Allegations of corruption made against Brazil’s Workers’ Party are seriously damaging the image of President Luiz Inácio Lula da Silva, who belongs to that party, and his political allies who govern the country. Among other things, the Workers’ Party (known as the PT in Portuguese) is accused of bribing federal representatives of the other parties in the governing alliance in an effort to win their loyalty. Severino Cavalcanti, President of Brazil’s Chamber of Deputies, has played a major role in the story. A business executive has accused Cavalcanti of taking money in return for renewing a concession contract for a restaurant that operates in the Chamber.


In the past, political crises wound up sinking the country’s economy. This time, however, the crisis has had only a marginal effect, for several reasons. First, the orthodox quality of the government’s economic policy has helped to separate the country’s economic progress from the corruption scandal. In addition, global conditions have been quite positive, mostly because of the growth of China’s economy, and also the rebound in the United States, which stimulated growth in Brazil.


The latest macroeconomic numbers provide the proof. The inflation rate remains within the 5.1% target set by Brazil’s Central Bank for 2005. As a result, interest rates, which are the highest in the world, have begun to fall slightly in September, from 19.75% to 19.5%. The forecast for GDP growth in 2005 has been revised upward to between 3.5% and 4%. Exports have reached historic heights, despite the rise in the value of the currency (the Real), leading to large positive balances in Brazil’s foreign trade. In addition, in mid-September Brazil’s “country risk,” a key indicator of foreign perception of Brazilian investment, dropped to its lowest level since 1997.


Nevertheless, not everyone appreciates these glowing numbers. The figures about job creation and income growth have not been positive enough to raise the overall standard of living.


Lula Loses His Popularity


One result has been the gradual fall in Lula’s popularity, starting in February 2005, as recorded in surveys conducted by CNT/Sensus. From January 2003 until today, the President’s level of public support has dropped from 83.6% to 50%. From July to September 2005 alone, his popularity dropped by about ten percentage points.


Last week, Lula tried to minimize the surveys during his visit to Guatemala City. “I am unperturbed, and sometimes I wonder what would happen if it were not me, but another president going through all this. The approval index might possibly be below zero,” he told the press, shortly before going to New York to take part in the United Nations General Assembly.


Brazil is undergoing an unprecedented crisis regarding the power of the government,” says Roberto Romano, a professor of ethics and philosophy at the State University of Campinas (Unicamp) in São Paulo. Because of the composition of the National Congress, it is quite rare for a President of the Republic to be elected by a congressional majority, notes Romano. As a result, the current government was created in a way that produced “an emergency situation for the executive branch, which needed the support of political parties that had competed against it in the past, in order to get a congressional majority. Those other parties had very different platforms [from that of the PT]. When you put a majority together that way, it is very fragile. The current crisis erupted with the accusation that this majority was formed by giving financial privileges and payoffs, which are against the law,” Romano says .


“When the crisis erupted, it created a paradoxical situation,” he adds. “On the one hand, the President of the Republic, who had been elected with more than 50 million votes, began to gradually lose his popularity. That’s because his party had campaigned for 20 years in favor of transparency and ethical behavior; it said that it respected the public. Beyond that, there was also evidence that the [Lula] government had used illegal funding.”


This frustration has had a negative impact on public opinion. Brazil’s first left-wing government is now widely perceived as having made the same political errors as past governments. “So long as the crisis in the Congress continues, we will see a drop in popular confidence in the President and in the government, and in the representative democratic system itself,” Romano says.


“Lula’s position has become significantly weaker,” notes Paulo Renato Souza, an educational consultant and former education minister in the government of President Fernando Enrique Cardoso (1995-2002). A key factor is the extraordinary complexity of the current political situation. “The things that happen in [Lula’s] administration should not have happened. No one believes that he was not aware of these corrupt activities. However, the President has not been implicated because they have not been able to prove that he has personally benefited from the corruption – or that he personally supported it. Yet, no one can guarantee that something like this won’t come to light again in the future,” he says.


According to Souza, the CNT/Sensus survey shows that Lula is gradually losing his popularity. “That trend is going to continue because Brazilian public opinion moves from the top downward – from those who form public opinion, down to the general public. This happens in most countries. However, in Brazil, because of cultural reasons – including the low educational level of the population – things take longer to filter down the social ladder. And when they get there, the process is irreversible.”


To Souza, this situation is extremely serious. The crisis has reached the heart of the Brazilian democratic system, the country’s National Congress. “The worst thing is that the corruption was backed by the government. It reached the [National] Congress because the executive branch preferred to buy legislators, rather than negotiate and open a political debate,” he says.


Souza, who belongs to the PSDB (The Brazilian Social Democratic Party), argues that the crisis must be resolved quickly. “A series of political reforms are required. Next year, in the presidential election campaign, they will have to elect someone who has a vision of the State that involves making these reforms happen, and in such a way that there is less chance that something like this ever takes place again.”


According to Senator Eduardo Suplicy, who belongs to the Worker’s Party in São Paulo, “Lula must resume a dialogue with the Congress to resolve the issues that prevent the country from being well managed in the future. Lula must make it clear to the federal deputies and senators [in the National Congress] that they must vote to defend the interests of Brazil itself, rather than their personal interests. If Lula follows those guidelines, he will be much more respected by the Congress and by the general public.”


Lacking Confidence


Romano is concerned about Lula’s chances of effectively managing Brazil after the current political crisis ends. “I believe that a general crisis of confidence could be created about the power of the State, and it would be very hard to overcome that. The government could discover that it is in a very tough spot, and it is very hard to straighten things out.”


According to Romano, “the President of the Republic used to have the unanimous support of the banks, the financial sector, industry and commerce. Now he has lost the unconditional support of commerce and industry [because of the government’s economic policy, which did not give any priority to investment in the manufacturing sector]. There has also been a failure of economic policy…On the other hand, politicians allied with the PT [Workers’ Party] are extremely corrupt,” he notes.


Romano does not believe that Lula has much chance of being re-elected in next year’s balloting. “His party has been undermined and his political allies are weakened. The President has to be extremely careful if he wants to carry out a successful dialogue with the Congress in such a way that the accusations against him and his party don’t wind up hurting him in the 2006 elections.”


Souza agrees. “Those people who had supported the President, but no longer trust him, will not recover their confidence. Lula has lost his credibility and prestige quite quickly. There is a strong negative trend. What worries me most is that the government is not carrying out any initiatives to address the crisis.” In Souza’s opinion, the PT has suffered a mortal wound. “The party will need a lot of time to rebuild its image. Throughout its history, the PT has maintained ethical standards, and now it has broken its commitment to the people.”


The fate of Lula and the PT in next year’s elections will depend on how well Lula deals with this crisis, says Suplicy. “It seems to me, it will depend a lot on what steps the President takes next. For example, I recommended to him that he visit the Congress and offer to reveal his views in a way that is clearly unrehearsed. He could even respond to questions from the leaders of various parties in a frank, sincere conversation. That would be very positive, and he could sense the most opportune moment for doing that.”


The Future of Democracy in Brazil


After such a process, Souza hopes that “the country and its institutions will wind up being stronger. This will happen if we reveal ourselves to be open and prepared to engage in a far-reaching investigation. We must be prepared to punish everyone who is responsible, no matter what party they belong to. It seems to me, this is the responsibility of the current leaders of the National Congress. If we don’t do that, no one can predict what will happen as a result.”


The 2006 elections will provide a test case for Brazil’s political leadership, adds Romano. Given the current level of awareness among Brazilian voters, it will not be easy for the country’s politicians. “When institutions and politicians are discredited, it creates a high level of abstentions and unused ballots in the following election campaign. Congressmen and senators will learn a very tough lesson from the electorate, I believe. If the democratic system is not actually perfected after the [2006] elections, at least the voting will serve as a major indicator that Brazil can count on having a representative democratic government.”