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This is an audio transcript of the Rachman Review podcast episode: ‘Brazil’s Lula joins leftist leaders pushing for change in Latin America

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Michael Stott
Hello and welcome to the Rachman Review. I’m Michael Scott, Latin America editor at the Financial Times, and I’m standing in for Gideon Rachman, who’s away this week.

Much of the news over the past week has been dominated by the midterm elections in the United States. But further south in Latin America, the region has gone through a big election cycle of its own, which has brought to power a new crop of leftwing leaders. And that’s the focus of this week’s show. My guests are Andrés Velasco, dean of the School of Public Policy at the London School of Economics and a former finance minister of Chile. And Chris Sabatini, senior fellow for Latin America at Chatham House.

So the election of a new group of leftwing presidents in Chile, Peru, Colombia and, most recently, Brazil, has dramatically changed the region’s political map. How are they faring in office, and what does all this mean for the United States, the traditional power in Latin America, and for China, the newly rising power in the area?

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When trying to understand Latin America’s recent political earthquake, it makes sense to start with what happened in Chile three years ago in 2019. On October the 25th, more than a million people took to the streets in Santiago. The demonstration was ostensibly triggered by a small rise in metro fares, but it quickly spiralled into a broader movement protesting against social inequality and demanding the resignation of the conservative president, billionaire Sebastián Piñera.

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(Crowd uproar, followed by multiple gunshots and siren blaring)

Michael Stott
The scale of the protests and the violence which accompanied them shocked many observers who are used to the idea of Chile as a quiet success story in an often turbulent region. But soon it became clear that much of the anger shown by the protesters in Santiago was shared elsewhere in Latin America. In other Andean capitals such as Bogotá and Lima, demonstrators took to the streets over the following year to protest against what they deemed an unfair system, which denied them proper public services and preserved the privileges of an elite. So when the time came for elections, all three Andean nations voted out their conservative or centrist incumbents and chose radical outsiders as president instead.

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Within minutes of polls closing, the fans started gathering. The victory was quick and definitive. Boric’s supporters filled the streets of central Santiago — happy their man had won.

Michael Stott
When I got my guests on the line, I began by asking Andrés about Chile’s new president Gabriel Boric, who took power in March.

Andrés Velasco
I should say at the outset I did not vote for Boric, nor did I vote for Mr Kast, his opponent in the second round. I was not too keen on either one of them. But I will recognise that Boric is a serious man. He is keen on governing well. He is well-read and he is curious about alternatives and policy discussions. Having said that, his government has not been particularly successful so far for a couple of reasons. One is that he does not have a legislative majority — so he is free to propose, but not necessarily free to accomplish. And he’s put two big reforms on the table: one, a tax reform, one, a pension reform. And it remains unclear whether he will have the votes to get either one of them done. The other big difficulty is that he does not govern with one coalition. He governs with two. One is the far-left Frente Amplio Communist party coalition. The other grouping is the so-called Democratic Socialists. And these two coalitions do not see eye to eye. They agree on very little. And Boric one day gives support to the Social Democrats, but the next day he leans toward the other group. And this lack of definition, I think, is hampering his efforts to move his policy agenda forward.

Michael Stott
Right. And he’s had quite a short honeymoon, hasn’t he? Now, Chris, if we can come to you. Gustavo Petro in Colombia — I mean, he’s been just three months in office, but he’s already been quite quick to take a few early actions, including taxing the rich more via tax reform. Now, Colombia is quite a traditional, conservative country. This is their first leftwing president. How’s the country adapting to him and how is it coming to terms with a man who was a member of a banned guerrilla group earlier in his life?

Chris Sabatini
I think for now there’s largely a wait-and-see attitude. There’s plenty of suspicion. I think he’s going to have a very short honeymoon, if any honeymoon at all. I think what’s helping him is his appointment of a few key cabinet ministers, among them, my former colleague at Columbia University, José Antonio Ocampo, as economy and finance minister. That was important. He’s a known quantity to businesses but doesn’t also contradict, if you will, Petro’s acclaimed values and commitments to addressing poverty. And the foreign minister . . . And also the defence minister is a well-known quantity internationally as well, having served as the head of the anti-corruption unit, UN’s support and anti-corruption unit Cicig in Guatemala. So I think, you know, it’s a balance and he’s clearly had to tack back in a few cases on some of the economic policies, given the response. Like what’s most people are focusing on are his international policies and his overtures to the Maduro government for sending an ambassador in the meeting with Maduro and now apparently trying to broker some sort of regional diplomatic initiative around that. I think you’re gonna raise some eyebrows, because, of course, there’s always this suspicion, some of it disinformation, of his affinities, maybe with Chavismo and attempts to turn Colombia into the disaster that is Venezuela. And so far, you know, while he’s spoken of human rights, he hasn’t gotten much. And I think the longer this goes on and the longer that the economy continues to not perform well, I think a lot of those suspicions that people had will return. We have to remember, too, he barely won the election, which is not a huge mandate against a candidate who was a complete outsider and really didn’t campaign. So he doesn’t have a lot of room for error here and he’s clearly trying to go big. But the question is, at what point will people start to expect results both domestically and internationally?

Michael Stott
Yes. And we’ll come back to the sort of international angles a bit later in the discussion. But, Andrés, I just wanted to bring in at this point the third member of this trio Andean leftist presidents — Pedro Castillo. Now Boric and Petro, who we’ve just talked about, are both sort of trained, quite serious on policy discussion, lots of policy ideas. Pedro Castillo in Peru’s a completely different sort of character, isn’t he? A former rural primary school teacher.

Andrés Velasco
He is, indeed. And when you put it that way, it sounds like a charming, romantic enterprise, but it’s been anything but that for Peruvians. I was in Lima last week and it is hard to find anyone in any walk of life who does not see the current government as simply extraordinarily incompetent. It is a government where senior ministers, on average, last a couple of weeks, where anything that might resemble consistent policy is absent, and where both the president and close associates and relatives are permanently under some kind of judicial investigation. And therefore the country is simply in a state of policy paralysis. There have been some attempts to have the Congress vote him out, but apparently, the votes are not there. But nor does he have the votes to pass any legislation and push the country forward in any direction. So I’m afraid this is simply an extreme version of something that’s been happening in Peru for quite a while now — a system in which political parties are very weak. Political parties come and go. They are created, tailor-made for a president. And when the president fails, so does the party. A highly fragmented Congress with very little ability to come together behind major policy initiatives. And so, from a political point of view, the news is not good for Peru. Of course, Peru has been a very strong performer in the past when it came to economic growth. And the economy is still growing. But there are good reasons to suspect that very strong Peruvian performance in the past will not extend much longer into the future.

Michael Stott
Right. And then, of course, we should think about Brazil, where there’s just been an election, Latin America’s biggest nation, which has also elected a leftwinger. But perhaps the story here is a little bit different. This time actually, Brazilians kicked out the radical outsider who was leading them, which was Bolsonaro — Jair Bolsonaro, the hard-right former Army captain. And they chose a known quantity, Luiz Inácio Lula da Silva, a man who already led Brazil as a sort of relatively pragmatic, moderate leftist from 2003-10. Chris, I’m just wondering, how do you think Lula’s gonna govern this time? Is he gonna be the pragmatic moderate again or is he going to be more radical this time around?

Chris Sabatini
I think, first of all, the coalition Lula assembled is much more centrist. He obviously has a number of his traditional, more extreme left elements within the PT behind him. But also he’s got a good bench of centrist economists, technocrats, politicians behind him. I think you’ll see him needing to draw from them, especially because the PT did not do particularly well in both houses of Congress in the elections in October. So it’s going to need to rely on a broad coalition, especially given the fractiousness of the Brazilian Congress. But in, you know, it’s interesting, in all these cases, and Andrés’s personal story about who he didn’t vote for in the Chilean presidential elections is illustrative, because I think many people, a large portion of the population, were voting against a candidate rather than for a candidate. And that’s certainly true of Lula. There’s certainly a cloud that hangs over him of the corruption that was sort of exemplified by Mensalão, the monthly payments scandal to members of Congress earlier, and then, of course, later the Petrobras “car wash” scandal. And then, of course, he had served a year and a half himself in jail for corruption charges. So there’s, you know, there’s a real cloud that surrounds him. I think there are more pragmatic politicians that are younger, that I think whose opportunity were choked off by sort of the re-anointment of Lula as the consensus candidate to oppose Bolsonaro. And I think that’s problematic. I think, you know, I think in some ways, he’ll be economically quite centrist. And I know you wanna talk later about internationally, but I think there he may kinda stick to his rather leftist ambitions about remaking and inserting Brazil into the global order. And then I think on social issues, he will continue to be very leftist. In many ways, that was what Bolsonaro was reacting against. And as we see here in the United States, unfortunately, this anti-wokeism, Lula’s very committed to that, whether it’s questions of LGBT rights or the environment, affirmative action for Afro-Brazilians. I think Lula will continue with that because a large part of his coalition believed in that. Really, I think it’s very much in his DNA. So it’s gonna be a mixed bag. I think economically, he will be conservative, socially he’ll be more leftist. And I think internationally he’ll continue his same policies from before.

Michael Stott
Yes. And you touched on something important there, Chris, which was this idea that, you know, it was a contest between the sort of almost the least worst candidate. And that was something we’ve seen, too, in Colombia, Peru, and to a certain extent, Chile. Now, Andrés, why are we getting this situation where election after election populations are complaining, they don’t like the candidates, they’re choosing the least worst one?

Andrés Velasco
Well, why do populations complain that they don’t like the candidates? Because many of the candidates are no good. But I think your question, Chris, is pointing us in the right direction, because we’ve talked about four left-leaning presidents. You haven’t used the term, but one possible reading of that conversation so far is that Latin America is moving left, in people’s view because of the pink tide, etcetera.

Michael Stott
I’ve been avoiding that. (Laughter)

Andrés Velasco
It’s a good thing that you have because I was going to argue that’s probably a very poor description of what’s going on for a couple of reasons. The first one is that the name of the game here is really polarisation. The reason why I could not bring myself to vote for either candidate in the second round of the Chilean elections late last year is that one stood for the very far right and one stood for the very far left. That is exactly the same story in the most recent Brazilian election. That was pretty much the same story, as you pointed out, in Colombia. Peru was slightly different, but still you had a hard-right candidate, a hard-left candidate. What that reveals, of course — and this is almost too obvious to be stressed — is the weakening of the centre parties and of the centre offering. It does not reveal, however, that centrist preferences in the electorate have faded away. And the most potent piece of evidence I have to make that claim is the Chilean referendum of early September, just a couple of months ago, in which the electorate was asked to vote yes or no on a very radical, very identitarian constitution, and almost to an outcome of two to one, 62 per cent against 38 per cent, Chileans said, “No, we don’t want that constitution. We want change, we want a stronger protection of the environment, stronger guarantees of indigenous rights, a more liberal constitution. But we do not want a constitution that will carve the country into little pieces and move very far to the left”. So what we have here really is a menu of offers, if you want, on the part of the political system which is very mismatched to what the electorate wants. Can that last for ever? I hope not. And I’m hoping that sooner rather than later, in some countries including my native Chile, you will have a rebirth of a stronger centrist offering.

Michael Stott
Yes. Because also the challenges facing all of these countries and the region are very serious, very severe. And they’ve had a decade or two in some countries of relative economic stagnation, very little growth, almost no growth per capita; in some countries rises in poverty, which have been exacerbated by the pandemic, poor quality of education and healthcare. I mean, there’s some very serious challenges out there. Andrés, do you think any of these leaders are up to the task of tackling these sort of challenges?

Andrés Velasco
Let me begin by adding a footnote to what you just said. It is true that the last three or four years have been dismal in terms of growth, inequality, poverty and everything else to some extent because of the pandemic and then the current war, plus sky-high prices, etcetera, etcetera. It is not true, however, that the last couple of decades have been all bad for Latin America. On the contrary, you had a period of fairly fast economic growth during the commodity boom that ended six or seven years ago, and you also had a period of much-improved income distribution. Yes, Latin America was very unequal at the beginning of that period. It remained unequal but somewhat less so. So we have had periods during which — for instance, Fernando Cardoso years in Brazil, during the Lagos period in Chile — you did have progressive social policies and strong economic growth hand in hand, and that is what today we wish we could reattain. I don’t see growth prospects or greater equality prospects around the corner for any country in the region, for the two obvious reasons. First of all, the international environment could not be more dismal. And in addition to that, regardless of whether the plans of these new leaders are good or bad, the most likely outcome is not reform or fast change in any direction. The most likely outcome is simply deadlock and stagnation because, as a result of the combination of presidential systems and very proportional electoral arrangements, none of these leaders has a robust majority in Congress. And in fact, most of them don’t have a majority at all, and therefore they can promise all they want but they will be very, very hard-pressed to pass laws. The real fear (inaudible) here is that voters will say, we voted for these guys, they failed to deliver, and then maybe we face a risk of an even stronger backlash from rightwing populists. That is one thing that keeps me up at night.

Michael Stott
Yes. And just on that theme of how they might tackle these huge challenges, I mean, Chris, last time, Lula pursued regional integration in Latin America as one of the vehicles to try and improve prosperity. Do you think he’s gonna try that again, perhaps using the Mercosur grouping of South American nations and expanding that or using some other vehicle? And what do you think that might mean for Europe and the US?

Chris Sabatini
I think he will. Brazil’s aspirations to be both a regional and global leader are historic. But in many ways, Bolsonaro was sort of a step backwards and is a very sort of “Brazil first” attitude. And it wasn’t just Lula, actually. Fernando Henrique Cardoso was obviously a towering figure intellectually in terms of just policy and foreign affairs. Lula, obviously, because of the windfall of the commodities boom, was able to put some real money behind that. He will have fewer resources to do it, but you know, clearly he’s already loved internationally. I fully suspect he will do a grand tour of Europe very shortly after he’s inaugurated on January 1st. And I think, you know, he’s going to try to leverage Mercosur, as you mentioned. Mercosur is a pending free trade agreement with the European Union that had been caught up for a number of reasons, including EU protectionism. But Bolsonaro’s rather strident and irascible stand on the Amazon provided an excuse for a number of those people who refused to ratify it. I think he’s gonna try to return to that and try to create more of a link between Mercosur and the EU. I think he’ll also try to build out Brazil’s role in negotiating the Venezuela crisis, the deadlock that’s going on right now with basically the Maduro government that was elected illegitimately in 2018 but has refused to budge even under US sanctions, in an effort by the opposition to elect a Democratic president. I think Lula, much as he did in his first term trying to negotiate a deal with Iran, with Turkey, I think he’ll try something else with Venezuela. So I expect a very activist foreign policy for Brazil, both within the region, especially now that there’s certain ideological affinity among the presidents. Although, I think there’ll be some disagreements — Boric and Lula, Lula and Petro, I suspect. But I think he’ll try to sort of ameliorate those and then also project Brazil globally once again.

Michael Stott
And then in Washington, Andrés, I mean, that Biden administration seems to be trying to engage these new leftwing governments, be friendly, suggest that there are some common agenda points, common policy points, particularly on women’s issues, LGBT rights, the environment and so on. But how much success do you think the Biden administration is having in really engaging this new generation of leaders?

Andrés Velasco
I think the good news is that these leaders are democrats, unlike some of their far-rightwing populist counterparts. And that, I believe, is the strongest and most important common ground with the US and with Canada and with other countries in the region. That matters above all for one crucial issue, and that is the future of Venezuela. Venezuela is not only a political tragedy, it is a humanitarian tragedy. And of course, Petro being next door to Venezuela could play a positive role, although the first steps that he has taken probably have emboldened the Maduro regime, but that need not be like that forever. If you could get some co-operation between the US and Canada and European governments on the one hand, and the major democracies in South America to achieve a settlement and a democratic transition in Venezuela, that would be the most important policy achievement and the most important area of collaboration. Another one is international financial architecture. One thing the pandemic reminded us of is that international safety nets remain very, very weak when it comes to finance, and plenty of middle-income countries and developing countries could well get into debt trouble in the years, maybe even in the months ahead. The US needs to play a more active role here in strengthening the IMF and enlarging the IMF lending capacity and the World Bank’s and the IDB’s, etcetera. That’s another area where collaboration could be fruitful.

Michael Stott
Yes. And Chris, you’ve been following that Venezuela situation very closely, I know. I mean, how realistic do you think the prospect is of Latin American countries and the US and Europe somehow together managing to broker a more peaceful democratic transition in Venezuela?

Chris Sabatini
I think there’s a broad consensus that the current policies failed. The policies were pretty much initiated by the Trump administration, heavy sanctions, and the country is stuck in a deadlock. I do think things are moving, thanks in part to the US policy of trying to encourage, incentivise the Maduro government to return to the negotiating table in Mexico. I also think the opposition has signed on to the idea that change isn’t gonna come quick or easy and that it has to go back to the negotiating table. And luckily there is a goal up ahead. I don’t want to sound naive or like a cockeyed optimist here, but in the 2021 regional elections, the EU-sent election observation mission, which was heavily criticised by the opposition in Venezuela, it came back with 21 very specific points that need to be addressed in order for there to be a free and fair election in 2024, in the presidential elections in Venezuela. I think, that has actually become a rallying point for the democratic opposition in Venezuela, for the United States certainly, for the EU, and I think for Latin American countries as well. And for the negotiations in a way that they can place pressure on the parties, especially the Maduro government, to ensure that there are free and fair elections, I think then you begin to set a stage where you’re not gambling on some sort of wing and a prayer that the government will collapse, but you see a path forward.

Andrés Velasco
Allow me to add one bit to what that Chris just said. Dialogue and negotiation are good things and good words, and we should celebrate them but we should add that it is indispensable to negotiate in good faith. The Maduro government and its predecessor, the Chávez administration, never once have negotiated in good faith in the last decade-and-a-half. And therefore, negotiations are fine but democratic countries around the world have to keep up pressure to make sure that we get more than simply a talk show and delaying techniques.

Michael Stott
Yes. And part of the reason that Maduro has managed to survive these very draconian US sanctions and all the diplomatic pressure from Europe and Latin America has been the support he’s had from his key allies, China and Russia. We haven’t talked about China and Russia yet, but I thought, Andrés, it might be interesting if you could explain a little bit how you think this new group of leftist leaders are gonna deal with China and Russia and whether we’re gonna see a significant difference in the sort of engagement there.

Andrés Velasco
The question will be for, you know, the three or four governments we’ve been talking about, particularly for Brazil — but Brazil is the big boy in the room. Is Lula, and is the new Brazilian administration willing to stand up internationally for democratic principles? In the past, in the earlier Lula administrations, its stance vis-à-vis Chávez was ambiguous at best. Lula is a democrat, he is not a Bolsonaro, but he did not spend a lot of political capital trying to push Chávez toward democracy, which takes me back to China and Russia. China and Russia are not democracies. Clearly, they’re large countries. In the case of China, they are very large trading partners of Latin America. But the question is, is a country like Brazil willing to combine an ongoing trade relationship — nobody suggests that that should go away — with clarity of purpose and clean and crisp language about the issues that remain vis-à-vis China? Or will they prefer a muddle and obfuscation? I think you can have a trading relationship with China, but at the same time be very clear about the democratic values that you embrace worldwide. And I will say in praise of the president of Chile that in this regard I think, he’s struck precisely the right note. He’s a man of the left. He’s a man of the far left. But he’s been very clear, crystal clear in saying Venezuela is not a democracy. Nicaragua is not a democracy. And he’s also been crystal clear in saying that he wishes (inaudible) democracy in other places, beginning with Russia. His condemnation of the Putin aggression against Ukraine was, again, crystal clear. That’s the sort of thing that a leftist in Latin America can do. And I would hope more people would do that.

Michael Stott
Yes. ‘Cause on the Ukraine issue, Lula of course himself has suggested that Zelenskyy and Putin are equally to blame for it, hasn’t he? So Chris, do you think Lula’s desire to help make peace in Ukraine is gonna go anywhere? How’s that gonna be received?

Chris Sabatini
I think, again, I don’t think he will be able to resist an effort to insert Brazil, his, and his foreign policy team of Celso Amorim and Antonio Patriota from his previous time in power, really see Brazil as serving as a broker role, as sort of offering an alternative that the global south perspective to great power politics that’s necessary, you know, an important antidote to violence and so on. So I actually think he’ll probably will try to broker something, much as Mexico tried or was going to try and was sort of walked aback a little bit. In almost a value-neutral way, Brazilians around Lula believe in the importance of multilateral institutions and dialogue. They have an alliance with Russia. The Brics was a creation — Brazil, Russia, India, China, South Africa acronym — really sort of reached its full height of prominence internationally during the Lula administration. And I think he’d be loath to break with that element, ’cause that gave in particular Brazil a platform to project itself internationally and to rub elbows with a country like China and India, and to sort of speak on behalf of the global south. And so I think he’ll be loath to break that relationship with Russia, even when it’s run by Putin, who has basically violated another nation’s sovereignty.

Andrés Velasco
Can I add something to that? I agree with Chris, but I would add two things. The first one, Lula is free to engage. Brazil is a big country. It has the right to try to play a more prominent international role. But you need moral clarity in this. And I don’t think it would be coherent with Brazilian democratic values to put Mr Putin and Mr Zelenskyy on the same plane. One is an aggressor, one is the victim. And as long as Lula keeps that clear in his mind and his rhetoric, Brazil is probably entitled to play a happy role, which is again, the same kind of problem we saw with Venezuela in the past. Trying to broker a deal is one thing. Trying to pretend that Venezuela is a democratic country is a very different thing. So we need a clearer message from Brazil on these issues. One other thought, the problem is not entirely coming from countries like Brazil or India or Mexico. I think the so-called west has made a very large mistake, both in substance and in branding, when at the very last minute it says to countries like Saudi Arabia or India or Pakistan or Brazil, “Hey, guys, come join the western coalition against Putin and please vote with us tomorrow morning at noon”. There are two problems there: you don’t invite somebody to a party as the party’s beginning to unfold. You want to invite people to the party early on. And secondly, you don’t call it a western coalition. This is the coalition of democracies across the world. That’s a coalition that a country like South Africa or countries like Brazil may want to join. But to be invited to join the western coalition at the very last minute is not a very appetising offer so we cannot be surprised that many countries had second thoughts.

Michael Stott
Absolutely. And just a very quick final thought from each of you, perhaps framed around the idea of thinking of our investment and business audience. Which of these leaders do you think is gonna end up being best for business during their four years in power? Chris, do you want to go first?

Chris Sabatini
Yeah, I’ll kind of pick the easy one, which is Lula. Obviously, given Brazil’s market size and has huge potential. It has some serious headwinds economically, given its fiscal deficit, in part because of Bolsonaro’s own heavy spending in the lead-up to the election. But I think one of the things Lula will do, will have to do, is score some quick wins on the economy and in some ways pay back some of the moderate and even business-oriented supporters who voted for him. And so I think you’ll see some loosening of market blocks, if you will, and also a greater engagement on trade.

Michael Stott
Thank you. And Andrés, do you agree or would you tick one of the others?

Andrés Velasco
Well, I’m going to rephrase the question slightly, if I may, because I am not of the school of thought that things that whatever is good for business is good for America. So which one of the four is likely to retain the sort of basic macro and institutional stability that is good for a country and good for economic growth and good for investment? I think Lula is likely to try, at least you know the signals we have so far regarding the composition of the team are good. I think Boric will give it a try as well. I have faith in the current minister of finance who’s a very able man and a number of the senior ministers on the political side in Chile who are also very serious people. But of course, the conditions are adverse. Chile is likely to have a recession next year. That’s what the IMF is predicting, what the Central Bank of Chile is predicting. So they have plenty of work ahead.

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Michael Stott
That was Andrés Velasco ending this edition of the Rachman Review, in discussion with Chris Sabatini. Gideon Rachman will be back again next week to host the show. So please tune in again then.

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