In Lula’s Shadow

Brazilians will be heading for the polls come October to elect a new president. For the first time since democracy was returned to the Latin American country in the 1980s, the name of Luiz Inácio da Silva will not appear on any ballot. But for the major party candidates, it’s hard to escape the shadow of the man who has been President of Brazil since 2003.

Lula, as the former union leader is affectively known, assumed the highest office in the wake of the presidencies of Fernando Collor de Mello and Fernando Cardoso who together occupied the presidency for little over a decade. Both presidents set out to break with Brazil’s previous experiments with socialism, opening the country’s borders to free trade and privatizing state corporations. Collor was particularly diligent in taming inflation with amounted to a staggering 84 percent a month when he came to power.

Although among the founding members of the Partido dos Trabalhadores (Workers’ Party) in 1980, Lula, in part, perpetuated the neoliberal policies of his two predecessors while president. He launched a series of social programs simultaneously which have lifted millions of Brazilians out of poverty and into the middle class since. Between 2003 and 2008, the number of people living in poverty dropped by so much as twenty million while income disparities narrowed. Regional inequalities also decreased. In the northeastern part of the country, once notoriously backward, incomes are rising faster today than the national average.

Lula’s governments could built on the stability fostered during Cardoso’s two terms in office but there is no doubt that his steep raising of the minimum wage as well as the vast Bolsa Família welfare program for the poor have been of major consequence. He was fortunate to rule in an era characterized before anything else by China’s ascendancy on the world stage. China’s hunger for foodstuffs and iron ore has boosted Brazilian experts while bringing the two countries close together in the G20 and informal BRIC.

In spite of Lula’s successes there is ample reason to crave a greater change in direction than his successor Dilma Rousseff promises to deliver. José Serra, currently governor of São Paulo and expected to run against Rousseff for the Social Democrats, likes to say that Brazil holds three negative world records: it maintains the highest interest rates in the world (the central bank’s benchmark rate is 10.25 percent), it has the highest tax burden of any developing country and it has among the lowest rates of public investment. All of these he blames on an “obese” national government that is spending too much on public-sector job creation and paying too little attention to promote private market growth.

Brazil’s growth rates are impressive and it has expertly weathered the recession yet obstacles remain, particularly in the form of poor infrastructure. The government has allowed some private investment to be made in roads, railways and ports but insists on controlling airports which continue to be run inefficiently by a government bureaucracy.

Meanwhile, the country has to spend more and more on pensions. Although just 6 percent of Brazilians are of pensionable age, they eat up a little over 11 percent of GDP. In the United States, for comparison, the numbers are almost perfectly reversed. The generosity of the pension regime is in large part to blame: Brazilians can often afford to retire in their fifties while their benefits are tied to the minimum wage.

Rousseff, so far, has shown little appetite for reform. She has announced to continue Lula’s policies which may be popular but cannot be perpetuated indefinitely. Serra instead envisions a leaner state with lower tax rates and greater room for private business to prosper. Neither candidate offers radical change. The sixteen years of stability and growth enjoyed under Cardoso and Lula are valued too much by Brazilians to imperil and rightly so: grand reform schemes in the past wrecked nothing but havoc and deserve no repetition.

Rousseff’s popularity has gradually improved in recent months and nearly doubled in May 2010. Her support currently stands at 40 percent while Serra’s popularity hovers around 35. Rousseff polls particularly strong in the north and northeast, still a bit poorer than the rest of the country, whereas Serra does well in the south and southeast where he enjoys comfortable 20 and 10 point leads respectively. These two regions are more urbanized and prosperous. The southeast alone, which is composed by the states of Espírito Santo, Minas Gerais, Rio de Janeiro and São Paulo, is responsible for approximately 60 percent of the country’s GDP. The candidates are tied in the central west, seat of the capital Brasília.