Lula Raises the Stakes
by William Greider and Kenneth
The Nation magazine, December
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 Inacio
Lula da Silva, the new left-wing president of Brazil, envisions
a united South America that gains economic strength by drawing
closer together in I 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 Chavez a $1 billion line of credit to buy Brazilian
exports. In mid-October Lula joined with Argentina's President
Nestor Kirchner to unfurl ~e "Buenos Aires consensus,"
a proposed alternative to the much-despised "Washington Consensus,"
which has straitjacketed developing economies with its harsh economic
rules. The future, hey 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.
Cancun 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 Cancun,
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 Sao 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 Cancun. 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
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
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
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 Sao 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. Business people 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 a falls short,
the global landscape has changed since the heady boom time of
the l990s. The establishment has nothing much to say in response,
and its usual tactics are no longer so successful at controlling
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 I | 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
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 Simon Bolivar. 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
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?
William Greider is The Nation s national
affairs correspondent. His most recent book is The Soul of Capitalism
(Simian & Schuster). Kenneth Rapoza is a staff correspondent
in Brazil for World Press Review. He has written for publications
including Newsday and the Sun Sentinel.