On March 19th, political scientist and risk analysis expert Alexandre Barros discussed Brazilian President Luis Inácio Lula da Silva's first 75 days in office. Barros's presentation satiated a thirst among international observers for insight on current risks in the economic and political framework of Brazil after one of the most closely followed elections in history.
Facing grim prospects for a quick global economic recovery, Barros noted that Brazil is also forced to cope with overwhelming social demands on the domestic front. He noted that the central challenge for Lula's administration will be to transmit confidence to foreign financial markets by demonstrating respect for existing contracts while simultaneously addressing social needs, trimming public expenditures, fighting corruption, reducing the debt burden, and promoting economic growth. Consequently, during the first days of his administration, Lula has adopted a very orthodox set of economic policies not dissimilar to those already being implemented by the previous administration. According to Barros, "there is nothing more similar to a conservative than a liberal in power."
In this context, Lula has been pursuing a responsible economic policy based on maintenance of fiscal prudence while pushing for reforms of the tax (revenue sharing) and social security systems as well as securing the autonomy of the Central Bank.
Although not unexpected in a new and inexperienced administration, some flaws have begun to appear in the form of details overlooked in major policies, prompting critics to question the efficiency of Lula's administration. Barros felt that these criticisms, in addition to what he referred to as "ego disputes" and the possible radicalization of some factions of Lula's political party (the PT) could raise red flags in any analysis or predictions regarding this administration. He also raised concerns about dual standards for the administration's appointments - Lula filled economic positions with individuals who were technically qualified, while appointees in other sectors were designated for political reasons.
Barros emphasized the importance of addressing the debt burden (67% of GDP in 2002) and for the Central Bank to achieve its targets, reducing its vulnerability in dollars. In order to achieve these goals Brazil needs to increase its exports which places enormous importance on bilateral trade with the United States (whichaccounts for 23% of Brazil's imports and 24% of its exports).
Mr. Barros categorized several issues as "big if's" deeming them too underdeveloped to make reliable predictions. Those areas include privatization, deregulation, social expenditures, growth and debt, and friction in Brazil-US trade relations. Barros felt that Brazil's overall outlook could be sunny or bleak hinging on the administration's effectiveness in managing these variables.
The deterioration of global political and economic conditions as well as the emergence of serious domestic challenges are concerning trends. Barros, however, remains optimistic for Brazil's future - he believes Lula's election and the first steps of his administration have been surefooted. Moreover, he believes that the entire process represents a true revolution in Brazilian politics, forcing observers in Brazil and around the world to view today's government in a new light.