Brazilian Leftist Stirs Up Presidential Elections

Brazil's politics and financial markets are in turmoil over the surprising lead of Luis Ignacio da Silva, a left-leaning presidential candidate of the Workers Party. Da Silva's substantial and growing advantage in polls for the upcoming elections in October sends chills through the Bush administration.

Da Silva opposes the U.S.-backed hemispheric free trade zone and supports regional independent trade pacts in South America. He is known for maintaining independence on foreign policy issues such as Cuba.

Da Silva's election would be a political jolt for Brazil itself, the largest country and biggest economy in Latin America. It lies between two tumultuous nations: Argentina, in economic meltdown, and Venezuela, where rightists and traditional political parties backed by the United States recently tried to overthrow President Hugo Chavez.

Brazil's president Fernando Henriquez Cardoso cannot run again due to term limits, and his center-right coalition is struggling to find a corruption-free candidate. First choice Roseana Sarney stepped aside when police seized a half million dollars in cash in her residence, allegedly from a bankrupt enterprise she established with state funds. Now, replacement candidate Jose Serra is embroiled in a fund-raising scandal.

Serra and candidate Anthony Garothino of the Brazilian Socialist Party have seesawed between second and third places, with Serra now holding second by a hair.

Da Silva, known widely simply as "Lula," has run unsuccessfully for president three times. But today he commands the widest lead he has ever enjoyed in polls. His negative ratings have dropped. Thirty-eight percent say they would not vote for him under any conditions, a number lower than that of any other major presidential aspirant.

Concerned about a possible Workers Party presidential victory, major investment banks including Morgan Stanley Dean Witter and Merrill Lynch have downgraded their ratings of Brazil as a good place to invest. The move led to a drop in the country's stock market and currency devaluation.

Reactions were strong. "These banks have led the neo-liberal sacking of our country, and now they are trying to scare people into perpetuating a political order that serves only their narrow interests," fumed Reinaldo Gonzalvez of the Economic Institute of the Federal University of Rio de Janeiro.

Even the staid Financial Times of London labeled the banks' reactions a "mistake," noting that da Silva's economic policies would likely be moderate. Workers Party governments in municipalities "have proven to be good administrators," said the Financial Times. In the southern state of Rio Grande do Sul, where the Workers Party has been in power for a decade, government has improved social services while helping stimulate agricultural and industrial production.

Indeed, the international banks seem to fear da Silva more than the Brazilian middle class does. Ever since the Asian economic crisis of 1997, Brazil's economic performance has been anemic, with growth rates sometimes failing to keep pace with population increase. The neo-liberal policies of Cardoso, such as the free flow of speculative "hot money" in and out of the country at the whim of investors, favored financial interests over Brazil's substantial industrial base, much of which is geared to production for the big internal market.

"Even some foreign interests with investments in the country's industry look with favor on Lula's policies," says Gonzalvez.

Da Silva first rose to national prominence in the 1980s, when he built up the Workers Party from his base among the trade unions in Brazil's large automotive industry.

He simply looks good to many after Cardoso, who allowed domestic interest rates to reach 18.5 percent as part of an effort to keep speculative finance and banking capital from fleeing the country. That policy runs against the interests of manufacturing and construction sectors, which need low interest rates to expand production.