Development & Aid, Economy & Trade, Headlines, Latin America & the Caribbean, Poverty & SDGs

POLITICS-BRAZIL: Lula, Placing His Pieces

Mario Osava

RIO DE JANEIRO, Feb 12 2007 (IPS) - The complexity of juggling the interests of the 11 parties in Brazil’s governing coalition has led President Luiz Inácio Lula da Silva to delay announcing appointments of the ministers who will serve in his second term until the end of the month.

Political uncertainty is the order of the day until it is known how many ministers the Brazilian Democratic Movement Party (PMDB) will have, which will indicate its power as the principal ally of the president’s leftwing Workers’ Party (PT), Brazilian Institute of Political Studies analyst Luciano Dias told IPS.

The PMDB, a centrist party which responds to many diffuse, local interests, was divided between pro- and anti-government factions during Lula’s first presidency (2003-2006). But now it has united in support of the government, a move that was decisive for securing a parliamentary majority.

The PMDB’s 90 deputies and 20 senators are the largest blocs in both chambers of Congress.

But the 110 PMDB legislators, added to the PT’s 82 deputies and 11 senators, still fall far short of an absolute majority in Congress, which has 513 deputies and 81 senators in total. The political fragmentation in Brazil, where 20 parties are represented in Congress, makes governing a notoriously complex task.

The support of other small and medium sized parties, on both the left and the right, is essential for the government to push its initiatives through Congress.

Lula was not reelected in the first round of the presidential elections in October, but in the runoff later that month he took 60 percent of the vote in this country of over 188 million people. His second presidential term began on Jan. 1.

In this second administration, apart from the PT and the PMDB, his allies are the Brazilian Socialist, Democratic Labour, Renewal, Brazilian Labour, Brazilian Communist (PCB), Green, Christian Social, Progressive and Brazilian Republican parties.

Lula is in a better position now than during his last mandate, as he has the formal backing of two-thirds of the members of Congress. But nothing is certain in Brazilian politics, where party loyalty is fragile compared with special or circumstantial interests, which can lead to all kinds of dissension.

When the new president of the Chamber of Deputies was appointed on Feb. 1, for example, the governing coalition was split between two candidates. The victory of Arlindo Chinaglia, of the PT, was a blow to the small leftwing parties that supported the reelection of Aldo Rebelo, of the PCB.

Fortunately for the coalition, the opposition is also divided, and is undergoing a process of attrition, with some of its Congress members moving over to the government benches.

The conservative Liberal Front party is a good example of a phenomenon that is quite usual in this country. It has already lost three of its 65 deputies from the October election, and the exodus continues.

However, the picture remains confused, with the PMDB demanding six ministries, twice as many as they have at the moment, many ministers about to lose their jobs, and prospects of even more intense disputes that will paralyse the government, according to Dias.

In this context, the adoption of measures earlier announced as priorities will inevitably be delayed, like the political reform to restructure the parties and the electoral system, he added.

The decay of the country’s institutions, reflected in the corruption scandals last year which involved ministers and a number of members of Congress from different parties, will no doubt continue, he said.

Meanwhile, the Growth Acceleration Programme (PAC) announced on Jan. 22 as a plan to “unblock” the economy, has not roused enthusiasm. Projected investments over the next four years sound huge at 503.9 billion reals (235 billion dollars), but most of them are related to old projects, already budgeted for, some of which are already under way.

Doubts about boosting economic growth to an annual average of five percent of gross domestic product (GDP) according to the plan, were exacerbated on Jan. 24 when the Central Bank reduced the basic interest rate from an annual 13.25 percent to 13 percent, frustrating expectations of a larger cut.

Discounting inflation, Brazil has the highest real interest rates in the world. The new rate drew criticism focused on supposed conflicts within the government, in a scenario where economy ministers striving for growth were confronted by obstacles put in their way by the Central Bank.

Such criticisms of monetary policy were heightened in the PT and other leftwing coalition parties, and gained ground among the business community and economists, especially after the local currency, the real, appreciated again against the dollar.

The exchange rate for the dollar was stable at 2.15 reals but dropped to 2.09 reals on Feb. 7. President of the Brazilian Foreign Trade Association Benedito Moreira said it was “a tragedy” for exporters. But supporters of the monetary policy point out that Brazil had a trade surplus of 46 billion dollars in 2006.

The problem is that some sectors, especially those that employ more people, like the textile industry, shoes or timber, are losing both foreign sales and the domestic competition with foreign products. Some factories have had to close their doors.

Brazilian industry is generally using more imported components in its final products.

Brazil is experiencing premature deindustrialisation, according to some economists like Luiz Bresser Pereira, former minister of finance and public administration.

Unless his policies change or are replaced, Lula’s second term runs the risk of wasting the political capital and enthusiasm represented by the 58 million votes he garnered in the October elections.