In the second semester of 2002, as the presidential campaign intensified and the likelihood of a victory the leftist opposition candidate increased, Brazil experienced the full impact of globalization. For several months, the country had been resisting contamination from the Argentine debacle, which plunged that country in a terrible financial crisis. The Argentine problem had very concrete effects for Brazil, on trade and all other economic transactions between the two main partners of Mercosur; effects that were amplified by the perception, in international financial markets, of the growing risk of “Latin” debt, in spite of the large differences in the conditions and economic policies of the two countries. However, the impact of Argentina on the Brazilian economy was much smaller than the effects that public opinion pools showing the growing support to the candidate of the Laborers’ Party –the PT - had on the assessments of a few rating companies, which made the “Brazil risk” to soar and the country’s currency to loose about fifty percent of its value in a few months.The rush of foreign investors to get out of Brazil at any price was labeled by the Brazilian financial authorities of the time as an “irrational” behavior of a nervous market, unrelated to Brazil’s economic reality. There was a clear risk, however, of a self-fulfilling prophecy. As the Real fell, interest rates soared, long-term debt papers were replaced by short-term ones, often indexed to the dollar, and the likelihood of a debt default increased. This was a typical “globalization” event – the fate of countries does not seem depend any longer on the hard realities of their economies, but on the fleeting waves of good and bad feelings and expectations that washed anonymous markets in New York or London.
This situation led to joint action between government and the opposition, through which the government negotiated a 30 billion dollar loan with the International Monetary Fund, and the main opposition candidate made a public commitment to honor it. Once in power, President Luis Ignacio Lula da Silva kept his word, in a clear turnabout regarding the views expressed the party and its allies until then. Before, it was common to hear proposals to stimulate the economy with the expansion of public expenditures and drastic reduction of
interest rates, and to postpone, renegotiate or cancel the payment of the international debt.3 One in power, the new stand was that the government would not “reinvent the wheel” in economics, would not overspend, would not tinker with inflation and the interest rates, and, to make sure that it was committed to this policy, a former top executive of Bank Boston was invited to head the country’s Central Bank.
Economic conservatism was justified in terms of realism, to be compensated by strong and immediate actions in the social sphere, dealing at once with the problems of hunger, illiteracy, housing, health care, and poverty. On the long run, the economic model inherited from the Cardoso government, which placed integration with the international economy ahead of the social needs of the people, would be replaced by a different economic policy, still to be described in detail.
In this paper, we argue that the notion that there is an option to be made between a policy of international integration, leading to poverty and social inequity, and a policy of national self-sufficiency, leading to economic development and social equity, is a false dilemma. The debates in Brazil have always evolved around two juxtaposed issues, the internal vs. external dimensions, and the relative weight of state vs. market, or society, in the economy and in the implementation of social policies. There is a tendency to identify “state” with “national,” and “market” or society with “international” or global. However, this is in large part an ideological argument, or a rhetorical device.
From this perspective, we will examine some of the key social issues facing Brazilian society, trying to ascertain to what extent they have been shaped and influenced by external or internal forces. Our conclusion is a simple one. Global trends have their impact, as they always had, on the internal life of countries, with the peculiarities of place and time. The main novelty of recent years is perhaps the speed and depth of short-term fluctuations in international perceptions and, consequently, in international capital flows, as well as the sheer scale and availability of these resources. It is necessary, however, to distinguish these abrupt fluctuations from the long-term effects of the country’s insertion in the international economy. It is also necessary to distinguish between the economic and the broader social implications of external conditions. The economy places a strong limit on what can be done in the social realm, but it does not determine all the choices; it is always possible to do better, or differently, with the existing resources.