The Workers Party (PT) success reflected the growing discontent among workers, peasants, and others at the impact of the country’s economic crisis and the austerity policies of the current government of President Fernando Henrique Cardoso.

The day after the vote the leading index of the São Paulo Stock Exchange fell by 4.28 percent. The real, Brazil’s national currency, dropped a further 3.3 percent against the U.S. dollar, on top of its 37 percent decline so far this year.

The stock market jitters were in line with months of worried speculation in the opinion and financial columns of the big-business press of both Brazil and the United States about the impact of a PT victory. Capitalist commentators have expressed concern about the party’s links to the unions and the pro-socialist rhetoric with which it has built a following among impoverished and combative workers and peasants.

Many capitalists remain nervous that a PT victory will raise working people’s expectations of a letup in government austerity measures, and spark renewed popular agitation for land, wage increases, jobs, and social benefits.

The "investors’ main worry," commented a feature article in the October 5 Economist, "is not that...Mr. da Silva will rip off his moderate garb to reveal his old, fiery, socialist self and declare a debt moratorium. It is that he may be incapable of taking the tough decisions needed to stabilize the debt--imposing a further fiscal squeeze if needed in the short term, while passing difficult reforms, such as cutting the fat pensions of public servants."

Seeking to allay these misgivings, da Silva and other PT figures referred in the campaign to the party’s "responsible" record in local government. Da Silva has assured the imperialists and local capitalists that his government would pursue "fiscally responsible" policies, including honoring interest payments on the country’s massive foreign debt. In the past, da Silva has called for renegotiating the debt.

"Every now and then someone will say to me that my discourse in 1980 is not like the speeches I make today," said da Silva. "What a good thing that is!" The PT candidate focused his campaign on advocating tax reforms and introducing incentives to capitalist businesses aimed at stimulating production and exports.

"Lula could lead the country out of its economic quagmire, mobilize a broad popular base allied with sectors of the progressive middle class, and galvanize international allies," enthused Marcos Arruda, an economic adviser for the PT.

The Workers Party president José Dirceu said that in recent years "both Lula and the Workers Party have changed, because the world and Brazil have changed."  
 
‘Economy on a knife-edge’
The PT candidate "and his advisers know that Brazil’s economy is on a knife-edge," wrote Peter Hakim, president of the Inter-American Dialogue in a column in the Washington Post earlier in October.

"They also know that strict fiscal discipline is needed to avert a full-fledged crash," he added.

Da Silva’s conciliatory stance helped to persuade some business people to declare their support for the PT in the latter stages of the campaign. The PT candidate named textile magnate José Alencar as his vice-presidential running mate.

He received the endorsement of leading bourgeois figures like Antonio Carlos Magalhães, the leader of the rightist Liberal Front, and former presidents José Sarney and Itamar Franco.

The PT campaign has also received the endorsement of the Brazilian Socialist Party and the Labor Party, which came in third and fourth respectively in the first round of voting.

The decision of some prominent capitalist figures to endorse da Silva was not "just a tactical ploy," stated the October 2 Wall Street Journal, but the reflection of a "broader shift: a discontent with the economy so profound that essentially conservative Brazilians are willing to embrace Mr. da Silva, whom they rejected as too radical in the past."

The PT’s near victory registered the depth of the country’s economic stagnation and the impact of the crisis on the living standards and expectations of millions of workers, peasants, and middle-class layers.

"If Sunday’s vote showed anything, it is that Brazilians are very frustrated with current economic policies," said political analyst Alexandre Barros. "It doesn’t matter if Lula or Serra wins," he said, emphasizing the economic and political weakness of the country’s ruling layers, and their difficulty in pressing ahead with unpopular austerity programs.

"You won’t be seeing any more privatizations in Brazil for at least another few years," said Barros.

Held up until recently as a model Latin American economy, Brazil’s economy has slumped after some years of relatively rapid economic expansion and a degree of industrialization. For several years growth in its gross domestic product has stalled, averaging less than 3 percent per year.  
 
Growing poverty levels
Brazil is the largest economy in Latin America, and the largest debtor nation in the region. Some 50 million of its population of 170 million people live below the official poverty level. According to government figures 13 million people are unemployed.

The country’s current debt equals $260 billion, or 58 percent of the country’s Gross Domestic Product.. Commentators in the big-business media have expressed concern for some time that the government will default on interest payments on the debt that come due at the end of October.

In anticipation of increasing political and financial turmoil, the giant U.S. bank J.P. Morgan Chase advised its clients earlier this year to reduce their exposure to Brazil. Argentina and Nigeria, it stated, were the only countries with riskier bonds.  
 
 
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