lula And The Argentine Signal

Brazil is facing a critical situation in its history: a party from the left has come to government with a widespread popular legitimacy, crystallising the hopes of the large national majority which yearns for a radical change to the policies implemented in recent years. These policies have resulted in deep economic depression, the escalation of foreign dependency and the impoverishment and social exclusion of large sectors of Brazilian society. In spite of the enormous expectations Lula raised, not only in Brazil but also in the whole of Latin America, these changes have still not been produced. On the contrary, what has been seen is an increasing implementation of the orientation imposed by previous governments, even exaggerating some of the most characteristic features, such as the policy of high interest rates. The old policies are continuing with renewed gusto, while the new ones, like “zero hunger”, still have not been introduced. In his electoral campaign Lula insisted that hope must conquer fear. Unfortunately, until now at least, the absurd fear of possible reprisals in the market has conquered hope, incarnated in the figure of the working-class President.


As an Argentine, a Latin American and, in particular, as an uncompromising “Brasilophile”, I would like to share some reflections which I believe could be of some use in the discussion regarding the economic and social future of Brazil.


I believe that it is of the utmost importance that the debate regarding the most appropriate policies to honour the electoral promises made by Lula and the PT take into account some lessons from Argentina’s recent history. The existing differences between our countries are not so great as to think that we cannot learn anything from one another. And in a situation like the current one I believe that Brazilians should pay a great deal of attention to the image mirrored in Argentina. For some years, for example, there seems to be a “repetition compulsion” in the Brazilian economic authorities that appears to inexorably lead them to emulate whatever foolishness is being tested on this side of the Río de la Plata. This happened when we adopted Plan Austral, shortly afterwards imitated in Brazil under the name Plan Cruzado; it happened again when Domingo F. Cavallo invented convertibility and established a crazy parity in the exchange rate of one peso to one dollar, only to be met with an even more irrational imitation in Brazil which set an exchange rate of 0.80 cents of the Brazilian “real” to the dollar, something which, as in Argentina, was much closer to delusion than to serious economic reasoning. Since Argentina could not sustain this absurd exchange rate, Cavallo and his successors had to resort to increasingly inflated interest rates in order to attract foreign capital to maintain the spell. Finally, the inevitable happened, causing the collapse of the financial system, the “corralito”, and the deepest and most prolonged economic crisis in Argentine history. In passing, the government that took these policies to the extreme paid a very high price for their recklessness: the mass demonstrations of 19 and 20 December 2001 that put an end to (President) De la Rúa, Cavallo and the Alliance government. Looking at things from the Argentine perspective, the policies that are currently being followed in Brazil, with phenomenally inflated interest rates in a world in which money is lent at a rate of 3% annually, seem to draw inspiration from those same fantasies – since they were not serious ideas – that brought about the economic and financial collapse of Argentina. We can only hope Brazil reacts in time to avoid a repetition of the Argentine outcome.


But apart from these disturbing parallels there are other things which worry me even more. Looking back at the days of the Menem era, in the nineties, one is confronted with the same type of admiration and praise that is today being lavished on Lula. The admirers are the same: the world financial establishments, the Director General of the IMF, the President of the World Bank, the Secretary of the United States Treasury, the White House, the leaders of G-7, the international financial press, the large financial speculators, the CEOs of the monopoly conglomerates, etcetera. What they are saying of Lula today is the same as they said of Menem: that he was a valiant governor, that he had abandoned his far flown ideas characterised by populism and state intervention, that he demonstrated prudence and good sense in the management of the public budget, that he had learnt to interpret market signals correctly, that he had overcome the irrational populist fear of globalisation. They also praised his “reformist” zeal in social security matters, in the opening of the markets, in financial deregulation and in the privatisation of state-owned companies. His calls to “modernise” the trade unions and to “de-ideologise” labour negotiations were received with a round of applause, as were his initiatives, fortunately thwarted, to tax the public university. In summary: the same people and the same arguments of yesterday, addressed to Lula and the PT government. These people and their immense propaganda apparatus repeated everyday that Argentina was on the right track, was a model to imitate, that its future was secure and many other lies of the kind. When the debacle occurred all these individuals fell silent and blamed the Argentines for the disaster. It would be a good idea for Brazil to take note of this lesson. The praise of the pillars of current international disorder is not accustomed to giving good advice to the governments established by the peoples’ vote.


If it means to keep faith with its electoral promises, but also with something much more important, its historical identity, the PT government has to definitively abandon the neo-liberal policies that have, unfortunately, inspired its governmental administration. Among many other reasons, -about which literature on the matter contributes an amazing battery of empirical arguments and evidence-, because these policies do not serve to generate growth, nor much less to redistribute wealth. With these policies, Brazil will never make progress and will continue to be one of the most unjust countries on the planet. This is not just my opinion. It is also the opinion of the majority of the most well- known economists in Brazil and the world, and it is inconceivable to suppose that all of them are wrong, while a certain few, incrusted in the government offices in Brasilia, are endowed with the truth. According the Nobel Prize-winner for Economics, Joseph Stiglitz, the IMF’s recipes do not turn out and the international evidence which he provides in his latest book is overwhelming. In no part of the world have these policies brought about an end to the crisis or allowed these countries to move along the path of economic growth and distributive justice. Can a miracle be produced in Brazil? In the Argentina of a few years ago they used to say, “God is Argentine”. I hope that no one will say the same foolish remark in Brazil.


When asking friends in the government why Brazil does not try other policies the response seems to be copied from the manuals of business schools in the United States: we need to win the confidence of international investors, we need to bring foreign capital to Brazil and we have to respect a very strict fiscal discipline, because to do otherwise would mean the “country risk” would shoot sky-high and no-one would invest a dollar in the country. Not a lot of effort is needed to demonstrate the total fragility of this argument. If there is a country with all the conditions to successfully try out post neo-liberal politics in the world, then this country is Brazil. If Brazil cannot, who could? The Ecuador of Lucio Gutiérrez? A possible government of the Frente Amplio in Uruguay? A possible government of Evo Morales in Bolivia? Argentina, I doubt it, as there would have to be extremely favourable international conditions. Brazil, on the other hand, has everything: an immense territory, all sorts of natural resources, a huge population, an industrial structure among the most important in the world, a society scourged by poverty but with an elevated degree of social and cultural integration, an intellectual and scientific elite of a world-class level and an exuberant and plural culture. In addition, Brazil has sufficient capital and a potential tax base of an extraordinary magnitude but which still remains unexplored due to the strength of the owners of wealth, who have vetoed any initiatives in this respect.


The corollary of “conservative possiblism” is resistance to change: nothing can change, not even in a country with Brazil’s conditions. If not, assure some government officials from Brasilia, the penalties we will suffer for abandoning the dominant economic consensus would be terrible, and would liquidate Lula’s government. Again, a close look at Argentina’s recent economic history can be educational. Argentina cultivated “possiblism” intensely, from the days of Alfonsín to the moments of the final disaster. After the collapse, President Duhalde lost more than one year in fruitless and un-conducive negotiations with the IMF to no avail, but which revealed the deep-rooted presence of “possiblism” in the Casa Rosada (the presidential palace). This ghost still agitates Argentine politics, and even if there are some encouraging signs such as the new regulations limiting the movement of speculative capital, the dangers of a recurrence of these suicidal policies are too large to pass unnoticed. The false realism of “possiblism” led Argentina to the worst crisis in its history, by tying down the policies and the state to the whims and greed of the markets. On the other hand, when it had no other option than to declare a messy and disordered default, things did not further deteriorate for all that. Before, there capital did not flow in and neither does it now. But the timidly heterodox trial set in motion after the default, above all in recent months, resulted in a modest revival of the economy and the practical demonstration that even a country that is weaker and more vulnerable than Brazil can resume growth if it turns a deaf ear, for whatever reason, to the (bad) advice that the IMF has lavished on the country for decades and to the numerous promises of support from the “international financial community”. Why should Brazil follow the policies dictated by the main promoters of the endless succession of crises and recessions which are affecting economies all over the world? What self-respecting economist – and I am talking about economists, not the spokespersons of corporate lobbies disguised as economists – can believe that it is possible to grow and develop while inducing recession through exorbitant interest rates and reducing public expenditure, suffocating the domestic market, increasing unemployment, slowing any growth in consumption, facilitating the operations of speculative capital, burdening the poorest sectors of society with indirect taxes, while subsidising the strongest and granting the large monopolies the right to veto taxes?


I am sure that many of my friends in Brasilia would tell me I am right, but would say that for the moment there is nothing else to be done. What is needed now is stabilisation, and the time for reform will come after. A serious error. President Lula does not have three and a half years in front of him. He has a maximum of eight or nine months of effective government. More concretely, until the end of the 2004 Carnival. After this he will not be able to take any serious initiative and much less of a genuine reformist nature. The continuous but futile effort that he will have been forced to undertake will prevent him from even beginning to implement structural transformations, which Brazilian society has been demanding for so long. The Right, emboldened by his hesitations and concessions, will have a much more favourable power balance than at present. Its powerful lobbies, its corporate organisations, its mass-media and its international contacts with the “guard dogs” of international financial capital will offer a formidable barrier against any 11th hour attempt to promote progressive polices. If until now the Right has been content to use, successfully for sure, the tactics of “praise and seduction” to domesticate Lula’s government, there is nothing to indicate that if circumstances change – for example, if Brasilia decides to adopt other policies – its mentors would abstain from recourse to their favourite methods of “pressure and extortion” such as those applied to Chávez and those which produced the collapse of the Chilean economy during Salvador Allende’s government. In such a case, Lula would not only have to battle with a much stronger opposition. His relative power would be reduced due to the demoralisation of his own party and the disillusion of the millions of Brazilians who trusted in his electoral promises and who, after a time, remain with empty hands. When the moment arrives to fight the causes of this momentous frustration that is Brazil today, one of the most unjust capitalist countries of the world, his own coalition will be irreparably damaged by the lack of confidence and frustration. While the conservative forces are well aware of the privileges that they need to defend and how to do it, and do not hesitate to put it into practise, the huge masses will be faced with a much more confusing panorama. The masses do not know where the government is taking them nor to what point it will be ready to fight a battle to construct the new Brazil which they long for. For this reason it is a fatal error to suppose that they have much time ahead of them. Time plays against the reformist soporifics of Brasilia and in the favour of its adversaries, because “the party of order” is increasing its force every day while the emerging social forces are getting weaker with the course of time and the lack of change. The former are strengthening themselves ideologically, emotionally and organisationally; the latter are confused, demoralised and disorganised. It is easy to predict the result of a battle where the contenders appear so unevenly matched.


Successive Argentine presidents have opted to govern by calming the markets and promptly satisfying each of their complaints. The voices of big capital and the IMF echoed thunderously in Buenos Aires, and the government did not waste a minute responding to its mandates. The results are in view. It is true that there is no comparison between a figure as loved as Lula and a figure from the political underworld such as Menem or someone as inept as De la Rúa. Nor is there any comparison between the Justicialist party or the Alliance (this insipid mix of radical dilettantism and “frepas” opportunism) and the PT, one of the most important political constructions at a world level. But neither a respectable leadership nor a great party of the people guarantees the right direction for a government. During the Stalin era, the leader and the party were said to be infallible. Today, fortunately, there is no one who still believes this. And a concrete analysis of the concrete situation, as was said in other times, leaves us extremely concerned about the future of Brazil. We are sorry to say this, but we are convinced that Lula and the PT government are advancing along the wrong path, at the end of which they will not find a new, more just and democratic society but a capitalist structure that is more unjust and less democratic than what came before and, in addition, much more violent. A country in which, at the end of this process, the dictatorship of capital, covered with ethereal pseudo- democratic robes, will be iron-fisted than before, demonstrating the fact that George Soros was right when he advised the Brazilian people not to bother electing Lula because in any case the markets will govern. And, as is well known, the markets do not govern democratically, nor are they concerned about social justice. It would be well-advised, then, to save Brazil the horrors that “possiblism” and policies of “placating the markets” produced in contemporary Argentina. My friends in Brasilia should study carefully what has happened in my country and, above all, once and for all abandon this time-honoured habit of copying our failures. (Translation y ALAI)


* Atilio A. Boron is Executive Secretary of CLACSO-Latin American Council of Social Sciences.



“Other News” is a personal initiative seeking to provide information that should be in the media but is not, because of commercial criteria. It welcomes contributions from everybody. Work areas include information on global issues, north-sutrh relations, gobernability of globalization. The “Other News” motto is a phrase which appeared on the wall of Barcelona’s old Customs Office, at the beginning of 2003:”What walls utter, media keeps silent”. Roberto Savio


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