UPDATED: 20 Years Ago Today, Socialists Won Spanish Elections & Brazilian Elections

Twenty years ago, Felipe Gonzalez and the Spanish Socialist Party won the general elections. While there were many problems with their government, especially in later years, there were some positive things that happened also. Spain joined NATO, the EU, held the '92 Olympics, had a World Fair, and the economy boomed. While official unemployment was high, nobody believed the figures. Indeed opposition member Cristobal Montoro told me years ago, that while official figures were over 20%, the "real" rate of unemployment was closer to 6%. In other words, if unemployment were around 20% there would have been social unrest. That figure has since come down to around 10% under the Partido Popular government, primarily by making it not so advantageous to remain on the dole and working on the side.

I relay this quick recap, to suggest that some of the fears over Luis Inacio Lula da Silva's victory in Brazil may be a bit overdone. Is his government left-leaning? Certainly. But it must be remembered that Lula's hands are to a tied by the World Bank and IMF, and promises garnered to assure that Brazil won't follow in Argentina's footsteps. Not to mention, that it's not a straight victory. Lula's party must work with other parties, including Cardoso's defeated Brazilian Social Democratic Party.

I would also suggest that not too much be given to the fact that the government is supposedly a "left government." As it stands now, in Brazil there is a vast difference between a very small percentage of the population that hold most of the wealth, and the vast amount of the population that are, well, poor.

And another thing, just as in Spain with the changing tides, from one political party to another, so in Brazil these elections show that their democracy is coming of age.

Financial markets are now saying the risk of a debt default was frankly, overblown. The country is on its way toward posting a record trade surplus of over $10 billion, and its current account deficit is rapidly shrinking to around $11 billion, which represents around 2.3% of its GDP, as compared to 4.5% in 2001. Add to that G7 bond yields are higher with moderately higher oil prices, meaning Brazil doesn't have as high a risk premium, and the country is also a net importer of oil.

If anybody still has questions, it should also be remembered that Brazil only has debt needs of around $5 billion in the first quarter of 2003.

And some of Lula's agenda looks even tougher than what the IMF had first exacted. It's widely expected that Lula will not only confirm his adherence to the IMF targets, but possibly even aim for a larger budget surplus than the agreed upon 3.75%. He's also seen increasing the central bank's independence.

Of course, a lot of this will depend upon who are the people that Lula bring in to help him...and which it appears many may be from Cardosa's party.

Here's a wrap up of related press:
Can Peace and Love Last in Lula's Brazil?
Consensus and cautious policies, analysts say, will be pillars of a transition while Lula's number one priority will be to pull Brazil out of its deep financial crisis...

Analysis: the challenges ahead
In order to meet IMF requirements, the government has to run a large budget surplus (minus debt repayments) for at least the next year and probably for longer....The crisis has been caused partly by the prospect of a Lula victory....So the first thing he has to do is to reassure financial markets and businesses that he intends to stick to fiscal austerity.

Last of all. an apology to Mark Byron, who's comment is for some reason not attached to a different link...