The Multinational Monitor

February 1984 - VOLUME 5 - NUMBER 2


The Brazilian Dilemma

Secretary of State George Schultz's visit to Brazil this month to sign a new agreement of scientific and technical cooperation between the two countries highlights the importance the U.S. places on its ties with South America's largest country.

Part of that importance derives from the enormous stake - at least $22 billion worth - that U.S. banks have in that debt-ridden country. Ever since it dawned on the Reagan administration that a Brazilian default on her loans could mean a collapse of the big banks and a chain reaction among other debtor nations, the administration has bent over backwards to help Brazil cope with her debt payments. In the fall, the administration advanced a multibillion rescue package of loan guarantees and other measures and, after pressing the country to accept IMF conditions, played a key role in welding together a final rescheduling agreement in October. Federal Reserve Board Chairman Paul Volcker has let banks know that, by granting Brazil concessionary loans that usually carry strict regulations, they "need not fear regulatory criticism."

At the same time, relations between the U.S. and Brazil aren't all friendly. On the American side, the U.S. government is unhappy about Brazilian restrictions on investments in Brazil's computer industries, and worried about the possibility of the country acquiring nuclear weapons. (This fear was further underlined by a January 22 statement by the Brazilian naval minister that the country will be able to build a nuclear bomb by the 1990s.) And for American workers, Brazilian manufactured products represent a growing threat to their jobs, particularly in the steel industry.

On the Brazilian side, government officials see arrogance emanating from Washington - a feeling amplified by such incidents as when President Reagan forgot what country he was in during a 1982 visit to Brazil. To unemployed Brazilians and those working in low wage jobs, the image of the U.S. is increasingly linked with the control American banks and the International Monetary Fund have over their economy, and the IMF's demands for lower wages and cutbacks in social spending as the price for further lending. And few forget that the U.S. gave important support to the military junta that seized control of the country in 1964, control that it has only recently begun to relinquish .

Thus, there are strong crosscurrents in Brazil-U.S. relations. How these conflicts are resolved will depend on which interests in both countries win out. If Brazil chooses a nationalistic, more radical solution to the debt crisis - a debt moratorium, for example - it would undoubtedly alienate the U.S., perhaps inciting reprisals against Brazil or other nations that follow its lead. On the other hand, the U.S. may decide to overlook lesser conflicts of interests in favor of Brazil's continued willingness to toe the IMF line. This solution might satisfy the bankers and some industrialists, but it would also mean increased unemployment for American workers, and prolonged misery for Brazilians.

For these reasons, Brazil is a country worth watching.

Victory in Vacaville

As in so many areas of social legislation, the U.S. lags far behind European nations and Japan in offering protection to workers and communities affected by plant closures. Only two states, Maine and Wisconsin, have laws that set standards for corporations that close or relocate their operations. Similar legislation in other states and in Congress has been blocked through strong lobbying efforts by big corporations, who view such laws as anti-business.

The successful campaign behind a unique city ordinance in Vacaville, California may show the way to circumvent these business lobbies. Described in our story on page four, the ordinance requires companies setting up in that city to give three to twelve months notice of a closure. It also has much stronger enforcement powers than other state or municipal laws now in effect. Although it can't stop a plant from closing, the law is being studied by a number of California cities as a model for protecting workers and communities from the often devastating effects of corporate flight.

But the Vacaville ordinance is threatened by a federal suit brought by the owner of the company whose actions led to passage of the law. If the Sacramento court supports him, all local ordinances throughout the country concerning plant closures could be overturned.

We strongly endorse the spirit of the Vacaville ordinance, and applaud the efforts of the two groups who organized the campaign for the law and are now fighting to preserve it - Local 1412 of the United Electrical, Radio, and Machine Workers (UE), and the Oakland-based Plant Closures Project. Their work benefits workers and communities throughout the country - and is worth supporting.

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