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Commentary

Brazil’s Rising Star



Until a few of weeks ago, Brazil’s presidential election was a done deal. Dilma Rousseff seemed poised to win re-election and perpetuate the Workers Party’s rule—a mixture of corruption, patronage and mercantilism, as well as a foreign policy envious of what is reasonable in Latin America (e.g., the free-market alliance between Mexico, Chile, Colombia and Peru) and supportive what is not (e.g., Venezuela’s blood-stained regime.)

That has now changed, to judge by the polls that place Marina Silva, the fragile-looking evangelical environmentalist who took over from candidate Eduardo Campos of the Socialist Party after he died in a plane crash recently, in a very strong position. They have her tied with Rousseff in the first round (October 5) and beating her by ten points in the runoff. Although Silva shares much with the president and was a minister in the cabinet of Lula da Silva, the Workers Party icon who preceded her, several factors have infused the business community and the emerging middle classes who owe part of their progress to the current regime but now see it as an obstacle with hope.

For the first time, they see an end to a state of affairs that has kept Brazil’s economy from growing since 2010—a cozy arrangement based on the distribution of credit by the state’s development bank and other vehicles, the manipulation of prices, a stifling tax system, and, through inflationary spending, interest rates that reach as high as 11 percent (inflation is currently 6.5 percent a year). As happened in India when Narendra Modi’s threat against the ruling Congress Party became real, the expectation of change at the top has overturned the psychological climate under which the animal spirits had lay dormant for a while, taking the spark out of a major BRIC country.

The second factor has to do with the fact that Silva (in this case, unlike Modi) does not head a major organization. She will therefore have to rely on the center-right opposition, the Social Democrats of Fernando H. Cardoso, the former president whose reforms originally elevated Brazil to world stardom and made it possible for his successors from the Workers Party to fund the credit and consumption binge that underpins the country’s political economy today. Because Silva will also need other players to defeat the mammoth governing machine if she makes it to the second round, her organizational orphanage is forcing her to talk to the economic interests—such as those in agribusiness, which accounts for a fourth of the economy—she used to treat with disdain because of her environmentalist beliefs.

The Social Democratic candidate, Aécio Neves, a former governor of Minas Gerais, who would likely support her in the runoff, could play a major role in helping Silva set up a credible government. He is pushing for a major overhaul of the business climate.

A third element making Silva palatable is the fact that she has evolved substantially in issues such as price controls, government spending and subsidies. She is now proposing to undo some of Rousseff’s interventionism, including the control of gasoline prices that has hurt Petrobras, the government-owned oil giant, and the easy money conditions generated by BNDES, the state’s development bank. She is by no means a free marketeer, but there are signs that she understands the productive economy needs to be at least partly unshackled if Brazil is to improve its investment rate, which is currently half of Asia’s.

Finally, Silva’s evangelical beliefs, which she has had to revise somewhat in order to accommodate her country’s social trends, including gay marriage, give comfort to those who think they will keep her from any revolutionary temptations she may have. Others, in turn, think her idealistic and leftish penchant will counterbalance any inclinations she may have towards pushing her religious beliefs too far.

There is, of course, no guarantee that what Brazilians see in her will become a reality. She may, if she wins, end up presiding over a chaotic, aimless government in the mold of Jânio Quadros or Collor de Mello and other ruinous presidents. But the fact that so many Brazilians are interpreting her to fit their needs tells us how desperately half the country wants change. The emerging middle class wants first-world services and the business community wants growth. They feel, as do many Latin Americans, that theirs is too important a country to go on like this.


Alvaro Vargas Llosa is Senior Fellow at The Center on Global Prosperity at the Independent Institute. He is a native of Peru and received his B.Sc. in international history from the London School of Economics. His Independent Institute books include Global Crossings: Immigration, Civilization, and America, Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.


New from Alvaro Vargas Llosa!
GLOBAL CROSSINGS: Immigration, Civilization, and America
The erosion of national boundaries—and even the idea of the nation state—is already underway as people become ever more inter-connected across borders. A jungle of myth, falsehood and misrepresentation dominates the debate over immigration. The reality is that the economic contributions of immigration far outweigh the costs.







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