São Paulo—A torrent of mud, glowing orange at sunset like molten steel, killed 17 people and poisoned all else in its path after the collapse in early November of two dams at the Samarco iron-ore mine in the southeastern state of Minas Gerais. Historians of early-21st-century Brazil may choose that image to illustrate the final chapter of the rise and probable fall of the Workers’ Party, or Partido dos Trabalhadores (PT), the historic party of the Brazilian left. The PT, voted into power in 2002 amid boundless optimism, is now immersed in the political equivalent of a million tons of toxic sludge.
As the Brazilian economy slides into stagflation, President Dilma Rousseff, her poll ratings at historic lows, is fending off attempts by the conservative majority in Congress to impeach her; she is accused of disguising the extent of Brazil’s growing public deficit. Yet the charge seems almost trivial set against the vast network of kickbacks and money-laundering revealed in the remorseless judicial investigation known as Lava Jato (Car Wash), which has already led to the imprisonment of scores of leading politicians and business executives.
Not even hostile judges or anti-PT media groups, such as the all-powerful O Globo, have dug up any evidence of Dilma’s involvement in the scandal, despite her former position as chair of the state oil company, Petrobras, the main target of the investigation. However, Rousseff, the former left-wing guerrilla and longtime PT militant, faces other charges—from her own electoral base. Re-elected as president on a socially progressive program in October 2014, she has implemented austerity policies that have stopped the economy in its tracks and reversed many of the employment and wage gains made under previous PT governments. Many on the left also criticize her development strategy, which has favored corporate titans while wreaking havoc on the environment.
The ecological disaster in Minas Gerais, first colonized by Portuguese gold-seekers in the 16th century, is a fitting metaphor for the PT’s predicament. One owner of Samarco, after all, is the Brazilian mining multinational Vale, one of the corporate national champions—along with agribusiness giants like meatpacker JBS, construction companies such as Odebrecht, and, crucially, Petrobras—considered to be allies of the successive PT governments of Luiz Inácio Lula da Silva and Rousseff. Both leaders implemented a development-and-growth strategy based on the export of commodities and the creation of a new consumer class.
Helped by soft loans from the enormous Brazilian public development bank BNDES, the key vehicle for the PT’s state-driven industrial policy, Vale became the biggest iron-ore producer in the world, shipping billons of tons of ore to China on enormous Vale max tankers. The company also tapped the dollar debt markets for cash when the commodity boom was in full flight, powering Brazil’s economy to 4 percent growth rates and the Brazilian currency, the real, to a rate of 2.5 to the dollar. Those halcyon days for Vale and other Brazilian corporate giants marked the most extraordinary achievement of the Lula years: Brazil became the darling of international financial markets, while, at the same time, full employment, government minimum-income programs, and wage increases took 30 million citizens out of extreme poverty. Lula became the savior of both the favela (Brazil’s urban slums) and the fund manager.
Those days are gone. The prices of commodities such as iron ore and soya have collapsed. Brazil is now in recession, unemployment has nearly doubled, and wages are in free-fall. So is the real, which fell below 4 to the dollar on Monday amid fears of a hard landing in China. This will further increase the cost of living for Brazilians. “Lula based his reforms on a broad interclass pact: Bankers, agribusiness, and mining companies made a lot of money; but workers improved their position too,” said Guilherme Boulos, leader of the Homeless Workers’ Movement (MTST) in São Paulo. “Since the crisis, that’s no longer possible; it’s one or the other now.” (For more on the crisis from Boulos, see this interview.) Meanwhile, Vale is downsizing fast in an effort to avoid a debt crisis. The cost of cleaning up the Minas Gerais disaster will not help. Vale workers wonder whether the company’s decision to raise output while laying off 400 workers at the Samarco mine may have courted disaster. “They knew the risk,” said Ronilton Condessa at the Metabase union in Mariana, the town worst hit.
But it is Vale as symbol of what the environmental left calls the “extractivist” development model—implemented by both Lula and Dilma under the rubric of the Program of Accelerated Economic Growth (PAC)—that has sunk the morale of part of the PT base. That base was once organized around the historic Landless Workers’ Movement (MST, predecessor to MTST) and environmentalists once inspired by rural workers such as the heroic rubber tapper Chico Mendes.
“I was a PT militant right at the very beginning; so what happened? What happened was shit,” said Father Edilberto Senna, an engagingly foul-mouthed revolutionary priest who leads the Tapajos River campaign, based in the Amazon port city of Santarém. The campaign is fighting the construction of mega-dams and expansion of extractive industries, cattle farming, and soya production. “They have based economic development on mining and agribusiness, on commodities like soy. The result is the hollowing out of rural areas and massive migration to cities like Santarém, where the only income available is Bolsa Familia,” he pointed out, referring to the subsidy program that pays between 22 and 200 reals per month to 12 million low-income families.
The Minas Gerais disaster, which has polluted the Rio Doce, is “a warning of what could happen here,” adds Senna. Vale, after all, will open a new iron-ore mine to the east of Santarém, powered by the Belo Monte hydroelectric project, which has its own controversial dam on the Xingu River, a tributary of the Amazon.
The Lava Jatos scandal has further besmirched the PT bureaucracy’s image in the eyes of veteran environmentalists such as Father Senna. Odebrecht and the state utility Eletrobras, both crucial to Dilma’s accelerated growth strategy in the Amazon, are accused of paying bribes with money raised from overpriced contracts tendered by Petrobras.
But Dilma has not alienated only the environmental wing of the PT base. Even the pro-growth developmentalists have turned against her policies. They are furious at the austerity measures Rousseff implemented after her narrow 2014 election victory. Cuts in public investment and services, the removal of price subsidies on energy and gasoline, and interest-rate hikes to 14 percent have exacerbated the recession. The public housing project Minha Casa Minha Vida (“My House My Life”), responsible for the construction of 3.4 million new homes, was placed on hold last year despite rampant speculation in the Olympic city of Rio de Janeiro as well as São Paulo, which is forcing thousands to leave those cities and many others onto the streets.
Yet international financial markets, seemingly oblivious to austerity’s repeated failures, are demanding more cuts, using mass capital flight to get their message across. “We are acutely aware that the idea of contractionary expansion, a fiscal adjustment to gain confidence and boost investment, won’t work; one look at Europe makes that clear; but the adjustment program is designed so that we do not depend on the confidence of the financial markets,” said Roberto Mangabeira Unger, a philosopher at Harvard, who in September left his post (for personal reasons) as strategic adviser to Dilma. This rather elliptical argument, however, had clearly not persuaded PT militants who attended the annual party meeting in June in Salvador de Bahia, a party stronghold in the poor “Nordeste” (northeast) of Brazil, where Rousseff forged her election victory. “Dilma is betraying the electoral mandate, cutting spending while the prices of basic services like electricity, water, and telephone are shooting up,” Jefferson, a young PT delegate from Nordeste, told me, noting that none of the adjustment measures were included in the 2014 presidential election manifesto.
Salvador was the right venue for a PT congress in search of hope, as Dilma’s popularity in the opinion polls slumped from over 60 percent soon after her 2014 re-election to 8 percent eight months later. Outside, processions of Afro-Brazilian Candomblé drummers marched through the streets past baroque cathedrals in celebration of Santo Antonio, Brazil’s favorite patron saint. Santo Antonio is in greater demand than ever, as unemployment swells and police violence returns to the favelas. Inside the Hotel Pestana, thousands of PT delegates demanded the return of their own savior. “Lula is in pole position for leading us in the next election,” said Jonas Paulo, former president of the PT in Bahia.
For Paulo, environmentalists such as Padre Senna are naïve and misled. The judicial investigations and media attacks on the PT’s corporate allies, he said, are part of a conspiracy to open up Brazil to international investors. “Under the accelerated growth program, we developed a strong cartel of national companies, in oil and infrastructure especially. The right wing and the international sector want to break that up, undermine our sovereignty. That’s what’s behind the Lava Jatos investigation,” he said, as other delegates nodded in agreement.
Lula is directly threatened by the Lava Jatos attorneys, who are investigating his unofficial role, after leaving the presidency, as ambassador for Odebrecht, for whom he lobbied to get business contracts in Cuba and Angola. The former president has expressed dismay at what he claims are politicized prosecutors, yet the accusations of a conservative bias in the investigation by Judge Sergio Moro are weakened by the presence among those subpoenaed of the rabidly right-wing parliamentary leader Eduardo Cunha, accused of laundering—and funneling into a Swiss bank account—money made in real estate speculation in Rio’s Olympic district of Barra de Tijuca. Moro has also ordered the imprisonment of billionaire banker André Esteves, founder of BTG Pactual, the biggest investment bank in Latin America. These do not appear to be the acts of a judge in the pay of the Brazilian elite.
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Another annual meeting highlighted the dilemma for Rousseff. University of Chicago–educated Finance Minister Joaquim Levy was the most eagerly awaited attendee in October at the 2015 gathering of the IMF and World Bank, held in Lima, Peru. Here, the pressure came from the other extreme in the battle for sovereignty and national development. While IMF managing director Christine Lagarde looked on smiling during a televised debate, Levy was pilloried by clownish CNN anchor Richard Quest for being too weak. “But can you afford it?” barked Quest, as Levy apprehensively outlined his frugal fiscal plan. The IMF demanded further fiscal retrenchment, privatization, and deregulation at the Lima meeting, where the Washington institutions could barely conceal their satisfaction at the economic problems that now beset the leftist (or recently leftist) governments of Brazil, Venezuela, Argentina, and Ecuador.
Chastened, Levy returned to Brasília, only to face resignation requests from PT leader Rui Falcão, with the tacit support of Lula. Levy finally resigned in December and was replaced by Nelson Barbosa, a more heterodox economist and PT member who will soften policy and set less demanding fiscal targets while maintaining the broad austerity program. As ratings agencies downgrade Brazilian debt, any radical policy change would require nerves of steel. “Barbosa will not do much more than make the austerity program a bit more realistic,” said Ricardo Summa of the Federal University in Rio. “The cuts to investment and price increases have crushed demand in the economy; there was no need for this sort of adjustment,” he added.
There is an air of inevitability to the PT’s dilemma. A month before Dilma’s narrow 2014 victory, Samuel Pessoa, one of the economic advisers to opposition candidate Aécio Neves, darling of the IMF and the financial markets, made a startling comment to me after lunch with his family in a São Paulo gated community. “You are moving close in the opinion polls. Do you think you can win?” I asked him. “I’m not sure it’s a good idea for us to win,” he replied. “Dilma can do the adjustment, and we’ll come in afterward.” It may prove to be a prophetic remark. Most expect the Brazilian right to return to power after the next elections, to be held no later than 2018—or sooner, if the right wing’s campaign for Dilma’s impeachment is successful.
Yet it need not have been this way, says Rodrigo Nunes, a political scientist at the Catholic University (PUC) in Rio. The crucial moment was the outbreak of mass demonstrations in the major cities in June 2013, when millions took to the streets demanding better public services. “These were clearly demands from the left for improvements in public transport, health, and education against the wastefulness of the World Cup and the Olympics, although most of the demonstrators were not the traditional left,” he explained. “This was a wasted opportunity for the PT. Instead of leading the movement, they tried to demonize it, portraying it as right wing.”
Dilma made some symbolic gestures to the protesters, including radical reform of the political system, including creation of a constituent assembly and measures to control inflation in transportation prices by reining in the cartels. But there was more marketing than substance in her response. Two years later, the movement resurfaced, this time clearly as a conservative protest led by neoliberals and the Christian right.
Commentators on the left both inside and outside Brazil have suggested that the PT is the victim of an attempt by media and US-linked conservative think tanks to stage a gradual coup d’état. Yet they do not recognize the responsibility that Rousseff bears for her own demise. “If you create a vacuum after protests like those in 2013, as Dilma did, someone will fill it—and the right has filled it,” says Nunes. Even in Nordeste, few outside the PT congress showed much sympathy for the president’s plight.
As the left slides from power in other Latin American countries—victims of the same commodity crisis and capital flight as Brazil—the question now is whether Lula can re-emerge as leader of a PT prepared to take on corporate power and the new Brazilian right. Opinion polls show that, even at 70, he is still the most popular politician in Brazil, despite accusations of corruption repeated in chorus every day by powerful media outlets.
“No one should underestimate Lula’s appeal; that’s why the media have put him on trial,” said writer Juca Kfouri at the newspaper Folha de São Paulo. Lula has promised to build links between the PT and campaigns such as Boulos’s homeless movement, the only element of the progressive protests of 2013 that remains to confront the ultra-conservatives on the streets of São Paulo and Rio. But Boulos is skeptical of Lula’s chances to stop the rot. “Progress made under the PT is real but fragile,” he said. “The left is exhausted, the right is empowered, and the danger of losing everything we’ve won is real.”