* Brazil keep of buildings and equipment, Document we have a 10% deficit even before we start! Inherited debt The state receives about R$400m/ month. This is not enough to pay the running costs, never mind the Rio Grande's 1994-98 con- population's most urgent needs for servative government was a new investment in health, education, security, and public hygiene. disaster, even according to its
Income is so low is because the own neoliberal theories. previous government gave most of The following explanation the state's largest companies tax exceptions, while federal legislation comes from a public informareduced the state's tax base. tion leaflet produced by the Dutra administration. Renegotiation
The overall economic situation
The previous administration was means that the debt of Brazil's incompetent in a way that no states to the federation will surely housewife would ever be with her be renegotiated. Rather than own budget. Quite simply, they growing by 6% as planned, there spent more than they received, for was probably no growth at all in four long years. The operational 1998, and we expect a 6% contracdeficit increased: from R$200m in tion in 1999 1995 to R$1.2bn in 1997. The Brazilian government has
Rather than trying to increase the often failed to meet its repayment obligations to international institustate's income, they preferred privatisation of the telephone company tions. In 1987, Brazil declared a and part of the electricity utility. moratorium on foreign debt payThis raised R$5bn, all of which was ments, and renegotiated its repayused to cover the operational schedule. deficit. A total failure. government is currently renegotia-
To make matters worse, new ting the terms of its debt with the federal legislation abolished sales IMF. Brazil's states are suggesting tax on products destined for the same thing for their own debt. exportation. The cost to Rio Grande Tax concessions by the previous do Sul was R$561m in 1997 alone. government reduced state income
As well as lower income, the by at least R$3bn in 1999. The deal Dutra government has inherited a with Ford and General Motors public deficit of R$13.4bn— R$1,300 included an incredible R$5bn. of tax for every person in the state. [the minimum monthly wage is R$190] The new government does not deny responsibility for the debt, but The money states that it simply cannot be
The core of this debt is money repaid. Rather than suspend borrowed for public works and payments, which would provoke services. Until a few years ago, the federal retaliation, isolation from state respected the repayment the other states, and make it timetable. But under the previous impossible to borrow money on the administration, the debt ballooned open market, the Dutra adminiseven though few new loans were tration has offered to pay the same received. This was because the amount as the previous administrafederal government's Real Plan to tion, a close ally of federal stabilise the currency by attracting president Fernando Henrique foreign investors] meant a sharp Cardoso increase in interest rates. The paper The mechanism is simple, but debt of Brazil's states doubled and ingenious. The federation owes Rio their financial Grande more than Rio Grande owes situation inviable. the debt of Rio in debt repayments. So Rio Grande Grande rose from 4.4bn in 1994 to is deducting its debt payments from the debt owed by the federation. Rather than welcome this balanThe costs ced approach, the federal govern-
Most of this debt is owed to the ment has reacted with threats and federal government. The new state insults. By accusing Rio Grande of government has to use 15% of its insolvency, it almost destroyed the income to pay the interest on this state's agreement to borrow money debt. R$800m in 1999, and a larger from the Bank of the Americas and amount in future years. Since 80% other international institutions. * of the state's income is needed for Source: Special Bulletin of the RS Secretary of Economics, personnel costs, and 15% for up- February 1999 20 International Viewpoint #312 June 1999 surre the ri
1 curic right presi state.
fede state
"Itan bour;
of hi grou be ve surrendering the vice-governor's palace to the new department that supervises the deal participatory budget. But these are very wing suffe visible symbols of the new style of government. The Pi has appointed
Olivi
"trustworthy" people to only about 3,500 of the 5,000 jobs usually reserved for our political appointments. The remaining majo positions have not been filled.
econ agait
Slowly but surely
PT activists in the rest of Brazil were the r surprised that the Dutra administration othe did not immediately confront the federal oppo government, by refusing to recognise the mea debt inherited from the previous state
Tore
Rio government.
гера whic state radi regi fede
Rio gove
Grat and, buds cons
Vice Governor Miguel Rossetto and
Governor Olivio Dutra at an election adm plati rally inchi
'Por
Vice-Governor Miguel Rossetto gov makes no apologies. "This is not a with government of fireworks. We are treat
All building a new Rio Grande, in a solid manner. We are establishing a permanent cons process of destroying the old system, and rate, the affirming the future which we want to build. The rhythms of progress will be goo determined by out capacity to deal with legi fun the problems which arise, and to overcome the chaos which we have
Un inherited."
This patience is shared by trade union leaders close to the new government.
det
According to one teachers' leader,
"We lead have four years to implement our
WOI programme. If the PT administration
Acc does the minimum—if it prevents redundancies and maintains current hav levels of health, education and social
Bra services, when all across Brazil the public sector is collapsing, and civil servants haven't been paid for months; if this government continues to try to move forward, then the people will never
Male cheques payableto UNIS and mail with address and contact detail to PO Box 515, Broedway NISH 2007.
Fax: (02) 9690 1381. Phone (02) 9590 1230.
E-mail -inks@ peg apc.org.-
Web http:/www.pegape.org-stan inka.
surrender the government of this state to the right."
This prudent approach led to the curious situation in early 1999 when a right-wing governor, former Brazilian president Itamar Franco of Minas Gerais state, was more confrontational with the federal government than the three PT state governors. But, as Nelson explains, 'Itamar Franco is a loose cannon. He is a bourgeois dissident, who has the support of his state assembly and the industrial groups in Minas Gerais. He can afford to be very radical in his demand for a better deal for his state. If he fails, the rightwing domination of Minas will only suffer a few ripples.
"Our situation is quite different. Olivio Dutra won 51% of the vote, and our Popular Front bloc doesn't have a majority in the state assembly. The major economic groups and the media are set
"Our only possibility is to mobilise the population, and try to make links to other states which are also ready to oppose the federal government." In the meantime, Dutra's top lawyer Paulo Torelli has identified a loophole whereby Rio Grande simply deducts its debt repayments from the much larger sum which the federal government owes the state in transfer payments.
Rio Grande always been the most radical part of Brazil, with a strong regional identity. not surprisingly, the federal government has tried to isolate Rio Grande do Sul and its radical government, but with little success. Rio Grande is the 5th richest state in Brazil und, despite its radical policies, the state budget is in much better shape than many conservative-led states.
In early February the Dutra administration agreed a common platform between seven state governors, including the three PT governors. Their Porto Allegre letter' calls on the federal government to respect its agreements with the states, and give them equal treatment in the allocation of resources. All state debt to the federation should be consolidated, and subject to 6% interest rates. The seven governors also called for that the administration shows absolute respect for the civic and trade union rights of the population. But the reality is that public sector wages are low, and the government has no money.
"As a revolutionary leadership, what do we do in such a situation? Since this is a government for the people, and not a government of class collaboration, we
"The left in the PT has a major role in government and in the trade unions. If there is no money for wage increases, we must seek other ways of improving workers' conditions, and winning them to the Popular Front's programme.
According to local leaders of the CUT trade union federation, problem isn't whether there will be wage increases, but whether there will be redundancies. The government is respecting its election pledge to avoid redundancies and maintain services. In return, the union should focus its efforts on improvements in democratic control within the education system, modernisation and democratisation of the curriculum, and so on."
The right wing parties, and their supporters in the trade unions, accuse PT militants of subordinating labour interests to the government, and putting a brake on the trade unions. But PT leaders believe that conflicts can be resolved within the popular movement.
The federal government, and the IMF, have imposed public sector cuts and privatisation programmes on all Brazil's state governments. In some other states, civil servant's have not been paid for six months, and huge sections of the population are denied even primary education and basic health care.
According to one trade union leader, "in any other state of Brazil, many of us would be redundant already! But in Rio Grande do Sul this is our government. We have a good organic relationship
Linda number 12 out
Raul Pont, Mayor of Porto Allegre, with PT leader 'Lula' da Silva between the social movements, the PT and the administration. In reality, the only way for public sector workers to improve their conditions is to participate in our project."
As the PT in Rio Grande consolidates its position, visitors are flocking from Latin America and beyond to learn from this exciting experiment. But Nelson insists that the Rio Grande experience is neither a replacement for social struggle, nor a shortcut to socialism.
"This is about fair distribution of services to the public. challenge the social relations in society, and it doesn't transfer ownership of the means of production. We remain convinced that only a rupture with the existing system will enable fundamental
"Our contribution to that struggle, and the originality of what we are doing here, is to build a solid system of direct democracy which involves large sections of the population in the social and political struggles that can create the possibility for a rupture. "*
Capita st crisis, neo-liberal myths the reintroduction of sales tax on export goods, and the repeal of federal legislation which enables it to seize states
Feature articles on:
funds to pay debts to the federation.
the nernational economic cass world poverty the new soclallst
Unity party in the Phil opines Russia s
Even if the economic situation talled derocrats the women s deteriorates, party and trade union liberation movement and leaders do not expect a conflict between
China s mew capitalist state workers and the Dutra government.
According to Costa, "During the 10 year
PT administration of Porto Allegre, there
Subscribe today have been several strikes of public sector
6 issues (2 years): indi idual $33, institutions $46 workers. In a dramatic departure from
3 issues (1 year: indiriluak $20, institutions $28
Brazilian practice, there has been no discrimination and no firing of protesters.
"Where a sector of the population enters into conflict with the administration—-as is inevitable-the PT ensures
International Viewpoint #312 June 1999 21