Brazil: Why Multinationals and Generals Are Such Good Friends

Brazil ranks first among all Latin American countries in levels of foreign investment. U.S. multinational corporations themselves account for approximately $7.5 billion worth - the largest concentration of U.S. investment in the developing world.

In Brazil, as in other countries in Latin America, U.S. corporations profit from their close association with the military government, which grants them incentives and keeps the labor force in line.

Multinational Monitor's Matt Rothschild and Patricia Perkins spoke in February with Maria Helena Moreira Alves, political advisor to the Brazilian Worker's Party (PT), about the relationship between_ multinational corporations, the military government, and trade unions in Brazil. Alves has just completed a study of the Brazilian trade union movement; her party is headed by metalworkers' union leader Luis da Silva (known as Lula), who has been convicted under Brazil's national security law of leading an illegal strike in 1979.

What is the relationship between multinational corporations and Brazil's military government?

The whole Brazilian system, the whole Brazilian government is for the benefit of multinational corporations. It's a heaven for multinationals: the government has created a system of tax incentives which is phenomenal.

Corporations also do not have the same kinds of safety requirements in Brazil as at home. A study was conducted on Ford and Volkswagen and it was found that they had turned off the safety equipment on the assembly lines, particularly on the lathe operations, which has had the result that Brazil has one of the highest industrial accident rates in the world. Fingers get chopped off. Lula (Brazil's most prominent labor leader) doesn't have one of his fingers; that's typical of lathe operators.

Workers have gone on strikes just to get protective masks and gloves, just for safety - it's absolutely essential safety equipment which people have to strike for, and since strikes are illegal, they face imprisonment and trial, just to be able to have safety equipment.

But from the government's point of view, isn't it a good strategy to bring multinationals in as a way of promoting exports and earning foreign exchange, which the government needs?

Yes, from the government's point of view it makes sense. The government now has to give a lot of incentives for export because the foreign debt is ridiculous. It's expected to top $75 billion this year, and we'll have to come up with $20 billion just to pay the service charges. Last year, with all the growth in exports, 65% of the export earnings went just to service the foreign debt. $12 billion just for debt service. You know, we are hostages.

How did Brazil accumulate such a large foreign debt?

The way it was contracted was by getting loans outside to subsidize corporations to invest in Brazil - so we paid for their profits, for their investments in Brazil. Now we have to pay all this back. It's just crazy.

To give you an idea of what can happen: Fiat came into Brazil around 1975 or thereabouts, and located in two areas, Rio and Minas Gerais. In Rio, Fiat purchased an existing Brazilian-owned factory, Fabrica Nacional de Motores, which employed 6,000 workers and has always done very well.

Fiat had a subsidized loan from the Brazilian government for purchasing the plant. The loan was money obtained by the Brazilian government outside of Brazil - thus increasing the foreign debt - and lent to Fiat at a subsidized interest rate, and all to purchase a Brazilian company that already existed in Brazil. It was a ridiculous deal. The first thing, Fiat did was fire 3,000 workers and auto-, mate the plant.

Then Fiat also opened a new plant in Minas Gerais. The deal there was that they would get 10 years of no taxes whatsoever, plus subsidized loans for a number of years. After all that, they have recently closed the plant; they decided that they weren't getting enough loans and enough benefits from the Minas Gerais government.

Why is there such collaboration between the Brazilian government and multinationals? Why are they granted such incentives?

Well, the Brazilian military government that took power in 1964 was directly connected to multinational corporations. One example, for instance, is that General Golbery do Couto e Silva, who was a presidential advisor and the power behind the throne until recently, was made the lifetime president of Dow Chemical in Brazil.

The connections are very direct. It's almost the natural end of a general's career, as soon as he retires, to get hired as an executive for a multinational. So there's a "gentlemen's agreement" between the multinationals and the military.

Another example is in the mining area, which is now the most profitable area in Brazil. You know that Brazil is very rich in minerals. We have bauxite, manganese, diamonds, huge gold mines - they just found another one with 45 million tons in the Amazon region. By Brazilian law the minerals are a state monopoly, and the state has to own at least 51 % of whatever explorations are done.

But the military government has done two things about the mines: They have engaged in joint ventures with multinational corporations, where a state corporation controls 51016 and then contracts out with a foreign mining company - Bethlehem Steel, Alcoa, Brascan, Hanna Mining, or one of the many Japanese companies - to do the actual mining and sell the product.

So the military has become a vast capitalist class - not only because of nice personal arrangements with the multinationals, but because 40% of the Brazilian economy is state-owned, and the military runs the state corporations in joint ventures with the multinationals. There are huge quantities of money coming out of this. The generals are going to fight any opposition to the death, because they'll lose this beautiful bounty that they have. It's not going to be easy.

In confrontations with multinationals, Brazilian labor unions have relied on the strike tactic. How successful has this approach been?

The first group of strikes in 1978 was organized inside the factories, quietly. People just went in to work, punched their cards, and folded their arms. In 1979 when they again declared a strike, the government and the corporations had figured out what to do and essentially forced a walk-out and would not allow them into the factories. So the workers were put out into the streets, whereupon the military said, you're disturbing the peace, and the picket lines were the scenes of repression all through 1979.

In 1980 the tactic was to organize strikes from the communities, from the neighborhoods, and to not go at all to the place of work. The 1980 metalworkers' strike involved almost 200,000 people, without any picket lines. But that also didn't work - the troops came in and repressed it. It took 10,000 troops to end that strike.

Now what the corporations have done - and it has been very intelligent - is that instead of repressing directly, which did not work, they have fired people. There have been over 900,000 people fired in the main industrial areas of Brazil.

How have unions responded to these firings?

The metalworkers' union has begun to try to organize the unemployed, for one thing, and to develop special funds for the unemployed, and to conduct strikes not for wage demands but for the right to protect their labor committees and for the re-hiring of fired workers. The Fiat workers have done that, and the most successful so far has been at Ford.

In a strike at Ford a few weeks ago in Sao Paulo, which is an appropriate model for what is to come, the workers took over the factory. They waited for the day they knew the board of directors was meeting, and they closed all of the entrances and let only the pregnant women out, and held the whole board of directors hostage inside of the factory. The military threatened to invade, but this was not to the liking of the board of directors, who got very frightened at the idea. The workers then sent a kind of retaliatory threat that they would blow up the painting section of the Ford operation if they were invaded. At that point the board of directors themselves negotiated and agreed not only to re-hire the thousands of workers that had been fired in the last wave of layoffs, but to give them a one-year job security guarantee.

The other strategy workers have devised is "popcorn strikes," as they call them, where they just stop a section of the assembly line in the most automated industries, which disrupts the entire production because cars can't go through without a wheel or a door or without some screws. They keep changing the strike sections all around the factory and from factory to factory so it's hard to pinpoint who's leading it or what sections are affected. For the purposes of job security, which is the primary goal now, it's very effective.

Are multinational corporations in Brazil in favor of the "abertura" - gradual political liberalization - or opposed to it?

I think they are in favor of having the government, open sufficiently to diffuse some of the anger of the Brazilian industrialists who are joining the opposition against them. There is a growing nationalist movement among Brazilian businesspeople.

But multinationals certainly have no intention of changing the rules in terms of the workers. I think in fact that they will be discussing with the government a new bout of repression, strong repression.

If the labor unions and opposition parties gained political power, how would they deal with multinational corporations?

If suddenly there were a miracle and we were in power and the military was out, what would we do? We have a common program of the opposition, certain ideas which the different parts of the opposition all agree on. One is agrarian reform - to remove the land from the hands of multinationals and distribute it to the peasants who live here. The second is an ethics code forcing multinational corporations to apply the same benefits and standards in Brazil as at home. The same worker's compensation, unemployment benefits, safety standards, the same wages as in the parent company - and this should be coordinated with the unions in different countries, to avoid the runaway shop, with one worker being exploited by another.

But is that really feasible? If Ford were required to pay its Brazilian workers the same as its workers in Detroit, wouldn't Ford say, "Okay, forget it, we'll pull out of Brazil?"

Well, what other choice is there - nationalizing? You can't nationalize all the multinationals without running the immediate risk of invasion, to begin with. It's got to go slowly. Our approach, which is similar to what Nicaragua is doing, would be to have certain requirements put on a multinational in order for it to stay - things it has got to comply with. If it moves out, it moves out. Then we keep the company - great. We keep the plant, the investment. But if they want to stay and invest, they have to comply with at least a certain minimum.