Latin America Advisor

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How Successful Has Lula Been a Year After His Return?

Lula in Brazil New Year’s Day marked one year since Luiz Inácio Lula da Silva returned to Brazil’s presidency. He previously served in that office for eight years, from 2003 through 2010

Jan. 1 marked one year since Luiz Inácio Lula da Silva returned to Brazil’s presidency. The past year has been marked by numerous new measures, notably major environmental policies, as well as a focus on international relations and leadership. What have been Lula’s most significant accomplishments and main missteps in his first year? What parts of Lula’s agenda remain unfulfilled, and what are the largest challenges he faces in the rest of his term? To what extent has Lula changed Brazil’s standing with the international community?

Guilherme Casarões, assistant professor at the São Paulo School of Business Administration of the Fundação Getulio Vargas: “Lula started his third term with two broad foreign policy goals in mind: to fix the damage that Bolsonaro caused to Brazil’s global image and to relaunch the active international strategy that made him popular in the early 2000s. The first goal has been accomplished: a respected Brazil has returned to the world stage, reclaiming its regional and multilateral protagonism. As for the second goal, it took Lula some time before he realized today’s world is much less prone to cooperation and diplomacy than in the past. In an increasingly dangerous and polarized world, Brazil’s longstanding diplomatic assets have lost relevance. Rather than being praised by his conciliatory approach to wars in Ukraine and Gaza, Lula has been criticized for remaining on the fence. Although Lula has made foreign policy a top priority, having spent more than two months abroad in less than a year in office, he has failed to attain tangible results. As Lula enters his second year, he needs to focus. Fighting climate change is one challenge, not just because Brazil is home to the Amazon and to 20 percent of the world’s fresh water, but also because the country has been suffering from heat waves, droughts and other ecological disasters. Another challenge is ensuring that South America remains stable and peaceful. As Venezuela’s Maduro threatens to go to war with Guyana over oil-rich Essequibo and Argentina’s Milei vows to crack down on protesters against his draconian policies, Brazil has a major challenge ahead, this time along its borders.”

Welber Barral, partner at BMJ Consultores Associados and former Brazilian foreign trade secretary: “Lula brought a new dynamic and more stability to Brazil’s political system. Having a seasoned team, with previous administration experience, curtailed the necessary time for adjustment and recovery. The surprising GDP growth in 2023 (close to 3 percent) is a sign of these accomplishments, with low inflation and positive job creation. On the down side, Lula has not formed a strong base in Congress; it is more powerful and interventionist than it was two decades ago. This has slowed the necessary modernizing reforms for the country. But a crucial step was the tax reform, which will have a positive economic effect in the next years. On the economic team, Finance Minister Fernando Haddad, including his approval by the financial market, has been a good surprise. However, political polarization persists in Brazil, and although the opposition is not fully organized, obstacles may become more common in Congress. In the international scenario, Brazil increasingly depends on commodity exports, and international crises may affect its splendid trade surplus. One particular and difficult challenge is to promote the national industry without recourse to protectionist measures. After the disastrous Bolsonaro years, Lula’s arrival was celebrated in the international community, and its standing on environmental issues has been crucial for Brazil’s image in the world. The presidency of G20 and the COP30 in Belém will be relevant opportunities for Brazil to assert its interests in multilateral forums. The recent Venezuela-Guyana crisis has demonstrated the relevance of Brazil’s leadership in South America.”

Carolina Costa, head of Latin America government affairs and multilateral engagement at RELX: “Following a politically divisive presidential race decided by the narrowest margin on record since democracy was restored in Brazil, with President Lula winning with just 50.9 percent of the votes, and a government transition marked by elevated institutional risks, there have been many challenges and opportunities to restore the country. On the international front, President Lula has sought to repair Brazil’s image and its role on the global stage, seeking to position the country as the leading voice of the Global South while also asserting Brazil’s longstanding commitment to multilateralism. For example, he has visited more countries during his first year back in office than former President Jair Bolsonaro did in his entire four-year term. In addition, Brazil currently holds a rotating seat on the United Nations Security Council, will preside over the G20 throughout 2024 and will host the COP30 climate conference in 2025. Domestically, one of the Lula administration’s main achievements in 2023 was the passage of a long-awaited tax reform, a central pillar of President Lula’s program to simplify Brazil’s complex tax system, which often has been cited as one of the principal hurdles to doing business in the country. The markets reacted favorably following the approval of the tax reform. On Dec. 19, S&P Global Ratings upgraded Brazil’s long-term ratings to ‘BB’ from ‘BB-,’ elevating Brazil’s attractiveness for international capital. Looking ahead, many challenges in critical areas, such as education, health care and the fight against crime, remain. Therefore, as President Lula continues efforts to restore the country’s standing domestically and internationally, he and his allies will need to leverage the achievements of 2023 and redouble these efforts in 2024.”

Charles H. Blake, professor of political science at James Madison University: “Jair Bolsonaro boycotted Lula’s inauguration and inspired an insurrection one week later. In turn, Lula’s supporters held a smaller share of Congress than during his prior two terms. Amid these challenges, President Lula projected a willingness to tackle difficult domestic problems and to revive Brazil’s longstanding aspiration to be a world leader. Domestically, he began by convincing Marina Silva to serve as environment minister with a mandate to review the status of a large bloc of public lands on which deforestation had expanded during Bolsonaro’s presidency. Last month, Lula achieved his largest legislative victory of the year: a simplification of national and subnational indirect taxes to reduce compliance challenges for firms while streamlining revenue collection. This tax reform, along with an earlier fiscal framework reform, are compromises between a Lula government intent on improving tax collection and a large center-right bloc in Congress that wants a business-friendly policy mix. The biggest domestic challenge for Lula’s second year will involve creating a more progressive income-tax structure that could reduce income inequality in Brazil. On the international stage, Lula restored Brazil’s visibility by organizing a relaunch of the South American Unasur bloc in May, an Amazon policy summit in August and a climate summit in September that builds a bridge to Brazil’s selection to host the United Nations’ COP30 climate summit in 2025. In turn, Lula was quite active at the BRICS summit’s expansion announcement in August and at the U.N. General Assembly in September.”

Leonardo Barreto, chief political analyst at Vector Governmental and Institutional Relations: “Lula promised he would not be Jair Bolsonaro. That was meant to signal a return of peace and predictability to politics. Nonetheless, even if he has worked hard to normalize relations among institutions and gotten through a significant part of his government’s legislative agenda, Congress has proved to be an unrelenting challenge. Lula has also strategically kept Bolsonaro’s ghost alive, framing the 2024 local elections as a new round between his and the former president’s allies. In foreign policy, Lula tried to influence global conflicts and to position Brazil as a nonaligned leader in a world in need of reform and multilateral governance. Concretely, however, he made no difference in the wars currently raging, and, closer to home, failed to restore the Unasur or close the trade deal with the European Union. In getting personally involved in the Argentine elections, he cast a shadow over Brazil’s closest international partnership and muddled his participation at COP28 by joining OPEC+. According to a Brazilian saying, one should not do more than the necessary in politics. For the new year, wisdom advises Lula to better calculate his movements, abandon polarized narratives and rethink the avenues available for Brazil in global affairs. Being more pragmatic with his goals, he would have a better shot at the challenges at hand, like his bittersweet record in Congress or threading U.S.-China tensions. Maybe then he could bridge the gap to all his talk of peace and predictability.”

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