“In the Roman empire, only Romans voted. In modern global capitalism, only Americans vote,” declared George Soros in June. “Brazilians do not vote.”
He spoke too soon. With only weeks remaining till the presidential election on October 6, Workers Party (PT) candidate Luis Inacio Da Silva–“Lula,” as he is popularly known–is still leading in the polls. His closest competitor, Ciro Gomes, is an ordinary politician whose rise to second place was fueled by harsh populist rhetoric against the IMF, neoliberalism and the economic failures of the current administration. The ruling party’s candidate, José Serra, is a distant third–despite Soros’s claim that Brazilians had no choice but to elect him.
The Wall Street-Treasury Complex, as Columbia economist Jagdish Bhagwati has named the IMF and its private sector allies, won’t be able to pick the president this time. So they are going for second best: choosing the policies. On August 19 President Fernando Henrique Cardoso met with the contenders and tried to rope them into pledging support for continuing IMF policies over the next three years. “The candidates,” he told the press, “whether they want to or not, will have to commit to these [IMF] agreements.”
We’ll see about that, too. The IMF recently approved a $30 billion loan, with most of it to be disbursed in installments next year. The idea is that the IMF can cut off the flow of money if the new government deviates from its program of fiscal and monetary austerity. That’s the way it usually works, but this time Imperial Rome may not get to choose the policy any more than the proconsul.
Why not? First, Brazil has an explosive debt burden. The IMF’s latest loan was intended to stabilize Brazil’s bond and currency markets, so as to prevent a default before the election. It will also help US banks, which have outstanding loans of more than $25 billion in Brazil, to get some of their money out, on more favorable terms, before the collapse. (The IMF may as well have written the check to Citigroup, FleetBoston and J.P. Morgan Chase.) But it will not prevent a default.
The default–or “restructuring,” if it takes place in an orderly, negotiated manner–will make plain to everyone the failure of the Cardoso/IMF model in Brazil. Since 1994 growth has been rather slow–about 1.3 percent in per capita income annually. At the same time, the public debt has soared relative to the economy–from 29 to 60 percent of GDP. And this was on top of $100 billion worth of privatization, a massive raiding of public assets that should have helped government finances significantly. The country’s foreign debt has also swelled. This is truly an enormous mortgaging of the country’s future, with very little to show for it. For Cardoso to lecture the current candidates about fiscal austerity is like Ronald Reagan and George Bush Senior–who presided over a similar record-breaking debt run-up in the United States–telling their successors to please keep the deficits down.