Latin America

Brazil under Lula

June 08, 2009

1 On October 27th 2002, millions of workers, vast layers of the population, along with whole swathes of the middle class and the landless peasants massively voted for Lula and his Partido Travalhista (PT). This reaped a record 52 million votes, riding a wave of great illusions and hopes of changes. Thus, Lula won the election and became the president of Brazil. The masses are seeking a solution to mass unemployment, to the critical situation of the economy, to the privatizations, the dependence from the powers abroad that has increased the vulnerability of the country -in a word, a solution to the appalling social inequality, the submission to imperialism and the growing poverty. The overwhelming majority voted in the belief that the new president will ’deliver the goods’ for them, after ten years of neglect of their needs.

This electoral outcome must be pondered within the context of the political situation in South America, where the working class and the poor peasants started to fight back the cutbacks and the implementation of the ’neo-liberal’ plans since the second half of the ´90s.

The milestones of that wave were the peasants´ rebellions in Bolivia in April and September 2000, and the peasant, aboriginal and popular uprising in Ecuador in January 2001, which forced the president to resign. In the last few years, those struggles have also taken place in the main urban centers, and also displayed a tendency to become generalized -e.g. the December 2001 uprising in Argentina, the fight of the Venezuelan people against the pro-imperialist coup d’état in April and the recent mobilizations in Peru, Uruguay and Paraguay.

From this point of view, the victory of Lula and the PT in the presidential elections opens up a new political situation in the country, signaling a major turn to the left of the mass movement, which harbors illusions and hopes in the future government. This turn-about will have immediate repercussions across the whole Latin American situation, i.e., it will be a phenomenon that will transcend the national frontiers.1 The developments in Brazil are turning this country into a milestone in terms of the political, economical and social situation in Latin America -a beacon for the Cono Sur (Southern Cone, i.e. Brazil, Argentina, Uruguay, Paraguay and Chile). In the words of the IMF, Brazil is a key factor, not only for South America but also for all the ’emerging markets’, in the sense that it will shape the future behavior of foreign capital in those countries.2

A preemptive policy to avoid the disruption of the unstable equilibrium in the country

2 We are witnessing the first electoral victory of a political coalition bearing features of a Popular Front in South America since the ’70s. It relies on a widespread popular support and has strong links with the mass movement, which will mostly regard it as ’their’ own government. This coalition emerged because the bourgeoisie needs to cushion the likely outburst of an economic crisis, trying to prevent Brazil from following a similar path to that of Argentina, and other neighboring countries that are being shaken by huge organic crisis, state crisis and the upsurge of the mass movement. By the same token, they are trying to stave off a massive shift in the balance of forces of the fundamental classes -i.e., imperialism, the national bourgeoisie and the proletariat, and their auxiliary forces. It is a preemptive policy to safeguard the regime. The bourgeoisie was unable to find a presentable candidate ´of their own´ due to the sheer discredit of ´neo-liberalism’ and the discontent of the masses; when the perspective of an imminent default arouse, it was forced to resort to the PT and Lula himself as a more solid ´alternative´ to preemptively derail the mass turn that was already in the making, for the sake of upholding the ruling regime. However, this process itself is bound to accumulate and exacerbate all the contradictions at work, which are likely to come to light in an overpowering fashion in the period ahead.

The new government will have to deal with the huge illusions and aspirations of the workers, the poor peasants and the people, amid a deep slump both at home and abroad. On top of this come the internecine fights of the bourgeoisie opposing the new quarters that are getting ready to take over and become the ´new´ ruling block, and those sectors that gained the upper hand during the last period, more oriented to financial businesses. This context means the coming to office of Lula and the PT is not merely a reshuffle of the administration, along the lines of the ones that we have seen in various countries of the region in the last few years. We witnessed the victory of a preemptive Popular Front revolving around the PT, with a former steel worker in the presidency allied to the most concentrated sectors of the bourgeoisie -not only their ´left´ wings-, which came to life not as a by-product of big mass struggles -i.e., without political radicalization.3

The fact that the Brazilian bourgeoisie, the strongest ruling class in the continent, had to resort to the PT bears testimony to the erosion of its political hegemony and the cracks in the ruling regime, which presided over the transition from the military dictatorship to the current political regime. The vigorous economic onslaught and its deep crisis, the break down of the unstable equilibrium that prevailed in South America during the ’90s and the degradation of bourgeois democracies in the continent, all ate away the foundations of Cardoso’s government and the hegemonic ruling sector. The rifts opposing different ruling factions of the bourgeoisie were fuelled by the collapse of the ’Washington Consensus’ and the blind alley that the ´neo-liberal’ agenda got caught in. Thus, one the biggest bourgeois-workers parties in the world, with strong links to the mass movement, completely adapted to the regime for many years now, which played a key role in upholding the ’governability’ during Cardoso´s presidency, is at the head of the government now to engineer a preemptive ’make up’ of the Brazilian political regime. For that purpose, it relies on the support of the big bourgeoisie, while it has reaped an enormous support among the masses, which harbor a big wish of change after a decade of outright implementation of pro-imperialist plans.

The bourgeoisie has trusted the PT with the task of helping it prevent a likely economical, social and political catastrophes because, on one hand, it has the necessary leverage to keep the masses at bay due of its influence on the working class, on the landless peasants and on the urban poor; on the other hand, the PT has proved to be ’reliable’ in those cities and states it governs.4

During the ’90s, the PT was a major bulwark for the bourgeoisie democratic regime, acting as a ’responsible opposition’ within the capitalist order whenever a political crisis burst out in Brazil, holding back any possible independent actions by the mass movement, and channeling popular unrest through the institutions of the regime. All that was done in the name of ’order’ and ’stability’, using the slogan of ´ethics and decency’ as an instrument for the ´modernization’ of the regime and also to provide a cover-up for the internecine fights of the bourgeoisie fights waged by the new hegemonic sector -a policy that resulted in the people having to pay for the crisis. Those political moves earned the PT the trust of wide sectors of the bourgeoisie, after they had governed in important states such as Rio Grande do Sul, and also big cities such as Porto Alegre and San Pablo. But also the option for Lula and the PT is a conscious policy of a new ruling bourgeois sector, the so-called ’development-oriented’ one (desarrollista), which was cast aside during Cardoso’s government, at a time when the financial sectors were predominant. At the same time, this new sector will also seek a ´negotiation´ with imperialism along more favorable lines, an option that does not preclude membership of the AFTA. They might also try to act as a privileged partner, one that maneuvers and wrestles advantages from the weaknesses of the imperialist policy in the region5, as we will explain further on.

Lula-Alencar’s Popular Front is a preemptive move precisely because it is anticipating the emergence of advanced developments of the class struggle in Brazil, trying to stave off a major crisis of the magnitude of those affecting other countries in the region. By the same token, this preemptive Popular Front is different from the classical type of Popular Front that Trotsky had seen back in the ’30s. Back then, the Popular Front was the last-ditch governmental option for the ruling classes in the face of sharp political radicalization or else a revolution -a last resort option before either revolution or counter-revolution came out victorious.6

Heightened contradictions of the ruling regime

3 In the light of the mass left turn, we can say that an objective change has occurred in the situation. In the words of Trotsky asserted ’it is no secret for Marxists that parliamentary elections...distort and even deceive as to the mood of the masses. Nevertheless, the dynamics of the political developments is reflected in the parliamentary elections...’ This is just the case in the Brazilian scenario today. The outcome of the elections means the great political factors wrapping up the contradictions of semi-colonial Brazil are gaining momentum. With this we mean no major disruption of the unstable equilibrium at home has occurred yet, i.e., the balance of the antagonistic forces remains in place, which explains the ´relative stability’ thus far. And no break down occurred because the masses so far have not set themselves in motion, in a move challenging both the regime and its institutions. For this reason we claim that this ´relative stability’ relies on the integration of a powerful bourgeois-workers party into the bourgeois order, rather than the strength of the bourgeoisie itself and its existing forces. At the same time, both the subjectivity and the leadership of the mass movement stand at an all-time low, as a result of the influence of reformism and the big illusion of the workers in it. The crisis of subjectivity of the mass movement, along with the big illusions in reformism is to account for the ’strength’ of the regime.

Thus, the complete adaptation of the PT7 gives the Brazilian regime a relative strength, specially compared with neighboring countries, where the bourgeoisie does not count on highly-esteemed leaders like Lula to mislead revolutionary developments -such as Argentina’s case. Marx himself by and large anticipated this process. When describing the effects of the ’incorporation’ of the upper echelons of the oppressed classes by the ruling classes: ´The more a ruling class is able to incorporate the most outstanding men coming from the oppressed classes, the more solid and dangerous their domination will become’.8 The undeniable fact is that the ruling regime in Brazil has undergone a token strengthening, via the incorporation of the PT, in stark contrast with most of the countries in the region lacking such powerful misleaderships9. Now then, the fact that the oligarchic Brazilian regime has been forced to share office with a bourgeois-workers party like the PT and a preemptive Popular Front reflects the increasing obstacles the bourgeoisie is coming up against due to the national, regional and international factors abovementioned.

The fact that the Brazilian bourgeoisie, which had always relied on ´oligarchic´ governments, has come to rely on a steel worker and a bourgeois-workers party to manage their administration is also a reflection of a ´degradation’ of bourgeois democracy. That is to say, we are not faced here with a ’business-as-usual’ policy from the ruling classes, nor can we consider it as a normal ’Big Frontist’ bourgeois government, no matter how preemptive that move might be. This is what explains the deepest contradictions within the ruling regime, which cannot be explained away only by the contradictions at the root of Lula’s government because of the illusions and the aspirations harbored by the mass movement. Nevertheless, this so-called ´degradation’ of the Brazilian democracy should be approached carefully, because unlike Bolivia or Argentina, there is no deep crisis of the ’party representation’ system here, which might be the prelude for a break down of the class relationships and the parties with them, ushering in a historical crisis for the ruling classes. Even when it is obvious that whole social layers, specially the middle classes, broke with ´their´ traditional parties, like the PSDB and the PMDB, these remain big national parties which preside over the most of the states that make up Brazil and are a conservative bulwark in the current situation. Lula’s election itself shows symptoms of crisis because in a ´normal’ bourgeois ruling regime, the government is meant to be directly controlled by the bourgeois forces themselves, without having to resort to a bourgeois-workers party. Exceptional means of leverage, such as popular fronts, semi-fascist coups, are resorted to when the order of the democracy for the rich needs to be re-established as the best wrapping for the dictatorship of capital, but these are just ephemeral episodes. For this reason, we assert that Lula’s victory is not a mere ´reshuffle’ of the administration10, but is rather a bulwark to prevent the further ´erosion’ of bourgeois rule -i.e., the new government, with the authority that has gained before the masses, is being confronted with the task of bridging the ’gap’ that has opened in the ruling regime. In this sense, it will try to rejuvenate the latter, preventing the masses from going down the path of their Argentine counterparts. When a ’crisis of authority’ bursts into the open, when ’voters’ (the oppressed) no longer pursue their interests by trusting their ’representatives’ (their rulers), Lula gets into office riding a wave of popular support. This endows the new government with an enhanced authority -a massive leverage for the bourgeoisie to weather any likely storm in the future, because the illusions harbored in Lula and the influence of the PT on the mass movement might paralyze them. And this expresses, in a dialectical fashion, the token strengthening of the ruling regime.11

The PT’s strategy and the agenda of the ’new’ economic bloc

4 President Cardoso and his government rallied various bourgeois factions around it throughout the 1990s, and he was in a position to push ahead with pro-imperialist plans through, which resulted in an increased submission of Brazil. He was the spokesperson for an all-round bourgeois agenda, which relied on uncritical alignment with imperialism and also the upholding of ’neoliberal’ plans, and which went hand in hand with the prevalence of the banks, of finance capital and big multinational corporations. The strong political alliance that underpinned that government bore testimony to a new hegemony that had been set up in the country in the frame of the so-called ’Washington Consensus’. But as the neoliberal agenda -with the ensuing loss of levers of the local elite over the domestic economy- started to wear out, an alternative project was devised by other bourgeois factions, one that with a bigger emphasis on the national economy. Lula and Alencar were both the standard-bearers of that project, which was also nourished by the fat cats of the so- called ’developmental’ (desarrollistas) strands of capital. These raise their own specific demands on economical and political matters, and also pursue more bargaining with imperialism with the aim of getting enhanced grounds for ’growth’ at home.12

This alternative plan has gained a new lease of life after Lula’s victory, and is being portrayed as a ’strategic’ option to prevent a total sell-out to imperialism -the Argentine scenario- in a attempt to safeguard the interest of the Brazilian bourgeoisie, the biggest in the region. In the words of Horacio Lafer Piva, head of the FIESP13, the main bosses’ chamber, ’We are expecting the government to make no less than a historical transformation. We [the industrialists] should leave the phase of ostracism behind. We need to put an end to the monetarist nightmare. The growth of industry should be the main topic of discussions again.’14 Luiz Fernando Furlan, one of the fat cats of the Sao Paulo-based agribusiness and also a big exporter, known as a ’man of the FIESP’ was appointed as a member the government. The FIESP went on the record stating that ’…his appointment is a motive of great joy for the whole productive class. In his post, he will furnish new concepts to a team15 that places its bets on pulling together as a single man, thus offering the chance, for which we are pleased, of becoming interlocutors and also put the production as full priority on top of Brazil’s agenda…It is a major break-through for the elected president, Mr. Luiz Inacio Lula da Silva.’16 Its participation comes on top of that of the vice-president, Mr.Alencar, top boss from the state of Minas Gerais. A poll recently done at the behest of the Industrial Federation of the State of Sao Paulo -FIESP- indicates that 77% of the entrepreneurs in the state is optimistic as to the future accomplishments of Lula’s government, believing it will be good or else remarkable. 17 Thus, the new government reflects a change at the level the ruling ’faction’ of the bourgeoisie18, being more prone to the interest of the bosses based in the states of Sao Paulo and Minas Gerais -a different strand to the bourgeois alliance behind former president Cardoso and his fully-fledged ’neoliberal’ agenda. And this is, along with the masses’ rejection of the neoliberal agenda and their aspirations for change, one of the key elements that explain the endorsement of the bourgeoisie to Lula as an alternative reshuffle. Thus, they have decided to go for a new agenda, which we call a ’neo-developmental’ one because of the social strands behind it and the ideas underpinning it as well.

This bloc seeks an enhanced bargaining and also association with foreign capital for the sake of ’a productive undertaking and growth’.19 This ’neo-developmental’ strand relies on handouts to industry, on an export-oriented policy, and on import-substitution -which dictates pushing ahead with fiscal and labor reforms. Lula’s Foreign Minister put it very clearly when referring to the negotiations for AFTA membership. He said: ’our position is to get advantages for those products deemed of interest for Brazil, but without taking commitments that block the way for development schemes at home, such as industrial or health schemes.’20 The outcome will be shaped by the pressure of imperialism and the other bourgeois forces at home that preside over local politics.

The meaning of the ’Social Pact’

5 We have to ponder the significance of the new ’Social Pact’ now in the making. It is very symptomatic that the FIESP, the main bourgeois lobby in the country, has said that a big coalition ’above the parties’ should be encompassed by that ’pact’. Their model is La Moncloa’s Pact in Spain. Counting on the big support and the trust of Lula and his PT, this Pact appears to be a tool for a bourgeois strand, as we said above, to gain a new ’hegemony’ over the country. For that purpose, ’a new compromise’ should be set for all the classes, a new regulation between capital and labor. This attempt at setting up a new socio-political ruling bloc, never mind it is a ’balance between heterogeneous sectors’, pursues the aim of overcoming the profound slump, which in turn dictates new pacts and major agreements should be reached. The newly created ’Council for Social and Economic Development’ is instrumental to this plan. It is made up of dozens of top local entrepreneurs21 , the main trade union federations, like the CUT, Força Sindical, SDS and the CGT. The MST (the landless peasants’ organization) has also reclaimed participation there, unfortunately. It goes without a saying that new Pact in the making will entail attacks on the workers: the labor reform, enhanced powers for the bosses to hire and dismiss and impose a wage freezing, tax cuts for the bosses to bankroll social welfare schemes, increased union cohesion, power will be given to re-negotiate contracts abrogating previous legal social provision furnished to workers. On top of these will come the wholesale reform of the pension system, a political reform to the party system that will exclude small parties, a move that is a direct attack against the left parties. The new Finance Minister, Mr. Antonio Palloci Filho, a man of the PT, has already set out the priorities of the government in his department: ’we have to block the indexation of the wages and stop inflation; uphold the agreement with the IMF, gain some trust and bring the dollar down, and above all we have to push ahead with the Pension reform, along with the Fiscal and Labor reforms, all of them priorities announced by the Lula.’22

The fate of the new pact and the ’neo-developmental’ plan will be shaped by the relationship with imperialism. The recession worldwide has left little room for maneuver for the local bourgeoisies, and many things depend on the attitude taken by imperialism and the unfolding of the economic crisis. The imperialist agenda for the region seeks to take over the domestic markets for their corporations, muscling out the local bourgeoisie, while closing its own markets to those products coming from the region -this might fuel tensions and contradictions between this neo-developmental agenda on one hand, and imperialism on the other, at least with the policy pursued by the Bush administration today. The American ambassador to Brazil, Ms. Donna Hrinak, is already talking about ’hard’ negotiations ahead. It is all too evident that those sectors might seize the opportunity furnished by the exhaustion of the Washington Consensus and the fact that now clear imperialist agenda has come to replace it. There is little room to implement a scheme along the lines of that devised by Mr. Juscelino Kubistchek back in the ’50s, the heyday of developmental agendas in Brazil. Both the historical context and the agenda pursued by US imperialism these days have changed so much -back then even big imperialist sectors benefited from it. The same happened at the time of the military dictatorship and its agenda for ’modernization’ of the countryside, when top agribusiness corporations immensely benefited from the production oriented for the world market. But times have changed now, and the ’neo-developmental’ scheme might not even take off eventually, as the Brazilian sociologist Emir Sader has warned recently. When the new appointments for the government were announced, he replied, ’it is impossible to change and make this country grow if the government leaves the hegemony of finance capital intact. Either Lula breaks away from that hegemony or else he will be devoured by it.’23

If Brazil proceeds along the lines of such a project, those ’productive’ quarters of the beleaguered Latin American bourgeoisies might see an opportunity there. Such a plan can only be thought on a regional scale, hence Lula’s emphasis on rejuvenating the MERCOSUR, a move clearly seen in his recent trip to Argentina. But should all plans fail, given the recession engulfing the world today, the imperialist pressure and heightened tensions among the classes can accelerate the tempo of events and fuel sharper political struggles -which in turn might lead the ruling classes to a stalemate.

Crisis in the realm of politics and the economy

6 When the election campaign was in full swing, the economic crisis peaked and the dollar displayed a rather jittery behavior, but Brazil eventually did not plunge into an open crisis like that of Argentina. However, those economic woes clearly revealed the submission of the country to the IMF and the United States, and also its vulnerability in the face of the financial shocks worldwide. A recent report published by the Central Bank states that the crisis of the second semesters has been ’overcome’. However, the recent data tell us a very different story. The ever-increasing cost of living, the growth of unemployment, the comeback of inflation, the hike in interest rates, the wild swings of the local currency and the fall in foreign direct investment are symptoms of a deep-going structural crisis. The fact that a default should be ruled out in the short term does not mean it can be completely discarded. A recent IMF report ranks Brazil on a par with countries like Uruguay, Paraguay, Ecuador and Venezuela, as a candidate for a likely default in 2003, given its unsound public finance and the uncertainty reigning in the political scenario. The inflation reached some 10%, according to the most optimistic estimations, and the unemployment in Sao Paulo stands at 20.4%. It is true that the trade balance yielded some 12 billion dollars worth of revenues this year, but it does not mean the economy is in good health. Such surplus was rather brought about by the devaluation of the currency, which boosted exports and cut down on imports. Beneath this, we see the industrial production has shrunk, in an economy already in recession that badly needs access to 54.5 billion dollars yearly worth of foreign loans to keep going.

This means that if the ’catastrophic element’, in the words of the Italian Marxist, Gramsci, should burst into the realm of the economy, a political crisis might unfold in the open. But we know that an economic crisis becomes a political crisis if it reaches out both the regime and its institutions. A slump can only bring forth a fertile soil for the disruption of equilibrium. Thus, ’a short-term economic crisis might be ruled out to provoke fundamental developments; it can barely bring forth a fertile soil for some ways of thinking, of formulating and working out the issues concerning the whole further course of the life of the state.’24
The majority of the left-wing parties are predicting that Lula’s government, by its own nature and the political decisions it has taken, will preside over an economic catastrophe. They even compare him to the ill-fated De la Rúa’s government in Argentina. But a capitalist crisis is not enough in itself; the crisis should also engulf the political institutions and the parties as well, with the alienation of the exploited classes and its allies. But we say that, in the present situation, if the recession ends in collapse, for instance a default, it would also become a major political debacle. The illusions and the wish for a change underpinning the left turn of the masses has resulted in a positive outcome: its energies have been released, and the middle classes have also shifted, becoming alienated with the previous hegemonic project. These will put to the test the ability of the PT to act as a bulwark for the ruling regime. This means that if ’the catastrophic element should burst onto the economic realm’, it might open up a crisis of bourgeois rule challenging the ability of any political force to act as a bulwark, with a likely upsurge of the mass movement. Hence, we believe that a historical crisis might break out as the result of a slump combined with mass actions.

In spite of its scope, the 1999 crisis was not strong enough to engulf all the institutions and the regime. It did not become a social and political crisis, precisely because the PT acted as a major bulwark back then, and also because the masses, the middle classes in the main, were yet tied up to the old bourgeois hegemonic project incarnated in the consensus around the need to implement a ’neoliberal’ agenda. This accounts for the fact that the government was able to finish off the one-to-one parity of the real and the dollar, hitting hard the wage earners and middle-class depositors alike, without unleashing a political crisis. Contrary to what Mr. Armiño Fraga claims, the crisis was not overcome thanks to the measures implemented by the Central Bank and the Finance Department -those might have had a countervailing effect on the crisis, but social containment played a key role at that time. Nowadays, in spite of the massive unrest voiced at the elections, the economy has not been thrown into disarray, although things look really gloomy last October. The masses, for their part, did not come into the fray before or else after the victory of the preemptive Popular Front -not even the vanguard waged any fight at all. The combination of both would have disrupted the balance between the existing political forces. Has the Brazilian bourgeoisie left behind such scenario? We do not believe it to be the case, because the contradictions keep piling up and growing apace, and they will either gain momentum or become weakened in tune with the evolution of the international situation and the mass actions. The economy remains a factor of instability. But in the face of the new contradictions that have arisen today, a ’catastrophic denouement’ would seriously impinge upon the ruling regime, since it would hit the PT -the main bulwark that the bourgeoisie is relying upon to get through the next period ahead- very hard, eroding the rest of the institutions as well.

Imperialism, Brazil and Latin American politics

7 Since the early ’90s, when the ’Washington Consensus’ and neo-liberalism were having their heyday, the US policy in the region has brought about a deeper economic and financial colonization and also a humiliating political subordination. But in the last few years, that imperialist offensive came up against the increasing resistance put up by the mass movement. It has also met the increasing reluctance of some bourgeois strands seeking more favorable terms of negotiation. The tenets codified by that ’consensus’ -i.e., the economic opening, privatization, guarantees to foreign investments, etc- no longer enjoy a widespread social and political support. Nor can the expectations in economic growth of the early 1990s be recreated. And this is fuelling contradictory tendencies, both in terms of the countries that have aligned with the US, but also at home, with internecine rifts in the bourgeois bloc.

In Brazil, such standoff burst into the open both before and after the elections, with a new social and economic strand trying to win the upper hand and become hegemonic under Lula’s government. For instance, this new sector is opposed to accepting the conditions dictated by the US for the ’free’ trade agreement. They do not oppose AFTA membership, but they are seeking better conditions for Brazil’s entry. 25 For the bourgeoisie, it is all about reducing risks and seizing on the opportunities provided by a continental bloc, and also get Washington to recognize Brasilia as a privileged partner and a regional power as well.26 We should bear in mind that under Lula’s administration, Brazil will preside, along with the US, over the negotiations for the AFTA, which should be finished by 2005.

The new president and also part of his political team met president Bush last December 10, and the American president will visit Brazil in April this year. The meeting was deemed a ’success’ by both sides. A mouthpiece of the Sao Paulo-based bourgeoisie, the daily Estado do Sao Paulo hailed the new line of the government in these words, ’everybody knows what the relationship between the US will be like: it was defined at the extremely cordial and very fruitful meeting between the elect president, Mr. Luiz Inácio Lula da Silva and president Bush at the White House. He also stood by the project, announced both by Lula and Mr. Aloizio Mercadante, of achieving a trade agreement between the MERCOSUR and the United States, on the fringes of the AFTA. With regards to the rapprochement to China, India, Russia and South Africa, that is no ’third world orientation’ at all, nor is it a novel move by the PT. Those are countries with big domestic markets and a rather satisfactory growth, which have already been put high on the agenda at Itamaraty [the house of government] and the Development Department, which have recently sent off trade delegations on a ministerial level there’. 27 While Lula was committing himself to support an eventual war on Iraq, within the regulations of the United Nations, he also asked Bush to intervene in the financial markets so that the American banks started fresh loans to Brazil, and he also sought a ’joint solution’ for the Venezuelan crisis. ’Loans, loans, loans’, those were the three things that the new government asked to the Vice-chair of the American Treasury, Mr. Kenneth Dam.

This in tune with the facts revealed by the New York Times in the wake of the elections: ’Foreign investors and finance institutions alike must give the new government some room for maneuver and understand Lula’s political stance… For the Bush administration, Lula’s triumph represents a unique opportunity at a time when the Latin American countries felt, with total justification, that Washington was neglecting them. President Bush must commit himself to Brazil in closer and more respectful talks for a trade agreement covering the whole hemisphere, besides showing understanding for the financial woes of the country. Such initiative would help disappoint those looking forward to a revival of the left in South America that will be followed by renewed anti-American moods.’ In other words, the United States are concerned with the political instability in the region, and want to prevent a re-run of the Venezuelan events elsewhere. That is why the politics pursued by the new Brazilian government in the region become relevant for the United States. At the same time, Brazil rises up to the status of a regional ’power’, from which new benefits might be obtained.28 And Lula himself can do an excellent job for US imperialism. ’We shall look at our South American neighbors with a special attention, because we will promote political, social and economic stability throughout the region, in the framework of peace and democracy’29, said Lula to president Bush recently.

As much as ’closer ties’ with Brazil on the part of Bush just seek try to stave off a deeper financial crisis to protect the interest of US multinational corporations, this is also true of the rest of the Latin American countries. The Financial Times points out that ’closer cooperation between Mr. Bush and Lula will help ease the regional tensions and to cover up the lack of policy for that region as well, which was all too evident in the wake of the September 11 attacks. The leftist record of the elect president and his talent for negotiation, as well as the political capital he earned through the huge poll reaped at the election in October make him an indispensable ally. The grave political crisis in Venezuela…might be a test for such a perspective.’30 All indicates that the new government will make South America its priority and will also further the economic integration of the southern region, to use it as a platform for negotiation with imperialism, so that it will provide the latter with their good political services in exchange for economic concessions.

The initiatives of the new government to go for the political and institutional invigoration of the MERCOSUR -today in tatters- represent an attempt, on the part of Brazil, of opposing a ’South American bloc’ and use it to bargain the membership to the AFTA from a stronger position.31 This is very important, because it will surely inaugurate a period of negotiation and tug-of-war wrangling with the US to settle the disagreements. The rifts nourished by such move will in turn fuel new political phenomena. Without challenging the subordination to the dictates of imperialism, they are seeking a ’compromise’ between the appetites of foreign capital on one hand, and the ’strive to exports’ and the domestic market on the other. Such compromise is devised to provide some kind of shelter for the bourgeois sectors oriented to the domestic market -the big local trusts and multinational corporations- that are confronted with serious risks in case the negotiation for AFTA membership proceeds along unfavorable lines. We are confronted with a defensive program with ’neo-developmental’ overtones seeking to rely on foreign capital as an associate, while protecting some domestic havens for capitalist accumulation. The Republican victory in the US election will push Bush in the direction of a more aggressive foreign policy. But the US’s policy is a pragmatic one. We have to wait and see how it unfolds in Latin America.

The working class movement and the masses

8 The masses spoke with their own voice at these elections, to the extent that the bourgeois parliamentarian regime and the brake of the union bureaucracy allowed them to do so. How long will it take for them to resort to ’extra-parliamentarian’ ways of action? How long will the ’honeymoon’ with Lula-Alencar last? The different phases along this road will be hinged upon a whole series of political developments, boosted by the emergence of new mass movements and a major shift in the mood of the masses.

Nowadays, we are confronted with a crisis of proletarian subjectivity, and also that of the masses themselves. The decade-long imperialist offensive downloaded over their shoulders is being felt yet, and the old leading institutions have been fully integrated into the bourgeois order as well. The masses had started to gain a renewed confidence in their own forces during the great 1979-81 upsurge, when many factory committees sprang up, thus laying the basis for an independent labor policy, a drive that was undermined by the reformist leaders of the PT and the backlash unleashed by reaction as well. Those factors eventually wiped out the very idea of achieving a radical social change from political horizon of the time. 32 The more far-sighted and active sectors do not feel part of a colossal social and political force incarnated in the prowess of the proletariat, a perspective that materialized back in the late ’70s. The influence of reformism, today in office, means that a revival of the working class subjectivity will be a tortuous, uneven and contradictory process, one that will be full of defeats and failures.
A new revolutionary subjectivity of the proletariat will come about in Brazil as a result of inevitable defeats, vacillations and victories, which will lay the basis for overcoming the crisis of revolutionary leadership of the mass movement, fighting resolutely against the centrists and the reformists alike. Only out of this experience will a real mass revolutionary movement come to life, outdoing the reformist PT and the capitulating centrist forces active within it. The experience of the masses with the pro-bourgeois PT leadership, which is now in office, will proceed through a protracted combat against deception and betrayal. But for all the influence of the PT, the Brazilian regime now headed by Lula’s government, is coming up against a big contradiction -i.e., ’delivering the goods’ or at least some bottom-line satisfaction to the demands of the masses. These cannot be met with state-funded relief alone, without tackling the structural causes provoking a dearer cost of living, the fall of wages and salaries and unemployment. Doing so requires challenging the interests of the bosses. This issue, given the recession both at home and abroad, is no easy thing, and might lead to big struggles and their radicalization as well. Hence, it is very important, to take steps ahead, to chart the lines that the mood of the mass movement will proceed along. What will it its shape be like? What will its main features be? What about the tempo and the direction of the whole process?

It cannot be ruled out that Lula’s government, once the ’honeymoon’ with the masses and imperialism is over, presides over a wave of labor and people’s struggles, initially fuelled by illusions, because in the ’democratic and reformist’ project no room has been left for any relevant economic concession for the masses. Folha do Sao Paulo puts it this way: ’If Mr. Cardoso could push through a whole set of modernizing reforms in the most critical moments, what will the reaction of the PT be when the high hopes of its voters are met with frustration? And should the country go through severe external crisis, will the pro-market agenda be upheld?’ The role of the middle classes will be a key factor here, since they were a key support contributing to Lula’ s victory. Fearing a renewed instability as a result of the wearing out of the neo-liberal agenda, they switched to opposition to Mr. Cardoso’s government. But we know that the working class, along with other social sectors, will be hit very hard, since all the agreements and pacts clinched between the various ruling factions will fail to deliver any solution at all for Brazil’s burning problems. New attacks, never mind how disguised they are, will provoke a mass backlash, sparking off a mass mobilization that might turn against both the government and the regime. Lula has promised to resort to all the power of its regime to crack down on ’illegal’ occupations of big estates, a move that is in collision course with the program pursued by the various organizations of landless peasants. We need to stand by the middle layers when the time for social discontent comes among them. A revival of the struggles might be nurture by a massive movement of landless peasants, when Lula fails to address their demands -a major peasant upsurge took place in the second half of the ’90s.

Nevertheless, Lula’s government will try and deliver some social provision for the mass movement (although it will be different from classical reformism), handing out some minimum concessions, and probably refraining from launching any attack against labor in the first time. It could as well be the case that some camouflaged attacks are launched against the ’labor aristocracy’ combined with wholesale distribution of relief. The much-vaunted ’Social Pact’ now being negotiated, and the truce handed over by the MST (landless peasants’ movement) and the CUT (main union federation) to the government are a brake holding down any likely mass action right now. That means the working class movement and the people will have to outdo big fetters if they want to wage any serious political struggle. But there is no Chinese Wall that the masses cannot climb over, surpassing the obstacles blocking any political endeavor they might try. The developments on the international arena, mainly the advanced events in Argentina might contribute to a political revival of direct action and a reinvigorated trust in their own methods of struggle.
But although the tempo of the national situation may be slower for some time, due to the token reinforcement of the bourgeois democratic regime and the existence of a misleadership as big as the PT, and also the MST and the CUT, a major destabilization might be brought about with the likely outburst of the Brazilian toiling masses on to the scene. The big internecine rifts opposing different strands of the bourgeoisie, the likelihood of a standoff with US imperialism and frustrated mass expectations can all stir the flames of unrest eventually.

The nature of the future government

9 Right now, as we go to press, Lula has just been sworn in as president of Brazil. His cabinet and the alliances in the parliament have been defined already. The parliamentary alliance clinched by the PT with the old right-wing party -the PMDB- and the negotiation around the presidency of both houses of parliament seems to be almost settled. The elect president has appointed industrialist and entrepreneurs to his cabinet, and also those parties like the PPS, the PDT, the PSB, the PTB, on top of which came its staunchest supporters, the PCdoB and the PL.
Lula and the strong men of the PT surprised to their friends and enemies alike with the members making up their government. The former CEO of the Bank Boston until last August -that bank is the second largest creditor of Brazil’s external debt- and recently elected federal deputy on a PSDB ticket, the party of former president Cardoso and his failed successor, Mr. Serra, has been appointed as president of the Central Bank. Enrique Meirelles was the first Brazilian ever to chair the American Chamber of Commerce, and shares a seat with the tycoon David Rockefeller at New York City Investment, being the only foreigner among its distinguished board made up of 22 consultants.33 A former advisor to the IMF, a strong man at the World Economic Forum in Davos and a top fat cat from the Sao Paulo-based agribusiness as well as a big exporter, Mr. Luiz Fernando Furlan has been appointed Minister of Industrial Development and Trade.34 He was also linked to the PSDB, and he actively campaigned for Mr. José Serra, Cardoso’s failed heir at the last elections. Mr. Celso Amorin was assigned to the post of Foreign Affairs. This man also served as a minister for president Itamar Franco and was also an official for Mr. José Sarney’s administration, he has also links with the PSDB, although he is not a full member of it -and the same goes for the Minister of Agriculture, Mr. Roberto Rodríguez, a fat cat in Brazilian agribusiness.35 And on top of them comes Mr. José Alencar, the current vice-president and also a textile tycoon.36 These are just some of most notorious figures, apart from other representatives coming from bourgeois quarters that have been appointed to lower ranks in various departments of the administration. Obviously, most of the cabinet posts have gone to the hands of PT’s representatives coming from all of its wings, who have taken over key posts such as the Finance Department, the Department of Mines and Energy, etc. Even a top representative from the Catholic Church has been awarded a top post in Lula’s administration, the bishop from Duque de Caixas, Mr. Mauro Morelli. This gives us a clear picture as to the composition of the new government. Lula will be the umpire presiding over all those sectors and the other allies, with the posts in social provision going to the hands of other PT members.37

But regardless of the participation of all those quarters in the administration, Lula’s government is a bourgeois government relying on a preemptive Popular Front, in which the PT takes over most of the cabinet posts hand in hand with big business. The current government is not one of ’national unity’, although it partakes the latter given its party composition and the participation of the bosses in it. We might see the following scenarios in the future: a government of national unity, with the open participation of other big mainstream parties38, a labor-styled government made up of the PT solely with big gestures in Parliament, or else a classical Big Front government. One or another variant will be the outcome of the balance of forces between the local classes and the relationship with imperialism in the period ahead. The predominance of one or another is hinged upon the dynamics of the situation, mainly the course of the action of the masses, if they ever burst onto the political scene putting a high pressure on Lula’s administration, pushing it to the left, thus paving the way for a more classical-styled Popular Front.

Trotsky pointed out that ’the government in backward countries, be them colonial or semicolonial, takes on a Bonapartist or semi-Bonapartist nature (…) The government wavers between foreign and local capital, between a relatively weak bourgeoisie and the a relatively powerful proletariat. These endow the government with features of a sui generis Bonapartism, one of a peculiar nature. It raises itself upon and above the classes, so to speak.’ And this much is true of Lula’s Popular Front government, located in a semicolonial country. By the same token, we might be in for two likely scenarios: a) if the economic crisis should deepen, or else Brazil defaults on its debt, Lula might be forced to seek reliance in the masses, fuelling a standoff with imperialism, thus becoming, to a certain extent a more sui generis Bonapartist government veering to the left; b) should the ’catastrophic element’ make a dent into the economy, the government might seek reliance in imperialism, thus becoming a right-wing Bonapartist government ready to take on the masses. These two likely scenarios will bring about a political earthquake, torpedoing any ’neo-developmental’ project as the ones we mentioned above.

It is quite obvious that these two scenarios are predicated upon general tendencies, and insofar as an economic catastrophe is avoided and the mass movement remains out of the streets we might see in-between scenarios as well. If the cost of living keeps on rising, aggravating the living conditions of the many -for instance, a series of bill hikes like the ones implemented by former president Cardoso- Lula’s government might be confronted with a series of demands it will be unable to meet in the short term. The crisis comes about as a result of a combination of different phenomena, the ensuing instability might lead to a process of ’various shades of gray’ leading to a right-wing or else left-wing variant of Bonapartism, depending on the situation. In this case, it may as well turn out to be a kind government with ’some degrees’ of Bonapartism to uphold the ’cross-class compromise’. This would be reflected in all-round economic pacts with the unions and also party-political agreements, like the one in the making. The current composition of Lula’s government already bears some of these features -we see big business taking over key departments alongside with PT quarters, including Democracia Socialista, taking over other no less key posts, and all this propped up by the big alliance engineered by Lula himself. Should the crisis deepen, this tendency will gain the upper hand, which in turn might lead to future trouble when it comes to staffing governmental departments expressing this ’cross-class compromise’. Lula remains the axis of the present administration. It is also worth noting that the conservatives hold a majority in Parliament, and most of the states are governed by the PSDB, PFL and the PMDB. That is why a government with the PT at its core, revolving around the figure of Lula himself, might lead to a government with those characteristics -the Brazilian political system allows this in fact.

In order to better approach the new developments that might be ahead of us, we have to understand, for instance, that one or another scenario will come to prevail as a result of the balance of forces between the fundamental classes in society. In this regard, we must take into account the relationships between the main contingents (their different social and economic position, etc) in those classes, and also those in the auxiliary forces that submitted to the influence of the hegemonic class -the bourgeoisie. With regards to the proletariat, the likely action of the million landless peasants in the countryside and those undertaken by the impoverished layers in the cities will surely impinge upon it. When it comes to the bourgeoisie, we can say that she counts on a favorable relation of forces, with both actual and potential allies as well, as a result of the co-optation of the PT -with this, the ruling class has a key leverage at hand.

But as we claim in this article, from a dialectical point of view, insofar as the PT administration is a token rejuvenation for the bourgeois democratic regime, its incorporation is at one and the same time a degradation of bourgeois democracy itself. As a whole, there are massive unresolved contradictions at work in the present situation. They might end up cornering Lula -the ’fears’ he is reported to harbor. He is fearful of an awakening of the mass movement, that the turn to the left at the October 27 election might turn into actions on the streets in the face of unfulfilled promises and frustrated demands. Above all, he is afraid to appear as a troublemaker in the eyes of his bourgeois allies, as someone who ’fuels unrest’, if not out of ill-will, at least due his inability to check the powerful forces that he might unleash himself.

Right now, in the wake of the victory of the preemptive Popular Front, our both policy and program has to start from the high hopes the mass movement harbors in Lula. Of course, we revolutionaries do not share such illusions, but ’we have to deeply seize upon those progressive elements enshrined within them’. The fact is that millions of workers have illusions in a government they regard as ’their own’. We know the desire for change that surfaced at the elections and was channeled through to the new administration will sooner or later come up against an empty-handed reformism -which will be unable to meet the deepest needs of labor and the people. We have to stand by the working class and the masses in their experience with Lula’s government, fighting for the political independence of the working class movement, which is today chained to an alliance with its exploiters, fighting as well for its organization along democratic lines and winning them over to build a revolutionary proletarian party.

Notes

1 For most political commentators, the victory of Colonel Gutiérrez in Ecuador is part and parcel of such international influence. The same goes for the new lease of life given to center-left quarters in Argentine politics, such as the CTA (Argentine Workers Union Federation) and its leader, Mr. Victor De Gennaro and Mrs. Elisa Carrió, amongst others.

2 France Press, December 12, 2002

3 The alienation of the mass movement as an active protagonist was a prerequisite for the PT finally getting into office. The strong sway of the PT leadership, his ability to subordinate its left wings, the control over whole swathes of the masses, all these prevented the unions, for example, from launching strikes and held back the landless peasants that tried to occupy land for the whole run-up to the elections.

4 The PT governed many cities and states for a long time. On top of that, the CUT holds the reins of the labor movement, and the PT has strong links with the Catholic Church and social movements active both in the cities and the countryside -e.g., the MST. All these elements have turned the PT into an actual option for the local bourgeoisie as a bulwark to prevent the outbreak of a revolutionary crisis -a reliable bulwark to weather the roughest political storm.

5 For example, in Venezuela, the masses defeated the abortive April coup. After that, in the face of a renewed attempt at a coup, the US has proposed a ’constitutional’ solution to work out the ’Chávez crisis’ without direct confrontation. Lula, in agreement with Bush, sent a ’personal envoy’ to deal with the crisis there, and seek an ’institutional solution’. On January 2, after being sworn in, Lula met Chávez in the capital, Brasilia, after sending in oil tankers loaded with fuel to counter the scarcity in Venezuela. It is also worth noting the importance attached by Lula to the South American agenda in his inauguration speech of January 1, 2003 -given the preponderant role that Brazil might play to help crisis-ridden countries out of the mire.

6 The prestige of reformism, mainly in Latin America, has enabled it to defend bourgeois interest quite efficaciously. The Lula-Alencar government will thus be of great value, given the difficulties posed by the structural crisis affecting capitalism. This, in turn, put them in position to push ahead with a bitter medicine wrapped up in left-wing rhetoric, hand in hand with ’social relief’, workfare schemes, food distribution and even a controlled hand-over of lands, housing, cooperatives and the like -all of them combined with repression, if necessary.

7 We have witnessed the ’incorporation’ of the PT into the ruling regime and the state apparatus for a whole period of time now. Such process was boosted by the 1989-91 developments on the world arena and the fierce capitalist offensive of the 1990s, with strong repercussions worldwide. However, this was a piecemeal process, i.e., there was first a ’molecular’ integration via parliamentary posts, the predominance of union figures and professional policy-makers, etc. From then on, a whole elite was co-opted; the entire upper echelons in the leadership of the PT were ’incorporated’. Such process started to unfold back in the mid-1980s, gaining momentum in the 1990s in the heat of the political developments both at home and abroad.

8 Das Capital, book 3, volume 7, p. 774, Siglo XXI Editores. Marx makes here a reference to the circumstances in which the Catholic Church in the Middle Ages was able to build its hierarchy regardless of the social background, noble origin or else personal wealth of its members, incorporating those best gifted people among the populace, a mechanism that was a key weapon to consolidate the power of the clergy and to force the subordination of the lay state.

9 The outcome of the PT’s ’incorporation’ has been the ’rejuvenation and preservation’ of bourgeois rule. In order to do this, something must ’be changed’ so that everything remains the same, a well-known move described in Giovanni di Lampedusa’s Il Gatopardo, also seen in the nineteenth-century Italian Risorgimento. This came about in the wake of the wearing out of the ’Washington Consensus’, the unpopularity of ’neoliberal plans’ and the world economic crisis affecting capitalism. To these we should add the dissatisfaction of the mass movement that has fueled advanced phenomena with independent actions as in Argentina, or in the last elections in Brazil. A ’change’ is necessary, i.e. to beautify the regime with the ’integration’ of the PT’s upper echelons so everything remains the same, staying away from any perspective of direct action by the mass movement. It still remains to be seen if these changes will remain in place.

10 Obviously, things are far from being settled yet in this respect -whether such will be the final outcome will depend on the performance of the present government, whether it manages to weather the deep contradictions ahead or else succumbs to them.

11 The practical result of the PT’s ’incorporation’ is that it shares a responsibility for the smooth government of the country, in tune with the ’common responsibility’, as Lula puts it, in order to keep law and order. We can say that the bet is to stave off the crisis as a result of the ability of the regime to ’incorporate’ the upper echelons of reformism, capitalizing on the illusions and aspirations placed on the PT and Lula himself. By the same toke, the socialdemocratic parties became passively integrated into the bourgeois order, being hegemonized by capitalism and the ruling class in the process. The state and the regime, with their overpowering influence, managed to co-opt the PT, not because its followers are ’incapable’ of putting forward a ’strategic alternative’, as the Brazilian centrists claim when considering that their policies are just wrong -we would rather say they have been won over in heart and mind for the continued existence of the regime.

12 A Sao Paulo-based journal, akin to those quarters, defines the present government like this: ’This is a government standing for production. The information sent to Washington by the ambassador, Ms. Donna Hrinak, reports that the elect president of Brazil claims he needs to trade with the USA to satisfy, in the medium term, those entrepreneurs that supported the PT’s access to government. Standing against some real obstacles, both the spin doctors and the policy makers inside the PT in the foreign trade department deem that it is the USA, rather than Europe or China and India, the one that can help Lula’s administration as quick as possible to make good of a true obsession during the election campaign: that this should be a government for production and to mobilize the state with a view to job creation and exports…This is at odds with the previous emphasis on finance, which became the raison d’état for the administration headed by Fernando Henrique Cardoso-Pedro Malan’. Review Primera Lectura, December 2002.

13 Industrial Federation of the State of Sao Paulo

14 Interview on Folha do Sao Paulo, December 13, 2002.

15 He is referring to Lula’s cabinet members

16 FIESP communiqué signed by its chairman, Mr. Horacio Lafer Piva, in response to the appointment of Mr. Luiz Fernando Furlan as Minister for Development, Industry and Trade.

17 Survey by the Getulio Vargas Foundation, made between November 28 and December 2, circulated by the FIESP on December 17, 2002

18 Giving a precise characterization of the bourgeois quarters is no easy thing, given the myriad of links between different quarters. Quite often, the same figures are in outstanding posts representing diverging interests. However, by and large, we are able to distinguish separate quarters. There is also an abundant Marxist literature dealing with this issue.

19 The Finance Minister was recently questioned in an interview vis-à-vis the continuity with past policies represented by the appointment of Mr. Meirelles at the head of the Central Bank. They asked him when the change would occur, and he replied the following: ’The government of president Lula has no need to put off the implementation of an agenda for change, an economically sound model for a sustainable social development. High rates of growth are hard to come by, especially during the first year because we are going to tackle the macroeconomic sphere with very big restrictions: a tight budget, a monetary policy to fight against inflation and a higher exchange rate. We can get started with some things, though.’ Interview published by Folha do Sao Paulo, December 22, 2002.

20 Interview published by Folha do Sao Paulo, December 18, 2002.

21 Mr. Horacio Lafer Piva, FIESP chairman; Mr. Alencar Burti, chairman of the Trade Association of Sao Paulo; Mr. Gabriel Jorge Ferreira, chairman of the Banks Federation (Febraban); Mr. Paulo Skaf, chairman of the Brazilian Association of Textile Industry (Abit); Mr. Luiz Fernando Furlan, CEO of ’Sadia’; Mr. Eugenio Staub, owner of the company Gradiente; Mr. Abílio Diniz, CEO of the ’Pão de Açucar’ trust, just to name some of fat cats of the Brazilian bourgeoisie.

22 State of Sao Paulo

23 State of Sao Paulo interview, December 16, 2002

24 Antonio Gramsci, Notes on Macchiavelli, the State and Politics, p. 52.

25 ’Brazilian business is interested in the AFTA, but they care above all that the country should have a strategy for survival in case a stalemate comes. In the words of the chairman of Brazil’s Foreign Trade Association (AEB): ’I can’t let go of the biggest market in the world. The Embraer corporation, for instance, sells as much as 25% of its production in the US, and if that happens, it would just go bust’. Snapping out of the stalemate in the increasingly muddled America’s Free Trade Association -AFTA- negotiations and creating real alternatives to boost foreign trade are part of the PT’s promise that they would change the course of the economic policy, switching from finance to production.’ Nueva Lectura Review, December 2002.

26 In his inauguration speech on January 1, Lula emphasized that Brazil demands a seat in the UN Security Council.

27 State of Sao Paulo, December 17, 2002

28 Lula, as the November 22 New York Times editorial put it ’might be an alternative alliance, neither a populist nor a leftist one, that might endow the Bush administration policy towards Latin America with some credibility.’

29 Clarín, December 11, 2002

30 Financial Times, December 12, 2002

31 ’Lula’s government can go for an in-between for such bilateralism [a likely bilateral agreement between the US and Brazil] On an official level, while not quitting the AFTA negotiations, it will prioritize the negotiations to reach an agreement of the MERCOSUR (Brazil, Argentina, Uruguay and Paraguay) with the US, the so-called 4+1 scheme. And this serves well the political interest of the PT: it makes good of the promise to help the re-launch the ailing Common Market of the South and goes in the direction of a bilateral negotiation that will provide a trial run for the AFTA’. Primera Lectura Review, December 2002.

32 The centrist parties have a share of responsibility in this.

33 Mr. Henrique Meirelles stands accused of reaping illegal benefits out of the devaluation of the Brazilian currency in 1999, when he was serving at the Bank of Boston. New York Times, December 22, 2002.

34 According to recent data, the company owned by Luiz Furlan owes some 160 million dollars to the Bank for Social and Economic Development (BNDES), which is part of the department he presides. In the past, he was accused of renegotiating loans for influential politicians on very favorable terms for them. New York Times, December 22, 2002.

35 Mr. Roberto Rodríguez is currently being scrutinized for the operation he carried out to get a 3.6 million dollars loan for his department, when he was in charge of a state administration some years ago. New York Times, December 22, 2002.

36 Mr. José Alencar has admitted that his textile company, Brazil’s second biggest, is being investigated under allegations of fraudulent cotton purchases promoted by the government. His son admits to having manipulated the price of cotton to qualify for the subsidies handed out by the government back then.

37 ’The future Finance Minister, Mr. Antonio Palocci, stated that the staffing of Lula’s cabinet represents the opening of a ’new phase that may seem odd for the PT, but that is nevertheless a choice for production.’ Último Segundo, Transition, December 20, 2002.

38 The disagreements with the PMDB resulted in its exclusion from government. However, the negotiations were tense, and the door has been left open for the future participation of this party in the administration.