Americas view

ON NUMEROUS occasions Rafael Correa, Ecuador’s president, has promised to defend freedom of speech with his life. In practice, however, he has steadily chipped away at the freedom of his country’s press. The most-publicised example of this trend has been his libel suit over a controversial opinion column against El Universo, a newspaper, in which a judge awarded him $40m and sentenced the author and his bosses to jail time. On February 15th the supreme court upheld the award, which could leave the publication bankrupt. The suit has caused several people to flee the country, including a judge who reportedly said the ruling was written by one of Mr Correa’s own lawyers. A director of El Universo was granted asylum in Panama. A few days earlier the president won a court judgment in a separate case for a further $2m, from two journalists who reported on the government’s dealings with Mr Correa’s brother’s companies.

Amidst these victories, the president has moved towards outright censorship. In January, using the powers to modify legislation he enjoys under the constitution he got approved in 2008, Mr Correa introduced into an electoral reform bill a rule stating that “the media must refrain from direct or indirect promotion, either through features, specials or any other form of message, which would tend to influence in favour of or against a particular candidate, postulates, options, voting preferences or political ideas.” In other words, the clause bans any statement that could be construed as supporting or criticising a candidate. “Private media want to continue with their power,” Mr Correa said last month, “and carry out election campaigns, promote candidates and install and remove presidents.”

The breadth of the ban has left editors wondering what, if anything, may be reported lest it appear to unduly influence voters. Since the government cannot monitor every published word, the opposition fears Mr Correa will have it enforced selectively to his benefit. The president retorts that state media will have to limit their coverage as well.

Ecuador’s constitution prohibits changes to the electoral system within 12 months of a vote. The new restriction took effect on February 4th, but the next general election had already been scheduled for January 2013 by the nominally independent electoral board. On February 16th Mr Correa duly announced to the press that the vote will be postponed until February of next year, allowing the new rules to be implemented ahead of the election.

The president recently touted a poll giving him an approval rating close to 80%. Yet his efforts to rein in the media suggest he is much less confident in his chances of winning another term than he would like to admit.

OUR sister blog, Game theory, has just published an article on the possibility of a professional ice hockey team returning to Quebec City. Read it here.

WHEN Ollanta Humala was elected as Peru’s president last year, many observers feared he would reorient the country back towards its strident leftist past. On February 12th, however, he further strengthened his credentials as a centrist, when a joint police-army patrol arrested Florindo Flores Hala (pictured), the leader of the rump of the Shining Path guerrillas that terrorised the country in the 1980s.

Successive Peruvian governments, principally that of the autocratic Alberto Fujimori in the 1990s, had already reduced the Maoist group to a shadow of itself. Its founder and first leader, Abimael Guzmán, was caught in Lima in 1992, and his successor, Óscar Ramírez, was nabbed seven years later. Its political wing, the Movement for Amnesty and Fundamental Rights (Movadef), had long sought to register as a formal party, but gave up that effort two weeks ago.

Nonetheless, the group’s remnants were still a threat to public safety. The 50-year-old Mr Flores, who goes by “Comrade Artemio”, had led the Shining Path’s faction in the northern Huallaga valley for decades. In 2005 his fighters ambushed a police patrol and killed eight officers. Although he announced a unilateral cease-fire in an interview in December and said he wanted to negotiate, Mr Humala rejected the proposal.

On February 9th, security forces with knowledge of Mr Flores’s whereabouts launched an attack on his makeshift camp in Peru’s northern jungle. One member of the team managed to shoot Mr Flores. They reached him again three days later and were surprised to find him alive, battered and bleeding. Mr Flores surrendered without a fight, saying simply “I lost”—though once he arrived at a police airport in Lima, he made a feeble attempt at a “revolutionary” salute, raising a mangled hand from a gurney. His interrogation begins later this week, and he will probably be sentenced to life in prison once tried. Most of his closest military and political commanders have already been arrested or killed, and he has no known successor.

Mr Humala, who already enjoyed a 58% approval rating, has sought to take full political advantage of the arrest. Immediately after the arrest, he travelled to a police base in the Huallaga valley to congratulate the security forces involved in the operation and inspect the cache of weapons, communications equipment and documents they had seized. His vice-president, Marisol Espinoza, has already suggested that February 12th be designated the national day against terrorism.

Yet Mr Humala still has a ways to go before fulfilling his promise to eliminate all remnants of the Shining Path before his term ends in 2016. The capture of Mr Flores probably eliminates the organisation in the north. But a different splinter group, led by Víctor Quispe “Comrade José” Palomino and his brothers, remains active in the south-central jungle. It has attacked government troops far more than Mr Flores did, killing 12 soldiers last year. On February 6th Mr Palomino’s forces fired automatic weapons and grenades on a police station in a remote jungle hamlet, seriously wounding two police officers. And since his group is actively involved in the drug trade and based in Peru’s leading coca-producing region, they may prove to be a more formidable adversary.

AFTER years in the wilderness, the opposition to Hugo Chávez has got its act together at last. This week's issue of The Economist explores whether that will be enough to topple the ailing and convalescent president, who is running for a third straight six-year term. It also includes stories on the privatisation of Brazilian airports and Mexico's first female presidential candidate from one of the main political parties.

MAKING the rounds in Haiti this week is a cartoon that depicts Jean-Claude Duvalier (pictured) behind the wheel of a blood-stained Mercedes brimming with human skulls. A policeman writes a ticket, exclaiming, “I’m arresting you for stealing a car, Mr Duvalier!”

Such is the state of justice in Haiti, where on January 30th Carvès Jean, an investigative magistrate, dismissed charges of grave human-rights crimes against Mr Duvalier, including torture and political assassination, because a ten-year statute of limitations had expired. Mr Duvalier ruled the country from 1971 to 1986, when he fled to France and spent 25 years living off the millions of dollars he is frequently accused of having siphoned from the public treasury. Mr Jean ruled that a trial for misappropriation of government funds could go forward, though it will be heard by a tribunal that handles relatively minor crimes. The maximum penalty would be five years in prison.

The UN and human-rights groups raised an immediate outcry. Human-rights crimes during Mr Duvalier’s regime are amply documented, and under international law, they argue, there is no statute of limitations on crimes against humanity. “Courts from Argentina to Cambodia have set aside time limits to address past atrocities, but once again, Haiti is an exception,” said Reed Brody of Human Rights Watch, which helped build the case against Mr Duvalier last year. Amnesty International called the investigation a “sham” and the ruling a “disgrace.” Mr Jean was accused of failing to investigate the claims of at least eight of the 20 complainants in the case.

Mr Duvalier, nicknamed “Baby Doc”, made a surprise return to Haiti in January 2011. He was arraigned a few days later and put under house arrest—an order he repeatedly violated by swilling Champagne at fashionable restaurants, venturing out to the countryside and even addressing a law school graduation in Gonaïves, where the uprising against him started 26 years ago. (“You have chosen a noble discipline,” Mr Duvalier told the graduates, one that “restrains and channels the selfish instincts and eternal brutality of men.”) When called into court, Mr Duvalier tended to take ill, supplying the court with a note from his doctor. Mr Jean eventually lifted the house-arrest order as well.

When asked about the Duvalier prosecution, Michel Martelly, the president, has repeatedly invoked the separation of powers, saying the case was a matter for the Haitian courts, not the executive branch. However, he has been ostentatiously gracious toward Mr Duvalier. Last month Mr Martelly invited the former dictator to a two-year commemoration of the 2010 earthquake at a mass-grave site. Later, he said he would consider pardoning Mr Duvalier. He backtracked a few days before Mr Carvès handed down his order, full of typographical errors.

The complainants said they would appeal the decision. So did Mr Duvalier’s lawyer, Reynald Georges, who announced that his client would appeal the corruption charges. Last year Mr Georges received your correspondent in his office with an automatic weapon on his desk, answered some questions, and then invited her to sit on his lap. She made a hasty exit.

The United States has offered technical support to the Haitian government should it pursue an appeal, but has maintained a vague stance on the Duvalier prosecution overall. Indeed, most countries that have donated money to Haiti have been muted on whether Mr Duvalier should be held to account for his human-rights crimes, disappointing advocates who say they exercise strong political influence here. In an interview last month, the actor Sean Penn—whom the Haitian government recently named an ambassador-at-large—echoed many donors’ thoughts on Mr Duvalier. “All of the emphasis now is going to have to be on moving forward,” he said. “Haiti is not a country that can afford to do the sort of righteous accountability that maybe we have a high responsibility to in our own government.”

Haitians who consider justice an essential element of becoming a peyi serye (serious country) find such logic insulting. “For a society to allow Duvalier to go free, after he’s killed so many people and kept a nation petrified for so long—no one would respect us. We wouldn’t even respect ourselves,” said Bobby Duval, an activist and former footballer who spent 17 months in the Duvalier regime’s most notorious prison, Fort Dimanche. Others argue that in a country where corruption and state-sponsored violence are endemic, not holding Mr Duvalier to account would send the precisely wrong signal to public servants. “People will say, ‘Why should I feel bad about stealing stuff?’ It becomes corrosive,” said Brian Concannon, Jr, the director of the Institute for Justice and Democracy in Haiti, an NGO. “Haiti needs to escape its past to have a future.”

UNIVERSITIES in the state of Rio de Janeiro reserve 20% of their places for black students. The Economist's readers are strongly opposed to this policy: 74% of them said it was a bad idea.

This week's poll turns to the Canadian housing market. The average home price there has doubled since 2002, and the ratio of prices to income is now 30% above its long-run average. Do you think prices will drop far and fast? Let us know.

SINCE 2006, the murder rate in Mexico has risen sharply and, apparently, inexorably. Has it now plateaued? Last year saw 22,200 murders, only slightly up on 2010’s total of 20,600. This isn’t exactly cheerful news. But it is at least encouraging that the high rate of increase of previous years was not repeated.

Look at the trend. Between 2007 and 2008, the number of murders rose by 29%. In 2009 it rose by 22% and in 2010 by 28%. So 2011’s rise, of 8%, represents a significant slowdown. Again, to be clear, it’s not time to crack open the celebratory tequila: security is not yet getting better. But it is getting worse much less quickly than before, and this is progress of sorts.

The trend is discussed in an interesting blog (in Spanish) by Alejandro Hope, a drug-war analyst, who proposes various explanations for the slowdown. Firstly, he suggests, Mexico’s security forces (and their level of co-operation with colleagues in the United States) may have got better with time, hampering the violent business of the drug gangs. It may also be that after a period of territorial fighting, the gangs are settling back into a new equilibrium, involving fewer skirmishes.

The blog proposes two further, economic explanations: the demand for cocaine seems to have fallen in the United States, Mr Hope says, making the drug-smuggling business less profitable. (Others say that this might divert gangs into worse sources of income, such as kidnapping.) And he notes that Mexico’s legitimate economy has perked up recently, offering jobs to young people who might otherwise have turned to a life of crime.

One drawback to the “plateau” argument, which we touched on in a recent article, is that violence hasn’t actually stabilised across the country. In fact, quite the opposite: it seems to have fallen sharply in some previously dangerous places (such as the area around Tijuana) and risen equally sharply in previously safe cities (such as Monterrey). So nationwide totals have plateaued, but they hide a lot of variation and volatility at the state level.

Mr Hope makes two closing points that are worth thinking about. One is that if and when the violence does start to drop, it could drop just as quickly and unexpectedly as it took off. Part of the reason that things have got out of hand so quickly, he suggests, is that as the security forces have been overwhelmed, the likelihood of a crime being punished has diminished, causing a vicious circle of impunity. The flip side to this is that when the violence does eventually start to fall, the security forces will find their caseload more manageable, more crimes will be solved, and the vicious circle will become a virtuous one. Peace may take Mexico by surprise just as violence did.

If that does happen, there will be a scramble to claim credit for the fall in violence. By then, Mexico will almost certainly have a new government (the new president, to be elected on July 1st, will assume office in December). He or she will be happy to boast about the drop, and a new argument will begin about what, or who, caused the outbreak of peace. Mr Hope wryly notes: “Violence, like failure, is an orphan,” for which no politician wants to claim responsibility—“but peace won’t have any shortage of parents.”

THE campaign to decide who will square off against Hugo Chávez in Venezuela’s October presidential election has, for the most part, been as dull as ditchwater. With all six contenders vowing to support the opposition Democratic Unity (MUD) alliance and unite behind the victor of the primaries scheduled for February 12th, mutual politeness has left many voters struggling to distinguish between one contender and another.

Only this week has the contest come into clearer focus. On January 24th Leopoldo López (pictured), the leader of the People’s Will (VP) party and a former mayor in Caracas, announced he was ending his candidacy and would become the campaign manager for Henrique Capriles, the governor of the state of Miranda. Mr López had been running a distant third in the polls behind Mr Capriles and Pablo Pérez, the governor of Zulia state. He had not performed well in televised debates, and his advertisements were seen as quirky and self-obsessed. He also faced a daunting obstacle: Mr Chávez’s government had banned him from holding public office because of dubious allegations of corruption. Even though the Inter-American Court of Human Rights had ordered the prohibition overturned, voters were put off by the risk that he might not become president if elected.

Once Mr López decided to throw in the towel, there was little doubt about who he would support. He and Mr Capriles were two of the founders of the centre-right Justice First (PJ) party in 2000, and were allies until Mr López left in 2007 after a split in the party. Both sides insist that Mr Capriles has not promised Mr López any job in a future government. They have stressed that they want to distance themselves from Venezuela’s traditional machine politics, which helped generate the anti-party revolt that brought Mr Chávez, a former soldier, to power in 1999.

That has put Mr Pérez, of the social-democratic New Era (UNT) party, on the defensive. His supporters have tried to cast him as the left-wing opposition candidate, in contrast with the more centrist Mr Capriles—an argument that makes Mr Pérez look like a stronger rival to Mr Chávez, since he might be able to peel off disgruntled left-leaning supporters. But Mr Capriles has been careful to recruit smaller leftist parties, including Podemos, which until 2007 backed Mr Chávez.

Moreover, Mr Capriles and Mr López have implicitly countered that the distinction between them and Mr Pérez is not one of ideology but rather of their approach to politics. Because the two parties that dominated Venezuela before Mr Chávez’s ascent, the centre-left Democratic Action AD and the Christian-democratic Copei, are both backing Mr Pérez, he is vulnerable to charges of representing the “old”, unwanted model of Venezuelan politics.

Mr Capriles was the clear front-runner even before Mr López dropped out. He now looks almost unstoppable. Mr Pérez’s campaign manager sneered that his candidate’s “steamroller advance” had forced Mr López and Mr Capriles into each other’s arms. But he may be hard-pressed, in the remaining fortnight of campaigning, to turn such rhetoric into reality.

CUBANS are not known for the brevity of their conversations. Unless, that is, they are speaking on a mobile phone. In a country where the average state salary languishes at around $20 a month, and daytime mobile charges are 45 cents a minute (paid by both the caller and the receiver), customers have a strong incentive to keep their conversations brief. Cubans have resorted to seeing their phones as mere fashion accessories.

But from February 1st, those who prefer to use their phone for its original purpose will be given some respite. The cost of using a the only network on the island (run by the state-owned ETECSA) is falling. For the first time, receiving calls from phones within Cuba will be free. The price of a text message is being almost halved.

Since Raúl Castro, the president, first allowed Cubans to have their own cell phone lines—under his brother Fidel, only foreigners and some senior officials could do so—mobile use on the island has more than tripled. According to official figures, 1.2m Cubans, or about a tenth of the population, now have a mobile phone. But that is still a fraction of the levels achieved elsewhere in Latin America. ETECSA says it intends to reduce prices further, to reach its target of 2.4m subscribers by 2015. Last year it cut the cost of a line subscription by 80%.

Scores of foreign companies would like a slice of this market. But currently none are participating. In January 2011, the cash-strapped Cuban government surprised observers by arranging to buy out its remaining foreign partner in the business, Telecom Italia, for $706m. A few months later, several senior ETECSA executives were arrested as part of Mr Castro’s wide-ranging corruption investigations. It is not clear whether their arrest was directly connected with the deal.

Some hard-liners in the Castro government might feel a little uneasy at the prospect of giving millions more Cubans access to any sort of information technology. But they can probably sleep soundly, on two counts. Firstly, although a 3G system for mobile internet is in place across the island, Cuban cell phones are prevented from accessing it (only those roaming from foreign networks can do so). And according to one foreign executive, who was familiar with the project to install that network ten years ago, the government took its habitual precautions. “When the core switch for the network was purchased from Ericsson, the Cubans made absolutely sure they had every imaginable ‘snooping’ feature available”, he says.

ON JANUARY 12th our São Paulo bureau chief interviewed Fernando Henrique Cardoso, Brazil's president from 1995-2002, at the Instituto FHC. They discussed Brazil's challenges and its increasing global power. You can click below to listen to the conversation, or read the full transcript following the link. A Portuguese translation is available here.

The Economist: Can we start with the way Brazil’s place in the world is changing? Brazil seems to be trying to create a new sort of world power—a “soft power”.

Cardoso: In the last century Brazil’s economy grew very consistently up to 1980. Only Japan grew faster in per-capita terms. From that point on Brazil has been always looking for roles. In Brazilian people’s minds, we are a giant. But our size, for so long it was an illusion. We did not yet have the capacity to play an important role. We were all the time envisaging what we might become.

Brazil aspired to be part of the core group of the League of Nations; after the Second World War Brazil raised that possibility again [during the creation of the United Nations]. Churchill vetoed it, saying that the Americas could not speak with two voices. Churchill was wrong. So we have always aspired to a big role.
In the 19th century, because of the struggle between Spain and Portugal, we were involved in wars in the South, and the Brazilian empire was perceived by our neighbours as a trap. Then the axis moved towards the United States and Brazil became a Republic and much more quiescent—and again hesitated. To what extent would we play a hegemonic role in the region? We never assumed such a role. We preferred to be more loved than feared.

At the end of the last century, the economy became so vigorous, we had established democratic traditions and we rediscovered our cultural particularities. These give us a sense that maybe we can play a role in the area of “soft politics”: not just to be economically strong, but also because of our capacity to accept others, to be tolerant. We love to consider ourselves as open-minded, as a racial democracy. It’s not entirely true, but it’s an aspiration with some ingredients of reality. Because in fact we are more tolerant than several other countries.

Compare the United States and Brazil. Both are countries built on migration, but in Brazil migrants have fused much more, and what has been even more impressive is that the cultures have mixed. We do not have a Black culture in Brazil, and a White culture. It is senseless in Brazil to speak about a Black culture: it is our culture.

And we are very accepting of variety in religion. We are not intolerant—Brazilians are syncretists, not fundamentalists. And because we are a country composed of migration we have contacts with many different parts of the world. Lots of Brazilians are Japanese and maybe more than 10m are Arabs. More than that are Germans; there is no other country in the world with more Italians, in absolute numbers. And all this fused. We never exactly know our descendancy.

Brazil has always been in favour of multilateralism, instead of bilateral relations, and of trying to negotiate, to bridge. Brazilian diplomacy is based on that. We need to look South, to the basin of the Rio da Plata—and to America; both relations with America and the South. There are elements of flexibility in Brazilian culture; they originate with the Portuguese, not only in Brazil.

If you compare the Portuguese and the Dutch in Africa, it is quite different. The Portuguese always had sexual relations with the native people. There is a phrase I like to repeat when I’m in Spain. In the eighteenth century the Marquess of Pombal [Sebastião José de Carvalho e Melo; the first minister of the Kingdom from 1750 to 1777] sent a letter to his brother, the viceroy of the North of Brazil, saying, we have to promote the Portuguese who marry indigenous women, because it is better to have half a Portuguese than one Spaniard! They were fighting the Spanish and worried about the demographic question. They felt the children were somehow Portuguese. That was not common in the Spanish world. They kept more separate.

Then in Brazil, the dominant ruling class normally tried to disguise the fact that inequality was so high. One of the ways to disguise differences is to treat people as if they are closer than they really are, to speak as if we were equal. To some extent this is a tricky thing, even if people are not aware of it: it is a way to maintain differences without provoking a strong reaction. The traditional part of the ruling class in Brazil will always be mild, soft, always saying “please”, not ordering. This is not the same now with the new bourgeoisie: they are much more arrogant than the old traditional elite groups in Brazil. They are different; more capitalist.

The Economist: Let’s talk about those social changes. Brazil has changed an enormous amount in recent years.

Cardoso: The landmark was the new Constitution. The beginning was the struggle against the military and the strikes, and the new constitution was the baptism of a new society.

The Economist: It’s still changing. This Republic is young; the Constitution was only written in 1988. You’re working out your institutions still. You are part of that process of institution-building, possibly the most important of all Brazil’s institution-builders.

Cardoso: The sense of institution has always been very present in Brazil, compared with other parts of the New World. The Portuguese monarchy was stable, and we were heirs to the Portuguese crown. All the institutions came here with the king of Portugal and Rio [de Janeiro] became the capital of the Portuguese Empire. And simultaneously this is a highly disorganised society! It is difficult to combine these facts: that we have institutions and simultaneously we are very ready to disobey them. It’s a flexibility—the jeitinho. It is good and bad. In some aspects our legislation is wonderful but the practice is a disaster. For example, we have very strict rules for the behaviour of public servants and politicians, and with respect to public money. And in spite of that corruption is there.

The Economist: Is corruption increasing?

Cardoso: Always we have had some degree of corruption, here and there, but the system was not corrupted. Now the system allows corruption as a normal ingredient. Everyone knows that when you organise a cabinet you have to share power with parties. But you are not sharing power, you are sharing opportunities to have good contracts.

The Economist: Was that not the case for you?

Cardoso: No, no, no. Maybe in one or another case, but now the whole system is based on this. This is novel. It’s a very bad development. In the political culture flexibility has become… not flexibility, but tolerance of crime. You have institutions, you have tribunals—but nobody is in jail.

The Economist: Do you see any sign of a movement for change at a public level?

Cardoso: Some individuals are very angry. The point is that in the last 15 years, the sense of well-being has been so obvious and every year is better. The population maybe knows that there is some bad behaviour, but that’s all. They don’t act against it, they don’t protest. Some people, yes, the “old” middle class.

The Economist: Now Brazil has two middle classes.

Cardoso: The new middle classes, maybe in the future they will protest, because they are not a product of corruption, but of markets. They are climbing up the social scale by work, by their own efforts. So maybe in time I hope they will react. But this will depend on the overall situation. Because today nobody cares. They are against corruption, here and there, but they don’t mobilise, because the situation is okay, they are moving up.

The Economist: Are these people natural PSDB voters? People who are working hard and want to keep what’s theirs, in other countries they vote for parties that are economically right of centre. (Note: The PSDB, or Party of Brazilian Social Democracy, was founded by Mr Cardoso and others within the movement opposing the military dictatorship in 1988. The PT, or Workers’ Party, to which the current president, Dilma Rousseff, and previous president, Luiz Inácio Lula da Silva, both belong, was founded around the same time.)

Cardoso: But there is no sense of left and right in Brazil. It’s a strange thing. We don’t have a right in Brazil. The PSDB started centre-left and now in practice it’s centre. But what does that mean?

What is the difference between the PSDB and the PT? At first it was very clear. The PT had much more connection with the unions, was much more close to some segments of the church and had a vague idea of socialism—not the traditional socialism, not communism, but socialism in the sense that they were not betting on the state to change society, but on the contrary that civil society would change the state. The PSDB was always closer to the middle class than to the unions and never had such a clear aspiration to socialism. It was much more social-democratic than socialist, but again supported the idea that what was important was not to expand the state alone but to create civil society.

Now I think the PT put aside civil society. They believe in party and state.

The Economist: What is the role of opposition in a country where the government is so large? Within the government is everybody from communist, right through to big landowners. There’s no ideology.

Cardoso: This is a kind of confusion, more pronounced under Lula, because Lula became the father of the poor—and of the rich too. In the name of governability. Lula never had a sense of class struggle, in spite of being a union leader. For him what is important is to negotiate. Negotiation, plus the enormous impetus coming from the markets, meant that there is no longer a difference between right and left.

Under the authoritarian regime we had a more clear right because there was a more clear left, because of the Cold War. With the end of the Cold War and the enormous economic progress in Brazil, the more rightist groups in Brazil—they are no longer rightist, they are conservatives. In a sense they are clientelists: they like to be close to the government. If you look at the composition of the Congress, you see the same people supporting [José] Sarney, [Fernando] Collor, [Itamar] Franco, myself, then Lula [Luis Inácio Lula da Silva] and now Dilma [Rousseff]. I don’t want to pick out one specific name, but just to give you an example, a friend of mine, the mines and energy minister, was part of all of these. Sarney is the same: he was the head of the group in Congress that supported the military regime and he’s still in government now.

The Economist: What does an opposition do in a system like this?

Cardoso: The opposition nowadays is in a kind of trap. Our parties have become more and more Congressional parties. The opposition is very strong in Congress: they make speeches, they protest, they want to organise an inquiry, a meeting, a commission. And to the people this is nothing. Society just doesn’t care about Congress. The parties don’t have contact with society. The PSDB has been strong in São Paulo for a long time, yes, but the population pay attention to the executive branch, not the congressional. In the Brazilian mind there is no contradiction in voting for Lula for president and the PSDB for state governor.

However, you can also find elements of rationality. If you look to see where the PSDB is stronger than the PT, the trend is clear: it’s in more economically developed, market-oriented parts of Brazil, that is, among the “new middle-class”. It used not be like that, because the PT was very strong in urban popular classes in São Paulo. But the PT has been losing ground in São Paulo and gaining power in the north-east of Brazil, where to some extent they replaced the old clientelist parties, because now it’s the PT that has the key to public money.

This is not absolute: there are PT governors in the south and PSDB governors in the north-east. But if you look at the level of municipalities the PSDB is mainly in the more economically progressive parts of Brazil: areas where the market is stronger and people are less dependent on government.

If the PT is in government, they get all the allies in Brasília [where Brazil’s Congress is based]. That’s why it’s so difficult to understand from the European perspective. Our parties are not exactly like American parties—they are a kind of machinery to produce votes—to some extent but not as much. But certainly we do not have the ideological spectrum that you have in Europe.

The Economist: In Europe left-wing parties have managed to find a new role for themselves since the end of the Cold War: something like justice, or fairness, or softening the hard edges of the market. I suppose the market doesn’t feel like it has too many hard edges in Brazil right now!

 Cardoso: If I imagine a stronger opposition in Brazil, it will probably be based on non-economic ideas: justice; personal safety; republicanism as compared with corruption; respect for the law; quality of life.

If you look at everyday life, what is gaining space in Brazil is the market. Government is very strong and important, but the spirit of the market is also infiltrating government. Take for instance Petrobras [a state-controlled oil firm], or Banco do Brasil [a bank, again state-controlled]: they behave like businesses.

It is important to emphasise that the spirit of enterprise is also gaining space in Brazil. Look at the banking system. It used to be based on making loans to the government at very high interest rates. But now we are reaching a point where these high interest rates cannot be sustained, so the banks have to adapt. Access to banking used to be very limited in Brazil; now it is expanding. The idea of credit is very young because with inflation it was impossible.

Compared with some other Latin American countries the banking system in Brazil has some advantages. We have a mixed financial system, 50% government, 25% controlled by Brazilian families and 25% international banks. So it is highly diversified. Secondly, domestic debt is in the hands of local people. We always had a financial system rooted in Brazilian society.

It would be impossible to do here what was done in Argentina. The dollar never was our currency, unlike Argentina. Through the whole inflationary period our savings stayed in local currency, because we had a system of indexation to adjust it. We never had a currency board. I myself had a tremendous discussion with the IMF during the 1999 crisis [when the cost of financing Brazil’s government debt surged and the country ended up devaluing]. [Stanley] Fischer who is now the head of the Israeli Central Bank, said: You have to do what Argentina did. We resisted. We never accepted tying our money to the dollar, because we had the awareness of the importance of being able to devalue, because of our exports. In Argentina, even today, they are sending their money abroad. This is not our problem: we have a very strong financial system and savings are in national currency.

The Economist: Now money is flowing in and there is the opposite problem: the real is incredibly strong.

 Cardoso: It’s a big problem. Now we have no alternative other than to increase productivity. But the problem with productivity is now not inside the firm, it is outside. It is government; it is roads; it is taxation. What has to be done is a long story, but the government has to rationalise, to do some reforms. Some are very idealistic—such as tax reform—but they are necessary. Look at the tax burden: it is up above 36% of GDP. Our GDP now is over $2 trillion. Thirty-six percent of $2 trillion is a lot of money. But they are expanding the bureaucracy; over-expanding without taking into account the need to renew infrastructure or concentrate on education. The population will react against still more tax increases. This has to force the government to be much more rational in the use of this money.

The Economist: Do you see any sign of this happening?

Cardoso: I don’t know…Maybe because of President Dilma Rousseff. She is much more open to understanding numbers.

The Economist: You have a very interesting relationship with the president. The two of you seem to have created a new relationship between ex-president and president.

Cardoso: Because Lula lost the opportunity to do that. I had a long personal relationship with Lula. We were very close. He spent a vacation once in my beach home with his family. But we had no institutional relationship, because that was the decision by the PT. But this was because of electoral politics. Dilma is different. She has no personal connection with me, it is a much more superficial relationship than it was with Lula. It may be that she has not yet considered herself—yet as least—as a candidate, so she does not conceive of other people as enemies. I don’t know, but she has always been very correct with me.

By coincidence I had a dream last night, in which we—Lula and I—were proposing together a national consensus. [laughs] It is so obvious that Brazil needs to focus on a few main things. What to do about energy? What to do about education? How to create better opportunities for our infrastructure, with government and private sector working together? How to come to a consensus on the environment? It is so obvious. These are not party questions, but national questions.

The Economist: National consensus tends to come at times of crisis…

Cardoso: That’s why it doesn’t happen. On the other hand, there is a kind of non-explicit agreement. When Lula became president the world believed he would destroy everything that I had done. And he didn’t—without being explicit. When I lived in Chile [during Brazil’s period of military dictatorship] the Christian Democrats and Socialists were opponents, the Socialists far to the left and the Christian Democrats much more conservative. Then they merged to create a united force, the Concertación. We didn’t do that. But in practice we are doing the same, to some extent. The electoral discourse is different, of course, because you have to signal that you are different. But in practice you’re not—which makes opposition difficult.

The Economist: On the subject of opposition, I will say frankly that I thought the PSDB’s campaign for president in 2010 was very weak. Is the party going to put up a good fight and a candidate in 2014, someone it can unite behind? Has it got a clear strategy? Or is it just going to fight internally and fall apart?

Cardoso: In the last campaign the PSDB made enormous mistakes. At the beginning the favourite was our candidate [José Serra], by far. And instead of organising alliances—because it is easier to create alliances when you are on the up, because of what I said before, that parties want to be close to the winners—we didn’t. It was a kind of arrogance. Our candidate was isolated, even internally.

The Economist: Isolated, or isolating? Did he push other people away?

Cardoso: Yes. And this was very bad. And in spite of that, Dilma went to the second round. And Serra got 44%.

The Economist: Only 44% against someone who had never even stood for class president before…

Cardoso: With Lula behind her. But anyhow, what I’m trying to express is that it would be possible to win. It was our mistake.

The Economist: With the same candidate?

Cardoso: Well…maybe not.

The Economist: How is the PSDB going to unite behind a candidate?

Cardoso: It has to search for internal unity. I would say that now the PSDB is more aware of the necessity of being united. This is not simple, because the sense of cohesiveness based on values is less strong than in the past. It’s more about personality now. And the same applies to the other side. Their last campaign was nothing, zero; the real questions were never raised. It was a mimicry of a campaign, with marketers playing the role of principal actors, instead of being submitted to some leadership.

Now there are several question marks. What will Lula’s role be? I would say that nobody knows, not even himself. Because of his health [Lula has throat cancer, with a good prognosis], but not just because of his health. I would say that normally Lula would try to compete: he is a very competitive animal, a political animal. And probably President Dilma has no internal strength [in her party and coalition partners]. If she also has the same aspiration—I am not sure—it would be difficult for her. It is one thing to compete with Lula, another to compete with someone else, even President Dilma.

In the PSDB’s case, former governor Serra plays the role of Lula: he has guts, he likes to compete. I don’t know to what extent he will be more convinced that it is not for him, to open space for others.

The Economist: Who would be the obvious candidate?

Cardoso: Aécio Neves.

The Economist: Can Aécio win?

Cardoso: Aécio is from the more traditional Brazilian culture, more apt to establish alliances. He has some support from Minas Gerais [his state]. São Paulo is not like that, it is always divided, it is so big. Things will be clearer after the municipal elections [in October 2012]. Probably we will see a very strong internal fight within the PSDB, between Serra and Aécio.

The Economist: Is Geraldo Alckmin [the current governor of São Paulo and the PSDB’s presidential candidate in 2006] also a player?

Cardoso: No, I don’t think so.

I have some responsibility in the case of the PSDB. To put all my cards on the table, my natural successor died, a former governor of São Paulo, Mario Covas. I had been president for eight years and I was in government before that and I was 71. It was enough. I decided it was time to open space for others, not just out of generosity, but also because I was tired of exerting political leadership. And Covas died. So no clear leader replaced me. It was a permanent tension between three or four possible candidates, and in the end Serra became the candidate, but without convincing others that he was really the man. And now again it’s not clear. In the case of the PT it was different because Lula never stepped out of the struggle, and he imposed Dilma. We will need to take some time to reorganise the hierarchy of leadership. And it’s now too late for me—I’m 80 years old—to have the will any more.

The Economist: You are still one of the most important voices within your party.

Cardoso: Sure, but that’s not because of me, it’s because of the lack of others! I think this is bad for Brazil. And the same applies to the other side: it’s only Lula. Let me speak in an impersonal way: in the last 20 years, only two leaders. It’s not healthy for a country, a big country. I took my decision: to open space. That space is still open.
We have some people from a new generation. After my generation you have Serra and the former governor of Ceará, Tasso Jereissati. Then you have Aécio; the governor of Pará, Simão Jatene; the governor of Goias, Marconi Perillo. If I look objectively, there is another governor, from the Socialist Party, Eduardo Campos from Pernambuco, who could become a leader—he has some of the characteristics. He could be capable, but not yet. He is a possibility.
So there are possibilities. It’s a matter of time. Probably if Lula is not involved—the same as applies to me—it would be better. To allow it to happen naturally.

The Economist: Since stepping down from the presidency, you have spoken out publicly on a variety of tricky subjects, notably the futility of the war on drugs and the necessity to treat drug abuse as a public-health issue, not a criminal issue.

Cardoso: In my most recent book, “A soma e o resto” [freely translated as “The final balance, and what remains”, published in 2011, only in Portuguese] I speak frankly about several issues, not taking into account that I am a former professor of sociology, or a former president. I speak as a person. It’s difficult, but anyhow I try. I included what I think about drugs. It is time for those who have already accomplished something to speak out, because what is now undermining the prestige of politics in society is that politicians prefer not to take positions. Because it causes problems. Because it sometimes costs a lot to be frank.
In the book I talk about less usual things, for instance my spirituality, because people were all the time discussing behind the scenes whether I was a person of faith or not. Also what I think about the old-fashioned approach to political life: the party system. It is completely outmoded when you have new forms of connection, like the internet. It is not clear in my mind what can be done by social media, internet and smartphones and so on: that they can mobilise people is quite clear, they are doing that—but then, how to connect this with political institutions? I think this is a question mark for the whole world.

FOR Hugo Chávez, sovereignty means never having to say you’re sorry. The Venezuelan president, who sees globalisation as an imperialist plot against developing countries, is determined to break free from all forms of international arbitration. His latest bid to de-couple his country from the rest of the world involves the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), a tribunal which serves as an arbitrator for foreign-investment contracts. Venezuela, which has over a dozen cases against it pending, will no longer abide by ICSID rulings, the president said earlier this month.

Like many important government announcements, Mr Chávez made this one during one of his rambling, six- or seven-hour Aló Presidente (“Hello President”) Sunday television programmes. It came in response to a ruling in a different tribunal, the International Chamber of Commerce (ICC), on a dispute which is also pending at ICSID, involving the oil giant Exxon Mobil. To the surprise of many analysts, the ICC found Venezuela liable to pay only $908m, in compensation for its 2007 takeover of assets belonging to the company. Exxon had reportedly been looking for a sum rather closer to $6 billion.

Not surprisingly, perhaps, the Venezuelan government said it would abide by the ICC’s decision, which it says will lead to a net pay-out of only $255m. But that, it said, was that. “We don’t expect (to make) any further payment,” said Rafael Ramírez, the oil minister, who also chairs PDVSA, the state oil corporation. “There’s nothing left to decide.”

It may not be quite that simple. Although Mr Ramírez says Venezuela will shortly formalise its withdrawal from the ICSID, such a decision takes six months to become effective. During that time, further claims can be filed. All claims pending at the time of withdrawal remain active, and rulings can be implemented almost anywhere in the world. With assets abroad, especially in the United States, PDVSA will remain vulnerable. Moreover, some two dozen bilateral investment treaties already signed by Venezuela contemplate arbitration by the ICSID.

Regardless of the technical details, the government’s determination to be judge and jury in all international disputes will further damage its already-battered image among investors. Venezuela continues to attract foreign direct investment (FDI), especially in its oil and gas sectors, and in finance and telecommunications, even though nationalisations have taken net FDI figures into negative territory in recent years. But the signs are ominous. The government says henceforth all disputes will be settled in local courts, which are widely perceived to be wholly under the thumb of the executive.

That really comes down to Mr Chávez himself, who is prone to decree state takeovers of land, factories and other businesses with no prior notice, and with scant regard for the law or the constitution. Hitherto, foreign investors have at least had the protection of international courts and arbitration bodies. But local business people and landowners are not so lucky. The constitution forbids expropriation without a court order, and guarantees prompt compensation at a fair market price. Thousands, however, have received no payment at all, while others have been paid only in part. Few judges dare defy the president, so taking him to court is futile.

Mindful of such precedents, investors with enough clout, like the Chinese government, have insisted on international arbitration. Contracts between the China National Petroleum Corporation and PDVSA include a clause that refers any dispute to the Singapore International Arbitration Centre.

Mr Chávez is seeking re-election this year for a third consecutive six-year term. He may be concerned that a series of adverse, billion-dollar rulings by ICSID would knock a big hole in his campaign kitty, although the likelihood of that happening seems remote. Either way, it is possible that sense may eventually prevail. And there is also a chance that, by the time the ICSID notice period has expired, Mr Chávez will no longer be the president.