Lula, a people's last hope

Brazil's president says he'll attempt the impossible in this, one of the world's most unequal societ

Has there ever been a government quite like the one that has now taken power in Brazil? The new president, Luiz Inacio Lula da Silva, will take the whole of his cabinet on a weekend visit to the poverty-stricken north-east on 11 January. "I want the ministers to look into the eyes of the Brazilians living there," said "Lula", who was himself born into a very poor north-eastern family and has never been ashamed of shedding a tear or two publicly when confronted with human misery. No one knows better than Lula the scale of poverty and exploitation in Brazil, for he has spent much of the past eight years travelling in his "caravans" into the most remote areas of this giant country. He says that it was the miseria - the Brazilian word for degrading poverty - that he saw on these trips that gave him the determination to carry on running for the presidency after three defeats. "I shall feel that my life's mission has been achieved if at the end of my government every Brazilian is able to eat three square meals a day," said Lula after his electoral victory on 27 October.

The ministers who will go on the weekend outing include stalwarts of Lula's own Workers' Party (PT): the environment minister, Marina Silva, who was born to a poor family of rubber- tappers deep in the Amazon forest and only learned to read and write when she was 16 years old; the education minister, Cristovam Buarque, who, as mayor of Brasilia, won international acclaim for his Bolsa Escola, a scheme in which poor families were paid a basic monthly wage for sending their children to school rather than out to work; the social welfare minister, Benedita da Silva, a black shanty-town dweller and feminist; and the agrarian reform minister, Miguel Rossetto, former vice-governor of the PT government in Rio Grande do Sul state and an ally of the militant Landless Rural Workers' Movement (MST).

It sounds like a Daily Telegraph columnist's nightmare, and you wonder why the US marines are not already hovering off Rio until you look at the cabinet members in key economic jobs: the central bank governor, Henrique Meirelles, who was the first Brazilian to be appointed chief executive of a multinational banking corporation (BankBoston); the agriculture minister, Roberto Rodrigues, a leading agribusiness representative and advocate of GM crops; and the development and industry minister, Luiz Fernando Furlan, chief executive of Sadia, Brazil's largest exporter of poultry and pork and, as such, the main supplier to the UK of battery-farmed frozen chickens. None of these people is likely to have voted for Lula in the election. But the president believes that his finance minister, Antonio Palocci, a former medical doctor, who is known as a PT "moderate", can get this disparate collection of forceful individuals to sing from the same hymn sheet.

Lula's ambitions - to redistribute wealth and relaunch his country - are similar to those of President Hugo Chavez in neighbouring Venezuela. Chavez (as I write) clings to power only by a thread. So why could Lula succeed where his Venezuelan counterpart looks set to fail? The answer is that Chavez, lacking the support of an organised political party, mobilised the support of poor mestizo Venezuelans through inflammatory rhetoric on television and at political rallies, repeatedly calling the white elite "los esqualidos" (the squalid ones) and "los corruptos". The abuse was largely justified, for the venality of Venezuela's oil-rich upper middle classes is unrivalled in Latin America.

But while delighting the poor, who had never before heard such language from a presidential candidate, Chavez alienated well-meaning members of the middle classes who might otherwise have supported his programme of modest reforms. Although Chavez is still an idol to millions of poor Venezuelans, his government lacks that necessary minimum of support among the educated classes.

Lula will not make the same mistakes. The idea of his inclusive government is to keep conflicts inside the administration - to have the bastards "inside of the tent, pissing out", as Lyndon Johnson used to put it. He believes he can forge a national consensus around the creation of a society modelled on Europe's postwar social democracies. Like so many other countries around the world, Brazil privatised a host of state-owned companies in the 1990s - water, gas and electricity, for example. Lula is not talking large-scale renationalisation, but he wants a big increase in the state's regulatory powers. And he wants to end the excessive dependence on short-term foreign capital, which led over the past eight years to three financial crises in which Brazil was forced to turn to the IMF for emergency bailouts.

However, even these moderate goals are likely to strain the unity of Lula's consensual government. Taken in by the seductive promises of foreign experts, the outgoing Brazilian government, under Fernando Enrique Cardoso, opened up the economy to foreign investment in the early 1990s, believing that it would provide a painless route to full economic development. Foreign investment poured in, rising from $3.9bn in 1995 to $30.5bn in 2000.

Yet, in a chain of events that has been replicated in many other developing countries, the influx of foreign capital rapidly led to an overvalued currency and heavy trade and balance-of- payments deficits, which could be covered only by an influx of expensive short-term capital, known as "hot money".

This has left Brazil extremely vulnerable to currency speculators, as became abundantly clear in the middle of last year when Lula surged ahead in the opinion polls and foreign speculators pulled billions of dollars out of Brazil, claiming to be scared that Lula would declare a moratorium on the foreign debt. As Brazil has no capital controls, the only way that the government could avert default on its foreign debt was to lure speculators back to the market with absurdly high interest rates of 15 or even 20 per cent over the US base rate.

Lula has reassured foreign bankers that he will respect all financial contracts made by the Cardoso government, including the commitment to the IMF to run a 3.75 per cent budget surplus this year. This, as Lula very well knows, is incompatible with the kind of Keynesian policies he wishes to adopt. On a trip to Buenos Aires, which, in an explicit act of solidarity, he chose to visit before going to Washington, he said: "Our countries have become too dependent on international financial flows and we have lost our capacity to take independent, sovereign decisions. We have been left at the mercy of speculators, who very often don't even know where our countries are situated geographically."

Lula's hope is that he can get through a difficult transition period by combining fiscal austerity with an emergency programme - Zero Hunger - which aims over three years to lift out of abject poverty the 9.3 million families (44 million people) who have a per capita income of less than one dollar a day. There is an outside chance that his strategy will work, because the hefty devaluation of the currency in January 1999 has eased Brazil's balance of payments headaches and increased the chance of economic recovery. Much more likely, however, is that Brazil will face yet another financial crisis, as foreign speculators express their mistrust at one government policy or the other. With money haemorrhaging out of the economy, Lula will have to decide whether to submit meekly to foreign creditors, as governments have done in the past, or face international fury by slapping on capital controls.

Maybe Lula will follow Tony Blair's example and decide that the best he can do is to try to make neoliberalism work a little more efficiently and a little more humanely. He would then face outright revolt from left-wing allies. Joao Pedro Stedile, a leader of the MST, described Lula's victory as a triumph for the Brazilian people but warned that "if he tries to deceive us, asking endlessly for our patience, then he will finish up like [Fernando] de la Rua" - the Argentinian president who was deposed by a popular revolt in December 2001.

It is likely, however, that when there is no more room for conciliation, Lula - who came to national prominence as a combative labour leader and was jailed in the 1980s as a "subversive" during the military dictatorship of 1964-85 - will stand up and fight. He feels as no other leader before him the weight of history. During his electoral campaign, he spoke to a huge crowd of poor supporters in Fortaleza, a city in the north-east: "When I arrived, several men and women came up to me, crying and saying that I am their last hope. I know I can't betray the dreams of the millions and millions of Brazilians who are backing me. Any other president of the republic can be elected and do nothing. The Brazilian people are used to this. But I don't have that right, for there are people out there in the crowd who have been supporting me for ten, 20, 30 years. We can't do miracles. The country is engulfed in an unprecedented crisis. The economy hasn't been growing for eight years. I don't know if I can achieve everything I want to, but you can be sure that I'm going to start doing what is necessary, then what is possible, and after that turn to what is impossible."

Sue Branford is the co-author of Politics Transformed: Lula and the Workers' Party in Brazil, to be published later this month by the Latin America Bureau, London