Trump, Lula, and the Orloff Effect

There's an intriguing aspect to it, I'd even say... alarming From our recent history, Brazil has been following, with a delay of only a few years, what is happening in the United States! And the pattern has proven to be extraordinarily repetitive. It's a new "Orloff effect".

Those who are older will surely remember the first “Orloff effect.” Let me explain briefly for the benefit of younger generations. In the 1980s, Orloff vodka launched a famous television advertisement guaranteeing that it didn't cause hangovers. It added the phrase that swept the country: “I am you tomorrow.” At that time, there was a great similarity between the economic and political trajectories of Argentina and Brazil. We were repeating, with some delay, the events and, in particular, the Argentine disasters. The so-called “Orloff effect” was our compulsion to repeat the unfortunate experience of our dear neighbor. “I am you tomorrow,” the Argentinians themselves told us, satisfied to have companions in misfortune.

The new Orloff effect – Brazil repeats the United States Well, wouldn't you know it, the same thing is happening to us now, only this time with the USA! We have a new and worrying Orloff effect. Let's see why.

The US elected Trump in 2016, in a contest against Democrat Hillary Clinton. Brazil elected Bolsonaro in 2018, who defeated Haddad, a moderate center-left politician. Bolsonaro, his ministers, and followers openly displayed their reverence for Trump and their belief in the convenience of following him. Trump and Bolsonaro led tumultuous governments, lacking a discernible strategy. Then came the Covid-19 pandemic, and Bolsonaro imitated, without much disguise, Trump's reaction, committing the same obvious errors. In sync, Trump and Bolsonaro failed to meet the challenge. 

Partly for this reason, Trump suffered a narrow defeat when trying to be re-elected in 2020. Partly for the same reason, Bolsonaro suffered a defeat when seeking a second term in 2022, also by a small margin. Both lost to opponents with somewhat similar profiles: Biden and Lula are highly experienced politicians, of advanced age, both seen, especially Biden, as part of the political establishment, that is, the dominant power system in their countries. President Lula even seems like a outsiderHowever, the broad alliance he has formed with sectors of the traditional right gives his government, in practice, a centrist profile.

But the comparison doesn't end there. Trump and Bolsonaro immediately denounced alleged election fraud and, with a furtive touch, sponsored an attempted coup d'état. January 6, 2021 there, January 8, 2023 here. The exact same script. 

I myself am struck by the parallels. And I continue: after being defeated, just as would happen to Bolsonaro, Donald Trump became the target of attacks, including and especially legal ones: as soon as he escapes prison, he is treated with pet peeve He was defied by the mainstream US media and much of the political establishment, including a minority faction of his own party, the Republican Party. Over four long years until 2024, he resisted all of this, ran for president again, narrowly survived an assassination attempt, and ultimately won by a wide margin against Kamala Harris, the vice-presidential candidate of a visibly aged, perhaps senile, Biden, who clung to his unviable candidacy until the very last moment. Biden, not knowing when to leave the stage, was forcibly and embarrassingly removed from it. Kamala had little campaign time, which contributed to Trump's victory.

And the Orloff effect continues! Furthermore, the similarity in the macroeconomic field should not be overlooked. Biden's foreign policy was a disaster, for well-known reasons. Less recognized abroad is the fact that he achieved successes in the economic field. From the beginning of his administration, he presented interesting ideas that would have constituted a Rooseveltian approach, had they received greater support in Congress. Even facing powerful parliamentary opposition from the Republican Party, Biden achieved positive economic results in terms of GDP, inflation, employment, and unemployment, among other indicators. However, Kamala was unable to convert these results into votes.

The reader will have already realized where I'm going with this last point. Doesn't Lula's situation today resemble Biden's? The macroeconomic results and social indicators in Lula's first two years in office range from reasonable to good, some very good. However, he lacks popular support, judging by recent opinion polls. 

It's not easy to explain what's happening. But, again, the US experience provides clues. Asked, shortly after the election, what explained his victory, Trump was direct, as he usually is:The prices of groceries" (prices in grocery stores). Now, one of the explanations for the lack of support for the Lula government seems to be precisely the cost of the basic food basket, especially food, which harms the majority of the population, especially the poorest who spend proportionally more on food.

As the late Conceição Tavares used to say: "The people don't eat GDP, they eat food!" And her contemporary, Delfim Neto, always warned: "The pocketbook is the most sensitive part of the human body!"

And now, Luiz Inácio? We have now reached the present. Will the Orloff effect persist? What does this repetitive pattern teach us, Brazilians? I do not believe that there are fatalities in human history; only trends that can be avoided, at least in theory. We can, indeed, interrupt this harmful effect.

Our eyes are already on 2026 – a presidential election of extremely high risk for Brazil, for reasons that I don’t even need to recap. 

We have already seen that the Brazilian president has some similarities with Biden/Kamala, especially with the first, that is, good macroeconomic performance, with specific problems in sensitive areas (high GDP, but groceries Both are elderly, around 80 years old, and consequently, there is a recurring appeal (especially in Lula's case, and not by chance, from his opponents) for him to step down in time, opening space for younger candidates. Lula, like Biden, is reluctant to accept these appeals. So far, thank God, he has given every indication that he wants to make a "Lula 4" viable. Inventing another name at this point would, in my view, be handing the country over again, on a silver platter, to inept and regressive Bolsonaro supporters.

All these comparisons seem true to me, but let's not exaggerate either. President Lula is strong and active, fulfilling a heavy agenda with enviable vigor. Age always weighs on him, of course, but he shows signs of being in good intellectual and physical shape. Unless he has some serious health problem, he will be able to run for re-election in 2026, freeing us once again, if all goes well, from a far-right whose incompetence and perversity are only surpassed by its Argentine counterpart. Only Milei overshadows Bolsonaro and his Brazilian equivalents. 

What to do? - Finally, I turn to the practical question: what can be done to stop this damned Orloff effect? ​​If it is infallible, we are screwed. But I don't believe it is. There is much that can be done to prevent its recurrence.

I start from the premise that, I believe, dispenses with further considerations, that President Lula is our best candidate and that he will be in a personal position to run for reelection.

I make some observations, without any great pretensions, just to help a little in this crucial debate.  

1. I'll start with a point that seems obvious at this point: we cannot rely too heavily on good macroeconomic indicators. And even these should be analyzed closely. Consider, reader, the labor market data. Employment has increased, great, but what about... Quality Regarding the jobs created/ IBGE statistics provide a lot of relevant information, but they don't fully capture underemployment – ​​they don't reflect, for example, the situation of middle-class, highly educated professionals who became Uber drivers; or that of industrial workers or formal employees in the service sector who became motorcycle couriers, just to mention two situations among many. Another issue, still in the labor market: the open unemployment rate fell to less than 7% in 2024, which is great, but the underutilization rate of the workforce (which includes unemployment due to insufficient working hours and discouragement unemployment) is much higher, at 15% in the last quarter of last year, according to IBGE.
2. Specific, but crucial, issues should have already been addressed, such as urban transportation and the cost of food. Regarding the latter, I refer you to an article I recently published in [publication name]. FSP on January 31st (available on my internet portal: www.nogueirabatista.com.br/).
3. It is necessary to immediately halt the regressive fiscal adjustment, of the type proposed by the Ministry of Finance and approved by Congress at the end of 2024. It is possible that the public's discontent, captured by some surveys, is already reflecting measures such as cuts to the Continuous Benefit Payment, paid to low-income elderly and disabled people. This is not yet clear, but what seems clear to me is the importance of immediately halting any initiative for additional spending cuts that affect the poorest and the lower middle class. 
4. As soon as possible, it is necessary to propose and have approved in Congress, still in 2025 to take effect in January 2026, an increase in the income tax exemption threshold to R$ 5, compensating for the loss of revenue with the already announced, but not yet detailed, increase in the already meager effective income tax rates on the super-rich. In the 2022 campaign, Lula promised to put the poor in the budget and the rich in the income tax. Will he fulfill this promise? Or will he repeat it in the 2026 campaign? Predictable resistance in Congress should be faced by bringing the issue to the public, naming names, and alerting voters to who is sabotaging measures in favor of the population and fiscal justice. It should be remembered, incidentally, that most parliamentarians are expected to run for reelection in 2026 as well and will not want to look bad in this situation. 
5. Starting with the third Copom meeting in 2025, scheduled for May 6th and 7th, the Central Bank should stabilize and, preferably, begin to gradually reduce the SELIC rate, which is extremely high in real terms, with heavy harmful effects on the economy, public finances, and the distribution of national income. In practice, it is enough for the Central Bank to have as an undeclared objective to keep inflation within the range foreseen in the target regime, below the ceiling, but without immediately aiming for the center of that range. This center should begin to be effectively reached in 2027 or 2028. It will not be the end of the world. Regardless, the Central Bank would need to begin to examine in depth possible changes in the target regime and its information system. The same, incidentally, should be done with regard to the fiscal framework – aiming for the floor of the primary surplus target and seeking opportunities to make the framework more flexible without abandoning the commitment to fiscal austerity.
6. Some slowdown in the level of economic activity seems inevitable in 2025. However, the Treasury, the Central Bank, and public banks should mobilize to adopt, starting at the end of this year at the latest, fiscal, monetary, and credit policies. expansive, in order to ensure substantial economic growth and a robust labor market by 2026.
7. In short, the government should be given a clear social and developmentalist character from the outset, differentiating it not only from the Bolsonaro-supporting right wing, but also from the traditional right wing.

The Brazilian people want their share in cash. These seven points, and others that could certainly be added (in the fields of foreign policy or social policies, for example), would clearly demarcate the nature of the government. Despite the Noah's Ark, that is, the super-broad alliance formed for the 2022 election, the Lula government would need, I believe, to consider initiatives of this nature. If it does not, it may be confused by voters with the traditional right. In other words: the watchword for the Noah's Ark – loads to sea! The crucial importance of doing this should be emphasized. the demarcation in relation to the traditional right. – a demarcation that, for obvious reasons, is more difficult than in relation to the caricatured Bolsonaro-supporting right wing. Why is this crucial? The answer seems clear to me. In electoral terms, the traditional right wing preferentially expresses itself through the famous third way. Now, what does the experience of this third way repeatedly show in various elections? I don't even need to say.

President Lula runs a serious risk of losing in 2026 and confirming the ill-fated Orloff effect if he appears in 2026 with a third-way face, talking about democracy and appealing to vague notions such as citizenship, human rights, the environment, and the defense of indigenous peoples, homosexuals, and other minorities. These issues, so dear to the identitarian left, are undeniably important and fair, but they have been a coffin as an electoral platform. 

As Getúlio Vargas said, with brutal pragmatism, “votes don’t fill stomachs.” In this endeavor, under Lula’s command, the Brazilian people want their share in money.

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The initial part of this article was published, in a summarized version, in the journal. Capital letter.