In the previous decade, Brazil was an emerging market success story. It weathered the 2008 financial crisis very well, boasting strong foreign reserves and relatively high domestic ownership over bank assets. A high demand for commodities also ensured that the Brazilian economy was booming. Brazil’s president at the time, Luiz Inácio Lula da Silva, enjoyed incredible support both at home and abroad, the warm and cuddly face of South American social democracy. A trade union official, Lula founded the Workers’ Party (PT) in 1980 to promote progressive policies during a time of military dictatorship. Lula won the presidency in 2002 and oversaw the implementation of the “Zero Hunger” plan, which offers financial aid and subsidies to low-income working class people. The keystone of this plan is the Bolsa Familia cash transfer system that provides welfare assistance to impoverished families. According to one statistic, over a quarter of the poverty reduction recently seen in Brazil can be credited to Bolsa Familia. On the global stage, Brazil was one of the “BRIC” countries, heralded by Wall Street investment firms as the most accomplished of developing countries.
What went wrong? A few days ago Lula was detained for questioning in a massive corruption scandal that has rocked Brazil. The investigation, called “Car Wash” in English, is focused on the illegal use of funds connected to Petrobras, Brazil’s state-owned oil company. Lula’s hand-chosen successor to the presidency, fellow PT politician Dilma Rousseff, has sought to give him a ministerial position, presumably to protect him from investigation. A judge has blocked this move, and to make matters worse, anti-government protesters have been gathering in huge numbers to call for the resignations of accused politicians and especially the impeachment of Rousseff for wrongdoing. Indeed, a case of impeachment is being shepherded through Congress while, at the same time, she is accused of funding her 2014 electoral campaign with dirty money. If found guilty, not only would Rousseff fall from office, but so would her vice president, who represents the Brazilian Democratic Movement Party (PMDB), a centrist party in coalition with the PT. Being non-ideological with a “catch-all” approach to coalitions, the PMDB has wheeling-and-dealing down to an art-form, so it is perhaps no surprise that they would prefer private advance to political principles. Indeed, several high-ranking PMDB partners in alliance with the PT have already been accused of corruption and involvement in the Petrobras embezzlement. For many hardcore devotees of Lula and the PT, however, the allegations leveled at their hero and his heir spark outrage and paranoia over a possible coup. On the other side of the spectrum, the majority of anti-government protesters calling for the ouster of Lula and Dilma have always been rate over the expansion of the Brazilian welfare state and “job-killing” economic regulation.
Patrick de Oliveira at Jacobin wrote last year about the conservative cottage industry that has taken root in Brazil, with their own right-wing celebrities in the style of Pat Buchanan, Ann Coulter and Glenn Beck. Criticism against the Lula and Rouseff governments have traditionally come from Brazilian conservatives, and with the “Car Wash” scandal, they may have not just the means to bring down the PT, but also to send its most well-known leaders to jail. The problem for them, however, is that there is no “good” right-wing party to fill the vacuum. The president of the largest conservative party, the Brazilian Social Democracy Party (PSDB), is Aécio Neves, and he has been cited in several of the plea bargains already being settled as consequence of the corruption investigation. At the very least, PSDB leaders like Neves will have to be replaced with more “squeaky-clean” leaders if it wants to portray itself as the less venal alternative to the governance of the PT.
More than that, regular Brazilians need financial hope. Once a titan of the developing world, the Brazilian economy has become moribund; inflation is on the rise and getting higher. The country’s debt has been labeled “junk” by credit agencies. Industrial and financial capital will not tolerate higher taxes on business and the wealthy, so even the PT briefly flirted with imposing harsh austerity measures on the country in order to reassure investors. Austerity, however, clashes with working class populism, which is what the PT has relied on as its soundest voting bloc. To their supporters, the PT has to at least keep up the appearance of being “for the worker,” even though in government they have governed as technocratic socially-conscious capitalists. It does seem doubtful, however, given their adroitness at playing the political game, that they will survive the “Car Wash” case.
This is not so much because of a specific scandal but how anti-PT forces in Brazil have come together to ensure “Car Wash” is fatal for Lula and Rouseff. As The Intercept reports, the right-wing media has been casting the spotlight fully on the anti-government protests, setting the narrative that order will only be restored when the PT leaves power. The main investigator behind the “Car Wash” case, who is supposed to be impartial, has been leaking illegal phone calls between Lula and Rouseff mere hours after they were recorded without a warrant. It would be incorrect and simplistic to render the images we see on television to an explosion of grassroots furor over poor leadership and betrayal of public trust, as nice as that story sounds. The truth is that, whatever the crimes of the PT, there is a real and organized campaign to force democratically-elected leaders from office because their center-left agenda has been detrimental for local business interests.
What next for Brazil? It is doubtful that Rouseff and the PT will recover from current events, and even if they could, no one should envy their limited options in attempting to adjust an economy in deep recession. Unless commodity prices rise to past levels and Petrobras is once again cleared of the cloud hanging over it, Brazil can do little else than seek revenue — most likely by spreading the pain around, as elites loathe to make their own sacrifices. This could very well mean that the poorest of the poor in Brazil could take the hit, after years of being lifted slightly higher under the PT policies. As ever, the rich will get richer and the poor will get poorer. Welcome to the desert of inequality.