TIS AN audacious and aggressive plan from the point of view of the ruling classes. The bourgeois press has even talked about the biggest shock that a Brazilian government has ever inflicted on the Brazilian economy. It should not be under-estimated.
The centre of gravity of the plan rests in the combination of monetarist measures with a battery of unorthodox policies - a small, relative and provisional price freeze and currency reform. It amounts to an application of that most venerable of capitalist anti-inflationary instruments: a recession.
This is a plan of a neo-liberal type managed and imposed by the state. It has been implemented with an authoritarianism that in fact goes beyond the constitution. This reveals how far the new government is ready to go.
The Cruzado plan? took into account the fact that the workers movement had been reinforced by struggles over indexed sala-
ry readjustments. By changing the rules, the government is trying to freeze the existing relation of forces to the detriment of the workers.
It is essential for the success of the Collor plan that the workers movement be defeated. This makes the plan explosive:
it is being imposed at a time when the movement is able to resist, and even destroy the plan.
Collor's most useful weapon against
PLAN COLLOR TE LOTSCH inflation is recession, which will be both the cause and consequence of the defeat he wants to inflict on the working class. It will be the cause via the unemployment that the plan entails, by the dismantling of the material base of combative sectors and by gigantic blackmail. It will also be the consequence, destruction of important defensive mechanisms for the workers and seeks to create a situation where the movement cannot impose political alternatives.
The anti-popular earthquake envisaged by Collor is a recession to contain infla-
The complex and sophisticated meas ures of the government must be analyzed as a function of the way in which the government is managing the transition to
The plan attacks inflation at three levels: by means of monetary reform; by tax reform; and by price and wage controls. This is a new combination, not seen in
The monetary reform (the replacement of the cruzeiro by the cruzado) is intended to control the quantity of money; it means a sharp reduction in liquidity. The creation of this new currency, supported by an enormous reduction in internal debt, has placed $115 to $120 billion that was previously in circulation in the hands of the
Central Bank. This is hitting economic activity and leading to a fall in prices.
The monetary reform involves the suppression of interest via the transformation of one currency into another through sales organized by the Central Bank. In the course of these sales, the bank determines how much the person who has been temporarily expropriated
Will lose in the exchange. It is in the management of this remonetarization that, according to some experts, the key to the success of the plan lies. It is on this very difficulty that the plans of the
Argentine president
Menem came to grief. And it is at this stage that the pressures of the big vested interests who supported
Collor for the presidency can be brought to bear.
The tax reform of minister Zelia is another novelty.
The government wants to attack the public deficit.
Starting from a deficit of
8% of GDP, Zelia wants to get to a surplus of 2%.
According to the calculations of Mauricio Borges, an economist from the University of Minhas Geras, the measures taken will affect 7.5% of the GDP (the on domestic moratorium debt will affect 2.5%, the reduction of stimulants such as subsidies
4% and reform of the administration the other 1%). Adding on the resources produced by the reform of the inheritance laws, the annual deficit can be done away
As for the reform of taxation, Borges considers this as the least ambitious measure, intended essentially as inflation measure, since the main proposals involve an increase in already existing taxes. Thus, although the tax base has been increased, drawing in land rent and capital gains, the tax reform is far from reaching the ceiling paid by the bourgeoisie of the capitalist countries.
The price controls are less dramatic.
The idea is for a certain freeze on prices that have been artificially raised before the plan. Furthermore, the fate of the wage controls will depend to a large extent on the level of resistance of the
Borges draws from his analysis of this set of measures the conclusion that they can break the tendency to hyper-inflation and control inflation in the short term, but at the cost of a sharp recession provoked
BRAZIL by the contraction of the domestic market and also by a drop in export activity, due to the impact of free exchange on dollar costs, which, he says, will strike the weakest export sectors and limit their ability to act as a counter to the contraction of the national market.
He also believes that there will be no automatic regaining of economic impetus in the period that follows the recession. Contrary to the propaganda being put out by Collor and his advisors, market forces Will have difficulty in giving a new impulse to development. Since 1930, the state has taken on the role of stimulating the cycles of the Brazilian economy and the private sectors of capital have acted only when the economic upturn is already visible.
Imaginings of neo-liberal theorists
Despite what the fashionable neo-liberal theoreticians imagine, Mauricio Borges considers that the structural characteristics of the Brazilian economy mean that the Brazilian state will have to recover its capacities as investor in order to set a new upturn going, but the present measures do not guarantee that this will happen. The package will, with difficulty, clean out the public deficit. But for a recovery to then get off the ground, more profound meas ures are required such as a tax on the big
A recession that will contain inflation but cannot guarantee a new upturn: that is how this economist at least sees the results of the Collor plan.
Collor is selling his plan by claiming that it will benefit 90% of the population while negatively affecting only Borges an interview in Em Tempo refutes the Collor version. The bourgeoisie is well prepared for the package, it has taken reasonable measures by accumulating reserves, and its money is at work outside Brazil. The most dynamic sector in the recent period, the export sector, is responsible for the existence of a large part of the "hidden" economy —estimated by the Getulio Vargas Research Founda-
Big capital will not be the principal victim. The big losers will be the middle layers. And is the government in fact attacking big capital? This is not how things appear to US Treasury Secretary
Brady. He believes that the measures "turn Brazil towards the modern world" (Folha do Sao Paolo, March 17, 1990). The American and English banks 1. A coalition created for the second round of the presiin December 1989, grouping the majority of the left around the candidacy of Luis Inacio da Silva, known as Lula, candidate of the Workers Party (PT). (see TV 178) 2. The cruzado plan was the work of the Sarney govemment in February 1986, to counter the danger of hyper-inflation. Seney Tempo, or can Pr the Socialist Democracy ten: 23 dency of the Workers Party. May 7, 1990 • #184 International Viewpoint
BRAZIL have also been singing the plan's praises.
With the concessions on questions of foreign trade (freeing of imports, end to export subsidies), the adoption of free exchange rates and a return to negotiations with the IMF, foreign capital has also been given an important tool in the form of provisional measure 155 which authorizes the conversion of IOUs for Brazil's foreign debt into shares in state enterprises being privatized.
Today, the international financial system is taking on new functions to compensate for certain losses incurred as a the way in which the attacks on the workers and the people are being perceived -a process that is neither homogeneous nor synchronized.
Today, the middle layers, including the small entrepreneurs, and the worst paid sectors of the working class are the first to understand the real import of the plan. They feel the injustice of the confiscation of their savings and bank accounts, of being treated like speculators.
For most wage earners, however, things will not become so clear so fast. The loss in wages will not be felt until April, when wages will be computed according to the March inflation figures.