Brazil

The Struggle Against Neoliberalism

by Tom Lewis

International Socialist Review, June/July 2001

Brazil
The Struggle Against Neoliberallism
by Tom Lewis
International Socialist Review, June/July 2001

Crisis hounded Brazil's president Fernando Henrique Cardoso this spring as developments on several fronts threatened to weaken his government. Looming energy shortages, a snowballing corruption scandal, the uncertain slide of the real, a negative human rights report, and new evidence of the massive inequalities in Brazilian society combined to punish Cardoso's public approval ratings.

But Cardoso has only himself to blame. His government's pursuit of neoliberal economic and social policies has caused the problems that Brazilians face today. Beyond drought and low water levels, for example, the power restrictions that are due to hit Brazil in June can be traced directly to the inability of privatized energy companies to meet rising demand. Part of the ongoing corruption scandal involves the private pocketing of public funds, including government insider tips on official currency movements, which allowed a few private bankers to loot millions.

A report released by the Brazilian Institute of Government Statistics in April also shocked the nation when it revealed that, after a decade of neoliberal reforms, the top 10 percent of Brazilian society averaged an income 19 times greater than the lowest 40 percent. A banner headline in a major Sao Paulo daily newspaper proclaimed, "The country ends the 90s as unequal as it began" ('Pais termina anos 90 tao desigual como comecou').

As if all of that wasn't enough, the Cardoso government was forced to admit to charges of widespread police brutality and corruption during a May appearance before the United Nations Committee Against Torture. The government thereby confessed to the world the kind of treatment it metes out to the poverty-stricken offenders who are created by its very own policies of eliminating jobs and reducing social services.

The resurgence of struggle

The public relations disaster for the Cardoso government occurs against the backdrop of a resurgence of popular struggle. Various end-of-year retrospectives identified the distinctive feature of 2000 as "the messages the people sent to those in power in the Republic-messages left in the streets as well as in the ballot box." A Catholic bishop in Rio de Janeiro explained, "Brazilians today are living a feeling of disillusionment with their country. Environmental degradation, globalization of the economy, and social exclusion prove that the model of development needs to be reformed."

In April 2000, hundreds of indigenous people protested their exclusion from the official celebration of the 500th anniversary of the "discovery" of Brazil and were greeted with police violence. That same month, following demonstrations by the trade unions and left political parties, the government agreed to raise the minimum wage. The Landless Rural Workers Movement (MST, Movimento dos Trabalhadores Rurais Sem Terra) launched an occupation of land and buildings in 12 capital cities during May as a protest against the slowdown of land reform and the failure to extend credits to existing settlements.

A wave of protests broke out in June 2000, uniting teachers, health workers, bank workers, and transit workers in huge demonstrations against the Cardoso government's economic and social policies. In July, public opinion pressured Cardoso into meeting with MST representatives in an attempt to find a way to resume expropriating lands and granting credits to the settlements. MST militants staged a new round of land and building occupations in September to protest the government's failure to deliver on the promises Cardoso made in July.

In September 2000, six million Brazilians participated in a national referendum on the external debt. The referendum was organized by the National Council of Brazilian Bishops and supported by numerous nongovernmental organizations and the opposition political parties. Ninety-eight percent of voters called for a national hearing on the debt, while fully 93 percent favored immediately repudiating the debt and severing relations with the International Monetary Fund (IMF).

In October, the Cardoso government unleashed a ferocious campaign of violent repression against the MST that led to numerous conflicts in the countryside.

The unpopularity of this campaign explained in part the positive results for opposition parties in October's first round of municipal elections. The second round in November increased the opposition's share of votes. The Workers Party (PT, Partido dos Trabalhadores) enjoyed particular success in the municipal elections.

The outpouring of anger at neoliberalism in 2000 suggested the beginning of a new period of fightback. As one observer remarked early in the new year, "2001 gives the glimpse of a promising scenario for the advance of popular struggles in Brazil."

"Savage capitalism": Neoliberalism's forerunner

Brazil boasts the world's eighth-largest economy today. In 1999, it produced $783 billion in goods and services, placing it between China ($980 billion) and Canada ($591 billion). To put this in perspective, Argentina, the second-largest economy in South America, is two-fifths the size of Brazil's and ranks as the 17th largest economy in the world. Trade between the U.S. and Brazil is modest from the U.S. perspective, accounting for one percent of U.S. imports and exports. The U.S. exported $15 billion of goods to Brazil in 2000, while Brazil exported $14 billion of goods to the United States. From the Brazilian point of view, however, the balance of the period 1994-2000 is exceedingly unfavorable. Brazilian exports to the U.S. grew barely 5.2 percent between 1994 and 1997, while imports of U.S. goods skyrocketed by 116.5 percent.

Despite its economic strength, Brazil has suffered for 30 years under the yoke of the U.S.-dominated international financial system. The military dictatorship that came to power in 1964 and ruled until 1984 repressed workers' organizations, curtailed citizens' rights, criminalized membership in left political parties, purged the public administration, and practiced systematic torture and summary execution. This terror served as the social basis for what became known as Brazil's "economic miracle" of the 1970s. Favorable access to foreign loans, as well as a tripling of foreign direct investment between 1970 and 1973, allowed for the diversification of Brazil's economy, making it less dependent on its main export, coffee. Gross domestic product (GDP) increased at a yearly average of 11.2 percent between 1969 and 1973.

Yet the "miracle" also produced a number of negative effects. Brazil became excessively vulnerable for the first time to the flow of international commerce and the dictates of international bankers. Growth also made Brazil more dependent on certain imported products, especially petroleum. Expansion led to higher prices and so favored high- and middle-income Brazilians while squeezing most urban and rural workers. The result was to widen the already horrendous gap between rich and poor. As one historian illustrates:

If the minimum wage of January 1959 had been 100, that wage would have fallen to 39 in January 1973. This return is especially significant if one considers that in 1972, 52 percent of the working population was making less than one minimum wage, and 22 percent was making between one and two minimum wages.

This harsh reality, along with the flagrant disregard of the environment, is what was meant by the phrase "savage capitalism"-the method by which Brazil entered the modern global economy.

Crisis of the neoliberal model

By the late 1970s, Brazilian growth had come to depend so heavily on foreign investment that its external debt reached $43.5 billion in 1978-double the 1975 figure. When recession hit in 1981-83, GDP fell at an average yearly rate of 1.6 percent, even as inflation continued. Unable to generate enough economic activity to permit servicing the ever-growing debt, Brazil was driven into the hands of the IMF. The IMF prescribed a well-known neoliberal regimen: slash public spending and lower workers' wages in order to raise the cash to pay down the debt. A long-term policy of achieving "higher trade surpluses through higher exports, lower imports, or some combination of both" would then ensure a future ability to pay.

Predictably, Brazil's adoption of IMF policies first "provoked an abrupt decline in living and employment conditions. Second, the trade surplus that might have been used to foster investment and resume economic growth in Brazil was absorbed by foreign debt payments." And not even the debt problem improved. Although Brazil paid $91 billion in debt service between 1980 and 1985, its foreign debt ballooned by 64 percent during the same period-from $64 billion in 1980 to $105 billion in 1985.

By the 1990s, it had become clear even to IMF and World Bank officials that the structural adjustment programs they had imposed around the world in the 1980s had not fixed the problems of economic instability, unmanageable foreign debts, and declining growth rates. A new doctrine of structural adjustment took shape: the "Washington Consensus," or neoliberalism as we know it today. It quickly became a basic condition for securing loans from the international financial system. As Maria Clara Couto Soares explains:

Instead of acknowledging the inconsistency of [their original] programs, the multilateral lenders merely considered them as insufficient. Complementary policies were formulated, geared above all to deregulating and liberalizing the economy. These policies directly link adjustment to the implementation of a free-market economy, entrusting the market with the optimum allocation of resources and the definition of development itself.

The main focus of this new Washington Consensus is based on five aspects balanced budget, trade liberalization, privatization of state-owned enterprises, liberalization of foreign investments, and domestic market deregulation.

Application of this set of neoliberal measures created a situation in Brazil, as elsewhere, in which "mass unemployment has settled in for the long haul, the unequal distribution of wealth has intensified, and working-class wages have fallen sharply."" Far from correcting the inadequacies of earlier structural adjustment programs, the emphasis of the new programs on privatization, deregulation, and free trade-in a word, on globalization-has only aggravated the difficulties faced by Brazil's working majority.

Brazil and globalization

The human toll of a decade of unbridled neoliberal globalization in Brazil is staggering. Almost 17 percent of the population-27.7 million Brazilians-still lives on less than a dollar per day. Fully 25 percent of Brazilians live below the official poverty line. The number of poor Brazilians without homes, adequate food, schools for their children, health care, and minimal resources for survival is as great as the entire population of France and twice that of Argentina. Fifteen million unemployed people inhabit Brazil's large urban centers, while 25 million rural workers struggle to survive in temporary agricultural jobs. Twenty percent of children between the ages of 10 and 14 work. Amid all of this human destruction, 1 percent of the population (some 400,000 families) controls nearly 53 percent of the nation's wealth. And the gap between rich and poor continues to grow.

Government spending on social programs that could otherwise bring relief to the disadvantaged populace has fallen dramatically as back-to-back Cardoso administrations have prioritized servicing the external debt. Cardoso's effort to manage the debt, however, has virtually gone for naught. Between 1998 and 2000, the first two years of Cardoso's second term, the external debt doubled, despite payment in principal and interest of an amount equivalent to the entire external debt in

1995 ($140 billion). Over the past 20 years, no less than $587 billion has been swallowed up by the debt, and yet Brazil currently owes the equivalent of nearly half of that amount ($240-$250 billion). In 2000, $67.1 billion dollars went to debt service-around 60 percent of all the monies taken in by the federal government last year. Yet, eliminating official poverty in Brazil would require only $33 billion.

The wreckage of neoliberalism is visible everywhere. In the late 1990s, for example, a new social movement formed in response to the plight of Brazil's homeless. The Movement of the Roofless (Movimento dos Sem Teto) in Sao Paulo seizes abandoned downtown buildings and uses them to house the poor:

In coordinated, almost military actions, more than 5,000 poor families have occupied hotels, a movie theater, mansions that once belonged to coffee barons, apartment buildings, government offices and even a hospital." Official estimates show that at least three million residents of Sao Paulo live in what the government calls "irregular circumstances." According to some private research groups, five million people, or almost 50 percent of Sao Paulo's population of 10.5 million, occupy illegal domiciles.

Neoliberalism's record on education, race, prisons, and the environment is equally damning. The level of education in Brazil in terms of years in school lags 10 years behind countries with an equal per capita income. Enormous regional differences in quality of education also afflict the country. In all categories, including education, job opportunities, and life expectancy, Black and Brown Brazilians fare significantly worse than do white Brazilians.

It is no wonder that sensational jail breaks and prison riots have headlined the Brazilian news in recent months. Amnesty International reports that "Brazil's police and prison officers regularly torture suspects and inmates to extract confessions, extort money or to punish those in detention." Such measures reveal the degree to which repression and state terror are still used to control a population beset by hunger, unemployment, homelessness, and despair.

Meanwhile, deforestation of the Amazon increased at a 15 percent annual rate last year. Officials cited an improved economy as the main cause: "Economic activity implies deforestation," according to a spokesperson for the Environment Ministry. Of course, it is economic activity for profit that has led to the deforestation of 14 percent of Amazonia over the past 30 years.

Greater vulnerability

Far from providing greater economic stability and control over their own lives for the majority of Brazilians, neoliberal globalization has made them more vulnerable. In early 1999, the world economic crisis that began in Thailand in late 1997 hit Latin American shores. Brazil sought to rescue itself by signing on to another loan from the IMF for $41.5 billion in exchange for a promise not to devalue its currency: "Yet, almost before the ink dried on the IMF plan, the real went into a free fall. The government abandoned its attempt to prop up its value." The Brazilian economy went on to contract by 1 percent by the end of 1999, with the currency devaluation inflicting new hardships on ordinary Brazilians.

In 2000, the sacrifices made by Brazilian workers the year before were supposed to pay off in renewed growth. A very modest drop in official unemployment was recorded, inflation retreated, and foreign direct investment returned. But the much-touted economic recovery of 2000 concealed a dark side.

The economy remained as vulnerable to the whims of international investors as before. To cover the hemorrhage of dollars paid out in debt service, Brazil continued to depend on its ability to attract enormous amounts of foreign capital. Foreign capital returned to the country, but it did so mainly in the form of direct investment to snap up bargains created by the government's privatization program. To make matters worse, the lion's share of these investments went into sectors of the economy that neither export nor replace imports. Thus, they do not generate dollars that could be used in servicing the debt.

Today Brazil finds itself in a precarious position within the global economy. As the leader of Mercosur ("Mercosul" in Portuguese, the South American NAFTA that also includes Argentina, Uruguay, and Paraguay, with Bolivia, Chile, and potentially Venezuela as associate members), Brazil has adopted an ambivalent posture toward the Free Trade Area of the Americas (FTAA). On the one hand, implementation of the FTAA, which President Cardoso signed in Quebec City in April, can only further weaken Brazil's ability to control its own economic destiny. Already, U.S. petroleum companies are suing Brazil to get rid of environmental regulations that they claim are barriers to trade. On the other hand, leadership of Mercosur also leaves Brazil particularly vulnerable to the three-year-old Argentine recession and a possible Argentine default on its external debt.

In fact, Argentina's financial troubles have already triggered a 20 percent depreciation of the real since the beginning of this year. An unexpected slowdown of the Brazilian economy in the first quarter of 2001, moreover, has caused economic forecasters to lower their estimates for year-end growth from a target of 4 percent to 2.5-3.0 percent. The fast-approaching energy crisis threatens to brake the economy even further. The 1 percent increase in the prime interest rate since January may also end up contributing to an economic slowdown.

Meanwhile, France and Switzerland are buying up significant chunks of the powerful Brazilian auto industry. The Spanish Bank of Santander has acquired huge holdings within the Brazilian financial sector. And U.S. companies ranging from Coca-Cola to Wal-Mart to Citibank have all announced major purchases or expansions in Brazil during the last few weeks, thus continuing the parade of sell-offs to foreign enterprises.

The landless movement

The strongest and most aggressive social movement in Brazil today is the MST. Brazilian land distribution is horrendously unequal, with less than 3 percent of the population owning two-thirds of the arable land. Twenty-five million peasants work as day laborers, even though 60 percent of Brazil's farmland sits idle.

The MST was founded in 1985. It grew out of the activities of the Catholic church-sponsored Pastoral Land Commission (CPT), which "provided much of the organizational backbone to what otherwise might have remained isolated rural struggles." Supported by the CPT, the MST's first action consisted of hundreds of rural workers occupying an unused plantation in the south of Brazil and establishing a cooperative encampment. By 1987, they had gained title to the land. Since then, more than 250,000 MST families have won titles to more than 15 million acres. According to the MST, some 25,100 families participated in occupations in 1999 alone. Throughout Brazil, 71,472 families currently reside in encampments awaiting government recognition as deeded settlers.

Despite negotiating at irregular intervals with the MST, the Cardoso government has actively worked to slow the pace of agrarian reform. According to one MST leader:

We considered, at the beginning of Fernando Henrique Cardoso's second term, that we were suffering a great reversal of agrarian reform. Many successes achieved during these 16 years of struggle for the land in Brazil-like the conquest of acreage, lines of credit, infrastructure for production, social infrastructure for housing, schools, sanitary facilities, a series of benefits for the settlements, were being destroyed by Fernando Henrique Cardoso.

Faced with this reality, the MST reinforced its strategy of confrontation with the government, launching a new offensive in spring 2000. A number of these occupations sought to unite landless rural workers with homeless and unemployed urban workers in common actions, matching the seizure of land in the countryside with the seizure of buildings in the cities.

The MST clearly articulates revolutionary aspirations among rural workers in Brazil. As George Meszaros explains:

One characteristic that marks the MST out as a social movement in the late twentieth century is that it has challenged not just the fact of land distribution but the logic of Brazilian capitalist development that sustains and aggravates the problem. One of its six general objectives is to "build a society without exploiters and where labor enjoys supremacy over capital." Others include the permanent search "for social justice and the equality of economic, political, social and cultural rights," the "spread [of] humanist and socialist values in human relations and the combating of "all forms of social discrimination," along with seeking "the equal participation of women."

Not surprisingly, the radical reach of the MST's program often brings it into direct confrontation with Brazil's repressive state apparatus. According to the CPT, 1,517 rural workers were killed during land conflicts in Brazil between 1988 and 2000. Eleven such killings occurred between January and September 2000. Moreover, 1,898 workers suffered arrest in land conflicts between 1989 and 2000, with 258 arrests coming in the first nine months of 2000.24 Violence has also been used against the MST during its protests against manufacturers of genetically modified organisms.

Alongside the commitment to taking on the government and Brazilian capitalism, important contradictions exist within the MST. The movement envisions not so much the abolition of property relations but rather the creation of millions of small property owners as the basis for land reform. It signs exclusive agreements with companies such as Coca-Cola (sugar) and Parmalat (milk) to supply the encampments and settlements. Its leaders have addressed police groups on land occupations and police tactics. And every year it negotiates numerous contracts and agreements at all levels of government. These aspects of the MST have led some to view it as becoming increasingly institutionalized. Writes Meszaros:

This is one of the many paradoxes of the MST. What is significant, however, is that these institutionalized aspects are accompanied by both a radical perspective and radical actions. In contrast, if we look at the institutionalization of the trade unions throughout the world, one of the key features has been the marginalization of radical perspectives, the progressive demobilization of members, a growing reluctance to use traditional tools, like the strike weapon, and the absence of adequate alternatives.

Despite its contradictions, the MST undeniably represents the most effective opposition to neoliberalism in Brazil today.

Labor's challenge

Strikes and trade union militancy remain at relatively low levels. Other than the 1995 petroleum workers' strike, no actions have compared to the great upheaval of organized workers that characterized the last few years of the military dictatorship. Nevertheless, important strikes around bank and energy privatization, as well as chemical plant closures, have taken place in recent months. Together with strikes by truck drivers and dockworkers, these actions have achieved occasional successes. In addition, a recent mobilization of workers to protest Cardoso's neoliberal policies in Brasilia, as well as demonstrations against the FTAA, has helped to politicize discussions within the trade union movement.

The largest organizations pursuing workers' rights in Brazil are the Workers Central Union (CUT, Centtal Unica dos Trabalhadores) and the PT. Their histories are deeply intertwined. The PT developed out of the great auto industry strikes of 1978-79 that rocked the military dictatorship to its core. The PT coalesced as a party in the fall of 1979 and quickly "put itself forward as a focus for militant opposition to the employers." As a product of the "new unionism" that had broken from the corporatist trade union structure of the dictatorship, the PT in turn became the major force behind the creation of the CUT as an independent central union in 1983.

The majority of the leaderships of both the CUT and the PT moved away from their early semi-revolutionary militancy during the course of the 1980s and 1990s. While still the leaders to whom the vast majority of workers look for direction, they have adapted themselves to Brazilian capitalism. Often rejecting neoliberalism with fiery rhetoric, they nonetheless understand socialism as the successful administration of capitalism "with a human face." A~ reformers, "they defend a Brazilian version of the social democratic 'third way' in Europe. They capitalize on the erosion of the government's position to make electoral gains, but they act as a brake on all the processes of direct action by the masses."

This is especially true of the PT. The PT currently boasts three governors, seven senators, 56 congresspeople, and 187 mayors. Its candidate in the last two presidential elections- Luiz Inacio Lula da Silva, who in 1978, as head of the Sao Bernardo Metalworkers Union, helped to lead the auto industry strikes-captured more than a third of the popular vote on each outing. Nevertheless, as the PT has gained electoral strength, it has substantially moderated its politics. Once in favor of repudiating the external debt, for example, the PT now endorses the idea of negotiating with the IMF and World Bank in order to restructure it.

The PT municipal government in the city of Porto Alegre, and the PT state government of Rio Grande do Sul, are often cited as brilliant examples of what can be accomplished by a socialist administration. The basis for the claim is the PT's implementation of what is known as the "participatory budget." One observer has described Porto Alegre's participatory budget as "an experience of direct democracy without equal in the world."

The participatory budget allows the citizens of Porto Alegre to decide at the neighborhood level where to invest the city's development funds-in new schools, in improved water supply, or in road repairs, etc. What admirers fail to mention, however, is that new investment represents only 10 percent of the municipal budget and that participants' decisions are subject to the approval of the city council. Ninety percent of the budget is not open to democratic decision making.

Decisions affecting tax payments to state and federal governments, for example, belong to the mayor's office and city council. The executive branch alone decides on public transit issues, such as fare hikes. It further controls labor relations and determines the benefits paid to companies contracted to undertake city projects. The Porto Alegre central administration also decides all questions related to zoning and human resources. For instance, the participatory budget does not give citizens the power to decide whether to expropriate vacant space within Porto Alegre for the purpose of constructing affordable housing.

And the percentage of the budget open to investment and citizen participation always remains the same-10 percent. Participants thus "decide" within limits set for them by the government; they cannot choose in a given year to use 15 or 20 percent of the total budget for investment purposes. As critics maintain, "The truth is that the Participatory Budget decides on crumbs in relation to the enormous necessities of Porto Alegre's poor. For this reason the democratic content is formal; it does not constitute an effective or substantial democratization of the state."

The behavior of the PT at the state level often seems informed more by neoliberal, rather than socialist, convictions. The government of Rio Grande do Sul still pays 15 percent of its annual budget to the federal government as its contribution toward servicing the external debt. Incredibly, when the state of Minas Gerais declared a moratorium on debt payment at the beginning of Cardoso's second term, Rio Grande do Sul refused to support it. The PT state government has also awarded huge tax breaks to large multinationals such as General Motors, Dell, Gerdau, and others. Although corporate tax evasion is a major problem in Rio Grande do Sul, the government refuses to publish the list of delinquent companies.

Unconscionably, the state PT has failed to comply with the agrarian reform measures it promised to the MST. It has cut the salaries of public-sector workers and sought to lower their social security benefits. It smashed an important strike by education workers belonging to the largest union in Rio Grande do Sul. Worst of all, it used the state's Military Brigade to dislodge MST protesters from a government building during a demonstration demanding state compliance with agrarian reform. Numerous injuries resulted.

What this means is that Brazilian workers are faced with the challenge of rebuilding a fighting labor movement from below. Only rank-and-file militancy has any chance of pushing PT leaders into a stronger stand against neoliberalism. The situation in the CUT is more hopeful. Recent elections gave members of the revolutionary left approximately 30 percent of the seats in the CUT Congress. But there, too, the challenge remains one of developing rank-and-file militancy.

Conclusion

Brazilian workers-urban and rural, white-collar and blue-collar-find themselves today at a crossroads. Their country has so far not experienced the scale of mass protests that has engulfed countries like Ecuador, Bolivia, and Argentina. But there are signs that a resurgence of mass struggle lies on the not-too-distant horizon.

Already events are sharply posing the question of alternatives to the horrors of neoliberalism. From reform to revolution, strategies for change are being hotly debated. What the proposals of the majority of the different leaderships of the MST, CUT, and PT have in common is that they ultimately look to secure a path of national development for Brazil within the context of neoliberal globalization.

Such a perspective, however, ignores the painful lesson repeatedly taught by global capitalism from the very first moment of Brazil's full entry into the world economy. Notes Eric Toussaint:

The fundamental problem here is that such policies do not lead to a process of cumulative development by which these countries could catch up with the industrialized powers of the North. Trade imbalances have annually grown, whatever the optimistic pronouncements of Latin American leaders. This is due to the structure of Latin American exports to the world market. Whatever the level of industrialization, these countries remain far behind the North. According to Oscar Ugarteche, there has even been a "re-primarization" of Latin American exports in recent years-in that proportionally Latin America exports more low value-added ("primary") products than before. At the same time, industries targeting the domestic market have stagnated or declined, whether they have remained in domestic hands or been sold off to foreign inrerests.

The possibility of a sovereign road to national development no longer exists for Brazil-if it ever did. This is the reality with which the various movements in Brazil must come to grips. It is, of course, important for workers and peasants in Brazil to fight against the economic dictates of American imperialism. But there is a difference between aggressively confronting the structure and institutions of neoliberal globalization and seeking a mode of "independent insertion" within it.

The hope that truly exists for economic and social change in Brazil today lies in the possibility of building international solidarity and a worldwide movement for genuine revolutionary socialism. For such a movement to succeed, the power and experience of the Brazilian working class would prove indispensable.

Tom Lewis is on the editorial board of the International Socialist Review

South America page

Index of Website

Home Page