
with the government’s gradualist approach.”
As for the countryside, it continues to be in ferment, with land occupations
by the militant Movement of the Landless (MST) and other groups taking
place even during the electoral period. Nevertheless, Lula’s room
for maneuver in the rural sector seems to be greater compared to the urban
areas. Geraldo Fontes, an MST leader, claims Lula is favorable to an MST
proposal for a short-term program in the countryside that has three elements:
expropriation of all land that is now occupied, provision of people in
the reformed areas with seeds, tools, and other basic needs, and food
for the first three months.
Threat from the North
Lula’s main problem in his first year may, in fact, not be internal
actors but international ones. Foreign capital is likely to be skittish,
watching for signals to head for the exit. The IMF will be watching the
new economic program with eagle eyes, determined in particular to make
the PT to live up to its promise to achieve a budget surplus of 3.75 per
cent.of Gross Domestic Product (GDP). Then there is the United States
and its pet project, the Free Trade for the Americas (FTAA).
The PT might not be as resilient when it comes to the Free Trade Area
of the Americas (FTAA), as it has been on the IMF loan and the foreign
debt. Lula campaign adviser Prado, who is an economist, tells me that
the current FTAA, as negotiated by the Cardoso government, is a “non-starter.”
Its provisions on investment, patents and trademarks, and government procurement
are seen as particularly damaging to the PT’s strategic economic
program.
With its investment program closely patterned after the current North
American Free Trade Area—including something similar to NAFTA’s
Chapter 11, which allows TNC’s to sue governments for discriminatory
treatment—Prado sees the current FTAA as making it practically impossible
for Brazil to pursue an industrial policy. Its provisions on government
procurement would make it difficult for Brazil to carry out an import
subsitution strategy by allowing the government to offer national industrialists
preferential incentives to produce important industrial inputs. Its patent
provisions would “endanger public health” by making it difficult
to produce the necessary chemicals to make cheap medicines for people.
“It is impossible to defend the FTAA before the Brazilian people
under these conditions,” he maintains.
The PT is, of course, only expressing the overwhelming negative sentiment
expressed by Brazilians in a recent unofficial referendum. Mindful of
this resistance, US Trade Representative Robert Zoellick recently warned
that Brazil’s choice was either to trade with ALCA [the Spanish
acronym for FTAA] or with Antarctica.” This created an uproar in
Brazil, which Lula, who had earlier characterized the FTAA as a “type
of economic annexation of Latin America by the US,” tried to defuse
by saying, “We have a number of things to settle with Comrade Bush.”
Not surprisingly, this “lulism” made things worse.
A clash with the United States might be eventually unavoidable on the
FTAA, but with Washington preoccupied by the Middle East, Iraq, and the
so-called war against terror, Lula, like Hugo Chavez in Venezuela, might,
for the moment, be spared the full brunt of a US response.
Keeping the US at bay, keeping the establishment divided, keeping his
mass base in line as he and his team try to restart an economy in the
throes of recession. Such is the magnitude of Lula’s task in the
next 12 months. “All new governments enjoy a honeymoon period with
the Brazilian people,” says Jacobson of CUT. Luis Inacio da Silva
will need as long a honeymoon as he can possibly get from the Brazilian
people and as little attention as possible from the United States.
*Walden
Bello is professor of sociology and public administration at the University
of the Philippines and executive director of Focus on the Global South,
a economic and political research institute based in Bangkok, Thailand.
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