BRAZIL The Brazilian crisis
THE Brazilian economic crisis expresses the end of the road for the model of capitalist accumulation that
THE International Monetary Fund (IMF) has just granted a new stand-by credit of $2.1 billion to Brazil, despite the resistance of Japan and the United Kingdom. The latter criticized Brazil for not having paid the arrears it owes to its creditors in the Club of Paris - but the IMF accepted the demands of a country which has just passed two "tests"
deemed crucial by this organization.
Firstly, it has successfully reduced its budget deficit, and secondly, it had brought inflation down by 2% at the end of the year - this latter, however, is now rising again, from
22.1% in December 1991 to 26.8% in January 1992.
EDUARDO ALBUQUERQUE*
T
HE manipulated victory of Fernando Collor in the 1989 presidential elections marked the beginning of a new period in Brazilian political and economic life, with the adoption of a neo-liberal project by the ruling classes.
Shaken by the deep crisis engulfing the country (see box opposite) responsible for what has been called the "lost decade" of the 1980s, after its experiments with military rule and the Nova Republica, the Brazilian ruling class went into the elections divided, without a national project to seal their political unity.
It was only in the second round of the presidential elections, on December 17,
1989, that the bourgeoisie got its act together, more through fear of an electoral victory for a left-wing candidate, Lula, at the head of the Workers' Party (PT), than around a clear project.
This anti-Lula unity is today focussed around Collor and his neo-liberal plan, which was put forward in a confused and demagogic fashion during the campaign.
Once Collor became head of the federal executive - he assumed his functions on
March 15, 1990 — this neo-liberal alternative began to change the shape of the class struggle in Brazil.
This neo-liberal project expressed in the first place a global response from the point of the view of the ruling classes to the crisis of the model of accumulation.
Beyond this, it has forced the popular and democratic movement to respond on two fronts: that of the old economic model - magisterially criticized by Lula during the campaign — and the neo-liberal alternative. This confrontation demanded programmatic rearmament, so as to define a third alternative for society. With the Collor government, the ruling classes have tried to retake the offensive against the popular movement, which in the course of the past ten years has develo ped so far as to appear as a possible governmental alternative.
In Brazil, neo-liberal hegemony has the acting as a sort of "imperial executive".
• The intervention of the state apparatus, reoriented in the direction of a docile insertion in an international order in recomposition.
• The pillage of the profitable and productive parts of the nationalized sector.
• Attacks on the meagre existing social
• A mandate to the government to inflict a defeat on the workers' movement - the recession provoked by state intervention since the coming to power of Collor is not only an economic measure.
Two years of neo-liberalism
On March 15, 1992, Collor celebrated two years as president of Brazil. It is necessary to analyze these two years and the success registered by his government in applying the prioritized points of his neo-liberal project. The unity which he has been capable of realizing has assured him * Eduardo Albuquerque is vice-president of the PT in Minas Gerais and the author of A foice e a robo: Asinovacões tenològicas e a luta operària.
has been in force in broad outline since 1930. Its first aspect is the exhaustion of the mechanisms of financing of accumulation: the end of the capacities of the agricultural sector to transfer revenues to the other sectors of the economy; wage austerity which has reached its limits; and the privileges given to the financial sector starting from the 1970s. The Brazilian economy has thus become a machine for exporting resources — in
1989, when Brazil was not able to pay the interest on its debt, more than $15 billion were transferred abroad. This dynamic feeds certain tensions: an exacerbated public debt, aggravation of the flight of capital and acceleration of inflation. The second aspect of this crisis is state insolvency: the fiscal crisis and the foreign debt; the destruction of the fiscal system by big capital;
the impact of the export effort; the encouragement of the flight of capital - Brazllian deposits abroad are estimated at $50 billion; and finally, the extension of the informal sector, which represents nearly 13% of GDP (see Diagnòstico da Economia brasileira, PT economist's group of
Minas Gerais, October 1991).
E.A. * the parliamentary, legal and political support essential for the implementation of his plan - political agitation, the difficulties encountered on the parliamentary terrain and the clashes with the employers have not tainted this success.
The effects of these "reforms" are already visible throughout the country and should not be under-estimated. 1. See Em Tempo, no. 240, April 1990. 2. See Em Tempo, no. 249, February 1990. 17 3. See Gazeta Mercantil, February 13, 1992. April 13, 1992 • #226 International Viewpoint
Table I
GDP, industrial growth and per capita income
• April 13, 1992
BRAZIL refinement, as well as the production and distribution of electrical energy.
Less spectacular, but quite as important, have been the "piecemeal privatizations" in which the private sector takes over the most lucrative parts of a public enterprise
Year GDP INDUSTRY
1988 -0.1 -3.6
1989 3.2 5.7 1990 -4.6 -8.9
1991 (1) 1.1 -0.4
* Source : IBGE (16).
1) The figures are from January to September 1991.
The principal weapon of the neo-liberal policy is recession. It has been unleashed through violent state intervention - by a "monetary reform" which represented an attack on popular savings — and a rigorous control of monetary policy, following an orthodox model in heterodox fashion.' The creation of a recession was the prime objective of Collor Plan 1 which was visibly inspired by the Chilean experience.
However, the fight against inflation has not been so successful — to do this, Collor Plan 2 was necessary?: despite everything inflation today remains close to 30%. This monetarist policy of inducing recession continues: it has been confirmed in a recent agreement passed with the IMF.3
In March 1990, the government introduced the so-called industrial and foreign trade policy, essentially seeking the elimination of restrictions on the latter -through cut-backs in administrative regulations, the reduction of import taxes, and the setting up of joint working groups of industry and the government.4
This "industrial policy" has been followed by a plan of support for technological training in industry, on September 12, 1990: by the Brazilian quality and productivity plan of November 7, 1990; and by the industrial competitivity plan of February 27, 1991. These documents define an overall policy and imply changes in the other sectors - for example, the plan of support for technological training in industry and the new offensive aimed at creating links between the universities and the big industrial groups.
These documents constitute the background to other initiatives like legislation on the computers sector and privatizations. All is aimed at establishing a "model of industry" in harmony with a type of "Chilean" adjustment.
The government offensive in the field of computer patents, which involves bringing pressure on the Congress to adopt new
18 laws in the framework of the TE/GATT
(General Agreement on Trade and Tariffs) International Viewpoint # 226
### AGRICULTURE SERVICES
-12.4 -0.1 1.8 1.5 -4.1 -0.6 2.4 2.1 model, shows the type of insertion in the world economy that it desires.
The recognition of the rights of the big companies in relation to innovations in the key sectors of the world economy is one of the conditions for the economic "integration" envisaged by US president George Bush's Initiative for the Americas. 6
The policy of privatization (following the National Programme of "destatization", issued by decree on April 12, 1990), began with Usiminas (a modern and profitable enterprise in the state metalwork sector). This policy resembles more that developed in Chile than that followed in
The government's victory in the case of Usiminas opened the road to further privatizations. Around ten state enterprises, mostly in the iron and steel sector, are to be sold off and are currently in different transitional phases of preparation for pri-
These initial successes have given the government the audacity to go still further. It now talks of the privatization of the telecommunications enterprise Telebras, and even of the petrol company, Petrobras. In the political field, the government is preparing the ground with proposals for constitutional change — "amendments" -envisaging the end of the state monopoly on telecommunications, transport and oil 4. It is interesting to note the criticisms made by certain sectors which in general have been supportive of the government. On the one side, there are the still more radical neo-liberals who think that the state still controls too many things, because of the maintenance of aid, incentives and so on. See M. Ronci's article, "A case of timid liberalism", in Conjuntura Econòmica, vol. 44, no. 9, September But there are also those. like the former minister João Paulo dos Reis Veloso, who believe that the opening is necessary, but after the modernization of the country and not before. See Folha de São Paulo, 5. Limits to this freedom of manoeuvre are envisaged by the new law proposed by the PT's federal 6. Gazeta Mercantil, August 5, 1991. 7. As in Chile, the public enterprises are exchanged that require the least investment, while the least profitable branches are left in the hands of the state.
As to "the integration of Brazil in the international circuit of capital", numerous measures have been taken to make transfers of capital and the repatriation of profits easier. Brazil is thus preparing to be one of the financial turntables of international speculation, widening the field for a rapid valorization of idle capital?. The opening to foreign capital is seen as a magic solution which will allow a resumption of growth. But, according to all the evidence, foreign capital is more interested in speculation and obtaining repayments of Bra-
The government has opened a credit line for the multinationals. On January 22, 1992, President Collor signed a decree authorizing the National Bank of Economic and Social Development (BNDES) to make such financings.
This act, unprecedented in the 40 year history of this institution, has already encouraged 28 demands from 22 multinationals (among them Shell, Bayer, Rhodia, Coca-Cola, and so on) which thus have access to more than $330 million from this
The government is also preparing the privatization of the social security system, whose enormous resources are coveted by the national financial sector.
This process will lead to a deterioration of the quality of services to which the working class and the poor have access, but The tactic of the government consists in attempting to prove that the social security system is no longer viable, and that its privatization is some kind of magic solu-
Finally, it is necessary to underline also the official policy of organized decay of the public services — like health and eduagainst public debt securities. In Mexico, the nationalized enterprises are exchanged against dollars. 8. Faced with the resistance of Congress, the government has drawn back and dropped some of its amendments, while keeping the points concerning economic restructuring. 9. According to an article in the Financial Times on the "return to fashion" of investments in Latin America, "investors will be attracted by the high returns which can be obtained on the Latin American financial markets". But later another estimate is quoted: "60% of the money entering Mexico amounts to short term resources. The money on the other Latin American markets is still more volatile". Article translated in the Gazeta Mercantil, October 16, 1991. 10. See the Jornal da FENASP (National Federation of Trade Unions of Workers in Health, Employment and Social Security, October 1991.
April 13, 1992 • cation — as well as the diversion of funds destined for the social sector.
Collor's recent letter of intent, approved by the IMF, reaffirms this policy and envisages the continuation of the recession — growth of 0% is predicted for 1992
The social cost of such a policy is enormous. Currently, in the region of São Paulo - the principal industrial centre of the country — there are already a million unemployed, 11.3% of the active population." An official study in 1991 had already noted a reduction of 10.2% in employment in Brazilian industries — 1991 was, on this level, the worst year since 1972,12
The deterioration of wages is equally significant. In November 1991, the minimum wage reached its lowest level since it was established in 1940.13
Attacks on public sector
The combination of the recessionist policy and the attacks undertaken on the public services, as well as the contraction of social investments, aggravates the dramatic current situation. There is a real deterioration of the social tissue of the country The neo-liberal policy does not even envisage a revival of investment in the Brazilian economy, the precondition to any revival of economic growth. The most recent figures concerning the contraction of investments are eloquent.
It suffices to compare the figures in table 2 with the 1974 figures: in 1974, total investment in the Brazilian economy was 25% of the gross domestic product - the current decline in investment is thus enromous. For 1991, the first estimates indicate a still larger reduction: according to the official sources, investment will be still lower, 15.3% of GDP. 14 There is a still more marked reduction of investment in capital goods, production of which fell to its lowest level since 1980 in 1990.15
Given the importance of capital goods in the economy - this is the sector which propagates technical progress - these figures show that Brazil is facing a particularly strong recession, which does not seem to be simply cyclical, and which combines with other manifestations of the "industrial policy" of the Collor government, and particularly his policy of "opening to imports" 16
The first repercussions of the "industrial policy" are already being felt in the other sectors. The multinationals are exploiting the opening to close down certain units of production in Brazil, saying that it is more economical to import these products from technologically more advanced units. This is the case with Parker, Philips - who have closed their integrated circuits factory at Récifel7 — with Man Roland — a Germanufacturer machines18 — and with Ford.
The president of the metalworkers trade union in São Bernardo do Campo, Vicenthino, denounced the Ford closure and pointed out that, "other multinational enterprises have already announced the closure of certain sectors, with the argument that, because of the new economic policy, it is more profitable to import the European or North American matrices 11. Research carried out by SEADE-DIESSE. Gaze12. Gazeta Mercantil, February 12, 1992 13. Ibid, December 31, 1991 and January 2, 1992. 15. Folha de São Paolo, December 5, 1990. 16. These figures show how the neo-liberal policy accentuates the "deformation of the economic cycle" 17. Folha de São Paolo, September 9, 1991. 18. Gazeta Mercantil, January 17, 1992. 19. Folha de São Paolo, February 18, 1992. See also the declarations made by the new president of the National Association of Automobile Manufacturers (ANFAVEA) (Folha de São Paolo, February 24, 20. Gazeta Mercantil, December 14 and 16, 1991.
BRAZIL directly: the factories of yesterday thus become the simple trading units of tomorrOW". 19
In the computer sector, Itautec has abandoned plans to produce optic readers in Brazil, deciding instead to resell in Brazil what has been produced abroad
Villares has closed its robotics department, 20 while in the field of bank automation, Digirede has mercial agreement with IBM.21
These facts are significant: in the strategic sectors of the Brazilian economy — the capital goods industry, computer science, and even cars (which impelled, up until now, the dynamism of the economy) — the recession is already making itself felt.22 That will have repercussions in other areas, like education, science or tech-
The government is not tackling the real roots of the crisis which relate to the
"underground" economic activities practiced by the big export groups (involving goods of a value of around 13% of GDP, exempt from any tax)23 - the informal economy and the flight of capital.24
On the contrary, the government is encouraging these sectors still more: in the framework of its "new" policy of encouragement of foreign trade, these are receiving yet more new resources and thus more profits.25
One of the central aspects of the neoliberal project is the role attributed to the private sector (national and foreign) as agent for financing any possible new expansion. In a study by the Institute of
Research and Economic Assistance
(IPEA), which is linked to the government, different scenarios are predicted for the
22. The debate on the rhythms of the opening is sharpening, centering on the reduction of import duties and the kind of transitional measures needed to safeguard certain branches.
This does not represent a questioning of the overall neo-liberal project, but only a discussion of certain aspects of it.
The employers' sectors who have been hardest hit by the opening have not shown any capacity to develop an alternative to neo-liberalism.
23. Document of the PT economists group of Minas
Gerais, October 1991.
24. In a document, the powerful Federation of
Industries of São Paolo (FIESP) says bluntly and cynically that "thanks to the informal market, hunger has not grown with the recession". See Gazeta
19
Mercantil, January 17, 1992.
25. See Gazeta Mercantil, February 19, 1992.
April 13, 1992
BRAZIL future; in all cases, the participation of the public sector is small: 5.7% of GDP in the serious mobilization.
Beyond the immediate effects of this
What is needed is an overall project, an alternative both to the old model of capitalist accumulation and to the new model that neo-liberalism wishes to impose -
Table I
Investment in plant Imported plant
Year
Investments
GDP
8.5
Domestic plant
GDP
100
100 this is an urgent task for the Workers Party
(PT) and for the democratic and popular forces.
The neo-liberal offensive has put the PT
1980 22.9
1990 16.0 4.9
- Gross fixed capital formation / GDP (percentage of values at 1980 constant prices)
-Total of investment in plant (national and imported) / GDP (percentage of values at 1980 constant prices).
- Index of investment in domestic and foreign produced plant (1980 = 100).
In millions of cruzeiros based on prices 1980.
* Source: IBGE (20). best of cases, 3.2% in the worst, while the projected share of the private sector varies from 15.7 to 21.4% of GDP.26
This constitutes an enormous change in relation to the classic model of financing of the Brazilian economy: between 1975 and 1979 (the last cycle of expansion) public investment represented on average 43% of total investment.27
Trade union struggle more
The recession has made the trade union struggle more difficult. First and foremost, in the big units of production where the combative trade union movement has accumulated its greatest capacities of mobilization and organization; in the 500 biggest private enterprises, the number of employees has fallen by 16.5% since the coming to power of Collor, 28
In addition, the development of the informal market and the number of nondeclared workers, even at the very heart of Brazilian industry, poses new problems for
Moreover, in some industrial sectors there is a tendency for the services of a big enterprise to be split up among smaller sub-contractor firms. This leads to new conditions of struggle in several sectors. In the big state enterprises, the privatization offensive has not been challenged by any
20
International Viewpoint # 226
98 57 policy of recession, a structural change is underway: the passage to a policy of passive insertion of the Brazilian economy into the international order - which replaces the dependent and active insertion preponderant from the 1930s to the 1970s. It is characterized by three essential traits:
• A general restructuring of the national economy aimed at facilitating the freecirculation of capital.
• The dislocation of the core of the big public enterprises which, up until now, have played a motor role in the phases of growth of the country.
• An absence of policies seeking to restore the financing capacity of the public
All this takes place in the context of a very profound reorganization of the international economy which condemns the countries of the third world to a growing marginalization.29 Islands of efficiency on a bleak horizon
The horizon is bleak. The hypothesis of a limited modernization, which would create "islands of efficiency"30 is socially perverse31, and can only deepen the social crisis and poverty. It is obviously necessary to combat this neo-liberal project in all its forms.32 26. "Socio-economic scenarios for Brazil", IPEA, published in Gazeta Mercantil, May 16, 1991. 27. L. Coutinho and H. Reichstul, "State investment 1974-1980: cycle and crisis" in Desenvolvimento Capitaliste no Brasil, vol. 2, São Paulo, Brasiliense, 1983. 28. See Exame, February 5, 1992. 29. See "Notes on the peripheral dynamic", chapter of the document of the PT economists group of Minas Gerais. October 1991. 30. This model can be deduced from some of the speeches of people linked to the government. One of the coordinators of PBOP told Gazeta Mercantil that one of the objectives of the programme was that the government "define the segments in which Brazil is already or tends to be more competitive, to encourage research and create lines of credit". He adds that "we are good, for example, in the field of shoes, of and the popular movement in an uncomfortable position: for example, it is not possible today to fight the privatizations without criticizing the former functioning of the state enterprises - which have only served to finance private enrichment — and without presenting anotheroverall project.
We must work out a project of structural reforms which is linked to our democratic and popular project, which deepens democracy, while constructing a new economic model.
The structural reforms that we propose should explain what "reform of the state" we propose - involving "deprivatization", democratization and forms of management open to society - what mode of development - combining the development of the internal market and the diffusion of new technologies — what social reforms are necessary and how the PT envisages the insertion of Brazil into the world economy.
The PT has already made its position clear: "Even if they are essential for public investment and central for the resumption of economic growth structural reforms are inconceivable without democratic advances, without popular participation and without intervention by the social movements" 33
The PT's alternative project will be the basis of the programme of Lula in the next presidential elections. The PT must raise itself up to face the challenges which await it, and propose what only the socialists can provide - a democratic alternative for the country. * paper, of cellulose and we could be good in that of food. "We are good at this and that is why we should not make electronic "chips" nor nuclear fabrics. The government then will mobilize the institutions so that we manage our resources, technology and growing production in the areas where we have the real chance of being competitive on the world market" (September 14, 1991). 31. It introduces technological innovations in this sector which is still dynamic (exporter) leading to redundancies which are not compensated for by the creation of jobs in other sectors. 32. See the resolution on the conjuncture adopted by the Ist Congress of the PT in December 1991. 33. "The urgency of a project for Brazil", document adopted by the national meeting of the economists of the PT, Belo Horizonte, August 1991.