Page 1 of 2 THE ROVING EYE An American dream made in Brazil By Pepe Escobar
SAO PAULO - Brazil is a country the world loves to love. Brazil is a (joyful)
riddle wrapped in a (chaotic) enigma, with the added complexity that the riddle
and the enigma are ritualistically juggling with football, dancing a samba,
ogling a sensual mulata, watching a telenovela and sipping a lethal caipirinha
- all at the same time.
The distinctive cultural trace of Brazil is anthropophagy - from culture to
technology, the legacy of a former, lazy European monarchy in a tropical
country where the aborigines, after banqueting over the odd whitey, were
merrily exterminated while Europeans and black slaves copulated freely, with no
Catholic guilt involved (there's no sin below the Equator). If this sounds like
the plot of a carnival parade, that's because it is.
French general and statesman Charles de Gaulle once quipped that Brazil "is not
a serious country". Multi-ethnic, multicultural Brazilians, addicted to
tolerance but most of the time drenched in complacency, preferred to believe -
and joked about - the eternal promise of "the country of the future" (as
Austrian novelist Stefan Zweig coined it over 70 years ago).
Now Brazil is on a roll - and profiting from global goodwill has become a
crucial element of its re-turbocharged soft power. It don't mean a thing if it
ain't got that Brazilian swing. The country is the "B" in Goldman Sachs-coined
BRIC - the new, emerging global powers; less inscrutable and misunderstood than
China, less authoritarian than Russia, less shambolic than India (and with no
religious problems). And let's face it; much more fun. A new, two-fold national
narrative has taken over; Brazil will become "the fifth power" - that is, the
fifth-largest global economy (bye-bye Britain and France). And the New American
Dream is made in Brazil.
Surfing USA, remixed
No wonder Anglo-American elites of the North tend to fry their brains
confronted with so much tropical ebullience. At the Group of 20 (G-20) in
London, United States President Barack Obama could not contain himself. "I love
this guy," he said of Brazil's President Luiz Inacio Lula da Silva, "He's the
most popular politician on Earth." Time magazine recently named Lula as "the
most influential person in the world". The Economist, never a fan of hyperbole,
is convinced Brazil will become the fifth power by 2025.
But was the London Independent hyperbolic when it blared, "The world's most
powerful woman will start coming into her own next weekend?" On Sunday, Dilma
Rousseff, 63, Lula's former chief of staff, may indeed become the next
Brazilian president, even without a run-off on October 31. She may become more
powerful than German Chancellor Angela Merkel or US Secretary of State Hillary
Clinton - but Brazilians would quip, what about celebrities Madonna and
The Financial Times, for its part, preferred to buy lunch last Friday in Sao
Paulo for former president (1995-2002) Fernando Henrique Cardoso, colloquially
known as FHC. It may have been a matter of the wrong president at the wrong
(overrated) restaurant. Never one to shy away from self-promotion, FHC the
peacock, multiple honorary PhD sociologist grumbled, "I did the reforms. Lula
surfed the wave."
FHC's key reform was to crush hyperinflation by launching the "real" - the new
Brazilian currency - plan in the mid-1990s; but it's telling how he still
refuses to give Lula credit for responsible fiscal management and for fighting
exclusion (but not corruption), and lifting about 30 million Brazilians out of
Welcome to Brazilian idiosyncrasy; a new poll by the Pew Global Attitudes
Project reveals that 79% of Brazilians see political corruption as a "major
problem", even while 75% approve of Lula's government, and no less than 80%
take Lula personally to the skies.
But even enjoying this stratospheric 80% approval rate Obama can only dream
about, Lula is not a god; in eight years in office, he couldn't push a crucial
tax reform through an inept, corruption-corroded congress. And without it, the
New American Dream - essentially concerning a newly empowered lower-middle
class consuming homes, cars, televisions and computers like there's no tomorrow
- can't rally take off. As much as the current Brazilian boom - essentially
fueled by the non-stop sale of commodities to China - cannot be sustainable
Lula - issued from a very poor family in the poor northeast, and a former
metalworker - rattled the nerves of the old-style Brazilian sub-imperialist
comprador elite to an extent that is hard to fathom abroad. Historian Jose
Honorio Rodrigues has pointed out how these elites have always been "alienated,
anti-progressive, anti-nation and anti-contemporary". And they "have never
reconciled with the people". The recent, vicious Brazilian corporate media
anti-Lula drive can be explained as a war against poor people that are finally
emancipating themselves and following a path whose trailblazer was Lula
himself. Who said class struggle was dead? One just has to visit Brazil - still
the most unequal society in supremely unequal Latin America.
Stella by starlight
Lula once again seems to surf on the right wave of history as the takes a
formidable risk by picking as his successor an austere and until recently
obscure middle-class apparatchik who has never faced the ballot box. The
daughter of a Bulgarian immigrant, Dilma "Iron Lady" Rousseff, or colloquially
Dilma, as a kid dreamed of becoming a ballerina, a firefighter or a trapeze
artist. But then the Brazilian generals smashed democracy in 1964 and installed
their own tropical brand of the war on terror - to defend what they called
It's fascinating to observe today that Lula essentially did what the Joao
Goulart government was trying to do before the military coup in 1964; to
empower urban and rural workers. The comprador elites only cared about exports
and an upper middle class mired in conspicuous consumption - the auto industry
was the axis of the Brazilian economy at the time. The military dictatorship
favored corporate - national and international - capitalism; those who profited
immensely included Brazilian media groups, controlled by eight families.
Dilma fought against the dictatorship development "model" by joining the
clandestine Palmares Armed Revolutionary Vanguard. Her codename was "Stella".
Stella, like musician Jim Morrison of the Doors did, wanted to change the
world, and change it now. These vanguards, in the 1960s and 1970s, used to
kidnap foreign diplomats for ransom and shoot foreign - some American - torture
experts training the dictatorship's death squads (hello General David Petraeus;
does that ring a bell?) Dilma was tortured by the secret police in Sao Paulo's
then Abu Ghraib, given a 25-month sentence for "subversion", and only recovered
her freedom three years later. She was ready to try to change the system from
How Brazil beat the crisis
Developmentalism will be the name of the game in a Dilma government. It's gonna
be a bumpy ride - especially because Brazil's infrastructure is in shambles and
education levels are still on the slightly better side of appalling. It's
unclear whether Dilma will follow to the letter the mantra among luminaries of
her Workers' Party (PT) - that Brazil can keep growing without foreign
investment in oil and agriculture, for instance.
Dilma holds on to a key guru - her former economics teacher Luciano Coutinho,
now head of the humongous National Bank for Economic and Social Development
(BNDES). He may be Brazil's next finance minister. With Sao Paulo functioning
as Brazil's Wall Street, no wonder the city's big bankers and financial
markets, not to mention rentiers, are not amused.
The key criticism is that the Brazilian Treasury has been showering BNDES with
cash, thus ballooning public debt. But this process also explains why and how
Brazil won against the 2008 Wall Street-provoked global financial crisis.
When China announced its massive, nearly US$600 billion stimulus package in
late 2008, the economists at BNDES knew they would have to, literally, follow
the money. There were no lines of credit to anybody, Brazil included. So to
fight an inevitable recession approaching, a $60 billion loan from the Treasury
to BNDES was designed. This was the absolute opposite of the capital
market-crazy FHC years. Coutinho recently insisted to journalist Consuelo
Dieguez that countries with strong public banks, such as Brazil, China, India
and South Korea, were the ones that really managed to beat the crisis.
Brazil may be allowed to hold a slight grudge against the US that explains why
the country did not modernize much earlier.
The steel giant CSN - still in business - was built in 1941 with full American
support; the US badly needed Brazilian steel for World War II. The Brazilian
government was led to believe that after the war, Washington would keep
investing in the country's modernization; Franklin Roosevelt, or FDR, had even
organized a committee to study a development plan for Brazil, including massive
financial help. But FDR died in April 1945. Harry Truman preferred to rebuild
the losers in the war, Germany and Japan. The problem is, the war automatically
fostered protectionism. From the 1940s ahead, Brazil was an economy almost as
closed as current fellow BRICs Russia and China at the time.
Yet it took only a decade for Brazil to develop a serious industrial base;
starting in the early 1960s, Brazil's economy jumped from 50th in the world to
eighth. Gross national product at the time was growing at 7% a year. That was
the so-called "Brazilian miracle". The problem is, the military only favored
businessmen close to the regime with massive BNDES loans. After the 1973 oil
shock, reality set in. With no oil and no cash to pay interest on foreign debt,
Flash forward to the 1990s. In an irony noted by many a Brazilian economist,
the BNDES was reborn from the ashes to run the privatization drive; instead of
developing state companies, it was ordered to dismantle them. And yet once
again, those who profited handsomely were very close to the government, that
is, flashy FHC and his coterie.
Now BNDES is betting on commodities companies to become Brazil's national
champions; cellulose, food, meatpacking, petrochemicals, oil, mining. No sign
of high-technology companies. A non-governmental organization study claims that
mining, steelmaking, ethanol, cellulose, oil, gas, hydroelectric power and
agrobusiness received almost half of the nearly $280 billion BNDES funds during
the eight years of Lula. JBS, for instance, became the world's biggest meat
Lula policy entails, for instance, borrowing money at a 10,75% interest rate to
buy oil giant Petrobras shares. These Treasury loans do not appear on the
budget, increasing gross debt but not the net debt. Brazilian gross debt has
already reached a staggering 63% of gross domestic product (GDP). No wonder
hordes of economists are horrified; there's a hurricane of money to lend, but
few good ideas, and no sign of an industrial policy strategy. And why is that?
Essentially because the country lacks a solid, well planned project for
long-term development. Dilma will be smart enough to notice that China buying
loads of commodities cannot drive Brazil's industrial policy.