Patience with Lula
and his advisers have resurrected the old "supply-side"
and "trickle-down" arguments pioneered by Ronald Reagan
and Margaret Thatcher. They claim that lowering taxes,
particularly for businesses and the wealthy, will produce growth
for Brazil's capitalist economy and eventually jobs for the poor.
Since he took office
a little over 100 days ago, Brazilian President Luiz Inácio da
Silva (Lula) has carried out austerity policies in the interest of the
international banks, in many cases outdoing his predecessor, Fernando
Henrique Cardoso. In addition to pushing through legislation that would
place the country's Central Bank out of the control of the elected government
and the country's voters, he has cut public spending and increased interest
rates, curtailing the Brazilian government's ability to create jobs and
provide social benefits.
He now plans to reform
the state-run pension system. On April 17, Lula obtained the consent of
the country's 27 state governors to back a system that will raise the
retirement age and lower benefits for Brazil's public employees. "We
are all in the same boat," said Lula, in reference to the deficit
in the pension system. New retirees would have their benefits capped and
While pensioners would
see their benefits reduced, another proposal would lower taxes on savings.
Lula and his advisers have resurrected the old "supply-side"
and "trickle-down" arguments pioneered by Ronald Reagan and
Margaret Thatcher. They claim that lowering taxes, particularly for businesses
and the wealthy, will produce growth for Brazil's capitalist economy and
eventually jobs for the poor.
Throughout the election
campaign last fall, Lula campaigned on a vaguely nationalist economic
program, promising vigorous measures to create one million jobs and to
tackle the country's social inequality.
Yet, in negotiations
with the International Monetary Fund, he agreed to subordinate his economic
proposals to the demands of international investors. After winning the
election, Lula put together an economic team committed to conservative
policies, similar to those of the Cardoso government.
Lula's arguments about
tax cuts and growth notwithstanding, his government's policies are designed
to protect the interests of international creditors. Brazil owes $250
billion to US financial institutions. Last summer, it obtained a $30 billion
credit line from the IMF, contingent on the drastic cuts in the federal
budget, a monetary policy run by the banks and structural reforms that
would lower costs for businesses, including a reform of the pension system.
Antonio Palocci, the
economics minister, is a medical doctor well known and trusted by São
Paulo banking circles. Henrique Meirelles moved over to take the helm
of the Central Bank from First Boston Bank, where he was a top executive
in charge of the bank's international business. Rounding off the economic
team are industrial executives Luiz Fernando Furlan, from a food conglomerate,
and Roberto Rodriguez from the Brazilian Agribusiness Council.
Lula did propose a
program to end hunger. A so-called "zero hunger" initiative
was described by Lula as a way of making it possible for all Brazilians
to "eat breakfast, lunch and dinner." The plan would hand out
vouchers to indigent families, worth between $16 and $80 a month (for
a family of five).
The vouchers would
be used to buy limited categories of foodstuffs. In return, these families
would have to participate in community jobs programs. In effect, the "zero
hunger" proposal involves the creation of a sub-minimum wage for
the nation's 54 million poor and unemployed in which recipients would
undercut minimum wage workersBrazil's minimum wage has been frozen
at about $60 a month.
Making workers labor
for as low as $16 a month would principally benefit Brazil's bourgeoisie,
while widening the gap between the rich and poor. In any case, $16 per
person a month is not enough to provide a minimum caloric intake in Brazil.
The banks, according
to the Los Angeles Times, celebrated Lula's 100 days in office:
"`The [government's] macroeconomic policy is very clear, coherent
and solid,' said Paulo Leme, director of Goldman Sachs in Brazil.
and [budget] reductions were essential for stabilizing the economy and
returning to growth. This has been accomplished in a firm and decisive
manner, and the effects were seen very quickly."
The vast majority
of Brazilians, however, are worse off. Officially, unemployment stands
at 12 percent, with pockets of up to 20 percent in some industrial cities.
Real incomes have declined for three years in a row, falling 3.8 percent
For unemployment not
to continue growing, Brazil's Gross Domestic Product needs to grow at
a rate of 4 to 6 percent per year. Economic growth in 2002 was 1.5 percent.
For 2003 the growth rate is expected to be between 1.4 and 1.8 percent
and is not expected to increase in 2004.
Lula has sought to
portray himself to the public as a pragmatist who will make capitalism
work for the average Brazilian, if he is given a chance. From the standpoint
of the IMF and the international banks, however, his task is to ensure
the increasing exploitation of Brazil's resources and labor in order to
pay off Brazil's debts.
In February negotiations
with the Bush administration, government envoy Aloizio Mercante declared
that Brazil was in urgent need of short-term credit, for which the banks
are demanding harsh conditions. Government sources warn that without those
credits Brazil faces increasing unemployment and a fall in real wages.
Lula's ability to
carry out his austerity measures has so far depended on his securing the
agreement of Brazil's biggest trade union, the CUT (Central Única
dos TrabalhadoresWorkers Unified Central), not to organize protests
or strikes. Last month tens of thousands of metal workers struck over
wages in São Paulo and Paraná states, an indication that
sections of the working class have already lost patience with Lula and
To combat the worst
effects of the economic slowdown, the government has tried to move forward
on its "zero hunger" programonly to stumble on numerous
Checks written to
the program by Brazilian celebrities remained uncashed for months because
the government was slow to open a bank account. Now the government is
moving to scale back the program, which has yet to begin feeding the poor.
was born in Colombia and has lived and traveled throughout Colombia,
Guatemala, Brazil, Mexico and Argentina. Married, with six children,
he lives in the US and can be reached at Azul_wsws@mac.com
This article was
originally published by the World Socialista Web Site: www.wsws.org