Watto was probably the best character in the movie, if you excuse the racism.
You don’t have to “excuse” the racism for him to be a good character. That’s the point of the character. He’s a bad guy, and that’s one of the bad things about him. Despite this, he is by no metric of the concept a good character.
Wait, one of the things that makes him a bad guy is that he’s a racist caricature?