Jan Rocha, October 2010

The World Today, Volume 66, Number 10

The Age of Lula - eight years of government by former metalworker President Luiz Inacio Lula da Silva - has transformed Brazil and put it on track to become a superpower in the next twenty years. What sort of country will the new president inherit after this month's election?

In the second half of the twentieth century, Brazil rode a rollercoaster of political and economic crises, marked by military coups and hyperinflation. Few presidents ended their terms of office peacefully. Currencies came and went, the foreign debt mushroomed out of control. The gap between rich and poor widened obscenely. Brazil seemed a basket case, condemned to be the eternal country of the future, dogged by an inferiority complex.

Today the scenario has changed dramatically, beginning with Brazilians' own perception of themselves. After a decade of economic and political stability and social progress, the feel good factor is high. Seventy-eight per cent now say they are proud to be Brazilian and optimistic about the future of their country. Even the infamous Brazilian 'jeitinho', the synonym for fixing things with a nod and a wink, has been redefined as a positive national characteristic, signifying creativity and a flexible approach to problem solving.

President Luiz Inacio Lula da Silva's government consolidated the achievements of the previous President Fernando Henrique Cardoso - low inflation and a steady currency - and took advantage of very favourable international circumstances, with growing demands for commodities. It also chose to invest in expanding the domestic market by including lower income groups in the consumer society.

This was done by above-inflation wage increases, micro credit for small entrepreneurs and the expansion of welfare programmes, generating consumer demand, investment and jobs. Per capita income has risen 163 per cent over the last decade. Sales of cars, televisions, computers, washing machines and mobile phones have boomed. Credit cards have multiplied, the housing market is in overdrive. Airports are congested with first time travellers. Millions whose consumption was previously limited to food and basic items have been incorporated into the consumer market.
Unequal Bounce

The government did this by ignoring market orthodoxy, and maintaining a pro-active role in economic policy through state development banks. It endorsed Nobel prize winning economist Amartya Sen's view that the state is not an obstacle but has a role, and helping the poor is an investment, not a hand-out.

At the same time, foreign currency reserves grew from $35 billion in 2002 to $250 billion this year. Brazil is no longer an International Monetary Fund debtor but has become a creditor. It bounced back from the financial crisis of last year with higher than ever gross domestic product growth, expected to reach six percent next year.

Yet Brazil remains one of the most unequal countries in the world, tenth worst according to United Nations Development Programme. In Latin America, only Bolivia and Haiti, infinitely poorer, are more unequal. This means that thirty million Brazilians live on less than $20 a week, at the margin of society, without even the most basic document, a birth certificate, let alone a bank account.

Including these marginalised Brazilians in consumer society must be a priority for the new president. Most agree that the key is education. Numbers are no longer the problem, 98 per cent of children are now in primary school, over sixty per cent finish secondary school. The problem now is quality, untrained teachers, low salaries, under-resourced schools. In Brazil, 'students finishing school are among the least educated in the world,' according to a recent Economist Intelligence Unit report. The result is a serious lack of qualified labour.

Yet there are growing pockets of world class research. Britain's Royal Society chose to hold its 350th anniversary celebrations in Sao Paulo, because 'The rise of Brazilian science over the last decade has been astonishing. `Its output, as measured in scientific publications, has more than doubled in the last ten years, as have national levels of investment in science and technology'.

Brazil is negotiating to join CERN, the European Centre for Nuclear Research, which would mean contributing scientists and technology. It is already a leader in sugarcane research: 164 delegations from 84 countries have visited to see what is being done.

Besides education, infrastructure is the other major bottleneck to progress. While the country is privileged in its climate, both tropical and temperate; water resources, twelve per cent of the world's fresh water; and has the world's biggest stock of unused arable land, ninety million hectares; it has a woefully inadequate transport system. The railway network was virtually abandoned when car factories moved-in sixty years ago, giving rise to a still powerful road lobby.

As a result there is today no rail connection, even between Brazil's two major metropolitan areas, Rio de Janeiro and Sao Paulo. A long talked of high speed train has never got beyond the drawing board.

Appropriately enough, it could be soccer that provides the motive for doing something serious about infrastructure. To ready the country for the 2014 World Cup, Brazil plans to invest $18.7 billion in infrastructure, a third of it going to urban mobility projects like subways and monorails. As the tournament is expected to generate an additional $104 billion in economic activity, it is money well spent.

Twenty-first century Brazil is an urban country, eighty-five percent of its population living in towns and cities. Unlike China and India, it does not have a demographic problem, fertility rates are at European levels. A middle income country with a population of two-hundred million will be one of the world's most attractive markets.
Hero or Villain?

The next president will have to decide whether Brazil wants to be the hero or the villain on climate change and energy. Again, it is a country blessed with an abundance of energy sources, at the moment hydroelectric power supplies half its energy needs. But the discovery of Pre-Salt, a vast oilfield very deep in the south Atlantic under salt deposits, promises to turn Brazil into a major oil producer.

For Marcos Jank, head of the sugarcane producers union, UNICA, this is disastrous: 'just when Brazil was heading for an energy matrix based on biofuels and renewables like wind and solar power, they discovered Pre-Salt and the debate now is all about the division of the booty - the royalties.'

Increasingly, hydroelectric dams themselves are criticised. Mostly located in the Amazon region, they cause serious environmental impact on rivers, indigenous groups and the forest.

Jank claims that sugarcane could provide the energy equivalent of three dams the size of Belo Monte, the controversial state-funded hydroelectric giant planned for the Xingu, a major Amazon tributary.

Will the new president resist the powerful farmers' lobby which wants to change the laws protecting the rainforest, to open up more land for cattle and soyfields, and stick to Lula's promise to lower Brazil's carbon emissions?

In the years to come, the political power of the conflicting energy and environmental lobbies, and the growing pressure of public opinion will determine which path the country takes.
Pacific Power

Brazil's rise to major power status involves a change of focus. Its long Atlantic seaboard, the site of all the ports and most major cities, has always shaped and directed trade, culture and foreign relations, first with the colonial powers in Europe and more recently with the United States.

Now China has supplanted the US as Brazil's biggest trading partner. Other Asian markets like India, Vietnam and South Korea grow in importance. Brazil needs ports on the Pacific. Joint projects are underway with Andean neighbours Peru and Bolivia to build connecting roads and bridges through the Amazon region. In a few years, instead of using the Panama Canal, many Brazilian exports will reach Asia via the Pacific.

The Lula government's foreign policy made Latin American integration and South-South relations its priorities. There is less emphasis on aspiring to join the rich club and more on alternative power groups like the G20 advanced and emerging economies, the four BRIC countries - Brazil, Russia, India and China - and the BASIC group active on climate change: Brazil, China, India and South Africa. The newfound economic and political stability has given Brazil, once a timid player on the international stage, the confidence for an active role, not only in Latin America but also in unexpected places like Iran and the Middle East.

Brazil likes to see itself as a peace maker, offering its natural traits of conciliation and consensus, maybe even injecting a bit of 'jeitinho' into international affairs. Around the world not everyone looks forward to this, but as Foreign minister Celso Amorim said 'the world cannot continue with the same countries deciding things as in 1945. In 10 years' time no one will doubt Brazil's important and central role in international relations, including peace and security … it already has an important role in financial questions, trade relations and climate'.

In Latin America itself, nobody questions the county's dominance in size, wealth and trade, but relations have often been prickly and ideologically-driven. Lula introduced a new pragmatic way of doing business with governments of both left and right.

Brazil's most important contribution as a super power could be its example of tolerance, as a country without border conflicts, without religious, ethnic or racial violence, without the aim of becoming a military or nuclear power. A serious challenge lies ahead for Lula's successor.