Brazil’s Historic Floods Create a ‘Katrina Moment’ for Lula’s Presidency

(Bloomberg) -- When Brazil’s Luiz Inacio Lula da Silva flew over the floods that have submerged the southern part of his country on Sunday, he surveyed not just the devastation that has left at least 107 people dead and 165,000 displaced but a defining moment for his presidency.

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Along with destruction, natural disasters like the record-breaking deluge that hit the state of Rio Grande do Sul carry tremendous power to reshape a nation’s politics.

In 2005, George W. Bush’s slow response to Hurricane Katrina in the US further dented already-declining approval ratings and caused a double-digit drop in perceptions of his ability to manage a crisis. Positive reactions to Barack Obama’s handling of Hurricane Sandy in 2012, by contrast, provided a much-needed polling boost on the eve of an election the Democrat went on to win.

Lula is keenly aware of the potency of sudden crises, close advisers say. Two years ago, he rode popular anger over Jair Bolsonaro’s handling of the Covid-19 pandemic to a narrow victory in Brazil’s presidential contest. Now he is facing a calamity of his own, one that could help him arrest a fall in popularity — or feed worsening feelings about the country’s trajectory and send him into a spiral that, like Bush, he may never escape.

“This is the government’s Katrina moment,” said Thomas Traumann, a Rio de Janeiro-based communications consultant. “For the third of the population that hates Lula, everything he does will be bad or insufficient. But there is a third that is watching the response of his government. And Bolsonaro’s neglect of the pandemic is very fresh in Brazilians’ minds.”

The tragedy has consumed Lula’s government since he traveled to Rio Grande do Sul alongside top members of his cabinet and key congressional leaders over the weekend, diverting attention from the administration’s agenda in congress, its Group of 20 nations presidency and planning for its hosting of the United Nations Climate Change Conference next year.

The hastily-organized trip was meant to unite branches of government that had been publicly squabbling over tax plans and other legislative measures, so they could quickly deliver relief to the region, according to three officials familiar with the internal planning.

By Monday afternoon, Lula had signed a decree to exempt emergency relief from 2024 fiscal rules, paving the way for his economic team — led by Finance Minister Fernando Haddad and Planning Minister Simone Tebet — to develop specific aid measures.

Haddad on Thursday unveiled a relief package worth 50.9 billion reais ($9.9 billion) that included subsidized credit and other measures meant to help workers, beneficiaries of social programs, and rural producers, as well as companies, states and municipalities. The government plans to present additional aid for flood victims next week, Lula said during an event in Brasilia. It is also finalizing a proposal to provide debt relief to the state of Rio Grande do Sul to assist its road and infrastructure reconstruction needs.

Lula, whose governing philosophy is rooted in the idea that the government should do more to provide for its people, is pushing to avoid the perception that he fell short in a crisis: He has warned his ministers against internal conflicts and told them to develop a response they can be proud of in the future, according to the people familiar, who requested anonymity to discuss internal matters.

He has also ordered his team not to fight with political adversaries, telling them to prioritize solutions no matter who they come from.

The tragedy has engulfed Rio Grande do Sul at a time when Brazilians’ faith in Lula’s ability to deliver appears to be waning: His approval rating has fallen 10 points to 50% since August, according to a Quaest survey released Wednesday. Disapproval has risen 12 points to 47% over the same span.

The federal government’s initial response to the flooding received positive marks from 53% of respondents in another Quaest poll released Thursday, with 24% calling it regular and 23% viewing it negatively.

The full scale of the crisis won’t be known until after the floodwaters recede, although it could have noticeable inflationary and economic effects that stretch beyond the affected areas. Rio Grande do Sul is a major agricultural region that accounts for roughly 6.5% of Brazil’s gross domestic product. It is also impossible to know yet, Lula said Monday, how much aid the crisis will ultimately require.

But the government is facing more immediate challenges than reconstruction. Colder temperatures and additional rains are set to arrive this week, potentially worsening the situation and complicating ongoing relief and rescue efforts at a time when more than 130 people are still missing, 67,000 are in shelters and the death toll is rising daily. Roughly 500,000 people remain without electricity, with an equal number lacking access to clean water, according to local authorities.

The tragedy, however, may also help refocus a president who has divided his attention between an ambitious global agenda and an array of domestic initiatives, many of which have sparked internal battles in his cabinet and lengthy fights with congress that have paralyzed the government.

The floods have coalesced many of the central causes of Lula’s presidency — hunger and social welfare, environmental issues and climate change — into a single point of attention. And much like the Jan. 8, 2023 insurrection attempt against his government, they have also given him the opportunity to craft a unified crisis response that may help the administration shake off its current “lethargy,” Traumann said.

Markets have expressed some concerns about the level of spending the floods may ultimately require, although Lula’s decree helped calm initial fears about a package on par with Brazil’s massive pandemic response.

After weeks of intense debates about fiscal targets, revenue goals and the potential need to cut spending, the floods have turned the conversation back to the government’s responsibility to help its people — a shift that benefited Obama a decade ago, and that puts the leftist Lula on far more comfortable ground: The latest poll from Quaest found that 70% of respondents believed investments into infrastructure could have prevented the tragedy.

“I can’t have the financial system every day only looking at the fiscal deficit and not looking at the social deficit,” he said during a Tuesday radio interview that followed his trip to the region. “Look at people who are unemployed, who are sleeping on the streets, who are starving. Stop looking only at your pockets, stop looking only at your bank account, and look at the people.”

--With assistance from Beatriz Reis, Martha Beck and Daniel Carvalho.

(Updates number of deaths and displacements in lead, adds aid package announcement in ninth paragraph and new polling data in 13th and 19th paragraphs.)

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