The hook of this piece is Lula’s recent technical exoneration by a Supreme Court judge on corruption charges. The decision is not necessarily a game-changer—the ruling may yet be reversed by the full Supreme Court, which will depend on how the political winds are blowing that week. It is also the case that Lula’s chances of winning the next presidential election are routinely overstated by his admirers.
This post, however, is more about setting the record straight, making a case that has gotten relatively little play in the anglophone media: Lula is a crook and belongs in prison. The legal technicalities involved are debatable, as they always are, but his conviction was not merely just, but a rare light of hope, competence and sanity in Brazilian politics—which, as with most such things in Brazilian politics, I do not expect to last.
Other than that, Mrs. Lincoln…
In true form, I’m going to start with a digression to discuss Lula’s legacy apart from the issue of corruption. This is necessary because the international media routinely insinuates, if not outright claims, that his achievements overshadow the stain of corruption. This is not an unreasonable argument on its face. The problem is not, as they sometimes say in Brazil, “relativizing corruption”; the problem is that it overstates his achievements by a few orders of magnitude.
When I discuss Lula’s legacy as president, I include not only his two terms but also the administration of his anointed successor Dilma Rousseff. Lula’s Workers’ Party, known by its acronym PT, is a party with strong unity, loyalty and hierarchy (unlike, say, Bolsonaro’s PSL, which he joined mostly out of convenience and dropped less than a year into his presidency); neither Lula nor Dilma were completely free agents as presidents, but acted rather in concert with the party’s broader strategies and objectives.
Lula was elected following a hard image reset as a neoliberal, following the popular policies of his center-right predecessor. For the 2002 presidential campaign, Lula ditched his radical union organizer image, taming his previously shaggy Fidel Castro beard to present a slick, moderate face, promising to maintain Fernando Henrique Cardoso’s policies of fiscal responsibility and dropping more radical promises like reneging on debts to the IMF. In this way, he leveraged his solid showing among the left in previous elections into a landslide.
Lula is routinely credited with lifting millions of Brazilians out of poverty. I will not deny that poverty in fact did fall precipitously during the Lula years. I also will not deny that his expansion of existing social programs, including of direct cash transfer programs to the poorest, played some role in this.
This is, however, a small sliver of the whole story. First, because he did in fact maintain, throughout his first term, the moderate neoliberal policies he had promised in his campaign. But the most salient and significant fact of the Lula-Dilma presidencies is that the Brazilian GDP more than quadrupled during this period.
If you have even a modest education in economics, you probably know that presidents don’t normally have the power to achieve this—certainly not presidents in liberal democracies. Indeed, the growth was driven by factors such as Brazil’s relatively recent emergence from grinding hyperinflation, the international commodities boom, a demographic dividend and so on. The expansion in social programs over which he presided are a footnote in comparison with this economic boom.
Emboldened by these years of near-miraculous economic growth, Lula in his late presidency, and then Dilma throughout hers, along with a coalition majority in Congress, began to spend more freely, with a host of new and expanded subsidies and social programs. They also insisted, at extravagant cost and cost overruns, on hosting the World Cup and the Olympics within two years of each other, in an attempt to establish Brazil as a major player on the world stage (most stadiums and facilities built for these events are today empty and languishing in disrepair). a case of premature ejaculation, it would turn out, as illustrated by a pair of covers of the Economist which are seared into the national consciousness. With the economy already on the brink and mounting allegations of corruption, the Dilma administration poured money into subsidies to forestall the coming recession in order to eke out a narrow electoral victory in 2014. In 2015, the Brazilian GDP fell by 3.5%.
As with the boom that preceded it, the recession was primarily due to structural and exogenous factors. Fiscal and economic policy, however, can do much to worsen a crisis. Though Dilma claimed to be a Keynesian (her 2014 campaign introduced the term into the wider Brazilian consciousness), her boomtime policies were, in Keynesian terms, eminently procyclical, attempting to boost growth with subsidies, spending and expansion of consumer credit. Without belaboring the point, this made the downturn hit with a vengeance. The country has still not fully recovered.
This economic crisis was one of the two major causes of Dilma Rousseff’s impeachment in 2016 (the second being the corruption crisis). The unemployment rate soared steeply, reaching a maximum of almost 13% in 2017.
In short, the gains in income and social well-being under the PT presidencies were buoyed by mostly exogenous and non-reproducible factors that caused meteoric economic growth. While their social policies did some good on the margins, their fiscal and economic policies, quite apart from the corruption, severely worsened the inevitable, though long-delayed, downturn. This is the true legacy of the Lula administration.
The PT Corruption Machine
It is undoubtedly true that corruption has been endemic in Brazilian politics for much longer than PT has been in power, and it is nigh impossible to find a single politician who is not compromised in some way. It is also true that the crimes for which Lula was convicted were, admittedly, comparatively minor, involving two leisure properties and worth something on the order of US$1 million. I won’t go over the evidence for these here, but suffice it to say, for now, that it is compelling. There are also various other instances of likely personal corruption that have still not gone to trial that add up to many millions, not counting corruption of the transparent, legal sort, such as charging astronomical fees for speaking engagements with large corporations. I will not go in too much detail about Lula’s personal corruption because it is peanuts to the greatest crimes in which he was involved: the Worker’s Party corruption machine.
The full mechanism of establishment political corruption will never be known, and PT, naturally, did not encompass all of it. However, PT not only participated gleefully in said corruption, it established and continuously expanded its own party machine to an unprecedented size and systematicity, in an attempt to establish a long-term hegemony not only over our own politics but as a regional leader among the Latin American left and beyond.
The corruption scandal that finally brought down PT—and it was indeed PT, which not only lost the presidency with Dilma Rousseff’s impeachment in 2016 but suffered massive electoral defeats countrywide in 2018—was not its first. Lula faced one during his own presidency, in 2005, when it was discovered that PT was engaged in systematic vote-buying in Congress, known as Mensalão. Various high-ranking party members, including the party president and its treasurer, were convicted. There was insufficient hard evidence that Lula was personally involved for a case to be brought against him, but so many of his close advisers and allies were in deep that, if he is innocent of any involvement, he suffers from one of the worst cases of useful idiocy in political history.
But even the Mensalão was peanuts to what was uncovered in 2014 on during Operation Car Wash, which focused on the mostly-state-owned oil giant Petrobrás. Brazil is relatively oil-rich, and the company held a formal monopoly over all the country’s oil until 1997; it still holds an effective monopoly in various aspects of the industry, such as oil refining. A lot of money flows through it.
The broad strokes of the Petrobrás scheme involved charging kickbacks from major contractors working for the company, to the tune of about 3% of every contract. Most of this would revert to party coffers. While some of this went to personal enrichment, the bulk of it went into campaign financing and other forms of expanding and consolidating their political power. The total money stolen in the Petrobras scheme was in the billions.
Nor was this the only scheme uncovered by Car Wash and other operations that followed it. One associated mechanism involved the national infrastructure bank, BNDES, and involved generous subsidized loans for major public works in foreign countries led by ideological allies of PT, including Cuba and Venezuela, which have since ceased payments, costing Brazilian public coffers hundreds of millions of dollars. The companies working on these foreign projects were the same major contractors which routinely paid kickbacks on Petrobras contracts.
It would take thousands more words to make a full accounting of the ways in which PT used government money and power to their ends, including astroturfing through publicly financed unions and student associations, public subsidies and ad purchases to major media conglomerates, paying off journalists, witness tampering, accounting malfeasance and fraud, among others. They even distributed money to Twitter influencers to write and boost favorable posts.
Though, once again, Lula’s personal involvement lacks hard evidence—the running of such schemes largely fell to behind-the-scenes party officers—he continued to be closely involved with the party’s government throughout Dilma Rousseff’s presidency. It’s debatable whether he was its mastermind, but it is not remotely credible that he was an innocent bystander to the operation of this vast machine.