What will Fernando Henrique Cardoso’s first-round victory in the October 3 presidential elections mean for Brazil?
Have things reached a turning-point in Brazil, a country where everything is on a gigantic scale distances, potential capacities, social inequalities and even passions? Or is this going to be just another of the country’s many disappointments?
To find the answer we should perhaps first analyze the context within which the elections were held, and then look at what lies ahead for the newly elected president.
First of all, it should be remembered that Cardoso – an economist and sociologist of international standing, as well as a former MP for the Partido Social Democrata Brasiliero (PSDB) – is not replacing a formally elected president, but Itamar Franco, the vice-president who had to take over the presidency when Congress impeached Fernando Collor de Mello in December 1992.
That impeachment came at the end of a prolonged trial of strength between Collor de Mello and the two Houses of Parliament, which was only resolved with the ousting of the president as a result of revelations about his personal involvement in corruption and embezzlement of public funds.
Public indignation at the scandal was enormous: there were huge anti-Collor demonstrations throughout the year. For once the usual Brazilian apathy with regard to politics was shaken, particularly amongst the young, who formed the bulk of those who took to the streets in protest and felt particularly betrayed by Collor, whose election in 1989 had been hailed as representing the consolidation of the New Brazil. It should not be forgotten that he was the first popularly-elected president since the end of military dictatorship.
An outsider amongst traditional political forces and established parties, Collor had captured the public imagination with his youthful – and telegenic – air of a decision-maker whose programme was based upon liberal principles and – irony of ironies – the fight against corruption. He raised great hopes which were then dashed in the most brutal of ways. And, for the first time, disappointment stirred Brazil to react. Much has been written, both in Brazil and abroad, on the subject – and often in very enthusiastic tones.
However, I think it should be pointed out that public indignation was not the only factor that brought about Collor’s impeachment. Equally – if not more important was the weakness of the president’s own party (Partito da renovacào nacional, PRN) in both Houses. This explains the strained relations between Congress and the president – difficulties made even more acute by Collor’s excessive exploitation of the mass media and the failure of his anti-inflation programme (which had frozen salaries and bank accounts, creating severe difficulties for Brazilian families without having a noticeable effect on the skyhigh inflation rate).
Without these two supplementary factors, I think it highly unlikely that popular indignation alone would have led to impeachment.
Collor’s constitutional successor was his vice-president, Itamar Franco, unscathed by scandal; his inheritance included an inflation rate of 1,100 per cent, interest rates of 30 per cent, enormous foreign debts and an economy deep in recession.
The first few months of his presidency were characterized by uncertainty, with Franco giving no clear outline of his political programme. And when he did so, he put the rapid reduction of inflation and interest rates at the top of his list of priorities; the difficulties involved in achieving such aims led to conflict with both the monetary authorities and his own finance ministers (in the first eight months of his presidency, two finance ministers and two Governors of the Banco do Brasil resigned).
Announced in April 1993, Franco’s economic strategy envisaged a zero annual growth rate in the national deficit, the reduction of interest rates on the public debt, wide-ranging privatisation (with foreign capital being able to buy up to 100% of a privatised company), incentives for the building industry and for agriculture, and accompanying social measures. Drawn up by the finance minister, Resende, (who subsequently resigned), the plan was welcome by the Brazilian business community as it did not envisage the shock measures that had been part of the Collor Plan. But that was not all that was missing; Franco’s programme also had very little to say about how its objectives were actually to be achieved. The whole thing was more like a statement of good intentions than a practical plan of action that had some chance of succeeding.
These failings went together with the inherent political weakness of Franco’s position: he didn’t have a political party. to support him in Congress and throughout the short time he was in office he failed to show the necessary qualities of political leadership. And this is where Cardoso comes onto the scene – as Rasende’s successor at the Finance Ministry.
His first position in Franco’s government had been that of Foreign Minister – an appointment that was probably made for reasons of ‘image’: Cardoso had not only been exiled during the period of military dictatorship, he was also – as I have already mentioned – a world-famous economist who had taught at some of the best universities in Europe, the USA and South America. After the image disaster of Collor’s presidency, Cardoso was just the person to restore a bit of lustre to Brazil’s tarnished reputation.
Appointed Finance Minister, Cardoso set to work immediately; in June 1993 he presented his Plano Verdade, which was the basis for the more-detailed Plano Real presented the following December.
The main points of the Plano Verdade were: reduction of public spending, the struggle against tax evasion, suspension of central government payments to indebted states and cities (these bodies owed something like 40 million dollars), the concession of greater powers to the Bank of Brazil.
The outcome of negotiations with Brazil’s foreign creditors depended upon the success of these measures. This made it fundamentally important that central grants to debtor states be suspended. However, the Brazilian Constitution makes it clear such grants are not discretionary; and, given the delicate political situation in Brazil, changes in the Constitution are a very sensitive issue.
In fact, central political parties are not very strong, and therefore elected representatives tend to defend local interests rather than follow the party line. So, any measure that conflicted with those interests was bound to have a rough time in Congress.
In the end, the approval of the Fundo social de emergencia, which was financed by a fifteen percent reduction in central grants to states and cities, was a real triumph for Cardoso; besides preparing the ground for the success of his ecоnomic strategy, it also convinced international creditors that Brazil was serious about reform. The result was that in April 1994 the IMF gave its blessing to an agreement for the staggering of repayment of a part of Brazil’s 49 billion dollars of foreign debt.
Success on the foreign-debt front was indissolubly linked with success in restoring some balance to public finances. This balancing was effected by the first phase of the Plano Real, which tackled inflation by dealing with the public deficit: along with the aforementioned 15% reduction in central government grants to states and cities there was an overall 5% increase in federal taxes.
The second phase of the płan,which was adopted on 1 March 1994, aimed to tackle the psychological effects of past inflation by instituting a Unidade real de valor (URV), which was calculated daily by the Bank of Brazil on the basis of various cost-of-living indexes. The URV was to be adopted on a voluntary basis – except where salaries and transfer of insurance payments were concerned. Through dealings on the foreign exchanges markets the Bank of Brazil kept the URV pegged to the dollar.
June saw the third phase of the plan: the introduction of the real – with the URV being adopted by all sectors of the economy. The rapid move on to this third stage shows that the plan is succeeding – or at the very least is having positive psychological effects on both public opinion and the world of finance.
To the great relief of Brazilian families this summer saw a drastic drop in the monthly inflation rate: from 45 to 5%.
Encouraged by these economic successes, Cardoso announced his candidacy for the presidency, thus modifying a situation inwhich the opinion-polllead of Lula da Silva, head of the Partido dos trabalhadores (PT), had been unchallenged for months.
Various factors had contributed to increasing the popular appeal of da Silva, an ex-trade unionist from Sao Paolo who was defeated by Collor in a second ballot in 1989 but is universally respected throughout Brazil, even by his oppоnents. Still smarting from their experience of Collor’s very old version of ‘the new’, and with the parties of the Right unable to put forward a convincing leader or political manifesto, the nation seems to have been willing to give the undoubtedly honest da Silva a chance. Perhaps he would turn out to be the man capable of rooting out the endemic ills of Brazil.
Cardoso’s announcement of his candidacy after the success of his Plano Real changed everything.
A man of the Centre-Left, Cardoso widened the basis of consensus behind him by accepting support from the CentreRight Partido do Fronte liberal (PFL). But, in essence, the presidential election was a paradoxical challenge between two left-wing candidates; the others (Eneas, Brizola, Quercia and Amin) were not even in the race.
Da Silva based his entire campaign on attacking the PSDB-PFL alliance and the negative influence it would have on a Cardoso presidency; he also emphasized the high social cost of the Plano Real. However, the middle classes which had seemed inclined to vote for him were won over by the successes achieved in the fight against inflation, which had an immediate effect upon their everyday life and for which they gave the credit to Cardoso.
By the closing weeks of the campaign it was clear that Cardoso would win – at the second, if not the first, ballot. The fact that he gain a clear first-ballot majority (as against 21% for da Silva and 6%for Eneas) shows that he was supported not only by the middle classes but also by traditional right-wing voters (who clearly found the idea of da Silva’s presidency unacceptable).
The PT’s candidate was not helped by the fact that the presidential elections were held along with federal elections for Governor and State Assemblies in 27 states (between 3 October and 15 November some 1700 elected positions were decided). There are various parts of the country in which the PT is not very well established, so the party organization was not able to set up a ‘snowball’ effect in support of its presidential candidate – something which the traditional parties could achieve for Cardoso.
But is the outlook for President Cardoso? There’s no doubt that the success of the Plano Real is to be considered asa positive factor, but will the president be able to continue with his reforms without alienating Congress, where Members are notorious champions of local interests and the status quo in general? And how will he handle the right-wing section of the coalition behind his candidacy? Will his government incline towards Social Democracy or Conservatism? His choice of Vice-President is already a cause for concern: Marcos Maciel is a old-hand at Brazilian ‘power politics’ and is notorious for his support of the military Junta; his appointment reminds us that Cardoso’s supporters included people like Rede Clobo, the person who ‘invented’ Collor in 1989.
But the debt owed to the Right is not the only problem hanging over Cardoso. How will he deal with the problem of the high social cost of his efforts to balance public finances in a situation which is already characterized by great social inequality? As I pointed out in my article on Salinas’ Mexico in the previous issue, the president must find a way of channelling economic growth so that distribution of wealth does not reinforce the already terrible inequalities between certain states and social classes and others.
Collaboration with da Silva – who has a good personal relationship with Cardoso – seems likely; and it to be hoped that the Trade Unions will also be involved in the reform process; but what will the president’s conservative supporters say to that?
Cardoso’s situation is, therefore, a risky one: he was elected with an overwhelming majority, but must nevertheless performa political juggling act if he is to govern successfully.
What is more, he has not only to balance the state’s books and deal with the social consequences, but also make some strategic choices that are fundamental for the future of the country.
On the one hand there have to be measures to further Brazil’s integration within the Mercosur (something that will require particular effort, given Brazil’s past preference for independent action); on the other, serious reforms have to be made to revitalize both the public administration and the state as a whole.
With regard to the second task one should point out that far-reaching measures are required within all three of the fundamental powers recognized by the Brazilian Constitution. The executive has to recover from the discredit cast upon it by Collor and, to a certain extent, by Franco (a president who suffered because of his extremely weak political position); the legislative body is sluggish, not to say idle (one need only think of the fact that in the last legislature only 176 of the 1402 laws approved by Senate and Congress were the result of draft bills presented by MPs, who are notorious for their absenteeism); and for their part, the Courts are snowed under with a backlog of cases which is increasing all the time. The public administration as a whole is top-heavy, not only in employees but also in institutions (the responsibilities of many of which appear to overlap).
The solution of all these structural problems will require an overall strategy and a political strength which perhaps will be beyond the reach of the new president.
While there is no doubt that Fernando Henrique Cardoso is a person of great abilities, and probably the best man the Brazilians could have chosen for the job, it is also true that he faces a positively herculean task.
Only during the course of his presidency will we be able to judge if the desire for change expressed by the Brazilian voters was the expression of a real determination to overcome the contradictions that riddle the country. If it was, then Brazil may well enter the twentyfirst century as a nation that is finally capable of exploiting its enormous potential.