The Brazilian elections - a new stage in the Latin American revolution

To scenes of wild rejoicing on the streets, the people of Brazil celebrated the landslide victory of Luiz Inacio Lula da Silva, the president of the Workers' Party (PT). This was undoubtedly a heavy blow struck by the masses against the corrupt and degenerate oligarchy that has ruled Brazil for decades. It has caused shock waves that will reverberate throughout the whole of Latin America and beyond.

This landslide victory prompted massive celebrations by supporters waving Workers' Party flags in Rio de Janeiro and Sao Paulo. Even before the official results were known, thousands of supporters poured onto the Avenida Paulista, São Paulo's commercial centre, waving the party's red-and-white-starred flag and chanting victory slogans. The workers, the peasants, and the poor people of Brazil are rejoicing in their victory, and with all our hearts we rejoice with them.

The enthusiasm of the people is entirely understandable. After so many decades in which Brazil was ruled either by military dictators or corrupt oligarchs, at last someone from the working class has come to power. A former trade unionist and metalworker has won with more votes than any president in the history of the world's fourth-largest democracy. Lula started work at the age of 12. At the age of six, he made a 1,000-mile journey with his mother to Sao Paulo in a rickety wooden truck. He is undoubtedly sincere in his desire to help the working class and the poor.

Unfortunately, however, good intentions are not enough. It is necessary to explain concretely how these intentions are to be carried into practice. If the victory in the polls is not to be wasted, it is necessary to tackle the centres of economic power. By voting massively for the PT candidate the masses have voted for a fundamental change. The argument that Lula won the election because he had embraced "moderate" (that is, capitalist) policies is false to the core. The people of Brazil did not vote for Lula because he wore a suit and tried to talk like a "moderate". They voted for him because they wanted things to change. That includes middle class voters like Marcia Britto, a doctor who told VOA on Sunday that Brazil needs major changes in health, education, and other areas: "We need changes in everything," she said. "The country could be in much better shape, but is in very bad condition, so we need major changes."

The key question is unemployment. The official unemployment rate now stands at 8%, up from 6% eight years ago. But broader, unofficial measures that include underemployment are higher still. The low growth that Brazil has experienced since 1998 (the year Cardoso was re-elected) means that creation of new jobs has not kept up with the 1.5m young Brazilians who join the labour market each year. In the world's ninth largest economy, a country with almost unlimited natural resources and a huge economic potential, an estimated 53 million people, or almost one-third of the population, lives below the poverty line. These millions voted for Lula with hope in their heart. They will now expect results.

In the election campaign Lula promised a more active industrial policy, thus more exports, more growth, and more jobs (10 million jobs to be exact). But given the world crisis of capitalism and particularly the collapse in Argentina, this is ruled out. Only by a decisive break with capitalism and the nationalisation of the banks, the land and the big companies that dominate the Brazilian economy can the cancer of unemployment be extirpated.

The PT originally put forward the idea of the socialist transformation of society. Unfortunately, under the pressure of big business and imperialism, Lula has steadily retreated from these positions. The PT was founded as a party based on radical socialist policies. The party fought its first election in 1982 on the slogan: "Vote PT - the rest are bourgeois." Unfortunately, as the party came closer to power, so it changed its language from that of militancy to so-called moderation. In order to soothe the nerves of its readers, The Financial Times pointed out:

"The PT has gradually moved towards the centre. The party leadership has embraced more moderate policies typically associated with European social democracy. It has favoured the maintenance of a market economy for more than 10 years and has dropped more extreme policies. The PT no longer favours suspending foreign debt payments, for example. In the past two years, it has supported policies designed to keep inflation low and it favours tight fiscal control.

"This year it has agreed to maintain the 3.75 per cent of gross domestic product primary fiscal surplus for 2003 agreed with the International Monetary Fund in August. In the past few weeks advisers have said they will back moves to give greater independence to the central bank.

"Also, the party's leadership has taken a tough line against its more extreme supporters. In the early 1990s it expelled two far-left groups that maintained separate organisations within the party (both ran separate presidential campaigns against Lula this year). The party's majority tendency that supports Lula and José Dirceu, its president, won 55 per cent of the votes at a national congress held last year. Its opponents are divided into at least four leftwing tendencies. Sixty-five of its 91 deputies are moderates who support the leadership." (The Financial Times, October 25, 2002)

The party no longer calls for a suspension of payments on the foreign debt or for re-nationalisation of privatised companies. It has also promised to maintain strict controls on inflation and says it will give greater independence to the central bank. Lula now heads the "moderate" (that is, right wing) faction, "Articulation", which has a tight grip on the party leadership. This has allowed him to carry the PT with him to the "centre".

In the election campaign, Lula replaced the PT's former pledge to renegotiate Brazil's government debt with a commitment to repay it, and indeed to maintain a primary surplus sufficient to stabilise it! The PT leader has thought nothing out to the end. How will it be possible to pay these huge debts and at the same time carry out reforms in the interests of the workers and peasants of Brazil?

In a misguided attempt to be "moderate", Lula has tried to be all things to all men. The main characteristic of his programme is its extreme vagueness. This was immediately understood by the bourgeois commentators. The Economist commented on October 3:

"Mr da Silva promises big changes if he wins the election. He is vague, however, about what they will be. In this campaign he has adopted, apparently with success, a softer 'love and peace' image, as he puts it, in place of his former tub-thumping trade-unionist rhetoric. He promises to be a great negotiator, achieving things that Mr Cardoso could not, besides bringing faster economic growth and faster progress on overcoming social problems. But he is fuzzy on policy details, of which he seems to have no grasp. The current economic model, he says, must change; he does not say what he would put in its place."

Negotiating skills are, of course, an important asset to a good trade unionist. But how is it possible to negotiate with the Brazilian oligarchy that they must reduce their profits and sacrifice part of their obscene wealth in order to provide the majority with jobs, homes and land? It would be like trying to persuade a man-eating tiger to eat lettuce! All history shows that it is not possible to mediate between class interests that are completely antagonistic.

The new President, who will take office on January 1, faces numerous problems, including making payments on Brazil's massive debt of $260-billion. His room for manoeuvre is very restricted. Cardoso left Brazil indebted and vulnerable with a vain bid to prop up the real's value artificially before being forced to devalue in 1999. Moreover, Brazil's government debt has soared, reaching a record 62% of GDP this July, compared with 30% when he became president. The conclusions are inescapable:

"Budgetary pressures and large debt obligations mean he will have few resources to meet high expectations, especially from his own radical supporters. 'Financial conditions imposed by the markets are extremely tough,' says Ken Maxwell, a British specialist on Brazil who works with the Council on Foreign Relations in New York." (Financial Times, October 28, 2002)

How, then is it possible to carry out a programme in the interests of the working people? Only by grasping the nettle and expropriating the wealth of the bankers, landowners and capitalists and instituting a socialist planned economy. No other solution is possible.

The picture of last weekend's triumph was clouded by other factors. The PT appeared to have won only two of the eight remaining state government races it contested. It appears to have lost control in Rio Grande do Sul, a relatively wealthy southern state where it governed for eight years. It also suffered defeat in the gubernatorial race in São Paulo, the country's most populous state.

Even before the elections the PT was moving to form an alliance with bourgeois parties. Overruling the objections of the PT left wing, Lula concluded an electoral pact with the small, conservative Liberal Party in order to get its leader, Jose Alencar, a textiles magnate, as his running mate. This was entirely unnecessary, as yesterday's result showed. Lula's victory was not due in the slightest degree to the block with the bourgeois Liberals, who really represent nobody but themselves. The real reason for this block was to provide an excuse for not carrying out socialist policies. "We would like to do these things, of course, but we cannot afford to alienate our allies! Please be patient!"

The PT's enemies are calculating that it will be far short of a majority in Congress and will have to seek support from the centre-right, possibly Cardoso's Social Democrats (PSDB) and their main coalition partner, the Brazilian Democratic Movement (PMDB). Thus we would face the scandalous situation of the bourgeois parties, having been decisively defeated at the polls, sneaking back into power through the rear entrance. The Financial Times remarked with malicious satisfaction: "The PT's need to forge alliances will reinforce its move to more moderate policies over the last two years and limit the potential for radical measures, analysts said."

However, no matter what manoeuvres may occur at the top, the tremendous expectations aroused by the PT's victory cannot be so easily dampened.

After waiting so long for a chance to change their lives, the Brazilian workers and peasants will certainly be patient - at least for a time. But the patience of the masses is not inexhaustible. At a given moment there will be a tremendous upswing of the masses, who will attempt to carry out from the bottom what the government has failed to do from the top. The scene will be prepared for a growing polarisation between the classes and a radicalisation to the right and the left. The Economist warned ominously: "trying to run the federal government machine, while curbing his party's and his supporters' huge expectations, would be a far bigger challenge."

The local correspondents of the FT wrote from São Paulo: "For now, activists in the trade unions and landless workers' movement (MST) - Mr da Silva's most die-hard supporters - have been restrained in their demands. Luiz Marinho, head of the São Paulo metalworkers' union, where Lula began his political career, says that things 'can't be resolved from one day to another' and argues that inflation must be kept under control. 'We want sustainable, not artificial economic growth. But obviously the people and working class have large expectations.'

" 'The radicals have been quiet during the campaign but they are soon going to present their bill,' says Carlos Lopes, a Brasilia-based political consultant.

"PT leaders have sought to reduce these potential pressures. José Dirceu, the party's president, warned last week that economic hardship would continue well into next year. 'We expect 2003 to be a year of crisis. Society is aware that the margin for manoeuvre is small.' " Financial Times, October 28)

"The radicals have been quiet during the campaign but they are soon going to present their bill" - this is the conclusion of a clear-sighted bourgeois observer. He is absolutely correct!

The Marxists predicted a long time ago that the whole process in Brazil would pass through the PT. Those impatient ultra-lefts who abandoned the party have been shown to be wrong. The way forward now lies through a regroupment of the Left in and around the PT, fighting for socialist policies. The polarisation of society to the right and the left will inevitably be reflected at a certain point inside the PT with the emergence of a mass left wing. If this current is armed with Marxist policies, it can rapidly grow into a decisive force.

Lula's growing popularity in recent months has worried investors and triggered a sharp sell-off in Brazil's financial markets. As Lula's lead increased, the real fell to record lows and the spreads on Brazil's bonds (i.e., the interest investors expect on them, above that on US Treasuries) soared. Already the financial markets have driven down the value of Brazil's currency by some 40 percent this year because of fears of a da Silva presidency. Despite the PT leader's conversion to orthodox economic policies, and the chance that some parts of the current governing coalition will stay, why were the markets panic-stricken at the prospect of a PT victory? What is the reason for this panic?

The answer is quite clear: the capitalists understand very well that Lula and the PT are not the same thing. The Financial Times noted that. "During the 1980s, it stood for such uncompromising socialist politics as nationalisation and radical land reform. Large numbers of its activists still favour this approach. So do its main trade union backers." This is the authentic voice of the strategists of capital. They fear that, once in office, Lula will be under the pressure of the masses to deliver a serious change, and that this pressure will find an echo inside the PT itself. They are not at all sure that Lula will be able to withstand this pressure. They are not afraid of Lula but of the class forces that are behind him.

Despite all his promises, they fear that the new President may be incapable of taking the tough decisions needed to "stabilise the debt" that is, of attacking the wages and living standards of the people who voted for him. Thus, they will react to his election by sending their money out of the country at an even faster rate than before. The result will be a strike of capital, which will further damage the economy, causing an increase in unemployment and poverty. This is the little present the capitalists and bankers have prepared for the new President of Brazil, as a gentle warning to him not to forget who is the real master of the house.

What the bourgeoisie wants is for Lula to carry out policies in the interests of the rich, to continue Cardoso's unfinished package of "market reforms", to cut pensions, to privatise state companies and to facilitate sackings. In other words, what they want is no change. But millions of Brazilians have just voted decisively for a fundamental change. The President will find himself ground mercilessly between two millstones.

The prostitute press is already saying that Lula has only a few months to "gain the markets' confidence". They suggest helpfully that it would help if he kept Arminio Fraga as head of the Central Bank... This is what is called "democracy": where millions of people freely vote for a President or a party, and a tiny handful of press magnates feel free to dictate policies to the elected government. The pressure from the bankers and capitalists and their hired press has only just started. It will become increasingly ferocious as time goes on and the crisis deepens.

The Bible says: "You cannot serve two masters: you cannot serve God and Mammon." That goes for the PT also. Lula has been elected with the votes of the overwhelming majority of the electorate. What matters more, the aspirations of more than 50 million Brazilians, or the interests of a tiny handful of wealthy parasites?

Behind the Brazilian oligarchy stands the might of US and world imperialism. Latin America is one of the USA's most important spheres of influence. And Brazil is the largest and most important country in Latin America. Washington is therefore following events there with great attention. After the result was announced Lula received a message of congratulations from US President George W. Bush. "The president... looks forward to working productively with Brazil," said Ari Fleischer, the White House spokesman. The real message from Washington, however, ought to have read as follows:

"We congratulate you, of course, but we are watching your every step and if you make one false move, you will get quite a different message. We hope, however, that this will not be necessary. We are looking forward to further robbing and exploiting your immensely rich country, as in the past, and we hope you will not put too many obstacles in our way, as this will incur our most severe displeasure."

In the old days Lula was one of the most vocal opponents of the so-called "Washington Consensus" that says open markets, privatisation, and tight monetary policy offer the best way forward for developing nations. He now seems to hope that it is possible to reach an understanding with the North American giant. The logic of this error is the same as the notion that one can mediate between rich and poor, between capitalists and workers. The only kind of "mediation" the imperialists are interested in is the complete subordination of Brazil to the exploitation and plunder of the big international corporations.

For years Brazil, like its southern neighbour Argentina, slavishly followed the dictates of Washington. The Cardoso government obediently swallowed the recipes of the IMF, sticking rigorously to the terms of its agreements with the Fund since 1999. Despite this touching loyalty, the value of its bonds and its currency, the real, have plunged in recent months. The reason for the investors' extreme nervousness was not only the fact that they were worried about the outcome of a presidential election but also the possibility that Brazil might follow Argentina's example and default on its public debt.

The trouble is that Brazil's huge size means that it cannot be ignored. The possibility of a default by the biggest economy in South America has very serious implications for the world economy. Moreover, what happened in Buenos Aires last December is a serious warning that economic collapse can create the conditions for revolutionary explosions. The size and power of the mighty Brazilian proletariat fills the strategists of US imperialism with foreboding.

The worry in Washington about the economic and political consequences of a Brazilian default is shown by the size of the recent IMF loan to Brazil. This was the largest loan ever made by the IMF, even bigger than those made to Asian countries in 1997 and 1998. It was a reversal of the policy pursued by O'Neill, who was apparently overruled by the White House, which has grown worried by the impact of a Brazilian debt default on the world economy and throughout Latin America.

The situation of Latin America is characterised by colossal instability from Tierra del Fuego to the Rio Grande. After almost twelve months, there is no sign of stability in Argentina, and the reverberations from that country are still being felt in one country after the next. Uruguay, Paraguay, Bolivia and Peru are all in the grip of convulsive crisis. The guerrilla war in Colombia is continuing and intensifying with increased US involvement, Venezuela is oscillating between the fires of revolution and counter-revolution. An explosion in Brazil, however, would put all these in the shade. Hence the desperate attempts of the US imperialists to get some kind of stabilisation.

They hoped that a steady real would in turn help calm fears over the Brazilian public debt, since around a third of this is indexed to the dollar. News of the loan indeed boosted the real and Brazil's bonds. But the aid given was wholly disproportionate to the depth of the crisis. The real subsequently slipped back somewhat - a clear sign that the financial markers know that the problems are far from over. The weakness of Brazil's currency has pushed up the cost of servicing the country's debt. The risk premium on Brazilian bonds has soared, leading some analysts to fear that the debt will become unserviceable. Some think the government should start an orderly restructuring of its debt, to avoid a more chaotic default.

However, when O'Neill, the IMF spokesperson, spoke about the deal, he was surprisingly enthusiastic about Brazil's economic policies. Brazil, he said, is a "good news story". The country had the "right economic policies" and the United States "stands ready to support Brazil as it continues to implement those policies". O' Neill's "enthusiasm" has two explanations. Firstly, it is not in the interests of the USA that the second biggest economy in South America should collapse. His soothing words were a not very successful attempt to soothe the shattered nerves of the investors. But they had a deeper, more menacing message. This speech was a coded message to Lula: "The present policies have the support of the USA. Don't even think of changing them."

For his part, Lula has quickly accepted the deal, saying on August 8: "it is inevitable". But this deal reaffirms the current restrictive fiscal policy, maintaining the target of a primary fiscal surplus (that is, before interest payments) of 3.75% of GDP. This would effectively rule out the possibility of carrying out the reforms that the workers and poor people of Brazil demand.

The Brazilian elections come at a time when Brazil is faced with a deep crisis. Although Lula has promised not to default and to honour Brazil's international obligations, the foreign investors are not inclined to place much faith in nice-sounding words. They know that a PT government will be under the pressure of the masses and that Lula might be pushed to go further than he intends.

The PT leader's attempt to be "all things to all men", promising one thing to the masses and another to the investors cannot be maintained. Having swept Lula to power, the masses will demand action to defend their interests, and the Brazilian and world bourgeoisie will demand the opposite. Lula will be ground between two millstones. He will not be able to hold the line for long. The way is being prepared for an explosion of the class struggle in Brazil.