[Marxism] The evolution of the PT

[Louis Proyect <lnp3@xxxxxxxxx>]

http://www.ckln.fm/~asadismi/brazil.html

LULA BOWS TO WALL STREET: Brazil's New "Leftist" President Moves Right to
Keep U.S. Happy
by Asad Ismi
        
Forty years after Brazil's last leftist government was overthrown in a
U.S.-backed military coup, the left appeared to have regained power there
on January 1 when Luiz Inacio ("Lula") da Silva, the candidate for the
left-leaning Workers' Party (PT), was inaugrated as President. Lula won the
national elections last October in a landslide, with 61% of the vote
compared to 38% for Jos? Serra, his closest rival. Serra was the
hand-picked successor of Fernando Henrique Cardoso, Brazil's last
president, who ruled for eight years. Lula won by the widest margin in
Brazilian history, amassing the highest number of votes (52 million) ever
received in the country. During the election, Da Silva, former head of the
Metal Workers' Union, promised to create 10 million jobs, double the
minimum wage, reduce the gap between rich and poor, and end the hunger that
afflicts 20 million Brazilians.

The top 1% of Brazilians own 53% of the country's wealth, making it the
fourth most unequal nation in the world; 50 million Brazilians live in
poverty out of a population of 175 million, and eight million are
unemployed. George Soros, the "Dracula" of currency speculators who has
large investments in Brazil, said that Brazilians should not have been
allowed to elect Lula. As he put it, "In the Roman empire, only the Romans
voted. In modern global capitalism, only the Americans vote, not the
Brazilians."

In his election campaign, Da Silva rejected the neoliberal policies of his
predecessor, which had concentrated income, increased poverty and
unemployment, encouraged official corruption, and reduced industrial
production with high interest rates. Promoted by the U.S., the IMF, the
World Bank, and international banks, these policies produced a minimalist
state, massive privatization, social spending cuts, the free flow of
speculative foreign financial capital, and lower tariff barriers for
foreign goods. As one observer put it, Cardoso was "unable to find a
scandal-free candidate to confront Da Silva, the result of government
corruption linked to neoliberalism and the privatization of public
enterprises." Roseana Sarney, Cardoso's first choice, had to withdraw when
$500,000 in cash was confiscated by police from her home; the money
allegedly came from a bankrupt private company she helped create with
public funds.

In place of neoliberalism, Lula called for a national development program
to be implemented by the state for the benefit of workers, the middle
class, and the manufacturing sector. The state would stimulate industrial
production and quickly move towards solving social problems.
Internationally, Lula is friendly with Cuba's Fidel Castro and Hugo Chavez,
Venezuela's populist president. He has been critical of U.S. policies
towards Cuba and Colombia, and during the campaign denounced the Bush
administration's emphasis on war since September 2001: "The United States
has a president that for every ten words he speaks, nine are about waging
war," Lula said, "He is always seeking a new opponent." Da Silva added that
Brazil would not be treated like a "banana republic," and he disparaged the
U.S.-led Free Trade of the Americas (FTAA) pact as "annexation politics,"
though he stopped short of rejecting it.

The IMF Still Rules

Lula's rejection of neoliberalism, however, was limited to rhetoric. In
practice, his policies thus far differ little from Cardoso's. Brazil,
wracked by a severe financial crisis, is too tied to foreign loans to act
independently. The country has an astronomical $260 billion foreign debt,
which is increasingly unsustainable. Lula's pledge to fully repay this vast
sum and his acceptance of an unprecedented $30 billion IMF bailout loan
package (and its conditions) mean that international finance still dictates
the Brazilian government's economic policy. The IMF package is aimed at
helping U.S. banks (especially FleetBoston Financial Corp. and Citigroup)
which have outstanding loans of almost $30 billion.

After the election, the PT assured foreign investors that, as required by
the IMF, Brazil would continue fiscal austerity, free market policies, and
control of inflation. Lula even agreed to the IMF's demand that he keep
aside a 3.75% surplus to stabilize the debt. "The difficult course that
Brazil will be confronting is going to demand austerity in the use of
public monies," Lula stated, adding that "budgetary restrictions" will be a
major obstacle to the realization of his platform. Most reassuring to
investors were Da Silva's two key cabinet appointments to the top posts of
the Central Bank and Finance Ministry. The first went to Henrique
Meirelles, who until August 2002 was president of FleetBoston with an
annual salary of $1.5 million. If anything was going to hearten Wall
Street, this was it: that one of their own from a bank with large
outstanding loans in Brazil was going to be running the Central Bank in a
purportedly leftist government. After his appointment, Meirelles made clear
his commitment to curbing inflation by maintaining the 25% interest rates
that are crippling the Brazilian economy while enriching foreign investors.

Lula's choice for Finance Minister was Antonio Palocci, a pro-market former
PT mayor. Like Meirelles, Palocci supports anti-inflation measures. As
mayor of the town of Ribeirao Preto, Palocci privatized local utilities
even before the central government started on the same path. After these
two appointments, Brazilian bonds shot up in New York. As one Wall Street
analyst explained: "People are feeling positive about Brazil because so far
Lula has said and done the right things."

Lula's rapid accommodation with international capital leaves the PT few
funds for relieving poverty, hunger and disparity. Nor can the government
do much to encourage increased domestic production, given its fidelity to
high interest rates; such rates will further reduce production and so
increase unemployment and poverty. Confirming its continued domination, the
IMF called Lula's economic proposals "prudent and appropriate," and added
that there were "affinities" between the PT's economic plans and those of
the IMF. This is surely the kiss of death for any Third World economic
nationalist, considering the large number of developing economies that have
been destroyed by the IMF. But, in spite of Lula's capitulation to the
demands of the IMF and foreign investors, Brazil may be forced to default
on its debt anyway, since 80% of it is highly vulnerable to two factors the
government has no control over: the U.S. dollar and floating interest rates.

Another Business Party?

Since its formation in 1980 as a socialist party, the PT's main support
base has been the Unified Union Federation (CUT), Brazil's militant union
central, made up of nine million workers, and the Landless Rural Workers'
Movement (MST), representing millions of landless peasants. As the
candidate of these groups in previous elections, Lula called for a radical
redistribution of wealth from the country's obscenely rich ?lite to its
peasants, workers and poor people; he supported the nationalization of
industries, promised to reverse privatizations, and pledged to repudiate
Brazil's foreign debt.

This radical platform failed to win the PT enough middle-class votes or
business support, and Lula lost three presidential elections in 1989, 1994,
and 1998. He became convinced that "the PT will never win power nationally
unless it allies with big players in the domestic economy." Thus, in 2002,
da Silva abandoned his fiery rhetoric and blue jeans in favour of a
business suit and the slogan, "Lula: Peace and Love," signifying "a
conciliatory discourse on social issues." He rejected nationalization,
actually advocated privatization of water services, and agreed to pay
Brazil's foreign debt. Where once he had threatened to take away the money
of the rich, now he allied himself with them. Da Silva chose Jos? Alencar,
Brazil's richest textile magnate, as his running mate. Alencar, worth $500
million, is head of the small Liberal Party (which is actually
conservative) and an evangelical church. He personifies the PT's new-found
alliance with a segment of Brazil's capitalist class which sees little
benefit from U.S.-enforced neoliberalism that opens up their country to
Wall Street capital but does not provide new markets for their products.

With this alliance and the other policy reversals, Lula has fundamentally
transformed the PT from a party of radical social change to a vehicle for
?lite politics. The PT now represents the national industrialist section of
Brazilian ?lite that was adversely affected by the former government's
compliance with the demands of international financial capital. It used
high interest rates to attract foreign capital, but these inhibited the
expansion of domestic industry. Since the 1997 Asian crisis, Brazil's
annual growth rate has averaged less than 1%. Thus, what Lula and the PT
stand for now is a different kind of capitalism: a more nationalistic
variety based on greater domestic production rather than international
borrowing. Members of Brazil's industrial ?lite realize that deteriorating
conditions for workers and the poor must be tackled through reforms so as
to "head off a more explosive revolt." As Sergio Haberfeld, the owner of a
large packaging company who backs Lula, put it, "Unless we do something
about our social problems, the country won't survive." In this sense, Lula
is the ?lite's insurance policy against revolution or social breakdown.
However, Da Silva's acquiescence to the IMF makes even his nationalistic
form of capitalism impossible to attain.

The Military's Man

Lula has sought to appease not only the IMF and the domestic business
class, but, most disturbingly, even the Brazilian military. The armed
forces overthrew the elected left-wing government of Joao Goulart in 1964
in a CIA-backed coup, and for the next 21 years Brazil suffered under a
brutal military dictatorship enforced by death squads. Thousands of
"suspected communists" (including children) were "disappeared" and
tortured, unions were banned, peasants' homes were burned, their land
stolen, and drug dealers were protected. Military rule also laid the basis
for Brazil's appalling inequality. Lula himself led strikes against the
dictatorship and was jailed several times.

However, in a speech to military officers last September, Da Silva lauded
the military dictatorship for encouraging "internal development" (Brazil's
arms exports grew significantly under military rule). He called for more
investment in the arms industry, pledged to continue the draft, and opposed
Brazil's signing of the Nuclear Non-Proliferation Treaty. Lula also
supported building a new jet fighter and missiles to compete with the U.S.
F-16. "Brazil must be an economic, technological and military power," he
announced, to great applause.

A Social Crisis

Despite his many compromises, however, Lula has so far retained his
traditional support base of workers and the landless. But there will be
enormous pressure from these sectors, as well as from the poor (who also
voted for him in significant numbers) on Da Silva to deliver on his social
promises. It is true that many Brazilians did not vote for a radical Lula,
and that he won only by moving to the centre; but after 21 years of
military dictatorship and 12 years of neoliberalism, people do expect
substantive reforms from him: more jobs, less inequality, and an end to
hunger and landlessness; in short, a kinder capitalism which distributes
benefits more equitably. The failure of such reforms to materialize is sure
to trigger a social crisis, with confrontations between the workers,
landless and poor on one side and foreign and domestic capital on the
other. Jo?o Pedro Stedile, the MST leader, said in September: "Lula's
victory will inspire the people of Brazil and Lula's government will need
an organized mass movement to give support for the necessary changes."
Stedile considers it necessary to give land to four million families in
four years. Lula pledged to redistribute land to half a million families
over the same time-frame.

This encouragement to class confrontation is the positive side of Lula's
victory. Many workers, landless and poor still consider Lula to be their
political champion. His victory is likely to galvanize them, make their
organizations stronger, and solidify their determination to take their fair
share of Brazil's wealth. When things do not change, the middle class could
join these groups, as well, and the resulting mass movement may bring to
power a genuine alternative to neoliberalism.

Continental Disaster

The Brazilian financial crisis which resulted in Lula's election is only
one part of the failure of neoliberalism in Latin America that has led to a
regional resurgence of the left. As one observer remarked, "What is called
a financial contagion is in reality the collapse of an economic model based
on U.S. pillage, local corruption, and joint exploitation." After a decade
of IMF-enforced austerity, high interest rates, wholesale privatization,
and massive corruption, Argentina is a catastrophe: its economy has
completely collapsed, with a 67% decline in national income and 50% of its
people living below the poverty line. It defaulted on its international
debt in December 2001. The country was the most prosperous and industrially
developed nation in Latin America and the most faithful follower of
neoliberal policies. Argentina privatized almost all state assets, most
crucially the banking system, which allowed foreign banks to loot the
country and transfer $197 billion abroad. Such an enormous capital flight,
combined with 90% interest rates, crippled industrial production and
destroyed the national banking system. Neoliberalism meant the sucking-out
of Argentina's wealth into the coffers of the U.S. and other northern
economies, leaving the country in total disintegration.

Similar scenarios are being played out to varying degrees in other Latin
American nations trapped in a system which extracts wealth from Southern
countries at such an incredible rate that even the richest ones can no
longer survive. Uruguay, too, is in deep recession with a 15% unemployment
rate, and had to get a $1.5 billion IMF loan to prevent its economic
collapse. Paraguay was rocked by "deadly anti-government riots" when its
currency lost 30% of its value last year. Alcides Gimenez, the country's
economics minister, warned in November that Paraguay's long recession could
deteriorate into "outright financial chaos." Paraguay is having trouble
paying its $2.3 billion foreign debt amid a run on the banks and resistance
in the legislature to more austerity measures. The opposition has prevented
the country from signing a $200 million loan deal with the IMF.

Peru is so dependent on World Bank-IMF loans that the World Bank recently
insisted that the government privatize "everything," as Argentina did. But
the government's attempt to privatize electrical companies last June caused
"a social eruption." President Alejandro Toledo's approval rating plummeted
from 70% to 16% after his failure to keep his election promise to create
"thousands of jobs." Unemployment and underemployment in Peru exceed 50%,
and 54% of Peruvians live in poverty. Venezuela, under the government of
Hugo Chavez, has forcefully rejected neoliberalism. Chavez, a former army
colonel and coup leader, has increased social spending, created 450,000
jobs, and moved the country four places up on the UN Human Development
Index. Not surprisingly, the U.S. tried to have Chavez overthrown through a
military coup in April 2002, and when that failed, started calling for new
elections while Chavez tries to withstand a strike by oil workers fomented
by the country's business ?lite and probably the CIA. Chavez has warned
that a second coup attempt is imminent.

In Ecuador last November, Colonel Lucio Gutierrez, another left-wing former
coup leader, was elected President on a platform of narrowing the gap
between rich and poor and fighting corruption. Ecuador has to pay $2
billion on its $13 billion foreign debt in 2003, which is almost half of
the country's budget. As one commentator put it, "[Guitierrez,s election]
has shown yet again that South America is fed up with the traditional
political parties, which have dished out economic policy dictated from
Washington. The region has turned left amid growing unrest and
disenchantment with the free market. It is this model, along with what is
seen as the interference of the U.S. and the IMF, that has provoked a
political backlash, not only against the free market, but against the
United States, which has a long and unfavourable history of intervention in
Latin America."


Published in:

Canadian Centre for Policy Alternatives Monitor
www.policyalternatives.ca


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