The election of Luiz Inácio Lula da Silva of the Brazilian Workers' Party (Partido dos Trabalhadores – PT) in November 2002 triggered both trepidation and exultation. For observers on Wall Street, the election of a one-time Socialist and seemingly dedicated leftist president raised concerns about Lula da Silva's commitment to the market-oriented reforms and financial stability achieved by his predecessor, Fernando Henrique Cardoso (Party of Brazilian Social Democracy – PSDB). For the left in Brazil – and Latin America generally – the triumph of the PT represented a crucial victory for the forces of social justice, for participatory decision making, for honest and transparent governance, and most notably for a rejection of the neoliberal paradigm. As it turned out, there was little cause for either reaction. Lula da Silva has not been a firebrand leftist, promoting populist, redistributive policies regardless of the economic consequences. Nor has he introduced new modes of decision making that open the doors to social movements and other previously excluded – and presumably largely antineoliberal – voices. In fact, Lula's government has offered little to suggest the emergence of a clear leftist alternative to the Washington Consensus or a new political style as an alternative to Brazil's traditional pattern of coalition building and bargaining.

Instead, the Lula da Silva administration, like the Cardoso administration before it, has embraced a generally market-oriented economic orientation and the traditional clientelistic rules of operating within Brazil's legislature (fisiologismo).

Introduction

In this chapter I will propose a few lines of reflection on the current partisan political struggle in Brazil and how this can be read in the light of international experience of contention between liberals and social democrats.

Many wonder why the PT and the PSDB/ DEM coalition have been the most successful options in recent presidential elections in Brazil. Indeed, no matter how complex the political life in modern societies may seem, there is basically a single and fundamental cleavage which pits electorally viable political forces against each other in nations structured according to the dictates of the capitalist order: the political actors who organize around the social democratic movement and the actors that organize around the liberal movement. The replication of this ideological divide is expressed in the famous ideological left-right continuum along which parties, leaders, voters, interest groups and opinion leaders seek to position themselves or somehow are inevitably drawn into. The point here is not exactly to determine, for example, whether or not the Partido Social Democratica Brasileiro (PSDB) is a liberal or genuinely social democratic association, but rather to point out that starting in the 1990s with the introduction of market-oriented reforms in Brazil, the PSDB in association with the former Partido da Frente Liberal (PFL) renamed the Democrats (DEM), has become the most competitive and reliable option for voters with rightist or center-right inclinations.

This chapter examines the context and implications of two transitions in Brazil: the political transition from a military regime (1964–1985) to democracy (1985 to the present), and the economic transition from import substitution industrialisation (ISI) (1930–1980) to neoliberalism (1990 to the present). These transitions have shaped the contemporary Brazilian political economy and the policy choices available to recent federal administrations. The chapter also reviews how neoliberal economic policies were implemented in a democracy, first under the centre-right administrations led by Fernando Henrique Cardoso (1995–1998, 1998–2002) and then under the centre-left presidencies of Luís Inácio Lula da Silva (2003–2006, 2007–2010) and Dilma Rousseff (2011–2014, 2015 to the present).

In this context, it is especially important to examine the policy shifts introduced during the second Lula administration. These shifts did not signal a decisive break with neoliberalism, but they inaugurated what became known as the ‘Lula moment’: a decade of significantly higher growth rates than had been achieved previously, and remarkable advances in employment, distribution and poverty alleviation. The chapter examines the economic and social policies underpinning the ‘Lula moment’, and reflects on the limitations of their policies, and those of neoliberal democracy, which have emerged through the political crisis of the Rousseff administration.

Following are eight sections. The first outlines the process of ISI and its limitations. The second describes the transitions from the military regime to democracy, and from ISI to neoliberalism. The next three review the first and second Lula administrations and the Rousseff administration. The sixth examines the distributional achievements under these administrations. The seventh considers the challenges now posed for the Brazilian Left, after the exhaustion of the ‘Lula moment’. The eighth section presents the main conclusions.

IMPORT SUBSTITUTION INDUSTRIALISATION

ISI is a system of accumulation based on the sequenced expansion of manufacturing industry, with the primary objective of replacing imports.1 Manufacturing expansion usually departs from the internalisation of the production of nondurable consumer goods (textiles, processed foods, beverages, tobacco products and so on). It later deepens to include the production of durable consumer goods (especially household appliances and automobile assembly), simple chemical and pharmaceutical products and non-metallic minerals (especially cement).

Introduction

A former trade union leader, Luís Inácio ‘Lula’ da Silva was the first politician from the left-wing Worker's Party (PT) to assume the Brazilian presidency. During Lula's two terms, foreign policy was an extremely important instrument to boost the country's development and international standing, just as it had been in the 20th century after the 1930s, albeit with varying paradigms. In addition to the national component, the foreign policy aimed to foster the development of its neighbouring countries on the other side of the Atlantic, from which the ancestors of a large proportion of Brazil's population had originated. Brazilian diplomacy therefore paid special attention to Africa by strengthening ties with several countries and developing an ‘active, affirmative and purposeful’ diplomacy. Brazil based its insertion in the African continent primarily on South–South (or horizontal) cooperation and the promotion of trade and investments. With this perspective, Lula intended to deepen and diversify ties with African countries by creating various initiatives to foster trade, investment, technical and cultural cooperation and also cooperation in security and defence. Therefore the delegations of Lula's frequent visits to African countries always included representatives of large Brazilian companies. The development projects presented to African countries were in the form of missions, seminars, small and large projects involving infrastructure and capacity building, mostly coordinated by the Brazilian Development Agency (ABC) and carried out by Brazilian technical institutions such as the Oswaldo Cruz Foundation (Fiocruz), the Brazilian Agricultural Research Corporation (EMBRAPA), the National Service for Industrial Training (SENAI), and dozens of other smaller organisations. The inauguration/reopening of seventeen embassies in African countries under the Lula administration also illustrates Brazil's foreign policy offensive in the continent.

In addition to bilateral relations with specific countries, Brazil–Africa relations were also strengthened within multilateral forums, such as the UN and the WTO. It is important to highlight the favourable global political context during the 2000s in which the Lula government was projected internationally, when countries in the Global South were able to challenge the hegemony of the traditional powers and play a more active role in the international system.