Brazil - after Lula

Dilma Rousseff came very close to winning in the first round of voting in Brazil, she ended up on the threshold of the government currently led by Lula de Silva. Lula, the most popular president Brazil has ever had, is stepping down after eight years that changed the face of the country and transformed its place in the world.

How can it be that a nearly unknown woman, who barely had 8.4% of projected votes two years ago, is about to become the next president of Brazil? Lula’s role, along with his 80% approval rating, has undoubtedly been a key factor. But Lula achieved his phenomenal backing for a number of internal and external reasons that merit close analysis. A phenomenon called lulismo was born during his eight-year presidency that explains Dilma’s success.

Electio results show that Rousseff, candidate for the ruling PT (Worker’s Party), got 46.9% of the vote, followed by social democrat José Serra of the PSDB (Brazilian Social Democracy Party) with 32.6% and the ecologist Marina Silva (Lula’s former minister) with 19.3%. On October 31, the day of the second round of votes, Dilma will need four million more votes to become president.

These figures are very similar to those Lula obtained the two times he was elected president. In 2002, Lula got 46.4%, compared to Serra’s 23.1%, and in the second round he climbed to 61%. In 2006, he got 48.6% to Geraldo Alckmin’s 41.6%, but in the second round he again achieved 61%. If nothing extraordinary happens, it’s very likely that Dilma will garner some 55% of the votes in the next round.

New Power Relations

Lula’s eight years in power changed Brazil’s political landscape. This change was reflected in regional elections for governors, senators and representatives. The PT won the states of Sergipe, Bajía, Rio Grande do Sul and Acre, and in the second round it will win in the Federal District (Brasilia), where its candidate already has 48% of votes. Its nine allied parties took control of Rio de Janeiro, Pernambuco, Ceará, Maranhao, Piauí, Mato Grosso, Espiritu Santo and Mato Grosso do Sul.

The social democrat opposition won the majority in Sao Paulo, the country’s largest electoral entity, and Minas Gerais, the third biggest, along with Paraná and Tocantins. The conservative party DEM (Democrats, formerly PFL, or Liberal Front Party) only won in Santa Catarina and Rio Grande do Norte. The Oct. 31 second round will be held in eight states and the Federal District.

In the senate, the government alliance went from 39 to 59 seats, putting it in the majority. Of the 54 senators elected on Sunday, 43 belong to the government alliance, which means a significant setback for the opposition, which had made the Senate a sort of bastion against the government. By parties, the centrist PMDB (Brazilian Democratic Movement Party) went from 17 to 20 senators, the PT from 8 to 15, while Serra’s social democratic party went from 13 to 11 and the DEM from 9 to 6.

In the Chamber of Representatives, the government took control of 60% of the seats. For the first time ever, the PT became the majority party, going from 83 to 88 seats. The two principal opposition parties, PSDB and DEM, lost 34 seats and the Partido R (Republican Party) of artist and entertainer Francisco Everardo Oliveira Silva, also known as the payaso Tiririca, climbed from 23 to 40 representatives. Of the 513 elected representatives, those who support Dilma number around 310. If she wins in the second round, she’ll have a comfortable majority in both chambers, something Lula never had.

The results show not just a growing strength in the parties that support the government, but also a significant drop in the traditional opposition. The changes over the last ten years are surprising: the DEM (Democrats) went from 105 representatives in 1999 to 42, the PSDB from 99 to 56. The DEM, which worked through favoritism, had its primary support base in the northern and northeastern regions of the country. Now, these regions show broad support for the PT, which grew from 59 representatives to the current 88.

All signs indicate that the old northern caudillos (political bosses) have been pushed out of politics, and in particular out of the senate where they had their strongest hold. In their place, new actors have appeared. The payaso Tiririca coined a slogan that represents the perspective of many: “What does a federal representative do? To tell the truth, I have no idea. But if you vote for me, I’ll tell you.” As a candidate for the Chamber, he won more votes than any other candidate in the country, with 1.3 million votes from Sao Paulo alone. In Rio, voters elected Romario and Bebeto, ex 1994 world champion soccer players, as their representatives. These examples may very well reveal profound cultural changes that must be analyzed.

Lula in the Hearts of the Poor

In the 2006 elections, when Lula was re-elected president, lulismo was born alongside public policies that modified Brazil’s social geography. The country is no longer a nation of poor people. Over the last eight years, some 25 million Brazilians left poverty behind and became part of the consumerist middle class. These changes do much to explain Lula’s consistent and solid support as he leaves the presidency with a nearly 80 per cent of popular support.

Lula was elected in 2002 without the majority support of the poorest sectors, comprised of households which earn less than two minimum wages. Since the 1989 elections, when Lula was defeated in the second round by Fernando Collor de Melo, Brazil’s poorest gave him the cold shoulder. While the former steelworker leader was ahead in the other income sectors, the difference in his support between the fourth and fifth lowest percentiles led to his defeat.

A meticulous study done by political scientist and former government spokesperson during Lula’s first term in office, André Singer, concluded that “the poorest of the poor were more hostile to the strikes than the richest,” to the extent that they were the ones who most supported military repression of the strikers.[1] The study also affirms that, according to surveys, these same sectors want State intervention to reduce inequality, but want to “avoid social movements that can upset order.” Their rejection of Lula and the PT the seems to have been based on a preference for changes maneuvered from the top, a sort of “popular conservatism,” according to Singer.

After four years of government, things changed. Lula was abandoned by part of the middle class, but cultivated support in very poor sectors that had not voted for him before. The secret, according to Singer, was the Bolsa Familia program, which went from serving 3.6 million families during the presidency of Fernando Henrique Cardoso, to almost 12 million in 2006. In the north and the northeast, the places where the cash aid program was most present–covering up to 65% of the population in some states– Lula was unbeatable.

The 24% real increase in the minimum wage since 2006 (a 54% increase over the eight-year term), also helps explain the change in political allegiances. Finally, the significant expansion of credit to popular sectors, combined with their use of banks, caused a huge increase in the capacity for consumption of goods, especially of appliances.

Based on this data, Singer reaches a striking conclusion: lulismo “expresses a phenomenon of representation based on a break up of a class that, although it is the majority, has been unable to build its own forms of organization from below.” Indeed, in the first round of the 2006 elections Lula won nearly 55% of the votes in sectors that earn up to two minimum wages per household. In the second round, he gained 64%, while his opponent Geraldo Alckmin barely got 25%.

The New Middle Class

In his new book, Lulismo. De la era de los movimientos sociales al ascenso de la nueva clase media brasileña [Lulismo: From the Era of Social Movements to the Rise of the New Brazilian Middle Class], sociologist Rudá Ricci organizes his analysis around socioeconomic changes. He maintains that the many social movements born in the eighties — the unions, the Landless Movement (Sem Terra), the PT, the Christian base communities — ran out of steam when they became institutionalized. “The street, the main stage for the new social movements of the eighties, was traded for conferences and meetings in government offices.”

During Lula’s presidency, the middle class, or, according to the way salaries are measured, the “C class,” made up of families earning between three and ten minimum wages, went from 37 to 50% of the population. There are now 91 million Brazilians who can buy plasma TVs, airplane tickets, cars and many other goods, including their own homes. “Lula speaks for this new middle class, these millions of Brazilians who break with their family histories of exclusion from mass consumption,” Ricci explains.

He goes even farther: “Lulismo operates on the basis of the integration –under the tutelage of the State- of urban and rural poor into middle-class consumer markets. Historically, these sectors have descended from the poor and marginalized, which makes for a family tree of resentment, cynicism and distrust towards politics and current public institutions.”

Lulismo began to take shape during the 2005 mensalao crisis caused by the discovery of the massive buy-off of representatives by the PT party. This led to the firing or resignation of many of Lula’s allies. The political crisis explains how lulismo was forged in adversity and “followed a clear option for the construction of consensus between the country’s traditional political powers,” says Ricci.

But the new middle class that is living the poor Brazilian’s dream of social ascent is quite different from other places, for example, the Rio de la Plata. It’s strongly linked to community and religious ideas, it has grown across religious faiths and is more comfortable in an intimate culture that focuses on the family, to the point that it appears to behave according to a “pattern of social participation that has little interest in achieving comprehensive, universal rights.”

Ricci concludes that it is made up of people “who do not spend time reading and are absolutely pragmatic.” This feature–a hard, inexorable pragmatism–would seem to explain loyalty to Lula and rejection of social actions, since the latter imply uncertain certain costly results in family and personal terms.

Petrobrás: The Crown Jewel

Brazil is now a world power. The recent increase in Petrobrás’ capital makes it the world’s second-largest oil company and fourth-largest company based on market value, and it is just one example of the country’s global projection. The oil company gained 120 billion reales (about 70 billion dollars), surpassing Nipon Telegraph and Telephone (NTT), which made 36 billion in 1987, and the Agricultural Bank of Chine, which took in 22 billion dollars in what had up to then been the largest capitalization of the year.[2]

The operation’s success was solidified by the emission of 2,402,611,655 ordinary shares and 1,867,808,535 preferential shares purchased by investment funds, the Brazilian state and more than 400,000 investors. In order to access 5 billion barrels on an offshore platform, Petrobrás had to sell the equivalent of 43 billion dollars in stock to the State. Thanks to this transaction, the State’s participation in the business jumped from 40 to almost 50%.[3]

Additionally, around 20 billion dollars in stock were bought by foreigners. The massive influx of dollars led to a revaluation of the real. Some pension funds controlled by unions, like the Bank of Brazil’s Previ and the Petrobrás workers’ Petros, control four percent of stock.

With these new funds, Petrobrás is putting its ambitious investment plan into action, overcoming a debt that had risen to 34 per cent of its liquid assets. It plans to invest 224 billion dollars, or an estimated 12 per cent of Brazil’s gross domestic product, until 2014 to double oil extraction. Right now, Petrobrás has the capacity to produce 2 million barrels a day, but intends to extract another 2 million per day in the years to come. This requires building 14 offshore platforms connected to 184 wells–an investment of 18.5 billion dollars.[4]

The “largest capitalization in the history of capitalism,” as explained by Guido Mantega, the minister of the Treasury Department, raised the value of Petrobrás to $220 billion, exceeded only by Exxon, valued at 290 billion, and ahead of Microsoft and Wal Mart.[5] Nevertheless, according to some calculations, the Brazilian company will need another $90 billion to carry out its ambitious plan, which consists in exploiting oil from below the salt crust, which means drilling through a layer of salt up to two kilometers thick on the ocean floor, some 300 kilometers from the coast.

In November of 2007, an oil reserve with 5 to 8 billion barrels of oil was discovered in Tupi, in the Santos basin. This is one of the biggest discoveries in the world since 2000. In April of 2008, Petrobrás announced the discovery of the Carioca megafield, with reserves numbering close to 33 billion barrels. However, experts believe that the total reserves could be anywhere between 50 and 100 billion barrels, which would make Brazil one of the world’s biggest oil producers.

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