After a decade of being a darling of the international business and diplomatic community, Brazil appears to have run off the rails. The confluence of economic troubles and political uncertainty is a toxic cocktail that threatens not only the country’s laudable economic gains but also its democracy.
After experiencing an average annual growth rate of 4.05 percent between 2004 and 2013, the South American giant experienced a recession in which the economy contracted by an average of 2.17 percent annually between 2014 and 2016. In the midst of this, and not coincidentally, Brazil’s political system entered a meltdown, first with the revelation of the massive Lava Jato corruption scandal, followed by the impeachment of then-President Dilma Rousseff over unrelated budgeting matter and last, a badly splintered presidential field and profound voter anger heading into the Oct. 17 congressional and presidential elections.
The leader in the crowded field of candidates is Jair Bolsonaro, a former army captain and member of congress who has promised an iron fist against criminals and has mocked women, the human rights community and LGBTQ citizens. Bolsonaro’s rise (he’s now leading the polls ahead of the first round of the election, with more than 20 percent of the vote) reflects widespread voter anger over the economic downturn, a contracting new middle class, a perceived corrupt political system and personal insecurity, with more than 63,800 murders across the country in 2017.
Bolsonaro’s lead in the polls was given a boost in August when Brazil’s constitutional court barred center-left former President Luiz Inácio Lula da Silva, who is serving a 12-year sentence for corruption, from running for election. After raging against his exclusion and rallying his supporters, Lula decided to remove himself from the candidacy in early September and allow his vice president — and former mayor of São Paulo — Fernando Haddad to run in his stead.
Prior to exiting the race, Lula was leading in the polls. According to surveys, his exclusion from the ballot may well lead many of his followers to stay home on election day in October or to vote by incorrectly marking their ballots to show their displeasure at the alleged politicization of the judicial system. Such action — should it happen — would demonstrate a lack of faith in Brazil’s 33-year-old democracy and potentially undercut the legitimacy of any winner. It would also likely result in no candidate gaining the necessary 50 percent of the vote to win the election outright, prompting a second round on Oct. 28. That would leave the election wide open, with the likelihood that more traditional political parties and leaders would rally behind the second-place finisher of the first round to prevent the election of right-wing populist Bolsonaro. That would require an odd coalition that, regardless of the candidate, would likely span environmental activists, moderate conservative parties, social democrats and evangelicals.
Left out of the polarized political debate and electoral politics is a central issue: economic policy. The decline in citizens’ trust in politicians and anger over everything from corruption to crime can be traced to the country’s economic contraction. In 2014, when the economy was just beginning its slowdown (growing by 0.5 percent that year), the two main candidates, Dilma Rousseff and Aécio Neves of the Social Democratic Party, accounted for 75 percent of the vote in the first round.
Today, with Lula out of the race, non-traditional party candidates have garnered the support of 36 percent of likely voters for the October ballot, with 28 percent still undecided. But as Brazil continues to try to climb out of its worst economic recession in more than a century, the leading candidates have shared few details about their economic plans.
That’s a risk. While Brazilian voters’ demands may have shifted to corruption, insecurity and crime, economic policy remains the country’s main path out of its political and economic malaise. Ultimately, it was the smooth transition from the market-oriented and social safety net policies of moderate former President Fernando Henrique Cardoso (1995-2003) to Lula and his handpicked successor Rousseff that paved the way for the economic boom of the early to mid-2000s, which lifted more than 40 million Brazilians out of poverty. But macroeconomic economic policy has been a minor theme in the platforms of Bolsonaro and many of his fellow competitors, such as Marina Silva of the Sustainability Party or Lula’s stand-in, Haddad.
As a result, the magic elixir of consistency that contributed to the country’s past success is in doubt. Despite his controversial rise to the presidency in the wake of Rousseff’s impeachment and the multiple corruption scandals that have swirled around him, current (and temporary) President Michel Temer implemented a series of much-needed structural reforms intended to right Brazil’s listing economy, such as trimming the country’s ballooning fiscal deficit and enacting labor reforms. But the larger goal of pension reform eluded the president and will pose both a political and economic challenge to whatever government succeeds him. According to economists, Brazil’s retirement age of 55 and generous outlays to retirees and their ex-spouses would swell the government’s pension obligations to the unsustainable level of 17 percent of GDP by 2060, if unchanged. Whoever inherits the presidency will need to address this looming fiscal — and political — train wreck.
None of the presidential candidates has put forward a plan to resolve this issue, and Brazilian voters are clearly in no mood to discuss tough decisions. Rather, their passions have been directed elsewhere, whether to decry the corrupt political class, respond to tragic crime rates or reject the political system entirely. In the end, whatever the outcome of an open-ended, polarized and fractured election in October, the real victim of Brazil’s economic and political malaise likely will be its economic policy, which has limped along for close to five years now.
And that may be the most damning story forward for Brazil’s economy and its democracy.
Christopher Sabatini, Ph.D., is a nonresident fellow with the Mexico Center and the Latin America Initiative. He is also a lecturer of international relations and public policy at the School of International and Public Affairs at Columbia University, as well as the founder and executive director of Global Americans, a nonprofit that conducts research on social inclusion, foreign policy, democracy and human rights.