Tuesday, November 20, 2012

No end of lessons for SA from Latin America

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20 Nov 2012 | Tony Leon  | Original Publication: BDlive

Brazil’s lashing together of sensible economics and pro-poor policies is worthy of local application, writes Tony Leon

THE past week offered our national trinity — trade unions, big business and the political class — some key lessons from the Latins.

At the weekend, the Congress of South African Trade Unions (Cosatu) enjoyed its "Lula Moment", when former Brazilian president Luis Inacio Lula da Silva dropped by in Johannesburg to share some of his recipes for successful governance.

Undoubtedly our political elite would like to learn how, after two terms as president, he had an approval rating of more than 80% on leaving office.

Lula’s headline achievement was to disprove the sneering adage that Brazil was "the country of the future, and always will be". Lula’s presidency from 2002 to 2010 saw the slumbering economic giant rise to global pre-eminence; earlier this year it ousted the UK as the world’s sixth-biggest economy.

Its $2.5-trillion gross domestic product has also been used to good effect and now inspires global envy. As Nicholas Lemann noted: "Brazil has achieved a rare trifecta: high growth (unlike the US and Europe), political freedom (unlike China) and falling inequality (unlike practically everywhere)."

No doubt Cosatu and the government will draw inspiration from the rise of 28-million Brazilians, 15% of the population, from extreme poverty into the lower rungs of the middle class.

Our trade unions will emphasise that its achievement was largely owing to the Bolsa Familia welfare payments, credit access for small businesses and rising salaries.

But these impressive accomplishments had a back story and Lula had a predecessor who built the fiscal and monetary platform on which he stood. It is an open secret that Lula and former president Fernando Henrique Cardoso, who beat Lula in the two presidential elections they contested against each other in the 1990s, have a healthy dislike for each other. Cardoso was shunned by Lula during the latter’s presidency, and Cardoso recently derided Lulanomics as "government by cash dispenser".

But it was the combination of them both, the sociologist-turned-politician Cardoso and the metal worker Lula, who overcame grinding poverty to reach the presidency, that created the modern and much-admired Brazil. Cardoso slew the inflationary dragon, which crested at a staggering 2,000% as recently as 1993. He did this through a prudent mix of currency reforms and tight monetary and fiscal policies. He became a hero of the country’s business and financial sectors.

Then, entering stage left, Lula won power only by pledging to maintain his predecessor’s economic course.

But he added to it his populist charm and extended the reach of government to the country’s poor, to whom his life story was heroic. In the process, he became, in the words of an admiring critic, "a purveyor of pragmatic politics that were at once pro-Wall Street and pro-Favella".

Of course, Brazil’s sheer size makes it an inexact fit for South Africa. But its lashing together of sensible economics and pro-poor policies and using presidential authority to popularise both of them, is worthy of local application.

Brazil’s neighbour, Argentina, has hewed a much less successful path. While Cardoso was making way for Lula in December 2001, Argentina entered national bankruptcy when it posted the world’s largest sovereign debt default to the tune of $160bn.

Argentina seemed an improbable place to buy a bank. But just four years after this financial meltdown, Standard Bank did precisely that and went on, under its blue and white brand, to create the seventh-largest retail bank in one of the more economically challenging markets. Last week, the Argentinian Central Bank confirmed the sale of Standard Bank Argentina to the Chinese ICBC Bank, the minority shareholder of the South African parent. For its sale of 80% of its share of the Argentinian operation, Standard Bank will receive $650m, a mouthwatering return on investment.

Standard Bank’s outsize success in South America was largely achieved through prudent lending, smart marketing and the individual skills of Johan Roets, its flamboyant and savvy head of private and business banking.

Finally from the far south last week, the BBC website featured the remarkable president of Uruguay, José "Pepe" Mujica.

Of the heads of state I have met, his background as a leading member of the armed insurgency against Uruguay’s authoritarian military rulers in the 1970s, including his imprisonment for 14 years, most closely resembled the biographies of former struggle activists now governing South Africa.

But there is a singular difference: as the BBC billed him, he is also "the poorest president in the world".

In contrast to the riches acquired and deference expected by leaders elsewhere, Mujica’s election in late 2009 has not led to any change to his admirably austere lifestyle. He continues to live with his wife on a very modest farm on the outskirts of Montevideo and records as his only asset an "elderly" Volkswagen Beetle. He also donates the bulk of his presidential salary to charity.

Follow Tony Leon on Twitter: @TonyLeonSA

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