Samba Lessons for Greece

Could Lula’s Brazil provide the precedent for economic renewal?

The nation that founded democracy is teaching the world another lesson in making choices. As Greece prepares for parliamentary elections on January 25, markets are bracing themselves for the fallout from a potential victory by the left-wing Syriza party. The narrative espoused by most financial media is that a vote for the incumbent New Democracy (ND) party augurs stability while a vote for Syriza portends economic ruin. A Syriza victory, however, must not necessarily be all doom and gloom.

More than a decade ago a strikingly similar political and economic scenario played out in Brazil. A 2002 election pitted José Serra, then-President Fernando Henrique Cardoso’s preferred candidate, against Luiz Inácio Lula da Silva, who was routinely characterized as a left-wing radical and an extremist. The Economist noted that a potential Lula victory “terrified the financial markets” and caused Brazil’s currency, the real, to fall sharply against the American dollar. The risk premium on Brazilian government bonds jumped to boot.

At first glance, comparing Greece to Brazil is like comparing feta to feijão (black beans). Brazil has more than 200 million people and the world’s seventh-largest economy. Greece has fewer citizens than there are residents of São Paulo and an economy in desperate need of an overhaul. But by looking at the choices faced by Lula and Syriza’s leader, Alexis Tsipras, the former may just offer a roadmap for the latter. Following in Lula’s footsteps with a similar ideology and focus on debt repayment, poverty reduction and job creation might give Syriza the chance to rescue Greece and prove the party’s critics wrong.

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