Lula in charge

A stalling economy will challenge his welfarism

At a time when peaceful transitions of power in democracies can be open to doubt, Brazil must celebrate the fact that 77-year-old Luiz Inacio Lula Da Silva, popularly known as Lula, could be sworn in without disruption for a third presidential term on new year’s Day. His accession after a fiercely fought election, which saw him win in a run-off by a wafer-thin margin, was by no means assured. Incumbent Jair Bolsonaro had contested the result in court and he and his supporters sought to mobilise the military to back him. Remarkably, both institutions declined to entertain these demands, with the electoral court adding a fine of $4.3 million against the parties in his coalition for “bad faith litigation”.

The fact that the military, which ruled Brazil from 1964 to 1985, refused to support the claims of a former soldier is a notable sign of the depth of Brazilian democracy. Even so, the transfer of power was grudging, with Mr Bolsonaro, like his role model former US president Donald Trump, declining to attend the transition ceremony and leaving the country. That provided Lula with an opportunity to turn the traditional handover of the presidential sash into a populist event. Instead of receiving the sash from the former president, it was handed to him by a group of ordinary Brazilian citizens, including a leader of an indigenous tribe, a man suffering from cerebral palsy, and a black youth, all representatives of people whose rights he pledged to fortify in his inaugural speech.

As grand gestures go, this one was graceful and canny, signalling to the people that the era of big business and growing inequality, hunger and poverty had ended. But there are doubts over whether Lula will be able to replicate or expand on the redistributive policies — such as the signature Bolsa Família  welfare programme — of his first two terms (between 2002 and 2010) with the same degree of success. For one, with the debt-to-gross domestic product ratio at 90 per cent — thanks to Mr Bolsonaro’s last-ditch move to introduce cash handouts to poor families and cap electricity and fuel prices ahead of elections — and economic growth stalling, Lula has limited room for manoeuvre.

For another, the long commodity boom of his first term, which enabled him to deploy surpluses from oil, soyabean, and iron ore exports to finance welfare programmes, invest in infrastructure, and pay down national debt, is over. Even oil prices have come down after the initial surge in the wake of Russia’s invasion of Ukraine. As for his pledge to reverse the massive deforestation of the Amazon and put climate change and the rights of indigenous people at the centre of his welfarism, Lula is likely to face strong opposition from business interests vested in agribusiness industries centred on the timber trade. Not only are these powerful businesses strongly represented in Congress, where the majority lies with Mr Bolosano’s party and allies, they are likely to be hostile to almost every aspect of Lula’s governing agenda. They can also be expected to put pressure on a corruption scandal for which Lula had been sentenced to prison but acquitted on a technicality by a higher court. In short, the return to “normality” that Lula promised in his inauguration speech is likely to be a tough ask.