Institutions and Competition

BRICS- Why is Brazil's Lula helping Argentina crash the party?

September 17, 2015
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At the 2014 BRICS summit in Brasília, which was attended by Russian president Vladimir Putin, there was a lot of buzz in the Brazilian media that Argentina was next in line to join the organization. None of it was directly attributed to president Dilma Rousseff.

 

Dilma, still in her first term leading the nation as the hand-picked successor of former president Luiz Inacio Lula da Silva, invited her friend president Cristina Kirchner of Argentina to attend meetings at which BRICS leaders were present.

 

There was even talk that Argentina and its inflationary, dollar-starved economy would be “first in line” at the loan window when the emerging “BRICS Development Bank” was ready to do business.

 

But the BRICS leaders and their “sherpas” had more important agenda items to act on and the question of Argentina joining the organization, and receiving an infusion of BRICS money, quietly fell out of the news

 

President Dilma shifted her focus to strategizing for her campaign to win a second term as president and “BRICSA” became a dead letter.

 

Lula leaps in

Last week, while Dilma and her group of Workers' Party insiders was negotiating the survival of her unraveling coalition, Lula was on an uncharacteristically long (one week) political junket to Argentina and Paraguay, ostensibly to promote bilateral trade and strengthen economic ties among Mercosul nations, another problematic issue.

 

 

In Buenos Aires,with president Kirchner at his side, the still popular former Brazilian leader again called for Argentina to be accepted as a member of the BRICS. None of the BRICS leaders, nor media in BRICS nations (save for a few political blogs in Brazil) covered Lula's promotion of Argentina as a BRICS candidate. The idea, which did not get much traction at all, seemed ill-timed.

 

Lula surprised by Federal Police questioning about Petrobras scam

When Lula returned to Brazil a few days ago Brazil media reported that the Federal Police (Brazil's equivalent of the US FBI) want to question him in connection with the big Petrobras scandal and the Lava Jato (car wash) money laundering operation connected to it. The questioning is of a general nature, and not connected to any legal action at this time.

 

The Brazil supreme federal tribunal, meanwhile, has authorized that a judge in the southern city of Curitiba be assigned to the case of , Lula's former chief-of-staff, Jose "Ze" Dirceu, who is now officially a defendant in a case that if proven, will make him the intellectual author ("the brains") who masterminded the entire Petrobras bilking and money laundering scam. Dirceu has been in protective custody in a common jail since August 3rd and had said he will not cooperate (talk). Now he has to. 

 

President Dilma Rouseeff, at that time, was chairman of Petrobras, and was subsequently named by Lula to replace "Ze" Dirceu as his chief-of-staff.

 

Lula-Dilma rift

Should the case against Dirceu be proven in the court the investigation of Petrobras scandal will get closer to Lula and Dilma,making it more difficult for Dilma to project even the essence of presidentia power. Against this backdrop it is no secret that Lula has consistently opposed the neoconservative economic tactics being used by Dilma's team and has called for the resignation of some of her ministers.  Lula has become a political liability for Dilma, and, in turn, for his own motives, she has become a political liability for him.  Some Brasilia columnists and bloggers have gone so far as to  openly accuse Lula of seeking to destabilize Dilma's government. Make nice photo ops between the two, which have worked in the past, won't work this time around.

 

When it comes to doing real business, it is not Lula who is favored, but vice president Michel Temer, of the Brazil Popular Democratic Movement Party (PMDB) who recently visited Russia with a delegation of ministers to promote the sale of meat and other agricultural products to Russia. The delegation also visited Poland.

UN "non binding" sovereign debt policy

When the Standard & Poor's credit risk rating agency shocked Brazil by reducing its sovereign debt rating to "junk" Lula dismissed the move suggesting that it means nothing.  The majority of Brazil's political class, and the businesses who dominate Brazil's state capitalism model, however, did not. Brazil now must pay more to borrow money to service its burgeoning sovereign debt, regardless of whether the Dilma regime or another government makes budget cuts, implements unpopular taxes.

 

Perhaps, in Lula's mind,  the new United Nations "non binding" policy for the "soft landing" negotiation of sovereign debt (default) that was achieved by Argentine diplomacy and supported by Russia and China (opposed by the United States, Japan, Germany and Great Britain) could be a last resort for Brazil.  It is important to note here that even back in 1989 when Lula ran for president for the first time (and was soundly defeated) he advocated defaulting on Brazil's foreign (soverign) debt.  In effect his policy has not changed in a quarter of a century.

 

Lula's becoming a front man for Argentina's entry into the BRICS and meddling in Argentina's internal politics leaves an opening to question the soundness of his methods. In the context of American analysis Lula's media image on the world stage of  a mash-up of labor leader (and racketeer) James R.Hoffa and Solidarity leader Lech Walesa.

 

Lula is talking about wanting to run for president in 2018. But one wonders if we might witness his last hurrah before that.

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