1) Lula's Brazil is mostly another example of neo-liberal disappointments. Although Brazil's GDP now has started a weak rebound from years of depression, the average household income is still below the day Lula took office. With little to show for the sacrifice in between.
As we know, Lula's economic policies for long run issues have been entirely neo-liberal with no steps towards structural change for long term development. In a similar vein, Lula's short run policies have been entirely neo-liberal and particularly unfortunate. The financial community (domestic and international) have been foremost in his mind, and this has resulted in crushingly high interest rates and greatly suppressed growth. (see for example Saad-Filho&Rollemberg 2005)
BUT this Sunday Lula will be re-elected by wide margin - scandals and all. Why?
2) The answer may be simple: Lula was *seen* by his base as using government to help them. Wages and salaries for most economic groups (not quite all) are worse off than when he took office -- Lula didn't touch the neo-liberalism that has taken so much money from them. BUT Lula did make an effort to give some "back" to his core constituency.
a) Lula's biggest effort was a "welfare" or income support program call Bolsa Familia ("welfare" has now been officially rebaptized "Conditional Cash Assistance", by the World Bank). On taking office Lula consolidated 4 small programs into one and then vastly increased its coverage. In his very first year in office Bolsa Familia gave monthly stipends to 3.6 million families and by this year it has grown to 11.2 million families. The amount given each family is substantial from their perspective -- while it averages around only US$300 p/y for these families the income *ceiling* for the program is about US$400 (payments are on a sliding scale).
The program probably cost about US$4 billion this year and that is estimated to be about 2.5% of the national budget or 0.5 of GDP. In normal political life this should be readily feasible but in today's world a developing country has to make arrangements with the domestic and international financial community. In essence, Bolsa Familia was financed by acquiescing to long standing demand of the IMF and WB among others: a comparable, perhaps even larger reduction was made to the relatively significant pensions owed to civil servants.
b) Lula's second biggest electoral boost will come from his policy on the minimum wage. In Brazil the minimum wage influences a significant sector of salaries (over 7 million people earn around the minimum wage, many more have their salary influenced by its level) and an even larger number have their social security (Beneficio de Prestacao Continuada) or public pensions directly tied to the minimum wage. The previous President consistently let the minimum wage increases lag behind inflation during most of his term in office.
3) The combined effect is an unusual pattern.
As elsewhere, in Brazil the wealthy who have property income have done relatively well the last 10 years and the inferential evidence shows that they *may* have done even better under Lula. OTOH, Brazil has seen a relative redistribution of income: but it is *within* the group of people who rely on labor income.
The top third of households' *labor* income has suffered badly in Brazil over the last 10 years (both in absolute and relative terms). Lula's abandonment of the pensions of some of them was one more stone on the pile. But the households of the working poor (people in the 20th to 50th income deciles) are clearly better off than they were 4 years ago -- their labor income has gone down but, thanks to Lula's initiatives their total income is higher. [see Brazil's household survey statistics comparable to the U.S. Census Bureau's CPS or the French INSEE http://www.ibge.gov.br/home/estatistica/populacao/trabalhoerendimento/pnad2005/sintese/tab1_1_3.pdf
Some would say that Lula's approach was "negotiated", or rather emerged from intense discussions with the financial community and other elements of big business (domestic and international). At the international level, a lead role was played by the then President of the World Bank Wolfensohn who engaged with Lula in a series of consultations culminating in an unusual "private" meeting. In the end, the World Bank actually funded 10% of the Bolsa Familia program and their endorsement of an overall policy "package" gave Lula the opportunity to avoid what appeared to be a looming confrontation. How would have Lula and the PT administration evolved had Paul Wolfowitz been President at the time?
Paul