Can Lula Stand to Lose?
Despite Economic Wins, Social Justice Remains Distant Reality in Brazil

By Marcela Sanchez
Special to washingtonpost.com
Friday, September 22, 2006 12:00 AM

WASHINGTON -- It is almost a sure bet that Brazilian President Luiz Inacio Lula da Silva will be reelected this October. If his second term is not assured in the first round of voting, it should happen a few weeks later in a runoff election.

Lula's popularity is due in great measure to optimism about Brazil's economy. More than four in five Brazilians said last week that they expect 2007 to be a good or very good year for them, according to a survey by the polling firm Ibope. Eighty-two percent expressed confidence that their personal incomes would increase or at least stay the same over the next six months, and more than half approved of the way Lula is combating inflation -- which means a lot to a country that struggled with years of hyperinflation.

Even those who just four years ago feared Lula would undo much of the free-market reforms of his predecessor are guardedly optimistic. Lula's government surprised many by maintaining an austere fiscal policy, keeping a budget surplus and paying off Brazil's entire outstanding obligations to the International Monetary Fund. This is what Lisa M. Schineller, primary analyst for Brazil at Standard & Poor's, describes as a "convergence across the main political parties for ... generally prudent macroeconomic policy."

If Lula's objective was to modestly continue free-market reforms and attain economic stability, his presidency so far could be labeled a success. Brazil has a $40 billion trade surplus, millions of new jobs and an inflation rate below 3 percent, the lowest in decades.

But the president has set himself up to deliver much more than economic good times. The former firebrand labor leader rode into office on a wave of anger and anxiety over free-market reforms, and promised to launch social initiatives such as the Zero Hunger program to dramatically improve the lives of Brazil's estimated 40 million poor.

Lula himself has asserted that his administration's "strategic premise" is to recover the lost link between growth and social justice. Under Zero Hunger, Lula has delivered with a widely expanded family grant program known as Bolsa Familia, a continuation of previous conditional cash-transfer programs.

In June, the government announced that it was reaching 11.1 million families with monthly grants -- $24 on average -- to female heads of household under the condition that their children remain in school. Lula has also started programs to facilitate access to bank accounts and university scholarships for the poor.

What's absent here are the radical solutions that so many expected of Lula when he was a candidate in 2002. Many on the left, who still hold those expectations, believe Lula is short-changing the social shift that is so desperately needed in Brazil. Presidential candidate Heloisa Helena, exiled from Lula's Workers Party, accuses Lula of "class betrayal."

The numbers are not kind to Lula's past campaign promises. Poverty has fallen only from 34 percent to 33 percent, according to the Brazilian Institute for Geography and Statistics. Income disparity, one of the worst in the world, has seen only a slight decrease. Radical poverty reduction -- as the left demands -- has simply not occurred.

But radical may not be possible under the rubric of growing your way out of problems. And that's the very experiment Lula's centrist path demands. "We know that with economic stability, with the guarantee that Brazil is going to have sustained growth ... it will be much easier for us to solve the social problems that have been accumulating in our country for more than a century," Lula said last year at the World Economic Forum.

This year Brazil is expected to grow around 3 percent, probably making it the slowest growing economy among the world's emerging markets. Most economists now agree that Brazil will need to grow at a much faster pace than it has -- averaging just 2.8 percent over the last four years -- if the poor are ever to find a sustainable way up the economic ladder.

Lula may have a hard time accelerating that growth, however. Some analysts believe that his ability to pass necessary reforms has been significantly diminished by the series of corruption scandals that have affected his Workers Party over the past year.

But if growth doesn't show better dividends soon, Lula will have a hard time maintaining his middle ground. Things may also turn difficult for the new left in Latin America, which is watching closely the Brazilian president's efforts to triumph over the old.

Marcela Sanchez's e-mail address is desdewash(at symbol)washpost.com.