Thursday, July 18, 2024

LATIN AMERICA | 30-09-2022 09:32

Henrique Meirelles: ‘Whether the president-elect is Lula or Bolsonaro, they face a difficult situation’

Brazil's former economy minister and Central Bank governor Henrique Meirelles on the challenges facing his country, Lula’s run for office and whether Jair Bolsonaro is a threat to democracy.

Brazilian economist Henrique Meirelles, who served as Central Bank governor during the Luiz Inácio Lula da Silva presidency and economy minister under ex-head of state Michel Temer, is sure that Jair Bolsonaro will remain a force in politics, whatever the result of Sunday’s election.

Meirelles, 77, analyses the upcoming presidential elections, looks at the challenges facing the next administration and gives his opinion on the current and former presidents. 


A“Letter to the Brazilians,” signed by businessmen, economists, legal experts, intellectuals and artists, was recently published. Do you think democracy is in danger in Brazil and what do you think specifically of this letter?

The “Letter to the Brazilians” was indeed important and relevant in setting very clearly the pulse for the election. Most of the business class, analysts and representative social figures are clearly saying that democracy is fundamental for the country – not just for growth, liberalism, the real economy, job creation and the generation of income but also as a value. Here I would echo Winston Churchill’s defence of democracy as being the worst of all the systems with the exception of all the others. Because authoritarian regimes have very defined programmes so the letter is very important in that sense. 

The fact that it was necessary says that in a certain way there are relevant people and politicians defending that and there has even been an email exchange between people and businessmen supporting the president openly defending a coup to establish an anti-democratic régime should the president lose. This has generated a lot of controversy because the Federal Supreme Court via one of its justices is heading the process also including the deputy attorney-general to investigate to what degree these people were really conspiring against democracy or not. Now there is no doubt that this was not only controversial. President Bolsonaro’s partisans tend to make these power alliances to attack much of the electoral process, which was greatly strengthened in Brazil by the 1988 Constitution. Electronic voting has been established with audits and not only controls but the president himself has questioned it. 

Society has expressed itself and the president has said that he will respect the result of the ballot-boxes, whatever it may be, which is very important. So the letter is really important at a time when a very numerous group of people judged that democracy ran some risk and it is very important that society via most of its representatives makes that very clear.


Should Jair Bolsonaro maintain his discourse against the system of electronic voting and not recognise the result of the elections if adverse, do you think that’s a threat for Brazilian democracy?

I understand that it would be because he has questioned so much the result of electronic voting, trying to roll it back in favour of paper ballots which no longer exist in Brazil and have not done so for a long time. He even created a commission of the Superior Electoral Court but also with other institutions (including the Armed Forces) to monitor the election. So it is not known to what extent the president is really thinking of doing something about this election or whether it was pressure, political promotion as a way of mobilising his electoral base, which is very fanatical and united around him. 

I’m at a stage in my life when I do not dedicate myself very much to judging what is inside other people’s heads, what their intentions are. I do not judge, I observe exactly what he wanted with that, whether he really had the intention of trying something out or was simply mobilising his base. So I don’t know and I think it’s a bit of a waste of time trying to judge. The important thing is that they are starting to show that they have accepted the result of the elections and that is very important, despite maintaining such a bellicose tone.


If Bolsonaro loses the elections, would his figure survive beyond a single presidential term?

I think so. He has a strong support base, a minority but with very deep roots and he keeps his focus on that electoral base. And there is no doubt, I believe, that if he loses the election, he will continue to be a relevant politician in this country with great influence. One example of that is Donald Trump in the United States, still a very important factor – so much so that today we have almost lost sight of the traditional Republican Party, which was always a strong and balancing presence in US politics, despite which there can be no doubt that Trump is the undisputed leader of the Republican Party. 

The balance here in Brazil is different; we do not have a two-party system so that the situation is not as polarised as over there from the standpoint of parties despite being polarised from the standpoint of the two main candidates. But the fact remains that anyway he will continue to be, in my opinion, a relevant and influential politician in this country.


Henrique, what do you think of the alliance between Lula and [Geraldo] Alckmin, a historical name from the Brazilian conservative right? Do you think that there is chemistry between them and that the whole of this ticket is greater than the sum of the parts?

I think that in reality this was a politically intelligent attitude on the part of Lula. Alckmin served more than one term as governor of São Paulo where Lula and his PT (Partido dos Trabalhadores) have lost past elections. Lula was never very strong there, even when he won, so this permits him to have a relevant position. Now what does this really mean in terms of the economic policy of a Lula government? We don’t know, that’s another story. I don’t know to what extent Geraldo Alckmin will influence Lula’s economic policies – that’s not clear.


Fernando Henrique Cardoso has already admitted that he will be backing Lula against Bolsonaro. Do you see this as a gesture in favour of democracy?

I think so. Firstly, for democracy and also towards a natural evolution, a new turn in the cycle of history. When the PSDB social democrats and the PT were founded, the two parties were very close to each other in ideology and doctrine. As from 2002 they grew increasingly apart, mainly from Lula’s aggressive attitudes after losing three presidential elections in 1989, 1994 and 1998. There was a great grudge match, not only from Lula’s people but also both the PSDB and PT parties. But now that fact is that I think they’ve got over it, consigning it to history. That’s why I think it’s important to give unquestioning support to Lula’s candidacy.


Is there a political polarisation where it will be more of a success for anti-PT or anti-Bolsonaro feeling with everybody voting against something?

That indeed exists. I participated in much of the PT governments. The two terms of the Lula presidency were highly successful – in my opinion, the second term was not as well administered as the first but it turned out well. The concrete fact is that annual growth in Lula’s Brazil averaged around four percent, jobs were created and 30-40 million Brazilians made an exit from poverty. It was a good government and I was an independent Central Bank governor during the entire period, keeping inflation at bay and expanding credit. But the fact is that in the third PT term, President Dilma [Rousseff], the candidate elected by the people, made a very bad start. She believed – and still believes – in runaway public spending to promote development, as well as in state intervention in the economy. All these factors gradually undermined her government with rising unemployment. The effects were not immediately noticed because of the momentum of the Lula governments but already in 2014, Brazil was entering into a very steep recession. 

When Michel Temer, who was Dilma’s vice-president, took over as president following her impeachment, he invited me to become economy minister. I accepted and the situation was really alarming. In the 12 months between mid-2015 and May, 2016 when I took the post, the Brazilian economy slumped 5.2 percent. It began to grow again and 2016 finished only 3.6 percent in the red. Now Brazil has slumped a lot exclusively due to fiscal factors, so much so that we have still not been able to recover. That is one side of the question, the other side (with even more impact, I believe) was the ‘Petrolão‘ scandal of the misallocation of Petrobras funds. This situation greatly aroused public opinion while the courts carried out the so-called ‘Lava Jato’ (“Car wash”) operation, which became very famous and gave me and many other people many sleepless nights - even at a great cost to businessmen who were convicted after being arrested and confessing in a plea-bargaining process known as ‘Delacao Premiada,’ where they confessed and denounced many other people in exchange for lighter sentences afterwards. And that created this strong anti-PT feeling, which was very favourable to Bolsonaro, who was then stabbed and ended up as a victim in hospital without being able to attend most of the debates and could thus cash in on a large part of that sentiment of revolt against the PT, not just because of the issues of recession, unemployment, etc. All this is his raison d’etre.

Now after almost four year of a Bolsonaro government, there also exists an anti-Bolsonaro sentiment. So we have feelings against Lula or against Bolsonaro. The latter comes from his stance on the pandemic and also a series of other things, the issue of his combats against electronic voting and the institutions. So what we have today is a very polarised situation with an anti-Bolsonaro sentiment in the PT. But there are also pro-PT, pro-Bolsonaro and pro-Lula feelings. Both have people voting against them but also in their favour. Many people like Lula’s style and  glories, giving him their unconditional support. There is thus no doubt in my mind that the election is polarised. The recent debate has produced a new factor with the [PSDB] candidate Simone Tebet, who was its best participant in the general opinion – and also mine – better than Lula and better than Bolsonaro. Another candidate, Senator Soraya Thronicke, also performed well. Nevertheless, I think that this will give her prestige and political clout for the future when she may reach the second round and defeat either Lula or Bolsonaro. I think that this second round will most probably remain polarised between those two but that’s a new and relevant factor. 


All consultants agree with Lula being ahead of Bolsonaro in the opinion polls so will Lula beat Bolsonaro?

Lula is the favourite, beyond any doubt, but I think the election will be tough. I believe that the difference will depend a lot on the pollsters because the opinion polls are throwing up very different results. There are many opinion polls, some based on street interviews, some carried out in people’s homes and some done by telephone – all giving very different results for the elections nationwide. One impressive and also questionable figure is the slow erosion of his advantage but Lula remains the favourite and the most probable winner but I don’t believe that Bolsonaro has lost the elections, no. 

I think that this election is in dispute. Indeed it is becoming clear that Lula’s PT campaign managers are beginning to take more seriously the hypothesis of the Bolsonaro couple that they can clinch the election via handouts (such as Auxilio Brasil for teamsters). Losing all this will generate an economic and fiscal problem but the fact remains that it has influence. The opinion polls are not conclusive. How many votes will really be changed or consolidated due to this? There is too much controversy. Some data show this difference and I believe that we still have plenty of emotion ahead of us.


What do you think will be the economic scenario which the election winner will have to face?

Whether the president-elect, who will take office next year, is Lula or Bolsonaro, either of them will face a difficult situation due to the extremely high spending. There is also another important parallel movement in Brazil, which is the issue of the empowerment of Congress – stronger than in previous decades from the viewpoint of the allocation of budget funds, including the so-called ‘secret budget’ in which the parliamentarians alternate the allocation of funds every year and where certain sectors cannot be followed. These so-called parliamentary amendments are not divulged and are not transparent – this is a new factor attesting to the strength of Congress, particularly the libertarians. So whoever is the candidate facing this situation, it is not just a question of fiscal effort – it’s a new institutional situation where Congress has a lot of power. 

We have always had what is known as a presidential democracy with a coalition to take Congress into account. Now I believe that Congress has more real and financial power. Congress with its secret budget adds to the spending increases through a series of measures, whether taken by Congress or by the Bolsonaro government to increase his possibilities of re-election, all fitting into the idea that Brazil is undergoing an economic crisis. 

I personally have a clear idea about this. I think that it was necessary to help the population so that there is no hunger in Brazil. Now I believe that the solution to this is social programmes but raising funds to finance those social programmes to reduce spending. I think that if well carried out, an administrative reform, for example in the state of São Paulo, could offer many funds which could be redirected to social programmes, infrastructure, etc. We did this in São Paulo, for example – the state, which had financial problems in 2019 when we took control, made some administrative changes, cutting benefits and spending while closing down state-run companies in various areas. That was more than justified, generating a cash flow for the government. I believe that can be done in Brazil, that’s an instrument worth a government commitment.


You are known as the person who revived the Brazilian economy, which now faces high inflation and rising interest rates. How do you view this panorama and what measures would you advise the new government to take?

The fact is that Brazil is in shape to face these problems. Firstly, administrative reform is fundamental, like I said. Secondly, a tax reform to simplify the process rather than increase revenue. One of the main obstacles causing the current low growth in Brazil is precisely the great complexity of taxation, as studies have already demonstrated very clearly. 

To recap, administrative reform to create funds for social programmes and investment in infrastructure and tax reform to increase the productivity of the Brazilian economy – I believe that both are absolutely fundamental today and that Brazil could begin to grow in the next few years for sure.


As a final question, how do you see the economic situation in Argentina and how do you think that a crisis in Argentina or an Argentine recovery could affect the Brazilian economy?

I’m not a great expert on the Argentine economy. I was following my colleagues when I was in the Bank of Boston, which had a major presence in Argentina and I was following the Argentine economy a lot then. Afterwards when in the Central Bank, I had very good cooperation with Argentina’s Central Bank, accompanying the crisis of 2002 and the flight from the dollar. But the basic problem is the issue of dollar debt. All the negotiations are in that area, which complicates the domestic economic situation. So I hope that things improve but it is difficult to solve because we are in a complicated global cycle for an indebted country, especially with a scenario where the Federal Reserve is raising interest rates in the United States, which could make all this more difficult. But I do not follow the Argentine economy on a daily basis, as I did in other periods. I hope that everything turns out well and that everything improves but it is a challenging situation, especially with the issue of foreign debt.


Producción: Sol Muñoz and Sol Bacigalupo.

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Jorge Fontevecchia

Jorge Fontevecchia

Cofundador de Editorial Perfil - CEO de Perfil Network.


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