The presidential election campaign in Brazil is heating up, perhaps almost as much on Wall Street as in Brazil itself. With the first round of elections set for 6 October, polls show Luiz Inacio ‘Lula’ da Silva of the Workers Party (PT) holds a significant lead over his opponents. As Lula’s fortunes rise, international banking and financial institutions have been downgrading the country’s financial rating causing the Brazilian currency, the Real, to plummet in value. When US Secretary of the Treasury Paul O’Neill traveled to Brazil in early August he promised new loans and more IMF assistance to bail out the country in an attempt to bolster the electoral fortunes of the ruling coalition opposing Lula.]
This has momentarily stabilized the Real. But the Wall Street Journal, believing a Lula victory is likely, proclaimed the loan money down the drain because the front-runner ‘spent much of his career as a crackpot Marxist, before recently moderating his rhetoric’. Lula first rose to national prominence in the 1980s when he built the Workers Party from his base among the trade unions in Brazil’s large metallurgic and automotive industries. Wall Street and financial speculators seem intent on sabotaging political candidates rather than waiting to find out if their economic policies will be effective in raising living standards.**
While Lula has promised a series of major reforms – in education, agriculture and healthcare – he also intends to revitalize productive and manufacturing sectors. Critical of the economic policies of incumbent President Henriquez Cardoso – which have produced anemic or negative growth in the last half decade – the PT candidate says the best policy is ‘to combat speculation with production. Every investor will look to Brazil when there is an infrastructure that supports the flow of production, a highly trained workforce and a market that really consumes because there are strong wages’.
Lula’s choice of running candidate, a progressive entrepreneur from the centrist Liberal Party, Senator Jose Alencar, is an attempt to align with the domestic manufacturing bourgeoisie. He needs to make a cross-class appeal to buttress his potential government and Brazil against the speculative and international financial interests that will almost inevitably try to sabotage his government if he takes office.
Support for Lula is indeed breaching class lines. Even sectors of the economic élite are beginning to believe that his policies may offer the best hope for the country. The neoliberal policies of Cardoso, such as the free flow of speculative ‘hot money’ in and out of the country at the whim of investors, have favored financial interests over Brazil’s substantial industrial base, much of which is geared to production for the big internal market. Even some foreign investors are said to favour this approach.
The Workers Party platform involves a fundamental transformation of the government and its relationship to society. Based on its experience in running state and municipal governments – most famously pioneering the participatory budget in Porto Alegre – the Workers Party proposes two innovative breakthroughs for Brazil at the national level. The first of these is participatory management of the state. Marcos Arruda, economic adviser to the Workers Party, says this will be achieved by ‘setting up local and regional councils that would involve representatives of civil society and non-governmental organizations.’ They would discuss and make proposals for economic, social, political, cultural and environmental policies while overseeing the implementation of public policy with the appropriate agencies in the central government in the capital, Brasilia.
The PT’s second innovation, ‘strategic management of the state’, signals an abandoning of the neoliberal approach of the ‘minimalist state’, instead using it to advance social and economic policies that serve Brazilian society as a whole.
Cardoso recently rejected crisis-ridden Argentina’s appeal to present a common front against the IMF. In contrast the PT believes strengthening the regional trade bloc Mercosur is the only way to confront aggressive international interests and serve as a pole for the economic development of the southern cone countries.
Clearly a Lula presidential victory would present tremendous challenges, given the internal economic slump, the volatility of other parts of South America and the likely opposition of the Bush administration. However, Arruda believes the financial crisis will lead to the defeat of the ruling coalition and that a Lula victory will be a ‘turning point’, not only for Brazil but for other countries in Latin America. ‘The government finds itself hoisted on a neoliberal petard of its own making,’ says Arruda. ‘President Lula could lead the country out of its economic quagmire, mobilize a broad popular base allied with sectors of the progressive middle class and galvanize international allies. Brazil would serve as a productive and exemplary political and economic pole for other Third World countries caught in the trap of neoliberalism and globalization.’
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