It’s official: Dilma Rousseff is no Lula. The left-wing Brazilian president may have been reelected late last month, but she enjoys nowhere near the popularity that Luiz Inacio Lula de Silva – better known simply as “Lula” – once did. Rousseff managed to squeak by with only 51.6 percent of the vote in a runoff – a far cry from the 61 percent that Lula garnered when he stood for reelection in 2006. And Rousseff’s close shave came despite the fact that Lula came out and campaigned hard for her.
Part of Rousseff’s problem is that she possesses none of the natural charisma and charm of the former president. But Rousseff is different from Lula in other ways as well. While they are both members of the leftist Workers’ Party, Lula avoided following in the far-left steps of Hugo Chavez or Fidel Castro when he was Brazilian president from 2003 to 2011. Lula kept inflation stable, invested in infrastructure, and simplified and reduced taxes – an impressive record for an avowed Socialist. He even balanced the budget for several years. Consequently, Brazil boomed under his leadership, enjoying rapid economic growth and lifting some 20 million people out of extreme poverty. Brazil is now the eight largest economy in the world, a significant achievement.
It’s been a rather different story for the four years that Dilma Rousseff, Lula’s former chief of staff, has been president. Rousseff has been very hostile to the free market, preferring an interventionist model. For example, the former leftist guerilla has set price caps on electricity and subsidized gasoline. She’s also prioritized increasing social welfare spending, rather than on lowering taxes and reducing government interference in order to foster growth. As a result of her flooding the economy with government lucre, inflation in Brazil now stands at an unmanageable 6.75 percent per year.
Despite her penchant for spending, growth has suffered mightily under Rousseff’s leadership. Part of this is due to the slowing Chinese economy, and therefore falling commodity prices. But that doesn’t tell the whole story: a couple of years ago, while neighboring countries like Colombia, Peru, and Chile were growing at more than 5 percent per year, despite suffering from the same macroeconomic conditions, Brazil was chugging along with only 3.5 percent growth. And things are even worse now; Brazil slipped into a recession earlier this year. The stock market, meanwhile, has lost 25 percent of its value since she took office, and the Brazilian currency, the real, has lost about a third of its value against the dollar. It’s little wonder that Brazil’s major cities were riven by major protests this year and last at the country’s deteriorating conditions, or that Rousseff suffered the humiliation of being booed at this summer’s World Cup.
Debt is also becoming a significant problem for Brazil. The topline numbers look reasonable, with the country’s debt to GDP ratio still a fairly healthy looking 60 percent. But this masks real troubles; as the Financial Times recently noted, “Brazil’s high interest rates mean that if debt continues increasing at its current pace, the cost of servicing it would reach over 7 per cent of GDP by 2017 – the peak level for Greece during the eurozone crisis.”
That’s not all; Rousseff’s leadership problems extend beyond her mismanagement of the economy. Her Workers’ Party is also embroiled in a major corruption scandal involving Petrobras, Brazil’s state-run oil company – the largest company in the country. The company’s former chief executive has reportedly alleged that he accepted bribes on inflated contracts,–and passed a portion of the ill-gotten gains to the Workers’ Party. Moreover, “dozens of senior politicians received kickbacks from oil contracts as part of a scheme to buy votes,” reports the Guardian. While Rousseff was not personally implicated in the scandal, it rightly raised troubling questions about the integrity of the political party that she leads. It also called to mind a scandal that nearly brought down Lula’s presidency, when it was discovered in 2005 that a number of Congressional deputies had been bribed to vote a certain way on certain issues. That scandal led to dozens of convictions and resignations.
Vice President Biden and his entourage visited Brazil in mid-June to attend the USA versus Ghana World Cup game, a trip that also included meetings with both the president and vice president of Brazil.
When Brazilian president Dilma Rousseff canceled her October 23 White House state dinner, she created yet another foreign-policy embarrassment for the Obama administration. Rousseff’s visit, which was announced back in May, was supposed to be an opportunity for highlighting a new era of strategic cooperation between the Western Hemisphere’s two largest countries. It would have been the first state visit by a Brazilian leader since Bill Clinton hosted Fernando Henrique Cardoso in April 1995.
The State Department today announced a basketball exchange program with Brazil, according to a press release from the federal agency. The program is, at least in part, coordinated with the National Basketball Association (NBA).
Based on last week’s debate, both President Obama and Governor Romney believe that squeezing the Iranians economically is the best way—and perhaps the only way—to end their nuclear-weapons program without resorting to a military strike. Of course, nobody knows if sanctions will actually work. But if the United States is truly serious about crushing Iran’s economy, it must pursue a more aggressive strategy, and it must put more pressure on Iranian trading partners.
Last month in London, Mexico’s Olympic soccer team won gold by defeating its Brazilian counterpart, 2-1. The victory gave Mexico its first-ever trophy in a major international soccer tournament (apart from the 1999 Confederations Cup), and it proved that the soccer gap between Latin America’s two largest countries is shrinking, with Mexico catching up on the region’s traditional powerhouse. The Olympic final also became a metaphor for the recent performance of the Mexican and Brazilian economies.
In 2001, Goldman Sachs economist Jim O’Neill famously coined the acronym “BRIC” to describe four of the world’s most populous countries—Brazil, Russia, India, and China—each of which boasted great economic potential. Since then, China has enjoyed breakneck GDP growth while making very little progress on economic or political reform, and Russia has devolved into a petro-autocracy dangerously reliant on global oil prices. As for Brazil and India, they have reaped consistent accolades for their commitment to democracy and economic stability.
As Lula da Silva’s handpicked successor, Brazilian president Dilma Rousseff was widely expected to embrace his policies both at home and abroad. Domestically, she has mostly fulfilled those expectations. In foreign affairs, the story is a bit more complicated.
On June 2, the convicted Italian terrorist Cesare Battisti walked out of a Brazilian prison a free man. He did so after Brazil’s supreme court upheld the decision of former president Luiz Inácio Lula da Silva to refuse to extradite Battisti to Italy. A member of the left-wing terror group Armed Proletarians for Communism (PAC) during Italy’s blood-ridden “years of lead” in the 1970s, Battisti had been on the run from Italian justice for nearly thirty years, since escaping from a prison near Rome in October 1981.
The Brazilian magazine Veja is reporting that al Qaeda members have established an active presence in South America’s largest country, as have militants associated with Hezbollah, Hamas, and other terrorist groups. They are apparently engaged in fundraising, recruitment, and strategic planning.
Amid the crisis in Japan and conflict in Libya, President Obama is scheduled to take a trip to South America this weekend. The President undoubtedly has a lot on his foreign policy plate, but while he's in the region the administration ought to give pay some needed attention to what's going on between Venezuela and Colombia.