Challenges Await Brazil’s Lula After Political Comeback

Two decades after first becoming president, on 1 January 76-year old left-wing icon Luiz Inacio Lula da Silva was sworn in for the third time as president of Brazil. The ceremony in Brasilia was the culmination of a remarkable political comeback after Lula won a close run-off election against incumbent president Jair Bolsonaro, returning to power after a 12-year hiatus during which time he served a year and a half in jail on corruption charges.

Awaiting the new president are numerous policy challenges relating to public health, political polarization, the economy, diplomacy and social inequality.

Lula’s victory is seen as a return to power of Brazil’s left and as a rebuke of the far-right Bolsonaro government’s four years in office. Bolsonaro’s COVID response was seen as uncaring and ineffective (Brazil is estimated to have the second largest number of COVID deaths worldwide), and his environmental policy was viewed as a callous exchange of accelerated deforestation for increased economic growth.

Bolsonaro, who engaged in unfounded accusations of election fraud before the election, has yet to concede defeat and did not attend Lula’s inauguration, opting to fly to Florida instead.

As a counter to Bolsonaro’s track record and persona, Lula has pledged to rebuild Brazil’s commitment to human rights and values that he claims were damaged during his predecessor’s time in office.

Having defeated Bolsonaro 50.9% to 49.1% in the razor-thin October 30 run-off election, Lula has come to power during a time of intense partisan divisions in Brazil. Lula will likely have difficulty building coalitions given that a majority of the National Congress is to the right of him politically.

Additionally, some of Bolsonaro’s supporters still not have accepted the former president’s election loss and have blocked highways in two states while attacking security forces at federal police headquarters.

Lula inherits a country with higher levels of inequality, debt, inflation and poverty than when he left office at the end of 2010. Other headwinds include a slowdown in the global economy, rising interest rates, low wages as well as declining investment and consumer activity.

To revive the economy, Lula would be well served to work with the National Congress to institute needed reforms to modernize Brazil’s tax system and to further support Brazil’s already successful renewable energy, infrastructure and agribusiness sectors.

Other needed measures are ratifying the South American Mercosur-European Union trade deal and putting in place pro-growth measures that will provide confidence to both businesses and international investors.

Lula will also need to strengthen the public health response to COVID-19 which has taken nearly 700,000 Brazilian lives. Brazil requires increased access to mRNA vaccines, therapeutics, healthcare equipment and the tools to mount a public education campaign to fight misinformation relating to the disease.

Hunger, education and poverty are other issues demanding the new president’s attention. According to figures from the Brazilian Research Network on Food and Nutrition Sovereignty and Security, the number of Brazilians facing hunger and malnutrition has increased from 19.1 million towards the end of 2020 to 33.1 in 2022.

Additional social welfare spending will be required, and to this end Lula’s Worker’s Party suspended the country’s spending cap in December allowing the new administration an extra $28 billion on social programs outlays in 2023. However, this has raised concerns among economists that the new spending will increase already high inflation and add to the country’s mounting public debt.

On the environment, there has been widespread concern that deforestation of the Amazon rain forest was unchecked during Bolsonaro’s time in office, reaching a fifteen-year high in 2021. Lula has pledged to refrain from further burning of the Amazon and to devote efforts towards its restoration and the planting of millions of hectares.

Expectations are that Lula’s Amazon restoration policies will face opposition from state governments and well-connected farming organizations which rely on development of the forests for regional job creation. Five of the Amazon region’s nine states have state governors who are supporters of Bolsonaro.

On foreign policy, Brazil’s position as Latin America’s most populous country (214 million people) and largest economy (a GDP of $1.6 trillion) means that it will continue to have an important role in world affairs as a member of the BRICS bloc of emerging economies and regionally in the Americas. On issues ranging from trade, climate change, pandemic response and diplomacy, the United States will take interest in how Lula steers Brazil on the world stage.

Like other countries, Brazil will be affected by the growing U.S.-China rivalry. China is Brazil’s top trading partner with annual trade reaching $100 billion in 2019. The agricultural commodities-based Brazil-China relationship flourished during Lula’s first go-around as president, propelling economic growth and raising living standards. For these reasons, Lula is likely to make efforts to reinvigorate economic and political relations with Beijing while establishing Brazil as an independent state aligned with neither side of the Pacific. This renewed outreach to China may cause friction with the Biden administration’s efforts to build coalitions of support against China.

Concerning the U.S., Lula’s advocacy for a less U.S.-dominated and more multipolar world will likely continue. Part of this will involve disagreements with Washington over Lula’s support for the governments of Venezuela, Cuba and Nicaragua. As with Bolsonaro, Lula is expected to refuse to condemn Vladimir Putin’s invasion of Ukraine to ensure continued access to Russia’s fertilizer and agricultural sectors.

However, there will be areas where Lula and the Biden administration will find common cause such as with human rights, climate change, rainforest preservation, rule of law, labor protections, democracy promotion, public health and fighting transnational crime.

“Our message to Brazil is one of hope and reconstruction,” Lula said as part of an address to the Lower House of Congress on 1 January. Making good on this uplifting commitment will require the new president to navigate the increasingly complex economic, social and political hurdles that Brazil faces during his third term in office.