Brazil’s economy is currently in a recession. In the second quarter of 2015, Brazil’s gross domestic product shrank by further 1.9% compared to the first quarter results. Pundits say this is the biggest decline to affect Brazil’s economy since reports of wide spread corruption by senior employees of a state owned enterprise, Petrobas oil company, with the collusion of senior political leaders of the governing Workers Party, were made public in November 2014.
A money-launderer of note, Alberto Youssef, admitted to having paid more than US $3 billion (approximately R42 billion) in bribes and kick-backs to politicians in power and in the opposition and to a cartel of thirteen companies when he entered into a plea bargain with Brazil’s prosecutors and the anti-corruption task force led by Judge Sergio Moro. More than 117 indictments have been issued in the courts and several big name players have corroborated and even confessed to the charges. Heads are rolling in Brazil.
At some stage of the ‘Lula Moment’, when Brazil’s political economy was on an all time high, Petrobas was the sixth largest company in the world by market capitalisation and it contributed 10% of Brazil’s GDP. The moment was fleetingly inspired by a growth period that came about after changes in the country’s leadership from the conservative Fernando Henrique Cardoso to the popular trade unionist Lula da Silva.
Corruption is the outcome of wrongdoing on the part of a powerful authority, through patronage and bribery, and using illegitimate, immoral, and unethical means to achieve self-enrichment.
Brazil’s systematic corruption is no small matter for South Africans, not only because of the impact this corruption scandal and its economic slowdown will likely have on BRICS member countries, but that the similarities of the struggles to overcome military dictatorship in Brazil on the one hand, and the atrocities of apartheid and settler-colonialism in South Africa on the other, have been hailed by a broad section of the progressive world as laudable.
Brazil, like South Africa, is a constitutional democracy with political pluralism and the separation of powers between the executive, the judiciary and national assembly. There is a two-term public office for presidents, a universal human rights culture and a regular five-year multi party electoral system. While Fernando Cardoso, like FW De Klerk, advocated neoliberal policies and triggered off the changes into a new era, Luiz Inacio Lula da Silva, like Nelson Mandela, both freedom fighters, charmed the citizens into warmly welcoming the new political dispensation. Brazil hosted the FIFA World Cup in 2014 like South Africa did before it in 2010.
The two countries play a leading role in the emergence of developmental states on a global level. They are also characterised as a case study in which state capitalism is manipulated by dominant parties in the corridors of power to illegally enrich a selection of benefactors closer to the state, at the expense of the majority who catch hell from neoliberal policies.
Lula da Silva’s charismatic leadership of the Workers Party – Partido dos Trabalhadores (PT) – even captured the imagination of SA’s redoubtable labour leaders like Zwelinzima Vavi and Jay Naidoo, who are both previous Secretary Generals of COSATU. Lula’s rise from the factory floor as a shop steward, through the grinding mill of mass struggles, to becoming state president of Brazil from 2003 to 2011 makes for an interesting case study of the correct or incorrect implementation of a people powered democratic process. It also locates Brazil’s economic place in the new world order.
In the new world order unrestrained capitalism calls the shots. Economic policies are imposed subtly from Washington, Tokyo and Bonn. The developing world takes their cue from these forums.
The Washington Consensus
Margret Thatcher’s privatisation of prime assets of the United Kingdom’s national economy did not happen when she was in office as Prime Minister. She was undoubtedly the champion of privatization. Interestingly however, privatization was put into practice and elevated into a concept called Thatcherism by Tony Blair’s Labour Party in what would be regarded by political theorists as a dialectical irony of history. The Labour Party’s ‘third way’ was a movement to shed its left-of-centre position and to become a practitioner of conservative Thatcherite policies – a classic example of how to be more catholic than the pope.
When Russian economic reforms burst at the seams in the nineties, the oligarchs turned themselves from Kremlin bureaucrats into enterprising capitalists. They assumed control of the means of production, which they had foxily grabbed from the state scot free, driven by the profit motive. This change of circumstances concentrated enormous wealth into the hands of a few. The Russian Federation had experimented with a set of policy prescriptions on privatization, reducing trade barriers and relaxing controls in line with the Washington Consensus. Putin’s administration is currently battling to reverse these circumstances by launching investigations against the oligarchs.
Promoted by the IMF, World Bank and the US Treasury since 1990, the Washington Consensus is a phrase explaining trade and development policies prescribed for client economies of the US to exercise deregulation of trade barriers, liberalization of inflows of foreign direct investments, privatization of state assets and the redirection of public expenditure priorities. In short, it is less and less state involvement and a shock therapy of neo-liberal ideas.
The new world order is characterized by the subtle and sometimes blatant enforcement of the Washington Consensus on emerging economies. Brazil and South Africa are not immune from this influence – despite the takeover of political power by elements of the resistance movement.
The Lula Moment
Lula da Silva took the baton from his predecessor’s privatization of state owned enterprises. His government then focused their strategies on opening new vistas of international trade in order to achieve accelerated economic growth in Brazil – just what the doctor ordered, according to most developmental economists. Lula then juxtaposed the growth with targeted poverty reduction.
He stepped up Brazil’s positioning as the world’s agro-business centre. Agriculture drove the country’s export revenue. Even South Africa bought the bulk of their cut price frozen poultry to supply the expanding bottom of the pyramid market, for instance. Oil resources also played a major role in international trade which led to Petrobas expanding its operations.
Policy analysts like Joel Netshitenzhe began to consider whether space existed for SA to have its own “Lula Moment”. They lauded his social grants for poverty alleviation among those living below the breadline.
If the world market’s industrial manufacturer was the Peoples Republic of China, and India was its high technology supplier, Brazil would be its premier food supplier. Lula’s sales talk was effective, but it was also very deceptive. He talked left in his conversation with BRICS member countries and walked right in his implementation of the Washington Consensus in Brazil.
The Workers Party (PT) was using the Washington Consensus toolkit to solve a complex problem of social injustice and endemic poverty in Brazil. The aim of building a national economy that primarily serves the interests of the Brazilians will not happen when the bricks and mortar are raised on the foundation of quicksand. The Washington Consensus is imposed as a one-size-fits-all instrument in the new world economic order, with limited examples to show a fit or connection with the characteristics of any of the developing countries.
The Workers Party ditched the landless people’s movement and arrested some of them for land invasion in the urban areas, despite an association with them during the election campaign.
Once in office, the Workers Party (PT) leadership was riddled with corruption scandals. They had tasted the nectar of state capitalism, as its guardians. The popularity of the “Lula Moment” went to their heads. The chief of staff in the presidency was prosecuted in a televised trial for embezzlement of public funds and corruption, during Lula da Silva’s term in office. This made the Brazilian people believe the Lula Moment was for real, and not a fleeting sight. They however ignored the early warning signals, as the latest investigation of wide-spread corruption – code named Operation Car Wash – seem to indicate.
Operation Car Wash
Brazil is number sixty nine on Transparency International’s list of 175 corrupt countries. Embezzlement and graft works within the confines of the law – as those in power often have the ability to make laws for their protection. Money goes around in a falsified circle to companies and ghost owners, to finally reach the pockets of politicians.
In the current investigation by Judge Moro, the sitting president, Dilma Rousseff, is said to have been the chairperson of the Board of Directors at Petrobas Oil Company, appointed by Lula da Silva, at the time when the Workers party (PT) siphoned off up to US$ 200 million (about R2.8 billion) and used it to finance their political campaign. The Senate is planning to impeach her for involvement in the scandal and for causing the current budget deficit.
Recent opinion polls indicate that the Brazilian masses are disenchanted with the powers that be and are in a state of very low morale. The momentum of their swelling pride have been punctured and burst by reports of widespread corruption involving senior leaders in government and state owned enterprises. The populace is sick, just like their economy is sick. Standard and Poor (S&P) has downgraded Brazil’s credit rating to “junk status” after Dilma Rousseff’s government failed to meet its own budget targets, revising them for the second time in 2015.
The excitement behind the fourteen year Lula Moment – of verve and promise – has turned sour and proved to be a damp squib. There are protests in the streets led by worker communities and the expanding underclass of the poor and jobless. Lula da Silva’s lax approach to corruption has resulted in the political elite in his ruling party systematically plundering the resources of the national economy, and bringing the country into chaos. Neo-conservatives are probably poised to make merry of the status quo.
The Pitfalls of Spoils Politics
The liberation movement has a moral purpose, in addition to its historical mission to act as the custodian of the aspirations of the people. Lula’s ruling party in Brazil seems to be failing the litmus test of this cardinal principle. Once in government, the liberation movement is supposed to be a clean and transparent administration. To do the opposite is to betray the revolution of the people.
The Workers Party of Brazil has been turned into a sordid platform for self-enrichment and personal rewards – the concept of spoils politics – wherein the ‘comrades’ display their accumulation conspicuously as a reward for past participation in mass-based struggles for change. By so doing, they have turned the national liberation project into a thing for parochial personal interests.
State Owned Enterprises are turned into a conduit for plundering the coffers of the national economy for personal gain. This is morally wrong. That is a critical lesson from Lula da Silva’s moment at the helm of Brazil.
Jaki Seroke is a PAC stalwart, a trained strategic management practitioner, and Chairperson of the Pan Africanist Research Institute.