Brazzil
Economy and Politics
August 2002
The Brazilian triumph in the 2002 World Cup should give the Brazilian economy a positive spin in the near future. Brazil needed very badly to win this time around, because of the deteriorating economic condition in the country. Brazilians needed anything positive to happen to give them any sense of hope for the future. Soccer has been used as the opium for the masses in Brazil for a long time. When Brazil wins, the people feel good about themselves and they forget how bad their personal financial situation is—at least for a short period of time.
When this World Cup euphoria diminishes, slowly the masses will go back to the current reality of their lives, and they will have to face the devastating effects of a deteriorating and spreading economic decline in South America.
The economic situation in Argentina has been deteriorating each day and has become chaotic. The Argentinean economy is shrinking with no end in sight. This continuous economic decline is pushing Argentina into a political and economic black hole.
Only fools believe that the complete collapse of the Argentinean economy which is under way would not have a major negative effect on the other economies of the countries which border Argentina—including the economies of Brazil, Bolivia, Chile, Paraguay and Uruguay. So far, the Uruguayan economy is the one which has been most severely affected by the Argentinean collapse. The Paraguayan economy also is in trouble.
But, in the coming months, depending on the Brazilian presidential election outcome, there is the chance that Brazil will follow Argentina into the political and economic black hole.
Anxiety Attack
With the polls showing Brazil's presidential front-runner Luiz Inácio Lula da Silva (known as "Lula") still ahead of the pack, with the increased chances of Lula's victory in the coming elections, Wall Street started having an anxiety attack. Wall Street started worrying that the left-wing Workers Party candidate may increase spending to fund social programs and jeopardize macroeconomic stability in Brazil.
There are different worries by different people about Lula's victory in this election. Wall Street is worrying about his views regarding social programs and the possible restructuring of the Brazilian government debt.
But after speaking with a number of people in Brazil, I learned that their worries are different from that of Wall Street. They are worried that if Lula becomes president, two groups of people will think that it is open season on private property—1) the "Sem Teto" and 2) the "Sem Terra".
The "Sem Teto" (Roofless) are a group composed of millions of destitute people who live in the large cities such as São Paulo and Rio de Janeiro, and they move in and take over without authorization any property that seems to be empty. Usually these properties are on the market to be sold or rented. After these people move into that property, it becomes a nightmare for the owner of the property to get them out.
The "Sem Terra" (Landless) are another large group, which includes millions of destitute people who want agrarian reform in Brazil. They want a piece of land for themselves. These people move onto people's farms without authorization and again they become a nightmare for the owner of the property to get rid of them. Sometimes things get out of hand and there are armed clashes between farmers and "Sem Terra," with deadly outcomes.
A Lula victory in October will signal to the "Sem Teto" and the "Sem Terra" that it is OK to invade other people's property and that they will get away with it. This is a serious issue in Brazil and very close to home for most Brazilians. Brazilians have a choice in the coming October election, and they should elect the president who will provide full protection to property owners, and they should not allow this nightmare to continue any further in Brazil.
Totalitarian America
When France elected as Prime Minister a socialist and left-winger—Monsieur Lionel Jospin—Wall Street did not destroy the French currency, the Euro, to show its displeasure with that election. Under Mr. Jospin's tenure, France sustained a period of growth and a large fall in unemployment, thanks in part to his significant social contribution and by his introduction of a 35 hour working week and other measures to boost employment.
In another example, Wall Street did not destroy the value of the US dollar when George Bush was elected US president by the US Supreme Court. Democracy? What does it mean for a country to be a democracy? Why there is so much hype in the US for democratic ideals? What type of democracy do we have in the US today? I had a very high regard for the US Supreme Court until they played politics in the last election, when they elected the new US president. If there were a similar election to the last US presidential election in any country in South America or in Africa, I am sure that the US media would characterize the event as a coup d'état.
The Constitution of the United States with its Bill of Rights served well the needs of the American people for the last 215 years. This US Constitution was one of the greatest documents in world history. I am sorry to see the American people allowing the destruction of such a great document in the name of fighting terrorism.
Benjamin Franklin, one of the founding fathers of the US nation, once said: "Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety". Since September 11, 2001 the US government took many measures—including the US Patriot Act and the formation of the Homeland Security with its special powers, which overrule the US Constitution and The Bill of Rights. I hate to see the United States becoming a totalitarian state with the blessing of the American people.
I hope that this new totalitarian mentality of some members of the US government does not translate into action and they decide to interfere with the coming Brazilian election if Mr. Lula is elected president. I would hate to see a replay in Brazil of the fiasco that occurred in Venezuela and the overthrow of a democratically elected president—Mr. Chavez.
Brazil is a democracy and Brazilians should honor the result of the election even if Mr. Lula becomes the next president of Brazil. But it is not a good idea to elect Mr. Lula president at this time, mainly now that Brazil could become an option for investments for the money leaving the United States for a safer haven. Brazil can become a major option and a safe haven for investments from the capitalist world.
With only two months to the presidential elections in Brazil, up to this point a Lula victory seems almost certain. After trying to be elected president so many times, finally, Lula has the chance to achieve his goal.
I believe that there is one thing in this election that is different than in past elections in which he participated. The difference that can put Mr. Lula over the top in this election is the deteriorating economic situation in the entire South American area, including: extreme poverty, despair, economic chaos, a fire sale of government assets (as in Argentina), and collapsing currencies.
Final Suggestion
From this point on, the October election will become a horse race to the wire between only two candidates as the latest polls are showing—Mr. Lula with 33 percent of the votes and Mr. Ciro Gomes with 26 percent of the votes.
If some of the other candidates who have no chance to win this election drop out of the race and put their support behind Mr. Gomes, then he will have a real chance to defeat Mr. Luiz Inácio Lula da Silva in October. I believe that between the candidates currently available for this election, Mr. Ciro Gomes will be the best choice to become the next president of Brazil.
Mr. Gomes has been a mayor, and a governor of the state of Ceará. He served briefly as Brazil's Finance Minister in 1994. He has all the credentials necessary to become the next president of Brazil.
It does not matter which candidate becomes the next president of Brazil. I just want to make one suggestion to the next Brazilian president, in case he needs economic advice from an American economist regarding economic policies which will help Brazil. I suggest that he contact Mr. Paul Krugman. He is an outstanding economist, and he would provide sound economic advice. Currently, Mr. Krugman is an economics professor at Princeton University in New Jersey.
Ricardo C. Amaral is an author and economist. He can be reached at amaral@alumni.fdu.edu