Comment on Lilia M. Schwarcz, "Brazil in the Shadow of Lula" NYRBlog | The New York Review of Books

Brazil in the Shadow of Lula by Lilia M. Schwarcz | NYRBlog | The New York Review of Books

Is Lula attempting to become the South American Putin, with Dilma as his Medvedev? How will Venezuela's Chavez respond to another in that role?

Lula, like the other despotic demagogues, floated on an energy price bubble. That has been fed by wealth transfers from United States that will have to stop, given that there is no more money. The US subsidized Soros backed offshore drilling by Brazil even as Obama banned offshore drilling in American waters.

The other driver that propped up the value of raw materials and sustained Lula was the growth of demand in China. That is proving to have been based on a paper bubble and the Chinese economy is likely to dramatically contract as there export markets no longer can afford to buy on credit.

Lula poured most of the wealth that flowed into Brazil over the last ten years into transfers to his supporters and consumption by urban elites kept them relatively passive. The failure to build a strong stable and honest financial and legal structure that would have enabled private capital to build the physical and commercial infrastructure that Brazil needs will make the country far less stable than it otherwise would be in the storms that are now coming.