The election of Ignacio Lula da Silva (or simply Lula as the Brazilians know him) as President of the Republic is a highly significant historic turning point for Brazil. For the first time in the history of the Brazilian republic, the politician who has risen to highest institutional office has not emerged from the country’s economic or intellectual elites. While his predecessor Fernando Enrique Cardoso gradually moved in the course of his political career from radical left to social democracy, Lula, a metalworker and trade unionist, is a bona fide representative of the historic left.
The left wing of the Partido dos Trabalhadores or ‘Workers’ Party’ (PT) often accuse Cardoso of being a social democrat only in name and that in his two terms of office (1994-2002), he has pursued a liberal political programme, dictated by the International Monetary Fund.
But what is Lula’s position on Cardoso’s legacy of reforms? Are the fears expressed in several quarters (but especially outside Brazil) of a backward slide well founded? His election would allegedly mean greater trade protectionism, a return to state intervention in the economy and a questioning of the structural reforms. Some even prophesise a new season of ‘communism’ in Latin America.
I have just left Brazil after four years following political and economic events in the country. Like many others, I predicted that Lula’s fourth presidential bid would see him an honourable runner-up for the fourth time. We believed the left should have gone for a more moderate ‘modern’ leader to have any real chance of victory, and that the ‘strong powers’ would never have allowed a former worker to become President. Lula seemed an honest respectable politician destined to morrer na praia, as the popular Brazilian saying goes.
The course of events over the last year have proved us wrong (once more demonstrating that political analysts don’t determine the fate of the world).
Challenged for the presidency by Eduardo Suplicy, Lula gradually consolidated much more support than the other candidates over the six months’ run-in to the elections and this trend never changed at any time up to the vote. The difference in the opinion polls between Lula and his main rival was never less than fifteen per cent, even after the announcement that Health Minister José Serra would be standing with backing from outgoing President Cardoso. The Governor of Maranhão, Roseana Sarney, the former Finance Minister Ciro Gomes, the Governor of Rio de Janeiro, Anthony Garotinho, took turns being second, but they were all always way behind Lula.
Brazil thus gradually grew accustomed to the idea of Lula as President and elected him with a more than comfortable majority in October. While in the first round Lula just missed out being elected (even though he had a much larger number of votes compared to Cardoso four years earlier), the gap of 20 million votes between him and Serra turned out to an insuperable gulf in the runoff three weeks later. Lula thus achieved the best electoral result in the history of the república nova. He received 52 million votes in the second round (62.48 per cent), compared to 33 million (37.52) for José Serra.
Under the guidance of Lula and Party President José Dirceu, the Workers’ Party had moved towards the centre and social democracy in recent years. A clear sign of this change was the local elections in 2000 which took many candidates from the moderate faction of the Party (the so-called ‘light’ PT) to power in a host of Brazilian municipalities. Marta Suplicy, Mayor of São Paulo, Olivio Dutra, Governor of Rio Grande do Sul (cradle of the Porto Alegre social forum) and many others rose to power as the respectable competent face of a new and finally mature party ready to take over the reins of the country.
The PT’s programme for Lula’s fourth presidential bid set it apart from the more traditional positions of the Brazilian left by making a commitment to defend the reforms of the economy and administration introduced in the 1990s: what they proposed was to complete the reforms with a greater emphasis on social aspects.
This new image was a successful response to a feeling of weariness with the reformist policies of the government of Cardoso, who had won approval but basically was in a similar situation to that of Gorbachev – greatly esteemed abroad and underestimated at home. History will undoubtedly decree that Cardoso was the President of the definitive turning point, taking Brazil down the road to modernity, but the country was tired of macroeconomy, structural reforms and IMF plans. Lula’s election is not seen as reneging on the path taken by Cardoso, but rather opening up new prospects, with a greater emphasis on development and the distribution of wealth rather than simply following financial orthodoxy.
The feeling of weariness was so widespread in Brazil in recent years that all the candidates, including José Serra, proposed programmes based on the need for change in continuity. No one overtly defended Cardoso’s legacy, because it was not expedient to do so in electoral terms. In fact if Serra had been elected President there would have been just as much a break as with the future Lula presidency.
This is undoubtedly unfair to Cardoso, whose performance was very positive, but the speed of history and politics do not always coincide.
But how much room for manoeuvre does Lula have in shifting the accent in Brazilian politics? Unfortunately very little.
In early 2002 the positive signs for Lula were already clear: the Brazilian business world showed it was willing to accept the prospect of Lula as President, while in 1998 this idea would have been anathema. The Argentinian crisis only slightly affected Brazil, whose economic foundations were and still are sound, despite considerable financial fragility due to the heavy foreign debt.
But from Spring on, Lula’s consolidated position as the leader in the polls and the markets’ confusion of the catastrophic Argentinian situation with the much more solid Brazilian situation led to a spiral of speculation that pushed the real down to artificial levels against the dollar, thus aggravating the Brazilian economic situation in an unjustified exogenous way.
In several quarters the spectre of Lula was flaunted to create an artificially Brazilian crisis which, however, was basically groundless: the Brazilian economy is strong and competitive; the reforms are here to stay; and Brazil is not Argentina.
The few reliable experts wrote and shouted their indignation but in all the confusion the stronger voices of the incompetent and illinformed (at times even high-ranking people, who we will leave nameless) tended to prevail.
The IMF rightfully intervened at the height of the crisis (July 2000), providing aid that was denied to free-falling Argentina.
But the extension of the IMF agreement, granted only after written guarantees about the reforms had been signed by the four candidates, including Lula, was not enough to calm the markets, unreasonably shocked by the prospect of Lula.
As Soros cynically but shrewdly commented a few months ago: ‘Brazil can’t elect its own President, the markets do it’. But Brazil paid no heed. The question is now whether the markets will allow Lula to govern. The answer is far from clear, since new waves of speculation affecting the Brazilian currency could push the foreign debt up to unsustainable – and unjustifiable – levels in a context of a sovereignty limited not by the force of tanks but by financial speculation.
In this sense the transition months from the current Cardoso presidency up to December 31 and the beginning of Lula presidency will be critical. Despite the different political colouring of the two men, the process is taking place in an orderly fashion and a common agenda, agreed for the coming months, has been also extended to work in the two houses of Congress. The message for the world is clear: Brazil is not going through a cataclysm, but it is simply changing political guard in a realistic significant move that will leave in place many of the Cardoso government’s reforms.
In fact the main reforms left unfinished by Cardoso (tax system, welfare and labour market) will probably be more easily completed by an openly left-wing government than a fragmented coalition like that supporting Cardoso. And the contents of the PT proposals are very similar to those of the previous government (which the Pr fiercely opposed…).
On the foreign policy front, Cardoso’s exit means Brazil will lose the objective strength of his charismatic figure. But no spectacular changes should be expected in the areas of Brazilian foreign policy, still guided with great skill by the very competent Ministry of Foreign Affairs (Itamaraty): Brazil will do as much as possible to inject fresh life into the ailing Mercosur. It will negotiate trade agreements in the Wro, with its neighbours in the American Continent (in the FTAA) and with the European Union. It will attempt to consolidate its increasingly evident sub-continental leadership in Latin America (much to Washington’s chagrin) and the links with other emerging countries (China, India and South Africa) to build a world as little unipolar as possible.
In this sense the already rather cool relations between Washington and Brasilia can hardly be expected to improve much. Over the last few years Brazilian diplomacy has taken on an increasingly active role to counterbalance (as far as possible) the American political and economic power on the continent. The Colombian and Peruvian crises, but especially the disagreements over the creation of the Free-Trade Area of the Americas (FTAA) has highlighted the importance for Latin America of Brazil’s independent decisionmaking. The US administration, less inclined to refined analysis than to raising the master’s voice, is not pleased with this situation, as the amazing statements made by the Treasury Secretary Paul O’Neil and others during the Brazilian financial crisis this summer demonstrated.
Dialogue between Bush’s Republican administration and Lula’s government will be far from easy. But it’s a very large step from this situation to the hysterical American analyses published in reviews and journals, which ought to express more balanced views than rant about a potential ‘axis of evil’ involving the communists Lula, Chávez and Castro. This is quite simply nonsense.
In this picture, the European Union has every interest in strengthening its relations with Brazil, especially since Europe is Mercosur’s leading trade partner and European countries are the main investors in the region. The slow but sure progress in the bilateral Eu-Mercosur talks is in significant contrast with the deadlock in the FTAA negotiations.
But to consolidate Europe’s role in the region and to counterbalance in an increasingly effective way the weight of the United States, Europe must make bold decisions: if we ask for trade concessions from our partners, we must open up our markets also to those sectors we tend to protect for political reasons. This is the key to the negotiations.
In Brazil the election of Lula has occasioned an outbreak of typically Brazilian euphoria. Independently of the political ideas we may hold, this is an important and historic moment for the whole of Latin America. It is in everybody’s interest that Lula succeed, but the challenge awaiting him will be far from easy.