Goodbye Lula?

March 30, 2018

Brazil’s leading presidential candidate Luiz Inácio Lula da Silva could face jail time as soon as April 4 and his subsequent disqualification from the race. What does this mean for the future of democracy and the Left in Brazil?  

Luiz Inácio Lula de Silva with Dilma Rousseff in 2009. (Wikimedia Commons/Valter Campanato)

In October 2002, Luiz Inácio Lula da Silva won Brazil’s presidential election and famously argued that hope had defeated fear. In fact, to preempt the fears of local and international finance elites, which threatened capital flight if the Workers’ Party (PT) candidate won, Lula had already signed the infamous “Letter to the Brazilian People” in which he pledged to follow relatively orthodox economic policies. Predictions about his government, and the global economy in general, were not particularly optimistic; fear was greater than hope in many quarters.

Sixteen years later, Lula—the leading candidate in Brazil’s October 2018 presidential election—has been convicted on corruption charges and could be jailed as soon as April 4, officially disqualifying him from the race. If so, we are likely to hear that the initial reasons for fearing Lula were wellfounded. Certainly the mainstream media will portray his imprisonment in that fashion, and Lula’s army of detractors is more than eager to wage attacks on him. In recent months, his campaign has been met with protests, and on March 26, two bullets struck his campaign caravan in southern Brazil. If Lula’s imprisonment plays out as is likely, Brazil will institutionalize a vast system of patronage and abuses the bureaucratic machine for personal gain via illegal payments and bribes, controlled by a right-wing cartel.

In order to understand Lula’s legacy and his ability to not only get reelected, but also to create an enduring Workers’ Party hegemony that has led to four presidential election victories in a row, it is important to remember that Lula came out of trade unions that emerged in the 1970s. He was a negotiator who was willing to bargain. He was a pragmatist, and a conciliator in style. His background was not that of the radical Left of the 1960s that resisted the dictatorship, or of the academic Marxists at the University of São Paulo, like Fernando Henrique Cardoso―who was dogmatic and vulnerable to intellectual fads, from dependency theory to neoliberalism.

Rather, Lula’s government maintained the main economic guidelines of his predecessor: a primary fiscal surplus goal, a low inflation target, and a flexible exchange rate. However, he significantly expanded spending on fiscal transfers to the relatively poor, and extended previous social programs, broadening their coverage. The Bolsa Família program became a global example, touted by the World Bank as a “quiet revolution” that significantly reduced poverty. Further, Lula administration’s increased spending in a positive international context, in which commodity prices went up, allowed the economy to grow at a reasonable pace, and the government to accumulate large foreign currency reserves, reducing the international fears of crisis.

Economic advances were significant, but still insufficient, and it would be an exaggeration to suggest that a new middle class was created during the Workers’ Party governments, as some have posited. In fact, the recent wave of economic protests in Brazil began in 2013, well into the government of Lula’s successor, Dilma Rousseff, and were sparked by the high cost of public transportation in São Paulo and other major cities. The protest movement’s organization was clearly associated with left-of-center demands for more progressive policies. However, as the protests gathered momentum, their targets increased to include spending on the 2014 World Cup and the 2016 Olympics, and corruption on the Left, with an increasing number of right-wing groups linked to the popular demonstrations. The demonstrations took on a broad range of demands, and the protest groups had a mixed political character, from left-of-center to right-wing libertarian, some of the latter funded by the Koch brothers

In spite of the protests, Rousseff won reelection in 2014. Lula was instrumental in her choosing a finance minister from one of the main Brazilian banks, and for pushing an economic policy that reversed the promises of her campaign, and to some extent the policies of Lula’s government, emphasizing the need for austerity. The economy stalled, and with the recession and the collapse of revenue, fiscal accounts that had been fine up to that point went deep into the red. But Rouseff’s pivot to the center and to relatively orthodox economic policies to appease right-wing protesters and to deal with a divided country after a narrow election kept in line with Lula’s approach of seeking conciliation.

Out of power after four elections cycles, Brazilian elites and a good chunk of the traditional middle class wanted their “country back,” much in the same way as disgruntled Tea Party protesters felt in the United States after Obama’s election. They were resentful of the lowly factory worker and a left-of-center party empowering the poor, and also resentful of a woman in power, in the same way that right-wing protesters in the United States resented Barack Obama and Hillary Clinton on the basis of racial and gender prejudices. From the outset, the opposition vowed not to accept the results of the election.

The headline-grabbing Operation Car Wash, which started in 2014 under Rousseff, was not the first corrupt investigation involving Workers’ Party government officials. The first Lula presidency was rocked by the Mensalão, or the Big Monthly Payoff inquiry into corrupt payments made to congressmen by the government. As a result, Lula’s former chief of staff, José Dirceu, was jailed. But after Operation Car Wash, the popular protests intensified as the economic situation worsened, providing cover for broadening the investigations. Meanwhile, impeachment procedures were started against Dilma, in part because she enabled the prosecutors to put at risk many members of Congress implicated in corruption scandals―including some from her own political base and party. As noted by Folha columnist Laura Carvalho, the impeachment was retaliation by the speaker of the house, Eduardo Cunha, who was indicted for taking kickbacks in a scheme at the state-owned oil company, Petrobras.

In 2015, Rousseff was accused and impeached for something trivial: delays in payments to public banks, not an impeachable crime under Brazil’s constitution. Were it criminal, several heads of state should be impeached, including in the United States. Rather, delaying payments was a strategy to deal with fiscal accounts as documented by the IMF, which suggests it is a regular practice. It is clear that the impeachment resulted both from the frustration of an opposition that was unable to win democratic elections, and from a political class that wanted at all costs to stop investigations into corruption. It was essentially a coup negotiated by corrupt politicians and supported by a biased judiciary system and media. The United States also signaled early on that it would be in favor of the coup, since it would remove the troubling independent foreign policy of the Workers’ Party administrations that had supported left-of-center governments throughout the region, as noted by Mark Weisbrot.

Although there were no corruption charges against Rousseff―unlike the current president, Michel Temer, and Aécio Neves, the opposition candidate who lost the election in 2014― it was essential for the forces behind the coup to eliminate the possibility of the Workers’ Party return by an electoral route. Since Lula was the obvious candidate, he became the prime target for investigation. Lula remains the most popular politician in Brazil, and is far ahead in all the polls to win elections this year. That is the real reason why Lula will most likely be imprisoned. Sergio Moro, the judge heading the Car Wash investigation, has been keen on obtaining information incriminating Lula, and has expedited the process, as a conviction would disqualify Lula’s candidacy.

It is also important to understand the use of the judiciary as a political arm of the oligarchy in Brazil, which has deep roots in country’s history. The conviction against Lula is based on a plea bargain by a confessed criminal who says Lula received a bribe from a construction firm, OAS, in the form of a beach house apartment, worth about $600,000 USD, and some other minor benefits, for which there is no corroborating evidence. Lula’s wife visited the apartment a few times, and Lula said that he considered buying it, but that it never came into his possession. The whole case hinges on the testimony of a not particularly credible witness.

The selectivity of the judiciary and its clear bias against Lula and the Workers’ Party is patent. The case of Aécio Neves, a right-wing senator and until recently the head of the Brazilian Social Democracy Party (PSDB in Portuguese), is illustrative. He was caught on tape asking for R$2 million, or $600,000 USD, from the head of the meat-packing conglomerate JBS, and his cousin was recorded receiving the bribe. Even though there is hard evidence―the recording and the money―Neves’s status as a senator has allowed him a privileged forum at the Supreme Court, and has effectively kept him from being prosecuted. In Brazil, senators and congressman cannot be judged by regular courts—in fact, only by the Supreme Court, which has allowed Neves to remain free.

The judiciary system’s bias toward certain strands of society finds deep roots in a country that is among the most unequal in the world. The origins of these inequalities harkens back to a slave system in which the central government could entice regional oligarchies with clientelistic patronage. In that context, the courts, and one might add the police and the military, were at the service of local elites. Despite the economic and social progress since the nineteenth century, some of these structures are incredibly resilient and still in place. The Workers’ Party governments understood that, in order to govern, political alliances and patronage for members of special interest groups in Congress were unavoidable. However, there is no evidence of direct payments to Lula, or that Lula knew of payments to members of Congress, or about bribes at Petrobras or any other state company or bank.

It would be naïve to suggest Lula was unware of how the Brazilian government is run, just as it would be naïve to argue that Fernando Henrique Cardoso did not know that congressmen were paid for their votes in favor of changing the constitution to allow his reelection in 1997―something that was never properly investigated. The need to provide patronage to political allies in order to be able to pass legislation in Congress—a system akin to lobbying in the United States—has made the right-wing Brazilian Democratic Movement Party (PMDB) essential to governing in Brazil since the 1980s. In fact, PMDB has been at the center of all the corruption scandals. The beneficiaries of Rousseff’s impeachment, including Temer, are members of that party. While Lula and Rousseff can be blamed for not doing enough for changing the long history of political corruption in Brazil, there is no evidence of personal gain in their cases, and in contrast to their predecessors, they managed to reduce inequality in Brazil.

Resolving structural corruption in Brazil is a crucial problem. One danger of the coup, coupled with the banning of Lula’s candidacy, is that it normalizes the corrupt structure that put the PMDB party in power. It also perpetuates the use of the judiciary system to prevent popular and progressive candidates from running for office and governing if they win. In the case of Lula’s proscription from the election, it creates the possibility of a victory for the extreme right-wing candidate Jair Bolsonaro, who has praised the last dictatorship and torture, and who has explicitly decried democratic values.

But even beyond Bolsonaro and his authoritarian tendencies, the real danger here is a long-lasting return to an oligarchic state like Brazil's in the nineteenth century, in which the rents of a relatively stagnant export economy were distributed among a few powerful families, while the vast majority was left out. In the contemporary version, instead of slavery, a mass of unemployed people eke out an existence in the slums at the mercy of an antagonistic police state. Patronage and the use of state companies for personal gain would increase, and the judiciary and the media would play a role in allowing illegal organizations to penetrate the state. Brazil would become yet another narco-state, in which drug cartels would play a lesser role than in Colombia or Mexico, but where a similar racket would be obscured by a façade of legality under the official institutions. It would be the Mexicanization of Brazil, and the enthronization of what has been described as the “perfect dictatorship.”

Matías Vernengo is a professor of economics at Bucknell University. He previously taught at the Federal University of Rio de Janeiro (UFRJ).

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