Brazilian Foreign Policy:The Economic

Consequences of Mister Lula

Talk-debate at the Lemann Institute of Brazilian Studies, Center for LA&C Studies – University of Illinois at Urbana-Champaign, May 1st, 2013

Paulo Roberto de AlmeidaDiplomat, Professor at the

University Center of Brasilia (Uniceub)

www.pralmeida.org

Mini CV of Paulo R. AlmeidaPh.D. in Social Sciences (University of Brussels, 1984)Master in Economic Planning (University of Antwerp, 1977)Professor, Post Graduate Law Studies - Uniceub (2004-2013)Invited Professor at IHEAL - Latin America High Studies Institute - University of Paris-3 (Sorbonne) (2012)

Economic Counselor, Embassy in Paris (1993-1995)Head of Financial Policy Division – Itamaraty (1996-1999)Minister-Counselor, Embassy in Washington (1999-2003)Strategic Affairs Unity of the Presidency (2003-2007)Deputy Commissioner of Brazil at Shanghai Expo 2010Deputy General Consul of Brazil in Hartford-CT (2013-___ )

Author of many books and articles on international relations, Brazilian foreign policy, and regional integration (Mercosur)

Most recent books (1):Relações Internacionais e Política Externa do Brasil: a diplomacia brasileira no contexto da globalização (2012)Table of contents:http://www.pralmeida.org/01Livros/2FramesBooks/RelaIntPExt2011.html

Most recent books (2):Globalizando: ensaios sobre a globalização e a antiglobalização (2011)

Table of contents:http://www.pralmeida.org/01Livros/2FramesBooks/107Globalizando.html

Outline of the Presentation:Introduction: the context of

Lula’s BrazilPT’s conceptions about the world systemLula’s diplomatic objectives:United Nations: Security

CouncilRegional: strenghtening of

MercosurTrade negotiations (WTO)

Economic consequences of Mister Lula: a critical assessment of his diplomacy

History: authoritarian experimentsSince the beginning of the Republic, the Army intervenes in the political life;From 1889 to 1930, erratically; from 1930 to 1945, with gusto; from 1946 to 1964, in despair; from 1964 to 1985, with delectation, against “corruption”!Military were big modernizers, with touches of industrial stalinism and economic fascism, which persists today.

And now: the context of Lula’s Brazil1985-1994: macroeconomic instability at the highest; many currencies... 1994: Real Plan: at last, one Currency.1995-2002: FHC: the big globalizer and the half-way modernizer of Brazil.2003-20l0: The “never before” doctrine of Lula: redistributionist à outrance;Change of partners: from US to China;Commoditization; desindustrialization.

PT’s diplomacy new clothes: It is almost impossible to analyze Brazil’s foreign policy without taking into account specific characteristics of the new power and its new conceptions.

PT is a party committed with a world vision anchored not only in the Left, as such, but in the Cuban “universe”.

That’s is a personnal opinion, but based on deep knowledge of the “field”.

PT’s WeltanschauungStill the old view of North-South, of oppressed-oppressors. Fight for a power change, against “hegemonic powers”, arrogant, unilateralists...Every and each anti-imperialist is an strategic ally: China, Russia, and other emerging (India,SA, etc.)It’s simplistic, but it’s like this...

Diplomatic objectives of Lula:Three principals (and many

others): 1) Election to the Security Council as a permanent member (veto);2) Strenghtening and expansion of Mercosur in South America; 3) Trade negotiations of the Doha Round (only bet, against FTAA)....And change the world, of course...

Security Council: an obsession!Old aspiration, since the League of Nations: Brazil was rejected in 1926 and 1945: total delusion of military and diplomatic strategies.Lula and Amorim undertook almost everything for this: debt cancellation, political manouvres, new embassies everywhere, except arrive at a deal with USA and China; G4 and Brics!

Deconstruction of MercosurUndue concessions to

Argentina: total dismantling of bloc rules;Invitation to new semi-members(Venezuela, Bolivia, Ecuador)Devaluation of the economic side, overvaluation of political moves.Democratic clause totally forgotten in the case of Chávez’s Venezuela.

Trade negotiations: failureStart by the implosion of American project of FTAA, by ideology, not by an economic calculation.Delusion with an agreement with the European Union (agriculture);Emphasis of the South-American neighbors (in vain: Br. leadership)In the end, there is nothing: Doha?

And the results are...:Not a single one of the main

objectives was achevied, even partially;

The “leadership” in South America was sabotaged by all neighbors, to begin with by hermana Argentina.

The “strategic alliances” did not fare better, with poor results in BRICS;

Lula, the one:“Le style c’est l’homme”?

A true party diplomacy:Itamaraty was subjected,

divided, and humbled by the “new Gramscians”;

Brazil became actually more dependent from China than it was ever, before, in any time, from the USA.

Lula’s personal diplomacy, à la Gaulle, served no one but himself, his glory;

Economic consequences of Mr. Lula: comoditization, industrial decline...

How good was Lulanomics?

Ops, the real Lulanomics:

Commoditization: Growth of commodity exports, thanks to China: extraordinary rise in prices

Desindustrialization:From 1985 to 2012, the rate of the industry in the GDP was halved: from 25% to 12%, and not only as a result of the normal sectorial transition.

Brazil’s terms of trade:

Rises in food prices and oil:

Expansion in world exports

(in volume; in prices it was even better):

Emerging countries sustain the world

trade, by importing:

But Brazil is too introverted:

And Brazil is a too fragile global trader

(a constant 1% of world trade):

Brazil: going to a current account deterioration?

Now: this is real desindustrialization:

Brazil compared with Asian countries:

Decline of industrial competitiveness in Brazil’s

foreign trade:

Where’s it the industrial decline ?

Perhaps China has something to do with it, in terms of Ricardian specialization:

The big industrial decline:Not due to China competitivity, or not only: China is a world problem Overtaxation: cascade of taxes Overregulation:WB Doing BusinessSuperprotection: too high tariffsCartelization: cost of investimentsBureaucratization: Brazil is in an economic fascist trend (Embrapii)

Social justice: what, exactly?Before: macroeconomic instability at the highest; many currencies... Then: Real Plan, at last, one currency.Enter FHC: the big globalizer and the half-way modernizer of Brazil (almost).Enter Lula: A “never before” doctrine and redistribution à outrance;Consequence Now: one third of the population on the welfare dependence.

What are the real big problems?Very low labor

productivity;Education continuously worsening;Poor technological innovation;Really, really bad infrastructure;Politicians going for the gold pot;State overdimensioned, too heavy;Lethargic reforms (like France);Brasil became TOO costly…

Fiscal charge is in continuous rise…

Total taxes in % of the GDP:

We beat our Brics partners:

But a very low savings rate:

A controlled public debt?

But, the real problem is the cost, not the size…

That’s the size of the problem:

Some fixes and non fixes...Enormous natural

resources;Renewable energy matrix;Perhaps the (pre-salt) oil curse?Poor competitiveness (domestic);Worse: bad prospects productivity;Diplomacy: active, prepared, fast;No foreign conflits (well, football);Democracy, low quality, corruption

Many thanks!

Now, let’s go to the questioning…

Paulo Roberto de Almeida

www.pralmeida.org