by Zirin, Dave
Those were the days of growth euphoria. Brasilia emerged as if from a magician’s cauldron . . . highways and great dams were built; automobile factories produced a new car every two minutes. The industrial curve climbed steeply. Doors were flung open to foreign investment, the dollar invasion was hailed, the dynamism of progress was felt in the air. . . . The leap forward was financed by inflation and a heavy external debt that would be unloaded on the backs of successor governments.44
This was true. Eighty percent of all investment between 1955 and 1962 came from state-guaranteed loans, which meant borrowing the money from successive generations, who would have to pay the bill when it came due. The optimism of the JK years was also tightly connected to Brazil’s success on the international soccer stage and its victory in the 1958 World Cup, led by two wildly charismatic teenagers called Garrincha and Pelé—more on them in chapter 4. Soccer historian David Goldblatt notes that “money was pouring into football” during this period: “The legacy of the Vargas years, in which black and mulatto players had been integrated economically and stylistically into a professional game, was strengthened by the influx of resources and new urban migrants and the booming popular cultures they helped create.”45
Like so many of Brazil’s rulers before and since, JK was plagued by rumors of corruption. (He would be the last president to finish a term in office until 1998.) None of the charges were ever proven, but his successor came to office in 1961 with a promise to “sweep the corruption out of the country.”46 He resigned in short order and was replaced by João Goulart, a left-wing economic nationalist who attempted to enact a “Basic Reforms” plan with an emphasis on redistributing land, improving adult literacy, extending voting rights to people who could not read, and taxing multinational corporations. Goulart also pledged to be a global leader on nuclear disarmament and vowed to stand up to the IMF and the crippling debts it was imposing on the country.47
In this Cold War climate, with the United States and the USSR competing for influence in Latin America, such radical “antibusiness” policies attracted the attention of the White House. Sure enough, in 1964, Goulart was deposed by a military coup, with the approval if not the direct support of the United States. There is audiotape of President Lyndon Johnson saying that the United States needed to take “every step that we can” to ensure Goulart’s overthrow.48 LBJ recognized the new military government as legitimate within hours of the coup. In fact, Goulart had still neither resigned nor left Brazil when Johnson, unable to restrain himself, sent a congratulatory telegram to military puppet Pascoal Ranieri Mazzilli, who had provisionally assumed the presidency.49 Barely a month after the coup, US ambassador Lincoln Gordon, touring Brazil’s army barracks, said that deposing Goulart “might be included with the Marshall Plan proposal, the Berlin blockade, the defeat of Communist aggression in Korea, and the solution of the Cuban missile crisis as one of the most important moments of change in mid–twentieth century world history.”50 As the coup took place, in an operation code-named Operation Brother Sam, the United States kept an aircraft carrier, the USS Forrestal, waiting just off Rio’s coast in case its military muscle was needed.
The military dictatorship held political power in Brazil for the next twenty-one years. The nation’s economic director, Roberto Campos, said in 1965 that “the era of charismatic leaders surrounded by a romantic aura is giving place to a technocracy.”51 A friend of Galeano wrote him a heartbreaking letter in 1966, describing the conditions for ordinary Brazilians: “We are a beaten, dominated, conquered, destroyed nation. The regime had to ban strikes and destroy unions and parties, to jail, torture, and kill, to cut workers’ wages by any means necessary.”52 This era was also, not coincidentally, when Brazil began selling off millions of acres of the Amazon rainforest to US business interests: Galeano notes that “before 1967 . . . foreign capitalists bought, at $0.07 an acre, a tract larger than Connecticut, Rhode Island, Delaware, Massachusetts, and New Hampshire put together. . . . Par for the course in Latin America: its resources are always surrendered to imperialism in the name of its lack of resources.”53
The establishment of the military dictatorship did not spur the mass killings and slaughters that took place in subsequent years in places like Chile, Bolivia, and Argentina. The “disappeared” in Brazil numbered in the hundreds instead of the thousands, and there was no “great leader” like Chile’s Augusto Pinochet. Instead, a series of five generals controlled the nation in this period. However, because it was the first country in the Southern Cone to fall to dictatorship, Brazil was used as a base to launch subsequent coups. As Noam Chomsky and Edward S. Herman note, “From Brazil, and with continuing U.S. assistance, torture spread throughout much of Latin America in the 1960s and early 1970s, with Brazil serving as a torture-aid subcontractor.”54 In 1970, Brazil won the World Cup, which, along with a spike in economic growth, contributed to a general mood that there would be no alternative to military rule. The dictatorship adopted slogans such as “Forward Brazil” and “Brazil: Love It or Leave It” to hammer the point home.
Goodbye to All That: The End of the Dictatorship
The military government effectively used torture and repression to smash the revolutionary left by 1974, but even without consistent political challenges, change was roiling the country. Brazil was finally on the path of industrialization. In addition, the population exploded from forty million people in 1960 to eighty-two million in 1985. The country was becoming younger, poorer, and far more restive. Much of this population growth was in the area most difficult for the military to control: the favelas. “The favela association movement became a vanguard in the national mobilization against the dictatorship. . . . The wave of mobilization for urban reform . . . helped pressure the military government to legalize the formation of new political parties in 1980, and to hold democratic elections for state governors in 1982.”55
The era of military rule was also marked by corruption and an inability to address problems of education and healthcare or to tame the inflationary nature of the boom-and-bust, production-for-export economy. The year 1984 saw millions in the streets rallying for the right to vote: the biggest political protests the country would see until the Confederations Cup protests of 2013.56 The protestors had a simple, unassailable slogan: “I want to vote for president.” A leading figure at the rallies was soccer star and 1982 World Cup captain Socrates, whose team, Corinthians, proudly operated on democratic principles and took a formal position against the dictatorship. Soccer announcers also addressed the crowd, cementing the connection between soccer and politics of which Vargas had dreamed, though perhaps not for the ends Vargas had in mind.
Like the end of royal rule and the end of slavery, the dictatorship did not end in the fires of war but with a pragmatic acceptance. João Figueiredo, Brazil’s last military leader, who governed from 1979 to 1985, took small steps every year to reestablish civilian rule. Political prisoners and those in exile were granted amnesty and six new political parties were founded. In 1985, civilian rule was enacted with the indirect election of Tancredo Neves, who died of a heart attack before he could take power. Yet civilians’ ability to vote for their leaders could not tame the economic cycle of booms and busts that still scarred the economy. In 1988 inflation was more than 1,000 percent, and there was a “brain drain” as educated young people emigrated to find work and a stable economy in other countries. In 1989 and 1990, currency values jumped 2,700 percent in one twelve-month period. One worker famously said, “What good does it do to have a shopping bag full of money if all I can do is buy a kilo of beans?”57
With hyperinflation and hypercorruption came a crime wave as well as a series of epic gun battles between drug dealers and the police. Brazil became internationally infamous for an explosion of homicides and the kidnappings of wealthy residents and tourists, though the level of police violence was little known outside the country. This rising violence was, as Bryan McCann wrote, rooted in the “partially demobilized security forces of
the Latin American dictatorships [which] became interest groups in the new Latin American democracies, exacerbating violence in attempts to secure their own position,” as well as an “an expanding illegal economic sector” in which “the two principal commodities were cocaine and guns.”58 The well-heeled refused to venture out of their gated communities without armed escorts, creating images of a nation hopelessly divided against itself. Yet the real war—with a real body count—was not the criminals kidnapping and murdering the rich, but the police acting with extreme prejudice against the poor.59 As McCann writes,
Favelas became stigmatized as the source of pervasive urban violence . . . deeper class divisions did not disappear. Instead, those divisions hardened into new forms of discrimination and exclusion . . . the border between the favela and the rest of the city was increasingly enforced through heavy armament. Rio’s elite retreated into closed condominiums, private schools, and shopping malls guarded by private security; they fortified their apartment buildings and coveted armored vehicles and personal weapons.60
The dirty secret of state violence and police brutality seeped out into the open during the night of July 23, 1993, when Rio police attacked sixty sleeping street children. Eight were killed. All of the children, part of the city’s exploding homeless population, were sleeping in an area that they believed to be safe: the steps of Rio’s Candelária Cathedral.61 At the time this massacre garnered international headlines, São Paulo’s police department had the highest homicide rate of any force on earth.62
Amid this decay, Brazil’s education and healthcare system was by almost every marker actually worse than it had been in the 1970s. Racism, although little discussed, still defined opportunity and access; Afro-Brazilians held very few positions of power or influence out of the music studio or off of the athletic fields. The year of the attack by police on sleeping homeless children, inflation hit 2,500 percent.63 This nation of unimaginable wealth was in free fall. If someone had said in 1993 that this country would not only be able to stabilize its economy, but also raise millions out of destitution and even pave the way for an economic boom, people would have looked at them as if they were daft.
How did Brazil do it? Before we go through the mechanics of how this was done, I should be clear that it is highly debatable, given the current state of its economy, just how secure Brazil ever actually was and how much of this recovery was illusory. Either way, to understand the current state of affairs in advance of the World Cup and Olympics, it is worthwhile to figure out just how a country with a 2,500-percent inflation rate rescued itself from an economic free fall in just a few short years.
President Fernando Henrique Cardoso, popularly known as “FHC,” tamed hyperinflation by taking the radical step of scrapping Brazil’s currency and starting with an altogether new system of exchange. Switching currencies wasn’t radical in itself: Brazil had been changing to a new currency every few years due to inflation. This was known as O Plano Real—the Real Plan (“real” being the name of the new currency it introduced).
Cardoso first introduced the Real Plan in 1994, when he was finance minister under President Itamar Franco. It was meant to address the economic instability caused by historically high inflation rates. Foreign and national investment in Brazil had slowed to a standstill because when inflation is high, production costs spiral, eliminating any prospect for profit and reinvestment. In addition, high inflation deeply damages the banks because the amount they lend is drastically reduced in purchasing power by the time it’s paid back. These kinds of inflationary spasms had plagued Brazil for decades, though never so severely, thanks to a program of indexation the military dictatorship implemented and used in the 1970s that ensured that the prices of goods and wages were pegged to rise and fall together. They thought this could tame inflation, but this practice just locked it in and made it worse—as did the military’s penchant for printing more money any time one of its state-run enterprises ran aground.64
Cardoso decided that the only solution was a dramatic departure. The Real Plan not only created a new currency, the real, but also implemented a mass austerity program, which included auctioning off state enterprises and dramatically reducing government spending. Cardoso also jacked up the nation’s interest rates. Foreign currency began to flow: investors could make money simply by parking their cash in Brazilian banks. These currency streams made it easier for Brazilian banks to lend money to businesses. The real gained value as greater numbers of people converted their savings into Brazil’s smoking new currency. A stable and valuable real also made imported goods cheaper for local consumption. Japanese-made electronics, because of Japan’s own crisis, flowed into Brazil throughout the 1990s. These cheaper imported goods also acted as a control on inflation, forcing Brazilian producers to keep prices low in order to compete with imports.
All of this taken together allowed Brazil’s inflation to fall from those highs of over 2,000 percent into the single digits. Once inflation had dropped, Brazil began to create a new kind of internal consumer market, where working people were able for the first time to open bank accounts and buy goods on credit. There would be no point in opening an account during a period of high inflation because the longer you would save, the more worthless your money, yet without a bank account it was impossible to get a credit card. It was around this time that the country also expanded the practice of giving individual residents of favela dwellings titles and assigning them value, so the properties would not be seen or perceived as “community owned.” These consumption patterns would have a dramatic effect on Brazilian life and culture, even as they simultaneously made Brazil the neoliberal darling of international capital and its media organs, which lustily described Brazil as “thrust[ing]” into “the forefront of the global trend toward open markets and free trade.”65
Cardoso’s Brazil was also trying to send a message to international capital that was heard loudly and clearly by FIFA and the IOC in the following decade: that Brazil is a safe place to hold your mega-events and that the government will allow the neoliberal games to operate as they wish without government interference or restraint. The contradiction of this entire plan, however, is that it was also predicated on an attack on working-class living standards and unions the likes of which the military could have only dreamed. Wages and social services were casualties of the market. Not long after Cardoso left office, Brazil held the ignominious ranking of “most unequal country on earth,” with 31 percent of the country living below the UN poverty line.66
These attacks on working-class living standards were doubly impacted by the fact that initially the Real Plan sputtered on its own terms. The entire plan was predicated on making a country attractive for foreign investment and Brazil’s economy was slammed by the global downturn of the late 1990s, which hit the “Asian Tiger” countries Brazil was courting particularly hard. In the end Cardoso’s Brazil had to be saved from catastrophe by a $41.5 billion loan from the IMF. The bailout was hugely unpopular in Brazil for reasons that echo deeply into Brazil’s history: the idea of being trapped in the chains of foreign debt held by the powers of the Global North. Its unpopularity was fueled even further by the fact that the bailout did not work; the economy continued to slump.
Cardoso’s response was the equivalent of putting out a fire with gasoline. He rushed to relaunch his campaign to make Brazil friendly to foreign investors. This meant even sharper reductions in government spending, even more privatizing of state industries, and even more driving down workers’ wages. In short, more austerity. This caused terrible pain among the Brazilian masses. When Cardoso’s government privatized and sold off the steel, telecom, and mining industries, the consequences fell on the shoulders of the most vulnerable. Historian Kenneth Maxwell noted the “perverse effects” of these decisions: “Many industrial workers were displaced as imports flooded the consumer market. Not only did the service sector expand, but many industrial workers were forced into the informal sector. Subsequently, unemployment increased dra
matically.”67 Cardoso’s losing streak was so acute that even Brazil’s soccer team, defending their title as World Cup champions after winning it all in the United States on July 4, 1994, lost in the 1998 finals to underdog France.
The true beneficiary of this period of austerity was Lula, who, after years of running for office, now finally completed his unique journey to the presidency. In Lula, the people of Brazil saw change. They also experienced far more continuity than anyone expected.
Chapter 3
Oh, Lula!
The ghosts of all the revolutions that have been strangled or betrayed through Latin America’s tortured history emerge in the new experiments, as if the present had been foreseen and begotten by the contradictions of the past.
—Eduardo Galeano1
You can’t understand why the presence of the World Cup and Olympics jangles every frayed nerve in Brazil without understanding the presidency of Luiz Inácio Lula da Silva. Lula served as president from January 1, 2003, to January 1, 2011, and left office as the most popular living politician on earth with an eye-popping 80 percent approval rating.2 Yet, even at his peak, discontent rumbled beneath the surface of Lula’s presidency. As long as growth rates continued to hum, everyone cheered the “Lula model” of leadership, despite concerns about corruption, health care, and education. Today, as growth begins to sputter and the nation pours billions into hosting the World Cup and Olympics, the current president, Lula’s anointed successor from the Workers’ Party, the less charismatic, more technocratic Dilma Rousseff, has paid the price. Despite continuing Lula’s policies, a unique amalgam of social democracy and free-trade neoliberalism, her popularity sits at less than half that of her mentor.
Let’s talk Lula.