Neoliberalism lost the elections in Brazil by a landslide on October 27, when 52.8 million people rested their hopes on Luiz Inácio “Lula” da Silva to revitalize the national economy and give currency speculators the boot. Lula’s smiling face covers the newsstands here. Television loves him. A week after Election Day, Workers’ Party flags, bright red with a white star in the middle, still hang over balconies of luxury apartment buildings. It’s not uncommon to hear people greeting each other with “Lula la” (“There’s Lula”)–a lyric from his campaign songs–or making an L with their index finger and thumb. Even Klaus Schwab, founder of the World Economic Forum, the archenemy of Lula politics, has said that Lula signifies the beginning of fair trade and socially responsible globalization.
Lula was elected because Brazilians of all social classes are tired of depending on the International Monetary Fund; sick of a rising dollar that increases basic consumer goods like food and gas; and fed up with 21 percent prime rates that make it difficult for companies to invest in growth. Lula’s economic plan was fairly straightforward: Attract investment–foreign and domestic–into the productive economy, not into government bonds.
For now, Lula’s biggest obstacles are the federal budget and the central bank. In eight years, public debts doubled to 61 percent of GDP. Lula has little wiggle room. The economy has grown by only 0.5 percent this year. He’s hoping it grows by 3-4 percent next year; many of his social programs, like Zero Hunger, largely depend on it. Lula has promised “some autonomy” to the central bank, but if the bank serves the market too slavishly, it will put a noose around his neck. (The bank president will be announced by December. Lula’s transition government is taking its time. )
The 61.3 percent who voted for Lula appear willing to make sacrifices, as long as they can participate in government. Big names in political parties not usually aligned with Lula voted for him and pledged support–“within reason.” Party allies have pledged “unconditional support.” One of Lula’s first orders of business is to create a Social and Economic Development Council–an eclectic group of bankers, landless farmers, labor unions, economists and professors–in an attempt to neutralize opposition from the more stubborn sectors of society. In his first public address, in São Paulo, he said he will use available cash in government banks to lend money to private companies working on civil construction projects, adding that such investments would help create a gradual return to sustainable growth.
He also has worldwide support. The European Union wants to discuss trade relations. Ronald Berger, German economic consultant and friend of Gerhard Schröder, said Lula can learn from Germany’s leftist leadership. Political analysts here would agree. They’ve often compared Lula’s politics to those of the European Union, including the EU’s reliance on multilateral social institutions, rather than the sole opinion of the now infamous Washington Consensus. Russia wants to boost business relations, as does Argentine President Eduardo Duhalde. Lula’s campaign promised to include the fledgling Mercosul bloc in trade agreements with the United States. Even the World Bank, which has $5.3 billion invested in projects here, has been positive about Lula’s win. The IMF’s Anne Krueger confided that Brazil would not go bankrupt like Argentina. If Lula gets his wish, the only IMF accords he will have to deal with will be those left behind by President Fernando Henrique Cardoso. Lula doesn’t want to have to rely on capital infusions anymore. The World Social Forum invited him to attend its third annual meeting this January; if he goes, it will be his third year of attendance.
The loudest opposition to Lula comes from the United States, but American officials are running out of intelligent things to say. Treasury Secretary Paul O’Neill admonished that the markets will watch to make sure that Lula “is not a crazy person.” (Translation: “We want our money.”) Tom Donahue of the US Chamber of Commerce told business leaders in Ecuador that anyone who tries to leave the free market “would pay a heavy price.” (Translation: “We’ve got ways of making you obey.”) Washington’s biggest fear is that Lula’s overwhelming support will spread not only to other parts of South America but to the global South, which has been poorly served by the United States and may seek better advice and partnerships with Europe, Russia or China. Ecuadoreans, who have adopted the US dollar as their currency to please bankers and now have a 70 percent poverty rate, are about to vote for a left-leaning president themselves.
All Latin America needs is a few more Lulas and the message to the capital markets will be clear: Reform the system or go bankrupt with us. As was said in Seattle, “the world is watching.”