Lula the Political Prizefighter

After a nasty campaign, Brazil's president will have to seek consensus and reform

 

 

RIO DE JANEIRO (Economist) October 29, 2006 — Four years ago Luiz Inácio Lula da Silva, the leader of the left-wing Workers' Party (PT), won election as Brazil's president by wooing centrist voters with the soft-focused slogan Lulinha, Paz e Amor. In a run-off ballot on Sunday October 29th he seems certain to win a second term—but after a campaign in which peace and love have been in shorter supply than snow in the Amazon.

Lula had been expected to win outright in the general election on October 1st. Instead, Geraldo Alckmin, until recently the governor of São Paulo, the biggest state, did unexpectedly well, winning 41.6% to Lula's 48.6% and forcing the run-off. Mr. Alckmin was helped by a last-minute scandal that hit the PT but he also benefited from anger against the government in regions where drought and the strong real have hurt farming and some industries.

In a month of campaigning since then, Lula has widened his lead to 20 percentage points, if the polls are right. To repair relations with farmers, he recruited Blairo Maggi, newly re-elected as governor of the grain-growing state of Mato Grosso and himself the world's largest soy bean producer. He is courting the disgruntled middle class, which does not benefit from federal cash transfers to the poor—nor from those that go to the rich through high interest rates on government bonds.

Most of all, he found a way to turn the pro-business leanings of Mr. Alckmin and his Party of Brazilian Social Democracy (PSDB) against them. Lula's predecessor as president, Fernando Henrique Cardoso, privatized electricity distribution, the telecoms monopoly and a mining giant. Mr. Alckmin has overseen São Paulo's own privatization program. Such is the PSDB's addiction to sell-offs, Lula suggested, that it would sell parked cars off the street.

Brazilians tend to forget the successful sell-off of telecoms, banks and many industries. They remember that electricity privatization was rushed and incomplete, and followed by blackouts (most power-generation remained in state hands).

In response, Mr. Alckmin copied Lula's habit of wearing silly hats. He donned a Banco do Brasil baseball cap to show that he had no intention of privatizing the bank or any other state enterprises, whose logos were plastered on his jacket. This gesture summed up Mr. Alckmin's mistakes over the past month. He should have defended privatization or changed the subject.

The privatization scare has embittered an already nasty campaign, which has featured claims that a “small elite” (the PSDB) is plotting to seize power through a “coup” if necessary against the “spawn of Goebbels” (the PT) clinging to it by any means.

Most damagingly, all this stifled discussion of the issue that matters most: how to lift Brazil's growth rate. Many economists argue that the main culprit is the heavily indebted state, which takes nearly 40% of GDP in taxes, keeps interest rates high and imposes burdensome and capricious regulation on enterprise. Mr. Alckmin calls for a “management shock” to public administration and cuts in “superfluous spending” but says almost nothing about how he would tame public spending.

At least Lula recently admitted the need to reform further the pension system for private-sector workers. Although Brazil is still a country of young people, this has a deficit equal to 2% of GDP. But he quickly added that workers should not have to pay more. By accusing Mr. Alckmin of scheming to starve the state, he suggests he is happy to feed the glutton. Both candidates, who may in fact favor a healthy diet, pander to voters who do not. That makes it harder to cure Brazil's Stockholm syndrome, a love for a state that holds the economy hostage.

The president's men are now fretting that mudslinging and scandal may lead to a “third round”, with Lula formally re-elected but the opposition trying to subvert him, harassing the government for corruption and blocking legislation. That could happen: Lula's opponents may end up controlling the Senate. If he wins his second term, the president will have to move quickly to apply balm to the wounds he has opened. If not, he will have only himself to blame.