“Only a crisis, real or perceived, produces real change.” – Milton Friedman.
Brasil is having a horrible 2015; a far less favourable global economic situation, a number of policy misjudgements made early in President Rousseff’s first mandate and rolling scandals that have followed 2014’s election have resulted in flurry of headlines both at home and abroad decrying “Brasil in Crisis” or “On the Brink“.
However, to seasoned Brasil observers, and in the context of the ongoing situation in Greece, this kind of language is sensationalist and excessive. 2015 will be the worst GDP contraction in 25 years but this is a sledgehammer statistic which does not get near describing the situation alone. Will it be a bad year for Brazilian workers? Yes. Are we likely to see roll backs in the impressive gains Brasil has made tackling inequality and hunger? Possibly minor. Will Brasil lose its hard-won Investment Grade status? Maybe, depending on who you talk to. But the real question is, will the Brazilian government be walking cap in hand into the International Monetary Fund asking for assistance, or risking a default on debts? No.
In context, back in 1991, Brasil was the 9th biggest economy in the World. By the time Fernando Henrique Cardoso left office, it had fallen below India and Mexico to 13th. Now it is 7th. It was briefly at 6th during fallout from the Global Financial Crisis, by which Brasil was one of the countries least affected, not least because of protective financial regulation that in 2007, the Friedmanite Priesthood at the Economist had admonished.
In 2012, a Federal Reserve study examined how economic downturns are often self-fulfilling prophecies, driven by a climate of uncertainty, fuelled by the media.
“There are tangible, and often painful, fundamentals that determine the course of the economy — unemployment, interest rates, housing prices, inflation, industrial production, government debt. But more than anything else, markets are psychology, and an atmosphere of fear and panic among producers and consumers leads to scaling back of purchases, which further exacerbates a downturn.”
The Big Lie
Brasil Wire has talked extensively about the internal biases and lack of plurality within the Brazilian media landscape, which is best summarised in a report entitled “Brazil, the country of 30 Berlusconis”. Brasil’s media, which is overwhelmingly against the governing Workers’ Party, have happily fed the hysteria with the language of crisis, with the foreign press corps snapping in line.
Occasionally live television provides a surprise. Former sports journalist and TV presenter Faustão hosts one of the most popular TV Shows in Brasil – Globo’s Sunday afternoon flagship. In late June he went into monologue about how Brasil is the country of crisis, of unemployment, of desperation and asked his guest, celebrated actress Marieta Severo, what she thought about this. She rebutted him, and the pessimistic view of many in his audience, and explained that as she sees it, social inclusion is better than ever, that perception of crisis is subjective. Telling were nods of approval from Faustão’s normally still & robotic cast of smiling models, more telling still was that the actress allegedly received threats for conveying such balanced views on television.
Break the country to break the government
Brasil’s current situation will be familiar to readers of Naomi Klein’s 2007 book Shock Doctrine, which argues that right wing politicians in collusion with their media allies have frequently attempted to manufacture crises as a method to further their goals.
In the book Klein focuses on Chile as Latin America’s example but Brasil has been there before as well.
In the lead up the United States aided, then abetted 1964 Military Coup there were numerous examples of deliberate exacerbation of a difficult political environment by reactionary forces to foster an excuse for the armed forces to step in and “save the country from chaos”.
That this was assisted by the United States government is not paranoid fantasy, as was long portrayed, but a matter of record as declassified documents on the National Security Archive show, nor was it the end of interference in Brasil’s internal affairs.
It should be noted that defeated 2014 presidential candidate Aécio Neves, at an event in 2013, referred to the Coup of 1964 as a “revolution”. This is actually a common conservative viewpoint, echoed in other countries, that the Military “saved” the country from “communism”, yet reveals a questionable attitude towards democracy.
Dilma Rousseff did not win the 2014 Presidential election by a “razor thin margin” – a zombie narrative in foreign media – she won by 3.5 million votes, a percentage variation comparable to Barack Obama against Mitt Romney. Yet the myth is perpetuated that Rousseff is a President without mandate, and that her leaving office would be some kind of democratic victory for Brasil. There were also predictable and baseless allegations of electronic voter fraud and upon news of her victory, reaction was that “The markets will not be kind to Brasil tomorrow”.
Nobody is questioning that historic institutional corruption or indignation at revelations of the scale and depth of these cartels and operations are real in 2015. The question really is how paralysing the country, exacerbating an economic slowdown, discouraging foreign direct investment, shutting down entire sectors of the economy, such as construction and energy, causing a wave of new unemployment in the process, can be in the national interest, rather than that of a particular political stripe.
Operation Lava Jato prosecutor Sergio Moro has for the most part focused on Workers’ Party (PT) prosecutions, despite there being many more indicted in other parties. The longer Moro persists with selective and strategic pursuit, the more his actions resemble an effort to deliberately asphyxiate government and economy. Similarities exist with Operation Mani Pulite, or Clean Hands, which destroyed Italy’s political establishment in the 1990s and helped sweep Silvio Berlusconi’s coalition with Fascist parties to power.
There are ongoing attempts to portray Petrobras, now at record levels of production, as broken beyond repair, with privatisation the only solution. Meanwhile media show Moro as some kind of saviour of the company and the country, a salvation from the hysteria the same media have formented over the past few years.
We are supposed to accept that this ongoing anti-national campaign is simply “Brasil’s institutions working properly at last”. Lava-Jato is portrayed consistently abroad as a noble, moral crusade, despite doubts over unconstitutional long-term detention of suspects without charge. It has also already accounted for an estimated 2.5% drop in GDP and surge in unemployment within the sectors it is focussed, energy & construction, not to mention the knock on effect to employment in their economic hinterlands.
A lawyer representing implicated construction giant, Odebrecht, Dora Cavalcanti, has openly criticised irregularities in how the case is being prosecuted. The U.S. Department of Justice is also assisting in prosecution in Operation Lava Jato, provoking concerns about judicial sovereignty.
The fear is that any social gains made during the previous generation will be rolled back if such shock doctrine triggered ‘regime change’ takes place – a glimpse of which we can see in the congressional maneuvers of Eduardo Cunha – an analogy would be the paralysis between Newt Gingrich’s house and Bill Clinton’s second term administration. Cunha, part of the Evangelical bloc in Congress, with a long history of corruption allegations, has opportunistically used weakness of the executive to force through a hit-list of right wing cause célèbres such as reduction of penal age, protecting private campaign funding, and legalisation of outsourcing, what the left are calling a retrocesso. Eventually, faced with proceedings that could lead to his own expulsion, he accepted, some say vindictively, a baseless petition for Dilma Rousseff’s impeachment that could see her suspended from the Presidency for 120 days even if unsuccessful.
Brasil’s main opposition party PSDB initially played a waiting game but have now come out in support of Rousseff’s impeachment. They do this rather than offering vision and policy improvements, things that Brazilians are justifiably looking for. Without doubt governing fatigue has set in with the Workers’ Party. Since the election the party machinery is embroiled in a endless internal debate on what the party can do to regain relevance in the eyes of it’s working class, educated middle class and social movement base.
One hypothesis is that if, as most economists predict, 2016/17 sees Brasil return to a brighter economic outlook, the window of opportunity for the current messy mediatic, judicial, parliamentary coup to remove Rousseff and PT from Government would be closed, albeit not without a fight. Brasil’s right wing, which straddles party lines across DEM, PP, PSDB and PMDB don’t just want Rousseff thrown from office, they seek the absolute extinction of PT as a political force.
Brasil is no stranger to exodus of its youth and wealth. Since return to direct democracy in 1989, at various points, such as 1994, 1999, 2001, there were brain drains for the Northern Hemisphere and economic security in the midst of inflation crises. Return of rampant and unpredictable inflation is still a principal fear for those old enough to remember the 1990s.
It is an odd situation when young & educated middle class dream of leaving the country when, so shortly after a period of optimism, all that has changed over the past 2 years is that the old economic fear has returned. How much of that fear is rational? How much is media driven? The crisis is not economic, not yet anyway, it is institutional and political.
We must question the ethics behind propagating disingenuous images of a collapsing state. What effect does this have psychologically on the population?
And amongst the English speaking upper-middle class, the effect of foreign media – now delivered instantly through social networks – on the country’s psychology and self-image should not be underestimated. Complexo de Vira Lata may be an overused expression, but the Viralatismo it describes is a genuine and widespread phenomenon. Marketing agencies even identify the complex as a target characteristic for the buyers of their products, such as foreign brands.
The mega events of 2014 World Cup & 2016 Olympics, when granted to Brasil, were lauded as if the ‘country of the future’ had finally arrived at it. Whilst bringing with them well-documented ethical and economic concerns, these events are also media platforms for foreign outlets to feed sensationalist, othering, images of chaos to a readership accustomed to material that affirms their own post-colonial superiority. Regardless of socio-political framing, the material is familiar – ‘south of the border’ stereotypes of poverty, crime, violence, corruption, with an occasional hint of naive beauty.
There are three principal threads of Anti-Brazilian propaganda that run through anglophone (and to some extent continental european) coverage of the country. One is the warped environmental theme which insists that Brasil must not be allowed to develop, a trope which has persisted for decades. Another regards Brasil’s “closed economy” (including majority state ownership of Petrobras). The other is portrayal of modern Brasil as a “failed state”.
One example of this “failed state” editorial narrative could be observed in how São Paulo’s water shortage was reported, especially when compared to that of California, which is a situation far more grave. Continual, and in some months record rainfall from November to April, was ignored, as was for the most part the crucial detail that only 5% of water goes to domestic consumers, around 40% is used by the state of São Paulo’s Ethanol industry alone. Instead, “Brazilians take too many showers.” was offered as explanation.
The ongoing projects & solutions to alleviate the shortage were deemed uninteresting to readership, as far more attractive editorially was the possibility of imminent societal breakdown resembling a Mad Max movie. The Guardian, published in a column sponsored by E&Y, a frankly bizarre article which appeared to suggest Wall Street divest from Brasil on the basis of the writer’s error strewn account of the water shortage. (That São Paulo water utility SabeSP has been listed on the NYSE for over a decade, subsequent drop in investment leading to the shortage, was not mentioned.).
In February 2015, Ian Bremmer of Eurasia Group published this astonishing piece in Time Magazine, which was circulated across Brasil’s regular & social media, ahead of Right-Wing Anti-Government protests, as evidence in a respected foreign publication that the country was falling apart. Not done, Bremmer then posted this risible astroturf in support of his own claims, an endorsement which in turn the author of the article used to affirm its validity.
Aside from the economic slowdown, the current perceived crisis began, like it or not, in June 2013, where Dilma Rousseff, then enjoying 79% approval, was the unexpected recipient of mass dissatisfaction that brought around a million to the streets, albeit triggered by the provocation of São Paulo military police (who are/were controlled by opposition PSDB) attacking an earlier smaller protest.
Following that demonstration where female journalist almost lost an eye after being struck by a rubber bullet, there was the enormous demonstration in São Paulo, with still very little in the way of overt Anti-Rousseff, or Anti-PT sentiment. What was present looked more a general disquiet with the political system and public services. Yet, on this monumental night Globo News instead ran with rolling loop of a few thousand atop the roof of congress in Brasilia, and the intended subtext was clear.
Attacked from left and right, PT appeared in this period to lose hold of the social pact that had kept it in power for 3 terms.
The end result was a diminished PT, a tighter presidential election than anyone could have envisaged a year previously, the most conservative and retrogressive congress since 1968, and this paralysing mediatic, judicial and parliamentary coup. These were the last things any those original protesters wanted or expected.
It recently emerged that explicitly anti-government, right wing protest groups such as Vem Pra Rua & MBL, which were formed in June 2013, tagging onto the coat-tails of protests just as the original movement went home, did so with the support and funding of foreign NGOs and Educational Institutions. These organisations have continued their U.S.-billionaire funded campaign to shift youth public opinion in Brasil towards privatisation of public health & education, abandonment of social welfare programmes, financial de-regulation and so on. Representatives of MBL recently visited Eduardo Cunha in Brasilia to present a petition for Dilma Rousseff’s (illegal) impeachment.
With hindsight, in June 2013, Brasil’s left were effectively hoodwinked into delivering what the right wanted: a weakening of Rousseff and PT.
Much of the modus operandi across Latin America is similar, but Brasil is vast & knotted, and any destabilisation attempt, either initiated by local elites, foreign interests or a combination of both as is most often the case, would need to occur on multiple fronts, with no guarantee of success. Some wrongly argue 2013 was an unsuccessful coup, but the efforts of those who sought to exploit it to that end didn’t stop. A strategy of “Fourth Generation War” observed in other South American nations such as Bolivia, includes the long game of destroying social bases and movements which might back parties unfavourable to U.S. interests. Rousseff’s record 79% popularity rating of May 2013 now stands at 10%. But even that drastic number needs to be looked at – a substantial section of the dissatisfaction with Rousseff is her perceived inability to manage the right wing forces now attempting to highjack power.
As this journalist points out, Brazilian voters’ top concerns, and therefore what will effect the popularity of any President, are jobs, rising incomes and inflation. 2015 is a bad year for all of these, compounding any unpopularity.
Domestically, former PSB leader Roberto Amaral remarked back in March that a Coup had already happened – from the moment Eduardo Cunha assumed leadership of Congress. His hypothesis was that the country was now effectively run by Cunha, Lava Jato prosecutor Sergio Moro, Renan Calheiros the Senate Speaker, Supreme Court Judge Gilmar Mendes, and Globo TV, whose news anchor William Waack was outed in State Department Cables as an apparent U.S. informant.
Main opposition party PSDB have gone on record to say that they are ready to step in should a power vacuum occur. Being the favoured party of the domestic media, and of United States and allies, this would be the most likely outcome from PT’s collapse. It should be abundantly clear that no illegal overthrow of a democratically-elected government in a South American country, not least one the size of Brasil, would be attempted without tacit understanding that the United States would recognise any new resulting administration. In 1998, still classified documents refer to a U.S. scheme to assist in delivering a favourable election result. Recent revelations show that the National Security Agency has been eavesdropping on a range of key figures responsible for Brazilian economic affairs.
In the dead-eyed professional world of U.S. diplomacy, current ambassador Liliana Ayelde, despite being expelled from Bolivia on allegations of involvement in destabilisation, and subsequently holding position of Ambassador to Paraguay in the lead up to Fernando Lugo’s ouster, is no Victoria Nuland.
At time of writing, PSDB Senator Jose Serra, who has long negotiated behind the scenes with Foreign Oil companies and the State Department about the opening up of Brasil’s Pre-Sal Oilfields, which are currently controlled by Petrobras, is attempting to push such a measure through the Senate.
Besides “Resource Nationalism”, receptiveness to controversial new trade treaties, the emergence of BRICS and its development bank to rival the World Bank and IMF, and consolidation, further regional integration of the Mercosul bloc, are well documented concerns of the State Department regarding Brasil. This publicly available information is unfortunately subject to editorial and self-censorship in corporate media – this is before we even get to the activities of U.S. organisations such as the IAPA.
To coincide with the President’s recent visit to the United States, Brasil Wire published a set of conflicts that must be reconciled if the two countries were to have a genuine and friendly partnership as equals. Meanwhile Washington Post-owned Foreign Policy published this report, which attempts to underline a fait-accompli surrounding Rousseff’s demise. (this earlier piece, and these two articles from FP which greeted her election in 2010 already expressed similar sentiments). More reports along similar lines have come from Reuters, whose bureau chief (and Fernando Henrique Cardoso ghostwriter), recently left Brasil following the #PodemosTirarSeAcharMelhor scandal, which suggested pro-opposition bias. Similarly terminal-funded market noise channel Bloomberg added to this chorus of inevitability.
Defining a crisis
Looking beyond the raw economic data Brasil has been very successful over the past 12 years at generating statistics that actually matter more, namely the ones about people’s daily lives. Pundits in the Anglo-Saxon financial press frequently accuse the Workers’ Party government of “wasting the commodity boom“, the reality is that Brasil used a favourable economic global climate for important priories like paying off international debts, hunger eradication, building a basic conditional cash transfer welfare program and massive increases in education and health spending. In 2005 Brasil told the IMF it would no longer require its assistance paying of its debts early using accumulated foreign reserves. Since then Brasil has accumulated one of the world’s largest dollar reserves – US$375bn, ten times that of a decade prior- and stands as the third largest sovereign holder of United States foreign debt at over $320bn.
Brasil is also an enormous country, and while the GDP growth of traditionally wealthy states such as São Paulo has gone into reverse, there is a comparative success story in the vast North of the country, with up to 8% GDP growth. More importantly the demographic spread of growth has resulted in Chinese levels of growth for Brasil’s poorest, while the upper income bracket have only seen German levels. Brasil is unique amongst the major emerging market economies in combining growth with inequality reduction. So far there is little to indicate that a cyclical downturn is likely to reverse this trend, however Brasil needs to take care as stagnation is a risk and rebuilding confidence quickly is vital.
United States based academic Fernando Lara wrote in Brasil Wire about converging GINI coefficients measuring the opposite trajectories of inequality in Brasil and the United States, which is uncomfortable reading for those who professionally ignore the failure of neoliberal economics to deliver the goods for the majority of populations.
Brasil has known worse, and will know better.