Inozemtsev: Mr. Cardoso, you were a very successful finance minister in Brazil who managed tight economic and financial reforms, as well as the stabilization of the Brazilian currency, the real. These moves were of a magnitude comparable with Russia’s reforms in the early 1990s. Following this period, you rose as a national leader and were eventually elected president. Would you explain the main focus of your reforms and why they were maybe unpopular, yet people understood it was necessary to follow your proposals?

Cardoso: It was probably a convergence of various trends and factors that helped me. One of the most significant factors was that I was against the military regime1 in Brazil. So I was perceived as a person coming from the left who was against the military. I was not considered a leftist, but my itinerary was against the established order, and mainly the order imposed by the military.

Second, when we produced a program to stop inflation, the so-called “the Real Plan (Plano Real)2 I made an unusual decision that had tremendous success. The idea was to explain to our people every new step to be implemented beforehand. I was the finance minister, but I am not an economist – I am a sociologist. However, very good economists surrounded me, and I was a kind of translator of the economic proposals to the nation on radio and TV and in the press. It took a lot of time to prepare the program and to have it approved by the Congress, to struggle against all the ideas in the Congress. Not just entrepreneurs backed my project, but the middle-class, who were well informed, were also in favor of my proposals. The unions, or the more populist parties, however, as well as popular parties like the PT (Partido dos Trabalhadores),3 were against the reforms. But since inflation stopped, it was clear to everyone that the workers were gaining.

So, the sense of being better off as a result of my program was clear. I won my first presidential election in 1994 because of that. And when I became president, I started proposing reforms. That was much less popular than stabilization because I had to propose social security reform, tax reform, all kinds of reforms. Nevertheless, I was re-elected four years after that. Incidentally, I got 54 percent of the votes in my election in 1994, and 53 percent in my re-election in 1998. This means that the population was rather in favor of our initiatives. Why? Because there was a sense that Brazil had to move faster toward a more open society and open economy. This idea was disseminated by the mass media, and by some leaders in Brazil.

Then, we had the devaluation of the real in 1999;4 thus, after my second election, the situation went against me. The mood of the population became much more skeptical. So, it was not so easy in the second half of my second mandate. That’s why we – not me, but my candidate – were defeated in 2002.5 I suppose my party will be victorious again in the upcoming elections.

Inozemtsev: In the parliamentary elections?

Cardoso: The elections for both the presidency and the parliament. No one party has ever had more than 20 percent in parliament in Brazil because it’s a big country, like Russia. It is fragmented, it has many parties, and it is difficult. As for the presidency, maybe we will revive the old trend, that is to say, Brazil has to move faster because the world is moving ahead, and because of the sense that we are losing ground to China, India, and maybe to Russia and the rest of the world. Now we are in the middle of a political crisis because of corruption and things like that. This will open windows of reaction to the proposals made at the beginning of my mandate, and to the way I presented the program and used the mass media as an instrument.

Inozemtsev: Presumably, your talents as a sociologist were of importance at that time because there was so much explaining, as well as convincing the people to go to the elections.

Cardoso: It was quite new and not easy. You can imagine our technicians and economists saying that it was impossible because everybody would engage in speculation. But I think it was a wise decision. One of my friends, an economist who has a much more open mind, said: “Okay, let’s do simple and clear things.” So, we used what I call “democratic pedagogy.” And the people believed it. I think it is important to explain to the people again and again… In big countries like Russia or Brazil, it’s not easy to go to the grassroots. But you have to make the effort at least, and try to convince. I am a profound democrat, so I think that inasmuch as you can give good information and the chance to make a good choice, you can win in the end. I think that if you believe that people cannot understand you, that you have to manipulate the public, it’s the beginning of a disaster in an open society. And Brazil is an open society, which is also amazing because, if you look at our past, at where we are coming from now, together with the inequality in Brazilian society,6 it’s hard to understand how that kind of disparity and freedom can be compatible. But it is like that here. And it is a kind of engine moving Brazil ahead. It’s an open society.

Look at what is going on in our country now. It’s just impossible not to explain things to the people, not to tell the truth, because everyone sees it. This is an important characteristic. Another thing is that Brazil is a culture of tolerance. It is a paradox that, being so unequal, it is possible to be open and tolerant. There are some cultural explanations. It is also true that we are like America and different from Russia. We are composed of many different people. I don’t know how many Brazilians are now of Portuguese descent. Maybe they are in the minority. We have blacks and mulattos and we have Germans. No less than ten million Brazilians are of German descent. There are no less than 25 million Brazilians of Italian descent. We have many Poles, as well as people from Ukraine, and no less than three million Arabs, mainly Lebanese. We have Japanese – perhaps two million of them, or more.

So this is a melting pot. In the 1950s, sociology explained America in terms of a big melting pot. America, however, is not a true melting pot because the different nationalities are there, but each one is a pot, a special area with its own community. We mix it up. And we are proud that we have this tremendous blend of people. This is also very important to stress. This is our national ideology. So, we have to accept differences as a natural thing.

If you compare what happened in the Spanish nations in America with Brazil, you will see that we have always been a little more prone to conciliation, to accommodation. This has been highly criticized, mainly by the left who say that this prevents the country from benefiting from a more genuine clash of classes. We have been much more prone to conciliation here. Of course, there have been moments of conflict, but we are more pragmatic in dealing with conflicts.

Now, let’s compare Brazil with America. America is fantastic in that they were able to change the situation with their black population in a very short period of time. But how did they accomplish this? First, the struggle was very hard. Second, the law enforced it; the American people are equal by law. We in Brazil don’t care about laws; we have much more flexibility. While it is true that we may lack the institutional instruments to enforce equality, we still have much less discrimination here than in America. We are equal yet we are different.

Inozemtsev: If Brazil has had such a huge success in uniting its people and creating tolerance in society, do you think there are prospects for other South American nations? Can they follow this example?

Cardoso: In Latin America, you have different styles of culture and national integration. If you compare Brazil to countries in the southern part of the region, you will find they are very similar to each other. I would say the southern part of Brazil, Uruguay and Argentina are all about the same. And what I said about Brazil, with some exceptions, can also be applied to Argentina, Uruguay and even Chile. These are open societies with much less inequality, and much less differentiation in terms of race, than in Brazil.

In the Caribbean and Central America countries, they are perhaps more unequal and more differentiated in terms of race, but this is because of the blacks, not because of the indigenous population. Furthermore, they are highly influenced by the U.S. In the Andean nations, the situation is completely different: in countries like Bolivia or Ecuador and, to a lesser degree, Peru, there remains the problem of how to integrate the indigenous and the non-indigenous populations. It is a matter of national identity.

Look at what is happening in Bolivia. The size of the indigenous population is by far the biggest in the region. However, they are not asking to be integrated into the white or non-indigenous population, they are asking for power for themselves. Bolivia is much more fragmented, including in terms of geography. Some parts of Bolivia are now discussing autonomy.

In Ecuador as well, you have the coastal area and the highlands. The highlands are much more indigenous, the coastal area is much more Spanish and black. So there are problems of national integration. That’s not the case in Argentina, Brazil, Uruguay or Chile.

Even in Central America they have different problems. Only Guatemala has problems with the indigenous population. Latin America is highly differentiated. The Atlantic nations always looked much more to Europe, but now it’s different. They are looking north, to North America. As for the Pacific area, it has always looked much more north than to the west.

The European influence has been much more profound in these parts of America, including Mexico. Mexico also had a strong European influence – French and Spanish. That’s not the case with Central America, which was much more influenced by the U.S.

In terms of economy, globalization has been a sort of earthquake across the world, and some countries have been able to recover from the earthquake in time to become integrated in a favorable way; others have failed to do so. I would say that, in terms of investment – foreign capital investment and increasing domestic investment – Brazil ranks number one in terms of foreign investment since the 1990s, when globalization was already there. Now Brazil is becoming much more integrated into the global production system than other countries. Mexico, for example, basically became integrated into the United States. We are more removed from the United States, so we have more chance to polarize here, to be more independent in our decisions. Not just in our decisions, however, because investment came to Brazil not just because of Brazil, but also because of the southern part of America, probably from the period of stabilization on. I mean, in 1994, 1995 and on. We have received no less than $150 billion in foreign direct investment in Brazil. Compared to the past, that’s an enormous sum. When I was the finance minister, Brazil used to receive between $1 billion and $2 billion a year. In 2000, we received $33 billion. Today, as the country is steering through a bad moment, we are receiving about $15 billion. So we are escalating in terms of our capacity to attract foreign capital.

Now look at Chile, which has a smaller economy. The Chileans have been wise and are now able to utilize globalization to export some crucial products and manage trade circuits in the world. They are exporting things such as wine, fruit and salmon. And they have also become very good in services. Thus, they are accumulating far more capital than they can absorb and are investing abroad, in other parts of Latin America.

If you look at Argentina or Uruguay, it’s different. They do not know yet where they have to move. If you look at the Central American countries, you will see that the Americans have always considered this region more carefully than other parts of the region because of their strategic interests – Venezuela because of its oil and energy, for example, and Colombia because of its guerrilla activities. What did Central America really do? It opened the doors for Central American exports into America.

So, economically speaking, the chances presented by globalization are unequal. Some countries had more chances, and some countries were able to seize the moment, others have failed. If you compare Brazil to Argentina, you will see that Brazil was much quicker in moving toward what was necessary at that time. Argentina is moving much more slowly in the sense of globalization. So all this introduces vast degrees of differentiation in the Latin American region.

It is interesting that, with globalization, foreign investment in Brazil is coming basically from the Latin countries in Europe. The U.S. has always been present here and continues to be. In the past, we had foreign investment from the UK, Germany, Sweden, and Switzerland. They are all still here. But new investment is now coming from Portugal, Spain, France and, to a lesser degree, Italy – all Latin countries.

Inozemtsev: Indeed, I know from statistical data that the Europeans are surpassing the Americans in investment in Brazil, in Argentina, and in various Latin American countries. But speaking about globalization, a book by Professor Jagdish Bhagwati of Columbia University appeared not long ago. As I understood it, the main idea of his book is that it is not globalization that causes damage to the peripheral economies of the world. It can cause huge harm, like an earthquake, only if governments oppose globalization processes in an unsophisticated manner. Do you agree with this?

Cardoso: It depends. I would say it’s true with some of the more developed countries. If a government were wise enough to understand new opportunities and move toward them, globalization would be helpful for them.

That is the case with Brazil. It was also the case with Chile. But if you look at Africa, it’s much more difficult to blame governments because the situation is so hopeless there. And globalization can be productive not by itself but in terms of comparison: people look around and see things are going fast and they are still in bad shape. This can provoke unrest.

None of the Andean countries are going back at this point. If you look at social indicators in Latin America, the situation is not worsening. Even if you take the problem of unemployment, which we often hear is being destroyed by globalization, we should look at the facts with some caution. Globalization requires integration at a global level; it requires the sophistication of technology, a high level of education, and institutions. If a country has all these conditions and the government is able to take the leadership, you can enter the globalization process in a positive way. If you don’t have these minimal conditions at the starting point, you are left aside.

Inozemtsev: That’s a very interesting opinion. Was the quality of government, of life, of people different here – in Brazil, Argentina, Chile, Venezuela – twenty or thirty years ago? I think they were somewhat similar, but some governments fight for national sovereignty, for their rights, for the chance to manage their own economy, while others accept the globalization process. It’s not about endorsing it and going faster than other countries. It’s the question of acceptance…

Cardoso: There’s no alternative, no other way.

Inozemtsev: So the problem with globalization, in my view, is that some governments do not really want to fight globalization or allow it to happen either. And it will not happen in their countries. If they just fall aside, like in Africa, they are not globalized. The world is happy to live without them.

Cardoso: You are right. What is globalization basically? It’s the integration of the world financial market plus the capacity to take control of the production system across the globe. It is a new form of capitalism. Capitalism today is dead. Globalization moves due to big corporations, those with the capacity to rationalize the production system and with a sophisticated information system to make proper decisions. That’s what globalization is. In some sense, this is the progress of our days.

Inozemtsev: In some sense.

Cardoso: You can compare it with the beginning of industrialization in Europe in the early 19th century when the workers were prepared to break the machinery because they were against it. To be against globalization is a similar situation, to some extent. I would say that if Karl Marx were still alive he would say: “You people are crazy. This is the means to progress.”

Yet there is another question: Who will control the progress? What class? You must have additional elements to tame globalization because it’s a fact that the markets become very powerful and may be cruel to some people. That’s why you have to compensate by having governments, an active civil society, an open society, by people moving in defense of their interests, and so on. So, we need more democracy and more governmental capacity to tame markets, for the market is becoming a ferocious animal. That’s the way I see it.

Inozemtsev: I absolutely agree with you here. Now, in connection with what you said about some of the historical links between South and Latin America and Europe, can you imagine something like European projects emerging here?

Cardoso: Well, that was the original idea behind Mercosur.7

Inozemtsev: Yes, but I don’t think Mercosur exists now. Is it anything more than an economic union?

Cardoso: At the beginning, in the early 1990s, it was our peculiar way of aiming for more political solidarity. The project had more prospects then than what it became in the end. It seems that we are moving toward trade treaties. Earlier, however, the economies of the base countries, Brazil and Argentina, were in bad shape and faced some financial crises and, as a consequence, had problems with exchange rates due to different kinds of systems of exchange. Thus, we clashed more frequently, and it became very difficult to make progress and have good trade agreements.

Thus, the presidents decided to move toward joint infrastructure projects. I proposed to hold a presidential meeting in Brasilia in the year 2000,8 composed not just of Mercosur representatives but South American people. We asked the Inter-American Development Bank (IDB)9 to present some programs for the physical integration of the region, to integrate the infrastructure in terms of the axis of development. The bank proposed several actions to promote the integration of the railroads, roads, energy, electricity, telecommunications, and so forth, to imitate what had been done in Europe when they started the coal and steel community.

We skipped a bit past trade because it proved difficult. We moved to other more basic integration, and now we still do not know what to do with it all. Some political convergences still exist, albeit very small political convergences, because even now, in this year’s elections at the IDB and the WTO, the Brazilian candidate was quite alone, with even some people from Mercosur voting against him. So, we are at a bad moment in terms of this movement. This is not our finest hour.

Regardless, I believe it’s important to keep the idea of a more profound integration in the area. We are also starting to engage with Europe, to have a direct relationship between the European Union and Mercosur. For example, we have proposed to convene a conference in Rio, but the Europeans have their own problems now; they failed to get enough votes for the EU Constitution. Thus, we have to wait to re-establish a link between Europe and Mercosur. But I would say it is important.

The FTAA10 was an American proposal. Brazilians were skeptical about the FTAA – we sensed American competition. Now the Americans have moved toward regional pacts in Central America and with the Andean countries; they have one with Chile. They are isolating Brazil and Mercosur to some extent by closing bilateral trade agreements with other countries and groupings of countries in the region.

I think we have to revisit all the subject matter, to see how to overcome the present situation for integration. And it’s very difficult – Russia understands this – to convince a big nation to integrate with a small nation and make concessions. The thing is that the idea of sovereignty is still very profound and well entrenched in Brazil, but I think we have to move to other countries and integrate early into South America. Brazil has a responsibility to move ahead because we are more powerful than our neighbors.

Inozemtsev: I have been dividing my time in recent years between Moscow and Paris, so I see European processes and European society. The processes in Europe involve a huge social, personal and psychological integration. We are witnessing something like the birth of a European nation. Maybe you have to see it one hundred years later, but something is happening. In Europe, around 5 percent of marriages are between different European nationals. Can you imagine something like this happening here, between Chile and Argentina or Paraguay and Brazil? Do the nations understand each other, and not just the politicians?

Cardoso: I lived in Chile for five years, and I would say that we possibly have less difference among Latin Americans countries than do the people of Europe. The first thing to consider is the language; the basic language here is Spanish. Brazilians understand Spanish, but they don’t understand Portuguese; they understand Spanish. So, it makes contacts much easier. We are Latinos. Maybe it’s too vague, but it’s true. There are some similarities.

Inozemtsev: But distances are much greater in South America than in Europe. All of Western Europe could fit inside Brazil. I saw my ticket to Lima for tomorrow and it’s about a five-hour flight. You could go from London to the Urals in that time.

Cardoso: From the southern part of Brazil to the north takes a jet six to seven hours. East to west, it’s like Russia.

Anyway, what is moving ahead is tourism. It is now an instrument of integration, corporate integration, because Argentines come to Brazil, Uruguayans come to Brazil, Paraguayans come to Brazil. They all come for the beaches. And Brazilians go to Buenos Aires and Chile. This is increasing our mutual understanding. We also have trade, and maybe, to some extent, universities.

Here is a small personal story. I was in Paris in 1961 and spoke French. And I realized that, in spite of the fact that I was fluent in French and my academic training in Brazil was influenced by the French, I felt more at ease with Spanish-speaking people, with Latin Americans, than with the French, because our sense of humor is similar. The lack of formality is similar.

There are some cultural traits that do not come from the Portuguese. They are not like that. Maybe it’s because we are a migrant people and an open society, with open spaces. It’s not difficult for this kind of people to interrelate. I am not saying that we are always able to understand each other but, as far as we have contact, we realize that we have similarities.

Inozemtsev: There will be a general assembly this autumn to discuss the United Nations reform. Do you think it is possible to speculate about some kind of new world order that is not quite so American?

Cardoso: I am personally involved in UN reform. I was heading a working group on it, and we were trying to deal with ideas around a real global civil society and the extent to which NGOs can be included in the UN.

I think there is, again, a twofold movement toward the reorganization of the world order. One is vaguely based on different movements, the NGOs, civil society. The fact that cities are now asking for more of a voice shows that there is a kind of democratization process concerning the issues of the world order. On the other side, there are movements originating with some governments and states saying that it’s no longer possible to have this kind of unipolar order.

The world is unipolar to some extent, yet we still have five big countries that do not want to open their doors to the others. I think that, if we could imagine a stronger Europe in the future, and China playing a more active role, as well as countries like India, Brazil, Russia and Mexico also, it would be possible to imagine a more balanced order.

So far it’s difficult to imagine how such a new order would really be implemented. I think that we have to move using soft power, rather than hard power. I think it is possible to move slowly toward a better world order, because certainly the order based on this unipolar system has limitations. Look at Iraq. They were able to destroy the former regime, but they are unable to build anything else and they had to request help from the UN.

The threat of terrorism, for example, could unify the global order in a different way, because we have a common threat. It cannot be dealt with because one power is so powerful that it can stop it – it’s not powerful enough to stop terrorism. This requires soft power in order to try ideology and persuasion, the idea that I was emphasizing, tolerance and new approaches.

1 The military regime established by General Humberto de Castello Branco in 1964 drastically curtailed democratic freedoms and led to the dissolution of the National Congress. The regime began to move toward liberalization in the late 1970s as General Jo?o Figueiredo, who ruled Brazil between 1979 and 1985, laid the foundation for the country’s return to democracy (hereinafter the footnotes by V. Inozemtsev).

2  The plan for combating hyperinflation, which depreciated the Brazilian currency, was devised by the chairman of the Central Bank of Brazil, Gustavo Franco, and provided for a series of monetary and fiscal measures. These included the freezing of salaries, termination of state borrowing, budget sequestration, the establishment of outside control over the credit policy of the top 40 banks in the country, and the introduction of a conventional monetary unit. In July 1994, as inflation eased, a new currency emerged – the Brazilian Real.

3 The Workers’ Party of Brazil (Partido dos Trabalhadores, PT) – one of the most influential leftist political parties in Latin America. Representatives of the Brazilian intelligentsia and activists of the labor movement founded the party in 1980. It controls 18 percent of the seats in the lower house of parliament.

4 In early 1999, Brazil was hit by a financial crisis provoked by financial upheavals on the East Asian and Russian stock and debt markets. The government was forced to depreciate the real by eight percent. Although the rise of the dollar rate against the real (slightly more than 55 percent) was insignificant compared to the depreciations in Asia and Russia, Cardoso still views this event as a major setback of his policy.

5 Luis Inacio “Lula” da Silva, a co-founder and leader of the Workers’ Party of Brazil, won the presidential elections in October 2002 with 53 percent of the votes. His rival, Jose Serra, proposed by Cardoso as his successor, won only 32.5 percent of the votes.

6 According to official statistics, in the late 1990s the poorest 10 percent of the Brazilian population accounted for 0.7 percent of the aggregate income, while the richest 10 percent accounted for 48 percent. The Gini Index, which shows the gap in income between the rich and the poor, stands in Brazil at 0.607, twice as much as in the EU countries.

7 Mercosur (Mercado Com'n del Cono Sur), a common market in South America, comprises Brazil, Paraguay, Uruguay and Argentina. Founded in Asunci?n on March 26, 1991, it was intended to be precursor to a customs union between the countries. In 1996, its four countries plus Chile and Bolivia set up a “political Mercosur.” In recent years, Mercosur has had difficulties implementing earlier approved economic measures. Mercosur and the European Union are linked by the Interregional Framework Agreement for Cooperation, signed on December 15, 1995 in Madrid. The agreement went into force on July 1, 1999.

8 The first summit in Latin America held in Brasilia in August 2000. The summit established a standing Latin American Business Council.

9 The Inter-American Development Bank (IDB) is the world’s first regional interstate bank for financing development programs. The bank was founded in 1959 on the initiative of Brazilian President Juscelino Kubichek by 19 Latin American countries and the United States.

10 The Free Trade Area of the Americas (FTAA) is a regional organization intended to ensure the free movement of goods and capital in the Western Hemisphere. However, the general slowdown of the world economy’s growth and other numerous problems has caused delays in the negotiating process, which continues to this day.