brazil and what it's all about
power/political:
Brazil has been trapped in a very bad situation in which only a big drop in Lula’s poll ratings can put the currency and debt markets back onto a solid footing". This was how the US-based business brief ‘Brazil Watch’ summarised the cause of the run on Brazil’s currency, the real, in July.
The crisis had begun three months earlier when it became clear that Washington’s favoured candidate for the October Presidential elections, Jose Serra, from the ruling PSDB, was trailing in the polls. Lula da Silva of the Brazilian Workers Party (PT) was receiving ratings of 38% while Serra was registering only 16-19%. The US business community responded in typical fashion, giving the Brazilian’s a foretaste of what would happen if they were wayward enough to elect a "dangerous socialist".
Major investment brokers and banks proceeded to downgrade Brazil as an investment opportunity. In May, Merril Lynch, Morgan Stanley and ABN Amro among others, issued warnings to investors. In June Moody’s rating agency altered Brazil’s rating from "stable" to "negative", sighting "uncertainties associated with the outcome of the October elections".
The currency started to plummet, losing 23% of its value between January and June. Ninety per cent of Brazil’s foreign debt is linked to the dollar. As the real fell, the debt rose. The price of new loans shot up as Brazil was now a greater risk. The Argentinean scenario loomed – a default on Brazil’s enormous $250 billion debt.
But last week the IMF stepped in with the largest loan in its history – a $30 billion drawing facility. The contrast with the hoops that Argentina is being made to jump through to receive a loan could not be more stark, but Washington has its reasons. First there is the fear of "contagion" - a general collapse of the Latin American currency and banking system which could reverberate around the imperialist world and its heavily invested banks and multi-nationals.
As one analyst put it: "the IMF is a welfare system for western banks".
The IMF thought Argentina could be isolated, there was even talk of Brazil being "immune" from the crisis next door. As late as April, IMF director Claudio Loser could declare that Brazil had reached a "virtuous circle" by adhering to IMF policies. The sudden collapse of the Uruguayan banking system followed by the Brazilian crisis has sent the IMF rushing to open their wallets to protect their system.
The continued "no bail-outs" hard line of US Treasury Secretary Paul O'Neil was countermanded by the White House; In Argentina is was a question of stealing the money of Argentine workers and middle class and forcing a few European banks to take a manageable write-down of their assets. If Brazil went down, then like Mexico in 1994-95, big banks in USA and even the whole financial system was at risk.
But of course Washington is not just handing over $30bn without strings. It comes with chains designed to tie down any Workers Party government - if one should be elected in October. These new draw down rights will come into effect after the elections and will only be allowed if the government keeps public spending down – indeed it is a condition of the loan that the government spends considerably less than it collects in taxes, having to achieve a surplus of 3.75% of GDP each year in order to pay back its debtors.
It is ironic that the crisis should have been made worse by fears of a Lula government threatening capitalist investors. The Workers Party (PT), which long ago transformed itself into a reliable reformist social democratic party on the European model, has moved further to the right during the current campaign. In many ways it echoes Blair’s transformation of new Labour in Britain.
In the past the PT had made threatening noises about "renegotiating the debt" and refusing to renew the IMF "accord" struck after the 1998 crisis. Now the PT is committed to sticking by the agreements with the IMF. As Lula put it recently "You can’t do without the IMF". Gone are the calls to double the minimum wage and even the mildly reformist commitment to increase the tax bracket to 50% for top wage earners.
The PT's manifesto launched at the end of July has dropped all references to previous commitments to re-nationalisation of privatised companies. And this in a country where the privatisation and deregulation of the electricity industry has resulted in such an electricity crisis that rationing had to be introduced.
The manifesto promises to create jobs through "improved growth", by introducing the 40-hour week and by emergency employment programmes. In practice the Brazilian economy is having difficulty avoiding recession with growth rates being scaled down all the time. With tax revenues falling and a commitment to the IMF to run a 3.75% surplus the PT, if it takes office, will be faced with budget and social welfare cuts almost immediately - unless it renounces the IMF deal.
While the manifesto promises "a new agrarian reform plan" the PT's attitude to the landless movement’s (MST) strategy of land occupations has been to distance itself during the election campaign. Lula recently condemned a land occupation by the MST of President Cardoso’s large landholdings.
Lula has been defeated twice before in presidential elections, despite being the front runner at various points. The right turn of the PT is designed to allay investors and Washington’s fears and show itself to be "fiscally prudent and responsible – fit to govern". Over the objections of the left wing of the party, Lula has made an alliance with the Liberal Party, making Jose Alencar, a multimillionaire businessman with close connections to the evangelical movement in Brazil, his running mate for the vice-presidency.
Clearly it is not the PT's programme that the multi-nationals and the IMF fear but rather the expectations that the PT's working class base will have in the Workers Party should Lula win. They fear the party will be an unreliable tool in a period of crisis, subject to the demands of its working class membership and trade unions. That is why Washington’s campaign to try and manipulate the elections to prevent Lula’s victory will continue.
Email: psyco49@epals.com
