Crisis and Elections: Where is Brazil Going?

by André Ferrari, SR, the CWI in Brazil (Sept/02)

BRAZIL FACES an historic election in October, just as the country faces a severe economic crisis. Andre Ferrari of Socialismo Revolucionário, the Brazilian section of the CWI, looks at the prospects ahead.

Once again, Brazil has mixed an explosive cocktail of general elections with a sharpening economic crisis. The last time this happened was in 1998, in the wake of the Asian and Russian crises, when the Brazilian economy came close to crashing too. The US administration under Bill Clinton supported a $41bn International Monetary Fund (IMF) aid package to avoid an economic collapse in the middle of the election campaign, and enable Fernando Henrique Cardoso of the Partido do Social Democracia Brasileira (PSDB) to be re-elected against Luis Inácio 'Lula' da Silva of the Partido dos Trabalhadores (PT).

Only days after his re-election, Cardoso devalued the Brazilian currency, the real, and floated the exchange rate. That did not succeed in avoiding a deep recession in 1999 although the devalued real and continued growth in the US enabled exports to edge forward. Nevertheless, Cardoso's second term was one of economic stagnation and rising unemployment. People were angry and social struggles revived. There were more splits between the capitalist parties that had supported the Cardoso government and, in this context, the PT won more support, as seen in the municipal elections of 2000.

The 'Cardoso period' also chalked up ballooning debt (from 30% to 60% of GDP) and a sharp increase of foreign-ownership in the economy. Just to meet its current commitments Brazil now needs around $50bn a year. With the international economy slowing down, however, and the collapse of Argentina, one of Brazil's main trading partners, international investments are falling and exports are not growing fast enough. With the highest real interest rate in the world, Brazil is mired in very low levels of economic growth. The average growth rate during the 1990s, the years of neo-liberal policies, was no more than 1.7%.

When the latest IMF aid package was announced in August, Brazil was on the brink of default. There was a flight of capital, a plunging exchange rate and the country was given record risk ratings. Trade finance was virtually cut off. A few days before announcing the agreement, US Treasury Secretary Paul O'Neill had spoken against more financial assistance for Brazil. The US, he said, did not want its taxpayers' money flowing into the Swiss bank accounts of the corrupt Brazilian elite! Then O'Neill visited Brazil and switched to supporting one of the largest IMF aid packages ever, of $30bn, with two payments of $3bn in September and November. The remaining $24bn is due in 2003 if the next government - to be elected in October - sticks to the rules.

The change in the US government's attitude reflected the potential impact of a Brazilian default on an international scenario marked by major losses for US banks due to the Argentinian moratorium and corporate corruption and bankruptcy in the US. The main aim of the IMF is to shore up the private banks. The real beneficiaries of the IMF package are in New York and Washington DC, not in Brazil.

In practice, the IMF loan enables the banks to play for time and move to a better situation for getting their money out before the perspective of a financial meltdown in Brazil, or forced renegotiation of its debt. The added difficulty is that this may have to be carried out under a PT government.

Cardoso's economists said the package showed the IMF has confidence in Brazil. In reality, it reveals pessimism in relation to the future of the Brazilian economy. Even mega-speculator George Soros said that the IMF agreement would mean 'Brazil bleeding to death, like Argentina' and proposed writing-off part of the Brazilian debt. (Valor Economico, 13 August)
The main condition underlying the IMF agreement was keeping to a 3.75% budget surplus (before interest payments). This means that around $22.5bn will have to be spent on interest payments, but even this is seen as insufficient. The pressure to raise the primary budget surplus was not clearly posed by the IMF, however, because it would provoke resistance from several candidates, particularly Lula and the maverick Ciro Gomes, in the middle of the election campaign. Although IMF dollars may avoid a collapse until after the next government takes office, the outlook for 2003 is one of enormous uncertainty.

Binding Lula to the agreement

Cardoso took the unprecedented step of asking the four main presidential candidates to come for talks on the same day. This reflected his fear of seeing his government replaying the last months of Raúl Alfonsín's lame-duck government in Argentina in 1989, when he had to leave office several months early due to the economic collapse. The aim was to put the candidates on the spot and have them commit to continue his policies, particularly Lula.

With the exception of José Serra, the government's own candidate, all the others who went to meet Cardoso were critical of the government's economic policy. But they also committed to the terms of the IMF agreement, including the budget surplus requirement. Lula compared going to the IMF with a visit to the dentist: 'I don't like it, but there's no other way out'.

The main strategy of Lula and the PT leaders is to attempt to make the party more palatable to the middle classes and the Brazilian and international economic elites. The PT programme has been watered down even more and the party is now committed to 'no breach of contracts', paying-off debt on time, not reversing privatisation, and sticking to the terms of the IMF agreement - including a 3.75% budget surplus.

Recently, the PT formally withdrew from the committee of left parties and social organisations organising a people's plebiscite on joining the Free Trade Area of the Americas (FTAA) in the first week of September. The reason was to avoid connecting Lula with any radical action that might scare international investors. Even today, right-wingers raise the spectre of the PT's participation in the people's plebiscite of 2000, where about six million voted to suspend the payment of national and foreign debts.

The PT has built a formal coalition with the Partido Liberal (PL). Its candidate for vice-president is senator José Alencar, who owns one of the country's biggest textile companies. Lula has been arguing that the joint slate with Alencar is a great social pact, an 'alliance of producers against speculators', workers with 'honest, nationalist businessmen' who favour real economic development.

Lula has also attracted an anti-Cardoso section of the opposition Partido do Movimento Democrático Brasileiro (PMDB), which includes old bourgeois politicians such as former-governor of the state of São Paulo, Orestes Quércia, and the current governor of Minas Gerais, Itamar Franco (non-party). There are even discussions underway with former president José Sarney.

This policy of alliances has had a traumatic impact on the PT rank and file. Broad left sectors linked to the Catholic Church, a traditional source of PT support, have rejected the coalition with the PL, a party now used as a vehicle by several right-wing politicians and evangelical Christians. In one state, Alagoas, former PT candidate for governor, senator Heloísa Helena, resigned despite having a chance of winning, in order to avoid running on the platform of a coalition with the PL.

In general, most organised workers are distrustful and confused by this turn to the right. Many still think, however, that Lula should be 'moderate' and avoid conflicts to avoid losing the presidency for the fourth time. Having won, they think that the PT would then be able to push for the profound transformations needed in Brazil.

A more critical section does not agree with the current approach but, even so, sees a vote for Lula and the PT as the only way of defeating the bourgeois candidates. This view is reflected in the position taken by the Movimento dos Trabalhadores Rurais Sem Terra (MST - the Landless Workers Movement). The MST takes a critical view of the right turn by the PT but officially supports Lula. The official position of the Central Única dos Trabalhadores (CUT), the largest trade union confederation, is also to support him.

In spite of everything, the majority of working-class people still identify Lula and the PT with the party's past history of struggle. The reason Lula is leading the polls is not the moderation of his current policies, but his past of struggle and opposition to this government.

Some of the more organised sections, and mainly youth, are showing disillusionment with the PT. Some have become profoundly sceptical in relation to political struggle. Another sector looks to non-party actions, and a minority is for voting for candidates to the left of Lula such as the PSTU's José Maria de Almeida. In the 1998 elections, Zé Maria received 200,000 votes (0.3%) and his vote may well increase this time.

Despite the PT leadership's efforts at moderation, it is still difficult for the bankers and speculators, the Brazilian and foreign ruling classes, to accept a PT government. At the same time as they attempt to tie Lula down, the elites fear that a PT government could lose control over the workers in a context of deepening crisis and social struggle. The tremendous pressure of an economic crisis and a widespread radicalisation of the masses could compel a Lula government to go further than he intends. It could force him to break the agreement with the IMF, although not to its ultimate conclusion and a break with capitalism.

The PT has a broad basis of support among organised workers and it has not yet gone as far as the European social democracy in terms of totally changing its class character and becoming a bourgeois party. A crisis situation, with the PT leadership trying to contain struggles, would speed up the reorganisation of the left with a much broader section of workers and youth looking for a left alternative. In this context, there would be the possibility of a left split from the PT and the formation of a new party along the lines of the original PT. One task of the socialist left in the PT and the social movements is to build a base for a left alternative in the current election campaign.

Who is the 'Anti-Lula'?

The sharpest dispute in the election campaign is seeing who is going to be the 'anti-Lula'. In spite of the support of the government machine, the media and the national and international capitalists, Serra is not making headway because he is so closely associated with the government. Not even 'electoral terrorism' has helped the PSDB. The cry of 'It's either Serra or chaos' has not had the same effect as when Cardoso used this tactic during the 1998 crisis. As the crisis developed, in fact, this tactic led to a blowback against its own candidate.

The last card in Serra's hand is his swathe of officially-allocated TV and radio time - the coalition supporting him has double that of its main opponents. But if Serra does not pick up over the next few weeks there will be a still stronger trend for conservative forces to move to support Ciro Gomes.

Gomes is a former member of the PSDB and ex-governor of Ceará state in North-East Brazil. He took over as finance minister when Cardoso stepped down to run for president for the first time in 1994, a few months after the Real Plan was introduced. In the early days of Cardoso's first government, however, Gomes split from the PSDB and attempted to build his image as a critical alternative in the event of the Cardoso government losing support, while remaining reliable from the point of view of the elites.

At this time he joined the small Popular Socialist Party (PPS), the new name of the old Brazilian Communist Party, which was totally transformed by an influx of careerist politicos and conservatives. In the 1998 presidential elections Gomes took 11% of the vote, coming third behind Cardoso and Lula. This time he is in a coalition with the long-time populist Leonel Brizola and his Democratic Labour Party (PDT), which was allied with the PT in 1998. Gomes' running mate for vice-president is Paulo Pereira, who is president of Forca Sindical, the neo-liberal union confederation opposing the CUT.

Gomes has attracted parties that used to support Cardoso, such as the Brazilian Labour Party (PTB) and most of the Liberal Front Party (PFL), which are the remnants of Brazil's leading right-wingers and conservatives. Increasingly, politicians from the PSDB itself are abandoning what they see as Serra's sinking ship and moving to support Gomes. Despite all this, however, Gomes has picked up support in the polls by his populist attacks on the Cardoso government and its economic policy, in some situations appearing more radical than Lula.

Break with the IMF!

Brazil's crisi will never be solved by the IMF agreement. On the contrary, the more Brazil is tied to the Fund, the more it will sink into the quagmire of capitalist crisis. In the context of economic recession worldwide, with the US economy leading the way, any real recovery of the Brazilian economy is practically ruled out.

Brazilian workers will have a choice. They can stop payment of the debt if the country goes broke, as Argentina did, or stop payment as an assertion of sovereignty while organising popular resistance and with the workers taking the future of the country into their own hands.

The only way to deal with the crisis is by freezing large accounts and confiscating speculative capital, ending remittances of profits abroad, expropriating the banks, nationalising the financial system and major companies under democratic workers' control, and planning the economy in the interests of the majority of the people.

The general mood among voters is in favor of real change. This mood could be deepened if there was a clear awareness of the tasks that face the organised working class and its allies among the oppressed population. This determination to change things, could then become consciousness of the need for an anti-imperialist and anti-capitalist programme. This could be translated into the organisation of millions of workers, young people and rural workers, struggling together on the basis of breaking with the IMF and rejecting submission to international speculative capital. That would not only enable the PT to win the elections, but also build the organised social base needed for real transformation.

To avoid the total 'Argentinisation' of the crisis we have to 'Argentinise' the workers' and people's resistance and struggles. This means mobilising the masses, building mass meetings and pickets, occupations of factories with workers running them, and overthrowing presidents. These are the examples from Argentina that we ought to repeat here in Brazil. A PT government that took up an anti-capitalist alternative would obtain active support from workers in Latin America, the anti-globalisation movement and the US workers now being affected by the crisis of capitalism.

The other candidates for president - Gomes, Serra and Garotinho - whatever they say, are no more than mere puppets of the elites. From Lula at least we can demand that he be consistent with the history of the PT and its basis of support in society. If Lula and the PT leaders continue to reject this role, they will pay a high price. In any event, under a Lula government it would be possible to build a broad social base to fight for the left alternative. A Lula government would be a setback for the elite. Therefore, we have to elect Lula to defeat the candidates of George Soros and the speculators and capitalist sharks. Against what some of the more sectarian on the left are saying, it is not true that it makes no difference whether Lula wins or not.

But a critical vote for Lula is far from being enough. We have to strengthen the left, inside and outside the PT, in the unions and social movements, to pose a socialist programme as the alternative to the crisis. With a victory or defeat for Lula the socialist left of the PT and the social movements must build a unified block and prepare itself for the challenge of the new period. This could include the possibility of building a new workers' party, of class struggle, that is democratic and socialist.

This is what the members of Socialismo Revolucionário (SR), the Marxist tendency of the PT and Brazilian section of the CWI, will argue for in these elections. In São Paulo, SR is standing Miguel Leme (member of the leadership of Apeoesp, the state's teachers' union, the largest in the CUT) as a socialist candidate for the state assembly under the slogan, 'For a socialist PT with no bosses'. Around this campaign we will seek to gather activists who want to vote against bourgeois candidates but who reject the PT's turn to the right.

Given the continent-wide scenario of sharpening crisis and mass resistance, the radicalisation of the class struggle in Brazil and the beginning of the construction of a left and socialist alternative has the potential to intensify the offensive of the mass movement throughout Latin America. This would have a tremendous effect on workers' struggles worldwide.

World leader in social inequality

Brazil is not only the world champion in football, but its other achievements are less desirable:

Along with the world's highest real interest rate, Brazil has the planet's second-highest unemployment in absolute terms.

Only India has more, with a much larger population than Brazil.There are 54 million unemployed or semi-unemployed.

According to official data, 50 million destitute people consume below the minimum requirement of 2,300 calories of food a day.In relative terms, the percentage of unemployed workers in Brazil jumped from 78th in the world ranking in 1990 to 23rd in 2000.

Brazil is second only to Colombia in the numbers of homicides with 44,000 people murdered every year. This is an undeclared civil war that mainly affects the poorest and youngest in society.