THE BLOG
10/02/2014 11:02 am ET Updated Dec 02, 2014

Why Dilma Rousseff May Win Brazil's Presidential Election

ASSOCIATED PRESS

When challenger Marina Silva pulled ahead of incumbent Brazilian President Dilma Rousseff in the polls a few weeks ago there was a lot of excitement here in Washington, in the business press, and Brazilian financial markets. Rousseff's Workers' Party (PT) has been in power for 12 years, and a lot of rich and powerful people -- North and South -- were ready for a change. Fortune seemed to favor them: The Brazilian economy, having slowed considerably over the past few years, officially went into recession this year -- something that would spell the end for many incumbent presidents. Before that, there were street protests over the rising cost of public transport and government spending on the World Cup, and the games themselves had ended in disaster with a humiliating 7-1 defeat for Brazil at the hands of Germany.

Yet Dilma has bounced back from every blow and now looks poised to place first in both the first and second rounds of the election. How does this happen?

If Dilma Rousseff is re-elected, it could be because the majority of Brazilians are looking at the 12-year record of the Workers' Party and, for those old or literate enough to remember, comparing this to the past. For the vast majority, the changes [PDF] are quite striking.

Despite the slowdown of the past few years and the 2009 world recession, Brazil's GDP per person grew by an average of 2.5 percent annually from 2003 to 2014. This was more than three times the growth rate during the preceding two terms of President Fernando Henrique Cardoso, who implemented "Washington Consensus" policies and remains a much-preferred statesman in the U.S. capital. (Before Cardoso there was a decade and a half of even worse economic failure, during which Washington had even more influence on economic policy, and income per person actually fell.)

This return to growth, plus the government's use of increased revenues to boost social spending, has reduced Brazil's poverty rate by 55 percent and extreme poverty by 65 percent. For those in extreme poverty, the government's internationally renowned conditional cash transfer program (Bolsa Familia) provided 60 percent of their income in 2011, up from 10 percent in 2003. A hefty increase in the minimum wage -- 84 percent since 2003 after adjusting for inflation -- also helped quite a bit.

Unemployment has fallen to a record low of 4.9 percent; it was 12.3 percent when Lula da Silva took office in 2003. The quality of jobs has also increased: The percentage of workers stuck in the informal sector of the economy shrank from 22 to 13 percent.

Brazil's income distribution remains one of the more unequal in the world, but there was significant progress here too. From 2003 to 2012, the 40 percent of the population just below the median nearly doubled their share of the country's income gains, as compared to the prior decade. This came at the expense of the richest 10 percent.

The poor have most obviously benefitted from this transformation of the Brazilian economy, and this is reflected in the polls. But it is not just the poor who improved their well-being: With a median household income of only about $800, the vast majority of Brazilians were set to gain from the rising wages, shrinking unemployment, and significantly increased pensions that the last decade had brought.

From the elites-eye view, these gains that ordinary workers have made are not such good news. A new law that required full-time domestic workers -- of which there are a lot in Brazil, thanks to its crushing inequality -- to be treated as formal employees, with maximum work hours, minimum wages and social security, was the most recent annoyance for the "haves."

A counter-narrative that Brazil under the PT is on the road to ruin has filled the media in Brazil -- which is mostly against the government -- and the international press. In this view, the economy has slowed because the government is not sufficiently "friendly" to business. Inflation (currently at the top of the target range at 6.5 percent) is too high, fueled by a labor market that is "too tight," and the government needs to cut spending. And oh, yes -- please be more friendly to the United States and its highly unpopular foreign policy in the region; that was an opposition theme in the last election and it has been resurrected today.

The reality on economic policy is quite the reverse: In fact, the government since the end of 2010 has listened to Big Finance a bit too much, raising interest rates and cutting spending when the economy was too weak. Hopefully these mistakes will not be repeated.

If Dilma wins, it will be because the majority of Brazilians got a lot of what they voted for. They may want more, and they should -- but they are unlikely to opt for a return to the past.

This article was published by The Guardian on October 2, 2014.