Luiz Inácio Lula da Silva, former president of Brazil, center, addresses supporters after winning the second round of presidential elections in Sao Paulo, Brazil, Sunday, Oct. 30, 2022.
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Analysts say Luis Inacio Lula da Silva’s narrow victory in Brazil’s presidential election marks a major turning point on environmental issues.
Da Silva, commonly known as Lula, won 50.9% of the vote in the second round against incumbent President Jair Bolsonaro’s 49.1%, according to Brazil’s electoral authority.
The 77-year-old leftist has championed policies including exempting the lowest earners from income tax, raising the minimum wage and increasing investment in public services to create new jobs. He promised to reduce poverty and boost economic growth, referring to it record of it when he served two terms as president from 2003 to 2010.
A great political comeback is coming after he was was imprisoned in 2017 on charges of money laundering and corruption which were canceled in 2019.
“It’s a big change, I can’t stress how much things will change in this country after Lula’s election,” James Green, a professor of Brazilian history and culture at Brown University, told CNBC’s “Squawk Box Europe” on Monday, referring to the planned increase in social security, more participatory decision-making and the return of “transparent government”.
It also, Green said, “marks a return to the policy of bailing out the Amazon.” In addition to containing 25% of the world’s terrestrial biodiversity, the Amazon plays a role decisive global role by storing billions of tons of carbon and releasing billions of tons of water each year.
Lula used his victory speech to pledge to tackle climate change and deforestation, problems that observers say have not simply been sidelined but have seriously worsened under Bolsonaro.
Deforestation in the Brazilian Amazon rose to an all-time high in the first half of 2022 and was 80% higher than the same period in 2018, the year before Bolsonaro took office, according to a report by the Amazon Institute for Environmental Studies.
Bolsonaro has been criticized for facilitating the spread of illegal activity in Brazil’s rainforests — including land grabbing and violence against indigenous people and campaigners — by cutting funding to law enforcement on the ground; reducing the budget of the national environmental protection agency; the drive to repeal environmental regulations; approvingly thousands of new pesticides; and appease the nation’s powerful agribusiness without taking action encroachment on protected areas.
Brazil also failed to detail plans to reduce carbon emissions in line with international agreements, Human Rights Watch reportsand its emissions from agriculture and animal husbandry reached its highest level.
Bolsonaro’s office was not available for comment when contacted by CNBC. Bolsonaro earlier said he took measures to protect tropical forests; but he also has defended expanding mining projects while accusing foreign governments and the media of exaggerating the damage done. In 2019, he told foreign journalists: “No country in the world has the moral right to talk about Amazonia. You have destroyed your own ecosystems.’
An environmental twist?
Organized crime has taken over several areas of the Amazon during Bolsonaro’s presidency, and many illegal miners and land grabbers see him as an ally, Carlos Rittle, an international policy adviser and Brazil specialist at the Norwegian non-governmental organization Rainforest Foundation, told CNBC.
“About 95% of the deforestation in the Amazon over the past four years has been illegal,” he said. “Territories that were supposed to remain forest became private land, the lands of the indigenous population were seized. It has reached this level because of government inaction.”
“If we look at the promises that Lula has made, including his victory speech last night, he has addressed several major issues as well as zero deforestation while protecting the rights of indigenous people,” Rittle continued.
“We can expect him to re-invigorate the Environmental Protection Agency and restore the budget to allow them to fight environmental crime,” but only as long as he “talks the talk,” Rittle said.
He added that it will not be easy and immediate for various reasons. The budget for 2023 has already been agreed and the systems must be rebuilt and put into operation. Lula will seek consensus in a deeply divided country and political system. And everything changed after his previous term (when the annual deforestation of the Amazon rushed from 25,396 square meters. km in 2003 to 7,000 square meters. km in 2010) due to higher levels of organized crime with a strong base.
International cooperation in this effort will be essential, Rittle added. Norway is already counting on resuming aid to Brazil to fight deforestation, which it suspended during Bolsonaro’s tenure, local newspaper Aftenposten reports. reported on Monday.
Growth goals
Another challenge is the pressure on Lula to tackle the economy, job creation and poverty reduction – themes he became known for during his previous term.
in Brazil the economy faltered over the past decade, falling into the deep recession of 2015 and 2016, followed by a period of political instability. It has also been hit hard by the coronavirus pandemic, with its population suffering one of the world’s worst death rates and inequality widening. according to think tanks. Inflation will average 5.8% this year, and interest rates will be around 14%.
Meanwhile, described in some commentators as a social rather than economic right winger, Bolsonaro also leaves behind various subsidies and unfunded spending programs that have increased Brazil’s high debt levels, which Brown University’s James Green has called “a series of ticking time bombs.”
However, Art Brazilian real was one of the only currencies to outperform US dollar this year due to demand for commodities, central bank tightening and distancing the economy from volatility such as the war in Ukraine.
It remains to be seen how international investors will react to Lula’s return to the presidency, especially one with significant spending commitments, and where he will take Bolsonaro’s planned pro-market reforms and privatization.
The real fell 2% on the news, before paring losses, and shares of US-listed Brazilian companies, including the oil giant Petrobrasfell in pre-market trading.
The immediate concern for markets, as well as for Brazilians and the international community, is political stability during the two-month transition.
Questions remain about whether Bolsonaro will challenge the election results. He can also try to block the smooth transition, Green noted.
Energy issue
And when he set ambitious goals to reduce deforestation to zero and review emissions targets under the Paris AgreementLula also acknowledged that oil will be needed for some time and will watch for increased oil and gas production, This is reported by Climate Home News.
Brazil has a relatively clean domestic energy supply, with almost half of its capacity from renewable sources. But it is also a major producer of oil, from it export of crude oil providing a major source of income along with the booming demand for goods during Lula’s previous terms.
Rittle said there is potential for an even greater shift to renewable energy domestically.
In addition, he continued: “We need to see agricultural financing that is linked to emissions reductions, environmental protection, fertilizer use control and cattle management. Brazil needs mandatory emissions reduction standards and an updated plan to meet them.”
“He needs an economic policy that is in line with the climate policy to make sure that infrastructure, agriculture and industry are the engines of change in Brazil,” Rittle added.
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