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THE ROVING EYE
Lula finding his way in
Brazil
By Pepe Escobar
RIO DE
JANEIRO - Only six days before the Brazilian general
elections that took place on Sunday, hardcore drug king
Fernandinho Beira-Mar (Fernandinho Seaside) picked up
his cell phone inside a maximum security prison in
sunny, swinging Rio and declared that all businesses
must close down - or else. Rio came to a complete halt.
Fernandinho Seaside was arrested in Colombia in
April 2001 and handed over to Brazil. America accuses
the Brazilian of conspiring to send cocaine into the US
- along with three other key members of the Colombian
FARC guerrillas. Since June he has had a place of honor
on a White House list of the top 30 international drug
lords that menace "American national security, foreign
policy and the economy".
After he shut down Rio,
there were widespread rumors that the Americans had
asked for him to be extradited to the US, but the
Brazilian constitution does not allow it. He could have
been extradited last year though. The Federal Police
said yes. But the then governor of Rio, notorious
populist Anthony Garotinho - a contender in the
presidential election this Sunday - and his police
insisted that keeping Seaside was a "question of honor".
Fernandinho Seaside did not vote this Sunday,
but his "message" and its symbolism was very much in
most people's minds as the fourth-largest democracy in
the world celebrated a triumph - 115 million going to
the polls in a country bigger than the continental US.
This was also a triumph of a key vector of
globalization: information technology. American and
European consultants flocked to Brazil to check - and
copy - the Brazilian system of electronic voting and
counting. For the first time in history, the old ballot
box of political democracy - invented by France in the
18th century - comes with a chip. The ballot box is now
called CEV - the acronym in Portuguese designating an
electronic vote collector, a technology totally
developed in Brazil with no competitors anywhere in the
world. Florida could learn a lesson or two.
And
for the first time in the 103 years of the republic, a
Brazilian who is not a member of the social elite is
getting ready to become president. Luis Ignacio "Lula"
da Silva is a former trade union activist and founder of
the Worker's Party, the largest leftist party in Latin
America.
By Monday morning, with more than 75
percent of the electronic votes counted, Lula had 47
percent and Jose Serra, a former health minister and the
government's candidate, a little less than 24 percent.
If Lula fails to garner an outright majority, the two
will contest a second round on October 20.
Lula's probable election in two weeks will be
nothing short of a cultural revolution. Because of its
critical mass - almost half of Latin America's GNP -
what happens in Brazil reverberates all over the region.
The Worker's Party is composed of many strata - from
Trotskytes to semi-neoliberals, but Lula has managed to
shift the party as a whole to the center. "Lula light",
in dark-blue business suits, replaced the fiery,
bearded, blue jeans-clad trade-unionist of yore.
But Lula remains independent from the Brazilian
establishment - although, ironically, he's more at ease
with his friends from the Socialist Party in France than
with politicians in South America. Washington is
following the Brazilian presidential election with
enormous interest. Washington wants Lula to be a member
of the "responsible left", and dreads Lula the populist
engaged in a Hugo Chavez scenario.
There may be
some ominous signs on the horizon. For Lula, the North
American Free Trade Agreement (NAFTA) - one of
Washington's pet projects - is not a zone of integration
but a zone of annexation. Lula badly wants to improve
the living conditions of Brazil's poor - and that is not
exactly popular with the Washington consensus.
Washington's hawks fear Cuba, Venezuela, Brazil and
Argentina might form a block against the neoliberal
avalanche. Republican hawks fret that Lula is a fiery
critic of globalization. The crackpot version of this
fear surfaced when a member of the ultra-conservative
Hudson Institute published a piece in the Washington
Times last August in which he predicted a new axis of
evil in the Americas - comprising Lula, Cuba's Fidel
Castro, Venezuela's Hugo Chavez and Colombian FARC
guerrillas.
The World Bank ranks Brazil as one
of the "Big Five" of the 21st century - along with
China, Russia, India and Indonesia. A non-nuclear state,
free from predatory instincts, at peace with its
neighbors and enjoying widespread international
perception as a land of great natural beauty, great
music, great soccer and sensuous, guilt-free women,
Brazil has tremendous potential as a stabilizing force
in international relations - a natural candidate for a
permanent seat at the UN Security Council.
During his two terms as president, the key merit
of smooth, cosmopolitan, former sociology professor
Fernando Henrique Cardoso was to solidify Brazil as an
eminently governable country, a modern stable democracy.
But the country used to be the world's eighth-largest
economy. Now it's the ninth-largest, and slipping
further. Under Cardoso, Brazil went through what is
known locally as a "neoliberal shock". Now, Brazil's
economic troubles constitute a case study carefully
analyzed by most developing countries.
It all
revolves around Brazil's debt. Most of the Brazilian
debt is not in the hands of foreign banks, but Brazilian
banks and pension funds. Public debt service represents
a staggering US$32 billion a year. In 2002, 2003 and
2004, Brazil will need nothing less than $1 billion a
week to finance an external debt of $30 billion and a
current account deficit of $20 billion. Leading
Brazilian economists admit debt reimbursement will have
to be negotiated - otherwise the world will be
confronted with another Argentinian-style meltdown.
The economy during Cardoso's two terms became
totally subordinated to finance. Family homes are in
deep debt. Banks wait to collect the bulk of public debt
- instead of lending money for investment. Interest
rates are among the highest in the world. And there's
wild speculative investment by industrial, commercial
and agricultural businesses.
In the 1980s,
Brazil grew on average 3.02 percent a year, but per
capita income went up only 0.7 percent - because of the
debt crisis. In the 1990s, the economy grew even less,
2.25 percent, and per capita income went up only 0.8
percent - half of the demographic growth. The fact that
income distribution is the most unequal in the world is
intimately linked to the fact that Brazil is the third
most violent country on the planet, according to the
latest World Health Organization report. Fernandinho
Seaside is a classic by-product of social inequality
generating urban violence.
Public sector debt
shot up from 30 percent of GNP in 1994 - when Cardoso
was elected - to 62 percent last July. It's an absolute
catastrophe for a government whose thesis was that the
Brazilian state spent a lot of money unwisely. And now,
with the crisis deepening, the proportion of the debt in
US dollars is getting much higher - with less time and
more interest to be paid.
This state of affairs
was reflected in the latest International Monetary Fund
(IMF) $30 billion loan package to Brazil - the largest
in the fund's history. Six billion dollars were
available immediately, so Cardoso could wrap up his
government without defaulting. The remaining $24 billion
will come because Lula has already accepted the IMF's
conditions - which in practice will tie his hands as far
as any meaningful social investment is concerned. All
the presidential candidates agreed with the Cardoso
government to engage in a "transition pact" to respect
the IMF package and "reassure the financial markets
against the risk of default".
Once again, the
have-nots will suffer most. Spending on education was 20
percent in 1995; it was reduced to only 8.9 percent in
2000. Payment of debt interest used to be 24.9 percent;
now it's 55 percent and rising. Brazil's spending on
health and education is now less than the amount of
interest Brazil pays to international banks.
No
wonder Brazilians have identified this state of affairs
- unemployment up, urban violence up, narcotraffickers
like Fernandinho Seaside able to dictate his whims to a
whole city - as the failure of the neoliberal model.
Anyone wanting to examine the ultimate 21st century
microcosm of civil war should not think about Karachi or
Grozny: just hop on a plane to Sao Paulo, Brazil's
financial and industrial heart, an ultra-violent nebula
of 17 million people where Texas-style ostentation
intimately coexists with sub-Saharan poverty.
In
these past few weeks, the Brazilian Central Bank burned
a mountain of money trying to tame market volatility.
The Brazilian currency, the real, has lost nothing less
than 35 percent of its value against the dollar since
the beginning of the year. Influential players in
Washington and London took no time to stress that
foreign investors had already voted against Lula. They
didn't even give him the benefit of the doubt. Brazilian
external debt bonds until last week were being
negotiated at 50 percent off face value - an indication
of fear of default. The country could spend the crucial
next few months with no new credit - while spending
mountains of dollars to repay debts.
But hope,
in a deeply Roman Catholic country, never fades. Italian
Mino Carta, one of Brazils's leading journalists, says
Lula means "the chance of changing the economic policy
that led us to disaster. He has the authority to manage
rising social tensions. And he is an adequate negotiator
in international forums. Large sections of the business
classes now seem to agree. There's a widespread feeling
in Sao Paulo that Lula is uniquely capable of uniting
entrepreneurs, workers and the middle class. Some even
attribute to him the vision of a true statesman.
But a lot of prejudice remains against the
former metalworker and his Worker's Party. Lula
supporters are still not exactly a majority at the
powerful Federation of Industries in Sao Paulo.
Ultraliberals say that under a Lula government there
would be land invasions everywhere; trade unionists
would run riot; the borders would be closed; and there
would be exchange controls. Everybody would be deeply
disappointed: entrepreneurs, workers and the middle
class.
Similar chaos is unlikely to happen. But
the establishment is convinced a reduction of political
risk and an increase in value of domestic assets will
only happen after Lula finally wins the second round on
October 27. He would take power next January. A leading
Sao Paulo banker says by then he should be committed to
the most important measure of his new govenment: "to do
absolutely nothing". Only then would Wall Street breathe
a sigh of relief.
But that is not the most
important part of the picture. It's not by accident that
this election is being followed with enormous interest
not only on Wall Street but all over Europe. A
successful "Lula light" government might signify not
only Brazil's definitive transition into a respected,
mature democracy but maybe set the tone for the true
political "third way" that Tony Blair was not capable of
pursuing. And maybe, one day, Fernandinho Seaside will
be willing - and able - to vote.
(©2002 Asia
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