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Snatching defeat from the jaws of victory? Lula, the 'Losers' Alliance', and the prospects for change in Brazil1

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This article explains the context of Lula's election for the Brazilian presidency, and the scope for progressive economic and social change in the country. We argue that although the ruling coalition is on the political left, the new administration is not, and it will face grave difficulties to achieve traditional left objectives, including universal citizenship and greater equality of income and wealth.
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Capital & Class
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DOI: 10.1177/030981680308100103
2003 27: 17Capital & Class
Lecio Morais and Alfredo Saad-Filho
and the prospects for change in Brazil1
Snatching defeat from the jaws of victory?: Lula, the 'Losers' Alliance',
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17
Lula, the ‘Losers’ Alliance’, and the prospects for change in Brazil
Snatching defeat from
the jaws of victory?
Lecio Morais and Alfredo Saad-Filho
The Brazilian Workers’ Party () won
a resounding victory in the presidential
elections in October . Its candi-
date, Luís Inácio Lula da Silva (Lula)
received m votes (.%) in the rst
round, and m (.%) in the second
round of the elections. His nearest rival,
José Serra, a former minister in F.H.
Cardoso’s administration (-),
was beaten by m votes in both
rounds.
2
The new president, a former lathe
operator and trade union leader,
commands nearly universal apprecia-
tion. He has been fêted by the interna-
tional left as well as the  government,
the  and the World Bank, and he is
probably the only person ever to be
cheered both in the Davos World
Economic Forum and the Porto Alegre
World Social Forum. This can be
explained by Lula’s impeccable leftist
credentials and personal integrity, and
by his adoption of a thoroughly neo-
liberal economic programme. This
article examines the reasons for conti-
nuity and the scope for change during
the new administration.
Neo-liberalism in the s
Since the late s, successive Brazilian
administrations have followed the
standard neo-liberal-globalist policy
menu. These policies included nancial,
trade and capital account liberalisation,
large-scale privatisations, economic
deregulation and monetary stabilisation
though the  Real plan.
3
Brazilian
neo-liberalism is peculiar only because
of its relative lateness and gradualism.
This was partly due to Brazil’s protracted
transition to democracy, stretching
between the mid-s and the late
s, and partly due to the political
T
his article explains the context of Lula’s election for the
Brazilian presidency, and the scope for progressive
economic and social change in the country. We argue that
although the ruling coalition is on the political left, the new
administration is not, and it will face grave diculties to achieve
traditional left objectives, including universal citizenship and
greater equality of income and wealth.
Lula, the ‘Losers’ Alliance’, and the
prospects for change in Brazil
1
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Capital & Class #81
18
resistance against the neo-liberal
reforms.
Brazil liberalised its trade and capital
accounts of the balance of payments
only during the nineties. When the rst
stage of the reforms was nally completed,
in , the international environment
was already much more hostile than in
the earlier period. The Russian crisis of
 was especially damaging, having
triggered capital outows leading to an
unsustainable balance of payments
decit ($. billion between the third
quarter of  and the rst quarter of
). In order to defend the currency,
the Real, the Brazilian government
negotiated with the  and the  a
rescue package worth $. billion.
However, these loans were insucient
and, in January , government
support for the Real was abandoned.
The currency immediately sank by 
per cent (see Morais, Saad-Filho and
Coelho ).
After the crisis, Brazilian economic
policy shifted towards a combination of
ination targets, primary scal surpluses
(in order to service the domestic public
debt) and lower real interest rates.
These changes were insucient to
restore economic growth. Between 
and , annual average  growth
rates were only . per cent, signicantly
below the growth rates of the so-called
‘lost decade’, the s. This declining
trend persists. In the meantime, the
foreign debt has doubled to $
billion, the productive and nancial
sectors were largely denationalised,
most state-owned enterprises were sold
o at bargain basement prices, and the
domestic public debt has increased from
below  per cent of  to over  per
cent. Finally, the concentration of
income and wealth has remained
unchanged.
Neo-liberalism, the currency crisis
and exchange rate instability have
triggered substantial changes in the
Brazilian productive sector. Manufac-
turing industry, previously relatively well
integrated through import-substituting
industrialisation, has been fragmented
and hollowed out, and key industries
were absorbed by transnational capital
(see Saad-Filho and Morais , pp.-
). As a result, industry has become
increasingly dependent on foreign
suppliers and markets, and strategic
planning has been subordinated to the
global strategy of the parent companies.
Finally, privatisation, often to foreign
bidders, has reduced state capacity to
inuence industrial development and
the composition of the output. World-
com, Bell South, Telefónica, Portugal
Telecom and Telecom Italia have
purchased parts of Embratel, the former
state monopoly; Enron, , El Paso,
Duke Energy, Iberdrola,  and 
have swallowed pieces of the electricity
generation and distribution systems, and
, -Amro,  and Santander
have moved into the banking and
nancial sectors largely through their
purchases of state-owned banks.
The domestic and foreign nancial
institutions have seized the co-ordinating
and allocative roles of the state. This
includes not only inter-sectoral resource
allocation and the composition of
investment, but also the determination
of economic policy. Peculiarly, in Brazil
the nancial institutions exercise their
inuence not mainly through the
nancing of industry or stock market
operations, but through their holdings
of Treasury and Central Bank bills.
Given the size and liquidity of these
assets, and the government’s inability to
stabilise the debt- ratio, a small
number of nancial institutions can
dictate economic policy, control the
sources and levels of consumption,
investment and growth, and select
monetary and exchange rate policies to
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Lula, the ‘Losers’ Alliance’, and the prospects for change in Brazil
their own advantage (see below).
Ironically, the domestic public debt is
not the product of state proigacy. Quite
the opposite; the debt is almost entirely
due to the high interest rates required
to attract foreign capital and subsidise
nancial interests during the nineties (see
Saad-Filho and Morais ).
In addition to these important
changes in the structure and dynamics
of the economy, there has been a sub-
stantial shift in the power relations within
the élite. The representatives of nancial
capital have dislodged the industrialists,
oligarchs, technocrats and the military
from the state bureaucracy, and asserted
their control of the state through the
growing power of the Ministry of
Finance and the Central Bank of Brazil.
The directors of the Central Bank and
the key policy advisors in the economic
ministries are typically either recruited
from nancial institutions, or retreat to
them after a stint in Brasília. For exam-
ple, former Central Bank president
Armínio Fraga was hired from George
Soros’s New York oce, while the main
strategist behind the Real plan, Edmar
Bacha, abandoned his prestigious
academic position in Brazil for greener
pastures in Manhattan.
The window of opportunity
The exhaustion of the majority (inclu-
ding a signicant part of the élite) with
F.H. Cardoso’s economic policy was
clear long before the elections. The
failure of neo-liberalism to overcome
economic stagnation was widely
recognised, the government was highly
unpopular, and it was agreed that the
social tensions in the country were
becoming intolerable. The neo-liberal
camp was badly fractured. No presiden-
tial candidate was willing to defend the
government’s record, and Cardoso’s
supporters deserted his ship. Even
though neo-liberalism is advocated by
powerful interests, it has become
indefensible except through the tired
claim that ‘there is no alternative’.
Lula shrewdly realised that his fourth
bid at the presidency might be success-
ful, and he positioned the  accordingly.
In order to contextualise this policy shift,
a brief digression is necessary. The
Brazilian Workers’ Party is a peculiar
type of left-wing political organisation.
It was founded in the late s by a
coalition of trade unionists, left intel-
lectuals, Catholic activists and Trotskyite
organisations ghting against the military
dictatorship.
4
The  was never a Marx-
ist organisation, and it was embroiled in
bitter conicts with the traditional
communist parties—until the mid-
s, when the  became hegemonic
in the Brazilian left and the rival
organisations became its satellites. The
 has traditionally been to the left of
the European social democracy, even
identifying ‘socialism’ as a strategic goal
(the meaning of which was never made
very clear). However, after Lula’s defeat
in the presidential elections of ,
 and  the ruling ‘São Paulo
group’ has imposed an increasing degree
of control over the party. Radical leftists
were either expelled or (by and large)
cowed into submission, and a small
group of cadres around Lula has shifted
the party’s goals towards winning local
elections, managing local government
‘eciently’, and preparing the organi-
sation for national power.
In , although the party’s
discourse still emphasised ‘change’, the
 carefully avoided any specic
commitments. Lula’s programme and 
advertisements were emotionally
charged but politically vacuous. Lula
was already leading the opinion polls six
months before the elections. In the
meantime, the other three main
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20
candidates struggled to attract the
interest of middle classes, which might
allow them to lead a right-wing coalition
against Lula in the second round.
Capital attacks
Brazilian and international nanciers
were increasingly concerned not only
with their potential loss of leverage over
policy-making, should Lula win, but also
with the possibility of default or
compulsory rescheduling of the public
debt by the new administration. In the
rst quarter of  the nancial
institutions were already demonstrating
their concerns, and their clout, by
refusing to purchase government bills
maturing after  December (the last day
of Cardoso’s presidency). The weekly
open market auctions became largely
fruitless, as brokers demanded rising
interest rates to roll over the government
debt. If higher rates were not forth-
coming the brokers liquidated their
positions and shifted funds to the dollar
market, devaluing the Real. At the same
time, their international partners
repeatedly downgraded Brazilian bonds
and foreign debt certicates, allegedly
because of ‘lack of policy credibility’.
As a result, foreign banks started re-
calling their short-term loans and
commercial credit lines, half of which
were rapidly lost. The dollar rose
steadily from $. in January to $.
in October (ination was only per cent
during that period).
The unfolding crisis had immediate
political repercussions. The media
howled with indignation, demanding
that the presidential candidates (i.e.,
Lula) must guarantee the continuity of
Cardoso’s economic policies in order to
‘calm the markets’. Eventually, exhaus-
ted by their daily tribulations and full of
patriotic concern for the country’s
balance of payments, the Minister of
Finance and the President of the Central
Bank theatrically demanded on television
that the candidates must ‘explain’ their
economic programme to ‘the markets’.
Lula blinked. On  June Lula issued a
‘Letter to the Brazilian People’ declaring
that his government would respect
contracts (i.e. service the domestic and
foreign debts on schedule) and enforce
the policies agreed with the . This
limited surrender was enough to secure
Lula’s wobbly leadership in the polls,
but it was not enough for nancial
capital. It now demanded institutional
guarantees, especially an independent
Central Bank committed to following a
‘responsible’ monetary policy, and a
new  agreement spanning well into
the new administration.
The possibility of a catastrophic run
on the Real was viewed with preoccu-
pation in New York, because several
large  banks were heavily exposed and
would suer substantial losses if Brazil
defaulted. It is rumoured that intense
lobbying took place in Washington, and
generous campaign contributions were
made just ahead of the crucial mid-term
 elections, in order to ensure that the
 would speedily oer Brazil a new
loan. Coincidentally or not, the agree-
ment was reached in record time and
signed on September . It states
that:
a combination of a worsening
external environment and increased
uncertainty among investors about
the future course of economic
policies has led to a deterioration in
nancial market variables in recent
months. The…new Stand-By Arran-
gement with the Fund…[is] designed
to safeguard economic stability, and
provide a framework for the continuity of
core macroeconomic policies next year
[under the new administration].
5
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Lula, the ‘Losers’ Alliance’, and the prospects for change in Brazil
The Brazilian government also agreed
to submit a constitutional amendment
granting independence to the Central
Bank. In exchange, the  oered
$ billion, of which only $billion
would be available immediately. The rest
would be oered to the new govern-
ment, but only if its economic policies
conformed with  expectations.
Faced with the prospect of an immediate
economic meltdown, Lula signalled his
agreement. His consent opened to the
Workers’ Party the doors of nancial
institutions and conservative govern-
ments around the world.
The ‘Losers’ Alliance’
At the party political level, Lula was
supported by the reformist Communist
Party of Brazil (do) and the non-
descript Liberal Party () (see Saad-
Filho ). However, in order to
understand Lula’s victory we must
review the social composition of his
voters.
The  is traditionally supported by
the unionised urban and rural working
class, including not only skilled and semi-
skilled manual and oce workers, but
also the lower ranks of the civil service,
sections of the professional middle class
and many informal workers. In addition
to them, a range of disparate forces and
interests also voted for Lula in . All
they had in common was the experience
of losses under neo-liberalism. For example,
several prominent manufacturing
capitalists supported Lula hoping that
his government would implement a
nationalist and expansionary economic
programme in order to restore growth,
reduce the debt burden of productive
capital, and minimise exchange rate
volatility. Typically, Globo, a reactionary
and heavily indebted media empire,
ditched the ocial presidential candidate
and supported Lula, hoping that his
administration would help the
corporation avoid bankruptcy.
Many reactionary regional oligarchs
also supported Lula. They had been
squeezed out of their inuential
positions in Brasília by the growth of
nancial interests, and had been starved
of ‘development’ funds by the scal
austerity measures required by the neo-
liberal reforms. Finally, the oligarchs felt
betrayed by Cardoso and Serra in the
run-up to the elections. By switching
their support to the , the oligarchs
rightly anticipated that Lula would
depend heavily on their support in
Congress and the State Assemblies, thus
maximising their political power and
inuence.
The Brazilian urban middle class is
relatively small but it exercises a
disproportionate electoral inuence
because of its economic power and
inuence on the media and the work-
place. This group is deeply heterogene-
ous and, in , its support was divided
across the main candidates. By and large,
the middle class was disappointed with
neo-liberalism and felt deceived by
Cardoso. It was also badly hit by
declining incomes and the vanishing
prospect of ‘good jobs’ for themselves
and their children, especially in the civil
service and the state-owned banks.
However, the urban middle class also
feared Lula’s ‘left-wing radicalism’, and
rejected any potential break with the
‘globalised world’ that it had only
recently joined.
Since it was impossible to synthesise
the conicting expectations of this
‘losers’ alliance’ into a coherent govern-
ment programme, the  evacuated
Lula’s manifesto of concrete commit-
ments, and appealed to pious sentiment
and clever advertising instead. This
tactic worked brilliantly during the
campaign. However, its triumph implies
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that Lula has received an unclear
mandate. The disparity between his
massive support and the distribution of
seats in Congress, where the  and its
dependable allies hold only a minority
of seats, shows that whereas hope is
high on the agenda, radical changes are
not unambiguously popular.
The new administration
Lula’s election is, in part, a reection of
the failure of the neo-liberal policies
imposed across Latin America since the
mid-s. The election of Venezuelan
president Hugo Chavez was the rst
clear sign that the peoples of the region
were exhausted, and were looking for
alternatives. The popular revolts in
Ecuador and Bolivia, and the Argentine
collapse, have reinforced this tendency.
The frightful implications of the
meltdown of the Argentine economy,
and the diculties faced by Chavez,
were interpreted by Lula as a warning
against ‘voluntarism’. From this point
of view, the  strategy of confrontation
—for example, facilitating the attempted
coup against Chavez, intervening
militarily in Colombia, and so on—has
been successful because it has limited
the capacity of Latin American govern-
ments to implement alternative policies.
These limitations are clearly visible
in the Brazilian case. Although the 
remains, by and large, a left-wing mass
party, Lula’s government is not imple-
menting a progressive programme. Lula
leads a centre-left administration
attempting, on the one hand, to
introduce an ambiguous programme of
social and economic reforms and, on the
other hand, seeking to preserve its own
credibility with ‘the markets’ and,
thereby, guarantee the solvency of the
state. This is a reection of the funda-
mental ambiguity of the new
administration; Lula was elected by
voters demanding change, but key
groups of supporters are unwilling to
bear the costs and implications of
change. The élite hopes that Lula will
be a ‘Third Way’ president, able to
contain social conicts through his
personal authority, and to manage the
economy more ‘eciently’ than
Cardoso’s neo-liberals. The left expects
the government to spearhead a pro-
gramme of social integration and
distribution of income and wealth
breaking with ve hundred years of
history. These conicting aspirations
can be made compatible only to a limited
extent. Specically, it remains to be seen
to what extent the élite is willing to pay
for the creation of a democratic welfare
state in Brazil.
It will be very dicult to break with
neo-liberalism. However, if the
government and the majority work
together to erode élite resistance against
distributive policies and a pro-poor
growth strategy, and to weaken the grip
of the nancial markets, change would
become possible. The point, then, is the
extent to which Lula and his allies are
prepared to undermine the coalition that
has elected them only recently, in order
to create the political conditions for
economic change. This is a risky pres-
cription. Although a military coup is
unlikely, there is more than one way to
dismiss a president. Fernando Collor
was impeached in , ostensibly for
corruption, but in fact because he tram-
pled carelessly upon powerful interests
in pursuit of a ‘modern’ agenda. Lula
must play his cards carefully. However,
excessive caution—as he has displayed
until May , when this article was
written—will disappoint and alienate his
traditional supporters, who will be
needed in any confrontation against the
neo-liberal consensus. In the meantime,
the clock is ticking. Lula’s neo-liberal
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Lula, the ‘Losers’ Alliance’, and the prospects for change in Brazil
policies and the economic stagnation in
Brazil and its principal markets will
inevitably erode the goodwill granted to
the new administration. Turbulence in
the balance of payments or scal arenas
will require fundamental decisions to be
made, not only by the government, but
also by Brazilian society.
Notes
1. We are grateful to two anonymous
referees for their helpful comments.
2. The most important candidates were
Lula (Workers’ Party), José Serra
(Brazilian Social Democratic Party,
), Ciro Gomes (Popular Socialist
Party, ), and Anthony Garotinho
(Brazilian Socialist Party, ). Two
other candidates represented small
Trotskyite organisations.
3. For an overview, see Saad-Filho (),
Saad-Filho and Mollo () and Saad-
Filho and Morais (, ).
4. See Branford and Kucinski (,
) and Fernandes ().
5. Brazil— Letter of Intent, Memorandum
of Economic Policies, and Technical
Memorandum of Understanding,
August , , http://www.imf.org/
external/np/loi//bra//index.htm,
paragraph  (emphasis added).
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... We are thus not dealing with a separate socio-economic sector, but with a class fraction capable of influencing the whole society, particularly the state, which has a key role in implementing finance's political and economic interests. In Brazil, finance has influenced the economy predominantly by owning public debt securities and having its own representatives in the state economic apparatus (Morais & Saad-Filho, 2003). Furthermore, the main ideologies promoted by finance served as policy guidelines. ...
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In 2016 Brazil’s Senate ousted the popularly re-elected President Dilma Rousseff, who had been accused of budget mismanagement under the pretense that she committed an impeachable crime that justified the parliamentary coup. This paper investigates the hypothesis that her government was removed once it could no longer sustain a neoliberal pro-finance agenda, which depends on the state, and that the forces that seized power promised to restore and strengthen. Pro-finance policies had been established in the 1990s by the Cardoso government and were maintained by the Lula da Silva government. The latter, nevertheless, was able to raise wages, as did Rousseff, but more slowly. Her government also loosened some neoliberal policies, such as the so-called fiscal austerity. Rousseff’s non-elected successor, Michel Temer, tried to limit budget spending by implementing a 20-year ceiling on the real growth of virtually all expenditures except public debt interest. He also began aggressive privatizations and, after curtailing labor protections, proposed a regressive social security reform to further cut state expenditures. Thus, the Temer government promoted dispossessing policies to redistribute economic surpluses—e.g., through future primary fiscal surpluses—and allow the expansion of capital accumulation. The latter is driven by the proletarianization that follows welfare cuts—i.e., cuts in the social wage—due to the budget cap and regressive social security and labor reforms that sought to increase the supply of cheaper labor-power. Capital could also expand because budgets can increase the commodification by private companies of hitherto state-provided pensions and healthcare.
Chapter
The third chapter shifts attention to Brazil’s experiences. Here the focus pivots towards the strategy adopted by the Worker’s Party (PT) towards state power. The chapter draws on Lenin’s works, especially his magnum opus, State and the Revolution (1917i). As stated in this work and elsewhere, Lenin believed that socialism could never be built from above via a benevolent state, but had to be fought for by the oppressed classes themselves and thus had to be a process the unfolded from below. This perspective is developed and used to illustrate the dilemmas that the Worker’s Party faced in Brazil while in power. The demise of the left in Brazil is explained in terms of its inability to resolve this core dilemma.
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This chapter compares and contrasts Brazilian and Indian trajectories of development in the neoliberal era. The chapter outlines the broad changes that each economy has undergone since the 1980s.
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The Worker’s Party won successive elections between 2002 and 2014. During this period, it was instrumental in implementing a slew of social policies. As a result, inequalities declined and the conditions of living of millions of Brazilians improved. Starting from 2014, however, the leftist experiments have started to give way. The economy has slid into a crisis, and on the political front, the Worker’s Party has faced increasing isolation. This chapter analyses the nature of the political and economic crisis that has engulfed Brazil in recent years.
Book
Full-text available
This book analyses the conflicts that emerged from the Brazilian labour movement’s active participation in a rapidly changing political environment, particularly in the context of the coming to power of a party with strong roots in the labour movement. While the close relations with the Workers' Party (PT) have shaped the labour movement’s political agenda, its trajectory cannot be understood solely with reference to that party’s electoral fortunes. Through a study of the political trajectory of the Brazilian labour movement over the last three decades, the author explores the conditions under which the labour movement has developed militant and moderate strategies. Marieke Riethof is Lecturer in Latin American Politics at the University of Liverpool, UK.
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While Brazilian unions had struggled with the effect of economic crisis and ever-tightening macroeconomic reforms during the 1990s, the presidential election campaigns in 2002 provided unionists with new prospects for political change. However, after Lula’s breakthrough election victory, the PT’s emphasis on radical social transformation during the 1980s made way for a more pragmatic agenda, including the maintenance of the previous government’s economic policies, supported by a new programme of social policies aimed at poverty reduction. In this new political environment, significant sections of the trade union movement benefitted from increased access to political influence as unions moved closer to the government agenda and several senior trade unionists took up ministerial posts, thereby absorbing the party’s electoral and governmental logic. Yet the new union-party relations with the PT in power proved controversial as new unionism’s close ties with the party sparked significant conflicts in terms of pursuing either radical or gradualist strategies. By examining these conflicts during the PT-led governments (2003–2016), this chapter moves away from the emphasis on political moderation evident in much of the literature. Instead, the argument proposed here is that while the drive towards moderation was strong during this period, disagreements about political agendas and strategies as well as changing economic conjunctures sparked not only divisions but also a new wave of labour militancy from 2009 onwards.
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The union movement’s success in influencing the transition left a legacy that emphasized the virtues of militancy and mobilization, one that viewed negotiation with the government, and “defensive” forms of bargaining with employers with suspicion. However, the economic crisis and the neoliberal reform programme of the 1990s limited the opportunities for this type of trade union opposition. The political debate no longer dealt with the deepening of democratic participation as the economic crisis focused government attention on macro-economic stabilization and institutional reform, which precluded the extension of social and labour rights. Widespread fears of joblessness also constrained the successful organization of strikes, while public sector reform and privatization undermined some of the most important constituent groups in the union movement. The consolidation of neoliberal reforms in the aftermath of democratization therefore created a paradoxical situation in which many unions developed a more flexible approach to capital-labour relations, but it also tried to maintain its identity built on the political successes of the 1980s. This paradox underlines the argument presented in this book that past experiences of successful militancy shaped union strategies, while political ideas began to shift from class conflict to a more accommodationist approach based on the new economic and political circumstances. Throughout the 1990s the balance between militant and moderate strategies therefore shifted, derived less from a deliberate choice than a response to an increasingly challenging economic and political context, posing novel challenges to the new unionist agenda.
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Latin American trade unions have faced a range of challenges as a result of globalization and the particularities of the region’s politics and societies. Labour and globalization research often reaches the pessimistic conclusion that unions have lost the power to bargain and represent workers. This chapter contests this negative interpretation, arguing that this linear narrative obscures episodes of renewed labour militancy. Instead, trade union action should be considered inherently political, as evident in the union movement’s role in the region’s democratization processes. Using insights from labour and social movement theories, this chapter develops a framework to understand militancy and moderation in Brazilian labour politics.
Book
Full-text available
This book analyses the conflicts that emerged from the Brazilian labour movement’s active participation in a rapidly changing political environment, particularly in the context of the coming to power of a party with strong roots in the labour movement. While the close relations with the Workers' Party (PT) have shaped the labour movement’s political agenda, its trajectory cannot be understood solely with reference to that party’s electoral fortunes. Through a study of the political trajectory of the Brazilian labour movement over the last three decades, the author explores the conditions under which the labour movement has developed militant and moderate strategies.
Article
Full-text available
This article outlines a political economy analysis of Brazilian high inflation and stabilization. The paper explains the distributive and monetary aspects of inflation and the gradual fragmentation of the Brazilian currency. It also reviews the most important aspects of the Real stabilization plan, the de-indexation of the economy, and its rapid “liberalization” and “internationalization.” The paper shows that, in spite of the successful reduction of inflation, the Real plan was highly vulnerable to shifts in international liquidity; partly for these reasons, it led to de-industrialization and high unemployment. In addition to this, the Real plan contributed to an increase in income inequality and the development of sharp social conflicts in Brazil. These weaknesses were the main factors responsible for the currency crisis in January 1999.
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THIS PAPER PROVIDES AN INTERPRETATION of the Brazilian Real (stabilisation) plan, and its recent collapse. The plan was designed to maximise Brazil's ability to profit from the exceptional liquidity of the international credit markets, when low interest rates in the industrialised economies (especially the US) facilitated surges in capital flows to a select group of countries, the so-called ‘emerging markets.’ The general backdrop of the Brazilian plan, as well as similar policy initiatives in other emerging markets, was the neo-liberal fundamentalist prescription that countries should ‘liberalise, privatise, cut government spending and show to the world your commitment to liberal principles.’ Allegedly, this would be enough to inspire investor confidence, and allow the country to benefit from the exuberant power of capital inflows. The events that followed the adoption of that prescription in Brazil tell a very different story.
) 'Neomonetarist Dreams and Realities: A Review of the Brazilian Experience A Post Keynesian Perspective on st Century Economic Problems
  • A Saad-Filho
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Saad-Filho, A. and Morais, L. () 'Neomonetarist Dreams and Realities: A Review of the Brazilian Experience', in P. Davidson (ed.) A Post Keynesian Perspective on st Century Economic Problems, Cheltenham: Edward Elgar, .
Memorandum of Economic Policies, and Technical Memorandum of Understanding
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  • Intent
Brazil— Letter of Intent, Memorandum of Economic Policies, and Technical Memorandum of Understanding, August , , http://www.imf.org/ external/np/loi//bra//index.htm, paragraph  (emphasis added).
B () Brazil Carnival of the Oppressed-Lula and the Brazilian Workers' Party
  • S Branford
  • Kucinski
Branford, S. and Kucinski, B () Brazil Carnival of the Oppressed-Lula and the Brazilian Workers' Party. London: Latin America Bureau.
Politics Transformed-Lula and the Workers' Party in Brazil
  • S Branford
  • B Kucinski
Branford, S. and Kucinski, B. (). Politics Transformed-Lula and the Workers' Party in Brazil. London: Latin American Bureau.
) O PT em Movimento
  • F Fernandes
Fernandes, F. () O PT em Movimento. São Paulo: Cortez.