INSIGHT: Lula’s ‘Katrina moment’ and Brazil’s wider environmental challenges (part 1)

SAO PAULO (ICIS)–Up to 29 April, Brazil’s President Luiz Inacio Lula da Silva may have been feeling optimistic: the economic recovery seems to have now reached all economic sectors, including manufacturing, where he promised to create more and better paid jobs.

However, on 27 April heavy rainfall started in Brazil’s Rio Grande do Sul and two days later, large parts of the state were flooded, hundreds of roads blocked, landslides were widespread, and a dam collapsed.

More than 150,000 have been displaced. As of Sunday, the death toll stands at 136 and as many remain uncounted for.  In the 12-million-people state, it is estimated two million have been affected by the floods.

While the rains have mostly stopped, many cities remain still at risk of flooding as the stream of several overflown rivers advances towards the sea.

The state’s economy has come to a standstill. Not many GDP growth forecasts have been updated yet following the floods, but last week a report by bank Bradesco said output could be flat in 2024, compared with 2023.

Rio Grande do Sul is the fifth largest economy in Brazil and an agricultural stronghold, concentrating around 70% of the country’s rice output. It is estimated 10% of it could have been lost, and Lula has said imports will be stepped up to cover for any shortfall of the grain, which is on every Brazilian table, every day.

Petrochemicals plants at the Triunfo production hub, near the city of Porto Alegre, remain under force majeure, mostly due to the difficulty of bringing workers in, and fertilizers players fear a hit to demand as the planting season for some crops is set to be affected.

KATRINA 2005; RIO GRANDE DO SUL 2024
As the days went by, the extent of the disaster was becoming clearer, and the scenes broadcast to the world from Rio Grande do Sul were sadly very similar to those seen in 2005 in the US in the aftermath of Hurricane Katrina.

Financial newswire Bloomberg quickly came up with the analogy: Brazil’s worst floods in nearly a century were Lula’s ‘Katrina moment’.

US former President George W Bush became the quintessential example of lack of leadership skills in a crisis and, many criticized, lack of compassion for the Black residents of poorer areas of New Orleans, which were practically left to fend for their own.

“His [Lula’s] advisers say he’s keenly aware this may be his ‘Katrina moment,’ a reference to the 2005 hurricane that caught US President George W Bush off guard and entered the global lexicon as shorthand for the failure of leadership in a crisis,” said Travis Waldron on 9 May on Bloomberg.

“The response to the devastation is particularly important for Lula’s leftist presidency, premised on the philosophy that governments should do more to meet the people’s basic needs. The tragedy has consumed Lula’s government.”

Hurricane Katrina caused 1,836 fatalities and the economic damage was estimated at between $97 billion and $145.5 billion.

LULA AND HIS PLACE IN HISTORY
Seventy-eight-year-old Lula is a true post-modern, spinning-expert politician. Brazilian newspapers often report on his inaccuracies in speeches and, just last week, he and his Workers Party (PT) were under scrutiny after Lula took part in a rally which could be in breach of electoral regulations.

Under his spinning, Lula wanted his third term – Lula 3, to differentiate it from the first and second terms between 2003 and 2011 – to be remembered as the Administration that “re-built” Brazil after Jair Bolsonaro’s pandemic-hit and rather divisive term (2019-2023).

Facing his biggest test yet, Lula’s response during the first week of the disaster was rather slow. However, as the country enters the third week of the calamity, there are indications Lula is getting it, and has now put his government on turbocharge mode and practically all ministers are focused on Rio Grande do Sul.

Following months of almost daily public quarrels between ministers in the coalition cabinet – Lula’s PT does not command a majority in parliament – the renewed sense of common purpose can only be a good thing for a country in crisis.

Lula’s global commitments in 2024, with Brazil holding the G20 presidency and hosting the annual summit in Rio de Janeiro in November, and in 2025, when the city of Belem will host the COP30 climate summit, have now taken something of a back seat.

Perhaps because of the authorities’ slow response, the country at large seemed to be on a wait-and-see mode during the first week, hoping for the best but fearing the worst.

WAR EFFORT-LIKE
But when the disaster was apparent both government and citizens alike started a remarkable, war-like almost effort to alleviate the pain of gauchos, as citizens of the state are called in Portuguese.

The President finally proposed the declaration of state of emergency, which can speed up the release of funds and the state’s wider machinery to assist in the aftermath of the floods, on 5 May: a week after the floods started.

Parliament greenlit the proposal on 7 May, a quick turnaround considering Brazil’s standards.

Finance and Treasury ministers have announced special credit lines for citizens and companies, and low paid workers will have access to special subsidies, while payments for other benefits they are entitled to will be brought forward.

Lula has visited the state three times.

Lula’s left-leaning cabinet does not hide its intention to increase public spending although, as long as taxation remains unchanged, higher proceeds can only come from higher debt, which has slightly increased under Lula 3. That’s another debate for another day.

However, in what concerns the current crisis, further increasing the debt burden to speed up Rio Grande do Sul’s recovery will be good debt in any case, the state being one of the most prosperous in the country.

As we enter the third week of the floods, for any of the 215 million residents in this subcontinent-like country the disaster is now inescapable and calls for action are everywhere.

From workplaces to residential buildings, from schools to universities, from civil associations to companies, there is practically no place where an effort to collect goods, food, and money is not being deployed.

And, in a country where poverty levels are still very high, it is humbling to see that some of those who have very little are giving a little bit, something. When tragedy strikes next door, it is hard not to be moved.

Some personal thoughts to wrap up. Living in Brazil and wishing this rich country could deliver more of its wealth to many more of its people, one can only hope Lula does not repeat a ‘Bush moment’, not for his own sake or his place in History books, but for the sake of gauchos and Brazilians at large.

Hurricane Katrina and, mostly and foremost, the poor way its aftermath was handled left deep scars which are still evident. In 2019, a long 14 years after the Hurricane, this correspondent visited outer areas of New Orleans and, indeed, they were in stark contrast with the quickly refurbished, fancy-again, and tourism-heavy city center.

For many residents of the suburbs, most of them Black, President Barack Obama’s promises of reconstruction never materialized, while his successor Donald Trump seemed to ignore the issue altogether, they said.

The same cannot happen to the dynamic and prosperous Rio Grande do Sul, an export-intensive and diversified economy accustomed to trade with the rest of the world as much as with other Brazilian states.

The state has an edge in several economic sectors, not only in agriculture but also in industry and services. Its GDP per capita stood at Brazilian reais (R) 50,700 ($9,830), versus a national average of R42,250, according to the country’s statistics office IBGE.

The poorest state in Brazil, Maranhao in the north, had a GDP per capita of R17,500.

Rio Grande do Sul’s ambitions go as far as having some wineries, a rarity in what is considered a Tropical country. It is the only state to produce wine because, given its southernmost latitude, it has an actual winter – of sorts – and wine connoisseurs will know grapes can only thrive with cold in winter months and decent heat in the summer.

Brazil needs more states like Rio Grande do Sul, so any setback to its economic development must be averted. Brazilian politicians, often more focused on themselves than in those they are meant to serve, have a golden opportunity to show to the world that this is the new Brazil they have been promising for decades.

The steps announced in the second week of the disaster go in the right direction. Brazil’s economy and its macro stability leave room for the state to step in and support citizens and companies in Rio Grande do Sul at their time of most need.

The political tits-for-tats of the first week, with exchange of futile accusations between the conservative-led state and the left-led Federal Administration, while on the ground the disaster was exploding, cannot be repeated.

“Public anger over the handling of the COVID-19 pandemic by his predecessor, Jair Bolsonaro, helped propel Lula to a narrow victory in Brazil’s 2022 presidential contest. Now he faces a calamity of his own,” concluded Bloomberg’s Waldron.

“Lula’s response could help him regain public approval of his leadership — or propel his presidency into a downward spiral that he can’t escape.”

($1 = R5.16)

The second part of this article, to be published on Wednesday 15 May, will look at Brazil’s climate change-related challenges; whether extreme and rare events like the floods in Rio Grande do Sul could become more common; and the country’s preparedness for such scenario

Insight by Jonathan Lopez