Brazil under a Labour Government Part One
Pires-O'Brien, Joaquina, Contemporary Review
WHEN Brazil's Labour candidate, Luis Inacio Lula da Silva, from the Workers' Party (Partido dos Trabalhadores-PT), won the presidential election of 27 October 2002, there was apprehension in the West, because of reports by some intelligence strategists in the United States. The alarm they raised during the first half of 2002, when the polls revealed the advantage of the Labour candidate, echoed throughout Wall Street. Its market analysts, already worried that Brazil would follow Argentina and declare moratoria on its debts, persuaded the credit-rating agencies to raise Brazil's risk-factor to stratospheric 1400 points.
At home, in Brazil, only Lula da Silva's closest opponent, Jose Serra, matched the offensive of the foreign intelligence analysts, accusing him of keeping links with the terrorist group FARC (Revolutionary Armed Forces of Colombia), via the 'Landless Ones' Movement (MST), which the Workers' Party supported. Lula da Silva filed a complaint with the Electoral Tribunal, which ordered that the accusations had to stop. In general, the criticisms that Lula da Silva got at home were less harsh and more sardonic, tending to focus on some 'pecadillo' in the candidate's impromptu speeches.
Abroad, Lula da Silva's harshest judge was Dr Constantine Menges, a senior fellow of the Hudson Institute, Washington D.C., whose three papers, A Strategic Warning: Brazil, Blocking a New Axis of Evil and Brazil's Lula da Silva, Castro and China, were widely quoted in the American press. In the first paper, Dr Menges claimed that Lula da Silva was a supporter of both terrorism and nuclear weapons, whilst in the last two papers he claimed that the victory of Lula da Silva in 2002, could lead to the formation of a Southern Hemisphere 'axis of evil', a pro-Castro alignment of the Marxist regimes in Latin America. Such an ideological block could forge links with rogue nations to develop both nuclear weapons and ballistic missiles.
Although Brazil is one of the world's largest emerging economies, its massive foreign and national debt makes its economy vulnerable to other markets' turmoil. Brazil's foreign debt was knowingly caused by the large sums it borrowed to build infrastructure, from the new capital, Brasilia, in the late 1950s to the great highways and dams of the 1970s and 1980s. From the late 1980s Brazil's national debt surged because of government overspending on pensions and in welfare benefits. The root of Brazil's internal debt lies in its new Constitution, passed in 1988, which gave the state the green light to profligacy. The vast programme of reforms launched in 1995 by the then President, Fernando Henrique Cardoso, was aimed at sorting out the escalating costs of running the government, including public services, such as state pensions. In my August 2001 article published in Contemporary Review, 'The Uphill Struggle of Brazil's Reforms', I mentioned the contempt for the reforms shown by many Workers' Party parliamentarians, who even resorted to tricks to slow them down. Such contempt not only suggested that the Workers' Party was against the reforms, but also gave the impression that should it ever come to power, it was likely to ditch the reforms altogether, putting Brazil in the fast lane towards bankruptcy.
Brazil's reforms were doomed from the start. At first, they had to struggle against the plain opposition of the anti-reformers, but then came the friendly fire of pro-reform activists, striving to ensure that only cuts to other people's pay cheques were to be made. The two most likely alternatives of not reforming are: to obey the rule of law and carry on with the spending-spree, or, to ignore the rule of law and limit the privileges granted by the constitution to selected categories of civil servants. The first alternative is a shortcut to insolvency, the second, a recipe for discontentment and civil unrest. Scenarios like these were at the core of Dr Menges' prediction that Brazil's Labour government, not only could halt the reforms and make Brazil insolvent, but that the resulting moratoria could drag down both the U. …