The Lula Government: The Challenges of the PT in Power and Contradictions of Power1

Salvador A. M. Sandoval PUCSP/UNICAMP Brazil

From its beginning the Lula Government has been criticised by intellectuals of both leftist and rightist perspectives. From the left, one hears critics like Luiz Werneck Vianna, president of the National Association of Graduate Programs in the Social Sciences and professor at the IUPERJ who stated recently Until now I have only seen more adaptations than change. I do not like to see a government elected to change things around so geared to adapting to those same circumstances. In spite of the rhetoric in defence of the State, the government has trusted much more in the market that is incapable of making the country grow at the rates that are necessary.2 From the neo-liberal perspective, ex-president Fernando Henrique Cardoso, declared that what is most surprising about the Lula government is the lack of imagination, since the main banner of the current president (the war against hunger) was not able to get beyond paper. The ex-president, representing the liberal and conservative elites, went on to say that the Lula government is not doing anything different than a PSDB government would have done, attesting to the correctness of the economic policies which the previous government pursued. In spite of the fact that the PT had never occupied the national government before, by the beginning of the Lula Government, it was a very experienced leftist party, having occupied several state and municipal governments. On the other hand, the current federal government is headed by a widely popular ex-labour leader whose political curriculum includes only a single term in elected office as a federal deputy. Nevertheless, this politically inexperienced leader, Luiz Ignacio Lula da Silva, has been the occupant of the Presidential Palace who has held popular approval in survey polls over the longest time span. Approval of Lula as a President remained remarkably high through the first two years of the administration. In January 2003, Lula had a 83.6 per cent approval rate and by the beginning of September of that year he could claim a strong 76.7 per cent approval rating. It is noteworthy that President
JILAS

Journal of Iberian and Latin American Studies, 11:2, December 2005 79

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

Lula maintained a higher approval rate through the first two years and for a longer period of time than his predecessor Fernando Henrique Cardoso. In the same year, the approval rating for Lulas government fluctuated slightly between 56.6 per cent in January 2003 to a low of 48.3 per cent in September. Considering that these levels of approval only slowly and gradually declined throughout the first two years suggests that, in general, public opinion did not share the criticisms made by members of the intellectual elites of the country. Three distinctive and related features characterise the first two years of the Lula Government. First, the PT Government was without a doubt a transitional government; a government navigating the transition from the clearly neo-liberal administration of the Cardoso Government to one that was to have a different and distinct ideological mark. Second, the PT government laid down the ground work for social changes in a near future in which the government assumed it would have at its disposal the command of resources needed to implement the social welfare reforms and policies long overlooked by previous governments. Third, Lula took over the presidency with a strong commitment to raising the living standards for the working classes. Attempting to make a transition from the neo-liberal posture of the previous administration, the PT administration inherited a mixed set of achievements and noteworthy failures which set the conditions under which President Lula was to govern in the first year. To better illustrate this, the legacies of the past administration can be summarised under the following headings. The positive legacy: A reformed and consolidated banking system. The Cardoso government should be credited with intervening and reforming the banking system so as to avoid the banking crises that have seriously shaken other economies. Through the privatisation of many stateowned banks, the intervention into a number of large insolvent private banks and changes in regulations and the creation of a depository insurance policy, the Brazilian economy over the Cardoso years was buttressed by a stable banking structure. The restructuring of the elementary educational system in terms of rationalisation of the uses of public funds and the establishing the bases for a national system of evaluation of educational institutions. The national AIDS Program which was not only a pioneer in public health policy, but which forced an otherwise complacent Cardoso government to assert national sovereignty and to defend the principle of national needs above foreign private interests in the matter of pharmaceutical patents. 80

Sandoval: The Lula Government: The Challenges of the PT in Power . . .

The negative legacy: An increased internal and foreign debt in which privatisation revenues were used to pay high interests on the debt provoked by the Cardoso governments economic policies. This resulted in a lost opportunity to apply the resources from privatisation to infrastructure or promotion of social welfare policies. The Lula government, having complied with the conditions set down by the IMF under the Cardoso Government, has had to forge economic policies under these conditions. A stagnating economy due to recessive economic policies based on high interest rates which encouraged increased investments in the financial market and discouraged investments in production and infra-structure. Growing urban unemployment resulting from economic recession brought about by the Cardoso economic policies, the introduction of new technologies, and the closing of nationally owned enterprises. Decline in income levels for the large majority of the population and most especially, towards the end of the Cardoso government, the effects of economic stagnation reaches into the middle classes as well. Continuing fiscal crisis due to the Cardoso governments failure to implement any of the main reform measures in its two terms in government. For this reason, the Lula government placed as its highest priority the approval of both the social security retirement reform and tax reforms measures. Effects of a badly planned privatisation program which resulted in widespread discontent for worsened services, best exemplified by the electrical power shortages and rationing that marked the final years of the Cardoso Administration and largely overshadowed some of the advances in other sectors made by that government. Declining foreign investment especially during the presidential election year. A concerted effort was made by some international financial institutions to influence the Brazilian electorate in favour of Jos Serra, the PSDB presidential candidate, and against Lula candidacy. Regular reports were designed to manipulate country risk levels suggesting a forthcoming reduction of foreign investment and confidence if the PT were to be elected. A significant decline in domestic investment during the Cardoso government as a result of government economic policies, high interest rates and lack of government incentives for the expansion of production base in Brazilian industry due to the lack of an industrial development policy. 81

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

An increase in the levels of poverty due to governments recessive economic policies and it systematic neglect of social policy areas, and the failure of the project known as Comunidade Solidria to provide a coherent viable welfare policy. Failure to produce a coherent agrarian reform policy in spite of the growing unrest among the landless workers and the successes of the Landless Workers Movement (the MST) in occupying unproductive agricultural lands. Bearing the performance of the Cardoso government in mind, it is no wonder that the Lula government in the first two years in office should have focused on stabilising the economy through strict control of government expenditures, with the objective of providing the conditions for an increase in social spending by the end of 2003 and stimulating economic growth through tax reform and reduction of federal expenditures in retirement benefits for the civil service. At the same time, stabilisation policies were devised to re-establish confidence among the international financial institutions which had initially favoured Cardosos would-be successor, Jos Serra. While the government has followed economic policies that appear almost identical to the neo-liberal policies of the Cardoso administration, the Lula Government claimed to have different social priorities, and a different political style of governing. It set out to achieve a more participatory policy formulation process and implementation of a broader social agenda. Initially, the Lula administration demonstrated commitment to creating mechanisms for the participation of representatives from civil society in the process of policy formulation. To this end, during the first months, the government set up consultation mechanisms for the participation of representatives from civil society in the policy formulation processes in some key policy arenas. These included: Zero Hunger (Fome Zero) and the National Council of Food and Nutritional Security (CONSEA). The Council was designed to consist of up of 62 members (13 ministers, 11 observers, 38 personalities from non-governmental organisations active in the field) all named by the President to serve as an articulation between the government and civil society in the formulation and implementation of social welfare policies and programs. The council was to evaluate the anti-hunger programs, organise the national conference on hunger for 2004, stimulate and collaborate in the creation of state and municipal committees to combat hunger, propose projects and priorities, and sponsor studies that contribute to the better formulation of welfare policy. Through council participation, key representatives from non-governmental social welfare agencies were 82

Sandoval: The Lula Government: The Challenges of the PT in Power . . .

to raise fundamental questions about the initial project of Fome Zero. This marked the first time that national welfare policy was debated by civil society such that government actors where obliged to take note and eventually reformulate key aspects of the program. The Conselho de Desenvolvimento Econmico e Social (Council of Economic and Social Development) was created in February 2003. It was composed of 11 members of the federal government and 82 members consisting of 38 leading entrepreneurs and businessmen, 7 bankers, 11 union and MST leaders, social welfare activists, church leaders, professional association leaders, academics and federal ministers. To select the council Lula chose from over 400 names nominated by political and social organisations throughout the country. The Council met twice a month to debate and send to the President recommendations on various issues: retirement reform, tax reform, high interest rates, economic policy and unemployment, slowness of Fome Zero implementation, etc. On several occasions the council was openly critical of government economic policies and welfare programs. The Forum de Governadores (governors forum) was organised to mobilise the support of state governors in favour of civil service reforms, tax reforms and anti-poverty policies like Fome Zero. Another facet of the Lula Government has been its linked commitments to raising the living standards of the working classes and to making government more responsive to demands from society. The current government posed the following programs as priorities from the beginning of the Lula administration: A comprehensive program for the eradication of poverty (establishment of the Bolsa Famlia program that unifies the various welfare programs implemented by the individual ministries and secretariats) A comprehensive program for the construction of popular housing. Expansion of educational opportunities for the working classes at the primary school level with a corresponding relative disinterest for the investment in public higher education. Equalisation of retirement benefits between workers in the public and in the private sectors. This led to a major conflict with civil service workers, traditionally strong PT supporters. Changes in labour legislation for the purpose of modernising labour union structures. This project has as yet not come to light and most likely will not be undertaken in the PTs first term in government.

83

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

Economic growth that also contributes to the creation of jobs, which ultimately result in one form of income distribution. Agrarian reform as way of attaining social justice, employment and agricultural productivity for large numbers of rural workers and their families through the development of small farm agriculture. Subordinating debt negotiations with international financial agencies to considerations of social welfare and infra-structural priorities in the process of renegotiating commitments to foreign financial institutions such as the IMF, World Bank and Inter-American Development Bank. Measures to make national governmental structures more participatory and responsive to citizen demands through the inclusion of representatives of important organisations in civil society. How has the Lula Government dealt with the Cardoso legacy and how has the Administration fared in achieving its social welfare commitments? This question is advanced by reviewing three major areas of policy initiatives undertaken in the first year of office. 1. Civil Service Retirement Reform From an ideological perspective probably the most controversial event in the first year of the Lula Government was the process of enacting the civil service retirement reform. The project and process of reform earned accusations from leftist politicians and academics that it had reneged on leftist principles and embarked on a dangerous neo-liberal shift through this reform. The Retirement System for the Civil Service was one of the major sources of fiscal deficits, but because the powerful public sector lobby was opposed to any reform, the Cardoso government was unwilling to tackle the issue in its 8 years in office. The abuses inherent in the system listed below make it apparent that the system was in need of a major overhaul: 1. By and large, civil servants retired between the ages of 48 to 53 years of age. 2. Retirement at full salary only required the retiree to be in the position at time of retirement, with no requirement regarding contribution time at that salary level. 3. The system was based on the principle of lower levels of contributions and higher retirement levels with the state paying the difference. 4. Fringe benefits inherent in the system were generous to say the least.

84

Sandoval: The Lula Government: The Challenges of the PT in Power . . .

On the other hand, in the private sector, workers retired at 60/65 years of age, were required to contribute to the public retirement fund for 25/35 years, contributing at least 5 years at the income bracket to be eligible to retire at the corresponding pension level which would never exceed a fraction of the salary. It is no wonder that President Cardoso, coming from a career in the public sector and having many of his allies and personal friends in the public sector, never attempted to undertake the needed reforms of this structure. Lula, on the other hand, coming from a career as a worker in the private sector made this the PT Governments first big reform issue, undertaking the battle to reform civil service retirement not, under the banner, of neoliberal austerity, but rather as a first step in unifying the national retirement system so that it would benefit equally both public and private employees. The proposal of unification of the two systems had five clear effects: First, the governments reform project brought under public scrutiny the abuses inherent in the civil service system, bringing into public debate the evident and unjustifiable disparity between the public and private sector retirement benefits. It became clear in the mind of public opinion that the deficit burden accruing from the civil service system was paid by private sector employees/tax payers who had considerably fewer benefits but paid more into their retirement fund. The debate conducted by the Lula government in raising the issue of cost/benefit of both retirement systems also provoked the emergence of popular dissatisfaction with the key sectors of the civil service such as the civil servants, the public universities and the judiciary. These are sectors that have become notorious for their inefficiency, inefficacy, arbitrariness and corruption. Second, the Lula governments strategy of unifying the retirement systems neutralised opposition and the mobilisation capacity of the major labour confederations (CUT and Fora Sindical) since, internally, these confederations had to negotiate the debate between the civil servants unions and private sector workers unions over the disparities of both systems. Illustrating this tension within the union movement is the incident, during the period of this national debate, outside the So Bernardo dos Campos Metal Workers Union headquarters in which protesting civil servants were beaten up by metal worker unionists at the time of the visit of the minister of labour to the union headquarters. Third, the unification proposal placed in the political arena a multi-partisan coalition of state governors and mayors supporting the Lula proposal not only because they themselves confront serious budgetary deficits from the public retirement system but also because the unification proposal provided a common ideological ground around which to mobilise their forces to pressure Congress to approve the reform package. 85

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

Fourth, the proposal received the endorsement of the business community in as much as it viewed it as seriously focusing on reducing budgetary deficits and at the same time benefiting their employees. Fifth, the proposal split the civil service unions/association opposition. The judiciary negotiated separately to preserve many of its benefits at the expense of abandoning the rest of the civil servants to their fate. The split guaranteed the Lula government judicial backing against any court actions with regard to constitutional issues about acquired entitlements. The events related to the Reforma da Previdncia illustrate the two facets of the Lula government. On the one hand, its transitional character was displayed in addresses to the serious issues left unresolved by the Cardoso Government and on the other hand, its progressive character was demonstrated in an apparently neo-liberal reform which was used as way of extending retirement benefits to the majority of the working classes. 2. The Zero Hunger Project (Fome Zero) Another important moment early in the government illustrating both the transitional and progressive facets of Lula administration came from the problems in implementing the widely announced anti-poverty program Fome Zero. The first round of nominations in positions that were key to setting up the much promised Program of Fome Zero, suffered from the traditional practice in Brazil of naming political friends and leading party allies to national office as compensation for electoral defeat. All the nominees proved to be unexpectedly inept in formulating and launching any convincing proposal for making government welfare spending more effective in reaching the poorest sectors. These nominees not only proved to be unable to administer their offices but worse yet became controversial figures in the public eye either because of lack of knowledge in the field, incompetence as administrators, or due to questions of administrative propriety. Through the Conselho Nacional de Segurana Alimentar e Nutricional (CONSEA), representatives of the leading poverty alleviation NGOs very quickly entered into direct conflict with the National Secretary of Food (Segurana Alimentar) over the format of the program Fome Zero, its objectives and more importantly its forms of operation. The program team was generally slow in getting started on any of the fronts of poverty relief, including mobilisation and collaboration of civil society, and indeed anything beyond the food handouts that had characterised Cardosos Comunidade Solidria.

86

Sandoval: The Lula Government: The Challenges of the PT in Power . . .

The National Secretary of Food Security (Segurana Alimentar) made formidable opponents among the more experienced NGO professionals who had worked in the field for many years, including PT partisans who reluctantly turned to open criticism of the program for its lack of technical competence. The crisis came to a head when both Fome Zero and the Ministry for Social Promotion were openly criticised by the press and many NGO professionals, forcing Lula to intervene and organise a committee to analyse the unification of the various anti-poverty programs located in the various ministries. Subsequently, Lula announced the program called Bolsa-Famlia. This brought together four existing programs: school aid for poor children, Fome Zeros food distribution program, food grants from the Ministry of Agriculture and gas fuel aid from the Ministry of Mines and Energy. Under Bolsa-Famlia, federal antipoverty programs were to be monitored by a single agency located in the executive office. With a budget of $5.3 billion Reais (US$1.76 billion) for 2004, the goal of the Bolsa-Famlia was to benefit 7 million families. The Fome Zero episode illustrates the two-faced nature of the Lula government. While pursuing as a priority the overhaul of the welfare structures of the national government, at the same time the administration engaged in traditional practices of featherbedding political allies and friends. The consequence of the clash of this progressive intent against the backdrop of traditional criteria for nominating national officials quickly erupted in national controversies over the process of formulating welfare policies under the new government. Once again the Lula government was caught between the old and the new politics. 3. Agrarian Reform The government initially named a supporter of the Movement of the Landless (MST) to head the federal agency for agrarian reform, known as INCRA. Many of the regional representatives of INCRA were nominated from among strong MST supporters with the expectation that the inclusion of sympathisers would facilitate negotiations between the MST and the government. Not only did this strategy fail but the overt sympathy expressed by these new INCRA officials and the increased mobilisation from the agrarian reform movements pressured both large and small landowners into an organised counter offensive of mobilisations resulting in increased confrontations and violence in the countryside. At the same time, state governments in the hands of parties in opposition to the PT government threatened to evict MST invaders in reaction to the nomination of what was perceived as radical and biased officials to the agrarian agency. Eventually 87

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

Lula was obliged to replace the INCRA president with a more moderate nominee and the regional representatives with persons less identified with the tactics and strategies of the MST. This set back illustrates again the double faceted character of the PT government. On the one hand, the desire to place the weight of government behind the social movement but on the other hand having to adapt itself to a political environment including of conservative and moderate interests opposed to the movement.

The political backdrop to the 2005 crisis of the PT Government

The Lula administration brought to Brazilian politics new public expectations as to style of governance and the commitment to social change. The PT represented an undeniable threat to traditional ways of doing politics and had earned a reputation for honesty, unquestioned commitment to social policy priorities and a mobilisation capacity that threatened other political parties. In spite of these expectations and wide-ranging support in the electoral process, the fact remains that the Lula government seems to have been unprepared to assume the federal government in a political system in which corruption is wide-spread and pork-barrel politics is the order of the day. In this sense one might approach the 2005 crisis of the PT national government by posing the question: what happens to a leftist party when it attains national office, and attempts to produce political and economic changes as a government with a minority in the Congress? The current crisis of the Lula Government has a distinct context that should be examined in determining the significance and prospects for the near future. One facet of the crisis refers to the very nature of Brazilian politics. The Brazilian political system nurtures and functions through a very high level of corruption and quasi corrupt practices ranging from blatant nepotism to defrauding public funds through a variety of schemes that are well known and often publicised at the end of a chief executives term. In a political system in which corruption has long been a recognised tradition, corruption is not only a source of political power for the party occupying the executive branch. It also provides resources for opposition parties and a way of lubricating otherwise inefficient political institutions in which partisan politics mix freely with the personal interests of politicians. The current scandals concerning misdeeds on the part of key politicians from several parties only corroborate this feature of the Brazilian political system. It is no wonder that in the scandals that have shaken the Lula Government in 2005, almost every major political party has been implicated in some way with the payoffs with public funds siphoned off and generous publicity contracts with governmental agencies, a practice that existed long before Lula took office. As an illustration of just how generalised these practices 88

Sandoval: The Lula Government: The Challenges of the PT in Power . . .

have been in the system, it is worth noting that in the current crisis that has run for most of the year, in addition to the involvement of several important congressional figures of the PT, the president of the opposition PSDB party was also forced to resign due to his taking of payoff moneys from sources. Likewise, a number of congressmen of the PMDB and the PFL and politicians of some of the smaller parties have come under scrutiny. Yet another casualty of the investigative climate that has emerged from this major scandal was the President of the Chamber of Deputies, Severino Cavalcante, who was also forced to resign from the National Congress due to documented accusations that he took kickbacks from the franchiser of the restaurant services in the Congress. From a systemic perspective two things are evident from these political events. First, the Lula Government was ill prepared to deal with accusations of corruption against members of allied parties which had been incorporated into the government through the distribution of political offices in order to maintain a majority vote in the Congress. Second, the need to use pork barrel and kickback tactics to hold a majority in the Congress meant that segments of the PT itself became involved in publicly unacceptable practices of corruption. In neither instance, had the party leadership, including those close to Lula devised any strategies that would counteract the effects of public disclosure of such behaviour. A major consequence of the PTs lack of preparedness was that the Lula government faced many months of inaction and delays in staging a counter attack. In spite of this, Lulas popularity only declined slightly during the first months of the crisis and has regained some of the percentage points lost over the past months. Further, the relative containment of the political crisis in the political arena with little or no effect on the economy attests to the confidence given to the Government by the national and foreign business sectors. The continued growth of the economy, gradual increases in the job market, and continued growth of the export economy have proven resilient to this political crisis in Braslia.

The Political Crisis and its Effect on the Partido dos Trabalhadores
Over two decades, the Workers Party had succeeded in building a strong and committed following of members throughout the country from among the working classes, and the middle classesespecially university students, church activists and intellectuals. This following, the militncia, as they have been called, have been key factors in PT election campaigns through face-to-face contact with broad segments of the electorate. The militncia has been responsible on many occasions for defeating or nearly defeating opposition parties that relied on expensive mass electoral marketing 89

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

strategies. The voluntary commitment of hundreds of thousands militants has been a constant menace to more conservative politicians and parties both in elections as well as in government when the militncia has often mobilised to directly pressure office holders. On the one hand, the political crisis of 2005 brought to a head the growing discontent prevalent within the PT grass roots membership and more leftist leaders with regards to the centralised style of Jos Dirceu as Lulas chief adviser and the centre figure of the current scandals. Under Jos Dirceu political decisions, policies and appointments were determined by closed negotiations without any consultations with the party. At the same time, there was growing antagonism between the PT leaders in the government and leaders and rank-and-file activists in the party over recessive economic policies, with a corresponding lack of social investments. Further, the multiple party alliances made by the Lula government under the guidance of Jos Dirceu, was another point of criticism within the large segments of the rank and file. Finally, the election campaign that took Lula to the presidency also introduced a major change in campaign strategies that was encouraged by the Alvorada Palace. The reliance on professional pollsters to conduct the campaigns and the dependence on media to get the votes, replaced the more popular manner of PT campaigning on the basis of intense mobilisation of supporters and voters. The more electronic approach to campaigning was encouraged by Lula in the municipal elections of 2004. This approach to campaigning predisposed many candidates to imagine that they would have more success at the polls using expensive pollsters than through the already proven door to door campaigns conducted by the PT militants. The professional pollster approach meant that candidates very often overspent on their campaigns and consequently became indebted. The scandals of 2005 have, at their basis, the kickback schemes used to obtain funds from federal government sources so that loyal politicians could repay these campaign debts. This was done by means of publicity contracts given to advertising agencies that had worked on the election campaigns. At the same time, the changes in campaigning initiated by the Lula group provoked a further marginalisation of party militants who had been largely responsible for the successful presidential election. The effect of this showed up in the municipal elections in which the PT lost in many of the large cities because of a lack of intensive face-to-face campaigning. The scandals involving Lulas friend, collaborator and party autocrat, Jos Dirceu, turned latent discontent among the rank and file to open expressions of disaffection with the Lula style of governing. In this respect, the PT, as the crisis evolved, was threatened more from within the party than from the outside. The possibility of major defections from leftist segments was further enhanced with the resignation of the party president, 90

Sandoval: The Lula Government: The Challenges of the PT in Power . . .

also accused of involvement in the scandal. This vacancy in the presidency of the PT forced party oligarchs to call for elections within the PT for a new president. In these, the Lula faction of the party lost significant support after a record number of party activists, over two hundred thousand, turned out to vote in the elections in October 2005. The new president was elected in a runner-up election and received just over 50 per cent of the votes. The verdict of the partys internal consultation brought mixed messages to Lula and the dominant party leadership. The Lula/Dirceu segment, called the Campo Majoritrio, was able to hold on to the party presidency but was forced to relinquish control of the partys governing board. The outcome of the internal elections clearly registered the rank-and-files disapproval of the Lula/Dirceu style of governance, particularly the use of pork barrel strategies to gain support from unreliable partisan allies. On the other hand, the elections demonstrated the resilience of the memberships commitment to the Partido dos Trabalhadores and a continuing vitality regardless of the crisis in Braslia. With a larger turn out of party members to vote than in previous consultations, PT leaders, including Lula, were relieved of their fears of a major wave of defections. Even though a few congressional deputies did bolt after their failure to oust the Campo Majoritrio altogether, the new party president took the results to mean a mandate to counterattack the coalition of centre-right and right wing parties which had orchestrated the attack against the Lula presidency.

Notes
1 Paper presented at the ILAS Conference 2003: Lula and Brazilian Transitions, La Trobe University, Melbourne, Australia, 31 October and 1 November 2003. Estado de So Paulo, 19 October 2003: A-17.

91

JILAS

~ Journal of Iberian and Latin American Studies, 11:2, December 2005

92