Americas view

ON JANUARY 12th our São Paulo bureau chief interviewed Fernando Henrique Cardoso, Brazil's president from 1995-2002, at the Instituto FHC. They discussed Brazil's challenges and its increasing global power. You can click below to listen to the conversation, or read the full transcript following the link.

The Economist: Can we start with the way Brazil’s place in the world is changing? Brazil seems to be trying to create a new sort of world power—a “soft power”.

Cardoso: In the last century Brazil’s economy grew very consistently up to 1980. Only Japan grew faster in per-capita terms. From that point on Brazil has been always looking for roles. In Brazilian people’s minds, we are a giant. But our size, for so long it was an illusion. We did not yet have the capacity to play an important role. We were all the time envisaging what we might become.

Brazil aspired to be part of the core group of the League of Nations; after the Second World War Brazil raised that possibility again [during the creation of the United Nations]. Churchill vetoed it, saying that the Americas could not speak with two voices. Churchill was wrong. So we have always aspired to a big role.
In the 19th century, because of the struggle between Spain and Portugal, we were involved in wars in the South, and the Brazilian empire was perceived by our neighbours as a trap. Then the axis moved towards the United States and Brazil became a Republic and much more quiescent—and again hesitated. To what extent would we play a hegemonic role in the region? We never assumed such a role. We preferred to be more loved than feared.

At the end of the last century, the economy became so vigorous, we had established democratic traditions and we rediscovered our cultural particularities. These give us a sense that maybe we can play a role in the area of “soft politics”: not just to be economically strong, but also because of our capacity to accept others, to be tolerant. We love to consider ourselves as open-minded, as a racial democracy. It’s not entirely true, but it’s an aspiration with some ingredients of reality. Because in fact we are more tolerant than several other countries.

Compare the United States and Brazil. Both are countries built on migration, but in Brazil migrants have fused much more, and what has been even more impressive is that the cultures have mixed. We do not have a Black culture in Brazil, and a White culture. It is senseless in Brazil to speak about a Black culture: it is our culture.

And we are very accepting of variety in religion. We are not intolerant—Brazilians are syncretists, not fundamentalists. And because we are a country composed of migration we have contacts with many different parts of the world. Lots of Brazilians are Japanese and maybe more than 10m are Arabs. More than that are Germans; there is no other country in the world with more Italians, in absolute numbers. And all this fused. We never exactly know our descendancy.

Brazil has always been in favour of multilateralism, instead of bilateral relations, and of trying to negotiate, to bridge. Brazilian diplomacy is based on that. We need to look South, to the basin of the Rio da Plata—and to America; both relations with America and the South. There are elements of flexibility in Brazilian culture; they originate with the Portuguese, not only in Brazil.

If you compare the Portuguese and the Dutch in Africa, it is quite different. The Portuguese always had sexual relations with the native people. There is a phrase I like to repeat when I’m in Spain. In the eighteenth century the Marquess of Pombal [Sebastião José de Carvalho e Melo; the first minister of the Kingdom from 1750 to 1777] sent a letter to his brother, the viceroy of the North of Brazil, saying, we have to promote the Portuguese who marry indigenous women, because it is better to have half a Portuguese than one Spaniard! They were fighting the Spanish and worried about the demographic question. They felt the children were somehow Portuguese. That was not common in the Spanish world. They kept more separate.

Then in Brazil, the dominant ruling class normally tried to disguise the fact that inequality was so high. One of the ways to disguise differences is to treat people as if they are closer than they really are, to speak as if we were equal. To some extent this is a tricky thing, even if people are not aware of it: it is a way to maintain differences without provoking a strong reaction. The traditional part of the ruling class in Brazil will always be mild, soft, always saying “please”, not ordering. This is not the same now with the new bourgeoisie: they are much more arrogant than the old traditional elite groups in Brazil. They are different; more capitalist.

The Economist: Let’s talk about those social changes. Brazil has changed an enormous amount in recent years.

Cardoso: The landmark was the new Constitution. The beginning was the struggle against the military and the strikes, and the new constitution was the baptism of a new society.

The Economist: It’s still changing. This Republic is young; the Constitution was only written in 1988. You’re working out your institutions still. You are part of that process of institution-building, possibly the most important of all Brazil’s institution-builders.

Cardoso: The sense of institution has always been very present in Brazil, compared with other parts of the New World. The Portuguese monarchy was stable, and we were heirs to the Portuguese crown. All the institutions came here with the king of Portugal and Rio [de Janeiro] became the capital of the Portuguese Empire. And simultaneously this is a highly disorganised society! It is difficult to combine these facts: that we have institutions and simultaneously we are very ready to disobey them. It’s a flexibility—the jeitinho. It is good and bad. In some aspects our legislation is wonderful but the practice is a disaster. For example, we have very strict rules for the behaviour of public servants and politicians, and with respect to public money. And in spite of that corruption is there.

The Economist: Is corruption increasing?

Cardoso: Always we have had some degree of corruption, here and there, but the system was not corrupted. Now the system allows corruption as a normal ingredient. Everyone knows that when you organise a cabinet you have to share power with parties. But you are not sharing power, you are sharing opportunities to have good contracts.

The Economist: Was that not the case for you?

Cardoso: No, no, no. Maybe in one or another case, but now the whole system is based on this. This is novel. It’s a very bad development. In the political culture flexibility has become… not flexibility, but tolerance of crime. You have institutions, you have tribunals—but nobody is in jail.

The Economist: Do you see any sign of a movement for change at a public level?

Cardoso: Some individuals are very angry. The point is that in the last 15 years, the sense of well-being has been so obvious and every year is better. The population maybe knows that there is some bad behaviour, but that’s all. They don’t act against it, they don’t protest. Some people, yes, the “old” middle class.

The Economist: Now Brazil has two middle classes.

Cardoso: The new middle classes, maybe in the future they will protest, because they are not a product of corruption, but of markets. They are climbing up the social scale by work, by their own efforts. So maybe in time I hope they will react. But this will depend on the overall situation. Because today nobody cares. They are against corruption, here and there, but they don’t mobilise, because the situation is okay, they are moving up.

The Economist: Are these people natural PSDB voters? People who are working hard and want to keep what’s theirs, in other countries they vote for parties that are economically right of centre. (Note: The PSDB, or Party of Brazilian Social Democracy, was founded by Mr Cardoso and others within the movement opposing the military dictatorship in 1988. The PT, or Workers’ Party, to which the current president, Dilma Rousseff, and previous president, Luiz Inácio Lula da Silva, both belong, was founded around the same time.)

Cardoso: But there is no sense of left and right in Brazil. It’s a strange thing. We don’t have a right in Brazil. The PSDB started centre-left and now in practice it’s centre. But what does that mean?

What is the difference between the PSDB and the PT? At first it was very clear. The PT had much more connection with the unions, was much more close to some segments of the church and had a vague idea of socialism—not the traditional socialism, not communism, but socialism in the sense that they were not betting on the state to change society, but on the contrary that civil society would change the state. The PSDB was always closer to the middle class than to the unions and never had such a clear aspiration to socialism. It was much more social-democratic than socialist, but again supported the idea that what was important was not to expand the state alone but to create civil society.

Now I think the PT put aside civil society. They believe in party and state.

The Economist: What is the role of opposition in a country where the government is so large? Within the government is everybody from communist, right through to big landowners. There’s no ideology.

Cardoso: This is a kind of confusion, more pronounced under Lula, because Lula became the father of the poor—and of the rich too. In the name of governability. Lula never had a sense of class struggle, in spite of being a union leader. For him what is important is to negotiate. Negotiation, plus the enormous impetus coming from the markets, meant that there is no longer a difference between right and left.

Under the authoritarian regime we had a more clear right because there was a more clear left, because of the Cold War. With the end of the Cold War and the enormous economic progress in Brazil, the more rightist groups in Brazil—they are no longer rightist, they are conservatives. In a sense they are clientelists: they like to be close to the government. If you look at the composition of the Congress, you see the same people supporting [José] Sarney, [Fernando] Collor, [Itamar] Franco, myself, then Lula [Luis Inácio Lula da Silva] and now Dilma [Rousseff]. I don’t want to pick out one specific name, but just to give you an example, a friend of mine, the mines and energy minister, was part of all of these. Sarney is the same: he was the head of the group in Congress that supported the military regime and he’s still in government now.

The Economist: What does an opposition do in a system like this?

Cardoso: The opposition nowadays is in a kind of trap. Our parties have become more and more Congressional parties. The opposition is very strong in Congress: they make speeches, they protest, they want to organise an inquiry, a meeting, a commission. And to the people this is nothing. Society just doesn’t care about Congress. The parties don’t have contact with society. The PSDB has been strong in São Paulo for a long time, yes, but the population pay attention to the executive branch, not the congressional. In the Brazilian mind there is no contradiction in voting for Lula for president and the PSDB for state governor.

However, you can also find elements of rationality. If you look to see where the PSDB is stronger than the PT, the trend is clear: it’s in more economically developed, market-oriented parts of Brazil, that is, among the “new middle-class”. It used not be like that, because the PT was very strong in urban popular classes in São Paulo. But the PT has been losing ground in São Paulo and gaining power in the north-east of Brazil, where to some extent they replaced the old clientelist parties, because now it’s the PT that has the key to public money.

This is not absolute: there are PT governors in the south and PSDB governors in the north-east. But if you look at the level of municipalities the PSDB is mainly in the more economically progressive parts of Brazil: areas where the market is stronger and people are less dependent on government.

If the PT is in government, they get all the allies in Brasília [where Brazil’s Congress is based]. That’s why it’s so difficult to understand from the European perspective. Our parties are not exactly like American parties—they are a kind of machinery to produce votes—to some extent but not as much. But certainly we do not have the ideological spectrum that you have in Europe.

The Economist: In Europe left-wing parties have managed to find a new role for themselves since the end of the Cold War: something like justice, or fairness, or softening the hard edges of the market. I suppose the market doesn’t feel like it has too many hard edges in Brazil right now!

 Cardoso: If I imagine a stronger opposition in Brazil, it will probably be based on non-economic ideas: justice; personal safety; republicanism as compared with corruption; respect for the law; quality of life.

If you look at everyday life, what is gaining space in Brazil is the market. Government is very strong and important, but the spirit of the market is also infiltrating government. Take for instance Petrobras [a state-controlled oil firm], or Banco do Brasil [a bank, again state-controlled]: they behave like businesses.

It is important to emphasise that the spirit of enterprise is also gaining space in Brazil. Look at the banking system. It used to be based on making loans to the government at very high interest rates. But now we are reaching a point where these high interest rates cannot be sustained, so the banks have to adapt. Access to banking used to be very limited in Brazil; now it is expanding. The idea of credit is very young because with inflation it was impossible.

Compared with some other Latin American countries the banking system in Brazil has some advantages. We have a mixed financial system, 50% government, 25% controlled by Brazilian families and 25% international banks. So it is highly diversified. Secondly, domestic debt is in the hands of local people. We always had a financial system rooted in Brazilian society.

It would be impossible to do here what was done in Argentina. The dollar never was our currency, unlike Argentina. Through the whole inflationary period our savings stayed in local currency, because we had a system of indexation to adjust it. We never had a currency board. I myself had a tremendous discussion with the IMF during the 1999 crisis [when the cost of financing Brazil’s government debt surged and the country ended up devaluing]. [Stanley] Fischer who is now the head of the Israeli Central Bank, said: You have to do what Argentina did. We resisted. We never accepted tying our money to the dollar, because we had the awareness of the importance of being able to devalue, because of our exports. In Argentina, even today, they are sending their money abroad. This is not our problem: we have a very strong financial system and savings are in national currency.

The Economist: Now money is flowing in and there is the opposite problem: the real is incredibly strong.

Cardoso: It’s a big problem. Now we have no alternative other than to increase productivity. But the problem with productivity is now not inside the firm, it is outside. It is government; it is roads; it is taxation. What has to be done is a long story, but the government has to rationalise, to do some reforms. Some are very idealistic—such as tax reform—but they are necessary. Look at the tax burden: it is up above 36% of GDP. Our GDP now is over $2 trillion. Thirty-six percent of $2 trillion is a lot of money. But they are expanding the bureaucracy; over-expanding without taking into account the need to renew infrastructure or concentrate on education. The population will react against still more tax increases. This has to force the government to be much more rational in the use of this money.

The Economist: Do you see any sign of this happening?

Cardoso: I don’t know…Maybe because of President Dilma Rousseff. She is much more open to understanding numbers.

The Economist: You have a very interesting relationship with the president. The two of you seem to have created a new relationship between ex-president and president.

Cardoso: Because Lula lost the opportunity to do that. I had a long personal relationship with Lula. We were very close. He spent a vacation once in my beach home with his family. But we had no institutional relationship, because that was the decision by the PT. But this was because of electoral politics. Dilma is different. She has no personal connection with me, it is a much more superficial relationship than it was with Lula. It may be that she has not yet considered herself—yet as least—as a candidate, so she does not conceive of other people as enemies. I don’t know, but she has always been very correct with me.

By coincidence I had a dream last night, in which we—Lula and I—were proposing together a national consensus. [laughs] It is so obvious that Brazil needs to focus on a few main things. What to do about energy? What to do about education? How to create better opportunities for our infrastructure, with government and private sector working together? How to come to a consensus on the environment? It is so obvious. These are not party questions, but national questions.

The Economist: National consensus tends to come at times of crisis…

Cardoso: That’s why it doesn’t happen. On the other hand, there is a kind of non-explicit agreement. When Lula became president the world believed he would destroy everything that I had done. And he didn’t—without being explicit. When I lived in Chile [during Brazil’s period of military dictatorship] the Christian Democrats and Socialists were opponents, the Socialists far to the left and the Christian Democrats much more conservative. Then they merged to create a united force, the Concertación. We didn’t do that. But in practice we are doing the same, to some extent. The electoral discourse is different, of course, because you have to signal that you are different. But in practice you’re not—which makes opposition difficult.

The Economist: On the subject of opposition, I will say frankly that I thought the PSDB’s campaign for president in 2010 was very weak. Is the party going to put up a good fight and a candidate in 2014, someone it can unite behind? Has it got a clear strategy? Or is it just going to fight internally and fall apart?

Cardoso: In the last campaign the PSDB made enormous mistakes. At the beginning the favourite was our candidate [José Serra], by far. And instead of organising alliances—because it is easier to create alliances when you are on the up, because of what I said before, that parties want to be close to the winners—we didn’t. It was a kind of arrogance. Our candidate was isolated, even internally.

The Economist: Isolated, or isolating? Did he push other people away?

Cardoso: Yes. And this was very bad. And in spite of that, Dilma went to the second round. And Serra got 44%.

The Economist: Only 44% against someone who had never even stood for class president before…

Cardoso: With Lula behind her. But anyhow, what I’m trying to express is that it would be possible to win. It was our mistake.

The Economist: With the same candidate?

Cardoso: Well…maybe not.

The Economist: How is the PSDB going to unite behind a candidate?

Cardoso: It has to search for internal unity. I would say that now the PSDB is more aware of the necessity of being united. This is not simple, because the sense of cohesiveness based on values is less strong than in the past. It’s more about personality now. And the same applies to the other side. Their last campaign was nothing, zero; the real questions were never raised. It was a mimicry of a campaign, with marketers playing the role of principal actors, instead of being submitted to some leadership.

Now there are several question marks. What will Lula’s role be? I would say that nobody knows, not even himself. Because of his health [Lula has throat cancer, with a good prognosis], but not just because of his health. I would say that normally Lula would try to compete: he is a very competitive animal, a political animal. And probably President Dilma has no internal strength [in her party and coalition partners]. If she also has the same aspiration—I am not sure—it would be difficult for her. It is one thing to compete with Lula, another to compete with someone else, even President Dilma.

In the PSDB’s case, former governor Serra plays the role of Lula: he has guts, he likes to compete. I don’t know to what extent he will be more convinced that it is not for him, to open space for others.

The Economist: Who would be the obvious candidate?

Cardoso: Aécio Neves.

The Economist: Can Aécio win?

Cardoso: Aécio is from the more traditional Brazilian culture, more apt to establish alliances. He has some support from Minas Gerais [his state]. São Paulo is not like that, it is always divided, it is so big. Things will be clearer after the municipal elections [in October 2012]. Probably we will see a very strong internal fight within the PSDB, between Serra and Aécio.

The Economist: Is Geraldo Alckmin [the current governor of São Paulo and the PSDB’s presidential candidate in 2006] also a player?

Cardoso: No, I don’t think so.

I have some responsibility in the case of the PSDB. To put all my cards on the table, my natural successor died, a former governor of São Paulo, Mario Covas. I had been president for eight years and I was in government before that and I was 71. It was enough. I decided it was time to open space for others, not just out of generosity, but also because I was tired of exerting political leadership. And Covas died. So no clear leader replaced me. It was a permanent tension between three or four possible candidates, and in the end Serra became the candidate, but without convincing others that he was really the man. And now again it’s not clear. In the case of the PT it was different because Lula never stepped out of the struggle, and he imposed Dilma. We will need to take some time to reorganise the hierarchy of leadership. And it’s now too late for me—I’m 80 years old—to have the will any more.

The Economist: You are still one of the most important voices within your party.

Cardoso: Sure, but that’s not because of me, it’s because of the lack of others! I think this is bad for Brazil. And the same applies to the other side: it’s only Lula. Let me speak in an impersonal way: in the last 20 years, only two leaders. It’s not healthy for a country, a big country. I took my decision: to open space. That space is still open.
We have some people from a new generation. After my generation you have Serra and the former governor of Ceará, Tasso Jereissati. Then you have Aécio; the governor of Pará, Simão Jatene; the governor of Goias, Marconi Perillo. If I look objectively, there is another governor, from the Socialist Party, Eduardo Campos from Pernambuco, who could become a leader—he has some of the characteristics. He could be capable, but not yet. He is a possibility.
So there are possibilities. It’s a matter of time. Probably if Lula is not involved—the same as applies to me—it would be better. To allow it to happen naturally.

The Economist: Since stepping down from the presidency, you have spoken out publicly on a variety of tricky subjects, notably the futility of the war on drugs and the necessity to treat drug abuse as a public-health issue, not a criminal issue.

Cardoso: In my most recent book, “A soma e o resto” [freely translated as “The final balance, and what remains”, published in 2011, only in Portuguese] I speak frankly about several issues, not taking into account that I am a former professor of sociology, or a former president. I speak as a person. It’s difficult, but anyhow I try. I included what I think about drugs. It is time for those who have already accomplished something to speak out, because what is now undermining the prestige of politics in society is that politicians prefer not to take positions. Because it causes problems. Because it sometimes costs a lot to be frank.
In the book I talk about less usual things, for instance my spirituality, because people were all the time discussing behind the scenes whether I was a person of faith or not. Also what I think about the old-fashioned approach to political life: the party system. It is completely outmoded when you have new forms of connection, like the internet. It is not clear in my mind what can be done by social media, internet and smartphones and so on: that they can mobilise people is quite clear, they are doing that—but then, how to connect this with political institutions? I think this is a question mark for the whole world.