Bloomberg — Late on the afternoon of Jan. 8, Luiz Inacio Lula da Silva stared out at Brazil’s ravaged capital from a third-floor balcony of the presidential palace and reflected on how his presidency had been upended.
The leader known universally as Lula had spent hours wading through piles of overturned desks, across floors defiled by rioters, and past the remnants of what were once priceless historical artifacts. Somber and silent, it was only now that the scale of the challenge he faced hit home, according to a close ally who discussed that day’s events in Brasilia with the president.
After his campaign focus on unifying Brazil, a hopeful message that helped secure his narrow victory over Jair Bolsonaro in October, Lula was confronted with just how divided the nation of more than 215 million had become since he last governed. His conclusion, this person said, was that instead of pursuing unity, he’d have to go all out to conquer his opponents to ensure his third term and policy ambitions weren’t derailed.
It was a realization made after barely a week in office that would dictate the course of Lula’s government, setting the stage for confrontation to dominate his final term at the helm of Latin America’s largest economy. It’s a path that’s already caused friction with the central bank and threatens to stall his reform agenda, with political volatility beckoning in place of compromise at the very time the economy is slowing.
“Lula won one of the most difficult elections in Brazil’s recent history, inherited a divided country and soon after, he faced a coup d’état organized to undermine our democracy,” said congressman Eunicio Oliveira, a longtime ally who was a minister in his first term and the head of senate.
Lula can still achieve his goals, according to Oliveira, who said he believed the president has the experience, political capital and credibility “to put Brazil back on track.” But, he said, all the obstacles put in his way “made the beginning of his government more challenging.”
Conversations with some 20 people close to Lula, including current and former ministers, congresspeople, presidential aides and officials from various ministries, show a president changed by the events of Jan. 8, when Bolsonaro supporters rampaged through the Praca dos Tres Poderes in downtown Brasilia, home to Brazil’s congress, supreme court and presidential palace.
The Lula that emerged is more combative than conciliatory, according to the people, all of whom asked not to be named to more freely discuss the president’s thinking. He is willing to fight all comers if he believes they threaten his last chance to rebuild a Brazil that resembles the one he left upon completing his second term in 2010, with a robust economy, declining poverty rate — and his personal approval rating above 85%. The president has declined repeated requests for an interview with Bloomberg News.
“I know I will carry this outrage with me for the rest of my life,” Lula told the Supreme Court on Feb. 1, addressing the “violence and hatred” of three weeks earlier.
The paradox for Lula is that his embrace of an adversarial style of politics mirrors the approach of Bolsonaro, the far-right populist who rose to the presidency and governed by stoking polarization. With Bolsonaro’s return from self-imposed exile to take up the reins as opposition leader and agitator-in-chief, the result threatens ever-deeper ruptures in Brazil. The question is how the cycle of mistrust can be broken.
For Lula, “there is no grace period, it’s a constant war,” said Bruna Santos, director of the Brazil Institute at the Wilson Center in Washington. “And the warrior is under a lot of stress, because he is facing so many battles.”
So far his primary target has not been Bolsonaro, who decamped to Florida in December and only returned three months later, but Roberto Campos Neto, the central bank chief whose decision to hold Brazil’s benchmark interest rate at a six-year high has drawn Lula’s ire.
The potential for tight monetary policy to act as a drag on growth has irked a leader who is long on ambition and short on time. Lula wants to eradicate the extreme hunger that returned to Brazil during the pandemic, reverse the destruction of the Amazon rainforest that took place under his predecessor, reclaim a major role for his country on the global stage — he’s just been to China after visiting the US — and fortify its democratic institutions.
But a slowing economy undermines his ability to influence those outcomes, all the more so at a time when he lacks the fiscal space to accommodate major investment and is facing both a splintered congress and a powerful opposition eager to see him fail.
The friction with the central bank governor “is counterproductive,” fueling inflation expectations and making it harder for the bank to cut rates, said Adriana Dupita of Bloomberg Economics.
“Lula’s third term already has challenges of its own: the underlying growth trend is weaker than it was in 2003-2010, the fiscal space is narrower than it was before, and the political divide is harder to overcome even for such a skilled negotiator as himself,” said the Sao Paulo-based economist.
Still, the long shadow of the insurrection attempt has weighed on that reputation for dialogue and added to the pressure. It all-but forced a confrontation with Bolsonaro’s supporters and with Brazil’s military, which closely aligned with the former president and, in the eyes of Lula and his allies, bore at least some responsibility for allowing the riots to take place.
There are signs the pressure is taking a toll on the leftist leader. His public fights against financial markets, the central bank’s autonomy and other lawmakers have started to alienate some of the moderates who backed him during the election. Even some supporters have found his continuous escalations baffling.
Brazil undoubtedly changed in the 13 years between his presidencies, a period during which a commodities boom turned to bust and the economy collapsed, a massive corruption scandal ensnared hundreds of politicians and business leaders, a president was impeached, and Lula spent time in jail — all of which helped Bolsonaro to usher in a raw new political era.
But Lula has changed, too, his allies say. He became more impatient and less available, quite different from the leader who used to listen to opposing views before making up his mind. He regards himself as having seen it all and done it all, and now has pretty clear ideas about what must and must not be done.
Politicians who worked with Lula in the past and still have personal or professional ties to the president give him the benefit of the doubt. They say he’s the most experienced leader in the country, but has faced a series of losses in recent years — his wife of more than four decades, a brother, a grandson, and not least his freedom — so it’s natural that he is more bitter.
But even leaving aside any efforts to unite Brazil, a goal that looks increasingly fanciful, the early days of his government suggest his much-vaunted tack toward the center was an electoral strategy only. His poor-versus-rich rhetoric when discussing financial markets contributes to a toxic relationship altogether different to his first term, when he worked for an alliance with investors.
One of the upshots is that Lula’s administration looks more like a traditional Workers’ Party government than one representing the broader coalition that brought him to power. Lula centralizes all key decisions, and is far more isolated as a result. Whereas previously he delegated, very few if any of his closest advisers can or wish to question him now.
Lula’s closest aides don’t have previous experience at the top, with the exception of Alexandre Padilha, minister of institutional relations, the same post he held during Lula’s second term. Consequently, Lula’s third term doesn’t seem like the continuation of a successful project, but rather a work in progress.
A question mark still hangs over his relationship with Congress. His opposition in both upper and lower houses is bigger and more vociferous than in the past.
One new element is Janja Lula da Silva, Brazil’s first lady, whom he married last year. Her ascendancy drives away former allies, especially congresspeople, who complain about the lack of access to the president.
Above all, Lula feels empowered by his historic comeback. After defeating the Carwash probe and emerging from jail to win another presidential term, and facing down an insurrection, Lula sometimes behaves as if there’s nothing he could not accomplish.
Yet the memory of the riots is like a ghost constantly reminding him that he doesn’t have much time to achieve all that he wants. Lula repeats in every ministerial meeting that he’s in a hurry. At 77, he has perhaps a little less than four years to deliver on his pledge to bring back the bonanza Brazilians enjoyed during his first two terms — and in the process save his legacy, tarnished by corruption allegations and a jail sentence.
“Brazilian democracy came out of this election very damaged, especially after Jan. 8,” said Santos of the Wilson Center. “The institutions are still there, and democracy won in the end. But Lula still has a lot on his plate — and his challenge now is delivery.”
--With assistance from Bryan Travis Waldron
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