After losing three previous Brazilian presidential elections, Luiz Inacio ”Lula” da Silva, the working-class former trade union leader, has won this time as ”Lula Lite”.
He has modified his policies, his clothes and his image. He chose a rich businessman who belongs to a small right-wing 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 massive foreign debt and is committed to maintaining the loan arrangements and the promises of fiscal rectitude that the outgoing centre-right President Fernando Henrique Cardoso made to the International Monetary Fund.
The new president-to-be may even free the Central Bank from government control. One of Lula’s top economic advisers recently visited Eddie George, the governor of the Bank of England, to find out how the switch to independence was made and what the benefits have been.
The southern cone of Latin America has long been a testbed for globalisation. It industrialised earlier than South-East Asia and 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, with foreign investors rushing in and out.
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 artifically high.
Argentina’s debt default earlier this year, which was exacerbated by the slowdown in the world economy, had a serious knock-on effect next door in Brazil.
Cardoso managed to prevent a catastrophe on the scale of the one that has impoverished millions of Argentinians, but Brazil’s currency has fallen sharply and economic growth is not enough to keep up with the rise in population, leaving average incomes down. Lula has benefited from a general feeling in Brazil that it is time for a change.
The wealth gap between the world’s most-developed countries and Latin America as a whole widened in the last quarter of the 20th century. Average incomes, which were just less than half of those in Western Europe, Japan and the United States, are now less than a third.
A key 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 Augusto Pinochet-style generals in dark glasses with gilded tassles hanging from their epaulettes was valid less than 20 years ago. Now it is gone for ever in Brazil as much as Chile and Argentina.
Equally important is the shift of style away from men of the elite to a former metalworker from a family of sharecroppers, who left the rural poverty of the north-east to migrate to São Paolo. Lula admires Cuban leader Fidel Castro and this year has twice visited the Venezuelan leader Hugo Chavez.
Yet while this shift of symbolism is important in setting a new tone and a vision of social justice, the record of Lula’s Workers’ 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. They went for populists or right-wing candidates.
Lula’s party has relied on public sector workers, trade union members, the liberal intelligentsia and grassroots activists with a ”liberation theology” background. Its appeal is based on a record of honesty in a system where corruption has been high.
Lula’s moderation even kept the Bush administration on the sidelines during the Brazilian campaign. Unlike in Venezuela during the aborted military coup in April or the recent election in Bolivia, where Washington’s reactionary Latin Americanists mounted crude interventions, the US embassy sat this one out.
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 Workers’ Party has no majority in Congress and will probably join forces with Cardoso’s party, giving Brazil a kind of grand coalition rather than any dramatic change of course.
The surprise is only that the international capital markets have been panicking. Blindly, they fear any change. 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 national sovereignty that lies at the heart of globalisation. In too many countries democracy has been forfeited to narrow social elites, military rulers or the dictates of 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 that they are currently being offered by the US and the European Union?
If Lula can find an answer, he will have earned the triumph that Brazilians have given him at his fourth attempt. — (c) Guardian Newspapers 2002