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The Truth about "The Edge of Democracy"

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Tags Cronyism and CorporatismGlobal EconomyWorld History

02/11/2020

The Edge of Democracy, a documentary by Petra Costa produced by Netflix and nominated for an Oscar, has been released to hundreds of millions of unsuspecting viewers who know nothing of recent Brazilian history and have little to no access to the real facts. So, as a Brazilian, I had to say something.

A documentary can look at facts and try to extract an interpretation or view from it. We might agree or disagree. The problem starts when a movie attempts to be a documentary and yet fails to get even basic facts or statistics right.

The documentary attempts to show what happened before, during, and after the impeachment process of Dilma Rouseff. The movie—let’s not call it a documentary anymore—largely ignores the corruption scandals that surrounded Dilma, former president Lula, and their Workers' party, only mentions the economic crisis they caused in passing, makes a straw man of the opposition, underplays the reason Dilma was impeached, misrepresents facts, and even gets basic numbers wrong.

Getting the Basics Wrong

The documentary asserts that Lula achieved the lowest unemployment rate in Brazilian history. Wrong. It shows Lula saying that he got into politics because only two congressmen of 443 were working class when there were never exactly 443 congressmen. It claims that Dilma lost her prestige and power because she stood up to banks when in fact banks made enormous profits under her government and high interest rate policies. Guido Mantega, one of her former ministers, has even been charged with selling privileged information to those banks and funneling profits to the party. In her second term, Dilma brought banks into government by appointing Joaquim Levy to what is today the Ministry of the Economy. If that is standing up to the banks, I’d really like to know what it means to be helping them.

The movie claims that Lula created the Bolsa Familia, a policy of basic income for the poor that is one of the staples of his government. The fact is that Bolsa Familia is an amalgamation and expansion of different support programs from previous governments. Lula should know: he’s on record criticizing those programs.

Another quite curious claim is that Michel Temer, Dilma’s vice-president and president after the Impeachment in 2016, was a traitor to her government from day one of the second term. The record shows differently: he took up heavy pro-Dilma negotiations in Congress and that was widely recognized. One of Dilma’s vice-leaders in Congress, Orlando Silva, was on the news saying so.

These are easily checkable—yet incorrect—statements found throughout the movie and are easy for a reader who doesn’t know Brazil to understand. The problem is that these statements are probably the smallest offenders on the list. Explaining the rest requires quite a bit of context and recent Brazilian history.

The most egregious error is the overall narrative: democracy was doing fine championed by Lula and Dilma. They stood up to big interests and got taken down on a coup, and democracy was subverted. None of this is true, and it’s not even a matter of interpretation: it’s something that any speaker of Portuguese can settle with basic googling.

In 2005, a large corruption scandal erupted: Mensalão. Lula and his party—the Workers' Party, PT in Portuguese—were caught embezzling funds to buy support in the National Congress, get nominations, and ensure that they would rule unchecked. That is not only a corruption scandal but a direct attack on democratic institutions and principles.

In 2014 they were again caught in Petrolão. The scheme was the same, and largely organized by the same people: divert funds, buy support, rule unchecked. That makes them repeat offenders in attempting to destroy the separation of powers and gain control by illicit means.

Freedom of the Press

The film claims Lula was a friend to journalists. Yet in 2004 Lula sent a bill to congress to create a federal council with powers to regulate and punish journalists. Almost every year Dilma or his party would drum up new efforts to “regulate the media,”  and Dilma even tried to conjure a “limited” constitutional assembly—whatever that means—to discuss the media. A relatively minor but symbolically important scandal occurred at the beginning of Lula’s presidency. When an American reporter wrote that Lula had a drinking problem, Lula demanded the cancellation of his visa. When his aides told him it was unconstitutional to deport the journalist since he was married to a Brazilian woman, Lula’s reply was ominous: "F[…] the constitution." Thus, to imply or overtly say that democracy in Brazil was doing fine under the Workers' Party is downright dishonest.

The movie only briefly mentions the Mensalão scandal and treats Petrolão as some made-up charges by Sergio Moro, a judge trained in the US. The film thus implies that the scandals were the result of interventions from foreign powers. But to quote Roy Jones Jr., "They must all have forgotten": in 1992 Dilma took the exact same course that Moro did.

The Edge of Democracy also shows that during his court hearing Lula asks Moro how he feels about having collapsed the construction sector in Brazil. One would think it would be relevant to mention that those construction companies were the ones inside the corruption scandal, but somehow the filmmakers didn’t find it very relevant.

Speaking of construction, Lula was jailed because he received an apartment as a kickback from one of those construction companies. He also is accused of getting a wide-ranging upgrade on a rural property, embezzling millions, overseeing a corruption scheme, and much more. Yet the movie claims that all the judges had on him was the apartment.

That is also why Lula could not run for president in 2018. People convicted of certain crimes—corruption obviously included—cannot run for office for eight years, a provision of the “Clean Record Act,” known in Brazil as “Lei Ficha Limpa,” which Mr. Lula himself sanctioned. Oddly, the movie doesn’t mention that and instead claims that the conviction by Sergio Moro knocked Lula out of the race. Moro couldn’t possibly have done that, since the conviction that counts for the Clean Record Act is through an appeals court, and Moro was one step below that. Three other judges not only affirmed Moro’s sentence, but raised the jail time Lula had to serve.

Lula is only free today, because the Supreme Federal Court voted that you can only go to jail for nonviolent offenses once you lose your case and all appeals at the supreme court. Before this, one could go to jail after being convicted in an appeals court.

It’s worth noting that the president of the supreme court was, and still is, Dias Toffoli. Lula appointed him to the Supreme Court for the shining honor of having never passed a judge test and having been Lula’s campaign lawyer. In fact, seven of the eleven supreme court judges were appointed by Lula or Dilma. Hardly a hostile court attempting to attack democracy or be partisan to a coup.

The Economic Record

But it was not only the construction sector that suffered. The entire economy endured its worst crisis in Brazilian history. The economy is only mentioned about an hour into the movie, and even then almost as an aside. The details are omitted, but let's clarify them.

In 2015 GDP shrunk by 3.8 percent and by 3.6 percent the next year. In 2017, unemployment shot up from 6 percent to almost 14 percent until new economic policies under Michel Temer started to knock it back down. Deficits exploded, taking the national debt from 51.5 percent of the GDP in 2013 to over 80 percent today, when we are still making deep reforms to try and tackle deficits and policies still on autopilot from the Dilma years. When pension reforms were approved in 2019, it was clear that if they did not go through Brazil would go bankrupt.

These issues were the result of expansionist and interventionist economic policies, interest rate manipulation, accounting fraud, price controls to control inflation and help Dilma’s reelection, and much more. That brings us to Dilma: why was she impeached?

Dilma's Impeachment

The movie attempts to show Dilma's impeachment as a coup, omitting a simple fact: she clearly and widely broke budgetary laws. Not only did she do so in terms of the interpretation of the law, but also in the sense of its original intent.

Back quite a ways in Brazilian history, it was normal for governors to create state banks, use them to fund deficits, launch vote-buying schemes and general budgetary responsibility. These banks would then be declared bankrupt. This would be followed by the creation of a new bank, and the process would be repeated eternally. The depositors were left holding the bag, the government washed its hands of the affair, political players got money. Rinse and repeat.

This and many other accounting schemes prompted reforms that created budgetary laws prohibiting the government from taking loans without congressional authorization and mandating better accounting and many other good practices.

Dilma used state-owned banks to finance her policies. In practice, she used the banks’ balances as if they were treasury balances. To emphasize: this wasn’t a week-long snafu of account balancing; this was a policy going back to 2009 with 45 billion reais in open balances. For reference, that is a bit less than half of all federal spending on education in 2015. That constitutes a loan without congressional authorization and budget fraud, as verified by the the Federal Audit Court (TCU).

Now one might wonder: did the Workers Party, Lula, and Dilma defend themselves of those accusations? No. Their responses were similar to what we fing in Edge of Democracy: directly state the opposite of what actually happened. Don’t mention what really happened. Source your arguments with partisan narratives and repeat.

While it is true that there are still many elements on the right and on the left who want to end democracy in Brazil and take control of state power, the fact remains that the largest threat to democracy since it returned to Brazil in 1985 and in 1988 with a new constitution was posed precisely by Lula and the Workers' Party.

Michel Temer was never a threat to democracy. Was he corrupt? Although there are no convictions yet, the consensus in Brazil is a clear yes. He was bought and paid for a long time ago by Lula and his coterie. But there is a difference between a thief and a dictator.

Is Bolsonaro a threat to democracy? Maybe. He has had some concerning ideas but so far has not implemented anything that would constitute a threat. Of course, he has only been in power for one year. Yet trying to compare him with a party that twice tried—and for quite some time succeeded—to subvert the separation of powers and control all the levers is disingenuous. His story has yet to be written, while the story of Lula, Dilma, and the Workers' Party is already written, part of it in the records of many courts, of audits, and of arrests.

Lastly, we have the Hail Mary argument of the movie: for all its faults, the Workers' Party was a hope for the poor, a bastion against inequality. They put up a fight for the common man, and maybe there were mistakes made, but at least inequality was tackled.

Well, again come those pesky statistics to show otherwise.

Inequality was already falling in President Fernando Henrique Cardoso's second term, from 1994 to 1998. It continued to fall at pretty much the same pace during Lula’s presidency, implying that he added little to the mechanisms in play, and it started to rise again after Dilma’s reelection in 2014. Right after her reelection, many state-controlled prices were allowed to go up, inflation crossed 10 percent per year, and many programs were cut.

Yet when we step back and look at the whole picture, the fact is that inequality has hardly budged. The Gini coefficient in Brazil went from a high of fifty-eight to a low of fifty-two during those years. Looking at this over the decades, it almost looks like a straight line. And in the end Dilma failed to maintain what little progress had been made.

It’s easy to hold things together for a while when one can raid the balances of state-owned banks, cook the books, buy support in congress, and win elections with billions of reais in embezzled money. But that can only last so long, and it came to an end with Dilma's impeachment. Brazil, however, did not come to such an end. It will now struggle for a decade or more to clean up the mess and get back on a path to growth and the reduction of poverty.

(These are not the only lies within the documentary, here’s the full list.)

Originally published at Ideias radicais.

Author:

Raphaël Lima

Raphaël Lima is a popular media commentator and author in Brazil. His Youtube channel is one of the largest and most closely watched in the country.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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