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Lula, Brazil and the future of the Left Chapter
2: Lula and the PT in power C:
Lula and the IMF Brazil’s
public debt is substantial, clocking in at around 65% of GDP, something like
$250 billion US dollars. Over the past twenty years debt servicing has swallowed
up no less than $587 billion and yet the debt mountain is barely reduced. The
previous government had turned to the International Monetary Fund for support in
its hour of financial crisis. In September 2000 six million Brazilians
participated in a national referendum on the external debt.
The referendum had been organised by the National Council of Bishops and
supported by numerous non-governmental organisations and by the PT. Ninety three
per cent favoured immediately repudiating the debt and severing relations with
the IMF, yet Lula has carried on co-operating with the IMF. Lula’s
macroeconomic management is meeting all of the IMF’s targets and he has
accepted the terms of the Washington Consensus: balanced budgets, trade
liberalisation, privatisation of state owned industries and banks,
liberalisation of foreign investments and domestic market deregulation. Lula’s
debt management strategy has succeeded in earning the government respectability
on the international financial stage. In addition, Lula's team has used precious
funds acquired from the country's record trade surplus to rebuild Brazil’s
national reserves. International investment banks have brought Brazil's credit
rating down from the pre-election hysteria and given it a stamp of approval. The
international demand for Brazilian government bonds broke records during
Lula’s first year. Bond investors rely on Brazil’s high interest rates to
garner a higher rate of return than they would get if they were investing in
U.S. bonds. Bovespa, Brazil’s stock exchange broke daily records in 2003,
gaining 79.12 percent from July to November. Speculators hadn’t felt as
confident about Brazil’s financial returns in years. The financial boom is
largely based on making short-term gains out of the exceptionally high interest
rates. The central bank raised the interest rate to 26.5%, a month after
Lula’s victory and speculators were able to boost their income share from the
stock market by 113% in 2003. (FT Nov 28, 2003)
The
decision by Lula’s government to concentrate on servicing the national debt is
really more of a political decision than an economic one. Servicing the public
debt does absolutely nothing for the productive economy, in fact the high
interest regime is suppressing production, the real economy grew by only 0.3% in
2003. The IMF loans are not given to stimulate growth in Brazil. They are a sort
of free social insurance to ensure that the State continues to transfer workers
taxes and savings to those banks, bondholders and speculators that hold debt
entitlements. The IMF’s real job
is to keep the political pressure on the Brazilian government not to default on
its interest payments. The IMF stepped in to ensure that the domestic and
international lenders and bondholders continued to get paid. All the
pre-election market panic was based on a fear that a victorious Lula government
would do what it had previously said it would do, just stop paying.
Lula’s
first act was to staff the most important economic ministries with business
figures he knew the IMF and Wall Street would commend. So the new President of
the Central Bank was named as Henrigue Meriella, a former President of the
American owned Fleet Boston Financial and a former political candidate of the
centre-right PSDB party. The central bank is the most important institution when
it comes to formulating monetary and fiscal policy. It sets interest rates,
oversees the exchange rate and is the chief negotiator with the IMF Three months
into the new administration (18th March 2002) the government published another
letter of intent to the IMF. The letter revealed that the Lula administration
intended to legislate to give Brazil’s Central Bank ‘full operational
autonomy’ something that had been sought by the IMF. Meriella has no doubts
any longer about Lula’s commitment to market orthodoxy: ‘We are following
the most successful policy in the world. It has three aims. The first is price
stability, as we know there is not a nation that has consistently grown with
high inflation. The second is to balance our public accounts. The third is to
make sure that the public accounts stay balanced.’
On
December 12 2003, the Senate finally passed Lula’s pensions reform bill, which
slashed benefits for retiring public service employees by taxing them at 11% and
raising the retirement age. Lula claimed the bill aimed to close an unfair gap
between private and public sector pensions. International financiers applauded
the change as a step toward further reducing the Brazilian State’s US$250
billion debt. On the same day the bill became law, IMF approved a new $14.8
billion loan for Brazil. The
Lula government’s propaganda concerning the costs of pensions was well
orchestrated and cynical, intended to arouse resentment against ‘privileged
workers’. The government manipulated the facts to make it seem that most
public service pensioners were in receipt of lucrative benefits and were living
the good life at the expense of ordinary workers. A retired federal pensioner
receiving $500 a month will now receive $445 a month. For those pensioners
receiving over $815 USD there will be a 30% cut in income. The so-called
“pension reform” included preliminary steps to begin the privatising of the
multi-billion dollar state pension system. It was no coincidence then that the
day after the after the bill made it through the Senate the IMF announced a 15
month extension on a $34 billion loan agreement and $6 billion in new funding.
The IMF managing director Horst Koehler declared on December 16th that the
policy responses of the new administration had been ‘ambitious and courageous
balancing monetary and fiscal discipline.’
D:
Lula and Free Trade Lula’s
economic growth strategy is aimed primarily at assisting Brazil’s giant
agricultural and mineral exporting companies.
During the election campaign Lula talked about a social pact between
labour, business and the government to work for the betterment of Brazil. In
government he set up a Social Economic Development Council to come up with
policy recommendations. The SEDC is packed with the representatives of
Brazil’s major export companies. Of the 82 members on the Council 41 are
recognisable business people and 13 are trade unionists. Lula replied to the
criticism that he had stacked his advisory council with so many business people
with the remark that ‘the council is not a friends club. I am not interested
in knowing the party affiliations of the members of the SEDC or for whom they
voted.’( quoted in Petras ‘Wither Brazil’)
Lula’s
frontline economic team of Paolucci, Furlan, and Rodriguez has been assigned the
task of promoting Brazil’s agro-mineral commodity exports. Finance minister
Antonio Paolocci is one of the leading players in the government. He is the
former Mayor of Ribeiro Preto where he allied himself with the local business
elite and the sugar barons. He privatised the municipal telephone and water
companies and half privatised the municipal transport system. His chief economic
adviser is Marcos Lisboa, one of Brazil’s best-known neo-liberal economists.
Luis Furlan a millionaire businessman and the chairman of the agricultural
company Sadia was handed charge of the Trade and Development Ministry. The
appointment of Furlan, was ‘greeted with great joy by the employers'
associations,’ according to a press release issued by Horacio Piva, president
of FIESP, the Sao Paulo employers' association. The
PT government has tried to assists the big exporters in two ways; by negotiating
with other governments around the world for greater market access, and by
offering exporters tax breaks. The deputy leader of the PT in Congress, Paulo
Bernardo, announced that the government would consider guaranteeing tax breaks
to companies by state governments for 10 years (FT, Sept. 2, 2003). Agro-mineral
commodities i.e. fruits, soybeans, coffee beans, cereals, dairy products, wood
pulp and paper, account for $33 billion of Brazil’s $72 billion worth of
exports and Lula travelled to 30 countries in 2003 as a salesman on behalf of
the exporters. A big effort has been to increase exports to China and India. A crucial issue
preoccupying the whole of the Latin American Left is what stance to take in
relation to the US proposal for a Free Trade Area of the Americas (ALCA in
Spanish). Like the WTO, the FTAA involves far more than a lowering of tariffs
and other barriers to imports. It also seeks to remove legal barriers that
presently prevent or discourage foreign investors from buying control of
underdeveloped countries' public assets and services. The 1993 North America
Free Trade Agreement between the US, Canada and Mexico had a similar agenda and
has had a devastating impact on workers' interests in all three countries.
A mass campaign against an FTAA treaty covering the whole of Latin
America has been building up. In the last two years, more than 22 million people
in Brazil, Venezuela, Colombia, Ecuador, Argentina and Chile have voted, in one
form or another, against the FTAA. In an informal referendum in Brazil last
year, 95% of participants — 11 million — opposed the FTAA. Two
very different views of Lula’s trade negotiating position with the Americans
and the rest of Latin America are currently circulating, once again a choice
between ‘Porte Algre or Davos.’ The Porte Alegre view is presented by
supporters of Lula in journals like the French monthly ‘Le Monde Diplomatique’:
‘Brazil has asserted itself in the world
by building alliances with India, South Africa and China within the G22 at the
World Trade Organisation summit in Cancun and is going against the United States
over the Free Trade Area of the Americas. However international monetary
institutions and entrenched local and regional oligarchies are hindering the
social reforms that Brazilians have been promised.’
‘International Viewpoint’ has a similar refrain: ‘Brazil
is also opposing the US on the Free Trade Area of the Americas.’ The other viewpoint is
asserted in no uncertain terms by James Petras: ‘Contrary
to most “leftist” opinion, Brazil’s “leadership” of the G-21 at the
Cancun meeting had nothing to do with the defence of the poor and downtrodden of
the Third World. The main point of contention was Brazil’s militant defence of
its agro-export elites’ open access to US markets. Da Silva has reiterated
time and again his favourable position on “free trade”, as the road to
growth and prosperity (despite the devastating impact on Brazil and the rest of
Latin America over the past 2 decades). Celso Amorin, Brazil’s neo-liberal
Foreign Minister, insisted that the US eliminates its tariff barriers, quotas
and subsidies that hinder Brazilian exports of sugar, cotton, soybean, beef and
citrus products. The US protectionist position defended by US Trade
Representative, Robert Zoellick, was unacceptable to Brazil because it put in
question the entire Da Silva free market, export led strategy. The ALCA (Free
Trade Area of the Americas) meeting in Miami on November 17-21, 2003 led to a
compromise in which the Brazilian Foreign Minister agreed to set aside
Brazil’s objections to US protectionism and agricultural subsidies in exchange
for an agreement which allows member countries to opt out of parts of the
agreement they found objectionable…. What
Celso Amorin called “ALCA lite” is in fact a substantial step toward
consummating the US version of ALCA
– and its de facto colonisation of Latin America.’( James Petras
‘Wither Brazil’) Two
thing are absolutely clear: Brazil’s powerful agricultural firms and
organisations such as EMBRAPA (Empresa Brasileira de Pesquisas Agropêcuarias),
the Brazilian Association of Citrus Growers, the Brazilian Coffee Institute,
Perdigão, Sadia, and Nestlé Brazil have so far expressed only praise for the
Lula government. And secondly Lula
desperately needs their export dollars to meet the primary surplus target his
administration has agreed with the IMF. E:
Lula and Agrarian Reform In
Brazil land occupying interests stretching back to the era of colonial slavery
and with firm family connections to the upper ranks of the military and federal
bureaucracy constitutes the reactionary bulwark of the State. The ownership and
management of land is concentrated in the extreme and land redistribution has
never been enacted. Studies made by the National Colonisation and Land Reform
Institute in the late nineteen nineties showed that out of five million
registered land properties covering some 639 million hectares 1.2 million could
be classified as latifundia: ranches
and farms of a size of 15,000 hectares and more. Some of the cattle ranches are
of vast size; one land survey found 264 properties that were over 100,000
hectares. About one percent of the latifundiarios own 46% of the land, some 360
million hectares; the biggest are generally livestock ranches.
‘Veja’, the largest Brazilian news weekly, reported (April 16 1997)
that 35,000 landowners ‘possessed a land area equal to the combined areas of
France, Germany, Spain, Switzerland and Austria.’ Abutting
the ranches are the agribusiness farms consisting of between 500 and 2,000
hectares producing soybeans, oranges, coffee, and sugar mostly for export. At
the lower end of the rural economy are around 5 million ruined small farmers and
landless workers, roughly 20 million people: ‘Regarding
the distribution of rural income, in 1970 the poorest 20% of the economically
active population received 5% of total agricultural income, while the poorest
50% got a little more than 22%. By the 1990s the first 20% received less than 4%
of agricultural income and the poorest 50% only 15%. These numbers reveal the
tremendous inequality to be found in rural Brazil.’ ( The dynamics of
chronic poverty in Brazil : S.K. Saha & M.C. Lima) In
1950, about 60% of Brazilians still lived in the countryside; by 1980 this had
dropped to 32%, today only around 22% of the population still live in the rural
hinterland. However significant numbers of city dwellers travel long distances
to work in the countryside. Tenant farmers have disappeared giving way to people
known as boias frias or cold grub, workers hired to work on farms for short
periods. These workers are dependent on the rural economy but don’t actually
live there. They live on the edges of the medium sized cities close to the large
farms and agribusinesses. It is informal workers who largely populate the
favelas, or shantytowns ,of the regional towns. The
rapid migration to the cities was not a development in advanced social mobility,
but rather a consequence of the social expulsion of the small producers and
artisans from the countryside, and the providing of Brazilian employers with an
overabundance of cheap and unskilled labour. The policy of the military
dictatorship during the period of the ‘economic miracle’ was to reorganise
the economy of the countryside by supplying credit and subsidies to secure a
greater integration of Brazil’s agriculture with both domestic and US
multinational agribusinesses. It was only after 1950 that Brazilian agriculture
began making use of tractors and chemical fertilisers to expand production, much
of the early concentration being centred in the States of Sao Paulo and Rio
Grande do Sul. The effect of agrarian modernisation has been contradictory,
productivity has greatly increased, but so have land concentration and the
surplus population. As an outlet for the displaced peasants and farm workers the
Brazilian government has promoted a land grab for the virgin territories of the
Amazon. Though agriculture’s economic contribution has declined it still
accounts for 40% of Brazil’s exports and 25% of its employment.
A
powerful impetus in the creation of the military dictatorship in 1964 was class
pressures emanating from the landowners to have the State stamp out the rising
tide of organised rebellion in the countryside. In Brazil the legendary back
land colonels still control large political machines and employ goon squads to
intimidate any would be social reformers. When in 1985 President Jose Sarney
presented an agrarian reform package the ranchers and farmers founded an
organisation called the Rural Democratic Union (UDR) to have the bill
confounded. The rural bloc is the
best organised political group in the Legislature, able to count on the cross
party support of around 200 deputies. It
was not just the urban trade unionists who built a popular opposition to the
military regime in the 1970s and 80s; rural based groups devised the new tactics
of collective struggle to supersede the largely unsuccessful armed guerrilla
tactics. The new tactic relied on large groups of landless families banding
together to set up camp on parts of private property not being worked by the
landowner, in Brazil there are extensive pieces of land of this type.
By
the late 1970s thousands of rural workers and peasants had become involved in
land invasions and occupations. In 1983 the various local groups of
‘squatters’ came together to form a united struggle called the Sem Terra
Movement (movement of landless workers). At their first national gathering a
decision was taken to organise the MST as an ‘autonomous movement independent
of all political parties’: ‘Our
analysis of the farmers movements of Latin America and Brazil taught us that
whenever a mass movement was subordinated to a political party it was weakened
by the effects of inner party splits and factional battles. It was not that we
didn’t value parties or thought it wrong to join them. But the movement had to
be free from external political direction. It also had to be independent from
the Catholic Church…We also decided then on the general tactics we would use.
We were convinced that the fight for agrarian reform could only move forward if
it were a mass struggle so we had to try to involve as many people as possible.
When we set out on a land occupation, we try to take everyone along-fathers,
mothers, sons, daughters, old people, children, the lot. We listed the ten or
twelve objectives our movement would serve-the struggle for agrarian reform, for
a different Brazil, for a society without exploiters.’(Jao Pedro Stedile
interview New Left Review May/June 2002) Over
the last eighteen years the Sem Terra Movement has mobilised some 350,000
families in land encampments and its direct action methods have sometimes ended
in violent confrontations with the hired goons of the landlords and the State
police. During Cardoso’s second term as President the MST escalated its
campaign of land occupations. At first Cardoso left the job of suppressing the
MST to the Federal States, but after the State Governor of Para ordered a
military police massacre of 19 landless workers in April 1996 in Eldorado
Carajas which received world media exposure he shifted to negotiation and
co-option. He offered to make State funds available for limited land
redistribution in return for demobilisation of the MST. The MST entered into
negotiations but refused to stop the land occupations on the grounds that the
government’s reform plans were far too limited. The
MST has made use of Brazil’s Constitutional clauses permitting the Federal
States to appropriate private land that has rested idle. The areas for
appropriation are carefully chosen and months of pre-planning are undertaken
before a mass occupation. An occupation can involve anywhere from 200 to 3,000
families, some of which are recruited in the immediate area and others from the
shantytowns. Joining an occupation requires an intense level of political
commitment. The MST has had some success in building up a broad political
coalition of peasants, workers, Catholic clergy and human rights campaigners in
favour of land reform and this has helped neutralise the violence coming from
the landlords private army organised in the Uniao Democratico Ruralista (UDR).
However scores of activists have been murdered in the States of Parana, Para,
and in Sao Paulo. During Cardoso’s time in government 1,158 activists were
murdered and only eight culprits were prosecuted.
Before
Election Day Lula met with the leadership of the MST and secured their support
for a suspension of their land occupations in return for a promise to authorise
a serious land reform if elected. However in the first nine months of the PT
government no serious land reform measures materialised so the MST increased its
land occupations by 140% over the previous six months. During the first nine
months of the Lula government, nothing changed for the better for the landless
peasants and workers. On the contrary, the right wing and large landowners
increased their threats and attacks on MST camps. Their private goons, the jagunços,
displayed their weapons more openly and the number of assassinations in the
countryside increased substantially. On
July 3, the Military Police, under orders from the Justice Department, violently
evicted the Chico Mendes encampment of the MST in Pernambuco where 600 families
had lived for the previous six years. The destruction of the encampment was
massive: 180 houses, numerous schools, a church and all the crops were
destroyed. The same day, in the state of Paraná, another squatters' camp was
invaded by the Military Police, leaving many workers severely injured.
Right-wing Senators are seeking a government edict to criminalise the MST. In
response to the large landowners' massive rearming, Minister of Agriculture
Roberto Rodrigues declared publicly, "I
consider that everyone who owns something has the right to defend it. Otherwise,
that person is not worthy of owning it in the first place" (Folha de
Sao Paulo, May 7, 2003). Even though Minister Rodrigues later said his comment
was a "slip of the tongue," his declaration revealed that he is a
representative of the latifundiarios, of the exploiters, of the assassins of
landless peasants throughout the Brazilian countryside. Unfortunately
the ‘socialist’ Agrarian Development Minister Miguel Rosseto refused to take
issue with Rodrigues' open endorsement of the right-wing violence against the
landless peasants, though he did state that these armed militias in the
countryside "are carrying out
irresponsible and illegal actions on a local level. These irresponsible
adventurers will not have any space to promote further their violence in the
countryside" (Folha de Sao Paulo, May 7). Still, at no time has
Minister Rosetto proposed any concrete measures to dismantle these armed
militias. Nor did Minister Rosetto propose at any time that the government adopt
measures to defend the Chico Mendes encampment. Nor did he propose any actions
to stop the destruction of the encampment in the Rio Bonito estate in Pernambuco.
At a time when the landowners were hiring goons and unleashing waves of violence
across the country, Minister Rosetto merely said "We will not tolerate
violent demonstrations of the landless peasants, just as we will not tolerate
the armed militias of the landowners" (O Estado de Sao Paulo, June 4,
2003). (Information on PT government ministers taken from Open World Conference
of Workers Web Pages) |