Photo Jonathan Blair

Friday, October 10, 2014

Brazilian elections: The stakes in Round two may not be what they look like

A campaign marked by a dramatic and unexpected turn ended with one more surprise as also-ran Aecio Neves finished with a solid 33.55% of the vote, twelve points in front of Marina Silva and only eight behind incumbent Dilma Rousseff. These results pave the way for what will likely be the most savagely disputed and hardest to predict election round since Brazil's return to democracy in 1985.

Vote distribution paints a divided country, with the poor North and Northeast coming out massively in support of Rousseff’s Worker’s Party (PT), while the West and Southeast, especially São Paulo, took a strong stand in favour of the opposition. Two important anomalies are worth noting, especially as they happened in the richest and largest electoral colleges of the country. Rousseff prevailed in Minas Gerais (43.5 to 39.8 for Neves) and Fernando Pimentel, the PT candidate for governor, was elected  in the first round, with 53% of the vote. Minas Gerais is an agricultural and industrial powerhouse but also the state where Aecio Neves was elected twice as governor, the state he represents in the Senate, and one where his overwhelming popularity was never in doubt before the campaign. This double victory stands as the PT’s most important gain in the firt round. The party’s collapse in São Paulo, where the party was born and where its core union support is concentrated, represents by contrast its most hurting loss. Aecio Neves’ Brazilian Social Democratic Party (PSDB) cleaned out: in that state, Neves won the presidential contest by an unheard-of margin (44.2 vs 24.8 for Rousseff), Geraldo Alckmin was reelected as governor with 57% of the vote while the PT finished third with barely 18%, and the PSDB’s José Serra crushed the PT’s incumbent, widely-respected 24-year veteran Eduardo Suplicy, in the contest for the lone senate seat at play. Along with Marina Silva’s ability to transfer her vote—most likely to Neves--, what happens in those two states, where a third of Brazilian electors live, could well determine the outcome of the second round. Now, does this matter much, that is, what exactly is at stake in this second round?

For one thing, a contest of personality it won’t be: the debates made clear that Aecio Neves is by far the slicker speaker and that he is much more conversant with the substance of policy debates than the somewhat awkward and at times insecure Dilma Rousseff (she was widely derided for bringing and using a thick briefing book during the last debate). Neither, however, stand for themselves. They are standard bearers for substantive and very different visions of Brazil's future. Above all, however, they embody very different prospects for the consolidation of their country's democracy.

In some way, we have a relatively clear Left/(centre-)Right battle. On one side, the PT stands as a socially progressive party, keen on protecting and expanding the social programs and subsidies that have helped millions of poor Brazilians escape a life of misery, a party committed to using the state apparatus to protect and expand the country's manufacturing sector in the face of market forces and globalization's onslaught. In many of its quarters, there is still a profound admiration for Cuba's socialism and even for Venezuela's Bolivarian experiment. By contrast, Neves' PSDB looks a lot like Canada's Liberals or perhaps better, like Europe's "third way" socialist parties, those pragmatic outfits led by Felipe Gonzalez, Helmut Schmidt and Tony Blair. From that perspective, the market and globalization itself represent unavoidable realities that, far from only presenting impediments for the development of the country, offer instead extraordinary opportunities that a country like Brazil, still plagued by immense human misery, cannot turn down. There is no naive embrace of the market, nor a rejection of the need for robust social program. There is however a clear conviction that to sustain those over the long term and to guarantee sustainable growth, trade and the economy need to be further liberalized, inflation must be kept low, prices "true," and the state made as efficient as possible.

Remarkably, these outlooks have changed very little over the last twenty years, the last twelve with the PT in power, and the previous eight with the PSDB in charge. Even more remarkably, neither project has really succeeded in gaining majority support in Brazilian society. Both were forced instead to take the lead of much broader coalitions, most of whose members shared only part, sometimes minute, of their core agenda. This is not about to change.

After Sunday's vote, the PT and PSDB control respectively 12 and 10 of the 81 seats in the Senate (with respective losses of 1 and 2 seats), and 70 and 54 of the 513 seats of the Chamber of Deputies (with losses of 19 for the PT and a gain of 10 for the PSDB ). With 14 parties in the Senate and 22 in the Chamber, governing coalitions will have to be extremely diverse. In addition, elections in that immense country are horrendously expensive, and the parties need lots of money to be competitive. To get elected, and then to govern, in sum, massive compromises and complex dealings are in order, and the results are not pretty.

The PT has governed with the help of some of the most corrupt politicians in Brazil's recent history. The best known was probably José Sarney, former President of the country--elected by indirect suffrage--, long-time and recent President of the federal Senate, and the patriarch of an immensely rich and corrupt clan that has governed and controlled Maranhao, one of Brazil's poorest states, for decades. The clan's candidate for governor of the state, Lobao Filho, was just soundly defeated, but to the very end, in this land of misery, he enjoyed the PT's support. Renan Calheiros is another case: long time senator for the small and poor Northeastern state of Alagoas, he was forced to resign as President of the Senate in the face of massive accusations of corruption but was absolved by his colleagues, with support from the PT, and regained his position, which he will probably keep in the new Congress if Rousseff is re-elected. Also the head of an oligarchical clan, he has just seen his son, Renan Filho, become governor of Alagoas, at the head of a coalition that included the PT. Both Sarney and Calheiros were also elected with PT support in their home states, but even with these "allies," the PT felt the need to buy-off smaller parties legislators through monthly cash payment a scheme that led two of Lula's closest collaborators to prison.

Getting the right people elected, beginning with the party's presidential candidate, costs lots of money, a major challenge for a workers and middle-class party whose main electoral support lies among the poor; hence the need to reach beyond natural allies to the deep pockets of the country's largest corporations.

Brazil has remarkably liberal rules regarding the financing of political parties, with no limits to private or corporate contributions. At the same time, however, parties are required to declare the name of the contributors and the amount of their gift to the party, all information that the Supreme Electoral Tribunal makes public through its web site,  progressively over the course of the campaign, and in full shortly after.

A look at the data already made public is eye opening. According to the latest electoral accounts, Dilma Roussef has received 123,307,942 Reais (or $C 57,584,808) in private electoral contributions. Of that amount, 99.59% involved donations of $R 100,000 or more. Some of the contributions, from several of Brazil's largest private corporations, are staggering. OAS and Andrade Gutierrez, two engineering firms heavily engaged in government-financed infrastructure projects, from stadiums for the World Cup, to port infrastructure and oil refineries, have respectively contributed $R 20 and $11 million. JBS-Friboi, the world's largest food processing company, and the recipient huge loans from the Brazil's government-controlled development bank (the BNDES) has for its part given $R14.5 million to Dilma Rousseff's campaign for president. These three companies, clear beneficiaries of government contracts and subsidies, have in sum contributed until now more than R$ 45 million (or about $ 21 million canadian), to support her re-election.

Leaving aside the very obvious ethical and political issues raised by such dealings and those involving the above-mentioned 'articulations' with parties in the Congress, it should be quite clear that neat the Left--Centre-Right distinction outlined above does not quite do justice to the game being played in the second round of the Brazilian elections.

The complexities, ambiguities and obscurities of what Brazilians call "political articulation" were not absent from the PSDB years. José Sarney and his cohort were in fact important allies of Fernando Henrique Cardoso's government and they certainly did not provide their support for free. A few scandals came to light, but none leading to prison terms or to the transparent absolution of criminal activities that benefited the likes of Renan Calheiros under PT rule. Still, it is possible that many of the dealings simply did not come to light and other tools, such as executive nominations to government ministries and state corporations, were quite openly used--as they were by the PT--to advance the government's agenda. Similarly, the electoral accounts of Aecio Neves are also very interesting. He has received until now more than $R40 million in private donations, 80% of which larger than R$100,000 or more. The name of the many of his donours are still not public but the three most generous ones (at $R2 million each) are the country's largest bank, Itau, and two large engineering firms, Odebrech and OAS (both of which also contributed larger amounts to Rousseff's campaign). Moreover, the campaign is still on and Neves’ chances did not look good after Marina Silva entered the race. The accounts are far from closed, in other words.

What all this illustrate is that beyond clear social and economic outlooks, a slight but perhaps more fundamental rearrangement of the Brazilian state may be at stake in the second round. On one side, the consolidation of a system in which a few large corporations and political cliques work tightly with the government, keeping it in power in exchange for local prominence, protection from prosecution, patronage and massive contracts and subsidies. Fernando Henrique Cardoso, partial to the candidate of the party he helped to found, but still a social scientist, probably put it best when he called the resulting contraption "state capitalism." Such arrangements are meant primarily to perpetuate the PT’s hold on executive power and they may well be compatible with the maintenance and even deepening of social programs for the poor, for a while at least. Above all, however, the pact they imply between the party in power and the country’s largest corporations augur poorly for the consolidation of democratic governance in the country.

Given the constraints imposed by Brazil's peculiar political system, the opposition cannot and would not promise a radical change. This was the illusion entertained by Marina Silva and now discarded by the electorate. Aecio Neves, far from an angel, is a consummate politician who has been elected three times in the country's second largest electoral college. Much of the private sector--though by no means all, as we saw--and all the major media, will line up behind him, in many cases less in support of his agenda than in opposition to the PT's, which remains a left-wing party with profound ideological roots and where social movements remain a force. In the end, in other words, the PT may not be the most reliable ally of capitalist firms, the size of their financial support notwithstanding. Several centrist and right-wing parties currently supporting the government have in fact suggested that they would gladly switch side, and, clearly, they will be welcome. Neves is not known to have ever turned down private sector contributions, and his party has muddled through expertly and for years in the dirty fields where policy is made in Brazil. For now, however, he owes much less than Rousseff to the powers that be in the Brazilian economy and in Congress. Moreover, his program, which favours liberalization and a degree of restraint for the government, implies lesser space for the political engineering that a statist PT in power has built with its allies, political and private alike.

The stakes in sum, are mostly political, and they have to do with the protracted consolidation of Brazilian democracy. In a slow process that began in the early 1980s with mass demonstrations in favour of the direct election of the president, the election of Lula in 2002 was a huge breath of fresh air and certainly the biggest step forward. Paradoxically, the reelection of his heir, Dilma Rousseff, could well be the first major step back in the process. The signs are many, in other words, that the Right-Left image is more caricature than reality.

[Published on  as “The stakes in Brazil’s final election” vote]

Thursday, September 25, 2014

Nation-building in the Mideast? What is needed is a Sunni home in Mesopotamia

In an enthusiastic endorsement of Barrack Obama's new offensive in Syria, Brookings' Kenneth Pollack argues that the key to the stability of the region lies in effective nation-building.

In the face of innumerable failures and, over the last twenty years, of the progressive reconfiguration of Germany, Central Europe and the Balkans around newly created--or re-created--ethnic states, Pollack still argues that multi-ethnic or multi-communal nation-building is possible in the Middle-East, from the outside and without rearranging the absurd boundaries of the region. And yet, if it were successful (a big if), the most likely outcome of the strategy he outlines--arming a "moderate" Syrian opposition and helping it take control of the country against both Assad and IS—would be the rise to power, in Syria, of a Sunni regime that would be a mirror image of Iraq's Shia one, and under which you wouldn't want to be a minority: Alawite, Kurdish or Christian, in this case, instead of Kurdish and Sunni in Iraq.

As Pollack puts it, "ISIS is the symptom of that underlying problem, not the problem itself." Fine, but what is the problem and, in particular, what is the problem that can be resolved? He basically argues that the problem is the need to make Syria and Iraq into unified and functional social and political entities in spite of the tensions and the blood over decades of state-led communal repression of communal massacres and wars. This is indeed a problem, but one that nobody since WWII has been able to resolve, especially not through the "reconstruction" of infrastructure and civil society-building by foreign experts who have been failing miserably everywhere they have tried. And for good reason: what is being sought is not nation-building but nation denial, nation breakdown, nation oppression and nation fragmentation among artificial states. In a few rich democratic countries like Canada, the UK--barely-- and Spain--for now--it has been possible. Everywhere else, it just hasn't worked.

ISIS is the symptom of the failure of the state system that Britain and France, then the United States, and now the UN, have been trying to salvage for decades. It is the expression of a nationalist claim on the part of Sunni populations in Syria and Iraq that just will not--in the case of Syria--or that could not--in the case of Iraq--continue to live under political regimes that are dominated by other communities. Take the Sunni of Iraq and Syria out of ISIS--or the Pashtun out of the Talibans--and you are left with a weak movement devoid or territorial or social anchor.

Aside from the re-establisment of communal dictatorships that would happen to represent majorities, instead of minorities, nothing good can come from the kind of nation building that Pollack advocates. The only sustainable solution to the problem is the creation of a Sunni state on a territory that currently straddles Syria and Iraq. In this region, remember, Sunni arabs have no home, unlike the Kurds (almost), Shia Arabs, and Shia Persians.

As Jeffrey Herbst has been arguying for years, this kind of solution also beckons in the Democratic Republic of the Congo and, I would add, in Rwanda, Burundi, Somalia and a number of other countries.

I can hear the standard objections: re-opening the border issues would lead to chaos and anyway, we don't do that anymore. We patch things up at the UN. Well, chaos is here and has been here for a long while and, as I mentioned before, we have in fact been doing lots of boundary adjustments in recent years, though only in Europe and almost exclusively with white people. The time has come to open up the communal state club to other peoples.

[First posted on ]

Wednesday, September 24, 2014

The very strange turn of Brazil's electoral contest

On October 5, Brazilians will head to the polls after one of the most unexpected and tightly contested electoral process their country has seen since the end of the military dictatorship in 1985.

The official campaign had barely begun when, on August 13, it was turned upside down by the tragic death of presidential candidate Eduardo Campos. Young but already experienced and a very clever, capable and ambitious politician, he was bound to become a fixture of the Brazilian political scene and, possibly, at some point, President of the country. To all observers, however, it was clear that, this time at least, he had no chance of winning: running third with about 10% of voting intentions, he could at best ensure that no candidate would gain an absolute majority, forcing a second round in which he could play the kingmaker.

His death, however, opened the way for his running mate, Marina Silva, to make the run that she had planned but could not pull off when the party she tried to set up was unable to get on time the hundreds of thousands of signatures needed to register. Silva was already very well known in Brazil, as a moralist firebrand and fierce environmentalist who had resigned from Lula's cabinet and left his Workers Party (PT) in protest against the government's decision to allow transgenic soya to be cultivated in the country. In 2010, she was presidential candidate for the Brazilian Green Party and received 20% of the votes in the first round, a spectacular performance given the limited resources she had at the time and the tiny following of her party. Born in an extremely poor family of Brazil's Northeast and working her way up the Workers' Party and Chico Mendes' environmentalist movement in the Amazon, her trajectory is every bit as bracing as Lula's rise from a similarly poor upbringing to the presidency of the country.

Her sudden rise in the polls following Campos death may have been driven in part by a wave of sympathy for the man and by the huge media exposure that followed his death. Very quickly, however, what appeared to crystallize around her was a strong sentiment of rejection towards what is broadly perceived as a stale and rotten political status quo of which incumbent Dilma Rousseff's Workers' Party, shaken by a series of corruption scandal, is very much a part. The wave on which she surfs echoes the deep discontent that fed the massive street demonstrations of the Summer of 2013, during which hundreds of thousands of people denounced the billions spent on holding history's most expensive FIFA World Cup while Brazil's public services were still clearly those of a third world country.

Silva has kept the second place in opinion polls, and the last few ones put her head-to-head with Rousseff in what is now a guaranteed second round run-off. Nothing is set in stone yet however. Indeed, support for Silva has been wavering and some polls even put her in a technical tie with Aecio Neves, the candidate for the centrist Brazilian Social Democratic Party (PSDB). Were Neves able to overtake Marina Silva, her sudden rise to political stardom would essentially be frozen in time, for at least four years. Such a result, however, would suit Rousseff and the PT as all polls give her a second round win in a head to head confrontation with Neves. Were Marina Silva to be the runner-up, the whole game would be thrown open, with the PT's grip on power very much under threat. In a strange twist of political fate, in other words, the outcome of the final round of this election could well hinge on who finishes second in the first one...

Now, what exactly could determine Marina Silva's final vote tally? Interestingly, not her program or that of her adversaries, for she doesn't really stand for any clear policy measure and is not particularly critical of that of her adversaries. Her politics is a peculiar mix of progressive ideas, particularly around environmental issues, and social conservatism, which has a strong appeal among evangelical Christians but also among a neglected but still sizable conservative Catholic bloc. The rest is unclear. The Workers Party has awkwardly tried to paint her as an enemy of social redistribution, accusing her of opposing the Bolsa Familia conditional cash transfer program that has become a political sacred cow because of its massive popularity among the country's still huge number of poor. In a poignant TV message that has been widely distributed, she has eviscerated the argument, using her personal experience of extreme poverty to powerful effect. She has had a harder time dismissing suggestions from the PT that her environmentalist convictions would lead her to oppose the exploitation of Brazil's massive deep water hydrocarbon reserves, another sacred cow as they are widely seen as a guarantee of an energy independence that Brazilians have long sought.

Neves' PSDB and its intellectual supporters have taken another tack, focusing on her ideological rigidity, on the limited openness to compromise she has demonstrated over her political carreer, on the lack of clarity of her proposals and on the limited administrative and technical expertise of her team and core followers, an issue the PT has also heavily insisted on. More generally, her ability to harness the discontent with "the system" that brought her the support of many young people is hampered by the sometimes messianic tone of her pronouncements and especially by the dogmatic opposition to abortion, drugs and gay marriage that makes her so appealing to her socially conservative base. She wouldn't need to lose much support in the richer and more liberal South Eastern part of the country to lose her second place.

In the face of Marina Silva's unexpected challenge, Dilma Rousseff and her party seem unable to exploit the massive advantages of incumbency and to lay out a clear program for her next mandate beyond the defence of a progress made essentially under Lula and largely inexistant since. The PT campaign has now become a huge attack machine, intent on eliminating what it clearly sees as a strong and credible challenge to the party's hold on power. Aecio Neves and the PSDB, very much in line with Fernando Henrique Cardoso's two mandates and with their continuing success at the state level, in Sao Paulo, have tried to present themselves as the pragmatic, serious and professional alternative to what they denounce as the ideological and amateurish management of the PT. That attempt was derailed by Marina Silva's rise and they also now focus essentially on her person and on the many damaging uncertainties that her election would entail. Although the electoral contest reflects quite a broad discontent with the very nature of the political system, we thus have an election that is dominated by the personal qualities, stands and attitudes of a candidate that was not even in the picture five weeks ago.

To some extent, this is understandable as Silva offers little else but herself and her abstract challenge to the way politics is done in the country. How different she would--or more importantly could--do politics once elected, however, remains unclear. For she would have to govern in a very peculiar political environment where the PT enjoys solid support for a largely political project centred on consolidating the party's hold on the state in the face of significant resistance from well-entrenched economic elites, where quite a large clientelistic right sells its vote to the highest bidder, and where more programmatic but small liberal and conservative factions try to usher in what they see as a modern capitalist democracy. Both the PSDB and the PT have proven adept at playing that complicated game, winning some battles and losing others. The nature of the game, however, clearly dismayed the many Brazilians that took to the streets last year, and for them Marina Silva looks like a way out. And yet, there may be little choice but for her to muddle though just like her predecessors.

Perhaps sadly for Brazilians, the very real short and medium-term challenges of the country take the back seat to this somewhat disembodied debate about "the system." Indeed, the columns of the country's newspapers are replete with discussions of the sorry state of an economy that is slated to grow at less than 1% this year and barely more than that next year, an inflation rate that is reaching 7%, a decline in inequality that is now stuck at what remains one of the highest levels in the world, the country's ever-shrinking industrial base, its sudden invisibility on the regional and international scene, and the criminal violence that year-in year-out produces more than 50,000 homicides. And yet, none of this seems to matter much, for now at least.

The three weeks separating the two Presidential rounds (the second will take place on October 26) may ground the debate somewhat. Many of the cards will already have been dealt, however, as the shape of the Congress will have become clear. On election night, in other words, keep an eye on who finishes second and on which parties get the largest shares of seats in the Chamber and the Senate.

Wednesday, September 10, 2014

Cannabis legalization is a sideshow. Illegal market management is the real game.

The Americas are slowly moving towards the full legalization of cannabis. Uruguay is still alone among national governments to have gone all the way, but for marijuana at least, hardline prohibition is quickly being replaced by a range of flexible arrangements, from the legalization of ‘personal doses,’ to the decriminalization of possession –as in the ‘ticket’ option being considered by Peter McKay. These changes are long overdue, and the fuller the liberalization, the better, in spite of the increase in consumption which should logically follow the drop in price and the lifting of sanctions. The benefits of consumption are most likely limited, but the potential negative health and social consequences of higher cannabis consumption pale when compared to the massive damage inflicted by tobacco, alcohol and prescription opioids. Moreover, much of the harm caused by the criminalization of cannabis is tied to the huge social and economic impact of marijuana-related arrests and convictions in the United States, an issue that would simply vanish with legalization.

Eliminating that part of the problem is a good thing. But the main challenge lies elsewhere. The War on Drugs has been an unmitigated disaster, mainly because it has created the conditions for mass murder in Latin America. In five years, between 2007 and 2012 and according to the latest available data (UNODC, 2014), 773,052 people have been murdered in the region: 274,585 in Brazil, 121,683 in Mexico, 92,274 in Colombia, 84,980, in Venezuela, 36,237 in Guatemala, and so on. By no means all of those homicides were drug-related, but most analysts agree that a very large proportion of them is tied to drugs or more precisely to conflict over shares of domestic markets and export routes. To this carnage, cannabis and its traffic have contributed very little. Cocaine is the culprit and its legalization, which would destroy the black market and eliminate the violence currently tied to it, is not in the cards. Not here, nor in Latin America. Something else must be sought.

By any humane standard, harm reduction in this case has to mean the reduction of homicidal violence and the limited liberalization that is politically feasible would simply not help. Decriminalization of cocaine possession and personal use, moreover, could very well lead to increased consumption and create larger, more valuable and more competitive drug markets. What is needed are policies that make those markets less violent.

This may seem far-fetched, but in fact, it is not. The largest drug markets in the world, North America and Europe, are not violent at all by Latin American standards, even the US’. Mexico, as it became the main hub of the global cocaine market in the 1990s and early 2000s, saw its homicide rate decline by half. Mexico City, the country’s largest drug consumption market, has a homicide rate of about 8 per 100,000, very low by regional standards. Similarly, Bogota, Medellin, São Paulo, Rio de Janeiro and Recife have seen their homicide rates drop by between 40 and 70% without any indication that drug consumption was going down.

Illegal drug markets can be managed. Gang truces in El Salvador, albeit fragile, have proven to be very effective at reducing violence. On universities and their surrounding student ghettos all over Canada, there are very active drug markets that the police and traffickers themselves are very careful not to disturb and, as a result, drug-related violence is essentially non-existent. More explicit arrangements, which Mexico’s Jorge Chabat has called ‘Pax Narcotica,’ were clearly behind the decline in that country’s violence and its end, under Calderon, widely seen as the main reason for its descent into hell.

Drug legalization is no panacea: the main cause of drug overdoses in North America are perfectly legal opioid painkillers. The same holds for illegal market management: Mexico’s Pax Narcotica, for instance, threatened to destroy Mexico’s budding democracy and for that very reason, many supported Calderon’s disruptive and ultimately deadly offensive against traffickers. And yet, for as along as the legalization of hard drugs is not on the table, any serious attempt at reducing the harm that drug and drug policies beget must include an effort to manage illegal drug markets in a way that minimizes violence.

[First published on as “A less-violent, illicit drug market?”]

Tuesday, August 19, 2014

Brazilian elections monitor (1): the stakes

This is the first instalment of what I intend to make a weekly analysis of the ongoing Brazilian election campaign. Each post will analyze recent events and polls, as well as one or two particular themes (candidate profiles, regional dynamics, congressional elections, as well as state elections in the country’s three largest states: São Paulo, Rio de Janeiro and Minas Gerais). The series will end roughly a week after the final results are in, i.e. after October 5, if there is only one round, or after October 26, if none of the candidates gets an absolute majority in the first round.

In this post, I will introduce the basic stakes of these elections, along with the most recent polling results, which have been affected by the death of Eduardo Campos, who was running in third place in the presidential race when he died in a plane crash, on August 13.

So, what is at stake?

Let’s start with reasons for the world to be interested in these elections. By any measure, Brazil is huge: fifth largest country in the world and fifth most populous. Seventh largest economy (after France and the UK, but before Russia. Canada is eleventh), fifth largest industrial and agricultural producer, sixth largest car industry, and so on. Regionally, it looms even larger, with about 40% of the territory, population and GDP of South America and almost half of the region’s military spending.

For much of its history, Brazil has punched well below its weight. A gentle giant protected by the American strategic umbrella and completely devoid of territorial ambitions, its raw size along with a clever and effective diplomacy have made it an anchor of regional stability in South America but essentially a non-entity at the global level. Decades of economic instability and hyper-inflation, along with a quasi-universal consensus around the development and protection of its domestic industry, dating back to the 1930s, have also kept it at the margins of the global trade and economic game. However, its huge market and formidable agricultural and mining potential have long sucked in large flows of foreign investments. Since 1994, moreover, economic stabilization, a degree of trade and investment liberalization, aggressive public investments, innovative social policy and an increasingly activist foreign policy have greatly enhanced Brazil’s visibility, status and influence in the world. It is now a prominent member of the most powerful global clubs and a player in most important negotiation venues (G20, BRICS, WTO), as well as an influential actor in global governance institutions, particularly the United Nations (where it is a perennial candidate to a permanent seat in a reformed Security Council) and the IMF.

As it rose to prominence over the last 20 years, Brazil has mostly played ball, nudging here and there but generally playing a constructive role in the chaotic redefinition of global governance that has accompanied the US slow retreat from prominence. Under incumbent Dilma Rousseff and her Workers’ Party (PT) predecessor, Luiz Inacio Lula da Silva (Lula), however, the country has taken increasingly confrontational stands towards the West generally, from its support of Iran’s claims to a “civilian” nuclear program, to its refusal to condemn Russia’s policy in Ukraine--which secured it a larger market share of Russia’s agrofood market following Moscow’s counter sanctions against the EU and the US). At the same time, however, Brazil’s taking this or that position, or taking this or that side would by no means be a game changer. With the marginalization of multilateral trade negotiations--where Brazil has become a formidable architect of veto coalitions--and as its complete absence from the discussions of the Ukraine and the Middle East crises has shown, moreover, Brasilia is not yet a major global player.

Regionally, and most obviously in the face of the deepening crisis in Venezuela, Brazil has abandoned the more neutral pro-democracy stand that had characterized its foreign policy since the end of the military regime in 1985. This has led to its virtual disappearance from the informal management of regional issues, leaving the space open for Colombia’s Santos, Mexico’s Nieto and Chile’s Bachelet, on the centre and centre-right, and for Ecuador’s Correa and even Venezuela’s Maduro on the left. Overall, the clever and effective regional governance led by Brazil’s foreign ministry and by activist presidents Cardoso and Lula has been replaced by a much messier regional game nobody is really in charge.

While it would be a wild exaggeration to say that the election could determine how pro- or anti-West Brazil’s policy could become, it is quite clear that the reelection of Dilma Rousseff would reinforce current orientations while an opposition victory would make Brazil once again the soft ally of the West that it had been well into Lula's presidency. Regionally, it would probably also mean a cooler attitude towards Venezuela’s current regime. Most importantly, however, it could open the way for progress on free trade with Europe and, in the same movement, for the further weakening of Mercosur, the trading bloc that Brazil forms with Paraguay, Uruguay, Argentina and Venezuela, the last two of which are adamantly opposed to trade liberalization.

Overall, because even the Venezuela crisis is unlikely to degenerate into a regional conflagration, and also because Brazil remains a relatively marginal player globally, the results of the election are unlikely to radically affect global dynamics.

The domestic game is another matter. The election of Lula in 2002 was the culmination of the country's slow transition from the military regime that had governed it between 1964 and 1985. In this most unequal country long dominated by narrow elite coalitions, the election of a working class President born in the impoverished Northeast came as breadth of fresh air and then his reelection, with the massive support of the poorest sectors of the electorate, undoubtedly boosted the democratic legitimacy of the political system. Innovative social programs, quite aggressive adjustments of the minimum wage, extensive infrastructure and education investments (almost all of it, admittedly, a continuation of efforts begun under Cardoso) have given substance to the claim that, at last, the state was to serve all Brazilians.

In spite of this very concrete progress, and beyond the important symbolic effect of Lula's decade in power, there are few signs of further progress towards freer, more open and less corrupt political governance since he was elected. The congressional coalition led by the Workers' Party ("PT," for Partido dos Trabalhadores) has included some of the worst sectors of the good old clientelistic cliques, and often provided cover for their corrupt schemes. The party leadership itself, including Lula's closest lieutenants (but not Lula himself, apparently), was involved and then condemned for their use of a large-scale vote-buying scheme. Court nominations, including at the Supreme Court, have become ever more politicized--epitomized by the progressive weakening of the vote-buyers' sanctions. The country's huge national development bank, the BNDES, as well as its mega-oil company, Petrobras, have been increasingly used as political instruments, both for populist purposes--e.g. to keep gasoline prices artificially low--and to place and help party members and allies.

From those standpoints and except perhaps for Petrobras, which had slowly become more autonomous from the political powers that be, the PT in power has not been very different from its predecessors. But that is precisely the problem: Brazil's democratic consolidation seems to have stopped in its tracks, and there are worrying signs that it may be starting to move backward. It appears, in particular, that Dilma Rousseff and the PT do not stand for a particular political, social or economic program, but that they are instead strictly driven by their will to stay in power. If Dilma is elected this Fall and, as is most likely, if she completes her mandate, the PT will have been in power for 16 consecutive years. Worryingly, party president Rui Falcão recently said bluntly that the main reason the party wanted to reelect Dilma was to pave the road for the return of Lula in 2020 (unlike their American counterparts, Brazilian presidents are only barred from more than two consecutive mandates). Four years is obviously very long in politics, but the comment nonetheless testifies to a political project that, beyond the consolidation of the party's grip on the state, is a bit thin. In the context of the growing politicization of public institutions and public policy, moreover, such an outlook is not promising for Brazilian democracy.

This political stasis happens in the context of growing economic difficulties, with some of the slowest growth rates in Latin America (only "beaten" in that race by the likes of chaotic Argentina and Venezuela). The resource boom that sustained Brazil's relatively high growth rates of the first decade of this century appears to be over, while the country's quickly shrinking industry is less competitive than ever. Inflation is creeping up, in spite of the government's efforts to artificially control it--for instance by forcing Petrobras to sell well below profitable levels, crippling the company's ability to invest and sustain the country's now very slow march towards energy self-sufficiency. The huge investments tied to the World Cup and, in two years, to the Rio Olympics, are set to have little long-term economic impact and heavily constrain the government's investment plans. These difficulties, unfortunately, push the government towards short-term populist measures likely to deepen the country's predicament.

While Brazil's political development and its economic and public policies now moves like an oil tanker--not a bad thing when the recent past includes a military regime and the wild economic swings of the Collor de Melo era--the stakes of this election may well lie in the fate of the increasing closure of the political system and the consolidation of a short-term, populist and ultimately counter-productive economic policy.

In the next instalment of this monitor, I will briefly examine how the two other candidates would likely affect the tanker's direction.

Latest polls

According to Datafolha, one of Brazil's top pollsters, Dilma Rousseff remains in first place, with 36% of voting intentions, while Marina Silva and Aecio Neves, the still unofficial replacement for Eduardo Campos, were tied at 21% and 20% (a huge progress for Silva, whose ticket, with the late Eduardo Campos as Presidential candidate, was still stuck below 10%). This implies that a second round would take place and, in that eventuality, Datafolha's numbers suggested that Marina Silva would defeat Rousseff, a stunning reversal of all the polls done since the latter was elected in 2010...

Silva appears to be surfing on the publicity and universal wave of official and public sympathy for Eduardo Campos, a bright, popular, likable and pragmatic centrist politician that, remarkably, had a plethora of personal friends of all stripes. However, she is also a force unto herself. She enjoys broad and positive public recognition and commands respect, even from her political enemies and she received 20 million votes in the 2010 election. As columnist Dora Kramer recently pointed out, moreover, in the early stages of this campaign, when Silva was trying to legalize her own party, 27% of poll respondents supported her, more than anything Eduardo Campos ever registered.

By next week, the dust should have settled to some extent when we will look in more details at the main candidates and assess their prospects.

Thursday, March 13, 2014

Venezuela: Dark present, darker future

Venezuela is in bad shape. Daily demonstrations, barricades and fights with the police are adding yet more chaos to the country’s economic mess and violent crime wave. But if you assume that things can’t get worse, just wait. Here is a grim, and unfortunately quite likely scenario.The political dynamics in the country are intractably poisoned. The two sides are deeply entrenched while hatred, not rivalry, rules. Even the start of a dialogue is made difficult by the internal divisions that plague each side, with radicals ready to denounce compromise as treason. Leopoldo Lopez, the now jailed opposition leader that led the early demonstrations in Caracas, has become the face of the street protests and he wants nothing less than President Maduro’s resignation. This leaves no room at all to manoeuvre for Henrique Capriles, the opposition candidate in last year’s elections. In the government’s aggressive campaign against the “fascist” opposition, the President, Nicolas Maduro, tries not to be outdone by National Assembly President, Diosdado Cabello, who has been keeping some distance since the very night of the Maduro’s disastrous and razor-thin electoral victory.

Economic problems complicate developments even more. High inflation (already greater than 50 percent in 2013), decaying infrastructure, regular power blackouts and shortages of a wide range of basic commodities cannot be tackled without deep economic reforms. Most of these issues emerged under Chavez, but growing oil revenues previously enabled the government to patch things up. The problems are now much worse, and  oil revenues are not keeping up as prices do not increase any more while production—given chronic under-investment and continuing brain drain at PDVSA, the national oil company—declines. This will leave the government in Caracas increasingly powerless to protect its political base among the poor, especially if anything is done to tackle inflation and address shortages.  Both already hit the poor the hardest: they are the ones with little access to dollars, the worst protection against financial inflation, and the narrowest range of options for buying basic necessities. But government action to fight these plagues will hurt them even more. Higher interest rates and lower government spending, critical to reducing inflation, will make unemployment, still remarkably low, shoot up, while dropping price controls, a crucial step to address shortages, will make inflation worse for a while at least, something the poor can ill-afford.

The current discontent, in other words, will likely seep into the chavista base. Given the polarization between the two sides, however, this won’t reinforce the opposition. Expect instead a growing, amorphous and violent mutiny, expressing itself in spontaneous looting and haphazard acts of violence, very much along the lines of the 1989 Caracazo. This will aggravate an already frightful security situation with, once again, the most vulnerable as the primary victims of the unrest.

Here, too, government action is more likely to make things worse than better: as a consequence of past and current policy, the country is rife with guns, gangs and poorly controlled chavista militias. Even government forces appear to be only notionally under control as demonstrated by the recent arrest of state security agents following the killing of demonstrators. Reestablishing any semblance of monopoly over the means of violence, in the context of growing popular discontent, necessitates a massive use of force and a degree of unity and coordination among government and military leaders that is clearly not present at this time.

Amid such deepening tensions and anarchy, the most logical exit is a military coup. Given years of chavista cleansing within the armed forces and with the opposition essentially bereft of weapons, the game would play out within the regime itself. In such a scenario, options are many but two look most likely: Maduro himself could find inspiration in Alberto Fujimori’s “auto-coup,” closing the political system to introduce harsh reforms and clean up the security mess. With that said, National Assembly President Diosdado Cabello, a former lieutenant widely felt to have much tighter links with the military, is in a better position, especially as he could blame Maduro for the crisis and, given the reservations he has expressed in the past, present himself as a true alternative. In either scenario, foreign players, especially Cuba, will likely play an important role. This is another story, however. For now, the domestic game is most prominent, and prospects most depressing.

[This commentary was first published on the CIC blog:]

Wednesday, February 19, 2014

There is no "Beyond NAFTA"

IN 1994, NAFTA was as much integration as the needs and politics of its three member countries could afford them. Twenty years later current politics are less amenable than they were to deeper integration, and needs are fewer. Treaties are tougher to undo than to do, and NAFTA won't disappear. But a sequel --better, bigger, deeper--will just not happen. We are back to bilateral agendas, and we should focus on them.

North-American integration had two pillars: the auto industry, with truly North-American production chains, and the energy dependence of the United States on its two neighbours. Only the first was really a trilateral agenda and as the industry is now reconsolidating along a US-Mexico axis, with Canada an increasingly marginal partner, a core rationale for regional integration is withering. Energy proved crucial to the Canada-US deal, but was left out of NAFTA because of nationalist qualms in Mexico. Still, the US's unquenchable thirst for energy, and the reserves and investment needs of its neighbours created a sense of regional interdependence. This second pillar is now crumbling as shale oil and gas transform the US into a self-sufficient energy behemoth.

Twenty years go, moreover, there was no China factor. Yes "Asia-Pacific" was seen as the world's forthcoming engine of growth, but nobody could sensibly bet the house on Asian markets or see them credibly as an alternative to America's. How things have changed. China's share of Canada's trade is increasing as fast as the US' share is declining. The simple fact that Obama could dither for so long on Keystone shows how weak Canada's hand has become on what used to be the central strategic vulnerability of its neighbour. Obviously, killing Keystone will precipitate Canada's turn to Asia, but approving it would not alter the fundamentals: the two countries' economies are drifting apart and soon, the old joke about Canada getting the flu each time the US coughs will need to be "chinezed."

Mexico has been moving in the same direction, as China has become the country's second largest trade partner. The movement, however, is much slower and likely to be much less radical than for Canada. The degree of economic, social and cultural integration of the border area, now reinforced by the redeployment of the auto-industry, has created a level of interdependence that has probably never existed between Canada and the US.

With trilateral stakes so low, there is no logical reason for current administrations to spend scarce political capital on deeper integration and, surprise, surprise, they don't. Meanwhile, however, bilateral agendas pile up: infrastructure, security, environment, water, migration, visas, standards, and so on. The best way to address those challenges is to frame them from the outset as bilateral issues. 

In that new landscape, the US remains Canada's most important partner, especially, if anything, as its increasingly resource-dependent economy is now hooked--both literally and figuratively--on China. Mexico, moreover, matters for Canada and it is just ridiculous that some progress on travel restrictions had to wait for a trilateral meeting to take place. As a significant trade partner, an important link in the value chains of major Canadian companies, and a society with which increasingly close links have been built over the years, it merits more attention from "the Centre" than it has received. That attention should be freed from the NAFTA shackles in which it is still stuck in much public discussion and policy development.

Continentalism and North-American integration made lots of sense a generation ago and clever political leaders seized the day. The very same ideas have now become blinders. We should drop them.

[This post was first published on Open Canada.]