In Brazil, the month of June 2008 will be marked by two important debates: on the one hand, by the intensification of the negotiations regarding the candidacies and coalitions for the 2008 municipal elections; on the other, by the resumption of the discussions regarding the short-, medium-, and long-term economic policy.

There are several reasons why Brazil’s economic policy is at the center of the debate.

In Brazil, the month of June 2008 will be marked by two important debates: on the one hand, by the intensification of the negotiations regarding the candidacies and coalitions for the 2008 municipal elections; on the other, by the resumption of the discussions regarding the short-, medium-, and long-term economic policy.

There are several reasons why Brazil’s economic policy is at the center of the debate.

For one, because the international crisis impacts on the Brazilian economy by affecting prices and foreign exchange. Using this impact as a pretext, Brazil’s Central Bank is pushing interest rates up, attracting thus more dollars into the country and further contributing to appreciate the real and worsen the exchange rate setting, hurting exports and increasing external vulnerability.

For another, the economic growth policy designed to reduce inequality is under heavy attack by the neoliberal opposition. Defeated in the 2006 presidential elections, the neoliberals are still campaigning for their “cost reduction” policy, which should be read as less State, fewer public policies, and fewer social policies. An important episode of this battle was the defeat of the CPMF, a tax that financed part of Brazil’s public health system.

In practical terms, the Central Bank is closing ranks with the objectives of the neoliberal opposition, since a rise in the base rate increases public debt and reduces the federal government’s, productive or social, investment capacity.

Other sectors of the government and its power base react with diverse proposals, from the creation of a new tax to finance health, to the proposal for the creation of a Sovereign Wealth Fund. Yet, the greatest pressure comes from the president of the republic himself, in his intent to render feasible the implementation of the PAC –the Growth Acceleration Programme– and other public policies.

The discussion about the economic policy constitutes thus a sort of third round of the 2006 presidential elections and the ante-room of the debate that will be waged in the 2010 elections, in that the opposition will try to pin on the government’s candidate the label “PT: party of the taxes”.

Despite its strategic character, inside the PT and its allied parties in Congress, the economic policy debate has lost momentum in face of the negotiations in anticipation of the 2008 municipal elections.

For those accompanying from afar, it is worth paying special attention to what will happen in the 26 state capitals (in the Federal District, the 27th unit of the Brazilian federation, there are no municipal elections), as well as in cities with 200,000-plus voters.

Of these, it is especially important to follow what will happen in São Paulo, Rio de Janeiro and Belo Horizonte, where an important percentage of the Brazilian electorate is concentrated.

In each of these three cities, Brazil’s main political parties devise a number of potential political alliances, whose success or failure will have repercussions on what the parties will do in the 2010 presidential elections.

The PT governs only one of these cities: Belo Horizonte. Yet precisely there, the local Party decided not to run with its own mayoral candidate, opting instead for supporting a PSB candidate, a candidate that in 2010 may support the presidential candidacies of Aécio Neves or Ciro Gomes.

That is, the odds of a victory that will directly strengthen the Party for the presidential elections are limited to Rio de Janeiro and São Paulo, with Alessandro Molon and Marta Suplicy, respectively.

The DEM, in turn, runs the capitals of the states of São Paulo and Rio de Janeiro; yet only has a chance of winning in São Paulo, and even so not by its own merit but because of the support it receives from Governor José Serra. That is, a DEM victory in São Paulo would reinforce its alliance with the PSDB social democrats in the next presidential contest.

The PSDB does not have a mayor in any of the capital cities mentioned, but has a good chance of winning, directly or indirectly, in two of them. It might win in São Paulo (with Geraldo Alckmin or with Gilberto Kassab, who is with the DEM but depends on the support of a PSDB sector linked to Serra) and in Belo Horizonte (with Márcio Lacerda, who owes his candidacy to Governor Aécio Neves of the PSDB).

Nor does the PMDB have a mayor in these three cities. However, it may take part in the winning ticket in São Paulo (where it is backing Gilberto Kassab of the DEM) and in Rio de Janeiro, where Governor Sérgio Cabral (who is with the PMDB and supports the Lula government) supports the PT’s mayoral candidate.

Also running in Rio de Janeiro is the strong candidacy of Senator Marcelo Crivella (of the PRB of Vice-President José de Alencar’s party); as well as the candidacies of Jandira Feghalli (of the PCdoB), Chico Alencar (of the PSOL) and Fernando Gabeira (of the Green Party).

In São Paulo are also running Aldo Rabelo (of the PCdoB, with the possible support of the PSB and the PDT) and Ivan Valente (PSOL).

In Belo Horizonte, another important candidacy is that of Jô Moraes (of the PCdoB, in alliance with the PRB).

In sum: the PT with few allies in the first round; the PT with the support of the PMDB; the PSB with the support of the PT and the PSDB; the DEM with the support of the PSDB; the PCdoB with the support of “leftist bloc” parties; PSOL with own candidacies.

The picture, apparently confusing, will work as a “test” for different maneuvers that may take place in the first round of the 2010 presidential election, such as:

a) a Workers’ Party candidacy, with some few allies or the support of the PMDB and other parties;

b) a PSDB candidacy, supported by the DEM and even by sectors of parties belonging to the ruling coalition;

c) a candidacy of the “leftist bloc”.

It will also test the potential of a movement dreamt of by many: a government’s candidacy that is not headed by the PT and that has the support of PSDB sectors.

Federal Deputy Ciro Gomes (PSB) seems absolutely committed to this last arrangement, while his relationship with former PSDB president Tasso Jereissati is widely known. Ciro Gomes is also involved in a bid to build a PSB-PSDB-PT alliance in Belo Horizonte.

The maneuvers conducted by Governor Aécio Neves (PSDB), by Federal Deputy Ciro Gomes (PSB) and by the mayor of Belo Horizonte, Fernando Pimentel (PT), is presented as part of a struggle against what they regard as the “paulista hegemony” in national politics.

Surely when speaking of this hegemony the three flirt with provincialism, localism and regionalism. Yet there is some truth in what they say; there is a “regional issue” in Brazil, and big business headquartered in the state of São Paulo is uncomfortable and sees in José Serra as president an opportunity to occupy more spaces.

One of the reasons for the São Paulo elite’s discomfort is the policy of regional and social development that is being implemented by the Lula administration, a policy that has as its by-product the weakening of the elites of the Brazilian northeast.

The point is to know how to fight the regionalism of the paulista elite: by strengthening another regionalism, even if spearheaded by neoliberal politicians like Aécio Neves and Tasso Jereissati? Or by strengthening the PT and the left, in Brazil as a whole, including in the state of São Paulo?

The Workers’ Party National Board met on 30 May and adopted a clear stand in this debate: it does not accept the PT and the PSDB taking part in the same coalition in the Belo Horizonte elections. How the other parties will react to this decision will become clearer over the month of June.