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Radical Solution

Sao Paulo Dispatch

The markets have cause for displeasure: None of Brazil's three candidates are fervent devotees of the Washington Consensus. But their fears of Lula are out of date. The IMF bailout conditions $24 billion worth of loans on budget surpluses, severely limiting any future president's inclination toward reckless spending. What's more, Lula isn't significantly more protectionist or anti-globalization than his competitors. In fact, unlike Gomes and Serra, who are scrambling to move beyond their center-right bases by pandering to working-class resentments, Lula is moving to the center in a bid to win over skeptical middle-class voters. Ironically, the onetime radical may be the best hope for neoliberalism in Brazil.

No Latin American government has more closely followed IMF policies--privatization, fiscal austerity, currency stability--than has the administration of Fernando Henrique Cardoso ("FHC," as he's popularly known), now coming toward its term-limited close. So it's not surprising that investors like Soros would pull for Cardoso's handpicked candidate, Serra. On paper at least, Serra is a Cardoso clone. After opposing the rise of Brazil's military dictatorship in the mid-'60s, both men spent academic careers in exile, Cardoso as a sociologist, Serra as an economist. Both helped develop the doctrine of "developmentalism"--highly statist, highly protectionist economic nationalism--adding their own Marxian overtones to the theory. Together in the 1970s, upon their return to Brazil, they created a new, European-inspired center-left opposition to promote their developmentalist agenda.

When the men came to power in 1994, however, their ideological paths diverged. In office, Cardoso and his finance minister, Pedro Malan, ditched developmentalism, becoming practitioners of third-way, DLC-style, market-friendly liberalism; Serra remained as loyal as ever to the old cause. He became the in-house critic of Malan's IMF-centric policy, pushing for more government intervention in the economy. During a stint as minister of planning in the mid-'90s, Serra argued that the government should use import controls to close Brazil's trade deficit. He publicly called the government a "sucker" for entering into agreements with the IMF that set rules on borrowing by state-owned enterprises. And his colleagues in the Malan faction accused him of sabotaging privatizations. After becoming health minister in 1998, Serra cemented his reputation as the administration's populist, railing against foreign pharmaceutical manufacturers. When the Swiss drug company Roche, for example, offered a deep discount on an aids drug, Serra peremptorily rejected it. Instead, he threatened to revoke Roche's patent. "Brazil is not a nation of suckers no matter what the drug companies think," he exclaimed last year. On the campaign trail he has blared his economic nationalism even more loudly, touting the wisdom of import substitution. And like Al Gore, to whom he's often compared, he has done little to defend the economic policies of his government, even explicitly criticizing its privatizations. "There's no question," says Johns Hopkins School of Advanced International Studies' Brazil expert Riordan Roett, "Serra will be tougher on free trade, globalization, and multinationals. He'll be more interventionist. He's not Cardoso."

Gomes, whose lead Serra recently erased with a barrage of attack ads, would be even worse for the markets. While Serra represents the Sao Paulo industrialists who want protection from international competition, Gomes represents another traditional power base, the oligarchical families of the less industrialized, more traditional Northeast. They have an even more regressive goal: to distribute the political booty that will ensure the continuity of their dynasties. Gomes descends from a dynasty himself: His family has held political office in CearA since the nineteenth century. Even though families like these--the Sarneys, Magalhaeses, Collors--cast their lot with the Cardoso coalition in 1994, they resented being ruled by arrogant academics like Cardoso and Serra, who spoke of "modernizing" the political system in which they had flourished for so long. After eight years on the backbenches, the oligarchs want to regain control of the pipelines of patronage and spending that were largely closed in the Cardoso era. The oligarchs, says political scientist Amaury de Souza of the Instituto de Estudos Econimicos, Sociais e Poleticos de Sao Paulo, "see this $(election$) as a reincarnation of an old rivalry against the rule of Avenida Paulista, the Brazilian Wall Street, and the University of Sao Paulo," where Cardoso was a professor.

The oligarchs practice a classical strain of populism, railing against the media elites who torment them with charges of "corruption" and against the political power of Sao Paulo. Gomes also indulges in anti-globalization fire-breathing. "I don't want to be a Brazilian president housebroken by the market," he proclaimed at a forum last month. Earlier this summer he told a group of Sao Paulo business leaders that he would sooner "cut off my hand" than accede to the demands of foreign banks.

And Gomes might not only turn Brazil away from neoliberal economics; he could weaken its democracy as well. In 1995 he recruited a mentor from Harvard, the legal philosopher Roberto Mangabeira Unger. A godfather of the neo-Marxian school of Critical Legal Studies, Unger promotes something called "democratic experimentalism." His doctrine, Unger claims, would reorganize government to free "individuals from the hold of entrenched social roles, divisions, and hierarchies." The details of his plans, however, aren't likely to do any of this. Frustrated with "politicsslowing" impasses between the president and congress, Unger proposes two solutions in his 1998 book, Democracy Realized, that have found their way into Gomes's platform. The first is that the president should have the constitutional right to call for a plebiscite whenever the congress doesn't agree to adopt his programs. And if they reach an impasse, he wants congress and the president to have the right to demand new elections. In other words, Unger and Gomes would give the president new powers to aggressively confront congress. It's the stuff of strongmen--a role for which Gomes seems well-suited, given his blunt, imperious persona--and a recipe for constant constitutional crises.

At first glance, Lula hardly looks like a harbinger of greater stability. He made his name as the Lech Walesa of Brazil, an uneducated metalworker who stood up to his country's military dictators in the late '70s. On the stump during his three previous presidential tries, he fit the part of the radical, wearing flip-flops and a checked worker's shirt. His campaign trumpeted slogans that could have been generated by the Third International, like "Worker, Vote for a Worker." His agenda was as red as they come: redistribution of wealth, land reform, friendship with Cuba.

But, as happened with the American Democratic Party and British Labor Party, Lula has shifted toward the center over the last two years, albeit starting from a point much farther left on the spectrum. Roberto Pompeu de Toledo, a columnist at the newsweekly Veja, told me, "It is as simple as it looks. The party got sick of losing. They realized that they had to move closer to the center to have any chance of winning." Before standing for a fourth time, Lula secured an agreement with the leadership of the P.T.'s radical wing, nicknamed the "Shiites," that they cease their demands for ideological purity. He began to make over his image, hiring a right-wing political consultant, Duda Mendonca, the Brazilian Dick Morris. Soon his whole look morphed: fine suits, a carefully cropped beard, a more subdued style on the trail. There was substance to the change, too. Lula minimized the Shiites' power, replacing the party leadership with unabashed pragmatists-- like P.T. President Jose Dirceu--who have no ties to radical public-sector unions. He made a textile magnate from a conservative, evangelical party his running mate. To showcase its new centrism, the P.T. published a "manifesto" in late July that made no mention of socialism. It promised fidelity to Cardoso-style economics, honoring debt payment and maintaining current anti-inflationary mechanisms. And Lula has adopted a new slogan in his speeches, repeating, "There's nothing more pragmatic in the world than Brazilian society"--a subtle assurance that he has no interest in nationalizing industry or rousing the proletariat. De Souza, a moderate, says, "In essence, the P.T. economic program isn't different from Serra's. They've come a long way."

Lula's critics claim that the change is nothing more than Mendonca's cosmetics, that Lula showed his true stripes last December when he made a pilgrimage to kiss Fidel Castro's ring in Havana. Writing in The Weekly Standard, Hudson Institute's Constantine Menges warned that the event presaged a new anti-American alliance. A Lula election, he thundered, "would be a major setback for freedom." But Menges neglected to mention the details of this visit. Castro had used the meeting to prod Lula leftward. "Why don't you adopt the Cuban model?" the dictator asked. "Cuba is not a model for Brazil," Lula responded. "We prefer pluralistic, competitive elections." After finishing their conversation, Lula headed to a meeting with a group of Brazilian businessmen who were visiting Havana. Long live the revolution.