A Southern Pulse hot take on Lula’s win

Rovena Rosa/Agência Brasil

Lula won. That statement seemed far from true a little over three years ago when the embattled Brazilian politician entered prison for corruption. He was out within 18 months on a “technicality.”

With just over 50% of the vote, the founder of Brazil’s Workers’ Party, former steel factory worker, and former president of Brazil, Luis Inácio “Lula” da Silva, will again assume the helm of the largest democracy in Latin America. Here are five points our team has been discussing internally since the news broke late Sunday, 30 October 2022.

First, it’s not the same Lula. The former president and close associates have tested the Brazilian justice system and found it lacking, but sound. He didn’t serve a full sentence, but he did serve just over 18 months. There are many, many things wrong with the Brazilian justice system, going back to the end of the military dictatorship, but Lula knows that he’s not going to get away again with the broad-spectrum corruption that occurred under his watch and which was uncovered by the now infamous Operation Car Wash (Lava Jato in Portuguese). Lula is a talented, experienced politician, but he’s 77. His administration will be heavily tuned toward reestablishing his political footing and that of his party. He needs to earn the people’s trust. Temptation to take a white envelope is eternal. Lula will think twice before participating in anything that resembles Lava Jato again, but it will be difficult for him to avoid lower-level corruption.

Second, it’s not the same world. When Lula first came into office in January 2003, he benefited from at least two strong tailwinds: oil and China. Brazil discovered offshore oil during his presidency. The term “Blue Amazon” was coined as a reference to the expansiveness, and wealth, of Brazil’s off-shore holdings. Petrobras benefited enormously. So did Lula’s administration. China entered the WTO in late 2001, prompting a decade-long tear on global commodity markets. Brazil’s agricultural sector enjoyed a historic windfall as a result. Both oil and China dumped hundreds of millions of Brazilian Reais into public coffers. To his credit, Lula and his team used some of this money to lift millions out of poverty. This fact alone played no small role in bringing him back to office. But he’ll not pull off the same trick twice.

Third, and related to the above point: globalization was increasing in 2003. Nearly two decades later, we can look back and see globalization’s high water mark somewhere in the mid 2010s. In 2022, a US-EU power bloc faces off against a China-led power bloc. Dozens of countries in the developing world are somewhere in the middle between these two global blocs that entice, attract, or demand loyalty. Brazil will need to make a choice. Though it will likely be one that Lula tries to defer for as long as possible, he will be met with offers from both sides. The globalized world that championed “emerging markets” is not what it once was. Everyone will need to pick a side as long as Russia’s Putin continues to push his agenda onto Ukraine, in the near-term, and as long as Xi Jinping runs China in the long-term. Brazil did well courting both the US and China in the 2000s, but those days are over.

Fourth, Lula cannot easily control the legislative branch this time around. Lula is a skilled negotiator. And while political allegiances often change in Brasilia, Lula’s administration will likely struggle to achieve any significant legislative action before the next midterms in Brazil. His focus now will be on implementing executive initiatives that bolster his administration and lead to more votes, with an eye to winning him a significant portion of Congress. The good news for Lula is that at least two of his campaign promises — protecting the Amazon and bringing unity to Brazil again — are conceptually within reach. Both at home and on the global stage, Lula will need to pick a path out of Brazil’s last four years of navel-gazing under Bolsonaro, and stick with it.

Finally, the opposition. As this piece goes to press, truckers are protesting and have been blocking major arteries across 12 Brazilian states. Lula’s mandate is thin. He will face internal legislative and social battles in the next few months that we cannot begin to predict. One thing is clear: Bolsonaro’s team knows how to use information to manipulate public opinion. Brazil has never seen an opposition so well armed for a disinformation campaign. Time will tell whether or not, or how, they will use it.

Whether it’s Brazil or elsewhere in Latin America, Southern Pulse has the experience, network, and relationships to simplify this challenging region with honest, direct answers to your most complicated questions. Want to learn more? Let’s chat.

Image credit: Where we work/Southern Pulse

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Southern Pulse

Southern Pulse

Southern Pulse provides strategic advisory services to help businesses operate successfully in Latin America.