Media Briefing on the Presidential Election in Brazil

Participants:
Paulo Sotero, Director, Brazil Institute
Ricardo Mendes, Executive Director, Prospectiva Consultoria
João Augusto de Castro Neves, Political Analyst, CAC Consultoria

Sotero:
Good morning to you all. Just to give a bit of context, this is the sixth general election in Brazil since the reinstatement of democracy in 1985. It is very significant. We're going to elect on Oct. 3, as always on a Sunday, we are going to elect a president, the vice-president, governors of 27 states and the federal district of Brasília, 530 congressman, 54 senators, which is two-thirds of the senate, and all the delegates to all state assemblies. So it is major, and the campaign has been going on for quite a while, although it really got going on Aug. 17, when the candidates had access to free TV time. It is allocated according to the strength of the coalition that supports each candidate, so on the presidential race we have 12 candidates, although only 3 of them are of any significance. There are Dilma Rousseff, the former chief of staff to President Lula and the former Minister of Mines and Energy, originally from the state of Minas Gerais but politically from the state of Rio Grande do Sul, the southernmost state in Brazil. The other candidate is Jose Serra, former governor of Sao Paulo, former mayor of Sao Paulo, former senator from Sao Paulo, former Minister of Planning and Health, former congressman, really a very experienced politician. This is the second time his is running for the presidency; he lost to Lula in 2002. And we have also Marina Silva, former minister of the environment for President Lula. She was a founding member of the Workers' Party; she switched parties and is now a leading member and presidential candidate of the Brazilian Green Party. From where we stand now, the polls suggest that Dilma Rousseff will be the next president; there is only one slight doubt whether it will happen on Oct. 3. She is very close or maybe is already in a position to wrap things up in the first round. In Brazil, in order to be elected president, you have to have fifty percent of the valid votes plus one. Dilma may get that in the first round. There was a flurry of scandals involving the misuse of information coming from the Brazilian equivalent of the IRS, and more recently something that involved an alleged influence-peddling from Dilma's successor as chief of staff. This person has already resigned her post, and all of these scandals have not seemed to gain political traction. One reason that is given is that we have lots of scandals all the time in Brazil, and most of them amount to not much. Since the economy is doing quite well right now, and most Brazilians are benefiting from it, especially poorer Brazilians, most people are quite pragmatically saying "Why should I bother right now about scandal and if we always have those? If I am doing okay right now, why should I be bothered by it?" So that is the explanation given.

Mendes:
Good morning everyone. Just to add to Paulo's introduction. Basically, the polls are showing that election has been decided – not it is just whether or not we are going to have a runoff, although it seems that we will not. According to the latest polls, we have Dilma Rousseff with 51% of the votes, against 25% for Jose Serra, and 11% for Marina Silva. An interesting movement that we see is that Jose Serra is losing votes, and he is now losing votes to Marina Silva. Dilma does not seem be losing votes; she has been steady at 51% for the past three or four weeks. The impact of the first scandals that Paulo mentioned did not seem to have any impact on the polls, although there is a new scandal that came out today. However, it does not seem that it will have much of an impact. Also it is important to look at the next government and the priorities areas that the Brazilian electorate expects this government to be active. A recent poll by Ibope shows that the public security sector is that main concern of the Brazilian population. The poll showed that 55% of the respondents, in spite of the very high approval rating of President Lula, did not approve of his performance on public security. So it is an area that Dilma will have to deal with. A second area is healthcare. 53% of the population do not approve of Lula's healthcare policies. The opposition candidate, Serra, is a former Minister of Health, and was very popular in that post. He tried to use this as a main campaign element, highlighting the problems the current government has had in this area, but it did not get a very strong response from the electorate. And finally the third issue that was not evaluated well in this administration is the tax structure. Although it is not part of the wider debate in public opinion, when asked in this poll, 52% said they did not approve of Lula's tax policies. Just to conclude, if you look at the profile of Dilma Rousseff and the challenges she is going to face as president – Dilma is not a politicians; this is the very first time she is running for elected office. Her political career has been built on technical and managerial capacity. She comes originally from the natural resource sector, and has some experience in the energy sector, but she does not have much experience dealing with congressional issues, for example. This could be one of the biggest challenges she will face. She is likely to have the largest majority in Congress since re-democratization, both in the lower house and the senate. So she should have the numbers needed to implement her policies. Although she is likely to have all of this support from congress, she might have some leadership problems – she is not a founding member of the Workers' Party, and there is opposition from within the party to her leadership. So people are expecting that there could be challenges in for her here. She is complementing this deficiency with her vice-presidential candidate, Michel Temer. He is a very experienced politician with vast legislative experience. He is also one of the few consensus names within the PMDB – the largest party in Brazil – and he is the current speaker of the House, so he is likely to play an important role in her government, especially in getting her agenda passed through the legislature.

Castro Neves:
Everyone seems the past few weeks to consider this election a done deal, with Dilma hovering right above 50%, and the prospects of a second round seem quite slim. That has to do with the nature of the current scandals around her. In Brazil it is possible to classify scandals according to their impact or scope – in order for a scandal to trickle down to all voters, it has to be more graphic. You have to have a picture of something, or a video. There are a lot of examples of that, including in past presidential elections. In 2002, there was the case of the dossier against Jose Serra in the Estado de Sao Paulo, which included a video, which helped take that national election to a second round. In 2002, there was the case with then-governor Roseana Sarney, with a picture of a table full of money. Today, the question is why these scandals have not stuck to Lula or Dilma, and it is mainly because there have been no pictures or videos. The impact of the scandals has been very minimal. It impacts those who do not know who they are going to vote for. But there is still a (slim) chance that there will be a second round. But what I wanted to talk about today is Dilma's governing coalition. The main issue here is not the numbers, because recent history has shown that it is quite easy for the ruling government to increase the number of allies. In Portuguese, we say that is because the government has the "pen," that is, the ability to spend money and name people to government posts. And that is very useful if you want to broaden your governing coalition. So it is not a matter of size, and she will have a broad coalition, at least as big as Lula's. The matter is of efficiency, and that is where the problem lies. We see today that in order for Dilma to maintain the same stability of the governing coalition today, she will have to maintain the cabinet design that Lula created, thirty plus cabinet members, and also even out balances between the largest parties in the governing coalition, mainly the PMDB and the PT. She will have good news on that front, because the PT is likely to balance out a little with the PMDB with who will be the larger party, which should help her govern. However, we are not sure how useful a larger PT will be, because it is quite well known for having internal factions – factions that President Lula held together quite brilliantly. So I think that is the main issue.

Sotero:
One more thing – the main opposition ran a surprisingly ineffective campaign. It was quite bad. For instance, there is in today's FT a piece with former president Cardoso saying that the electorate does not actually distinguish much between the two candidates – if you're doing well, why not stick with what you have – which is Dilma. This is a factor, because Serra is running far below his potential.

Question: My name is Raisa Comargo, Hispanic Link News Service. What are some the challenges that the next Brazilian government will face in defining Brazil's role in South America, and how will they incorporate political and economic engagement with other Latin American countries?

Castro Neves:
The issue of South America is very interesting for Brazil, because the process of regional integration has been going on for the past two decades, but in the past decade this process has stalled in terms of trade and institutional development. Lula has brilliantly dealt with this problem like he deals with many other problems – he knows how to get different people together and not solve the problem per se, but to get people to live with a continuation of the current policy and try to not give permanent solutions to Brazil's foreign policy problems. Mainly, in Mercosul, for example, the trade disputes with Argentina are the same today as they were ten years ago and I think that is a situation that will have to be dealt with. People associated with Serra have mentioned the possibility of doing a step backward in Mercosul, which is today a customs union with plans to become a common market. There are talks for the first time in Brazilian history to forget the idea of Mercosul as a political project but of making it a free trade area – very pragmatic, very business as usual. For the first time that has been talked about by former diplomats that were responsible for creating Mercosul and regional integration in general. Sooner or later that problem will have to be dealt with. Please keep in mind that Brazil has this rhetoric of leading South America and of doing everything for reigonal integration, but Brazil has trade surpluses with all of its neighbors. That is not the whole reason, but that fuels dissatisfaction in neighboring countries. Paraguay wants more on the Itaipu damn treaty, Uruguay wants to deal alone with the U.S. on its own, Argentina wants trade exceptions, etc. So that's that will become a major issue for Brazilian diplomacy sooner or later.

Mendes:
A quick comment: I think everyone is expecting Dilma's leadership in terms of foreign policy to be much more limited than Lula's, so more will depend on the profile of her advisor for foreign policy – speculations that Marco Aurelio Garcia could continue to be this advisor. The minister and ministry of foreign affairs is likely to play a much larger role in the formulation of foreign policy in Dilma's government – presidential diplomacy will be less important.

Sotero:
For this reason, I think we should keep an eye on the relationship between Brazil and Venezuela. Lula has star power, and he beats Chávez in any popularity contest anywhere in the world, any day. Dilma does not have this charisma, and I believe that Mr. Chávez, especially now that he seems to be in some sort of trouble, will now try to occupy the world stage. How President Rousseff will deal with that remains a mystery to all of us. But behind her will be a country that is much more present in the region because of its economy. For instance, in Venezuela, Brazil has some 5-7 billion dollars worth of exports, including especially the services of engineering companies that are major Brazilian companies. And throughout the region, Brazil's economic interests drive its presence in those countries, although there is no popular constituency for having relations with neighboring countries, there is a growing business constituency. Because they have these interests, Brazil is now an important exporter and investor in those countries. We have borders with eight of the ten countries in South America. It is a major challenge – President Lula used his extraordinary ability to keep people feeling comfortable, he embrace everyone (literally, he hugs people) so he is seen a nice person. But now, Dilma does not have the experience of Lula – he was still a union leader when he first gained international attention, and now she is coming on the scene when Brazil is a much larger quantity internationally and regionally, with neighboring countries viewing Brazil as this growing economy and making greater demands on Brazil, so it will be a challenge – how we develop those relationships.

Question: Given this lack of charisma and experience from the favorite candidate, but still at the same time Brazil will keep going – growing to 2.3% of global GDP in ten years, so what will be the worst scenario for a country that will keep growing at this rate but with a leader that has no charisma?

Sotero:
It is important to understand about Brazil's current success that yes, it is associated and reinforced with the president's popularity, but the basis of everything is economic. It is the economic growth that drives Lula's popularity – take away economic growth in Brazil and Lula rapidly becomes an unpopular leader. Brazilians are very practical in that sense. So Dilma Rousseff will confront a new set of challenges. For instance, one of them in the external accounts, where you can already see deficits accumulating, so we will have to keep increasing our exports and attracting foreign investment in Brazil. We have been successful at doing that – I think Brazil has been the second highest recipient of foreign direct investment among the emerging nations, China obviously being the first, but we have to keep doing that. There are editorials this morning calling it a sort of yellow light for the next year – you're not talking about the crisis, but it is a challenge. There has been a discussion in Brazil, even within the inner circle of Dilma Rousseff, the need or not to make a fiscal adjustment; the current expenditures of Brazil at the federal level have been increasing consistently for twenty years. Its not a problem – our public defitcit is about 42% of GDP, but we know that people such as Luciano Coutinho, economist and head of the BNDES, likely to be Dilma's minister of finance, said here not long ago that the objective is to reduce that deficit from 42% to 30% because he knows that Brazil needs to increase the rate of savings in the economy. In the past ten years the average has been 17%. We know that we need to go for 22-23% because that is the situation that will not only provide the situation to provide the space for the central bank to reduce the interest rates but also to invest in infrastructure that we desperately need in Brazil. So the challenges are real: in that sense Dilma has one advantage vis-à-vis Lula. She understands the details of this. Lula was a president very much in the mold of Ronald Reagan. He is the big-picture guy, and he delegated to other people to manage the details. Dilma has a much more clear view of this, but in the governing coalition you have to manage this and there will be demands on who gets what, how you spend public money – those are diverse coalitions. Former President Cardoso used to describe this exercise as "you have to kill a lion a day" – because it is very difficult, it is very heterogeneous, so you don't go for ideology on this. You have the leftist and the evangelical in the same coalition. In the American context, it would be like having Sarah Palin and Ralph Nader in the same area negotiating. So it takes a lot of political skill.

Castro Neves:
On the political dimension and on the topic of the risks that Brazil's emergence may face without Lula's leadership and international popularity, although Brazil's emergence is based on material resources and the economy, the question is how this translates into political clout. Lula's popularity and charisma shields him from harsh criticisms. He has a photo-op with Obama one day, but he might talk to Ahmadinejad the next. Also, that popularity kind of protects Brazil's diplomacy itself from not having to clearly stand or pick sides on very controversial issues, and that is very traditional Brazilian diplomacy, even before Lula. Brazil abstains very often in the Security Council or in the Human Rights Council, etc. But without Lula's popularity, it will be much more difficult to maintain that neutral stance and not picking sides, and be criticized for it. And the question is will Dilma be able to fend off those criticisms as Lula has been doing inside and outside Brazil brilliantly because of his expertise and popularity. That's the question. Will she not only be able meet with Castro or Ahmadinejad, but is this emergence in the political sense sustainable with a not-so-popular president? And that's the question that will have to be addressed. I think that there will be risks and that she will find it very useful to stand in Lula's shadow for a few months. But in Brazil's political history we've known that political loyalty between the creator and its creatures doesn't last for very long so the honeymoon might be short.

Question: I would like to come back to the comparison between Chávez and Lula, and given the importance of personalized populism in Latin America, who do you think would do better than Dilma to eclipse Chávez on the stage? Who could have been a better choice than Dilma?

Sotero:
The problem here is that the two top candidates share the same temperament. They are not charismatic; actually, if you take some statements that Mr. Serra has made regarding Chávez and Evo Morales, his election could create a series of problems for Brazil because we are very good in part because we avoid taking too many risks, and in part because we see the relationship with the neighbors as a relationship that is by definition positive. We are the big guy there, but we try not to say that too loud. We don't want to make people uncomfortable. Of the candidates, Serra probably knows more about the region than Dilma. He was a student leader in the 1960s, he left Brazil and went into exile, and he lived in Chile, actually completed his studies in Chile, is married to a Chilean, and has friends all over the area. So that would probably compensate for his statements during the campaign that were very critical of Chávez. In Brazil, if you talk to diplomats, they use a very interesting expression regarding Chávez, which is you have to use "strategic patience," which is a nice way of saying we believe that he is on the decline now, so we should not worry that much. It will be just a challenge to see how Dilma could respond – Lula has always avoided confrontation with Chávez. I think it is in Lula's bones to avoid confrontation. Dilma Rousseff and Serra are known as short-fuse people, no-nonsense people, not particular simpaticos, and it will be a great test for President Rousseff the first time Hugo Chávez says or does something that is not seen particularly favorably in Brasília. So this is one of the big questions right now.

Castro Neves:
There will be tensions for sure, but I think Chávez knows his way around as well. When Fernando Henrique Cardoso was president he was friendly, even too friendly on some occasions visiting Brasília and praising Cardoso's presidency. So Chávez has lots of vulnerabilities in Venezuela and his rhetoric is a function of the oil price, basically.

Transcript by J.C. Hodges