Early into Brazilian President Lula da Silva’s new term, he is rapidly forging closer political, trade and cultural integration with Brics countries (Brazil, Russia, India, China and South Africa), Brazil's Latin American neighbours and developing countries, including those in Africa. In doing so, he is moving away from the US-led West.
For all his ambitions, Lula may be bogged down domestically, confronted as he is with a broken economy, the negative impact on Brazil of a slowdown in the global economy due to Covid-19 and the Russia-Ukraine war, and a country deeply divided between his and his predecessor Jair Bolsonaro’s supporters.
Lula appears to be pursuing a much more pragmatic, non-ideological and strategic foreign policy, within the context of closer ties with Brics, Latin America and developing countries than, say, South Africa has been in its foreign policy stances.
During Lula’s last two terms of office (2003-2010), he aligned Brazil closer to Brics and these regions. Though he is pushing for closer collaboration between Brics countries, he is very clear in his criticism of Russia's invasion of Ukraine. “I think Russia made the classic mistake of invading another country’s territory, so Russia is wrong,” Lula told reporters in January after a visit by German chancellor Olaf Scholtz.
A joint statement by the leaders stated they “emphatically deplored Russia’s violation of Ukraine’s territorial integrity and annexation of parts of its territory as flagrant violations of international law”.
Lula recently expressed determination to work towards de-dollarising international trade, during a visit to the Shanghai-based New Development Bank, a financial institution created by Brics countries as an alternative to the western-dominated World Bank and International Monetary Fund (IMF).
“Why can’t an institution like the Brics bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other Brics countries?” Lula asked. “Who decided that the dollar was the (trade) currency after the end of gold parity?”
However, the Brazilian president appears to be realistic, understanding the dollar cannot be replaced overnight, that Brics countries do not have the capacity to replace it and what breaking overnight from the dollar will do to Brics countries. Lula has emphasised small steps, such as Brazil and China using their currencies in bilateral trade by using methods such as credit receipts.
In March Lula moved to work out an agreement with China to settle foreign trade between the two countries in Chinese yuan or Brazilian real to eliminate the dollar as a third currency in trade between the two countries. Lula sees this as critical step in the cost of foreign transactions between them and, more importantly, to begin to de-dollarise global trade.
In January, during Lula’s first visit abroad as new president, he met neighbouring Argentina’s president, Alberto Fernandez, calling for a Latin American currency union to extract the continent from use of the dollar. In a joint letter, the leaders said they planned to “advance discussions on a common South American currency”.
Again, Lula more realistically envisaged such a currency would not be like the euro. It would only be used for trade purposes. The currencies of the countries would remain. The proposed Latin American currency could be a digital one pegged to major currencies or gold. Nevertheless, the challenge is that digital currencies are unregulated and unstable, and it will not be simple to create a digital-based trade currency for Latin America.
During Lula’s presidency Brazil moved from being the 14th-largest economy in 2003 to the seventh-largest in 2010. Poverty dropped from 26% to 12%. Lula benefited from his predecessor Fernando Henrique Cardoso’s prudent macro-economic policies of maintaining a stable currency, low inflation and a balanced budget, combined with anti-poverty programmes.
Bolsonaro was sceptical about climate change, overrode environmental regulations and reneged on Amazon rainforest deforestation promises.
Lula has promised to turn Brazil into a “green superpower”. He increased the powers, reduced by Bolsonaro, of the country’s environmental protection entity, Ibama, to fight deforestation and reinstated a $1bn (about R18bn) fund sponsored by Norway and Germany to finance environmental sustainability initiatives, which Bolsonaro dismissed as western neocolonialism.
Lula said he would put the fight against climate change, specifically deforestation, high on his presidential priority list. He also wants countries with tropical forests, such as the Democratic Republic of the Congo (DRC) and Indonesia, to club together to come up with plans to protect them. Brazil, the DRC, and Indonesia host more than half of the world’s tropical forests. Lula has criticised lack of delivery on financial promises by industrial countries to help developing nations disproportionally impacted by climate change, though they contribute less to it.
In December 200 countries agreed on a proposal argued by 20 developing countries which represent 70% of the world’s biodiversity to set up a new global fund in 2023 to protect nature. The countries raised concern that they have little access to funding to protect their biodiversity.
The proposed fund, spearheaded by Brazil and African countries, will help implement the December 2022 Kunming-Montreal biodiversity deal which aims to protect 30% of the world’s land and water ecosystems by 2030. The US was not part of the deal. Countries will mobilise $200bn to do so. Named the Global Biodiversity Fund, it will be established by the Global Environmental Facility (GEF) and have its own governing body. Industrial countries have also agreed to end $500bn in subsidies they give to industries which harm biodiversity.
The challenge is that developed countries have only committed $20bn and $30bn a year by 2025 and 2030 respectively. The rest of the money is expected to be donated by the private sector, philanthropists and developing countries. Brazil says the financial pledges are inadequate, with Lula promising to campaign for industrial countries to deliver on their pledges to protect the globe’s biodiversity.
During his previous presidential term he travelled to more than 30 African nations and opened embassies in 19. Bolsonaro was disinterested in Africa and did not visit the continent during his term. Lula has promised Africa will again be a key partner.
At home, he faces formidable obstacles. Bolsonaro and his supporters violently questioned his October 2022 election win and have vowed to block all his reforms, whether in the streets or parliament. Only successfully turning around the economy for all is likely to reduce opposition to his leadership. Brazil suffers from sky-high inflation, a struggling economy and crippling infrastructure deficits.
During Lula’s presidency Brazil moved from being the 14th-largest economy in 2003 to the seventh-largest in 2010. Poverty dropped from 26% to 12%. Lula benefited from his predecessor Fernando Henrique Cardoso’s prudent macroeconomic policies of maintaining a stable currency, low inflation and a balanced budget, combined with anti-poverty programmes.
Lula maintained the macroeconomic strategy, including balancing budgets, while strengthening support for indigenous communities, human and women’s rights, and expanding poverty reduction programmes under the mainstay Bolsa Família, which gave social grants to the poor on condition they underwent civic education, followed healthcare regimes and kept their children in school. Lula benefited from a favourable global economic climate, which he strategically leveraged, in combination with prudent public finance management and poverty reduction.
The Organisation for Economic Coordination and Development (OECD) predicts Brazil’s economy will only reach 1.2% in 2023. World Bank figures show unemployment is at 14.4%, having doubled since 2010 when it was 7.3%. Inflation has ballooned. The real has been unstable and undergone several depreciations. Brazil’s contribution to GDP declined to 11%, from 26% in 1980. This represents significant deindustrialisation of the country.
Bolsonaro introduced a populist political programme and austerity measures, cutting social initiatives and undermining democratic institutions, the rule of law and human rights.
The global economy does not favour Lula's Brazil. The post-Covid-19 economic hangover, Russia-Ukraine war and slowdown of the Chinese economy, which have combined to cause a global energy crisis, supply chain disruption, western economies increasingly prioritising their own markets and stagnation of the global economy, may shatter his lofty ambitions.
William Gumede is associate professor, School of Governance, University of the Witwatersrand, and author of South Africa in Brics (Tafelberg)
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.