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The State and Economy in Brazil: An Introduction

Rosa Maria Marques teaches political economy at the Pontifícia Universidade Católica de São Paulo. Paulo Nakatani (pnakatani [at] teaches economics and social policy at the Federal University of Espírito Santo.

These articles were written five months before the first round of presidential elections in Brazil, on October 1, 2006. The second round, on October 29, saw Lula reelected with 58.3 million votes (60.78 percent of all valid votes), beating Geraldo Alckmin, the candidate for the Partido Social Democrata Brasileiro (PSDB), the party of Fernando Henrique Cardoso, Lula’s predecessor in office. Lula won this second four-year mandate after a campaign revolving around ethical issues and allegations of corruption against government officials and high-ranking members of his Partido dos Trabalhadores (PT)—allegations from opposition parties, right and left. The campaign included the pathetic episode of PT officials trying to buy information on candidates from the PSDB in the State of São Paulo (economically and politically speaking, one of the most important states in the union, with a strong oppositional streak), and a concerted nationwide media campaign for Alckmin on a scale never before seen in Brazil.

In percentage terms, Lula received slightly fewer votes than in the second round of the 2002 election (taking 61.27 percent of the vote) when he won office for the first time. But the results were surprising given that some of his highest-ranking officials left their posts after being accused of corruption. If we analyze the election in terms of voter distribution, bearing in mind the geography of the states, voter income, and size of the county we find a country divided. Lula won in twenty out of twenty-seven states, carrying all the states in the Northeast, the poorest in Brazil, and all but one in the North, the second poorest. He won three states in the Southeast and two in the Center-West, including the Federal District where the country’s capital is located. And he lost in all the Southern states. Research shows that the smaller and poorer the voting district, the more votes went to Lula, and the same applies when looking at the real income of voting groups. Yet another fact revealed by this election was that the poorest segments of the population were not influenced by the so-called opinion makers, particularly the press and television.

Among the endorsements Lula received before the second round was that of the Landless Workers’ Movement (Movimento dos Trabalhadores sem Terra, MST), which did not endorse him before the first round. Joao Pedro Stédile, an economist, leader of the MST, and a staunch critic of Lula explained the endorsement in an interview for the Agência Carta Maior:

Electing Alckmin would mean a return of U.S. hegemony in Latin America. The continent is in transition, and in virtually every election the peoples voted for anti-neoliberal candidates. That created three kinds of governments: a left-wing group—Venezuela, Bolivia and Cuba—a moderate group in transition from neoliberal policies and confronting U.S. policies—Brazil, Argentina, Uruguay, Peru and Ecuador—and a group of faithful allies of the United States—Chile, Paraguay and Colombia. An Alckmin victory would mean a pro-U.S. rupture, with Brazil going to the group of servile allies.

An editorial in the October 11, 2006, edition of the MST-influenced weekly, Brasil de Fato, explained that the most important reason for endorsing Lula was that his government had respected democratic institutions. The magazine told readers that they should vote for Lula regardless of the “disappointing results for the working class” during his first term, and regardless of the risk that Lula will be “even more deeply committed to a neoliberal agenda” in a second term. The following quote from the editorial, long as it is, is of interest in understanding the dilemma of the social movements and part of the Brazilian left:

A balance of Lula’s first four years in power produces disappointing results for the working class, particularly where the economy is concerned. Moreover, seeing the new composition of Congress and the alliances made in the first term, the tendency is for Lula to be even more committed to a neoliberal agenda during a second term in office, particularly if the dampening of the popular and mass struggles continues or deepens. We all know that. Meanwhile, it is necessary to bear in mind that at no time did pro-Lula forces mention in public or even hint at the use of force and the breaking of the democratic institutions—fragile as they are—that allow us to organize and muster forces to consolidate social gains and work toward the kind of structural change so badly needed by the working class and the people.

Contrary to what the media claims, the mainstays of these democratic institutions were the workers, the people and the Brazilian Left. The transition to democracy, negotiated between elites during the military dictatorship, would have been much more restricted were it not for the great strikes and demonstrations resulting from the unrelenting clandestine work by the Marxist and Christian Lefts in organizing factory and company committees, proletarian neighborhoods and popular movements, and in taking back workers’ organizations, such as unions and associations, that had been under military intervention since the 1964 coup. It was the people on the streets, organized by their movements and associations, that defined the more advanced victories we enjoy today, enshrined in the 1988 Constitution. We owe this neither to the elites, nor to any inspired guiding light of the peoples or father of the poor.

We need to remember history, our own history. We need to remember that many were murdered so that we could achieve and guarantee the freedoms we enjoy today—still precarious but enough for us to have the right even to publish this editorial. And we need, above all else, to stop discussing the current situation from an economist’s viewpoint and clearly identify who the main enemy is, who the adversaries are, and who the allies are. Every time we get it wrong, we are defeated.

Today, the main enemy is the block around the Geraldo Alckmin ticket. Therefore, it has to be defeated in this election. To vote for Lula, even with no illusions about his economic policies, is a duty for all of us who are part of the working class and the Brazilian people.

It should be remembered that there was a part of the Brazilian left that did not support Lula for president even in the second round. That was the case with the Frente de Esquerda (Left Front) formed around presidential candidate, Senator Heloísa Helena,1 by the Partido Socialismo e Liberdade (Socialism & Freedom Party), created by PT dissidents; the Partido Socialista dos Trabalhadores Unificados (Unified Workers Socialist Party); the Partido Comunista Brasileiro (Brazilian Communist Party); and the Partido Democrático Trabalhista (Democratic Labor Party), seen by many as moderate. Nonetheless, most of the Brazilian left and mainly its intellectual figures were involved in the Lula campaign from the start.

What, other than the reasons given by the MST, the largest social movement in the country, moved the Brazilian people to vote for Lula in spite of his economic policies and the allegations of corruption?

To answer this question, bearing in mind the social profile of most of his voters, we have to underline that, during his first term in office, Lula managed to raise the real purchasing power of the minimum wage by 40 percent (measured from December 2002 to September 2006). He transferred revenue to 11.1 million families through the Bolsa Família Program, which benefited 47 million people (25 percent of Brazil’s total population) and improved family incomes by as much as 39.58 percent. He made credit abundantly available to families and created a program of scholarships for students at private colleges which benefited over 200,000 students. Among other measures, he reduced taxation on food and cooperative construction projects. In addition, by September 2006, a month before the second round of elections, unemployment was two percentage points below the September 2002 rate, when Fernando Henrique Cardoso was president.

There is no doubt that, for the vast majority of those who voted for Lula, the crucial factor was that their personal situation had improved, with no regard for the permanence of the measures that made such improvement possible. The prospect of Lula using a second term to reform unions, labor laws, and social security is of no consequence for the voters. This is due in part to the fact that most unions and virtually all the media support the reforms.

On the union front, next year the project for a constitutional amendment (PEC 369/05) will, it is expected, be resumed. Among other things, the amendment sanctions government intervention in unions and mandatory affiliation to a national labor confederation. In the field of labor relations, the project permits: (1) abrogation of the current dispositions that give preeminence to labor law over contracts when the former is more convenient for the worker than the latter; (2) negotiation and signing of labor contracts exclusively by labor organizations, with complete disregard for the will of the rank and file, even when unions at the factory level are openly against the contract; and (3) legalization of the hiring of workers to replace strikers, unless the union itself designates members to work during the strike.

In the realm of social security, Lula is expected to introduce even more restrictions on the pension system, reducing the gap between the top and the bottom of the payments scale, and severing the link between the bottom of the scale and the minimum wage. Regarding the system in general, the government is planning to eliminate all legal barriers to channeling social security funds into other areas, as well as raising the percentage of Social Security levies that go directly to the Treasury.2

There is no sign that economic policy will change, although the Central Bank has continued to lower the basic interest rate over the last few months (13.75 percent on October 31, 2006). The economic priorities will remain honoring debts to financial capitalists and developing agribusiness.


  1. The front received 6.8 percent of all votes in the first round of elections. The main party in the coalition, the PSOL, elected just three representatives, thus losing ground relative to the period before, when their block in Congress was formed by dissident PT members.
  2. The ceiling introduced by Fernando Henrique Cardoso in 1994 currently stands at 20 percent.