Lula Convicted: End of an Era?

By Anthony W. Pereira*

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Former Brazilian President Luiz Inácio “Lula” da Silva / Jeso Carneiro / Flickr / Creative Commons

Former Brazilian President Luiz Inácio “Lula” da Silva’s conviction last week on corruption charges was more than a legal decision and could mark a political watershed – the beginning of the end of “Lula-ism,” a political and redistributive pact that lasted from 2003 until 2010 which Lula has been offering to revive as a candidate in the 2018 presidential elections.  On July 12, Federal Judge Sergio Moro found Lula guilty of taking a bribe and laundering money, sentenced him to nine years and six months in prison, and banned him from taking public office for seven years.  This judgment, the first to convict an ex-president in Brazil, was the result of the Carwash anti-corruption investigations begun in March 2014.

  • The decision will be appealed to the Federal court for the Fourth Region in Porto Alegre. This court will probably rule on the case before the 2018 filing deadline for presidential candidates (yet to be decided, but usually in mid-August), and is expected to uphold the conviction.  Lula would be legally barred from being a candidate at that point, although he might mount some sort of challenge to such a ruling.  Lula’s strategy for now is to press on with his campaign, to criticize his conviction as political persecution that was not based on evidence, and to portray himself as a man of the people capable of taking on the “elite.”

Lula still has great strengths.  The basis of Lula-ism has been his personal appeal – he captured twice as many voters as did his political party, the Partido dos Trabalhadores (PT), in 2002 and 2006 – boosted by economic forces and public policies that raised the living standards of the poor.  With his finely-tuned ability to communicate to ordinary people, he showed that it was possible to both grow the economy and redistribute its fruits.  His government reduced poverty significantly, offered the poor inclusion in the consumer society and the chance of social mobility, and even achieved a modest reduction in income inequality – while promoting the interests of big companies.

  • But he may not have achieved the long-term realignment his supporters claim. Lula-ism proper only lasted for eight years, the length of his two presidential terms.  His hand-picked successor, Dilma Rousseff, ruled for almost six more years, but by the last year of her first term, poverty had stopped declining.  The current government of President Michel Temer has passed a constitutional amendment freezing federal spending in real terms for 20 years; the measure does not automatically reduce spending on social programs, but in the absence of tax increases that is what it has produced.  Temer’s own bribery scandal may take him down, perhaps within the next couple of weeks, but his policies raise a more fundamental question:  whether Brazil can return to economic redistribution, diminishing the severe inequality that still marks its society, without Lula-ism.

The organs of anti-corruption investigation and control that have challenged Lula, Dilma, and Temer – the media, the Federal Police, the Public Prosecutor’s Office, and the judiciary – are neither consistently politically neutral nor free of corruption themselves.  They are not a Deus ex machina that can free the Brazilian polity of corruption all by themselves.  For that, Brazil needs political reform, further changes in at least some of the rules that regulate elections and governance, a realignment of incentives faced by elected officials, state bureaucrats, business people, trade unions, and the electorate.

  • The PT and the other two most important parties, however, seem incapable of renovation despite leaders’ awareness of the low level of legitimacy with which they are viewed by voters. The PT has few viable new leaders and is clinging to Lula’s candidacy as its only hope of a return to power.  The Brazilian Social Democratic Party (PSDB) still nominally supports Temer.  And Temer’s own party, the Brazilian Democratic Movement Party (PMDB), is torn between defending the president in an act of self-preservation, and fearing the wrath of the voters in 2018.

Brazilians face a “trilemma”: they yearn for the three long hoped-for goals of sustained and successful anti-corruption investigations, political reform, and a return to economic redistribution.  Achieving two of those goals at the same time, let alone three, seems impossible.  The 2018 elections therefore will reveal a country in which anti-corruption investigations continue to knock major figures out of the political game, while political reform and economic redistribution are postponed.  The old cliché that Brazil is the country of the future takes on a new meaning in light of this somber possibility.

July 17, 2017

*Anthony W. Pereira is a Professor and Director of the Brazil Institute at King’s College London.

Brazil: Not-so-Happy New Year

By Matthew Taylor*

Brazil Basta

Photo Credit: Antonio Thomás Koenigkam Oliveira / Flickr / Creative Commons

A vicious combination of corruption scandal and economic malaise suggests a troubled new year awaits Brazil.  Economists estimate gross domestic product has contracted 3 percent this year and will decline a similar amount in 2016, while inflation and weak government finances hamper efforts to stimulate growth.  Two of three big rating agencies have cut Brazilian debt from investment grade to junk. Unemployment has risen from under 7 percent a year ago to nearly 10 percent, with forecasts of 12 percent on the horizon.  Efforts to reform fiscal policy are getting nowhere, and the champion of fiscal reform, Finance Minister Joaquim Levy, has just resigned.  The bonanza launched by the 2003-2010 presidency of Lula da Silva – seemingly setting Brazil on a unique path of state capitalist development – is long over.

The country’s interconnected scandals cast shadows on many of the leading players on the national stage, including President Dilma Rousseff.

  • Petrobras, the crown jewel of Brazil’s state capitalist model, is at the center of allegedly massive corruption schemes. Rousseff, who was chair of the Petrobras board at the time of the alleged wrongdoing, has claimed absolute ignorance.  But the charges implicate Brazil’s leading political and business elites, many of whom have been jailed in recent months.
  • A feud between Dilma and the president of the Chamber of Deputies, Eduardo Cunha, reached a new low this month after Cunha’s approval of impeachment proceedings against her. (His own ethics problems continue to fester.)  The charge against Dilma is not of personal corruption but rather that Rousseff flouted budget laws by using public banks to cover up unauthorized debt issuance and off-books spending.  Rousseff supporters have argued that the impeachment charges represent the worst of golpismo, or coup-mongering, and a constitutional overreach that threatens to undermine democracy.

For Brazil, 2016 will be dramatic and unpredictable – as the country weathers the most dangerous political crisis since the impeachment and resignation of President Fernando Collor in 1992.  Dilma’s opponents will have difficulty convincing two-thirds of the Chamber and Senate to oust her, but the crisis is already creating significant fissures in the democratic system.  The parties have been turned upside down.  Even if Dilma survives in office, she faces nearly impossible odds in restoring the credibility of her administration and party, the Partido dos Trabalhadores, or PT.  There are early indications that the PT will face a bloodletting in the 2016 municipal elections, and former President Lula, the party’s once-ironclad standard-bearer, has the highest rejection rate (55 percent) of any potential candidate in the 2018 presidential contest.  The PMDB, Dilma’s coalition partner, is threatening to break with the government, but is internally divided. The opposition PSDB is facing scandals, protests, and troubles of its own in the states it governs.  The newfound proactivity of prosecutors and judges is making democratic checks and balances work as never before – and is largely welcomed by Brazilians – but Brazil’s old party system may not be able to keep pace.  Rumblings for a rethinking of the political system will grow louder in the new year, as the crisis deepens.

December 21, 2015

*Matthew M. Taylor is associate professor at the School of International Service at American University.

Brazil: Implications of Dilma’s Victory

By Eric Hershberg and Matthew Taylor

Sala de Imprensa / Flickr /  CC BY-NC 2.0

Sala de Imprensa / Flickr / CC BY-NC 2.0

President Dilma Rousseff’s reelection – by a tight 3.28 percent of the vote – sets the stage for a period of challenges and political uncertainty.  The Social Democratic Party (PSDB) candidate, former governor Aécio Neves, was truly a formidable contender, and Dilma and the Worker Party (PT) showed new weaknesses.  The battle was marked by a strong desire for change – even Dilma’s campaign slogan was “Governo Novo, Ideias Novas” (New Government, New Ideas) – and the big question now is what sort of change will come from the PT’s fourth consecutive turn in office.

  • Dilma lost overwhelmingly in the Worker Party’s (PT) old stomping grounds of the southeast (by 2-1 margins), but picked up support in Neves’s state of Minas Gerais and thoroughly dominated the northeast (by 3-1 margins in many places), including Pernambuco, which had gone to Marina Silva in the first round.
  • The lower middle class, known widely as Classe C, ultimately appears to have thrown its lot to Dilma – apparently driven by the PT’s relentless message that only it could be trusted to protect their interests and social programs like the Bolsa Família.
  • The PT emerges from the battle bloody and bruised. The Rousseff campaign’s systematic deconstruction of Marina Silva in the first round buys the resentment of a solid fifth of the electorate.  Former president Luiz Inácio Lula da Silva was an uneven participant in the campaign, inexplicably absent at critical moments and losing his cool at others.
  • The PT won 19 of 27 governorships, and Dilma’s alliance did well in the Chamber of Deputies and Senate, but the opposition is likely to be far more assertive, as the combined issues of the economy, public services and corruption proved during the campaign to be useful wedges to drive between the middle class and the PT. A newly combative and forceful Aécio will be the clear leader of the opposition.

Dilma faces formidable challenges.  The economy was moribund for almost all of her first term, and fairly urgent work is needed to cope with a deteriorating current account, the weak fiscal results, resurgent inflation, and declining personal credit, especially among the politically influential Classe C.  Management of public services – theoretically manager Dilma’s strong suit – needs attention, and she actually has little hope of driving meaningful change singlehandedly.  The corruption story, moreover, is an immediate threat.  If the testimony of foreign exchange dealer Alberto Yousseff, who was given whistleblower protection in exchange for testifying to the police, is to be believed, this is an enormous scandal that may shake the administration to its core.  In light of this political scenario, it is perhaps not surprising that Dilma’s victory speech focused on building consensus, suggesting she would push political reform via plebiscite, promising anti-corruption reforms, and suggesting, after largely downplaying the issue on the campaign trail, that inflation and fiscal balance will be key priorities during her second term.  Whether she can actually accomplish these goals on her own timetable is a big question.

October 27, 2014

Elections in Brazil: The Force of the Latin American Left

By Eric Hershberg and Luciano Melo

Aécio Neves – Senador & World Economic Forum / Foter / CC BY-NC-SA

Aécio Neves – Senador & World Economic Forum / Foter / CC BY-NC-SA

The first round of Brazil’s presidential election has set the stage for a runoff playing primarily to class differences.  By the eve of the election, polls hinted at the real possibility that the center-right candidate Aécio Neves of the Brazilian Social Democratic Party (PSDB) would edge out the other principal opposition contender, former Minister of the Environment Marina Silva.  Silva enjoyed a spike in the polls after she replaced the late Eduardo Campos, who perished in a plane accident in August, as the Brazilian Social Party (PSB) candidate.  Sunday’s results confirmed Silva’s decline, as she captured only 21.3 percent of the votes compared to 33.5 percent for the PSDB and 41.6% for incumbent President Dilma Roussef of the Worker’s Party (PT).  The PT used its potent propaganda machine to portray Silva as a potentially dangerous candidate – an indecisive leader who could not be trusted to sustain popular social programs such as the Bolsa Familia conditional cash transfer program, which has helped lift millions of Brazilians out of poverty.  Also, Aécio and Rousseff built their images upon two iconic ex-Presidents – the former on Fernando Henrique Cardoso (FHC) – seen by the middle and upper classes as the leader who managed to defeat hyperinflation and putting Brazil on track for economic growth – and the latter on Lula, Rousseff’s mentor, who is idolized among the most disadvantaged parts of Brazilian society as the President who helped the poor become less poor.

To win the runoff on October 26, Aécio needs at least 70 percent of Silva’s votes – she has only hinted at supporting him – while Rousseff would succeed with only half of that.  It is clear that Dilma and the PT will double down on their negative advertisements, now aiming at Aécio rather than Marina.  The PT’s barrage over the airwaves will highlight the risks of abandoning the course set out by Lula and followed by Rousseff.  Voters will be told that the opposition may underfund cash transfers, privatize the state oil company Petrobrás or treat it as a profit-making enterprise rather than as a development bank, thus increasing unemployment as occurred during the Cardoso years.  And the PT will no doubt remind voters of its consistent efforts to boost minimum wages and chip away at the vast inequalities that had long characterized Brazil.  Surely they will portray Neves as an elitist out of touch with the majority that has benefited from the PT’s redistributionist agenda.  Aécio and the PSDB, by contrast, will highlight the worrisome slowdown in growth under Rousseff, the failure to significantly improve public services – it was frustration over health, education and, particularly, urban transportation that drove the social protests that began in mid-2013 – and the over-regulated and over-taxed economy.  Most of all, Neves’ campaign will harp on the persistent scandals that have bedeviled the PT over the past decade and that have helped to fuel popular disdain for politicians.

The election results in Brazil are likely to become increasingly polarized in terms of class.  Dilma appears poised to prevail in the poorest states of North and Northeast, where Bolsa Familia and other cash transfer programs, subsidies, wage increases and Lula’s image are compelling.  In turn, Aécio should come out ahead in the richer states such as São Paulo, which offer the largest pool of voters and where highly educated and middle- and upper-income Brazilians are concentrated.  We make divergent predictions: Hershberg anticipates a PT victory, since for all the speculation about the travails of the Latin American left, it has built very substantial foundations of support in societies that credit the left with finally making some advances to tackle Latin America’s yawning inequalities.  Warnings that Aécio represents a return to elite rule will resonate among the PT’s electoral base, and the PT’s success will be nourished by its powerful organizational capabilities.  Melo, by contrast, anticipates a PSDB triumph.  In this scenario, the corruption, disappointing growth rates over the past two years as the commodity boom has slowed, and widespread frustration about the quality of public services will generate an anti-incumbent dynamic that will bring to an end a dozen years of PT rule.

October 10, 2014

Brazilian Presidential Election: Challenging a Divided Society

By Luciano Melo

Dilma Rousseff | Photo credit: Office of Governor Patrick / Foter.com / CC BY-NC-SA Aécio Neves | Photo credit: Agência Senado / Foter.com / CC BY-NC Marina Silva | Photo credit: BrasilemRede / Foter.com / CC BY-SA

Dilma Rousseff | Photo credit: Office of Governor Patrick / Foter.com / CC BY-NC-SA
Aécio Neves | Photo credit: Agência Senado / Foter.com / CC BY-NC
Marina Silva | Photo credit: BrasilemRede / Foter.com / CC BY-SA

The Brazilian presidential elections are nine months off, but President Dilma’s adversaries are starting to present more clear and consistent visions of their values and positions.

  • Aécio Neves, from the main opposition PSDB, was a successful governor of the state of Minas Gerais and is currently a well-respected senator in Brasilia.  But his party has long suffered from “oppositional apathy” – the inability to position themselves as a real alternative.  This weakness appeared when former Ministry of Health José Serra was the party’s candidate in 2010.  Now, in opposition to the highly criticized welfare state represented by Dilmas’s Workers Party (PT), Neves has been defending a liberal (or more libertarian) state that will not stand in the way of people’s initiatives.
  • On the other side of the spectrum is the unlikely coalition represented by a former senator and minister in the Lula administration, Marina Silva.  She is a leader of the PSB party, and she earned a strong reputation for fighting for environmental protection alongside assassinated Brazilian hero Chico Mendes and for resigning as Minister of Environment over disagreements with the PT policies.  Marina Silva brings a certain gravitas and edge to the alliance, which, as a former ally of PT, has never differentiated itself well as a real competitor.

Neves and Silva are seen as possible game changers, but no one is under the illusion that it will be easy to surpass Dilma.  Her popularity has been steadily increasing since she stood up against the NSA’s spying activities, and she still benefits from the PT’s popular welfare policies.  The latest polls show that 67 percent of Brazilian Facebook users disapprove of the current government, but Dilma’s primary support remains from the poorer states located in the Northern and Northeastern regions, where the main beneficiaries of PT social programs live.  Neves is the clear representative of the frustrated middle class that was behind large protests in July, and it is behind the current social media campaigns attacking Dilma and the corruption perpetrated by PT’s leaders.  Marina Silva and coalition leaders, also representing those regions, would have to strategically target swing voters in order to obtain a larger margin in the next elections.  At this early moment, Dilma seems to have a good chance of obtaining a second term – but leading a highly divided society, with a middle class unwilling to accept excuses for poor results in the economy, education and security.