“This year industry is going to chalk up the biggest growth in its history”, said a triumphant Carlos Lupi, Brazil’s labour minister, in the middle of March 2010. “All sectors are growing fast, and exports are picking up well, especially textiles and footwear.” Overall economic growth this year is expected to reach 5.5%–6%, a very good prospect for a country that just a year ago was fearful of being sucked into a prolonged world recession.
So, not surprisingly, the “feel good” factor is running high (with Brazilian journalists using this expression, in English, as there is no equivalent in Portuguese), and President Lula, in his eighth and final year of government, enjoys very high levels of popularity. When, on Friday 19 March, José Serra, from the opposition PSDB party, currently governor of the state of São Paulo, declared for the first time that he would be standing for the presidency in October’s elections, he had to admit, somewhat ruefully, that Lula had led “two good governments”. His strategy, it seems, is to claim that he, with his administrative experience, is better equipped than Dilma Rousseff, Lula’s chief of staff and candidate of the ruling Workers Party (PT), to carry forward Lula’s legacy.
Much of the growth at home stems from success abroad. Brazil used to be a very ‘closed’ economy, with a low level of foreign trade. But since 2000 Brazil’s exports have been expanding by an average annual rate of over 13% and, as a result, its export-to-GDP ratio has increased from 13% in 2000 to nearly 19% in 2008. Farming has played a huge role, for agricultural and food products account for about 35% of the country’s exports. Brazil is the world’s top exporter of six key agricultural commodities – sugar, beef, chicken, orange juice, green coffee and the ‘soya complex’ of beans, meal and oil.
Just as extraordinary as the success of its export boom has been the transformation of the Brazilian economy. Luciano Coutinho, the president of Brazil’s powerful economic development bank, the BNDES, has repeatedly called for the formation of ‘Brazilian champions’, the equivalent South Korean chaebols and Japanese keiretsu. Far from fearing the emergence of ‘monopoly capital’, the government has put its money where its mouth is: in 2008 (the last year for which figures are available), BNDES made loans worth R$128bn (US$80bn), most of it geared to building infrastructure for export and funding mergers and take-overs. The loans made by BNDES were worth more than the total amount lent by the World Bank, the Inter-American Development Bank (IDB) and the US Eximbank.
With the support of BNDES, companies like Odebrecht, Camargo Corrêa and Andrade Gutierrez, which used to be large domestic construction companies, have grown into gigantic, diversified conglomerates, with investments in a whole range of activities in many countries. The number one priority has been Latin America, but investments have also grown rapidly in Africa and the Middle East. For instance, Odebrecht has become the largest private sector employer in Angola, with activities in food and ethanol production, supermarkets and other areas. Not surprisingly, its executives enjoy direct access to the country’s ageing President, José Eduardo dos Santos. Odebrecht is also active in Mozambique, another country with which Brazil has a common language, where it is working with Brazil’s giant mining company, Vale, to develop the country’s huge coal reserves.
Much of the investment abroad is linked to Brazil’s goal of obtaining a larger share of world trade. With BNDES funding, JBS, Brazil’s biggest beef packer, has taken over a whole swathe of companies at home and abroad, including all of Argentina’s largest beef producers, the Smithfield Group’s beef division in the US and numerous Australian beef producers, including the AMH and Tasman Group, which are now all part of the JBS-owned Swift Australia. Though not a household name, even in Brazil, JBS is today the world’s largest producer of beef. And the government is hoping for more: it expects that Brazilian companies, with JBS at the helm, will have doubled their share of the world beef market by 2018 so that they account for a remarkable 60% of the global market.
‘Saudi Arabia of ethanol’
Perhaps the area where the government is putting most effort is the production of ethanol from sugarcane. Because it has been making ethanol for more than 20 years, Brazil has built up impressive technological expertise in this area, and it now sees this as a route for gaining more economic clout abroad. Several years ago President Lula was derided for claiming that ‘Brazil will become the Saudi Arabia of ethanol’, but in many ways this is what is happening.
Ethanol plays a central role in Brazil’s desire to forge a much closer economic, political and commercial relationship with Africa. Lula has long been keen on the Green Revolution in Africa, pledging Brazil’s support to assist the continent to increase food and energy security through cooperation, technology and skills transfer. According to a recent report, “Commercially, Brazil hopes to leverage its status as one of the world’s most advanced and rapidly growing agricultural and renewable energy powerhouses by deepening its reach in vibrant and untapped markets throughout Africa.”
Brazil’s strategy includes working much more closely with US and European multinationals. In February this year Royal Dutch Shell, one of Europe’s leading energy companies, took the first steps towards merging with Cosan, Brazil’s largest ethanol producer, in a deal said to be worth US$12bn. This is no old-fashioned takeover of a Brazilian company by a much more powerful multinational, but a new-style ‘horizontal’ consolidation. Cosan will pool its 23 sugar mills with Shell’s Brazilian interests, including its work on the next generation of biofuels. Together, they will consolidate Brazil’s position as the world’s alternative energy superpower.
Assertive foreign policy
Brazil’s growing economic clout has made Lula much more confident in developing an independent foreign policy. He has long asserted his right to befriend both Fidel Castro and Hugo Chávez, controversially inviting them to his inauguration in January 2003. At times, Lula has blundered in the defence of his friends. This was the case, for instance, in March this year when, after the death of the Cuban dissident, Orlando Zapata, after 85 days on hunger strike, Lula said that a hunger strike should not be used as a pretext for alleging an infringement of human rights. ‘Imagine if all the criminals in prison in São Paulo went on hunger strike and demanded to be let free’, he explained. Lula is said to harbour ambitions to become the next UN Secretary General and comments like this one will not have advanced his cause.
On other occasions, however, Lula has made observations that have resonated well among the left. This is the case with his much-publicised reluctance to join in the chorus of criticisms of Iran’s president, Mahmoud Ahmadinejad. Brazil has commercial ambitions in Iran, as it wants to play a central role in helping the country develop its huge sugarcane industry to develop ethanol. But this does not invalidate the concerns raised by Lula, many of which are shared by the left throughout the world: why has Iran been so widely criticised when few voices have been raised against Israel’s decision to acquire nuclear weapons? And why has India, which, unlike Iran, has refused to sign the non-proliferation treaty, gained preferential treatment from Washington?
Development for whom?
Despite the satisfaction at seeing Brazil raise its profile abroad, many on the left in Brazil are profoundly unhappy with the form of Brazilian expansion, both at home and abroad. The role of the BNDES causes particular concern, as the left-wing newspaper, Brasil de Fato discovered when it canvassed opinion around the country for a special edition on the role of the bank. Fernando Cardim, from the Universidade Federal do Rio de Janeiro, said that, while it was true that the Lula government had brought back the old concern for development, something that had been completely abandoned during Fernando Henrique Cardoso’s two administrations, it was the kind of development that gave priority to large national monopoly conglomerates.
Father Dario Bossi, a campaigner in the Amazon, agreed: “The type of development promoted by the BNDES is based on big projects, which cause a great deal of social and environmental damage and bring few benefits to the local population.” One example he gave was the BNDES funding for vast plantations of genetically modified eucalyptus along the railway line taking iron ore from Vale’s huge mine in Carajás to the port in the state of Maranhão. “Ignoring our dreams of preserving the Amazon forest and creating small rural communities, the authorities have once again given in to the strongest lobby and allowed agribusiness to get its way”, said Father Dario.
Promoting regional fragmentation
Guilhermo Carvalho, from FASE, Brazil’s largest non-governmental organisation, makes a similar point: “BNDES investments are made to further the interests of the Brazilian state”, he said. “Far from promoting the integration of South America, as the government claims, they have the opposite effect, increasing regional and social fragmentation.” The historian Mathias Luce says that the BNDES has undermined the viability of local companies in neighbouring countries: he points to Uruguay, where funding from the BNDES permitted two Brazilian beef packers – Friboi and Marfig – to buy up local companies and to control 60% of Uruguay’s beef industry, one of the few viable sectors of the economy.
There is little doubt that Brazil is turning into a world power. Yet – despite Lula’s very real concern with the welfare of the millions of very poor Brazilian families – the kind of self-interested, hard-headed development that Lula is promoting does not differ in any fundamental way from that pursued by the US and Europe over the last century. It is a far cry from the early ideals of the Workers’ Party, with its emphasis on ethics, social redistribution and solidarity with workers in the rest of the world.