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 Heloísa Helena, a leftist senator from the impoverished northeast state of Alagoas, Brazil, has consolidated a third place position in the Brazilian presidential polls. In a recent poll, her 12% means she trails the PSDB (Party of the Brazilian Social Democracy) candidate Geraldo Alckmin, the ex-governor of São Paulo, by only 9%!
Her surge in popularity is partially attributed to several personal factors. Much of the electorate perceives women to be more honest than men. Also, Heloísa Helena has an impeccable reputation as a senator who thoroughly investigates corruption that penetrated the halls of Congress and parts of the PT administration. A few weeks ago, former 2002 presidential candidate and ex-governor of Rio de Janeiro, Anthony Garotinho, threw his political weight behind Helena's candidacy. Her leftist political program seems to be resonating with many educated Brazilians. She is promising to cut the domestic interest rates in half, by appointing to the central bank economists who favor domestic production over financial interests. Such a sizable cut to interest rates which are now at a stratospheric 14.75% will generate nearly US$ 38 billion (80 billion reais) in savings to fund her far-reaching social programs while inducing robust economic growth. Although inflation is unlikely to immediately reappear, will interest rates remain low once the economy reaccelerates and moderate inflation quickens? She is also promising to distribute land to 1 million rural peasants per year. (1) Clearly, her campaign promises have not made her popular among the entrenched elite and conservatives. Yet, Heloísa's campaign message to alter the economy resonates with millions of educated Brazilians because of the pitiful stagnation of the Brazilian economy since the 1980s. This is why her campaign can boast 12% in most polls and might pickup more votes in the near future. She leaped by 8 percentage points among the most educated voters stealing votes directly from Geraldo Alckmin. (2) Lula's nearly insurmountable lead in the polls reflects not faster economic growth than previous administrations but a consistent social policy that has enabled substantial rises in income of the poorest segment of the population, which consists of a significant part of the voting population. The present economic stagnation is a phenomenon that began in the 1980s. Brazil's GDP per capita from 1945 to 1980 grew on average by 4.4%. (3) Yet the economy since has seen a stark reversal. Between 1980 and 2000 the GDP per capita has remained nearly stationary averaging just 0.4%. (4) The GDP per capita (the growth in GDP divided by population growth), the most basic measurement of economic well-being, of the previous Cardoso and the current Lula administration is a sad reminder of how stagnant the once dynamic Brazilian economy has become. According to the IBGE data, during the Cardoso administration (1995-2002), the average GDP per capita expanded by 0.975%. Overall economic growth (GDP) expanded by average of just 2.33% throughout his 8 years in office. (5) The Brazilian electorate sent Cardoso's PSDB party a resounding message in 2002 by overwhelming defeating their presidential candidate at the hands of the current president Lula. During that election, Lula symbolized the candidacy of economic and social change that the Brazilian electorate clamored towards. Yet, profound changes to economic policy have not materialized. Lula's economic advisors implemented a similar economic policy meant to assure, "economic stability", and low inflation at all cost. Under Lula's economic stewardship the economy is better insulated from economic instability yet it continues its lackluster performance. The average GDP per capita during his 3 years tenure as president is equivalent to a meek 1.3%. Overall, economic growth limps at average of 1.9%. (6) As 2006 ends, the economy might expand 3.5% pushing up both averages marginally. In 2005, Brazil's economy, in Latin America, only grew faster than Haiti's, a country devastated by internal stifle. Brazil's economy stagnates while the rest of the world is advancing at a brisk pace. In 2005, average per capita growth worldwide was at 2.6% and average economic growth was significantly higher. (7) Heloísa Helena has recently turned down her democratic "socialist" message as she attempts to entice a slightly more moderate audience. She says she is not stupid to try to construct socialism today in Brazil. She is hoping to build greater democracy before thinking about any sort of socialism. (8) Her economic program does call for closing the economy through higher tariffs since it seems she is also promising to expand export credit through BNDES (National Bank of Economic and Social Development) to domestic producers. (9) Yet, her rise in the polls does not explain how Lula, the PT candidate, garners so much support for his re-election bid. There is no doubt Lula, the political figure, wields a tremendous political force greater than his own party, the PT (Workers Party). His poor northeast roots provide him clout among the millions of poorer Brazilians, who were largely excluded from the supposed economic "miracle" that lasted from 1968 to 1974, especially in the Northeast. During this period, GDP per capita grew at a remarkable 8.6%, equivalent to China's economic growth (1978-1998). Except, after the expansion fizzled the GDP per capita has stagnated for the past 26 years. (10) It is evident that the economic policy of the past neo-liberal reform minded administrations have failed to prescribe the right medicine to position the Brazil's economy on the path towards faster and sustainable growth. While stagnation continues, it seems that some government policies are at least formulating a more equitable country in contrast to many other countries around the world. This provides Lula with the political strength to potentially get re-elected in the first-round of voting. The poorest segments of Brazil's economy have benefited generously from government programs implemented by Cardoso and expanded by Lula. According to the economist, Marcelo Neri, the poorest 10% have witnessed their income rise by 23.3% between 2001 and 2004 while the poorest 20% have seen a 15% rise over a similar period. According to the economist Ricardo Paes de Barros, even if Brazil's economy grew zero percent in 2004 (unlike the solid growth rate of 4.9%) the income per capita of the poor would have still grown by 9%. (11) This improvement is due mostly to consecutive minimum wage increases above inflation (from 240 reais a month in 2002 to 350 reais today - roughly US$ 110 to US$ 160), an expansion of pension coverage to poorer rural workers and the growth of Bolsa Família, a monthly stipend program that benefits 11 million poor families (30 million people). Bolsa Família costs only 0.5% of the GDP or about 8.5 billion reais (US$ 4 billion), a fraction of the federal budget. All these specific social programs incur an expense equal to about 80 billion reais (US$ 38 billion), about half of what the public sector paid in interest payments in 2005. (12) In 2003, 27.26% of the population was considered below of the misery line; by 2004 it fell to 25.08%. Misery fell by 8% in 2004. Between 2001 and 2004, the poorest 50% had their total income equal to 13.8 (today it is closer to 15% the lowest inequality since 1964) while the richest 10% experienced a sharp 5.5% decline. (13) It is no wonder the elites dislike Lula. During Lula's term in office, Brazil is making albeit slow progress in ending the perverse inequality that has persisted throughout its history. Besides some improvements to social indicators the Brazilian economy is more resistant to any future global economic turbulence. Lula's economic policies have won him praise from the international financial community. His politics is the poster boy for "respectable" "moderate" left-wing regimes in Latin America mostly because of the positive achievements made over 3 years. Brazil is set to record another resounding trade surplus. Inflation has dropped precipitously since 2003 to a figure below the inflation target for this year. Brazil's risk assessment as gauged by Morgan Stanley is at a record low. Brazil's government has more in foreign currency than external debt. Brazil's government only owes roughly US$ 70 billion in external debt a record low not seen in several decades. The central bank will soon amass a record-setting foreign currency reserve outmatching the record accumulated during the Real Plan. The massive influx of dollars due to agricultural exports allowed Brazil to pay-off billions to the IMF, Paris Club and other external creditors. With Brazil's record trade surplus, the country is quickly becoming a creditor not debtor nation as it achieves consecutive current account surpluses. Basic interest rates are at 14.75%, still the highest in the world but at record low. Yet, so far it seems that the vice-leader of PT in the Congress, Walter Pinheiro is among a few politicians who have taken notice of this paradox. (14) These improvements were almost exclusively created during Lula's administration since previous administrations enacted distorting economic plans. Previous mistakes do not excuse errors made today. These positive government accounts should have theoretically empowered the domestic economy, yet as proven by the disappointing economic growth the domestic economy is still extremely sensitive to domestic (and American) interest rates and other barriers such as: erroneous taxation, crushing corruption, suffocating bureaucracy and an expanding informal sector. None of issues can be easily resolved especially as the government at all levels tackles the consequences of vast inequalities and persistent poverty. Without focusing on growing the domestic economy the PT will not be rated much higher than the previous Cardoso administration. The interest rate policy is too similar to the previous administrations (with almost identical economic results) yet the current government had no intentions of changing such a policy since it reaped the benefits of misleading their supporters to the contrary. By maintaining such an excessive conservative interest rate policy, the currency has radically appreciated helping curb productive domestic investment. Paulo Bernardo, the current planning minister admits that the current high interest rates inhibit economic growth, although he rightfully claims a similar recipe was used by the previous PSDB administration. (15) Although, high interest rates may assist in pushing down inflation it is destroying jobs especially among domestic producers and exporters. The policy has been so conservative that even the Economist and Wall Street Journal have questioned its resolve. Let's hope this election whoever is elected that they heed the demands of the Brazilian populace to make adjustments to the economy to further boost economic growth in a robust manner while expanding the social programs that are enabling Brazil to become a more just and equal country. (1) José Maschio, "Heloísa Helena diz que vai assentar 1 milhão de famílias por ano," Agência Folha, August 20, 2005, http://www1.folha.uol.com.br/folha/brasil/ult96u81661.shtml. (2) Karen Camacho, "Heloísa Helena diz que está no encalço de Alckmin", Folha Online, July 24, 2005, http://www1.folha.uol.com.br/folha/brasil/ult96u80661.shtml (3) Alexandre Cunha and Antonio Fiorencio, "O BRASIL ESTÁ PRONTO PARA VOLTAR A CRESCER 4% AO ANO?". Valor Economica, June 5, 2002, http://professores.ibmecrj.br/abcunha/opinioes/artigos/artigo14.htm. (4) Idem (5) "Variação do PIB em 2003 foi de -0,2%", IBGE, 27 de fevereiro de 2004, http://www.ibge.gov.br/home/presidencia/noticias/noticia_visualiza.php?id_noticia=109&id_pagina=1 (6) Janaina Lage, "Brasil cresce só 2,3% em 2005 e supera apenas o Haiti na América Latina," Folha Online, Feb. 24, 2006, http://www1.folha.uol.com.br/folha/dinheiro/ult91u105546.shtml. (7) "Brasil cresceu menos que a média mundial em 10 anos, diz estudo", Folha Online, Mar.22, 2006, http://www1.folha.uol.com.br/folha/dinheiro/ult91u106201.shtml. (8) José Maschio, "Heloísa Helena diz que vai assentar 1 milhão de famílias por ano," Agência Folha, August 20, 2005, http://www1.folha.uol.com.br/folha/brasil/ult96u81661.shtml. (9) Karen Camacho, "Heloísa vai ao ABC e defende redução do juro e empréstimo para montadoras," Folha Online, July 24, 2006. http://www1.folha.uol.com.br/folha/brasil/ult96u80651.shtml (10) Mirta NS Bugarin and Roberto Ellery Jr. et. al., "From Miracle to a Disaster: The Brazilian Economy in 3 Decades." January 21, 2005. http://degitx.cide.edu/Documentos/D94.pdf. (11) Fernando Canzian, "Gastos com programas sociais ameaçam contas do governo", Folha de S. Paulo, http://www1.folha.uol.com.br/folha/dinheiro/ult91u108467.shtml (12) Idem (13) Janaina Lage, "Miséria atinge menor patamar desde 1992, diz pesquisa FGV," Folha Online, November 11, 2005. http://www1.folha.uol.com.br/folha/dinheiro/ult91u102805.shtml. (14) Rose Ane Silveira, "PSOL diz que PIB deve crescer com abertura de cofre em ano eleitoral," Folha Online, Feb. 24, 2006. (15) Claudia Lamengo and Luiza Dame, "Paulo Bernardo desafia Alckmin a explicar promessas de campanha", O Globo Online, Aug. 22, 2006, http://oglobo.globo.com/pais/eleicoes2006/mat/2006/08/22/285371546.asp Daniel Torres is a political science and economics major at the University of Massachusetts. Comments welcome at
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