Tuesday, 30 December 2008

Brazil, the Economic Crisis and the Presidential Succession (Part 1)


A few days ago I met a number of political analysts in Sao Paulo as part of my routine duties as an ''analyst.´´ Apart from the typical lousy political jokes we make, and the arguments we have, and the speculative scenarios that we tend to fabricate, the conversations had an unusual and perhaps not quite timely focus: the 2010 presidential race.

Dear reader, you may wonder why we were talking about the campaign, which starts only in April 2010, and the election (scheduled for October of the same year.) But the global crisis is giving some sort of relevance to this discussion, so I will tend to be brief (sorry for my long epistles of the past few days) and summarise the main bullet points that we all touched during the round of talks of the first days of December.

1) The crisis and how it does/will affect presidential hopefuls: The inflation rate, the Selic and the unemployment rate won´t be as relevant as they were in defining the winner of the 2010 race, although they will play a role. The crisis poses a problem, and hardly an opportunity, to the presidential hopefuls, according to most of the analysts I talked to. For the opposition, the crisis seems to be a significant problem -- the two biggest states that it dominates (Sao Paulo and Minas Gerais) would be hard hit in the event of a recession (which I insist is day by day becoming a more likely scenario.) Governors Jose Serra of Sao Paulo and Aecio Neves of Minas (photo, right) will put into motion an ambitious programme for investments next year. I wonder how they will implement it as tax revenue declines. Sao Paulo is even creating some Frankenstein-like programme similar to what Lula created: the sovereign wealth fund. I read that in the news (can´t say where exactly and I am sorry for that.) But government supporters who dominate a great part of local governments also are in dire straits. Lula won´t be able to transfer part of his record popularity to his handpicked successor. That because his popularity depends (and will depend) upon high growth rates. Dilma Rousseff (photo, left,) so far his handpicked and preferred candidate for 2010, is lagging behind in polls, and his national presence, charisma and preparations are almost always put into questions by allies and foes. We know the good times are gone for sure and for Dilma, that´s bad news.

2. The reshuffle of political forces in the event of an economic crisis of great proportions: The crisis may make it almost impossible for the ruling Workers´Party to create a candidacy (president-vice president formula) of its own. For sure, the PT will have to rely on Lula´s choice for the succession (and it is more likely than ever that he will force the party to accept a formula where the PMDB -- the largest party in the country, -- to pick the running mate.) And it is not necessarily clear that the presidential candidate will be a ''petista´´ (as members of the Workers´Party are known.) A candidate with national presence and recognition such as Ciro Gomes (the former finance minister who is a member of the Socialist Party) or PMDB´s Sergio Cabral (the Rio de Janeiro state governor.) One analyst mention Henrique Meirelles, the central bank president, as one of Lula´s possible choice.

And for the opposition PSDB party, the crisis will also create hurdles for the unification around one single name (remember that Neves and Serra are excellent names for the 2010 presidential election.) If their administrations manage to dribble the worst of the crisis and as a consequence leverage their names a bit further for the race, and the better their image, the smaller the chance they will agree on a single name.

3. Congress and its role: The government and the opposition face a tug of war for the election of the presidents of the Senate and the lower house in February. The opposition will use its force to fracture the ruling coalition. The ruling coalition is fractured, all in all, because the PT and the PMDB want to elect their own leaders as heads of both houses. The PMDB may, in the event of a defeat in the Senate, start to depart from the ruling coalition. The consequence of all this will be, in the opinion of all the analysts consulted, a complete paralysis of the economic legislation agenda for next year in Congress.

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