Lula Wins Brazil Election for The Third Time

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Bloomberg Línea — Brazil’s former President Luiz Inácio Lula da Silva (PT) has just been elected the new Brazilian president on Sunday (30). With 98.81% of the vote sections accounted for, Lula received 59.563 million votes, equivalent to 50.83% of the valid votes, defeating President Jair Bolsonaro (PL), who was running for re-election and received 57.500 million votes, or 49.19% of the valid votes. It was the slightest difference in the second round since the current electoral system came into force in 1989.

Lula will return to the presidency of Brazil on 1 January 2023, 12 years after he left the country at the beginning of 2011. He passed the sash to Dilma Rousseff after serving two full terms, between 2003 and 2010. At 77, which he completed last Thursday (27), he will become the oldest president to take office in Brazil, surpassing Michel Temer, who was inaugurated in 2016 at the age of 75.

The PT candidate had already been the most voted in the first round when he received 57.2 million votes or 48.43% of the valid votes. With the victory on Sunday, he maintained the tradition of elections since 1989: none of the most-voted candidates in the first round loss in the second. The former president’s favoritism had been recorded by electoral polls since the day after the first round.

With Sunday’s result, Bolsonaro becomes the first Brazilian president not to be re-elected since the change in the constitution in 1997 that authorized re-election for executive positions. The following year, Fernando Henrique Cardoso was re-elected, defeating Lula.

PT’s 5th term in office

It is the fifth election won by the PT since 2002 - the only one the party lost was in 2018 when Bolsonaro was elected, defeating Fernando Haddad (PT).

In that one, however, Lula was banned by the Superior Electoral Court (TSE) from running because he had been convicted of corruption in the second instance of the Federal Court, in a matter that caused challenges, since under the Ficha Limpa Law, he could run but not take office.

Lula’s victory this Sunday represents redemption for the PT: in addition to defeating the candidate who defeated the party in the last election, the party returns to power six years after the removal of former President Dilma Rousseff (PT) in 2016 by impeachment. She was replaced that year by her vice president Michel Temer, of the MDB, a party that supported Lula’s candidacy in this year’s elections.

Fierce campaign

In the second round, the campaign was “very close”, as Lula himself admitted in a recent interview.

It was also an unprecedented campaign in terms of false information campaigns. The TSE, responsible for overseeing the election, granted Lula 70 requests for a right of reply due to false information disseminated by Bolsonaro’s campaign, according to data compiled by the PT defense up to 18 October.

Among these requests were 164 insertions of the former president’s campaign in Jovem Pan programming, which, according to the TSE, had been giving unequal treatment to the two candidates, which is illegal, since the station has a public radio concession.

Use of the public machine

Running for re-election, Bolsonaro spared no effort in the final stretch to use the public machine to help his campaign and increase his chances. Two months before the official start of the electoral period, in August, the government managed to get Congress to approve a change in the Constitution so that it could make budgetary spending outside the spending ceiling in the election year - moreover, the Constitution forbids expenditures in an election year, but the declaration of a State of Emergency allowed the exception.

With the change approved by Congress, the government increased the value of Brazil Aid from R$ 400 to R$ 600 until December 31, created a benefit for truckers and taxi drivers, created a subsidy to buy cooking gas, released the withdrawal of FGTS, allowed the use of future deposits of FGTS to buy affordable housing and increased the subsidy of a housing program, among other programs.

A report by UOL calculated that these programs injected R$ 21 billion into the economy in less than two months, to stimulate consumption and improve economic performance indexes.

According to economists consulted by Valor Econômico newspaper, the programs launched by the government will cost at least R$110 billion by the end of this year. For economists from the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre-FGV), the shortfall is estimated at R$400 billion.

History

Lula has been president for two consecutive terms, from 2003 to 2006 and from 2007 to 2010.

During this period, he faced challenges such as the 2008 global financial crisis and the mensalão corruption allegations - which eventually led to the imprisonment of some of the main PT leaders, such as José Dirceu, José Genoíno, João Paulo Cunha and Antonio Palocci, who were convicted by the Federal Supreme Court for corruption.

But they were also the governments that created the main social programs in force in the country. Among them, Bolsa Família, the largest cash transfer program in the world, which has been endorsed by politicians of all parties; Fies, for young people’s schooling; Prouni, for low-income people to enter higher education; and Minha Casa Minha Vida, for low-income housing.

Lula left the government with over 80% approval, an unprecedented achievement for any elected politician since the re-democratization in 1985.

After his time as president, he faced more accusations of corruption and was even arrested, accused by prosecutors from the Lava Jato Federal Prosecutor’s Office. The Lava Jato operation was set up in Curitiba to investigate the formation of a cartel of contractors to rig Petrobras tenders and overcharge contracts and pointed to the former president as the leader and biggest beneficiary of this scheme - which was never proven.

He was convicted in 2017 by then-judge Sergio Moro and was banned by the TSE from running in the 2018 elections. With the TSE’s decision, Bolsonaro, who had been appearing in second place in the election polls at the time, ended up elected.

Lula was arrested in April 2018, after his conviction was confirmed in the second instance, but he was released in November of the following year, with a change in the position of the Supreme Court in anticipation of serving his sentence.

Also in October 2018, before the second round of that year’s elections, Moro accepted an invitation from Bolsonaro to be his Minister of Justice. He remained in the post from January 2019 to April 2020, when he left accusing the president of undue interference in the PF. In the 2022 elections, Moro was elected senator for the Brazil Union of Paraná and supported Bolsonaro’s candidacy against Lula.

What to expect

With the victory, Lula will begin the articulations to set up his government. In the final straight of the election, he received the support of a wide range of market personalities, such as the members of the team that drew up the Real Plan, former president Fernando Henrique Cardoso, former senator José Serra, the former presidents of the Central Bank Armínio Fraga and Henrique Meirelles, as well as various economists more closely linked to the liberal agenda.

In addition, Lula is counting on the former governor of São Paulo Geraldo Alckmin (PSB) as his vice-presidential candidate. Alckmin spent almost 30 years in the PSDB and ran for president against the PT twice. In this year’s elections, he joined Lula’s ticket as part of a strategy of composing a moderate ticket, beyond the left and the agendas historically linked to the PT.

Therefore, the expectation is that Lula will put together a more “center” team than the one seen in his previous mandates. The PT president has already said a few times that he intends to commit to debt stability and fiscal responsibility, although he has also said that he sees no problem in increasing the debt to have the capacity for public investment.

And he has also said that he intends to appoint someone with a political, and not just technical, background to lead the economy, as he did in 2003 by nominating Antonio Palocci to the Treasury.

Analysts’ expectations for Lula’s third mandate are that he will be more pragmatic. Although he can count on the growth of the left-wing benches in the Chamber, he will also face large right-wing and conservative benches and a not insignificant number of congressmen loyal to former president Bolsonaro.

This reality points to an even more fragmented Chamber, which will impose negotiation challenges. Observers such as the political risk analysis firm Eurasia believe that the government will face difficulties in assembling a coalition.

Added to this is the so-called secret budget. It is a mechanism for sending money by parliamentarians to states and municipalities in which they do not need to identify themselves, only the rapporteurs of the Union Budget in the House and Senate are the ones who put their names on the payment orders. This removes the Executive’s control over the Budget since parliamentarians send the money without having to identify themselves, which has become an important bargaining chip in the last two years - it is estimated that the secret budget has cost R$80 billion since 2020.

In Diap’s analysis, this will give more independence to the Legislative in relation to the Executive. And, as Lula does not share the same agendas as the majority of the elected Congress, the government should have “a moderate movement more towards the center”.

Obstacles

This could hinder the government’s plans to carry out the reforms it considers a priority, such as the repeal of the spending cap and its replacement by another fiscal regime that has not yet been defined, and the restructuring of the tax system to relieve the burden on production and tax assets, as Lula said in a debate at the Federation of Industries of São Paulo (Fiesp).

The new government will also face budget problems. For example, Auxílio Brasil: the Bolsonarista version of Bolsa Família, which since August has paid R$ 600 to poor families, will only last until 31 December this year. From January, the amount returns to R$400, according to the Union’s Budget proposal sent by the government to Congress. Therefore, Lula’s government already begins the year with this task of articulation.

The future president will also have to face the Bolsonaro government’s lack of budgetary forecasts for other social programs. In addition to Brazil Aid, for next year, the government proposed to reduce the budget of the popular housing program Casa Verde e Amarela by more than 95% - which means the paralysis of 125,000 works -and proposed to reduce by more than 50% the Mais Médicos, Farmácia Popular, for the subsidized purchase of medicines, and programs for indigenous health.

If it cannot reverse the situation, the government will have to rely on the secret budget to reach the constitutional minimum investment in health, for example.

But the modality, although it pleases the parliamentarians, removes the Executive’s power over the budget, which weakens the government’s political capacity - Lula himself has criticized the policy several times. There is a lawsuit against the secret budget in progress in the Federal Supreme Court, which should be judged later this year.