Brazil Election Victory and Global Capital

John M Cox coxj at
Fri Nov 1 06:51:16 MST 2002

(This article is by a member of a dissident wing of Lula's Brazilian
Workers Party (PT). Sorry I don't have a URL.)
The Workers Party Electoral Victory of Oct. 27th and
the Trap of the "Participatory Budget"


SAO PAULO, Oct. 29 -- Immediately after the Oct. 27
landslide election of Workers Party (PT) presidential
candidate Luis Inacio (Lula) da Silva, editorials in
the world major financial daily newspapers began
telling Lula, as he is known widely in Brazil, exactly
what he must do in the economic arena if he is to be
true to his electoral pledge of fiscal responsibility
and respect for the terms of the recent US$30 billion
IMF "rescue" package.

The Financial Times editorialists (Oct. 29) wrote:

"Mr. da Silva must act quickly to gain a reputation
for economic responsibility. That means making the
right appointments to senior economic positions,
delaying pledges for social change and concentrating
instead on a credible commitment to even tighter
fiscal policy [than the current Cardoso government]
until the debt to GDP ratio has fallen."

For his part, Kenneth Rogoff, senior economist at the
International Monetary Fund, warned that any way you
look at it, "structural adjustment in Brazil, which
the da Silva government must pursue, cannot be
implemented without pain. ... There is no other option
if international economic confidence is to be
maintained and Brazil's entire financial system is not
be wiped out."

Herein lies the problem: If Brazil is to continue
paying back the onerous foreign debt to its
international creditors, it will have to earmark 3.6
billion Reais (Brazil's flagging currency) toward debt
repayment each and every month. This is money that
will have to be taken out of the budget for public
hospitals (already on the brink of collapse), schools
and wages for public workers.

The watchdogs of international finance capital -- that
is, the IMF and World Bank -- are demanding tighter
fiscal policies than existed even under eight years of
the Cardoso government. What would this mean, for
example, for public workers in Brazil?

A letter addressed to Lula prior to the election by
the Federal Workers Union in Brasilia underscores the
impossibility facing the Lula government of addressing
the needs of the mass of Brazilian workers -- who
voted for him and for the PT, seeking to put an end to
eight years of fiscal austerity -- while also abiding
by the dictates of the IMF and World Bank. The federal
workers wrote, in part:

"During the past eight years, our wages have been
frozen. We need urgently a wage increase of 89.12%
just to keep afloat. This figure was sent by the
National Federation of Federal, State and Municipal
Employees to the current president of the republic,
Fernando Henrique Cardoso. It was accompanied by an
entire list of demands regarding parity between active
and retired public workers, recognition of a master
contract for all public workers across Brazil, the
restitution of essential public services that have
been wiped out through privatization and deregulation,
and the recognition of 56 basic rights for public
workers that have been eliminated, among others.

"Mr. Cardoso has ignored our demands. He has signed an
agreement with the IMF on debt repayment that will
impose a Draconian structural adjustment plan and will
leave Brazil even poorer than it was before. The
condition dictated by the IMF for paying back the
interest on the debt in the year 2003 would require
cuts of an additional 53 billions Reais in the budget
for public services alone.

"At the rate things are going, with Brazil being
delivered to those who are simply pillaging our
country and bleeding us to death, even the payment of
our current salaries and retirement payments is under

"Comrade Lula. We are convinced that now is the moment
to change course. It is now or never. It was for this
moment that the Workers Party (PT) was built 23 years
ago and that it has grown into a mass party of the
Brazilian working class. Today, millions of working
and oppressed people are supporting your candidacy
because they see in you and in a PT electoral victory
the possibility of moving toward a dignified future
for the youth and for those who work for a living.
They see the possibility of paving the way to the
creation of a truly democratic and sovereign country,
where it is up to the people -- and not the IMF -- to
determine our destiny."

In his first public statement after winning the Oct.
27 election, Lula pledged swift action to reduce
malnutrition and other social ills while also seeking
to reassure investors that he would pursue a
"moderate" and "responsible" economic course.

"Even with budgetary restrictions," Lula stated, "we
are convinced that from the first day it will be
possible to act fast and creatively in the social
area." Lula went on to point to the example of Workers
Party governments in Brazilian states, cities and
towns to underscore his point that fiscal
responsibility and "creativity in the social area" can
go hand in hand to meet the expectations and
aspirations of "all Brazilian civil society."

What "Acting Creatively" Meant in Porto Alegre

The concept of implementing fiscal responsibility
while also promoting "creativity in the social area"
is not a new one for the Workers Party, or at least
for a certain wing of the PT.

In the city of Porto Alegre -- and then at the level
of the entire state of Rio Grande do Sul -- this
"creative" balancing act went under the heading of
"participatory budget." The PT city government of
Porto Alegre was the first to implement this
"participatory budget" process 13 years ago, calling
it "an innovative form of governance." Other
municipalities and states governed by the PT later
followed suit.

Today, many of those who, both within and outside the
PT, advocate the creation a "Social Pact" among "all
actors of civil society" in the aftermath of the PT
landslide of Oct. 27th are pointing to the example of
Porto Alegre's "participatory budget" as the way

What is the "participatory budget" and why has the
World Bank characterized the PT-led city government of
Porto Alegre as the "best pupil" of the World Bank and

The budget of Porto Alegre, like that of all Brazil's
cities, lies within a framework set by the federal
government. This framework demands that each state
contribute its share in servicing Brazil's crushing
$300 billion foreign debt. The state government, in
turn, allocates to the municipalities in its own
jurisdiction the share of the foreign debt they must
pay. In this way, all state and municipal governments
are tied directly into payment of the foreign debt. It
is not left to the federal government to take care of.

The "participatory" aspect of the state and municipal
budget allocation pertains only to a relatively small
percentage of the overall budget. Whether or not to
pay back the foreign debt, for example, is not up for
discussion -- even though this is the largest budget
item. Payment of the debt is automatic, and has not --
in fact -- been questioned by the PT mayors or
governors implementing this so-called "participatory"

In what sense is this process participatory?
Associations, trade unions, NGOs -- all on an equal
plane -- are called upon to define the budget
priorities based on what is left over -- after the
payment of the debt. In other words, they are asked to
determine how to "distribute" the budgetary shortfall;
that is, they are co-opted directly into the
administration of poverty. This is why PT activists
across Brazil who disagree with this model have dubbed
it "participatory austerity."

For example, which is the priority: to repair the
sewers, which break down on a regular basis, with
deadly consequences in the shantytowns and poor
districts -- or to pay civil servants, who sometimes
go for four, five, or even eight months without pay?
Should a district healthcare clinic be closed, thus
depriving thousands of working-class families minimal
care, in favor of installing running water? Or should
the reverse be prioritized?

By enlisting organizations -- particularly trade
unions -- into making these debasing choices, what
really happens is that these organizations cease to
defend the specific interests of their members.
Instead, they are transformed into relays for the
policies dictated by the IMF. [Ed. note: See article
below on the 13-year record of Porto Alegre's
"participatory budget."]

The World Bank's "Best Alternative"

It is therefore not surprising that the World Bank has
translated, published and distributed widely a
propaganda handbook written jointly by the past PT
mayor of Porto Alegre, Tarso Genro, and Urbitaran de
Souza under the title: "The Participatory Budget: the
Porto Alegre Experience."

In this World Bank handbook we learn, for example,
that during the year 2000, 140 municipalities across
Brazil - 73 led by the Workers Party and 67 led by
"center-right" city governments - have implemented the
"participatory budget."

Likewise, the Brazilian mainstream press has devoted a
great deal of attention to the "participatory budget."
A full one-page interview with Victor Vergara, World
Bank administrator for Brazil, published by O Estado
de Sao Paulo on March 5, 2001, gives further insight
into the usefulness of the "participatory budget" for
the proponents of the IMF and World Bank Structural
Adjustment Plans (SAPs).

Vergara answers a reporter who asks him how the World
Bank assesses the "participatory budget": "It is one
of the most positive and innovative administrative
experiences to come on the scene in Latin America,"
Vergara stated. "It is a modern method of governance
that has awakened great interest throughout Latin
America. ... The World Bank has translated into
Spanish the book by Porto Alegre Mayor Tarso Genro on
the subject. We have already distributed 2,500 copies
of the book in nine Latin American countries."

When asked why the World Bank views this model so
positively, Vergara replied: "It is a modern form of
governance in that it transforms representative
democracy into participatory democracy, into
decision-making by consensus."

When asked if such a model can be implemented only by
"left" governments, his answer was unequivocal. "Not
at all. The participatory budget has no ideological
origin. It is simply a method for making decisions.
.. We are not saying that it is the ideal model, but
it seems to us that it is the best alternative."

Method to "Avert Social Explosions"

This "method of decision-making" is, in fact, fully in
sync with World Bank policy. For many years now, World
Bank President James Wolfensohn has been warning that
as a result of the implementation of World Bank-IMF
Structural Adjustment Policies, "the number of social
conflicts and social explosions is likely to increase,
the quality of our environment will be worse, and the
disparities between rich and poor will be wider."
(Address to the Board of Governors, Washington, DC.
Sept. 28, 1999)

To avert the risk of such social explosions,
Wolfensohn has argued repeatedly for the need to
co-opt the trade unions and social protest movements.
Addressing a meeting of NGOs in Prague on September
22, 2000, Wolfensohn declared:

"What we are trying to do in as oblique way as we can
is to convince the governments that you cannot impose
development on communities or groups of people, that
what you need to do is to consult so that they could
own the process and that we don't design something in
Washington or La Paz, but that it includes the

The World Bank president made specific the role ahead
for the NGOs and, more broadly, for "civil society."
It was necessary, he said, "to give people a voice in
development. ... This means giving people an
opportunity to actively participate in the
identification, design and implementation of World
Bank projects and lending."

The World Bank's World Development Report 2000/2001:
Attacking Poverty summarized this strategy: "Social
fragmentation can be mitigated by bringing groups
together in formal and informal forums and channeling
their energies into political processes instead of
open conflict."

Participatory Budget is Rebuffed at the Polls

Riding on his credentials as the PT mayor of Porto
Alegre, Tarso Genro set his goals on a higher office,
running for governor in the state of Rio Grande do Sul
in the recent October 6 elections.

The results of this election were at odds with the
results experienced across Brazil by the PT candidates
for public office. Everywhere but Rio Grande do Sul,
the PT vote increased dramatically over previous
years. Ana, a leader of neighborhood organizations in
Porto Alegre and member of the PT, explained in an
interview with O Trabalho newspaper, her assessment of
this electoral setback for the PT candidate for
governor. She stated:

"Across the state, Tarso Genro obtained 11% fewer
votes than his counterpart, Olivio Dutra, did in the
1998 election. In the case of Porto Alegre, his vote
total was 16% lower than Dutra's. And this occurred at
a time when in city after city across Brazil, the PT
vote skyrocketed in the first round of the election.
Hence, the PT, which held the governorship of the
state now risks losing that post. [Note: The interview
with Ana was conducted before the second round of the
election, held Oct. 27. Now the results are in, and
Genro ended up losing the election. The PT hence has
lost the governorship of Rio Grande do Sul.--JP]

When asked if the PT's record implementing the
"participatory budget" had anything to do with this
loss of votes, Ana responded:

"There is no doubt in my mind. All you have to do is
look at what happened to Ubiratan de Souza, budget
chief for Porto Alegre and co-author, with Tarso
Genro, of the World Bank's handbook showcasing the
model of Porto Alegre. De Souza ran for the National
Assembly under the slogan, 'I am the candidate of the
participatory budget.' Everywhere he went -- on the
TV, the radio, at PT rallies -- he could not stop
hailing his record as the overseer of this
'participatory budget' process.

"What was his result in the first round on Oct. 6th?
De Souza obtained only 8,000 votes in the entire state
of Rio Grande do Sul, when he needed a minimum of
25,000 just to qualify for the second round."

The interviewer pressed on, asking how she could be so
sure this vote total was, in fact, a rebuff by the
voters of the consequences of this "participatory
budget" process. Ana responded:

"Look. People aren't stupid. At first we believed what
they were telling us -- that we would finally have a
voice in determining the budget priorities of the
population. And we were patient, realizing that not
everything can change overnight. But then we began to
see that the priorities we put forward were never
selected for review and implementation by the
overseers of the budget process. We were always told
that others were worse off than we were, and that our
issues were 'not a priority.'

"Little by little, we began to see what was going on.
We came to understand that the PT municipalities
working under this 'participatory' process were
dutifully paying back the debt to the foreign
investors -- who, we should point out, did not invest
a cent to help the Brazilian people. Why should they,
the rich and super-rich who have simply speculated on
our resources, get paid back when we are hurting so
badly? We were told that the issue of the debt could
not be discussed or challenged. How democratic is

"We learned that they were abiding strictly by the
Camata Law, which -- at the behest of the IMF --
requires that wages paid to public workers not exceed
60 percent of the budget. In fact, in Porto Alegre,
they 'bested' the IMF by reducing this amount to 48
percent -- which meant massive layoffs of public
workers, and, naturally, mass strikes by teachers and
other categories against the architects of the
'participatory budget.'

"But most important, we saw that our basic needs were
not being addressed, and that things, in fact, were
getting worse and worse. ... The people saw through
this "participatory budget" fraud and simply wanted
nothing more to do with it."

Ana went on to recount in detail how the neighborhood
organization which she leads was lied to time after
time, and how the neighborhood health clinics were
gradually shut down. [Ed note: Also see below the
interview with Lourival Pereira, a leading trade
unionist in the state of Rio Grande do Sul, for more
information about the massive popular rejection of the
"participatory budget" framework.]

So today, just days after the election of Lula to the
presidency, Brazil's working people have served notice
that they want change -- not more austerity via
"responsible fiscal policy." They have also served
notice that they are no longer easy prey for the
promoters of "creative" and "innovative" social
policies premised on "Social Pacts" and "participatory

What the Brazilian people want is a PT government that
begins to address their demands and that breaks with
the IMF precisely so that it can fund the jobs and
social programs that are needed to put Brazil back on
its feet -- free from the dictates of the
multinational corporations and the international
institutions of global capitalism.

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