After eight years under a conservative government that promoted a widespread liberalization of the Brazilian economy, investors' fears that the Workers' Party (PT) would revert these policies in case it won the presidency provoked a collapse in financial markets during the 2002 campaign (Barbosa and Pereira de Souza 2010; Santiso 2003).

The crisis transcended the financial sector. It caused a sharp devaluation of the Brazilian real, accelerated inflation rates, and provoked recession, severely affecting the real economy. It also had a fundamental impact on the newly elected administration. The urgency to gain market confidence to re-attract capital flows subjected the government to investors' influence, resulting not only in the adoption of an unexpectedly orthodox economic program, but also in the appointments of conservative leaders as heads of the Central Bank and the Finance ministry (Carcanholo 2006). In the words of a member of Lula's team, it was a matter of “giving up the rings to keep the fingers.”

Lula's move rightward had long-term implications to Brazilian politics. Studies show that the similarities between the program advanced by the PT and those implemented under the previous administration, particularly in the economic realm, contributed to dilute ideological differences voters perceive among Brazilian parties (Carreirão 2007).

The influence of Lula's U-turn on the trajectory of the Left in other emerging economies was also tremendous. It was comparable to the impact François Mitterrand had on the European Left in the early eighties when, after a persisting speculative attack, the French president was forced to abandon a socialist program in favor of a conservative economic agenda, burying what Helleiner (1994) referred to as “keynesianism of one country.”

Lula's orthodox shift turned him into the poster child of a “responsible Left” in Latin America (Castañeda 2006; Roberts and Levitsky 2011; Weyland, Madrid, and Hunter 2010), one that “pursues the twin goals of growth and equality within the confines of a responsible economic policy,” frequently contrasted with the “radical Left” epitomized by Hugo Chávez in Venezuela.