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Two Brazilian candidates with much in common
By Jonathan Wheatley (Financial Post, SP)*

Brazil’s election season is under way, and from August 15 voters will be bombarded by free electoral broadcasts on television and radio.

What choice will they be offered? Although six candidates are expected to run for president, there are two main contenders at this stage: Luiz Inácio Lula da Silva of the leftwing PT, president since January 2003, and Geraldo Alckmin of the centrist PSDB.

On one level they are radical opposites.

Mr Lula da Silva is a former firebrand trade unionist, born and raised in the impoverished northeast, who cut his political teeth on São Paulo’s industrial rustbelt. He is a charismatic man of the people with powerful support among the poor and lowly educated who are the mass of Brazil’s population.

Mr Alckmin, who resigned as governor of São Paulo state to run for president, is a doctor by training but has been a professional politician throughout his working life, most often pictured in shirt and tie, jacket off and sleeves rolled up. He is the epitome of managerial efficiency and his support is strongest among the wealthier and more highly educated.

Yet when you speak to the men responsible for drawing up the candidates’ programme for government, it is sometimes difficult to tell them apart.

Marco Aurélio Garcia, from the president’s camp, reels off a shortlist of priorities: social inclusion through job creation; economic development through continued stability and investment in infrastructure; political reform; and advances in education, especially concentrated on science and technology.

José Carlos Meirelles, for Mr Alckmin, has a similar list: a vigorous education programme focused on primary schooling and further education in science and technology; growth through investment in infrastructure; political reform; and reduction of bureaucracy and the cost of government.

It would be easy to conclude that they have similar ideas about how to achieve their aims.

“We have to keep inflation low, our accounts balanced, and continue efforts to reduce our vulnerability to external shocks,” says Mr Garcia. “Fundamentally, our idea is to continue with current economic policy.”

Although the PT denies it, continuing with current policy means maintaining policies introduced by the previous, PSDB, government: using tight monetary policy to combat inflation, and supposedly tight fiscal policy – cutting spending on investment, though allowing current expenditure to increase – to attack the high level of government debt, currently equal to 50 per cent of gross domestic product and a big impediment to investment.

Mr Meirelles, too, sometimes finds it hard to disagree with his opponents’ policies. “The Lula government has shown some good ideas,” he says. “But there is no management.”

At one fundamental level the candidates see eye to eye. Mr Lula da Silva, indeed, perhaps understands better than anyone else in Brazil the role of low inflation in improving the living conditions of the poor – hence his staunch defence of independence for the central bank in spite of fierce criticism from all sides.

Yet there are big differences in the way each candidate proposes to maintain stability while improving on the lacklustre economic growth of recent years.

The best way to reduce the ratio of debt to GDP, says the PT, is through faster economic growth. Mr Garcia cites a recent increase in the national minimum wage by significantly more than the rate of inflation as a big boost to the spending power of the labour force.

Mr Meirelles proposes tight monetary policy, genuinely tight fiscal policy, and a yet-to-be-defined foreign exchange policy to achieve a “managed” exchange rate to boost competitiveness (but not along Chinese lines, which he concedes is not possible under democracy).

Both candidates will make much of their records. For Mr Lula da Silva, this means exploiting a powerful feel-good factor over the economy. Benign global conditions have boosted exports and enabled interest rates to come down, though they remain high, with little danger of a speculative attack on financial markets. Brazilians are enjoying cheaper credit and consumption is growing more quickly than the wider economy.

Mr Alckmin will point to his achievements in São Paulo state, where a 25 per cent budget deficit has been turned into a surplus, taxes have been cut and investment in infrastructure has been boosted with both private and public money. His appeal, says Mr Meirelles, will be “to show what Brazil could become”.

Mr Lula da Silva enters the campaign with a commanding lead in opinion polls. But a recent flurry of advertising by the PSDB helped reduce the gap from 22 points to 17 in one poll last week and from 26 to 13 in another. Both sides have everything to play for.