Imagine a prime minister who makes his first visit to the world’s fourth largest democracy and refuses to meet the leader of the opposition.
Even if Luiz Inacio “Lula” da Silva, the working-class former trade union leader, had not been ahead in the polls for the presidency at the time, Tony Blair’s decision not to see him during his trip to Brazil last year would have been a mistake. Now that Lula has won the election as president of Latin America’s largest nation, it becomes a blunder.
Blame rests partly with Blair’s foreign policy advisers, but the prime minister himself is most at fault. Lack of intellectual curiosity and the traditional British ignorance of Latin America overruled whatever good advice he was offered. He apparently preferred to listen to Peter Mandelson, who has been openly contemptuous of Lula’s party, comparing it with old Labour and saying it had no chance of being elected.
The irony is that Lula is more New Labour than old. After losing three previous presidential elections, the candidate of the Workers’ party has won this time as “Lula lite”. He has modified his policies and his image. He chose a rich businessman who belongs to a small rightwing party as his running mate. He signed a joint declaration with the Brazilian Stock Exchange, pledging to develop Brazil’s private pension funds.
Promising financial orthodoxy, he rules out any default on Brazil’s huge foreign debt and is committed to the deal that the outgoing centre-right president, Fernando Henrique Cardoso, made with the International Monetary Fund. It is rather like Gordon Brown’s pledge to maintain the Tories’ level of spending in the first two years of Labour’s first term. Lula may even follow Brown’s example and free the Central Bank from government control. One of Lula’s top economic advisers recently visited the Bank of England to find out how the switch was made.
The southern cone of Latin America has been a testbed for globalisation. In the 1960s and 1970s its management was in the hands of people who kept their economies relatively closed. They protected local manufacturers from foreign goods and capital takeovers through high tariffs and exchange controls. Over the past two decades all that changed as the barriers to trade and capital flows were lowered. The region saw uneven growth, high inflation, the privatisation of its utilities, exchange rate crises and volatile capital movements. Efforts to stabilise the currency in Argentina and Brazil by neo-liberal methods worked for a time, but eventually unravelled because the rates were kept artificially high. Argentina’s debt default earlier this year had a serious knock-on effect in Brazil.
President Cardoso prevented a catastrophe on the scale of the one in Argentina, but Brazil’s currency has fallen sharply and economic growth is not enough to keep up with the rise in population. The wealth gap between the world’s most developed countries and Latin America widened in the last quarter of the 20th century. Average incomes, which were just under half of those in western Europe, Japan and the US, are now under a third. This contributed to the feeling in Brazil that it was time for a change.
One benefit of Lula’s assumption of power on January 1 will be the peaceful transfer from one freely elected civilian president to another for the first time since the years of military rule. It is hard to believe that the Latin American stereotype of Pinochet-style generals in dark glasses was valid less than 20 years ago. Equally important is the shift of style away from men of the elite to a former metalworker from a family of sharecroppers. Yet while this symbolic shift is important, the record of Lula’s party in the cities and smaller states where it has ruled has been pragmatic. His is not a classic party of the left, and in his three earlier runs at the presidency Lula never won a majority of votes among the poorest — his party has relied on public sector workers, trade union members, the liberal intelligentsia and grassroots activists. Its appeal is based on a record of honesty in a system where corruption has been high.
The main problem of a Lula victory is the high level of expectations it arouses. People who are impatient for change are likely to be disappointed. Lula’s party has no majority in Congress and will probably join forces with President Cardoso’s party, giving Brazil a kind of grand coalition.
The only surprise is that the international capital markets, unlike on this occasion the US government, have been panicking. Ironically, their hysteria helped Lula. It forced the outgoing government to raise interest rates, thereby taking the blame for more hardship imposed on ordinary people. More importantly, it highlighted the crisis of sovereignty that lies at the heart of globalisation.
In too many countries democracy has been forfeited to narrow social elites, military rulers or international institutions. How can governments that want to recover democracy succeed without having their economies undermined? Should they put up barriers to short-term speculative capital? Can they resist further trade liberalisation on the unequal terms currently being offered by the US and the EU? If Lula can find an answer, he will have earned his triumph. – Guardian Unlimited