Decision Time in Brazil
Por Pedro Paulo Zahluth Bastos — Tribune
On October 4, Brazilians put the son of a jailed coup plotter in line to win the presidency. Flávio Bolsonaro won 47 percent of valid votes to Lula’s 45 percent, with runoffs to be held this Sunday. There are two main explanations for the surprise outcome. The first blames Trump: his tariffs, his sanctions, his support for bolsonarismo. The second blames the economy, with high levels of material hardship working against the incumbent. Both are half right, but we can only understand the reality of the situation when we put these halves together.
As in Chile, Honduras, Colombia and Peru, voting took place in Brazil under intense pressure from Washington. There were trade tariffs tied to the trial of the elder Bolsonaro, sanctions placed on his trial judge, punitive measures slapped on the financial system, and a far-right candidate openly celebrating this interference. Yet the other regressive force came from within. Brazil continues to maintain an interest-rate regime that bleeds its working classes, transferring wealth upward to investors. There is a clear connection between these two factors. The empire and the rentier both live off Brazil’s surplus. The election must be seen as a struggle over its future.
What Empire Wants
Washington has set out its hemispheric strategy in no uncertain terms. The Trump administration wants to protect US supremacy against China in what it views as a civilisational contest. It aims to do this by securing the material means of ‘energy dominance’: cheap fossil fuel for its reshored factories and its allies locked into American gas, as well as leverage over global oil flows (including those that China imports). It also sees computation — chips, data centres, frontier models — as a crucial battleground. Washington is willing to bargain with Beijing over soybeans, aircraft, and rare earths, but it will not move on chip controls.
When an entire resource network cannot be dominated, the next best thing is to seize its chokepoints. This is how the Trump administration views Latin America, as the place where chokepoints come cheapest: a hemisphere of oil, minerals, electricity and server farms, all of which can be fenced off from China. After the raid on Venezuela, the US now holds a majority stake in 65 billion barrels on hundred-year terms. It has traded tariff relief for a minerals framework in Argentina and collected a minerals deal and a nuclear memorandum in Colombia.
Brazil is the next domino it wants to topple. This giant country pumps 3.8 million barrels of oil a day, more than any of its neighbours. It sits on the second-largest rare-earth reserves on earth and its electricity is 89 percent clean, which allows it to host half the region’s data-centre capacity. Its central bank runs Pix, a free public payment system that moves more transactions than credit and debit cards together. Lula remained unwilling to subordinate Brazil to the US. Under his presidency, the country fined and suspended American social media platforms that failed to curb far-right disinformation. It used its international position to work towards possible alternatives to dollar hegemony, building on systems like Pix. It charted its own course in foreign policy, rejecting US warmongering in the Middle East and Ukraine; and it vowed to fortify its democratic institutions against a Trump-backed takeover — prosecuting Jair Bolsonaro for his attempted coup in 2022.
Limits of Coercion
Trump tried to use force to get Lula to yield. In July 2025, he decreed a 50 percent tariff. But Brazil did not retaliate and did not capitulate. Bolsonaro was convicted, coffee and beef got more expensive in the US, and the tariff was gone by November. The second attempt was smarter: a 25 percent duty that exempted everything American consumers would notice and focused instead on Pix, the platforms, and patents. In May, three days after Flávio’s visit to Trump, Washington put Brazil’s two biggest criminal groupings on its terrorist lists, which places any Brazilian bank at risk of secondary sanctions if it is accused of giving them ‘material support’.
Still, the intimidation failed to pay off. Coercion works best when the target country is dependent. In the 1980s and 90s, Brazil had dollar debts, few foreign exchange reserves and an IMF programme, and it did what it was told. Today, China buys 29 percent of its exports to the US’s 11, the central bank holds more than 300 billion dollars, and the country paid off the IMF in 2005. This makes for a less pliable state.
If the US cannot use trade to get its way, it must instead target the ‘network’ layer: dollar clearing, platforms, chips. Bringing them fully under its control requires a new government in Brazil. Hence support for the Bolsonaros, who are more than willing to hand over such strategic resources. Eduardo Bolsonaro moved to the US to lobby for sanctions on Brazilian judges. Flávio asked Trump for the terrorist designations, then tried to persuade the trade representative to freeze the tariff until after the election, since punishing Brazil may have handed victory to Lula. His platform promises to loosen environmental rules, legalise mining on indigenous land, and align with Washington on foreign and trade policy.
This is the latest chapter in a much longer story of Brazilian subordination. Washington did not directly orchestrate the coup of 1964 or the impeachment of 2016: two previous instances where the country’s left was defeated. Instead, it worked to elevate a ruling class that prefers to live off American patronage than to share domestic wealth. It need not take what can be freely given.
The Rentier’s Role
Yet a strategy this crude was unlikely to succeed on its own. Lula’s approval rating rose when the tariffs hit; sovereignty was one of his strongest campaign issues. The country’s high interest rates, however, drained vital support from the left. The policy rate is an astonishing 13.75 percent, which after inflation is close to 8.5 percent, more than any other economy in the top forty. Banks lend to households at 62 percent a year and on revolving credit cards at 445. A record 51 percent of adults are in default, and households spend nearly three tenths of their income servicing debt.
The same rate organises the public accounts. Before interest, the government’s deficit is 0.6 percent of GDP. After interest it is almost 9.5 percent. The gap, about 1.2 trillion reais (£180 billion) a year, flows to the owners of public debt: banks, funds, pension plans, and the families at the top of the distribution ladder. The country’s deficit is essentially an interest bill that reflects this massive transfer of wealth to the rich. The rent Brazil must pay at home is the twin of the one Washington wants to extract from abroad. One is charged in dollars by card networks and oil majors, the other in reais by the owners of the public debt. Both will be served by the Bolsonaros.
Lula’s third government chose to redistribute around this domestic toll rather than break with it. Every year the minimum wage beat inflation, income tax disappeared for incomes up to 5,000 reais (£745) a month, and dividends were taxed for the first time in thirty years. But the government kept the 3 percent inflation target that Bolsonaro’s finance minister had set, and kept the central bank’s autonomy to enforce it. It left the public banks lending at private rates, and wrote a fiscal rule that leaves the interest bill outside its limits. Under that rule the main cash transfer, Bolsa Família, stayed frozen until seventeen days before the first round. This is a dynamic that I have previously described as ‘contained social-developmentalism’: real gains for the poor, but inside a fiscal cage.
This explains the paradox of October. Brazilian unemployment is at a record low, real wages are rising, and inflation is inside the target band. Yet a 445 percent charge on one’s credit card is not a formula for reelecting an incumbent. In such a highly indebted country, this rate regime gives rise to political volatility.
Sovereignty that Pays
Flávio’s trick is to hide one kind of rent behind the other. His campaign focused on crime, promising to build Salvador-style mega-prisons, as well as cutting tax across the board. His economic team has considered limiting pensions, disability benefits, and the health and education floors to inflation, according to Folha de S.Paulo; the campaign calls these ‘informal conversations’. Yet his programme says nothing about the interest bill. The electoral demography shows why. Bolsonarismo does not need to conceal its racism and misogyny: it knows it cannot win over these constituencies. Its path to success lies in convincing indebted workers — those who want their Sundays and their credit scores back, and who naturally feel that Lula has not delivered.
Lula has begun to fight on that terrain. In the last month of the campaign, he moved the contest away from identity and the culture war issues, where bolsonarismo is strongest, and onto the economy, where it is weakest. Bolsa Família rose by 15 percent, the first increase since 2023, from 600 to 691 reais (£89 to £103) a month for 19 million families. Congress passed a government bill forgiving 12.6 billion reais (£1.9 billion) in tax debts owed by 3.6 million self-employed microentrepreneurs, who were also promised grants and cheaper credit. The state-owned Banco do Brasil cut its personal loan rate by a fifth. The Treasury was authorised to buy up to 150 billion reais (£22.3 million) worth of defaulted consumer debt from the banks at a tenth of its face value. The online betting platforms that drained 62 billion reais (£9 billion) from households in 2025 were banned. And the government forced the Senate vote on the six-day week. None of this touches the interest rate. But it shows the direction that a fourth term would have to take.
The task now is to turn these campaign measures into a lasting agenda for economic sovereignty. Pix was defended by millions because it saved them money every day. The same principle must now be applied to credit, to the budget, and to the terms on which Brazil sells its resources. Public banks can cut rates and force private ones to follow. The inflation target can be adjusted to what the country’s productivity allows. Fiscal rules can be reformed to exempt public investment and the capitalisation of Petrobras, Eletrobras and the development bank — transforming Brazil’s trade with China from a commodity account into a real developmental strategy. Data centres and rare earths can be offered to anyone, on one condition: technology transfer, public equity, and electricity sold at cost to Brazilians before it is sold to servers.
Until just a few days ago, Brazil’s constitution permitted a six-day week. A movement launched by a pharmacy clerk pushed an amendment to end it through the lower house with only 22 votes against; in the Senate, Flávio’s party kept it off the floor for months. Seven in ten Brazilians supported the reform, including a majority of Bolsonaro voters, according to one poll, while three thousand employers’ associations lobbied against it. On 14 October, with the polls tied, the Senate finally passed it by 75 votes to one. Flávio had announced his support the day before, after visiting his father in prison; his allies already speak of revising the rule in 2027. Congress promulgated the amendment on 16 October, nine days before the runoff. This is what a sovereignty that pays looks like. The rentier could not block it and the empire could not sanction it. What remains to be decided on Sunday is who gets the credit.
British readers will recognise the shape of the problem. A centre-left government treats its fiscal rule as laws of nature, and the far right reaps the rewards. While Lula has defied the empire, he has not yet confronted the rentier. This inconsistency may already have sealed his fate. Yet if he manages to win on 25 October, the task of the left is to resolve it by reclaiming the country from its creditors.
Fonte: Tribune
