Brazil's Lula Looks Less Re-electable

In spite of available funds, none of Brazilian President Lula's
projects, announced with fanfare, have been implemented.
They include Zero Hunger, water and sewer works, agrarian
reform, cheap pharmaceutical products, job creation, and a
government-private sector partnership for infrastructure works.

Richard Hayes

Were a presidential election to be held now, Lula would defeat ex-president Fernando Henrique Cardoso by a comfortable margin, according to a recent poll. It seems as if the drop off in Lula's popularity may have leveled out. However many politicians who had assumed that Lula would be easily re-elected in 2006 due to prosperity, jobs, economic growth and better social conditions that he has promised, are beginning to have second thoughts.

This doubt as to whether or not Lula will be in office for another term is starting to affect the behavior of many coalition members. Politicians want to be careful not to be perceived as closely associated with Lula if he is to be merely a one-term president and a temporary swing to the Left.

One party that has been a lukewarm supporter of Lula, the PPS (Partido Popular Socialista—Popular Socialist Party), expresses their dissatisfaction with the way things are going. This is embarrassing since Minister of the Interior. Ciro Gomes, who lost out to Lula in the first round and later supported him in the second round of the 2002 elections, is currently a member of this dissident party. If Ciro senses that Lula is not invincible in 2006, he may come back to life as an alternative.

The PL (Partido Liberal—Liberal Party), of Vice President José Alencar, constantly criticizes the policy of high interest rates maintained by Finance Minister, Antonio Palocci, and silver-tongued Central Bank President Henrique Meirelles.

Other parties that comprise the "coalition" such as the PP (Partido Progressista—Progressive Party), the PTB (Partido Trabalhista Brasileiro—Brazilian Labor Party) and even the large PMDB (Partido do Movimento Democrático Brasileiro—Party of the Brazilian Democratic Movement) express discontent with the government and their failure to have been rewarded for past legislative support by spoils system jobs. The Workers' Party (PT) has kept most of the key positions for its own members.

Potential PSDB (Partido da Social Democracia Brasileira—Brazilian Social Democracy Party) presidential candidates, Governors Aécio Neves and Geraldo Alckmin of Minas Gerais and São Paulo states respectively, have so far not been openly critical of Lula's government so as to not spoil their chances of receiving federal aid for their important states. This may change soon if Lula looks vulnerable for 2006.

The elections for the mayors of all cities in Brazil will be the first real test of the PT's popularity with voters. Lula is risking a great deal by ostensively backing the current PT mayor of São Paulo, Marta Suplicy, who is seeking a second term.

A recent poll shows her loosing to two potential candidates, Paulo Maluf and José Serra, neither of whom has said he will be running. Marta's popularity has diminished drastically in the last year. This is due to the continuing problems São Paulo faces such as frequent floods and nearly perpetual traffic snarls, the latter condition exaggerated by several road jobs she has ordered.

Still Popular with Masses

Lula, in spite of the PT run government's failure in most areas, still has the support of a majority of the population due to his apparent sincerity and folksy manner that appeals to the lower end of the intellectual scale.

The President has even appeared on a popular fourth-rate talk show hosted by Ratinho (The Little Rat). Even the recent planting of flowers in the form of a red star, the symbol of the PT, in the gardens of the presidential residences, a clear abuse of power, has not turned off the populace.

Lula is becoming impatient with the failure of his government to produce any concrete action. With the notable exception of the financial team and the Minister of Agriculture, Roberto Rodrigues, and Luiz Furlan who is Minister of Industrial Development and Foreign Trade, Lula's cabinet seems incapable of performance. It is interesting to note that these two men have had experience in the private sector where as the vast majority of Lula's collaborators have not.

In spite of available funds, none of Lula's projects, announced several times with great fanfare, have been implemented. These include Zero Hunger, water and sewer works, agrarian reform, cheap pharmaceutical products, job creation, and the partnership between the government and the private sector for much needed infrastructure works.

He recently gave fifteen days for his ministers to come up with solutions. Ideological prejudices plus an excess of bureaucracy and plain incompetence seem to be the principal causes of this inertness.

Foreign Fears

Earlier this month, JP Morgan caused a ripple by recommending to their clients that they reduce the level of Brazilian paper in their portfolios. Citicorp followed the next day with a similar recommendation for different reasons. The authorities and press have been quick to point out that these institutions are wrong and that all is well.

The macro economic situation with continued rigid fiscal and monetary discipline would seem to rule out for the time being any massive exit on the part of buyers of Brazilian foreign debt instruments. But should signs of laxity or "permissiveness," as Morgan fears, or a perceived weakening of support for the well-respected financial team appear, problems may arise. An increase in US interest rates may diminish the attractiveness of emerging market assets making it more difficult for Brazil to raise the funds it needs abroad to pay interest and maturing principal.

Lula appears aware of this delicate situation and has expressed unwavering support for the current economic policies in spite of criticism from all sides, including factions of his own PT. His government is criticized for its failure to react to the illegal invasion of private property on the part of several social movements, mainly the MST (Movimento dos Sem Terra—Landless Movement) and the urban "sem teto" or literally "without a roof."

These incidents plus the continuing violence in the slums of Rio de Janeiro, the killing of diamond prospectors by Indians in the far west state of Rondônia, the on again off again strike of the Federal Police that controls among other things immigration procedures at airports, have caused negative comments by the press and many politicians including the Chief Justice of the Supreme Court, Maurício Correa.

Brazil is not an easy country to govern. Lula is doing his best to accomplish what he hopes to do. Considering that his unprepared administration is the first admitted far left wing government to run the country during its nearly 182 years of independence, it is amazing that things are no worse than they are.

We can only hope that this peaceful transition will soon bring positive results and that the PT does not allow the situation to get out of control. In spite of the showings of the recent UN survey, I doubt that Brazilians wish to trade democracy for a return to an authoritarian regime.

Richard Edward Hayes first came to Brazil in 1964 as an employee of Chase Manhattan Bank. Since then, Hayes has worked directly and as an advisor for a number of Brazilian and international banks and companies. Currently he is a free lance consultant and can be contacted at 192louvre@uol.com.br.