Brazil: Elections and the elect

Jeremy Seabrook

The IMF rescue package for Brazil has been crafted to ensure that any new government elected by its people will pursue fiscal and monetary policies that will guarantee the servicing of debt and the returns of investors. All this raises serious questions for the future of democracy and as to where real power resides.

THE $30 billion ‘bailout’ or ‘rescue package’ of the International Monetary Fund for Brazil has been hailed as a humane and common-sense response, since Brazil has hitherto adhered scrupulously to the conditions imposed by the international financial institutions. Where Argentina - that former star pupil of the IMF - was held to have brought its woes upon itself, Brazil, with its $260 billion debt, is the ninth largest economy in the world, and must not suffer the same fate. We are back in familiar territory - Indonesia, Russia, Mexico, Turkey: the loan to Brazil marks a reversal of the hardline policy enunciated by the  finance  ministers  of  the G-7 earlier this year, of no more bailouts.

Vote for investors

The IMF has, according to some commentators, expressed a vote of confidence in Brazil. All the principal candidates in Brazil’s October presidential election have endorsed the policy, and have dropped all mention of ‘restructuring’ its debt, which is generally perceived as a euphemism for defaulting. Some 80% of the loan will not be paid until 2003 or later, which will ensure there is no backsliding among politicians, whatever the outcome of the elections.

The instability in Brazil had been created in part by the fear that Lula da Silva might win the election, and that his Partido dos Trabhaladores might declare the debt unpayable. The fear of a left-wing victory led to a loss of value of almost one-quarter in the Brazilian currency. ‘The package,’ according to the Financial Times, ‘is a response to the plunge in market confidence in April, when investors began to suspect their favoured candidate, Jose Serra, might be knocked out of the presidential race.’

It seems that investors, who have no vote in Brazil, have a more significant influence on the outcome of the election than the citizens of that country.

In other words, the IMF has voted, not for democracy, but for investors, and the fiscal and monetary prudence that will guarantee the servicing of the debt and the returns on their investments. This must take precedence over people’s political choices: and if the people will not bow to this superior wisdom, all electable candidates must be made to do so in advance of the ballot. Transparency indeed: the true governors of Brazil are, and are seen to be, the financial institutions, even though their acronyms will appear on no ballot papers.

If this relationship were between individuals, it would be called bullying, blackmail or coercion, and would be a crime. But where governance is concerned, these things are called something else: they demonstrate the sagacity and maturity of politicians who, with a majority of their people in or close to poverty, might otherwise be tempted to prioritise their interests over those of the global rich. Such sentimental vacillations have no place in the economics of globalisation.

No alternative

The democratic outcome is thus sewn up two months before the poll. Does this loan represent a setback for the hardliners of the Bush administration who are willing to see bankrupt countries fail, in the same way that companies collapse, say WorldCom or Enron? Or is it a defeat for the people of Brazil, who must learn - again - that there is no alternative to the payment of debts of which they are not, and never were, the beneficiaries?

It is declared a triumph of pragmatism and a retreat from ideological excesses of neoliberalism. But what is the ‘servicing’ of bottomless debt if not the enforcement of ideology, the elevation of economic reason over human rationality?

The conditions of the loan - maintaining a budget surplus of 3.75% - actually mean further ‘belt-tightening’ measures, a greater ‘austerity’ than that already familiar to the starvelings of globalism. The people must vote for even greater impoverishment, cuts in social programmes, greater violence in the favelas where, for decades, activists have cried out against the triumph of barbarism, where gangsters and druglords provide their own alternative welfare systems in the slums they control, and whole cities - like Nuova Iguacu, seventh largest city and satellite of Rio - are  lawless labour camps and dumping grounds for the victims of a savage development, and where the wealthy lock themselves in gilded prisons for fear of the violence of those they have dispossessed.

Any presidential candidate who might have entertained ideas of land reform, improved health care, some protection for the wasted children, the juvenile prostitutes and drug-couriers, the uprooted and disemployed, must promise to subordinate these trivial aims to the more vital one of honouring dishonourable debt.

Policy failures, old and new

The reaction to Argentina was supposed to represent a new policy by the IMF, which would show the politicians who was boss. It has been disastrous. The response to Indonesia after the Asian crisis was the old policy. It, too, was disastrous, since the economy of Indonesia contracted by 14% in 1998. IMF officials, according to the Financial Times, say ‘the problem with Indonesia was the intertwining of politics with economics.’ It is clear that politics may not intervene in economics, but economics have free rein to do so in the political process. So Brazil represents a return to the status quo ante. Why this should be a guarantor of any greater ‘success’ than what we saw in Indonesia is unclear.

It seems the choice for indebted countries is between the fast track to immiseration (Argentina) or the slow track (Indonesia and Brazil). However, since a disproportionate number of the people are there already, they have little to lose.

Let the peoples of the world observe and draw their own conclusions. In the chaos and disorder that attend the superintendence of the affairs of the world by the financial institutions, no wonder mafias, criminal syndicates, corruption and cronyism flourish. No wonder the illegal, parallel or black economy rivals the official economy in many parts of the world, and the clandestine trade in  arms, diamonds, human beings, drugs, endangered species, currency, ivory, tropical hardwoods, butterflies and birds constitutes a large but unquantifiable  portion  of the official economy. Free trade indeed. But do not let anyone imagine that the democratic governments they elect will be anything but puppets of the lords of globalisation.

Jeremy Seabrook is a freelance journalist based in the UK.