The Brazilian Experience

The Brazilian Experience

Since 1990, Brazil has been made into a laboratory for disastrous
economic recipes that hurt
its productive capacity and increased
its external vulnerability. An end must be put to
financial anarchy. It is essential to do away with the
protectionism that marginalizes poor countries.

Luiz Inácio
Lula da Silva


Over the past six months an innovative experiment in government has been taking place in Brazil.

The Workers’ Party, or PT*, at the helm of a coalition of left wing parties, and in a broad coalition with parties of
the center, has launched a program of action that combines economic growth with income redistribution while at the same
time keeping a lid on inflation. This is a platform that seeks to deepen political democracy in Brazil and underscores the
country’s sovereign presence on the world stage.

This is hardly a minor challenge.

Although Brazil grew at very high rates in the past, it continues to be one of the countries with the most uneven
distribution of income in the world. Tens of millions of men and women are economically unproductive and have no access to
consumer goods, public services and to the benefits of education and the world of culture.

This situation must be reversed, for the absence of economic and social democracy threatens the very nature of
democracy. The values of social solidarity are in decline. The family as an institution has been degraded. Children and
teenagers are deprived of ethical, moral and cultural markers and become easy prey to criminality and drug trafficking.
Institutions, politics and politicians are viewed by many with increasing suspicion and open hostility.

This state of affairs has become more acute over the past two decades as a result of repeated recessions or mediocre
growth. Since 1990, in particular, Brazil—as other Latin American countries—has been made into a laboratory for disastrous
economic recipes that hurt its productive capacity, tore at the fabric of society, weakened the State’s regulatory ability and,
above all, increased its external vulnerability.

The dire macro-economic numbers inherited from the previous administration made this picture all the more
worrisome. The currency underwent a stark devaluation and was quoted against the US dollar at close to 4 reais. As a result,
inflation was expected to accelerate to over 35 percent per year by the end of 2002. The interest premium Brazil has to pay on
loans, the so-called Brazil risk, peeked at almost 2,400 base points. Brazil was running an awning deficit in its external
accounts while international export credit dried up completely.

The new government was able to overcome these trends and to confound dire forecasts of an imminent collapse of
the economy.

Fiscal discipline, high interest rates in the short term, an aggressive export policy and proposals for tax and pension
reform have helped revive both the economy and the credibility—domestic and international—of the policies Brazil has adopted.

A social and political alliance, unparalleled in its broadness, has brought together all 27 State governors, parliament,
the trade unions, the business community and many other distinctive sectors of society. There are times when only a major
coming together of wills can prevent a looming economic and social catastrophe.

The results of this policy are now evident.

The real has recovered to less than 3 to the US dollar. Inflation has receded and will remain under 9 percent this
year. The Brazil risk now hovers around 700 base points. The debt burden has fallen. Export credits have been re-established
and this year the balance of trade will run a US$ 20 billion surplus. External vulnerability has fallen.

Six months into the new administration, monetary policy can now be relaxed, interest rates having already begun to
fall, albeit slowly. Together with other measures to boost credit, particularly for small enterprises, this policy has generated
the conditions for a return to growth and job creation.

A new economic model combining growth, social justice and stability calls for highly focused social policies, such
as the Zero Hunger and the First Job Programs, apart from the aforementioned credit policies and support for family
farming and economic solidarity.

Fighting hunger has a twofold character. It combines structural measures—in support of small farmers, education,
health, housing and water and sewage treatment—and emergency relief to those suffering directly from malnutrition.

Hunger cannot afford to wait for the long-term results of structural measures to come on stream.

Thus while the Brazilian economy remains vulnerable, important steps have been taken to launch the country on a
new and fruitful period of its economic and social history.

Brazil has had similar opportunities in the past.

They were wasted for lack of political leadership. The social and political conditions are now in place for a new
and sustainable cycle of development to begin, one that will benefit those left behind.

The Government and its political parties are keenly aware that they cannot afford to fail.

This requires enlarging the internal market, particularly that of mass consumer goods, by integrating into it tens of
millions of previously excluded citizens.

This movement will feed into the economy as a whole_ including high tech sectors_ and so foster a virtuous cycle
of development.

Agrarian reform is crucial to rebuilding the Brazilian economy in a manner that addresses urgent social demands.
This is a challenge that has remained unanswered for centuries. The strengthening of modern family-based farming, in
co-existence with agribusiness, will help promote social inclusion. Agrarian reform will also help the economy as a whole
become more dynamic and, above all, will enhance democracy by rewriting the balance of forces within society.

As was pointed out during the expanded G8 Meeting in Evian, Brazil seeks to replicate, allowing for local
specificities, the experience of the US economy in the 1930’s and that of Europe in the post-World War II period. Apart from
meeting macroeconomic challenges, the State must act decisively to fulfill its regulatory function in the economy.

The International Situation

In contrast to conditions that made for rapid growth of the Brazilian economy in the past, the current international
outlook is unfavorable. This scenario must be taken into account if appropriate measures are to be taken.

The loudly proclaimed achievements—in production, trade and finance—of globalization have failed to materialize
as heralded by its ideologues.

The advice offered by international organizations and slavishly followed by many has brought about the
de-industrialization of vast expanses of our planet with predictable social consequences.

The free trade rhetoric preached by rich countries contradicts the protectionist practices of these very same
countries. Protectionist measures have gained momentum to the point of hampering the negotiations underway at the WTO and
other international bodies.

The unrestrained flow of financial capital has in the past destabilized economies in a matter of hours.

The gulf between rich and developing countries has increased. Hunger, unemployment and exclusion have reached
alarming proportions and there are significant pockets of poverty even in developed societies.

For these reasons a new foreign policy was required, one that would better position Brazil in the world and help
bring about a new, fairer and more democratic international order.

An end must be put to international financial anarchy and the absurd pressures it puts on developing economies. It is
essential to do away with the overt and covert protectionism that marginalizes poor countries.

Concerted international action is urgently required to set up funds specifically tailored to courageous programs to
fight hunger.

By the same token effective mechanisms to finance the buildup of infrastructure in developing countries are
necessary to improve these countries’ competitiveness and enable them to cater to their own social needs.

Brazil has stressed its commitment to the peaceful settlement of international disputes and to the defense of
multilateralism. It provides the only foundation on which a world order respectful both of human rights and of international law can be built.

If multilateralism is to prosper international bodies must be reinvigorated and reformed, including the UN and its
Security Council. Indeed, Brazil seeks to become a permanent member of the Council.

The Brazilian Government is not unaware of the threats that currently weigh over humanity.

It therefore unconditionally condemns all forms of terrorism. It equally combats organized crime, and particularly
drug trafficking and its international financial offshoots.

Brazil seeks the elimination of weapons of mass destruction, wherever they are found. It defends the
non-proliferation of nuclear, chemical or biological weapons as well as more ambitious disarmament programs.

The new Government is convinced that the main international flashpoints result from the profound inequalities that
now prevail in a world with billions of unemployed and hundreds of millions that go hungry and ill, and from the unfair
global trade regime.

Therein breeds the resentment that is at the source of all forms of fanaticism and fundamentalism.

In this uncertain and adverse world, new priorities and new alliances must be forged.

South America has become the number one priority of the new Brazilian foreign policy, a priority expressed not just
in words but also in deeds.

A new agenda for Mercosul going beyond a simple customs union was required. There is a need to integrate
industrial, agricultural and services policies and to develop common public policies that link educational, cultural and science
and technology programs. Macro-economic harmonization is the way ahead on the road to a future common currency.

A politically meaningful Mercosul is equally important. This requires improving co-ordination on industrial policies,
dispute settlement mechanisms and moving ahead on the issue of a regional parliament elected by direct vote of the citizens of
the member countries.

A common foreign policy must be progressively fashioned, in particular with a view to presenting a common front
throughout the negotiations on the Free Trade Area of the Americas (FTAA), as well as with the European Union and other
international fora.

The strategic alliance between Brazil and Argentina is crucial to reinvigorating Mercosul and the future South
American union.

Mercosul should bring other countries on board by allying itself with the Andean Community in order to push
forward an ambitious program of South American physical integration. It will be as a result of this policy of
rapprochement that a South American union may evolve.

In its first sixth months in office, the Brazilian government has hosted almost all of the presidents of South America.
In these meetings, which covered a wide array of both bilateral and multilateral issues, a significant level of agreement prevailed.

Brazil, with the second largest black population in the world, has reinvigorated its ties to Africa after many years of
neglect. Similarly it has re-engaged with the Arab world, in the search for new markets and new political interlocutors.

The enlarged G8 Meeting in Evian provided an opportunity to foster links with major developing countries such as
China—currently Brazil’s second largest trading partner—as well as India, Russia and South Africa.

Recent contacts with Heads of State and Government of these and other countries have given new weight to
South—South relations. The recent joint meeting of the foreign ministers of Brazil, India and South Africa, in Brasília, christened the
G3, gives voice to this desire to build new partnerships.

In parallel to these new guidelines, a more balanced relationship has been forged with the United States and major
European countries. The mature and respectful dialogue with President G. W. Bush and major European Heads of State and
Government attest to this.

There is no place here for complaints or resentments. Brazil will continue to promote its national interests and those
of its region. It openly defends its views on the changes required if the world is to achieve a greater measure of balance,
democracy and social justice.

The Brazilian Path

The Brazilian experiment is not intended as a model. There is no wish to teach anyone lessons.

The Workers’ Party—the nucleus of the social and political coalition that currently governs the country—was born
during the declining years of the military regime. It is a latecomer on the socialist scene when compared to communist and
social democratic parties.

Its appearance in 1980 coincided with the predicaments facing social democracy and the decline of the USSR and
the communist block in Eastern Europe. It also coincides with the conservative wave that swept the world and that even
contaminated segments of the left.

The party’s platform combined workers’ economic and social demands with calls for political freedom and respect
for Human Rights.

This is why it has always been able to count on broad support among the middle class, particularly intellectuals,
youth and new social movements involving, among others, women, blacks, environmentalists, homosexuals and the disabled.

The Workers’ Party has defined itself as a mass leftwing socialist party that is organized democratically and where
different tendencies flourish.

This ideological pluralism brought together Marxists of all stripes, radical democrats, as well as Catholics and other
religious groupings.

Unity of purpose has coalesced around proposals to deal effectively with the serious challenges that have for
centuries afflicted Brazilian society.

While one can hardly remain oblivious to the global crisis of the socialist worldview, this should not lead to
paralysis or endless debates and inevitably to political ineffectiveness or endless infighting.

The brand of "socialism" set out in the Workers’ Party Manifesto-Platform is directly derived from the workers’
struggle and not the by-product of a purely theoretical exercise.

The PT’s platform has since been enriched by the experience gained in grappling with major social and institutional questions.

At the same time, the party helped rebuild the trade union movement and spark social activism throughout the country.

It also played an important role in the municipal, state and federal assemblies as well as in developing government
policy to fight corruption, foster transparency of public affairs and to enhance social and political democracy in the country.

The PT experience, beginning in the 1980’s, in running municipal and later State governments helped renew the
Party politically. By exercising administrative responsibilities, the PT gained a better understanding of the role of the State
and, as a result, developed politically innovative social policies in health, education, public transport, housing and water and
sewage treatment, culture and human rights protection, particularly as concerns the needs of the most disenfranchised social groups.

The ties between the State and society have been revisited, giving impetus to initiatives such as the Participatory
Budgets that ensure citizen oversight over public policies.

While the challenge remains of defining a new socialist vision in the wake of the collapse of the Soviet model and
the predicaments of Social Democracy, it has become obvious that a new socialism will have to "socialize" both politics
and power if it is not to repeat past mistakes.

Change Without Changing Sides

Courage is required to put into practice an ambitious reform platform catering to the immediate needs of vast
majority of people.

However, such changes must be understood within a broader perspective, as a step along a path that we must build
as we go.

Realpolitik is no excuse to abandon the dreams that lay at the very foundation of the thinking of the Left. These
dreams bear demands that are unmistakable, nevermore so than now that over 52 million Brazilians have invested a group of
men and women with the responsibility of making these dreams come true.


Luiz Inácio Lula da Silva is the President of the Federative Republic of Brazil. He can be reached

*Translator’s Note: PT is the acronym for the Workers’ Party in Portuguese.


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