POLITICS-BRAZIL: Approval of Gov’t Down – Economy to Blame

By Mario Osava Reprint | | Print |

Analysis by Mario Osava

RIO DE JANEIRO, Mar 29 2004 (IPS) - The honeymoon is over between the government of President Luiz Inacio Lula da Silva and public opinion in Brazil, and the reasons are economic, according to the latest opinion polls.

Unemployment accounts for ”80 percent of the (government’s) loss of popularity,” said political scientist Ricardo Guedes, commenting on the results released Monday of the survey carried out by the Sensus Institute, under his direction.

The Institute’s monthly poll is commissioned by the National Transport Confederation (CNT).

Of the 2,000 Brazilians interviewed last week in 195 municipalities across the country, 34.6 percent said they approved of the government’s performance, while 19.4 percent held a negative view.

But it was the largest month-on-month fall in positive responses – a drop of 5.3 percent – since Lula took office in January 2003.

The proportion who said the government’s performance was ”average” rose from 40.6 to 44.7 percent.

Although the president, a former trade unionist, remains popular, the gradual decline of his image also accelerated.

His popularity, which remained steady at around 83 percent throughout 2003, fell to 69.9 percent in December, but has already dropped to 59.6 percent this year.

Another poll, by the National Confederation of Industry (CNI), whose results were published Friday, showed an even larger drop, because it is carried out quarterly. From December to March, the proportion of respondents who said they ”trusted” Lula fell from 69 to 60 percent, while confidence in his government shrank from 66 to 54 percent.

Some analysts and the press attribute the drop in popularity to the corruption scandal that erupted on Feb. 13, when the right-hand man of Lula’s powerful chief of staff, José Dirceu, was found to have pressed a gambling magnate for funds.

At that time, the magazine Isto É revealed a video in which one of Dirceu’s aides, Waldomiro Diniz, was seen demanding cash, apparently to finance election campaigns of Lula’s leftist Workers’ Party (PT).

Diniz was sacked and the case has gone to the courts, but the ruling party has blocked a broad parliamentary investigation into the matter.

The polls, however, pointed to something unexpected: a majority of respondents were not even aware of the scandal, and the proportion who believe there is corruption in the Lula administration has hardly changed at all in the past few months.

In fact, the percentage who suspect there is corruption – 51.3 percent, according to the Sensus Institute – is similar to the proportion who said the same thing under previous governments.

With respect to the economy, the respondents who were critical of the administration’s policies – 46 percent – outnumbered those who approved – 40 percent – in the CNI survey, for the first time.

Meanwhile, a full 58 percent said economic growth and the generation of jobs were the most pressing tasks facing the government.

The surveys reinforced the view of analysts who see the economy as the origin of the PT’s biggest headaches. The demand for change in the government’s economic policy have become louder and more widespread lately.

The government’s failure to modify economic policy has overshadowed the repercussions of the ”Diniz scandal”, rather than vice versa, said PT Senator Cristovam Buarque, education minister until January.

Buarque, who is highly respected as one of Brazil’s main advocates of education, lost his post after repeatedly making public pleas to Lula for more funding for his ministry.

Containing government spending with the aim of reaching the target of a primary fiscal surplus of 4.25 percent of Gross Domestic Product (GDP), as agreed with the International Monetary Fund (IMF), has led to a ”starvation diet” for state investments, which has stood in the way of growth, according to louder and louder criticism from economists and business.

But the most insistent criticism is aimed at the Central Bank’s high interest rates, which have annoyed industrialists since the second quarter of 2003.

Their frustration came to a peak in January, when the Central Bank unexpectedly stopped the gradual reduction of the basic interest rate, justifying its move by pointing to inflationary pressures that experts believed were merely transitory.

The announcement that GDP shrank 0.2 percent in 2003 confirmed assessments that the Central Bank was following an overly conservative economic policy, which was curbing economic activity. In mid-2003, Lula had predicted ”a spectacle of growth” that was to begin in the second half of the year.

The basic interest rate, which stood at 25.5 percent in January 2003, began to be gradually brought down in June, to 16.5 percent in December, and remained steady until being reduced this month to 16.25 percent.

Many economists argue that with the economy in recession, official unemployment at 12 percent, and wages on the downslide, there is no justification for fighting inflation with high interest rates, especially since consumption is dropping.

Some say the Central Bank missed its opportunity to lower the interest rate, which has been among the highest in the world for the past decade, in the current period of high liquidity and extremely low interest rates in the industrialised world (only one percent in the United States).

Despite the pressure, both Lula and his Economy Minister Antonio Palocci and Central Bank President Henrique Meirelles ruled out changes in economic policy, projecting GDP growth of 3.5 percent this year.

”There is no political crisis,” and with respect to the economy, it has been a long time since Brazil has ”found itself in a time of such optimism,” Lula said Monday.

But commenting on the distance between reality and the statements of officials, after Lula blamed ”conservative” sectors for attempting to provoke a crisis in the government, journalist Clovis Rossi complained in the newspaper Folha de Sao Paulo Sunday of ”an alarming autism.”