:: blame the extended gestation.... ::

:: Monday, July 22, 2002 ::

Brazilian Democracy Faces Obstacles from the
North
by Mark Weisbrot

RIO DE JANEIRO, BRAZIL -- In this slum carved
out of the hilltops overlooking Rio de Janeiro,
Claudia de Andrade Burgo explains why she plans
to vote for Lula, the presidential candidate of the
Workers' Party, in Brazil's 2002 elections. "He is
from the people -- the poorer classes. The Workers'
Party is more likely to create jobs."

Claudia is a 31-year-old single mother with
two children, who earns about $40 a month for
childcare work. She has lived all her life in
Jacarezinho, a favela -- one of the slums
surrounding Rio, where drug dealers are often the
law and police fear to tread. She is ready for change
in Brazil.

But unknown to Claudia, her vote could be
cancelled by the decisions of Wall Street firms
some 5000 miles away. Last week Luis Ignacio da
Silva -- or Lula as he is popularly known -- pulled
ahead in the polls. He scored 38 percent, with the
nearest competitor at 16 percent.

Brazil's financial markets showed no
reaction, until the US financial giants Merrill Lynch
and Morgan Stanley Dean Witter downgraded
Brazilian bonds in response to the polls. The
Brazilian stock market dropped more than 4 percent
in one day, and the press broadcast Wall Street's
warnings far and wide.

The power of these firms to move financial
markets -- and thereby intimidate the electorate -- is
a growing threat to democracy in Brazil, as well as
in other developing countries.

In the case of Brazil, Wall Street's warning
seemed unfounded, and it raised suspicions of
political motives. The Workers' Party has made
clear its intention to honor the government's
existing obligations, and there is little reason to
believe otherwise. That's why Brazilian financial
markets showed no reaction to the poll results, until
Wall Street weighed in.

Indeed there is a strong case to be made that
the Workers' Party program makes economic sense,
and is sorely needed. Like most of Latin America,
Brazil has suffered a drastic slowdown in economic
growth over the last two decades. Income per
person has barely grown: 5 percent from 1980-
2000, as compared to 141 percent over the previous
20 years (1960-1980).

Yet the current government of President
Fernando Henrique Cardoso has kept real interest
rates here among the very highest in the world. This
pleases Wall Street and has made a few Brazilians
very rich, but it has stunted economic growth and
greatly increased the country's debt burden. Income
per person has grown by about one percent annually
since Cardoso took office in 1994.

Income inequality has also worsened. Of
course Brazil has long had one of the most unequal
distributions of income in the world. But in the
1960s and 70s, when income per person was
growing by 4.5 percent a year, the majority of
Brazilians experienced at least some improvements
in their living standards. That is no longer true.

The Workers' Party proposes to raise growth
with lower interest rates and investment in public
infrastructure. One of the most badly needed of
these investments is in sewer systems: 60 percent of
Brazil's households flush untreated sewage into the
waterways. Poverty and fiscal austerity are terrible
for the environment.

The Workers' Party has also proposed a
"zero-hunger" program for the more than 30 million
Brazilians who do not have enough to eat. This
would include a combination of food stamps,
increased minimum wages, and support for small
and medium-scale agriculture to produce for the
domestic market.

In a nation of 175 million people that is rich
in resources and has more land than the continental
United States, these are feasible goals. And most
observers agree that the Workers' Party has a very
good track record in the localities where it has
governed.

But there will be powerful opposition from
special interests, at home and abroad. From the
United States, it is not only Wall Street but also our
government that poses a threat to fair elections in
Brazil. During the 1998 election, the New York
Times reported that a large US loan package would
only be approved if Cardoso (rather than Lula) were
elected. Such threats did not determine the outcome
in 1998, but they could easily make the difference
in a close election.

Given the Bush administration's support for
a military coup against a democratically elected
government in Venezuela, and its open intervention
in last years' election in Nicaragua, we can hardly
expect better behavior this time around. Ironically,
most Americans believe we should let Brazilians
(and everyone else) choose their own governments.
But that kind of thinking has yet to trickle up to
Wall Street or Washington.

Mark Weisbrot is Co-Director of the Center for
Economic and Policy Research, in Washington
D.C. (www.cepr.net)

:: Jim Nichols 7/22/2002 01:00:00 AM [+] ::
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