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Brazil At The Crossroads

Seen from the outside, Brazilians must choose on their Oct. 28 runoff ballot between a right-wing candidate who may have authoritarian leanings and a left-winger whose policies could easily lead to national bankruptcy.

Seen from inside the country, the choices seem to look pretty much the same.

Jair Bolsonaro, Fernando Haddad and 11 other candidates faced off in the first round of Brazil’s presidential election on Oct. 7. While Bolsonaro won that contest at 46 percent to Haddad’s 29 percent, he fell short of the 50 percent of valid votes necessary to win the election outright. (The most successful of the remaining candidates, center-left candidate Ciro Gomes, secured only 12.5 percent of the vote.) Going into the resulting runoff election, the two remaining competitors are neck-and-neck according to polls.

Bolsonaro represents the Social Liberal Party (PSL), a right-wing party that was once insignificant but gained prominence along with popular anger at the Workers’ Party (PT), which Haddad represents. Bolsonaro and his fellow members of the PSL have warned voters that supporting the left would put the country on a path similar to the disastrous one traveled by neighboring Venezuela.

A former army captain, Bolsonaro has made law and order a centerpiece of his campaign. He has pushed for tough criminal penalties, including a restoration of the death penalty, which has been illegal in Brazil except in times of war since 1988. He favors shrinking the government’s economic influence overall, lowering taxes and privatizing state companies. The latter is especially central to his message of fighting government corruption, a subject that remains top-of-mind for many Brazilians after the impeachment of former President Dilma Rousseff and the arrest of her predecessor, Luiz Inacio Lula da Silva (known as Lula) on corruption charges. Not incidentally, Lula had hoped to run again for the Workers’ Party despite his conviction, contingent on the Supreme Court permitting an appeal; Haddad was his running mate before Lula ultimately stepped aside in September.

Many Brazilians are torn between disillusionment with the PT and reluctance to support Bolsonaro’s militaristic approach, leading them to vote for the “least worst” candidate. For more enthusiastic voters, however, both presidential candidacies are powered by a rose-colored nostalgia. In Balsonaro’s case, that nostalgia is for the supposed prosperity and security that the military brought with a junta that ruled for more than two decades after the 1964 coup. For Haddad, it is for the financial sugar high that accompanied the PT’s reign under Lula, during a period in which a Chinese-fueled commodities boom and runaway domestic spending briefly gave Brazilians the strongest economy they have ever known.

A more sober look back at Brazil’s past isn’t so rosy, however. The military regime ruled over a desperately poor country with only a rudimentary education system and a completely unaffordable social security scheme that was, at the time, propped up by the country’s very young population. Currency controls made it difficult for foreign investors and Brazilians alike to take local earnings out of the country. In a country nearly the size of the contiguous United States, only a small sliver of the population could take advantage of air travel. Roads ranged from primitive to nonexistent. The Amazon literally burned at the hands of subsistence farmers and violently avaricious ranchers. And through most of this time the government fired its critics, censored the press, and tortured and occasionally murdered its opponents.

In the PT years, from 2003 to 2016, the government payroll climbed along with the welfare rolls. Grandiose projects like the World Cup and the 2016 Summer Olympics sucked up scarce capital, while urban sewer and water systems crumbled. The Wall Street Journal recently reported that Brazil’s public spending now outstrips its revenue by an amount equal to 7 percent of the country’s annual economic output, and that borrowing has grown to nearly 80 percent of Brazil’s gross domestic product. Meanwhile, many favelas became no-go zones for the police under the rule of drug lords, except when the military essentially occupied them with little regard for civil rights or civilian safety. Efforts to address the problem have so far done little to help.

For all the fears about Bolsonaro’s presumed dictatorial leanings, it is worth noting that it is the PT that cozied up to authoritarian leftists in Venezuela, Cuba and Argentina. The impeachment proceedings and corruption trials of the past few years have strengthened Brazilian institutions outside the executive branch, offering the plausible possibility that there will be checks and balances as Bolsonaro governs under a constitutional system. And for the most part, his economic policies offer more Brazilians a chance for a sustainably better life than the statist recipes of the PT, which have failed virtually everywhere they have been implemented.

Bolsonaro has been labeled a Brazilian version of Donald Trump, and that is probably a fair comparison. He says a lot of things that offend a lot of people. His social agenda leans heavily toward the country’s conservative, religious and rural past, rather than its urban and more secular present. He might indeed believe extrajudicial justice is the answer to a crime wave that kills more than 1,000 Brazilians – most of them poor – every week.

But Brazil needs someone who is untainted by corruption scandal to cut the tangle of red tape, reduce the state role in the economy and take on the entrenched structural problems of its education and pension system if it is to offer its citizenry any real hope of a sustainably better life. Like Trump, Bolsonaro might not be the candidate the conservative political elites would have chosen, but he is the one they got – and more importantly, he is the one his political base wanted. So if Brazil is going to change direction, he will have to be the one in the driver’s seat.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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