Brazil: Nine months of Lula's government (International Viewpoint) - Part I

Richard Fidler rfidler at
Mon Nov 10 11:20:08 MST 2003

[I posted this item to the list yesterday but it bounced, probably
because of length. I am reposting it in two parts. With luck, they will
arrive in the right order.]

The following report by a leader of the left wing of the Workers Party
(PT) and its Socialist Democracy (DS) tendency, appears to be a
reasonably balanced and cogent assessment of the record of the Lula
government to date. It is published in the current (November) issue of
International Viewpoint. I am posting it in full since it is not yet
available on-line.

Note his conclusion: "it is not correct, on the basis of the orientation
of the government in the first nine months, to conclude that the game is
over, as if the options taken [by the government] expressed in a
homogeneous manner the entire movement and indicated its entire

Machado's report is focused almost entirely on developments within and
around the PT itself, as are the proposals he advances on behalf of the
DS tendency. However, he makes the point that "the debate on the PT's
orientation cannot today be made only through internal quarrels - this
should be a debate in the broad political and social movement for which
the PT is a reference."

Elsewhere in the report, he cites the recent establishment of a
coordinating body for the "social movements", including the trade unions
(CUT) and the landless workers movement (MST), as a step toward
deepening and broadening the social struggles independently of the
government while pressuring it and taking advantage of the openings it
presents for the mass movements. "To help develop this process in the
direction of affirming the social movements as basic subjects in the
conflict of orientation of society and government", says Machado, "is
one of the main tasks of the Brazilian left today."

The ability of these broad social movements to spread and strengthen
themselves will be decisive to the course of the PT government. During
his recent speaking tour of Canada, MST leader Joâo Pedro Stedile
explained how the PT's election in some ways contradicted a decade-long
decline in mobilization by the social movements in Brazil that is only
now being reversed.

For a highly instructive overview of how the MST and agrarian reform
fits within this perspective, I would recommend a fascinating interview
with Stedile that appeared recently in New Left Review:

    * * *

Brazil: Nine months of Lula's government

After nine months in office, the government of Luis Inacio da Silva
"Lula" has confirmed its contradictory and in many aspects even
surprising character.

João Machado*

The biggest surprises are an economic policy that displays great
continuity with that of the previous government, which the PT had
opposed, and the assembly of a base of parliamentary and political
support that incorporates almost all the existing right wing forces in
the country. *1 In fact, on the right, only the parties that formed the
axis of the government of Fernando Henrique Cardoso (FHC), the Brazilian
Social Democratic Party (PSDB) and the Liberal Front Party (PFL)
continue in formal opposition; nonetheless, they have been partners of
the government in some of its more important initiatives, such as
pensions reform.

This does not denote incoherence on the part of the PSDB and the PFL.
since the pensions reform proposal presented by the Lula government
followed the general lines of their own proposal, which had they been
unable to fully implement, largely because of opposition from the PT. On
this question, the government faced opposition from sectors of the
social movements and, at the parliamentary level, mainly the left of the
PT and some of the other left parties.
On the other hand, the Lula government has maintained coherence with the
historical programme of the PT in the areas of international relations,
agrarian reform and other sectors. There have been important changes in
these areas from the policies of the previous government, but they face
difficulties, given the more general economic and political choices made
by the government so far.

An initial balance sheet of the government

The great contradictions which exist make it difficult to draw a
considered balance sheet of this process. In any case, it is important
to try. Because of the weight that they have in the definition of the
government's overall policy possibilities, it is best to start the
assessment from the general political options and the economic policy
which has been adopted. The central core of the government opted to
avoid a global confrontation with the dominant classes, whether national
or international. More than this, they seek the maintenance of a degree
of broad agreement with them. The political axis of the government has
been to broaden alliances with the historical political adversaries of
the PT, while preaching patience to the people in general and the social
movements in particular.

This had led to a distancing from what the text approved at the national
meeting of the PT in December 2001 defined as the "democratic axis" of
the programme - to rely on social mobilization to make possible measures
that would face resistance from the ruling classes, and to go in the
direction of implementing mechanisms of participatory democracy. In
fact, even though there are initiatives from the government and the
social movements that can represent initial steps in this direction, as
well as processes of consultation and debate in some areas that keep
open channels of dialogue with society, this is not this what
predominates. In fact, the government has not submitted its central
choices - especially its economic policy - to any type of debate with
the social movements and with society.

Neoliberal economic orientation

Macroeconomic policy has been characterized by continuity, and there are
no consistent signs of the search for a transition to another policy.
The government has concentrated on fiscal austerity (mainly through
increasing the "primary fiscal surplus" *2), fighting inflation by means
of conservative policies (of higher interest rates) and seeking to keep
the confidence of the financial markets. This orientation helped stop
the depreciation of Brazil's currency, the real - which has experienced
a significant revalorization - and has led to a sharp fall in inflation.
The risk of an immediate currency crisis has been averted. However, this
is not essentially due to 'confidence' in the Brazilian economy, as the
government has proclaimed; it was due to a large extent to the inflow of
speculative capital, favored both by the general international trend of
the last few months and by high Brazilian interest rates.

These results are then very precarious - in fact, the external
dependence of the Brazilian economy has not been reduced at all. On the
other hand, it is important to point out the serious negative
consequences of these policies - a serious recession (at best, the
result by the end of 2003 will be economic stagnation), increased
unemployment (reaching an all time high in August) and a fall in real
income for workers and for society as a whole (all these facts are
certified by different public statistics). Moreover, the combination of
an increased primary fiscal surplus with high interest rates implies a
significant transfer of wealth to the holders of financial assets, in
other words the wealthier sectors of society. The income of the overall
population has fallen and, to make matters worse, it is becoming still
more concentrated. Finally, fiscal austerity imposes great restrictions
on all government policies.

The negative consequences of this macroeconomic policy will be hard to
overcome. The maintenance of the increased primary fiscal surplus is
foreseen for the entire term of president Lula, and compromises the
capacity for public investment. The fall in the income of society
inhibits private investment. Thus, even with a reduction of interest
rates (which, given the fall in inflation, is part of the logic of the
monetarist policies followed and would not indicate, by itself, a change
in economic policy), economic recovery will tend to be limited - and
will always be threatened by the permanence of external vulnerability.

As a result basically of the economic policy adopted, especially the
search to gain the "confidence" of the markets, pensions reform has
resulted in a particularly negative experience. The government plan
encountered opposition from civil servants and the CUT, that is, social
forces that had been decisive to Lula's victory. Inside the PT, and in
particular its active social base, it led to great discontent. This led
to partial alterations in the plan, that reduced its damage, but they
were insufficient to change its character. *3

A new foreign policy

The most positive aspect of the government's orientation so far has been
its foreign policy. Beyond opposing the US attack on Iraq and steps in
the direction of establishing an independent foreign policy, there has
been an attempt to construct South American unity, and also a front of
the so-called "developing" countries, opposed to the interests of the
imperialist centers, as was seen at the World Trade Organization (WTO)
conference at Cancún. Brazil is also opposing the US position on the
Free Trade Area of the Americas (FTAA). Although the negotiations on
this are continuing, the government has sought to reduce their scope,
saying that it could eventually accept an 'FTAA-lite', from which
subjects would be excluded that surpass the limits of trade (like
regulation of government purchases and investments), and has demanded
important concessions from the US. However, given the vulnerability of
the country to external pressure and the existence of divisions inside
the government, it is not clear what the outcome of the process will be.
Thus, the proposal for a referendum made by the Continental Campaign
Against the FTAA, with the objective of rejecting the FTAA in its
entirety, retains a burning relevance.
In opposition to the policy of the Ministry of Foreign Affairs, it is
necessary to point out that there are aspects of international relations
that are conducted by the Ministry of Finance (like relations with the
IMF). There, a conservative position prevails. This recently led to a
paradoxical situation - when the Argentine president negotiated an
agreement confronting (in part) the pressures of the IMF, they enjoyed
the support of other Latin American heads of State, and even the USA,
but not Lula. The press has divulged that Kirchner is dissatisfied with
the extreme subservience of the Brazilian government at this level,
which seems very likely. Lula has rejected criticism that he has
accepted excessive interference from the IMF with the doubtful argument
that the more controversial options - like the primary fiscal surplus of
4.25% of GDP - were decided on by the Brazilian government independently
of pressure.

In fact, it seems that a significant number of the more dubious
decisions in economic policy have not been a result of IMF pressure. For
example, there is currently a discussion on whether a new agreement with
this institution is useful, and many sectors of the government have said
that this would depend on having greater flexibility in the negotiation
of conditions. They want to modify the method of calculating the primary
fiscal surplus, to allow for greater public investment and more social
expenditure (for example paying for the lands redistributed in the
framework of land reform with Agrarian Debt bonds. With the method
currently used, this would be counted as an internal debt and would
reduce the primary fiscal surplus). In this debate, finance minister
Palocci has opposed any significant flexibilization, even if this would
be accepted by the IMF. The inner group that decides Brazilian economic
policy is, therefore, showing itself more orthodox and conservative than
the IMF.

Land reform

The conservatism of economic policy has been a significant obstacle to
agrarian reform. On this question, the Ministry of Agrarian Development
*4 has, since the early days of the government, established a
constructive relationship with the rural social movements and has sought
a broad dialogue with society.

A new conception of agrarian reform is being developed, as well as of
family and cooperative agriculture, integrated with a project of change
of the economy and society. Immediately this involves aid to the
settlements of landless peasants carried out under the FHC government,
so as to ensure citizenship rights and overcome productive
disorganization. Financing of the harvest for small producers, as well
as the construction of alternatives that make the settlements
economically viable are the first concrete results of this process.
Moreover, the government has committed itself to urgently settle about
60,000 families who are squatting. Finally, the Ministry has shown the
determination to face down the criminal armed resistance of the large
estate owners, who are organizing militias. It favours immediate and
firm action to punish those responsible and prevent them constituting a
latifundium state in the Brazilian countryside.
All these policies, however, come up against the budgetary restrictions
imposed by the economic policy that has been chosen. For example,
without the funds to pay the latifundistas *5 the commitment to settle
60,000 families could not be fulfilled. *6 This example, like others,
has shown once more the contradiction between social change and the
maintenance of basic aspects of the economic model inherited from FHC.

Retreat on GMOs

Another controversial question opposes the conception that prevails in
the economic area to other sectors of the government - the question of
genetically modified organisms (GMOs). The more conservative sectors of
the government, prominently the Ministry of Agriculture, linked to the
big agricultural producers, have defended the use of these organisms (in
opposition to the policies previously defended by the PT as a whole).
The Ministry of the Environment, the Ministry of Rural Development, the
environmentalist movement, the social movements in the countryside
(especially the MST), the progressive sectors of the Catholic and
Evangelical churches, the CUT trade union federation and the broad
majority of the PT are all opposed. The government has finally issued a
Provisional Measure allowing the culture of generically modified soya up
to 2004 (repeating a procedure already adopted in the early days of the
government, when the marketing of the harvest of illegally planted
genetically modified soya was authorized). This measure has helped
discredit the government in the eyes of the progressive social
movements. It is possible that the vote on this question in Congress
will lead to a significant confrontation between the position of the
government and that of sectors of the PT.

This initial period of government reveals a conflictual dynamic, both
inside the government and in the relationship of the government to the
social forces responsible for its election. The contradictions have
become ever more clear. If the Lula government can in some cases be the
partner of progressive movements, as happened in the conference of the
WTO in Cancún, it can also be clearly opposed to these movements, as in
the case of pensions reform and the dispute over GMOs. On other
questions, such as agrarian reform, the government has had difficulties
in fulfilling its commitments due to budgetary restrictions and
conservative conceptions of economic policy and the rural social
movements have thus made their demands more forcibly.

Thus, at the centre of this conflict is the economic policy that
maintains external vulnerability and imposes policies of adjustment
governed by neoliberal logic. So far, it is this policy that has set the
general tone of the government.

The social movements in a complex picture

In this situation, the social movements have been obliged to seriously
modify their behaviour. The electoral defeat of neoliberalism, with the
election of Lula, represented a victory for the trade union and popular
movement, and renewed its possibilities of organization and
mobilization. On the other hand, they continue and have deepened adverse
social and economic conditions for the movement, above all unemployment.
The political conditions have changed, but the fact that the Lula
government is defending, and putting into practice, significant
orientations that clash with the aspirations of the social movements,
make the picture more complex. A phase of expectation in the government
is being transformed into another phase, that involves criticism of
various policies and processes of unification and mobilization with the
objective of pressurizing the government and opposing its choices.

The recent establishment of the Coordination of Social Movements (by the
CUT, the MST, the World March of Women, the UNE students' union and
other bodies) is an important step in this direction. It was created on
the basis of an understanding that a broad and unified popular
mobilization alone can guarantee the conquests of the toiling classes.
Most of the participant movements had already worked together in the
campaign against the FTAA - this meant they already had a critical
vision of the economic policy of the Lula government. A campaign for
jobs was defined as the main initial joint action, since this struggle
has greater potential for mobilization at this moment and makes greater
unity possible. It has a broad platform, including agrarian reform,
national sovereignty and recovery of the social role of the state.

There is, therefore, an important politicization of the social movements
underway, having as its axis a redefinition of their role in relation to
the government. To help develop this process in the direction of
affirming the social movements as basic subjects in the conflict of
orientation of society and government is one of the main tasks of the
Brazilian left today. In fact, the unfavorable correlation of forces
inside the government can only be modified by a strong social
mobilization, defending an alternative set of policies.

A platform for change

The construction of a broader platform presenting society with a
programmatic alternative has therefore a central importance at this
moment. Some elements of this platform could be:

1/ Understanding that popular participation in political decision-making
is a decisive element for the affirmation of a left government
(participatory democracy is one of the axes of the Guidelines of the
Program for Government, approved at the 12th National Meeting of the PT,
which took place in late 2001 in Recife).

2/ An alternative economic policy. Since the beginning of the year many
economists linked to the PT or the left have criticized the economic
orientation of the government and defended an alternative strategy. This
strategy also corresponds to ideas presented in the text of the
Guidelines approved at the meeting of 2001 and in the 'Program of
Government' of 2002; it also corresponds, partially, to the 'Strategical
Orientation of the Plurianual Plan' proposed in June 2003 by the
Ministry of the Planning, which conflicts with the policies of the
Ministry of Finance and the Central Bank (however, the Pluriannual Plan
does not have the same real weight as the concrete measures of economic
policy adopted by the Finance Ministry and the Bank). The central ideas
of this alternative are:

a/ Understanding that the biggest problem of the Brazilian economy is
its external vulnerability, the most acute face of economic dependency;
this is the problem that must be faced in the first place, and that
cannot be done through searching to 'gain credibility' through bigger
fiscal adjustments, which means strengthening dependence on the
interests and moods of the financial markets. It is necessary, on the
contrary, to establish controls on the movement of capital, among other

Moreover, the question of the foreign debt has returned to the centre of
discussion. There was a statement made on September 1, 2003 by Celso
Furtado, a well known Brazilian economist, in favor of the declaration
of a moratorium to renegotiate the debt. There is the example given by
Argentina in its renegotiation; and we have seen the publication of a
study by the IMF itself (!) in mid-September, wherein the latter
recognizes that "countries that declare moratorium, like Argentina, have
great possibilities of reducing the weight of their debt in relation to
GDP and returning to growth in a relatively short period". *7

b) to return to economic growth, through the reduction of interest rates
and abandonment of the concept privileging "primary surplus". This will
make possible the reduction of unemployment (that will also require
other specific policies) and increased incomes for workers. Therefore,
it is the key to the reduction of poverty and social inequalities. It
must be combined with a bigger emphasis on development through the
expansion of the domestic market, a traditional proposal of the PT
(which appears in the 'Strategic Orientation of the PPA - 2004-2007').
In other words: it is necessary to emphasize the search for a national
project of development, as the PT always did.

c) a national project of development is not counterposed to the
deepening of relations with the countries of Latin America and others in
a similar condition to Brazil. This aspect of the foreign policy of the
Lula government is important, and must be strengthened. On the other
hand, any project of development is counterposed to the FTAA

3/ Defense of agrarian reform and a new agricultural model as conditions
for a democratic and popular project of development.

The agrarian question is a contemporary question that has still not been
resolved from the point of view of popular interests. The worsening
social, economic and environmental problems in the countryside show the
necessity of a new agricultural model, that must involve a deep
modification in the agrarian structure and the development of programmes
of support for production and the marketing of family agriculture and
the settlements established through agrarian reform. The Harvest Plan
for Family Agriculture presented recently by the federal government
represents an important positive measure in the strengthening of a
sector that will come to have a still more central role in Brazilian

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