In October, the Workers Party (PT) won the largest election victory in Brazil’s history taking over 61% of the vote. Shocked and discouraged, right wing financial analysts had to concede that president-elect Luiz In·cio Lula da Silva, better known simply as Lula, has a mandate to reshape Brazilian society.

That mandate came from the rejection of the neo-liberal policies administered by previous president Fernando Henrique Cardoso. After eight years of carefully following his free market prescriptions, Brazil is weighed down by an external debt of $300 billion. Government workers in the country’s capital Brasilia have calculated that they need an immediate pay increase of 89% just to keep their heads above water.

Indeed the rejection of neo-liberalism was absolute – many of the Brazilian ruling class threw their weight behind the PT after seeing their companies besieged by foreign capital as government subsidies and protections were withdrawn in line with IMF policy.

So Lula comes to power in a country with high expectations of him. Three groups with very little common ground – the native business class, international capital, and Brazil’s workers and peasants – are looking to him to do their bidding.

For its part, the international business class through the Financial Times told Lula, “Mr. da Silva must act quickly to gain a reputation for economic responsibility.” The IMF chimed in, “Structural adjustment in Brazil, which the da Silva government must pursue, cannot be implemented without pain.”

The expectations of Brazilian workers was summed up by Joao Penha, a member of the PT’s left wing, “What the Brazilian people want is a PT government that begins to address their demands and that breaks with the IMF precisely so that it can fund the jobs and social programs that are needed to put Brazil back on its feet – free from the dictates of the multinational corporations and the international institutions of global capitalism.”

It will of course be impossible to fulfill all three groups’ aspirations.

Social pact

The PT will attempt to govern through a social pact, similar to that used by PT mayors in the various cities they control. In essence, the social pact attempts to include all sectors of society in determining how the country’s resources should be used. But it’s not quite all the country’s resources, as the money necessary to repay the foreign debt is not included. Instead the population, through trade unions, NGOs and other associations, is encouraged to decide how the IMF-dictated cutbacks should be implemented.

In Porto Alegre, the social pact has taken the form of a “participatory budget.” So successful has this been in pushing through IMF-inspired austerity that the World Bank has published a booklet titled “The Participatory Budget: the Porto Alegre Experience.” The World Bank has distributed the booklet in nine Latin American countries and says of it, “It is one of the most positive and innovative administrative experiences to come on the scene in Latin America.”

Unfortunately, the citizens of Porto Alegre who are party to this “positive and innovative experience” do not gush with the same enthusiasm as the World Bank. Indeed, the author of the study, Tarso Genro the former mayor of Porto Alegre, hoped the success of the budget model would ensure him election to state governor. He received a mere 8,000 votes, when he needed a minimum 25,000 just to qualify for the second round.

Explaining his failure, Ana, a leader of a neighborhood organization in Porto Alegre, told the PT newspaper O Trabalho, “Little by little, we began to see what was going on. We came to understand that the PT municipalities working under this participatory process were dutifully paying back the debt to the foreign investors…But most important, we saw that our basic needs were not being addressed, and that things, in fact, were getting worse and worse.”

Can Lula escape the fate of Genro? On the US left, Lula’s victory has been met with two inadequate responses. The first is a triumphalist assertion that all is now right in Brazil and the PT’s election will ensure a prosperous future for the lower classes. The second is the exact opposite. In this view, the PT, trapped inside the logic of international capitalism, will embark on a classic social democratic project of trying to improve the lot of their supporters but ultimately end up attacking their base of workers and peasants in order to service the foreign debt.

Both views are wrong for the same reason: they fail to take into account how Brazilian society will respond to Lula’s election victory. In the best case scenario, supporters of the PT, many of whom have waited 20 years for their party to attain power, will pressure Lula to break with the international bankers and their hired thugs at the IMF and World Bank, and force them to deliver the improvements they so desperately need.