Lula's "Workers' Regime" Plummets in Stew of Corruption
Source News for Social Justice Action
Date 05/08/03/15:08

July 30 / 31, 2005

Lula's "Workers' Regime"
Plummets in Stew of Corruption

"Nobody has the moral authority to discuss ethics with

President Lula da Silva

Corruption has devastated the Lula regime in Brazil.
Every sector of Lula's "Workers Party"(PT) has been
implicated in bribery, fraud, vote buying, theft of
public funds, failure to report illicit campaign
financing and a host of other felonious behavior,
revealed almost daily between May-July 2005. All of
Lula's closest and most important advisers,
congressional leaders and party bosses have been
forced to resign and are under congressional
investigation for illegal large-scale transfers of
funds into electoral campaigns, private enrichment,
and financing full time functionaries. So far the only
officials not implicated in felony investigations are
Lula and the millionaire ministers who direct the
regime's neo-liberal policies. Even here Lula's
president of the Central Bank--Mireiles--is under
investigation for tax evasion and fraud from the time
he was the director of the Bank of Boston. Apparently
the millionaire cabinet members, unlike the upwardly
mobile arrivistes of the Workers Part have no need to
rob the public treasury--they earn plenty speculating
on the market or exploiting workers and peasants.

What are the politics of the pervasive corruption
endemic in the PT? Why has a party which began a
quarter of a century ago as a vibrant, democratic,
participatory parter, based on social struggles and
movements degenerated into a corrupt elite party
backed by financial speculators and agro-mineral
interests and run by greedy upwardly mobile

In the early 1990's the PT expelled militants,
converted the party from a 'movement-party' to an
electoral party and transferred decision-making from
popular assemblies to parliamentary and state
officials. The PT turned to professional electoral
advisers, paid electoral campaigners, and increased
dependence on the mass media. The predominance of
electoral politics and mass media campaigning required
greater financing at a time when fewer militants were
willing to contribute to the electoral machine. The
party and parliamentary elite increasingly developed
ties with private sector contractors to secure
contributions in exchange for public contracts. With
the rise of Lula to the Presidency these practices
multiplied, as thousands of PT functionaries occupied
posts and began to develop their own private sources
of financing. Lula's neo-liberal agenda and
appointment of big businessmen and bankers to the key
economic posts was based on securing the support of
the right-wing parties in Congress, as it adversely
affected popular social movements, trade unions and
especially public sector unions.

The political problem that Lula faced in securing the
support of the rightwing congress-people was two fold:
most of the political offices were taken by the PT
officials, hungry to capitalize on their electoral
victory, hence Lula could not compensate the right
with offers of office; secondly while the right was
completely in accord with Lula's policy, they were
political rivals, they competed for support of big
business. In order to secure their votes Lula's
closest advisers then resorted to bribing the
rightwing parliamentarians--with payments reputed to
be $12,000 (USD) a month per congress-person, paid via
a public relations firm which worked with the Lula

The PT was no longer an ideological party of the left,
having adopted a program of promoting agro-business,
(receiving 90 per cent of agricultural credits),
finance capital ($90 billion paid out in debt payments
in 30 months--more spent in debt payments in one month
than for education, health and agrarian reform in a
year) and mining and petroleum. What held the PT
together was the "patronage of office"--corruption,
co-option, enrichment and clientelism. Political power
and the values of neo-liberal 'individual enrichment'
became the dominant motive for seeking influential

The opposition from the right--from the Social
Democratic Party and the Liberal Front Party, is not
over programmatic differences. The opposition is
attempting to recapture the big business base, the
support of the IMF, World Bank and international
financiers whom Lula has attracted to his government.

The principle groups "crying for Lula" are not the
urban workers or rural dispossessed, but the bankers,
foreign investors, millionaires and speculators who
have gained billions during his reign of office. The
Financial Times and the Wall Street Journal are
greatly disturbed that the corruption investigations
will prevent Lula from carrying out the rest of his
reactionary neo-liberal agenda. As the FT (July 22,
2005,) states "The corruption scandal seems likely to
postpone any further reforms of the sort that have
bolstered Mr. Lula da Silva's reputation on Wall
Street. Day-to-day government has been paralyzed by
the scandalmeasures to introduce a public-private
financing initiative will go on the back burner, as
well as a proposal to grant autonomy to the Central

Thanks to the corruption investigation and the
"paralysis" of Congress, Lula will not be able to
privatize the remaining public services and
infrastructure and hand over the Central Bank to the
financiers (the more autonomy from Congress, the
greater the integration into the financial sector).
The actual workers in the public sector scheduled for
"public-privatization" have had their jobs, salaries
and pensions preserved, thanks to the corruption
scandal of the "Workers" Party.

While Lula has lost key allies for his neo-liberal
transformation of Brazil, he has moved further to the
right--replacing PT cabinet ministers with officials
from the Conservative Party and PMDB -- the Brazilian
Democratic Movement Party--and others.

Because of Lula's support of Wall Street, the City of
London and the IMF prescriptions there is absolutely
no chance of a coup. As the saying goes, military
coups never happen against the IMF. The biggest loser
in the debacle of Lula's regime has been the Landless
Workers Movement, which has continued to support the
government even as scores of peasant activists have
been killed, tens of thousands of land squatters have
been forcibly evicted and Lula has continually reneged
on every promise of agrarian reform. During the height
of the corruption scandal, even as Lula made more
explicit his widening coalition with the right wing
parties of landlords and speculators, the MST joined
the co-opted trade union bureaucrats in organizing a
pro-Lula demonstration against "destabilization" and
corruption. The pro-Lula policies of the MST has not
only severely weakened the struggles of the landless
peasants but has divided the opposition and
strengthened the "old right", Social Democratic and
Liberal Front parties. While some speculators have
reduced their exposure in the Brazilian stock market,
the big investment houses are still rushing to secure
profits from the high-yielding Brazilian assets,
paying the highest interests rates in the
world--between 18per cent and 25per cent.

The speculative bubble, which spurred 5 per cent
growth in 2004, has come to an end. Brazil is expected
to grow at approximately 2 per cent in 2005, with
manufacturing entering into a recession, thanks to the
free market policies, which have inundated the
Brazilian market with cheap Asian industrial goods.
While the opposition parties and mass media pursue the
deepening corruption scandal up to the innermost
circle of the Lula regime, big business and banking
interests are not in favor of replacing Lula prior to
the elections of 2006. The Financial Times (July 25,
2005) in an editorial continues to praise Lula's free
market performance but advises him to "take more
responsibility for have allowed (corruption) to
happen" and "to re-organize his government around a
programme to secure stability". In the meantime with
the cooling off of the commodity boom, the Brazilian
currency overvalued by 20 per cent, manufacturers are
hoping that Lula will be replaced by Vice President
Alencar of the Liberal Party, a major textile owner
and defender of state promoted industrial policy and
lower interest rates.

Whether Lula remains in office or is ultimately forced
to resign depends not so much on how closely he is
implicated in the corruption scandals, as is the
impact of his departure on the financial markets. In
either case, whether Lula resigns (or is impeached) or
remains, the major investment consultants expect the
opposition to continue the monetarist neo-liberal
policies, which Lula promoted so ardently, even to the
point of buying congressional votes to reduce
pensions, freeze minimum wages and subsidize
agro-business exporters. It is the supreme irony that
the once independent militant Landless Workers
Movement joins Wall Street in defending a regime
immersed in corruption. At least the bankers have
harvested $100 billion in interest and principle, the
MST has over 40,000 displaced land squatters to add to
the 200,000 families living in plastic tents by the
side of highways. "Don't cry for Lula", a banker told
me, "he spoke for them but he worked for us."

When Lula is no longer able to buy, convince, co-opt
or corrupt congress-people, or manipulate the populace
and is no longer effective in pursuing neo-liberal
reforms, the ruling elite will toss him aside.

The Lula regime has accomplished many "firsts" in
Brazilian history during its first 30 months in

No government has moved so far and so fast to the

No government party has had more top party leaders,
congress-people and ministers and functionaries under
investigation for fraud in such a brief period.

No government has paid more in foreign debt interest
and principle in such a short time.

No government has created more multi-millionaires in
30 months.

No government has disillusioned more poor voters in
such a brief period.

James Petras, a former Professor of Sociology at
Binghamton University, New York, owns a 50 year
membership in the class struggle, is an adviser to the
landless and jobless in brazil and argentina and is
co-author of Globalization Unmasked (Zed). His new
book with Henry Veltmeyer, Social Movements and the
State: Brazil, Ecuador, Bolivia and Argentina, will be
published in October 2005. He can be reached at:

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