"Free Market" Fiasco

Durval Carvalho is the secretary for political action of Central Unica dos Trabalhadores (CUT), Brazil's national labor center. This secretariat works on issues of economic integration, labor law legislation, technological modernization, industrial policies, state-owned companies and working women. The secretariat also addresses issues of workers in the informal economy.

Miguel Rossetto, an officer in the local petrochemical trade union in Rio Grande in southern Brazil, was elected to the CUT national executive board in 1991. Rossetto is the head of the political coordination group on the integration of Mercosur, a planned common market for the Southern Cone of South America.

Multinational Monitor: What impacts does the restructuring of the Brazilian economy have on the population?

Miguel Rossetto: Brazil has the ninth largest economy in the world. Our Gross Domestic Product last year was over U.S.$414 billion; we have an industrial base that is relatively well-developed in many sectors; the agricultural sector is very strong in terms of diversified exports. From 1991 to 1992, we had a 20 percent reduction in the workforce. We are estimating that we will have fewer industrial workers in 1993 than we had in 1980. And while the economy is now growing a little, industry is continuing to reduce the workforce.

In Brazil there is great debate over the policies that were developed by the Collor administration to stabilize the economy. It is important to remember that inflation in Brazil reaches rates of around 27 to 30 percent a month. The new administration of President Itamar Franco proposes reducing the fiscal deficit. The 1993 budget allots 65 percent of federal funds to the payment of domestic and external debt services. Only 6 percent of the 1993 federal budget is allotted to social resources. So it is within this overall picture, with this terrible squeeze on wages, that the government maintains a recessive economic policy. It is opening the Brazilian market, opening up trade through agreements like Mercosur and continuing the push for privatization.

Another important issue currently under debate in Brazil is the proposed legislation on patents as a component of guaranteeing the free mobility of capital. The U.S. government is pressuring the Brazilian Congress to guarantee industrial property for 20 years, which we believe would hinder industrial and economic development. The new patent legislation promotes the interests of the large multinational companies.

What is interesting is that in 1990 and 1991, Brazil did not have a fiscal deficit - we had a surplus. Yet inflation remained high. So our experience shows that Brazil's economic policies not only failed to demonstrate a capacity to stabilize the economy, but hold deep and ominous implications for the social crisis that we are facing. It is within this economic picture that CUT is creating an alternative position.

MM: How has the political crisis affected the economic situation and the movement for labor rights and reform in Brazil?

Durval Carvalho: The 1989 presidential elections were the first in 30 years. The military dictatorship had eliminated the people's right to vote for president.

The inauguration of President Collor in November 1990 brought in an administration that was totally committed to neo-liberal, free market and privatization policies. We were confronted with inflation, the limited purchasing power of wages, and at the same time, a policy that eliminates any kind of economic or social role for the Brazilian state. Privatization of state-owned companies was undertaken indiscriminately, while basic social needs, like education, health care, housing and sanitation, were abandoned by the government.

The administration of Fernando Collor de Mello was extremely corrupt. To our surprise, the Brazilian media played an important role in exposing its corruption. This made it possible to create a massive people's movement, involving various sectors of Brazilian society, demanding that the president be impeached. We even managed to recover the student movement which played a very important role in fighting the dictatorship in the 1960s, but had subsequently lost its political power and collapsed. With the movement that we created, we were able to pressure the president to resign. We interrupted the onslaught of the neo-liberal agenda a little bit. And at the same time, the labor movement and grassroots movements managed to recover some energy for new battles.

I think that the political environment in Brazil today is going to heat up, because the Brazilian elite has become much more skillful at maneuvering and manipulating. Yet the de facto impeachment of the president as a result of people's pressure came as a surprise to the elites. It went beyond their control. Our success in that campaign opens new possibilities for getting back to the center of political activity in Brazil and offering an alternative.

We are now preparing for the 1994 presidential elections. 'I' he labor movement is debating how to orient our political strategy so that we can assume a more powerful and aggressive position in Brazilian politics. We need to offer a profound criticism of the social downgrading and deterioration of life in Brazil, while presenting an alternative political model in which the working class can build alliances with all those that are excluded in Brazilian society. And in Brazil, when we talk about excluded populations, we are talking about masses, about the majority of the people.

MM: What social and economic conditions are you facing in your attempt to create a new national political agenda?

Carvalho: We are facing a severe economic crisis in Brazil. A combination of two phenomena is having profoundly negative impacts on Brazilian workers. From 1990 onwards, the Collor government steered the economy into a deep recession, causing an immense blow to the purchasing power of the working class. Companies are also going through a process of structural adjustment involving vast restructuring of production methods and managerial techniques, which is greatly undermining the role of human labor in the work process. So unemployment in Brazil today is structural in nature: we have unemployment due to the recent recession, but we also have unemployment resulting from the restructuring of the companies. Even if we get out of the recession, we will not have the same number of jobs as we did in the past.

Social indicators in Brazil today are frightening. Official data from the government statistical boards show that more than 60 million people in Brazil live at the poverty level. These people therefore do not have access to basic rights: education, housing, health care or jobs. And 32 million of these 60 million people are actually living beneath the poverty line.

There is a housing deficit in Brazil today of approximately 14 million houses. This creates a very serious social problem. Thousands and thousands of people in large- and medium-size cities are squatters, occupying abandoned land or houses. The squatters make up a very important new grassroots movement in Brazil.

We have 62 million people in the age bracket of the economically active population. Of these 62 million ,48 percent work in the informal job market-they are non-documented workers. And 60 percent of workers in the formal sector earn the minimum wage of about $120 a month.

We also have a serious problem with tax evasion: companies simply do not pay their taxes. This is the economic and social picture of Brazil today.

Rossetto: A perfect example of the results of the free market model is cholera. Endemic diseases that had been vanquished return due to the worsening of social and health conditions. There is no soil treatment. Running water is not treated.

Despite the tremendous struggle we now face in Brazil, we are enthusiastic, because we think the political climate will encourage national debate on domestic and international economic policies. The victory in Uruguay, where the population opposed privatization, showed us that Brazil can escape the pitfall it is now in. The Uruguay victory raises the hopes of the left movement in Brazil.