Brazil: The Heat Is Up for Lula

 Brazil: The Heat Is Up 
  for Lula

Right-wingers in Washington
are becoming obsessed with Brazil
as they fear the emergence of another "evil axis." Conservatives
in the Bush administration fear an emergent alliance of Cuba,
Venezuela, Brazil, and now Argentina as Nestor Kirchner works
with Lula to challenge the political and trade policies of the US.
by: Roger
Burbach

The cabinet ministers of Luiz Inácio Lula da Silva’s government, who
have kept the Brazilian economy in a neo-liberal economic straight-jacket,
are coming under sustained attack from the more popular sectors of the governing
Workers’ Party. Even Lula himself has given signs he is moving away from the
budgetary and financial prescriptions imposed by the International Monetary
Fund that he has adhered to during his first fifteen months in office.

Interestingly the start
of the discord had nothing to do with economic policy. In mid-February Lula’s
chief of staff and closest political adviser, José Dirceu, became embroiled
in a political scandal. Waldomiro Diniz, a close friend of Dirceu’s who serves
as his aide on congressional affairs, was caught on video camera accepting
payoffs from the head of one of the country’s major bingo parlor operators.
The funds were allegedly used to back the political campaigns of candidates
of the Workers’ Party.

Diniz was quickly fired
and the opposition in Congress began calling for a full-scale investigation
and the removal of José Dirceu from office. As Emir Sader of the Public
Policy Laboratory of the State University of Rio de Janeiro noted: "The
reactionaries are making their move. They are trying to bring down Dirceu
and gut Lula’s government."

Dirceu however, is not
an easy target, having served for years as a talented political strategist
at the head of the Workers Party before becoming Lula’s most powerful aide
in the government. His first line of defense to prevent Congress from opening
an independent investigation was to point out that the video camera taping
occurred before the 2002 election and that the bingo scandal had only taken
place in Rio de Janeiro, not in other parts of Brazil, therefore not allowing
for federal prosecution. Then in early March to smash the opposition, Dirceu
began to mobilize the Workers Party behind him by openly criticizing the Finance
Minister and the economic policy team.

The case Dirceu presented
against them was fairly straight forward. During 2003, the economy had grown
at less than 1 percent, and unemployment in Brazil’s largest industrial center,
São Paulo, stood at around 19 percent. This economic lethargy was due
to Brazil’s high interest rates (10 percent in real terms, among the highest
in the world) and the following of IMF guidelines demanding a budgetary surplus
of 4.25 percent so that Brazil could make payments on its international debt.
Even large sectors of the Brazilian business community were deeply upset with
this no growth policy.

Dirceu’s attacks initially
focused on the Minister of Finance, Antônio Palocci, a technocrat aligned
with the head of the Central Bank, Henrique Meirelles, who formerly worked
as the worldwide president of the US Fleet Boston Financial Group. The Central
Bank is autonomous, but the Finance Minister is influential in its decision-making.

In early March, Palocci
indicated that when the bank next met, interest rates would be held steady.
Dirceu criticized this stance, mobilizing most of the leadership of the Workers’
Party along with its membership behind him. The bulk of the party had been
simpering and complaining for months about Lula’s economic policies that appeared
to mimic those of his predecessors and produced little of the "New Brazil"
that Lula had promised during his election campaign.

Brazil-Argentina Alliance

A handful of Senators
and representatives from the Workers Party had even been forced out when they
refused to support budgetary legislation that reduced the retirement income
of public employee pensioners.

While Lula has thus far
remained above the domestic fray among his ministers, he threw down the gauntlet
against the IMF and other international institutions when he met with Argentine
President Nestor Kirchner in Rio de Janeiro on March 16. The presidents of
South America’s two largest economies jointly released The Declaration on
Cooperation for Economic Growth with Equality.

It demanded that the international
financial institutions act "sensibly" and that they end the deep
contradictions between the economic demands they place on the developing countries
and the countries’ real needs for sustainable development. The two presidents
stated "this financial architecture requires mechanisms to avoid causing
the crises that have afflicted Latin America."

As a step in this direction
Lula and Kirchner asserted that investments in productive infrastructure projects
should not be included as part of regular government expenditures. Brazil
and Argentina called on the other full and associate members of the Mercosur
trade bloc—Uruguay, Paraguay, Bolivia, Peru and Chile—to sign on
to the declaration. The presidents also issued "The Act of Copacabana,"
a wide ranging document that called for the formation of a "Community
of South American Nations."

Emir Sader of the Public
Policy Laboratory, who has been severely critical of Lula’s economic policies,
declared that "in the foreign policy arena Lula is making a profound
difference. He is staking out a new agenda in Latin America and the global
South in general." Prior to the Iraqi war, Lula was one of the most outspoken
opponents of the impending US invasion.

Then, he helped forge
the bloc of 22 nations that stopped the World Trade Organization in its tracks
at Cancun in August 2003. Next at the close of the year he lead the charge
that forced the Bush administration to back off from its plans to impose the
corporate-dominated Free Trade Area of the Americas on the entire Western
Hemisphere by 2005.

Right-wingers in Washington,
like the State Department’s top aide for Inter-American Affairs, Roger Noriega,
are becoming obsessed with Brazil as they fear the emergence of another "evil
axis." Lula has provided political and economic support to Hugo Chavez,
the charismatic President of Venezuela who is at odds with his country’s economic
elites as well as Washington.

In December, Brazil extended
a billion dollar loan to Venezuela to enable it to purchase Brazilian goods
it urgently needed. Conservatives in the Bush administration fear an emergent
alliance of Cuba, Venezuela, Brazil, and now Argentina as Nestor Kirchner
works with Lula to challenge the political and trade policies of the United
States.

Tension in Brazil

Inside Brazil, political
tensions have risen notably in recent days. The reactionary sectors are continuing
to try to destabilize the government with the bingo scandal. After Lula’s
joint declaration with Kirchner some financial market analysts are asserting
that even higher interest rates may be needed to offset any future increases
in government expenditures.

At the same time, progressive
dissidents in and outside of the Workers’ Party are making it clear they are
bent on stepping up the pressure on Lula. The largest social organization
in Brazil, the Landless Workers Movement, at a meeting on March 18 announced
that it was ending its self-declared truce on land invasions. They are drawing
up plans for invasions of particular regions in the country in April and May.

Land reform has been stymied
in particular by two other conservative ministers, Roberto Rodrigues, the
Agricultural Minister, who served as the head of an agricultural business
association representing domestic and multinational commodity giants, and
the Minister of Development, Luiz Fernando Furlan, a former director of the
global food processing corporation Sadia. Due in part to their influence,
the process of agrarian reform has moved at a snail’s pace, while large agribusiness
exporters have witnessed a boom in their revenues.

It is doubtful if Lula
will fire his conservative ministers in the short term or make any immediate
dramatic shifts in his domestic policy. But many believe he may be preparing
the groundwork to square his economic programs with his foreign policy initiatives.

Francisco Menezes, an
agricultural analyst who sits on the National Council of Food Security that
advises Lula on issues related to hunger and agriculture states: "It
is understandable that Lula has not implemented fundamental economic changes
thus far, given the clout of the international financial organizations and
the power of domestic economic elites. But we may see some significant shake
ups take place as the political and social caldron heats up in Brazil."


Roger Burbach has just returned from a trip to Brazil, Argentina and Chile.
His most recent book is The Pinochet Affair: State Terrorism and Global
Justice. In May, Zed Books will release Imperial Overstretch: George
W. Bush and the Hubris of Empire, which he co-authored with Jim Tarbell.
He welcomes comments at censa@igc.org.

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