Lula's message for two worlds - Can Brazil's president continue to appeal to Porto Alegre as well as Davos?
www.economist.com Jan 30th 2003 | PORTO ALEGRE From The Economist print edition
PERHAPS no other world leader could have pulled off the feat achieved last weekend by Brazil's new president, Luiz Inácio Lula da Silva. First, an ebullient crowd of 75,000 at the World Social Forum, a global gathering of the radical left, hailed him as its leader. “He provides hope not only to his own people but to struggling people all over the world,” said Thomas De Castro, a Canadian trade unionist, as he listened to Lula at the forum in Porto Alegre, a tidy state capital in southern Brazil. Then Lula flew directly to Davos, the Swiss town that hosts the World Economic Forum. There, his speech was greeted ecstatically by the assembled businessmen and bankers who symbolise everything that the Porto Alegre event was set up two years ago to oppose.
A month into his term, Lula does not discourage the idea that his Brazil will provide the world with a new paradigm. In Porto Alegre, he cited several Latin neighbours which, he claimed, “have high expectations” of his government. In Davos, he called for the creation of a fund, backed by rich countries and multinationals, to “fight misery and hunger” in the third world. We'll look into it, replied the head of the Davos forum.
World Social Forum, World Economic Forum, Workers' Party (in Portuguese), Brazil's presidency (in Portuguese), Free Trade Area of the Americas, Brazil and the IMF
Yet what brings joy to Davos Man ought to alarm Porto Alegre Woman, and vice versa. The Porto Alegre “progressives”, as they call themselves, are strident folk. Many routinely equate George Bush with Adolf Hitler. The proposed Free-Trade Agreement of the Americas (FTAA) amounts to crimes against humanity. Capitalism itself is thought to be toxic. But while Davos Man may be a little crestfallen of late, his faith in capitalism has been stirred, not shaken.
Ironically, if Lula is to satisfy them both, it will not be by creating a new paradigm but by working creatively within an established one. There are two reasons to think this. The first is that Lula is a reconciler. The marchers' slogan “Don't spill blood for oil” becomes, in Lula's mouth, “the world needs peace, not war,” and drew cheers in Porto Alegre nonetheless. “Down with the FTAA” turned in Davos into “we want free trade” but with “reciprocity”. And for leftists disenchanted with traditional democracy, Lula's election represents the possibility of reprieve.
Second, Lula seeks to achieve progressive ends largely with means that Davos would endorse. His economic team has swallowed the IMF's remedy for countries with weak finances and rising inflation: budget surpluses and high interest rates. Last month, the central bank raised interest rates, already astronomic, by half a percentage point. Brazil's currency and its bonds have weakened recently, but that has more to do with investors' war jitters than with any financial wobbling by the Lula government.
Nevertheless, some of the features of Lula's new paradigm are acquiring definition. In local government, his Workers' Party (PT) pioneered ways to bring ordinary citizens into policymaking through “participatory budgeting”. It plans to take the principle to the federal level, through a new Council of Economic and Social Development. This is supposed to build consensus on reforms within “civil society” and industry. The foreign minister, Celso Amorim, is expected to visit the PT's trade-union arm to discuss trade policy. “We never had ministers consult us before,” said a union official in Porto Alegre.
The government's flagship programme, to be launched over the next few days, is Fome Zero (“zero hunger”), a national version of Lula's proposed international fund to fight misery. But this programme, like others of Lula's policies, is not nearly as novel as he and his supporters claim. It is likely to expand and improve upon anti-poverty schemes set up by Lula's predecessor, Fernando Henrique Cardoso.
Asked to define the new model, Tarso Genro, head of the new council, mentions first “realising the vast possibilities of the internal market”. This entails such unexceptionable measures as investing in infrastructure and research and development and giving small enterprises access to credit. Does the government want to raise taxes, already a weighty third of GDP? No, it would prefer to lower the burden and widen the revenue base, says Mr Genro. This would be done partly by bringing into the formal economy the half of the labour force that works off the books. The new model “is not a radical change,” he admits.
Caution is no guarantee of wisdom. The government could err in many ways that would pass unnoticed by the financial markets, at least for a time. Money could be squandered on badly designed poverty programmes or on bail-outs of failing companies. Rather than trying to prise open North American markets, Brazil could close the door to its own. This week it took action to stem imports of textiles from East Asia to protect its domestic industry.
Porto Alegre progressives would cheer each retreat from “market fundamentalism”, but the Lula government looks unlikely to give them many such satisfactions. What, then, does the PT's pragmatist majority have in common with the Porto Alegre radicals? Opposition to “neo-liberalism”, says Mr Genro. But that convenient political swear word means different things to the two groups. For radicals, the term stands for capitalism; for Lula, a narrow conservative version of it.
Already it is clear that the obstacles to Lula's success may come less from Davos than from within his own camp. On the one hand, he has accepted the support of backwoods political barons whose problem with “neo-liberalism” is that it means a smaller state to plunder. And on the other, his most vocal public critics are on his party's left, preparing to oppose the IMF, and the pension and labour reforms which Lula has accepted are essential to generate the growth and resources needed to fight poverty. If he does show that Davos is no obstacle to economic and social justice, his welcome may be chillier in Porto Alegre by the end of his term.