Brazil’s Winning Streak

By Gabriel Paquette, February 20, 2012

President Dilma Rousseff and Lula

President Dilma Rousseff and Lula

Brazil has recently shot to “superpower” status in the eyes of the world. Gabriel Paquette looks at the country's apparent immunity from the global recession, its new self confidence but also at some of the more long standing problems: the corruption and the deforestation of the Amazon.

Gabriel Paquette teaches History at Johns Hopkins University. He has written about Brazilian history and contemporary politics for History Today, The Times Literary Supplement, and The National. He is completing a book on Portuguese and Brazilian history in the first half of the nineteenth century. Click here for Gabriel Paquette’s web site
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Recently a wild optimism has become almost contagious in the media about Brazil as a dynamic economy and a vibrant society. Do you share this enthusiasm?
There certainly is a great deal about which to be excited, especially with the 2014 Word Cup and 2016 Olympics on the horizon. Cultural efflorescence has been matched by steady, if unspectacular (compared with other BRICs) economic growth. If inflation remains under control (as it has been under Presidents Cardoso and Lula da Silva), I see no reason not to share the enthusiasm for Brazil one encounters in the media. Brazil escaped the Great Recession of 2008 unscathed, largely due to its active government response and the economy grew at 7.5% in 2010 (though lower rates are anticipated in future years). But impressive GDP growth and splashy international events are not the whole story: long-term structural deficits, particularly with regard to educational attainment, economic inequality tied to race, and dreadful transportation infrastructure all threaten to undermine prosperity in the long-term.

Lula has been given the majority of the credit for this upsurge in the country’s self-confidence and economic welfare. Looking back on his presidency, how do you judge it?
Lula enjoyed a popular approval rating eclipsing that of all other elected world leaders. During his tenure in office, there were unmistakable gains, most of which were shared by large segments of the population. And, you are right, many of his policies bolstered Brazil’s self-confidence, particularly his insistence on Brazil’s robust and active role in world affairs. If he has been given the credit for Brazil’s resurgence, however, that is mainly because he was able to capitalize on the gains of his predecessor, Fernando Henrique Cardoso, not because of policies originating with him. It was Cardoso, after all, who introduced the policies that underpin the present prosperity, continued by Lula and now Dilma Rousseff, including monetary stability through the Plan Real, keeping runaway inflation at bay (it had reached 2,000 per cent in 1989), preserving international capital flows, fixing high interest rates, and limiting public spending. In the area of social programs, for example, the programs aiming to decrease infant mortality, increase school attendance, and transfer income to the very poor all originated with Cardoso. The model of income transfers being contingent on certain types of explicit obligations (such as prenatal exams, vaccinations, nutritional advice from local health workers) originated with Cardoso. In many respects, Lula’s Bolsa Familia consolidated and integrated these earlier initiatives.

Lula is said to have sacrificed his left-wing agenda to pacify the bankers and diplomats in Washington. Is this fair? Did he opt for a ’capitalism lite’? If so, did he even have a choice?
While I was disappointed with many aspects of Lula’s presidency, I think that the verdict that he “sold out” or “compromised” the PT’s (Partido dos Trabalhadores) left-wing platform is largely unfair and misleading. Lula ran for president several times, over two decades, before emerging victorious. From union organizer to leader of a small party with a limited national appeal to victorious candidate for the presidency, Lula’s own politics morphed and transformed over time. The types of policies he advocated while in opposition were not practicable once he was ensconced in office. The scale of the types of redistributive policies he discussed as a candidate sent a shudder through the financial markets and would have threatened the prosperity that has helped huge swathes of the populations join the middle class. By maintaining international confidence in Brazil’s economy, Lula was able to pursue a range of social programs unimaginable during leaner times, when austerity measures would have halted such initiatives. A better, fairer question might be whether Lula’s government over-capitulated to the financial markets, unnecessarily downsizing its ambitions, and in so doing failing to tackle the biggest long-term obstacles to prosperity. The much-vaunted social programs, like Bolsa Familia, are a very small percentage of GDP, at present ½ of one per cent. Yet this program benefits 45 million people (19 million families). Would the modest expansion of this program, in terms of benefits and number of people reached, really undermine Brazil’s economic growth? Surely not. This is an example of where the political will of the PT governments deserves criticism. But Lula is not alone. Throughout Latin America, the leftist pursuit of social equality, justice, and solidarity has been abandoned by the ruling parties. They have stopped challenging the basic outlines of the existing socio-economic order. Instead, they strive to replicate the Western European experience of social democracy, for which mass prosperity is a precondition.

Gabriel Paquette

Gabriel Paquette

Whatever one’s opinion of Lula, he is certainly the most successful and popular politician – possibly ever. People cite his ‘Bolsa Familia’ policy and his personal charisma as his secret weapons. Is there more to it?
Undoubtedly, policies like Bolsa Familia and Lula’s personal charisma were keys to his success. But what must be kept in mind is Lula’s historical importance and his background. Product of a hard-scrabble upbringing in Brazil’s northeast, he migrated, like so many nordestinos, seeking a better life in the industrial centers of Sao Paulo, with nothing more than a primary school education. In Sao Paulo, he worked in manufacturing, was seriously injured and became a union leader. At the time, Brazil was under the yoke of a military dictatorship. Political dissent had been crushed, with many dissidents imprisoned or forced to seek refuge abroad. In his role as chief organizer of the PT and as the public face of workers’ movement, which landed him in hot water with the regime, he played a major role in the transition to democracy (in 1985). But what has made Lula popular is his status as a civilian “everyman” in a political world dominated by wealthy, long-entrenched elites or military officials. Even since the transition to democracy, Brazilian politics continues to be dominated by scions of wealthy, well-placed families. Known for his unabashed fondness for cachaca (sugar cane brandy) and football, Lula’s appeal to the Brazilian population at large is unsurprising. Another element in his personal appeal, it should be added, is that he has been personally untainted by the corruption and peculation that brought down many members of his administration and which continues to be rife in Brazilian politics.

Has the economic boom created new problems or exacerbated old ones? Brazil has always suffered from a serious problem with corruption and a north-south divide. What other developments have you noticed emerging in recent history?
The economic boom has served to lift many out of extreme poverty. Poverty rates plummeted 8 per cent a year between 2003 and 2007, though 25 per cent of Brazilians are still beneath the poverty line and more than 40 per cent of Brazilian households lack consistent access to garbage collection, clean water, and sewage disposal. There are still major regional asymmetries, particularly between the wealthier southeast and poorer north and northeast (though the northeast is the fastest growing region, perhaps due to its modest starting point). And the inequality index (Gini) has changed for the better, but only slightly. As I mentioned earlier, however, tremendous structural problems have remained unaddressed during this period of rising GDP. Educational attainment and achievement is one of these problems. Though one can’t attribute causality to it, education has the largest explanatory power when determining the source of income inequality. Also, government programs, however well-designed, are not a magic bullet for deep-seated problems.  Functional illiteracy rates remain high, for example. Moreover, as Brazil develops, and as it makes good on the social rights enshrined in its 1988 Constitution, new problems threatening to derail growth emerge. Health care costs, for example, are rising rapidly and social security reform is needed. How Brazil handles these challenges will determine its long-term prosperity.

It has been suggested that Brazil’s success and the renaissance in South American politics is a result of the US no longer keeping such a firm grip on its “back yard”, a distraction that left the way open for more left-wing governments. Do you agree?
It is certainly true that the fall of the infamous “Washington Consensus” has made feasible the types of social programs put in place by left-of-center governments in Latin America in recent years. But it should be added that left-of-center governments have adopted policies to keep inflation in check, maintain deficits low, and favor foreign direct investment. That is, they have become neo-liberals without external coercion. US policy toward Latin America since the end of the Cold War has wavered between condescension and neglect, but direct intervention in political (and policy) outcomes is increasingly rare. There are many reasons for this state of affairs, including US decline, US over-stretch in western Asia, Latin American political stability and flourishing democracy, and Latin American economic prosperity. Optimistically, hemispheric cooperation among equals has never appeared more likely.

Let’s back up a little and look at Brazil’s history as a country. It has developed differently to other South American Spanish-speaking countries. What are some of the unique elements of Brazilian history and are they still affecting the country today?
The differences between the historical development of Brazil and its Spanish-speaking neighbors are legion. First, the vastness of Brazilian territory and difficulties of communication meant that each of Brazil’s regions developed separately, which partly accounts for the regional differentiation so pronounced today. Second, with the exception of the Minas Gerais region, where major mineral strikes occurred around 1700, Portuguese colonization was largely confined to the littorals, meaning that the interior was largely unpopulated. Still today, though now exacerbated by hyper-urbanization and off-set by efforts to move population into the interior (i.e. the construction of Brasilia in the 1950s), the vast majority of the country’s population is found along the coasts. Third, Brazil’s colonial economy was premised on export-oriented agriculture and extractive industries. Gold and silver gave way to sugar, tobacco, and coffee, which in turn gave way to coffee and hides. Many of these activities were dependent on slave labor, itself dependent on the slave trade with West and Southern Africa. Brazil was the last country to abolish the slave trade (1850) and the last in the Americas to abolish slavery (1888). The legacies of both export-oriented economy, and its dependence on enslaved Africans continues, obviously, to be felt today, from inequality to racial discrimination, but also in the fact that Brazil is the fourth largest exporter of food globally. Fourth, when Brazil became independent of Portugal in the early nineteenth century, it did not become a republic, like the rest of the colonies in the Americas, north and south. Instead, it retained a monarchy (it was called the “Brazilian Empire”), which survived until 1889, when it was replaced by a republican form of government. But the robust role of the executive and presidential power in present-day Brazil is a legacy of the survival of monarchy, as much as it is the result of strong executives such as Vargas, who dominated Brazilian politics from 1930 until the early 1950s.

Brazil seemed to arrive late to the modern world, as if it was being held back. A functioning democracy has only really been in place for less than twenty years, is that fair to say?
Yes, it is fair to say that Brazilian democracy has functioned only for the past 25 years. From 1964 until 1985, the country was ruled by a military dictatorship. Dictatorship was welcomed by many segments of the population, particularly the middle class. It was, after all, between 1968 and 1973 that Brazil experienced “miracle growth” of more than eleven per cent per year, along with the huge expansion of industry. However, it is important to note that there are robust republican and liberal traditions stretching back to Brazil’s independence. As early as the 1820s, there was a thriving civil society and parliamentary culture. To be sure, there were great contradictions, notably the persistence of slavery amidst the embrace of other facets of liberalism (free trade, for example). But nineteenth and twentieth century Brazilian history was punctuated by many political movements as “advanced” or “progressive” as anything one finds in North America or Europe. What is notable in the last 25 years is the removal of the military from politics and the peaceful transfer of power to an electoral democracy.

Brazil has a long chequered history of military dictatorships, are they a thing of the past? Or might a recession in Brazil open the doors to military rule. How far has Brazil come?
I think that civilian rule is here to stay. The historical conjuncture that made recourse to military rule probable (The Cold War, revolutionary political movements, economic crisis) appears to have passed. What remains to be seen is whether the persistence of inequalities (economic, racial, educational, regional) amidst continued economic prosperity leads to the erosion of the basis consensus governing Brazilian politics, and the radicalization of its political discourse.

What about Dilma Rousseff? It is still early days and she is something of an unknown but how do you see her presidency developing?
Dilma Rousseff held important positions in Lula’s two administrations and largely shares his vision of Brazil’s future. There is very little difference between them, thus far at least!

What about Brazil’s foreign policy. There is clearly an anti-US slant with its cozy relationship with Venezuela and Iran. Is this just the joy of irritating Washington to pay them back for decades of interference or is there something valuable at work here?
I’m not sure if I’d characterize it as an anti-US slant. It certainly is an independent foreign policy. Not only under Lula, but even under Cardoso, many Brazilians have long felt that their country’s economic weight, regional importance, and population size have not been adequately represented in the architecture of international institutions. Clearly, Lula’s push to have Brazil on the UN Security Council is but the most visible of a broader sense that Brazil has not enjoyed influence and decision-making power commensurate with its power (for example, Brazil is poised to become the world’s fifth largest economy by 2016). Relations with Iran and Venezuela have been pursued for complex reasons, but it is the independent, assertive nature of Brazilian foreign policy that deserves to be re-iterated here. Interestingly, Brazil under Lula (and Dilma) has pursued an active foreign policy with various African countries. Trade between Brazil and the African continent, has gone from $3 billion in 2001 to $26 billion in 2008. Another major foreign policy issue is Brazil’s relationship with China, which recently became its largest investor. While offering benefits for each country, as well as aiding Brazil’s ambitions on the global stage, it also poses challenges. In 2010, for example, almost 80 per cent of Brazil’s exports to China were basic goods and raw material (soy, iron ore, and oil), but 90 per cent of imports from China were capital or manufactured goods. Such figures suggest that a debate in Brazil about China’s impact on Brazilian industry is not far off.

What about the three major issues affecting the country, inequality, corruption and the Amazon deforestation? Is there any activity on these fronts? Are these serious issues getting left behind in the euphoria of the economic boom?
Environmental degradation and the deforestation of the Amazon are crucial issues, which will assume greater importance in the decades ahead. Brazilian energy policy, too, is a huge question mark. The discovery of huge offshore deposits of oil will have a tremendous impact, but it is difficult to predict in which way. Political corruption remains a problem, perhaps a growing problem, while poor infrastructure (i.e. absence of high-speed rail, unpaved roads, horrendous airports, poor port facilities) could undermine economic growth. The challenges, in sum, are huge. But what country, at any time in history, hasn’t had challenges to confront!

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