Where is Lula Taking Brazil?

Where is Lula Taking Brazil?

A few weeks into his term, the contours of the Brazilian president’s agenda is starting to take shape.

 

In the weeks following his return to power in Brazil on January 1, Luiz Inácio Lula da Silva—best just known simply as Lula—has proven himself to be, as always, a canny politician who, despite his narrow victory over Jair Bolsonaro, has shown success both in forming a cabinet and obtaining a relatively friendly leadership in Congress. This initial period has been capped with a highly publicized meeting with President Joe Biden in Washington.

A Failed Seizure Gives Lula Space

 

In what direction will Lula take Brazil? At this early date, one must judge more from words than deeds. But there are signs that he will not be afraid to play political hardball. As politicians often do, he initially stressed that he wanted to unify the country after a raucous campaign in which Bolsonaro ran not only against him but against Brazil’s electoral system and courts, which he had insisted were conspiring to steal the election from him.

But in the aftermath of the January 8 attempt by a mob of Bolsonaro supporters to occupy the Congress, Presidential Palace, and Supreme Court, Lula has used tough rhetoric, insisting (with some justification) that this was a failed coup attempt. Most egregiously, top military officials had used troops to prevent police from arresting protestors who had camped in front of the Army headquarters, instead letting many of them simply slip away. As a result, Lula dismissed the commander in chief of the Army, replacing him with another general who had earlier cast cold water on Bolsonaro’s allegations of electoral fraud.

He also removed the large number of soldiers who had been serving on the presidential security detail, saying he had “lost trust” in them. At the same time, prosecutors are starting to deal with the over 1,000 individuals arrested during the events in Brasilia. And a previously pro-Bolsonaro senator has asserted that in the interim between Lula’s election and inauguration, the former president at least tacitly approved a proposed effort to cook up an excuse to arrest the Supreme Court judge in charge of elections and nullify the results of the vote.

All of this has left Lula in a stronger position at the start of his administration than he might otherwise be, with Bolsonaro seemingly unsure whether to return to Brazil, where he could face legal jeopardy. Although Brazil’s political right has a mass base and its own well-oiled social media network, for now it is on the defensive, giving Lula some extra breathing space.

Building a Cabinet 

In forming his cabinet Lula has reached out to representatives of a range of parties beyond his own base, the leftist Workers’ Party, to include figures not only from other parties which had been aligned with him in his campaign, but also from ones that had opposed him. He had earlier picked as his running mate Geraldo Alckmin, former governor of populous São Paulo state and presidential candidate for the centrist Brazilian Social Democracy Party. Clearly chosen as a gesture to voters concerned about the Workers’ Party’s leftist orientation and Lula’s own free spending record, especially in his second term, Alckmin played a leading role in the transition and subsequently was named as minister of development, industry and foreign trade, in addition to holding the vice presidency.

However, the crucial position of finance minister has gone to Fernando Haddad, former mayor São Paulo city and a Workers’ Party heavyweight, moving the center of gravity on economic policymaking back towards the left. The position of planning and budget minister went to Simone Tebet from the centrist Brazilian Democratic Movement. 

The Foreign Ministry was entrusted to veteran diplomat Mauro Viera. (In Brazil this ministry is usually headed by a senior career foreign service officer.) His record includes serving as ambassador to the United States, which may help in keeping relations with Washington on track. However, the former foreign and defense minister, Celso Amorim, remains a close advisor to Lula. His third-world-oriented viewpoint is likely to significantly influence the Lula administration’s approach to international affairs. 

Lula’s defense minister, Jose Múcio, comes from a small party currently aligned with Lula and has served in Lula’s cabinet before. His position has gained added importance as Lula grapples with civil-military relations after the January 8 events. Otherwise, the cabinet does not seem to have many stars, although it is noteworthy that Marina Silva, an environmental activist turned environment minister in Lula’s previous administration, is returning to her position.

Reaching Out to Congress

Lula’s approach to cabinet-making with its aim of coalition building seems to have served him well in his relations with Congress, despite the strong performance of pro-Bolsonaro forces in both houses on Election Day. A member of the centrist Brazilian Social Democracy Party gained the presidency of the Senate, with support from Lula’s Workers’ Party. It also successfully backed a conservative (if highly transactional) opposition figure for re-election to the presidency of the Chamber of Deputies. 

During Bolsonaro’s presidency, Congress benefited from the practice of the “secret budget,” under which legislators got to determine individually where large amounts of public money was directed—a practice somewhat like the “earmarking” found in the U.S. Congress, but on a grander scale and more opaque. This in effect was the price Bolsonaro paid for gaining control over Congress (and beating back several impeachment attempts).

Lula campaigned against the secret budget, and a recent Supreme Court decision ruling it unconstitutional means he cannot be pressured to maintain it, which would have been politically difficult as his previous administration had been marked by a major scandal regarding the wholesale purchase of congressional votes. But finding other means to gain passage of legislation will be a challenge for Lula, given that in Brazil the path to good executive-legislature relations is seemingly paved with money.

Left Turn on Economics

With the personnel in place, Lula’s policies are beginning to emerge. On the economic side, his recent actions and statements have led some to believe that his moderate gestures during the campaign were a “bait and switch,” as he has ramped up his rhetoric against the rich who “don’t work.” Even before taking office, Lula attained congressional support to suspend a constitutional amendment passed in 2016 which had established an overall cap on spending increases at the rate of annual inflation for a twenty-year period. This will allow him to maintain trademark social programs. (Bolsonaro too had obtained a temporary suspension which allowed him to engage in a pre-election spending spree.)

Lula has publicly disparaged policies that privilege fiscal discipline over the needs of the poor. And he has also engaged in a vocal campaign against the independent central bank for keeping interest rates too high, calling them “an embarrassment,” and suggesting that the bank’s president will be replaced when his term expires. Finance Minister Haddad has echoed Lula, albeit in somewhat milder terms, urging the bank to be more “generous” in the interest of stimulating the economy while pledging to create a more realistic “fiscal anchor” than the spending cap.

Brazil’s huge state-owned Bank for National Economic and Social Development (BNDES) has also become an issue. In his previous administration, the bank, flush with the cash which had flooded into state coffers from the global commodity boom, had been an aggressive player on the international, and especially Latin American, stage, financing infrastructure projects undertaken by large Brazilian construction firms. This was an effort at supporting “national champions” as well as Brazil’s ambitions for global, and particularly regional, leadership.

During the presidential campaign, it had been suggested that BNDES, instead of venturing afield, would concentrate on supporting local enterprises, particularly small and medium-sized businesses. However, since taking office, Lula has asserted that BNDES would indeed be active in support of regional development and integration, and has named Aloizio Mercadante, a former Workers’ Party senator, as its head. This has raised eyebrows as Brazilian construction firms and politicians, including Lula himself, have been caught up in major foreign bribery scandals, though BNDES itself was never charged with misconduct.

Lula has criticized Bolsonaro’s partial privatization of the huge state power generator and transmitter Eletrobras as overly generous to investors (“almost banditry”), and said that this sale would be reviewed (though undoing it may be legally difficult). He has categorically ruled out the idea that Bolsonaro had floated of similarly privatizing state oil producer Petrobras.

Still, there are some who suggest that Lula’s bark may be worse than his bite regarding the economy. During his previous presidency, he showed fiscal restraint, at least during his first term, before money from the global commodity boom began to flow. It may be the case that he is setting up the wealthy and the central bank to take some of the blame when he is unable to make good on all his promises to low-income Brazilians.

Back to the Future on Foreign Policy

The themes of Lula’s previous administration are also reflected in his foreign policy. In his first international trip since taking office, he went to Buenos Aires for a meeting of the Community of Latin American and Caribbean States—a body of Western Hemisphere states which, unlike the Washington DC-based Organization of American States, excludes the United States and Canada while including Cuba, Nicaragua, and Venezuela. While some Latin leaders, notably Chile’s Gabriel Boric and Uruguay’s Luis Lacalle, raised democracy issues, Lula, faithful to his longstanding approach, demurred, only urging in the case of Venezuela that these issues be resolved through “dialogue” while saying that Venezuelan leader Nicolas Maduro deserved “affection.”