Lula Raises the Stakes

by WILLIAM GREIDER & KENNETH RAPOZA

The Nation

http://www.thenation.com/doc.mhtml?i=20031201&s=greider

The bearded political leader they call Lula is the new
phenomenon of globalization, a man with audacious
ambitions to alter the balance of power among nations.
Luiz Inácio Lula da Silva, the new left-wing president
of Brazil, envisions a united South America that gains
economic strength by drawing closer together in trade
and bargaining collectively, much as the European Union
does. He wants to create a global coalition speaking for
the not-rich countries—reminiscent of the "nonaligned
nations" that decades ago tried to stand between the
cold war’s two superpowers. And he wants to push the
IMF, the World Bank and the United Nations to become
more democratic.

Lula may well fail. Nevertheless, his aggressive
diplomacy looks like the most promising initiative to
reform globalization in many decades. One sure
indication that Lula must be taken seriously is that the
US government has mounted its own nasty, hardball
diplomacy to isolate him from potential allies and
crumple his ideas before they can gain momentum. The
United States versus Brazil is a most uneven contest,
and the smart money will not be betting on Lula. But he
does not stand alone in the world, and may speak more
authentically to this new historical moment than
Washington does.

Toward that end, Lula became an energetic world traveler
during his first ten months in office. He has persuaded
South Africa and India to join Brazil in a new
triangular dialogue that will focus on technological
alliances and social issues like world hunger, and also
serve as a unifying opposition voice inside the World
Trade Organization. Indian Finance Minister Yashwant
Sinha defined the purpose as promoting the economic and
social interests of the Southern Hemisphere. "We have
thought enough about South-South cooperation," he said,
"and we have reached this stage now where we want to
give it a concrete shape." Lula is courting China to
become the next big partner. China and Brazil have
already signed a commercial accord covering
agribusiness, technology, construction and natural
resources. In October the two countries jointly launched
an earth-monitoring satellite.

In South America, Lula traveled to Peru and Colombia,
where he urged closer economic relations between the
Andean Pact nations and their southern rivals in
Mercosur (the Southern Common Market), anchored by
Brazil and Argentina. He offered to mediate talks
between the Colombian government and the revolutionary
guerrillas of FARC. In Venezuela he gave embattled
President Hugo Chávez a $1 billion line of credit to buy
Brazilian exports. In mid-October Lula joined with
Argentina’s President Néstor Kirchner to unfurl the
"Buenos Aires consensus," a proposed alternative to the
much-despised "Washington Consensus," which has
straitjacketed developing economies with its harsh
economic rules. The future, they declared, must give
poorer nations the sovereign space to determine their
own development strategies, balancing social necessities
with economic stability.

Lula was also a hit with delegates at the UN General
Assembly, where he laid out a visionary proposal for
eradicating hunger worldwide and reforming the UN
itself. Then he was off to tour five Southern African
capitals, with a December excursion planned for the
Middle East and, later, Russia. This past summer his
travels took him to Washington, where he chatted up
George W. Bush. "Not the man I would like to see in the
White House," Lula allowed afterward, but the two "would
have to get along."

What Lula has in mind is literally changing
globalization as we know it—the version led from
Washington. A muscular coalition of developing countries
could block the draconian investment rules that
multinational corporations and bankers keep pushing for
the WTO and the Free Trade Area of the Americas (FTAA),
set for debate in Miami this month. A convergence of
third-force nations might also generate more trade and
capital investment among the developing economies,
allowing somewhat less dependence on the wealthiest
nations. In short, Lula’s vision is for a multilateral
world, with power dispersed from the center, shared more
equitably with regional trading blocs and alliances.
That idea is anathema to Washington (also Brussels,
Paris, Berlin and Tokyo). But, for many political and
economic reasons, this new approach might sustain and
stabilize the global trading system more effectively
than the present top-down arrangement.

Cancún was the flashpoint where Lula’s ambitions
collided head-on with American power. His diplomats
helped organize the coalition of twenty-two developing
nations that stood their ground in the WTO negotiations
and did not yield to the usual pressure tactics from the
United States, Europe and Japan. The talks collapsed, an
emblematic victory for Lula in demonstrating that unity
means power. After the breakdown at Cancún, US Trade
Representative Robert Zoellick announced that he will
negotiate individual trade agreements with the "can do"
nations, never mind the "won’t do" nations. Zoellick’s
rebuke was "an open declaration of war against Brazil,"
declared the liberal weekly Folha de São Paulo.

Indeed, it was. The United States began immediately to
deliver economic threats and reprisals against the Latin
nations that had stood with Lula at Cancún. Zoellick and
his agents put the squeeze on them, one by one. The
impoverished island nations of the Caribbean were told
they could forget about their newly negotiated US trade
agreement. They folded. Central American countries were
threatened with loss of the modest trade preferences
already granted to their products. Costa Rica, one of
Lula’s original allies, was hammered—privatize your
energy and telecommunications sectors or be left in the
cold—and gave in. Peru and Colombia both resigned from
Lula’s group. Paraguay and Uruguay also kept their
distance, though both are partners with Brazil in
Mercosur. Within a few weeks, Lula’s G-22 coalition had
shrunk to the G-12.

It looked like a rout, but the underlying reality was
more complicated. Federico Cuello, while forced to
resign as the Dominican Republic’s WTO ambassador,
expressed admiration for Lula’s cause: "Brazil embodies
the hope of countries like the Dominican Republic,
showing that you can still have dignity at the
negotiation table.... I doubt that Lula, who has massive
public support and a top-notch Cabinet, will be
intimidated."

Zoellick’s offensive might not get the WTO negotiations
back on track, but it was meant to soften up Lula for
the next critical showdown—the upcoming FTAA
negotiations. And when Lula didn’t seem to get the
message, Zoellick’s deputy, Peter Allgeier, announced
that the United States intends to go ahead on FTAA
without him. The new agreement would include all of
North and South America—every country but Brazil.
Argentina, however, stood firm with Lula and turned down
a backdoor trade offer. Its foreign minister, Rafael
Bielsa, explained, "If the US hopes that our countries
will be subservient, they are sadly mistaken."

Anyone who understands the dynamics of globalization
will recognize that the US threat is quite hollow.
Together, Brazil and Argentina account for nearly two-
thirds of South America’s economic output. Brazil, as
one well-placed Washington trade lawyer confided, is the
only reason US multinationals wanted the FTAA in the
first place. It is intended as a NAFTA-style pact that
will impose on the world’s eleventh-largest economy the
investment and public-policy rules that now confine
Mexico. Other Latin American countries are small and
already compliant by comparison. As recent events
demonstrate, Washington doesn’t need new trade
agreements to push them around.

"Miami will probably decide whether there is an FTAA,"
predicts Vicki Gass of the Washington Office on Latin
America. "I don’t see the United States making any real
concessions, and I don’t see Brazil backing down. It’s
just not in their interest. They have seen what happened
to Mexico under NAFTA."

The threats and warnings from Washington officials are
perhaps better understood as an attempt to conceal their
own failure. A few days before Miami, US and Brazilian
diplomats had a more amiable exchange, perhaps hoping to
avoid another drama of name-calling.

But while Lula may be able to exercise real power in the
international trade arena, and even pull the giant’s
beard, he is vulnerable at home—from both the right and
the left—with regard to trade policy. The Brazilian
economy is stable but growing quite slowly, too weak to
produce the jobs and rising incomes he has promised to
deliver for his working-class and poor constituencies.
Lula’s governing coalition includes Cabinet ministers
from important industrial sectors—manufacturing and
agribusiness—who are extremely nervous at seeing their
government in confrontation with the colossus of the
North. "I really like what they’re doing here," said one
Brazilian financier, "but the government definitely got
too excited and overplayed their hand. They’ve given the
United States the easy way out—the opportunity to pin
the blame on Brazil."

On Lula’s left flank, the Workers Party he has led for a
generation and the movement of landless peasants are
nervous for opposite reasons, fearing that Lula’s
exertions for expanded trade and investment may eclipse
social objectives like reducing Brazil’s extreme poverty
and inequality. If Lula backs down from the fight with
Washington, that might reassure business interests but
disillusion his core supporters. The president’s poll
ratings are still quite high but beginning to decline.
Popular wisecracks now depict Lula as Brazil’s Bill
Clinton, triangulating between supporters and the
business lobbyists.

The United States holds most of the cards, including
crucial trade concessions it could grant to Brazil’s
leading agricultural exports: soy products, citrus,
sugar and beef. Since no one expects the Bush
Administration to injure those domestic sectors in the
run-up to the 2004 election, it is difficult to envision
terms that could rescue FTAA without also humiliating
Lula. An international relations authority in São Paulo
predicts the two Latin allies can resist US pressures,
but in that event "Brazil and Argentina will drown
holding each other’s hands."

And yet even Latin America’s business leaders seem to
love the man’s go-for-broke politics—what Lula has
called his "sure-fire democratic gamble." According to a
Zogby International poll, only 39 percent of the
continent’s business and government elites think FTAA
would benefit everyone equally, while a majority expect
the United States to be the big winner. Businesspeople
may fear reprisals from the colossus, but only 12
percent give Bush a positive rating (only 8 percent in
Mexico and 2 percent in Brazil). Lula, by contrast, is
the most popular political leader in Latin America among
elites—supported by 78 percent in Mexico. Maybe his
"democratic gamble" has a stronger future than the smart
money realizes.

Why is this happening now? It’s about much more than
Lula’s nerviness. The Brazilian president has made
himself point man for a deep shift under way in the
politics of globalization—new values were dramatically
surfaced by the worldwide popular movement born at
Seattle in 1999. Even if Lula falls short, the global
landscape has changed since the heady boom time of the
1990s. The establishment has nothing much to say in
response, and its usual tactics are no longer so
successful at controlling the outcomes.

George W. Bush’s go-it-alone foreign policy unwittingly
encouraged the emerging realignment of interests. Jose
Genoino, president of Lula’s Workers Party, explained:
"With the end of the cold war and a new US foreign
policy, the world has acquired a unilateral nature, with
the imposition and pre-eminence of US interests. The
discord...has created lines of force favoring the
formation of a multilateral world." In other words, many
nations, rich and poor, now have an interest in creating
a political counterbalance to US power. Brazil’s
leadership, Genoino emphasized, "has no hegemonic
ambitions but rather is aimed at consolidating blocs of
forces, producing new significant actors on the
continental level and in areas of global relations."

The most significant new actor is China, not Brazil.
China’s entry into the WTO two years ago tipped the
balance of power within global governance as well as
global economics, Gwynne Dyer, a savvy Canadian observer
of globalization, has pointed out. China’s economy is
three times the size of Brazil’s, but is growing
explosively and destined to become a world industrial
power with girth that threatens even advanced economies.
China—like Brazil or India or any other country—will
doubtless pursue self-interest first, but will also find
political advantage in making alliances with other poor
countries. China, also like Brazil and India, has no
desire to be governed in its development by WTO rules
devised by American and European multinational
corporations. But unlike Brazil, China comes to the
debate "with an economy too big to be bullied or
bluffed," as Dwyer puts it.

Another, more fundamental reason for political
confrontation is that the reigning dogma of
globalization has failed, visibly and catastrophically,
for developing countries (and less obviously for some
wealthy nations, too). A decade ago, when the
globalizing forces were accelerating, strategists at
major multinationals used to talk ambitiously about the
"big emerging markets"—the five countries with the
greatest promise for investment and growth. The Clinton
Administration picked up the "BEM" line and made a half-
baked economic policy of courting those nations: China,
India, Mexico, Brazil and Indonesia.

Three of them have since been mangled by globalization.
Mexico fell off the list in 1995 when the peso collapsed
and the Salinas "miracle" was exposed as a fraud.
Indonesia’s prospects were smashed by financial crisis
in 1997. Through no fault of its own, Brazil was brought
down the following year by the financiers’ panic that
swept around the world, randomly collapsing currencies
and economies. In each instance, Washington and Wall
Street blamed "crony capitalism" or incorrect management
of national finances for the failures. These
explanations became far less persuasive after the United
States encountered the same disorders—the scandals of
corrupt corporate accounting and a rising tide of
foreign indebtedness.

For developing countries, the boom-bust experience
taught a searing lesson: The center cannot be trusted to
run things or to provide sound economic advice.
Argentina followed the rigid discipline of the
Washington Consensus more faithfully than any other
Latin economy. Yet its policies also failed, in 2001,
and plunged the country into devastating recession,
discrediting the US orthodoxy. Nations large and small
are now united in the need to escape the "golden
straitjacket," as pundit Thomas Friedman called it. The
trick is doing this without offending the world’s only
superpower or losing entry to its largest consumer
market.

Lula’s grand ambitions illustrate the historic
obstacles. Uniting South American nations in a common
cause, if not a fully developed federation, is a very
old dream, championed 200 years ago by Simón Bolívar.
But his campaign was centered in the northern colonies
of Spain, not Portuguese-speaking Brazil. Given the
history of continental conflicts, the first step may be
at best only a modest platform for trade cooperation and
joint public works. A "United States of South America"
will remain a distant dream.

Lula’s global coalition seems off to a more promising
start, and if China joins, it will have impressive
muscle. This idea, however, has also failed before. The
movement of nonaligned nations during the cold war never
formulated a robust ideological alternative beyond
declaring they were in neither the Soviet nor the US
camp. Brazil never joined, though it sent
representatives to the meetings. Most nations merely
used nonalignment as a bargaining chip with the two
rival superpowers. Some countries cleverly managed to
win aid and arms deals from both. The same pressures to
cut a separate deal with the big boys will test the new
formation.

In any case, the center is not holding. India is trying
to organize a Southeast Asia trading zone. China and
Japan have made similar noises. American and European
leaders denounce freelance alliance-building by Lula and
others on grounds that it will balkanize the "one world"
trading system into many potentially protectionist
blocs. But this is deeply hypocritical, because
Washington and Brussels are themselves doing dozens of
such side deals with smaller nations and regions.

The fundamental problem is that global economic
integration cannot proceed with stability under the
undemocratic canopy of the WTO, which is designed to
serve multinational commerce and investment but not the
aspirations of national cultures, economic equity or
human values. Events are making clear that the WTO
cannot enforce its own commandments, nor can it reform
itself. The world, in a sense, is stuck halfway between
global governance and the nation-states. Nothing
illustrates this better than the current flap over
steel, with the United States caught between the demands
of its national producers, who want tariffs, and the
WTO, which, pressed by European steel-producing nations,
has ruled such tariffs illegal. Most nations are too
weak to defend their interests while standing alone, yet
joining the global system makes them subservient to the
powerful few with colonialist appetites.

The future of globalization may actually become more
equitable if nations first accept the need for
intermediate organizations like regional trading blocs,
which can experiment with home-grown development
strategies and collaborate on how to synthesize economic
goals with social imperatives. Governments would gain
greater proximity to the decision-making, but so would
citizens with diverse views of how the future should
look. The WTO would perhaps continue to exist, but its
stalemated condition would not halt the possibilities
for progress.

The more localized context would seem to be a better
laboratory for advancing global reforms like labor
rights, environmental values and democratic self-
government. The global-justice movement would have to
rethink its strategy, but could achieve far more
tangible results in regional settings, instead of the
negative victories of blocking the multinational agenda
at the WTO. If the US government were not so beholden to
the multinationals, its diplomats might see Lula’s
initiatives as a great opening for a different kind of
FTAA—a chance to work out mutual terms for advancing
social goals and economic development in tandem. As it
is, Washington is using its power unilaterally to
discredit and destroy this visionary leader. Americans
might ask themselves: Is that really in our long-term
national interest?