With Latin America rejecting neo-liberalism, the US may have to stomach a leftwing president in Brazil
by Isabel Hilton, September 20, 2002, Guardian UK

According to the latest opinion polls, the most likely winner of Brazil's presidential elections next month is a former metal worker with a long record of leftwing agitation. It is not a prospect that is pleasing either Brazil's foreign investors or its banks.

So alarming has the figure of Luis Ignacio Lula da Silva proved in the past that, on his previous three election bids, Brazil's overwhelmingly conservative mass media closed ranks to ensure that his image did not survive the campaign unshredded.

Today though, Lula, leader of the Workers' Party (PT) - Latin America's largest party of the left - is running at 42% in the polls. His steady climb presents those investors and bankers - not to mention the Bush administration - with a tricky choice. Should they follow their instincts and cut and run, thus pushing Brazil's fragile economy even closer to default? Or should they grin and bear it, trusting that a combination of Lula's recently acquired middle-aged moderation and fear of the consequences of a confrontation with the international financial community will keep his behaviour within bounds acceptable to them?

Six months ago there seemed to be no doubt which way the money was headed. As Lula held firm in the polls, the banks downgraded Brazil's credit rating, precipitating a slide in the value of its currency, the real.

At the same time, the Bush administration patronised a record $30bn International Monetary Fund credit to the debt-ridden country to try to boost the standing of the incumbent president, Fernando Enrique Cardoso, and, by extension, the chances of his nominated successor - a Lula rival. The IMF made clear that future disbursements of the loan would depend on continued interest payments. In other words, any monkey business from a future President Lula and all bets would be off.

Lest anyone miss the message, the world's most celebrated currency speculator, George Soros, spelled it out in letters 10 feet high.

In an interview with the Folha de Sao Paulo, Brazil's leading financial newspaper, in August, Soros argued bluntly that Brazil would not be allowed to elect Lula president.

As long as Lula led the polls, Soros predicted, and even more should he win, the Brazilian real would be under speculative attack. Therefore, if elected, Lula would be forced to declare a moratorium on Brazil's debt, precipitating a much larger version of the catastrophe that has been played out, to the general indifference of the world, in neighbouring Argentina.

That prospect alone, Soros said, would prevent Brazilians from electing Lula. It was tough, he said, but added: "In the Roman empire, only the Romans voted. In modern global capitalism, only the Americans vote. Not the Brazilians."

His remarks were judged so outrageous in Brazil that even President Cardoso was forced to come to Lula's defence.

In the past, Brazilians appeared to think along lines similar to Soros's bleak analysis. But today things are different. At this stage in the great neo-liberal experiment, there are few voters in Latin America who have failed to notice that the net result of those policies has been that the gap between rich and poor, already preposterously wide in Brazil, has grown wider.

The voters want jobs, healthcare and education - and by now they know that the IMF is not the best route to get them. The miseries of Argentina, once touted as a neo-liberal model, only illustrated the point. Their problem, though, after 1989, was to find a plausible alternative - which makes the unfolding political drama in Brazil of particular interest.

Lula began his political career in 1980, with a classic leftist position. While he enjoyed fame as a union leader, Brazilians never trusted him to run the country.

His brand of leftwing socialism seemed old-fashioned even before the collapse of the Soviet system. When the USSR did go down, Lula seemed stranded by the end of history. Latin America turned to Washington - and Chicago - for new solutions.

But, as historian Eric Hobsbawm observes in his autobiography, Interesting Times, the disappearance of "even a very bad socialist region from the globe", had consequences even for those who had not signed up to real existing socialism. It removed, Hobsbawm argues, any constraints on the selfishness of the rich.

"What political penalties do they have to fear if they allow welfare to erode and the protection of those who need it to atrophy?" Hobsbawm asks.

After 13 years of that experience, Lula's socialism - rather softened round the edges and now dressed up in a suit - has begun to seem attractive.

In former times, a Lula victory would certainly have been viewed in Washington as a signal to push Brazil into outer darkness. But Brazil is Latin America's largest economy and its collapse, on top of Argentina's, could not be ignored. Washington may be forced to accept Lula - even to support him - for fear of something worse.

Reproduced from:
http://www.guardian.co.uk/comment/story/0,3604,795505,00.html