What a difference a hundred days seems to make--at least, in this case, the first hundred days of President da Silva, who turns out to be the biggest surprise of all. A labor leader who began working in factories as an adolescent, founder of the Workers Party, an icon of the Brazilian and international Left, he has long been a critic of globalization and "neo-liberalism." Nonetheless, in the recent presidential campaign (his fourth), he had already pledged to respect the financial commitments made by his predecessor, Fernando Henrique Cardoso, and even before taking office he had significantly moderated his discourse. The combination of pragmatism and continuity has paid dividends in terms of economic stability. So far it has paid off politically as well. As of now, his public approval rating is higher at this stage of his term than that of any Brazilian president since 1990. Ironically, however, he is most popular now among those voters who were most wary of him before the election.

Tackling the Big Issues

Lula's advisers have decided that this is the optimal time to tackle two contentious but crucial issues--the pension system and the tax code. With respect to the first, the government proposes to increase the retirement age for civil servants from 53 to 60 for men and from 48 to 55 for women. It would also cap monthly pensions of currently retired public employees at $6,300; future public and private employees would have their payments capped at an even lower level, with an option for additional private pension plans. Most controversial of all is its proposal to levy an 11 percent income tax on current civil servant pensions.

These changes are desperately needed to cut an $18 billion budget deficit, which represents roughly 5 percent of Brazil's gross domestic product. Although public employee unions like to brandish leftist rhetoric, if they succeed in stopping these reforms they will perpetuate a system that actually accentuates existing inequalities in Brazil. Initially many sectors of Lula's own Workers Party (PT)--which has historically drawn much of its support from white-collar unions--opposed the reforms; there is still talk of some members recurring to the courts to invalidate whatever congress decides. Critics claim that these reforms are exactly the ones suggested by the previous government, as if that alone invalidated their worth. Even so, Lula's party has largely rallied behind him, even to the point of threatening to expel one senator and two deputies for failing to support the bill. Meanwhile, the president can count on support for most of the reforms from the centrist Brazilian Democratic Movement (PMDB), which is the first minority in the Senate and the second in the Chamber of Deputies, and also many members from Cardoso's Social Democrats (PSDB) and the (conservative) Liberal Party.

Tax reform lacks consensus among Brazil's governors, which under its peculiar federal system are rather more powerful than they are in the United States. (In some ways Brazil's federal-state relations resemble those of the United States during the Articles of Confederation.) Even so, some business leaders complain that the tax reform proposed does not go nearly far enough in promoting serious economic reactivation.

To win passage of these two reforms, Lula may have to sacrifice a third--a bill that would grant full autonomy to the Central Bank, a proposal particularly unpopular among the president's own supporters. One poll showed a full 50 percent of PT congressmen and 44 percent of senators are in opposition, compared to 37 and 31 percent, respectively, for members from other parties. This suggests much of Lula's presidency may be a delicate balancing act in which he will have to win support from the center and Right while holding his own left together.

This tactic will require all of his political skills, and then some. On two issues of enormous political and emotional significance-land reform and his proposal for "Zero Hunger," he is already backpedaling. After spending more than a decade appealing to land-hungry peasants, the president now declares that bringing social justice to the countryside is not merely a matter of distributing land, but adopting "economic and political decisions that improve the quality of life for millions of country dwellers," including training, education, health, infrastructure, credits, and the development of markets. This year the government will disburse $1.8 billion worth of credits to small farmers, but the president urges patience: "Four years are insufficient to construct a just, fraternal society of the type all Brazilians want."[1] As if by way of response, the Landless Movement (MST) has resumed land seizures for the first time in over a year.

His "Zero Hunger" program, which is partly inspired by our own food stamp system, has run up against serious obstacles, including an unresponsive bureaucracy, poor leadership, and accusations of pork barrel politics. One newspaper reported with evident malicious glee that a $13,000 donation by one celebrity languished in a drawer somewhere instead of being cashed. As the president said in a major television address commemorating his first hundred days, the program is "a complex project that requires various structural changes."

Left-Hand, Right-Hand

President da Silva may be recurring to a time-tested Latin American formula of embracing "progressive" positions on social and foreign policies to compensate for orthodoxy in macroeconomic matters.

Lula's cabinet is the first in Brazilian history to include four Afro-Brazilians, one of whom is in charge of a newly created Secretariat for the Promotion of Racial Equality. The president has also named the country's first black supreme court justice, Joaquim Benedito Barosa Gomez, author of a book on affirmative action.

On racial politics Brazil has always been a study in contrast with the United States. Formerly it denied that it had a racial problem at all, and in fact "black consciousness," at least as understood here, has been slow to develop. Now, however, it appears that Brazil is about to leapfrog over the United States. Whereas advocates of affirmative action here indignantly deny that they favor quotas, the new racial equality statute now before the Brazilian congress would require percentages of blacks at all levels of government and even in the casting of television programs and commercials! Quotas are beginning to be imposed as well for government contracts, even university admissions.

Brazil may even have its own version of our Bakke case on university admissions, since two public universities have just accepted a freshman class that is 40 percent black. Whites who scored higher on entrance examinations are suing, claiming that they have been denied "equality of access" guaranteed by the 1988 constitution. Advocates of reverse discrimination are expected to respond by pointing out that typically only three percent of university students define themselves as black--a figure which, however, may soon increase as the result of new regulations. (It has never been entirely clear in Brazil who is black and who is not.)

The direction in which Lula is taking Brazilian foreign policy could be glimpsed at the Fifty-Ninth meeting of the UN Human Rights Commission that took place in Geneva, Switzerland, in March and April. There Brazil took the lead in promoting resolutions against racial discrimination and on access to AIDS drugs (generally understood in the UN context to mean the right of everyone to get free drugs, or at any rate, for countries to disrespect pharmaceutical patents), as well as an unusual (for a Latin country) resolution against discrimination on the basis of sexual orientation.

In Geneva Brazil discreetly abstained from voting on a resolution regarding Cuba, though it came up on the calendar within days of Fidel Castro's arrest of eighty pro-democracy and human rights activists and the summary execution of three Cuban blacks who attempted to hijack a ferry boat and force it to take them to Florida. The resolution itself did not even mention this event or condemn Cuba in any way; it merely begged Fidel Castro to allow the special representative of the High Commission to visit the island to evaluate the human rights situation there--something he has steadfastly refused to do. Although it is true that Brazil traditionally opposes country-specific resolutions at the commission, it is an open secret that the way many countries vote on any given resolution on Cuba is a barometer of attitudes toward the United States. Certainly this was the case for Argentina, which for the first time in a decade failed to support the Cuban resolution, largely to emphasize its newly recovered independence from Washington after a decade of conspicuous (some critics would say automatic) alignment with it on international issues large and small.

Long before the election Lula had been calling the Free Trade Area of the Americas project a conspiracy of the United States to "gobble up" Latin America, so his aggressive approach on regional issues is not surprising. He favors deeper and broader integration with Brazil's immediate neighbors, and is planning a free trade agreement with the Andean Community (Venezuela, Colombia, Ecuador, Peru, and Bolivia). He met in Recife in April with Venezuelan president Hugo Chávez, where the two presidents pledged to work on common positions within the World Trade Organization and on FTAA. They also discussed greater cooperation between the two state petroleum companies, and even the joint construction of a refinery.

Lula is giving special attention to the Mercosur countries, calling for a joint position on services, government purchases and investment. At present, Mercosur unites Argentina, Brazil, Paraguay, and Uruguay, with Chile in associate membership. There has also been talk of developing a common currency between Argentina and Brazil, beginning with a common exchange rate band, and a joint commission has been set up to explore the possibility. Neither international bankers nor Argentine businessmen are particularly enthusiastic about this proposal. "It appears as a simple solution," remarks Enrique Mantilla, president of the Argentine Chamber of Exporters, "but it basically focuses on the wrong issue. What Argentina and Brazil need to do to reduce the volatility of their currencies is to implement sound fiscal and monetary programs."[2]

In some ways Lula's foreign policy represents no great departure from that of past Brazilian governments, although in one respect--its desire to assert independence from the United States--it more nearly resembles the policy of the military governments of the 1970s than that of the recent Cardoso administration. Independence need not mean confrontation, however. Many people within the government and the foreign ministry favor a pragmatic approach to relations with Washington, a point of view undoubtedly strengthened by Lula's visit to President Bush in March, which the former publicly declared "exceeded my expectations." A Brazilian-American summit on all major issues is planned for next month.

The Prospect

The rush to enact pension and tax reforms now rather than later is driven not only by the desire to capitalize on Lula's current popularity, but also by anticipation of nationwide by-elections next year, which will strongly affect the composition of the Brazilian congress. Although the president has so far been able to discipline his own party, two other left-wing forces, the Democratic Party of Labor (PDT) and the Brazilian Socialist Party (PSB) are already in open revolt against the government's policies. During Cardoso's term his own Social Democrats often worked together with the centrist Brazilian Democratic Movement. Even so, Cardoso ran up against a brick wall on some of the very reforms the present administration is trying to enact. What will happen if dissatisfaction with the status quo turns out to redound to the benefit of the PDT and the PSB, both of which are led by men who opposed Lula in the last presidential race?

Meanwhile, the president will also have to discipline some of his own appointees within the administration. Regulatory agencies are now in the hands of people generally mistrustful of private ownership, particularly in energy and telecommunications, and a large number of hard-left political appointees preside both at government ministries and at state-owned corporations. As the Financial Times (April 8) reported, there are hints now that independent regulators created in the last administration "may be stripped of their authority to set energy and utility rates"--something that reportedly deeply alarms investors in both sectors.

President da Silva has said that "if we fail . . . the left won't be governing this country for the next fifty years." Thus Lula's supporters both in government and in civil society have a huge challenge to meet--to sustain their president while he juggles resources and agendas. The current political adventure in Brazil is unique in scale, scope, and significance for the region, and therefore bears careful watching.

Notes

1. El Nuevo Herald (Miami), May 14, 2003

2. Bloomberg News, May 5, 2003.