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Brazil's presidential election: Lula's legacy

Economist Original article ›

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Brazilian President Lula's interview witht the Economist, just before leaving office. It is not still clear how Lula will be seen, even though his popularity at the moment is helping elect his chief of staff Ms. Rousseff, as his successor. Lula's success in office is seen as a continuation of the policies of President Cardozo, who helped tame Brazil's inflationary crisis. Lula has benefitted from the continuation of the policies of his predecessor, and also from the boom in exports to China for soya, metals and other exports. By helping expand Brazil's middle class and the aid to poorer segments of society with the Bolsa programme, he has earned credibility and wide popular support. The dangers lie in the areas of an extremely overvalued currency- see the link to the Brazilian currency Real- with the Real at 1.7 and analysts with computer models showing the Real really worth 2.65 dollars. Part of the problem is government deficits to finance increased spending which require inflow of foreign capital and higher interest rates. Brazil is very dependent on exports to China for the increased level of growth, this poses risks if China's growth slows as expected from the high growth rates of the past. This poses risks for the level of infrastructure spending the Lula and Ms. Rousseff goverments plan on developing. Brazil's educational system is weak and efforts to improve this under the Lula government have not produced results. So the longer term assessment of the Lula goverment will have a balanced score card of wins and losses, without the euphoria of the moment.

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