Making Do

Making Do

New official statistics show that the subterranean economy in Brazil
employs one in every four Brazilians. Some experts think that the situation is so
desperate that only a federal program modeled after Franklin Delano Roosevelt’s New Deal
created to combat the Great Depression would work right now. The 12.87 million people
employed by the informal economy equal the total number of workers in the public and
industry sectors combined. Furthermore, this crisis has increased the amount of working
children. In Rio alone, there are 1.5 million youngsters between the ages of 10 and 17 who
By Francesco Neves

For 20 years Carioca Jorge Nunes was a bus driver. Even working
as much as 10 hours a day, he never made more than $250 a month, too little to maintain
his wife and raise a family of four children. Then, in 1994, he lost his job and for two
years, Nunes tried in vain to get a new one, but his efforts proved fruitless due to his
"old age" of 46 years. It was during this time of despair that Nunes was able,
in November 1996, to get himself a minivan and start working independently transporting
passengers. Today, he is making around $800 a month.

Nunes’s story was used by Rio’s daily Jornal do Brasil to
illustrate the booming times of the informal economy in Brazil. In Jornal do Brasil,
the former bus driver declared: "My life has improved a lot since I started working
for myself. I remodeled my house and I am even paying for private school for my son. I am
my own boss and I know my obligation: to treat my clients and my car well."

There are millions of Jorge Nunes in Brazil today, however, not too
many of them live happily ever after. They are men and women who for one reason or another
could not get a regular job or had a job that paid too little, and, therefore, decided to
go their own way. A newly-released IBGE’s (Instituto Brasileiro de Geografia e
Estatística—Brazilian Institute of Geography and Statistics) study entitled Economia
Informal Urbana (Urban Informal Economy) shows that the informal sector represents 8
percent of the GDP (Gross Domestic Product), which are the goods and services generated in
the country.

While modest in the formation of the GDP, the subterranean economy
employs one in every four Brazilians. The data was collected in October 1997, but it is
still believed to be a fair representation of the informal economy situation, which
economists believe has become a bit larger since then. In October 1997, 9.47 million
informal businesses generated $7.15 billion, $2.9 billion of which were profit. According
to Ângela Jorge, chief of the IBGE’s Deren (Departamento de Emprego e
Rendimentos—Employment and Earnings Department), the institute’s work despite being
two years old is still a faithful portrait of the informal sector. "What might have
happened is an increase in the number of ventures causing the sector to expand, not a
change in the most significant characteristics of such economy."

The new information, which uses the International Labor Organization
parameters for informality, dispels previous estimates in which the informal world was
shown as big or at least half as big as the official GDP of around $700 billion a year.
According to IBGE’s president, Sérgio Besserman Vianna, the activities included does not
necessarily mean irregular and then he jokingly added: "We did not include criminal
activities such as embezzlement, prostitution and drug trafficking since we did not have
the means to study this."

The study, which is believed to be the first not only in Brazil but
also in the whole world by its scope and amplitude, has interviewed 50,000 families in 753
urban municipalities in every one of the 27 states of the union. Among the findings was
the discovery that half of the 12 million informal workers are younger than 25, with 67%
of them between the ages of 18 and 39. Almost half of them (45 percent) never finished
elementary school.

Half a million of these employees (4 percent of the total) work for
nothing, because most of the time they are at the service of a relative. The majority of
them (67 percent) are self-employed while 10 percent work for a legitimate company, but
get paid under the table. Twelve percent, on the other hand, offer up to five jobs in
their informal company. The 12.87 million people employed by the informal economy equals
the total number of workers in the public and industry sectors combined.

When we add to this number of informal workers those who work as maids
or other domestic jobs, we find out that 32 percent of Brazilians living in urban
surroundings do not have a so-called real job. Domestic work is a chapter apart in the
Brazilian labor landscape. A residue from slavery times, domestic workers—only 6.84
percent of them are men—live in that limbo of coziness that often makes the employee
a member of the family on one hand, depriving her (or him) of a just salary and benefits
on the other. According to the IBGE, there are almost 5 million domestic workers in

Very few of them, however, are taking advantage of the ten-year-old
legislation for the sector that contemplates among other things, a 30-day annual vacation,
paid maternity leave, and the so-called 13th salary once a year. The law, however, says
nothing about overtime, social security payments and raises. In São Paulo and Rio de
Janeiro, salaries for domestic workers can be as high as the salary for teachers. In these
big cities, baby sitters make in average $400 a month; a cook, $350; and a maid, $180. A
house cleaner gets an average of $22 per day. In other large cities, however, like
Brasília (Brazil’s capital) and Salvador (capital of Bahia state), these salaries are cut
in half and it is not that uncommon those who work in exchange for a roof over their head,
clothes and food. Sixty five percent of all domestic workers make minimum wage, which is
only $72 a month.

In a recent article entitled "Profession: Maid," weekly
newsmagazine Isto É told the story of the president of Bahia’s Domestic Workers
Union, Creuza Oliveira. She was only ten when she left the interior of the state to work
in Salvador. For a long time, she worked for food and a very special kind of food:
leftovers from her bosses children. She remembers her boss giving her lunch or dinner.
"Everything is pretty clean, she would say, throwing a ladle of beans over the
food." This was 30 years ago. Oliveira has no reason to believe things have changed
that much since then: "In the small towns, it is very rare that maids get any salary
at all."


And where are the informal businesses? They are all over. Commerce gets
the bigger chunk with 26 percent of such ventures. Then comes services, which include such
jobs as hairdressers and repairmen, with 20 percent of the total. Next in line is civil
construction, which absorbs 16 percent of this informal work force. The so-called
transformation industry, which includes apparel makers and artisans, represents 12 percent
of the informal sector. Transportation, while representing only 6.7 percent of the
informal ventures, was the sector with the biggest volume of investment (an average of
$7,500), four times more than the second place: technical services.

Only 23 percent of these businesses are installed in adequate
locations. About 28 percent of them are conducted from their owner’s residence while 27
percent use the client’s home as its place of doing business. Nine percent just use the
streets and other public places and another 5.5 percent use a vehicle. Sixty-six percent
of them have no work permit and, consequently, also do not pay neither taxes nor fees
related to their enterprises. These are non-stop businesses, with the vast majority of
them (91 percent) keeping workers busy the whole year.

As in the formal job market at large, the informal one is not favorable
to women. While monthly earnings average $135 in the area as a whole, this amount is only
$120 for women. Compare this to $140 for men, who hold 64 percent of all informal jobs.
Sixty-six percent of all owners are also male who make an average of $310 a month. The
majority of informal workers (66 percent) have been doing this for more than three years
and are neither looking for nor interested in a regular job. With their low educational
level, they would be making less than two minimum wages ($144) anyway.

The image conveyed by the IBGE is a mirror of Brazil’s larger picture,
showing the same economic disparities between the different regions of the country. Almost
half of the informal businesses (46 percent) are in the rich Southeast, where the average
monthly profit is $435. In the Northeast, on the other hand, where profits are the lowest,
this average is $181. Profits are almost six times bigger in the South where they average

For 10% of those with an informal occupation, this job is just a way to
complement their earnings from working in a regular job. In some cases, they can even make
more in their own business, but prefer to keep their jobs as a way to feel more stable as
well as to secure pension and health benefits.

A study released in the last week of June by Rio’s Municipal
Secretariat of Work show that self-employed people were the ones most favored from 1994 to
1997, following the introduction of the Real Plan. Their average monthly earnings grew
from $163 in June 1994 when the Real Plan started to $241 in 1997. This amount fell to
$215 in the first quarter of this year. Among the reasons were the devaluation of the real
and the stagnation of the informal sector that is not being able to absorb all the new
unemployed. The informal sector, however, is the one that grew the most between 1991 and
1998. While self-employed people represented 26.2 percent of all workers in the Greater
Rio in 1998, this number has increased by 4.3 percent since then.

Commenting on the recent fall of the real in Jornal do Brasil,
economist Marcelo Néri from the IPEA (Instituto de Pesquisa Econômica
Aplicada—Institute of Applied Economic Research) said, "We have here a
pro-industry and not pro-services fact, and this does not generate jobs in Rio." To
what André Urani, another expert, added: "The creation of the real Plan gave us
conditions to think about the economic future of the country. In order to achieve a
reversal in the situation brought about by these five years of real, we need to define
what kind of growth we are looking for: one that includes or one that excludes

50,000 in Line

Brazil has 6.6 million—one third of the population living in the
state of São Paulo alone—unemployed people right now. For some experts the situation
is so desperate that the only solution would be to immediately start a federal program
modeled after Franklin Delano Roosevelt’s New Deal, created in 1933 to grant relief to a
US wrecked by the Great Depression. "No one can be against state intervention and the
creation of job fronts in a time like this," Universidade de São Paulo’s economy
professor Hélio Zylberstajn, told O Estado de S. Paulo.

He even suggested that governmental relief programs should be in a
constant standby waiting to be adopted as soon as the economic conditions deteriorate and
unemployment gets out of hand: "This is the time to promote the worker and not to
diminish him and stigmatize him as someone incapable and not qualified for the new job
market. It’s time to use unemployment to teach a new occupation and to invest in the
worker’s dignity."

In São Paulo, embattled mayor Celso Pitta was just following this
advice when he decided to attack unemployment through the use of job fronts. In the last
week of June, Pitta signed contracts for six months with 6,500 people who were unemployed.
All of them will receive a monthly salary of $75, a basic basket of food and
transportation passes. During this period, they will also have to take one or more of the
40 different job-related courses for which there is demand, like sewing or working with
computers. Other courses offered are telephone repair, gardening, and construction work.
The project, which is costing $8.4 million, is called Program of Job Incentive and
Professional Requalifying. If everything works as planned, 3,500 of the recently
unemployed will join the program starting in August.

To illustrate how bad the unemployment situation is, close to 50,000
people applied for the openings even though they were told beforehand of the requirements
they should fulfil before even being considered. They had to be unemployed for, at least,
one year, have lived in São Paulo for a minimum of two years, and not to have studied
beyond the eighth grade. Those with children had priority. This did not prevent people
with college degrees from trying to get a chance to sweep streets or do other kinds of
menial jobs.

The state of São Paulo will also be offering 150,000 jobs to face the
rampant unemployment in the state. In São Paulo, the unemployed today need an average of
18 months to get a new job, two months more than in 1998. Even those with unemployment
insurance are not getting adequate relief since this insurance lasts only for five months.

According to some experts, the national program of public work will
only be effective if it is capable of absorbing close to 1 million unemployed people. In
an interview with O Estado, Unicamp’s (University of Campinas) economist Márcio
Pochman proposed urgent and dramatic measures by the government, including the creation of
public restaurants, bathhouses, and health clinics, as well as massive investment in
infra-structure to offer jobs. He said, "If we want to discuss job fronts, we have to
think about absorbing at least 600,000 to 800,000 people, otherwise the programs will not
have the effect of combating the negative cycle of the economy and employment."

Child Work

Together with unemployment, the employment of children has also
increased in the country. Among the most common activities for children who work are
paperboys, counter attendants, office boys, and domestic helpers. The practice is
prohibited by law through the Federal Child and Adolescent Statute, but it is believed
that in Rio alone there are 1.5 million youngsters between the ages of 10 and 17 who work.

A study conducted by Universidade Federal do Rio de Janeiro with
employers, parents, teachers and the children themselves shows that the idea of children
working is universally accepted. Close to 90% of these children’s parents believe that
working is an educational activity for their children and that the job does not interfere
with school. Even teachers (67% of those interviewed) see work for children as something
positive. Besides, more than half of these youngsters say that they consider their bosses
as a second father, somebody who listens to them and gives them advice.

"Sure I am in favor of eradicating child work, but let’s not be
hypocrites," said one of the authors of the study, researcher Alda Judith Mazzoti, in
an interview with Jornal do Brasil. "The majority of the youngsters come from
poor families, which are not able to support themselves. For them, a paying occupation is,
besides being a factor of independence, a way to avoid criminality. What kind of childhood
do these slum children have? Their parents work the whole day and they are left home at
the mercy of drug traffickers, violence and a lost bullet. I am in favor of ending child
labor, but you cannot do this overnight."

Another indicator of the unemployment crisis is the steep surge in
hocking at the state savings bank Caixa Econômica Federal, the only institution allowed
to offer these loans in Brazil. The Caixa pawning practice was created by Emperor Dom
Pedro II in 1861 under the name of Monte de Socorro (Help Mountain) and was used even by
slaves who utilized it to buy their own freedom.

Pawning had increased by more than 60% from $2.8 million in December
1998 to $4.5 million in March. Everyday, around 4,000 Brazilians take their possessions to
pawn in one of Caixa’s branches spread all over the country. The most common object for
hocking is the wedding ring, with the fanciest ones guaranteeing as much as $1700 in
loans. For this kind of loan, Caixa charges an annual interest of 45%—a rate
considered low in Brazil—to amounts of up to $170. For larger sums, the rates jump to

"We cannot continue to have programs that distribute basic food
baskets indefinitely, because this is shameful," said President Fernando Henrique
Cardoso. "We need to create more jobs and working conditions conducive to a positive
environment, so people can have access to a standard of living that does not drive them to
receive a basic food basket. We have to offer more dignity to the human condition, so
people can live without assistance. Either Brazil participates as more dynamic society in
the world being molded into the next century or we will be condemned to irrelevancy,
poverty, misery and exclusion."

The presidential talk happened early July during the launching of a
federal plan called Active Community Program, which intends to promote economic autonomy
among the poorest Brazilian cities. While bemoaning state paternalism on one hand, Cardoso
and his team were celebrating the fact earlier this year that the union distributed, in
1998, 30 million basic food baskets to the poor at a cost of $217 million.

The President hailed the Active Community Program as a step in the
right direction. This effort intends to make government, businesses and national and
foreign NGOs (Non Governmental Organizations) join forces. The residents from the poor
localities themselves helped by federal technicians will be offered the opportunity to
create their own projects to develop their region using the available resources in the
area. The government’s announced goals are to include 1000 cities in the program by the
end of the year 2000. Initially, the plan will reach only 133 cities—five in every
one of the 27 states—all situated in rural areas with less than 50,000 inhabitants.

Real Five Years

Despite all the displeasure with the present administration and the
perception that Cardoso reneged on his promises of taking care of the country’s social
ills, the Brazilian population continues to back the real, the new currency created five
years ago, which ended a succession of disastrous economic plans incapable of stopping an
inflation that at the creation of the new currency was 21.26 percent a month. The monthly
inflation has fallen to 0.05 percent now. The cost of living index in Brazil dropped from
911 percent in 1994, the year before the introduction of the real, to 0.5 percent last

While the fifth anniversary of Plano real in June was received in the
media with phrases like "we are living in a Brazil without hope" and "our
economy is now being managed by nationless capitalism", a poll conducted by
InformEstado—a subsidiary of media group O Estado—revealed that 55 percent of
the greater São Paulo residents are in favor of the Plan even after the recent adoption
of the free exchange that makes the dollar jump from $1.20 per 1 real to $1.80.

Naturally, the backing is much more lukewarm than in years past. In
1997, 71 percent of the population approved of the plan and such approval hadn’t gone
lower than 65% previously. Today, 16.6 percent say that they are totally in favor of the
plan, while another 38.4 percent talk about being partially favorable to it. On the other
hand, 14.6% declared themselves entirely against the Real Plan, while another 14.9% said
to be partially against it. Almost half of the people interviewed believe that the plan
worked out well. While 30 percent said that they are spending more in restaurants and
leisure, 40 percent stated exactly the opposite.

At the end of June, the government was not celebrating the fifth
anniversary of the real as it has done every year since the creation of the Real Plan in
1994. With 35 million Brazilians unemployed, there is hardly any reason to celebrate the
date. Instead, the President got together with his economic team to discuss ways to deal
with unemployment. According to the government’s own admission, the economy will not grow
but shrink this year. There are hopes that there will be a 2 percent growth in the year
2000. This is only wishful thinking at the moment, though.


Managing the Brazilian economy has been a tough act. While the US has
had only two Federal Reserve chiefs in the last 20 years, Brazil had 20 Central Bank
chiefs during the same period. In recent months alone, there were three of them. Gustavo
Franco, who had defended the so-called foreign exchange anchor maintaining a fixed
exchange rate, was replaced by Francisco Lopes, who idealized a complex model known as
"endogenous diagonal band".

Lopes’ passage was short-lived, however, and respected trader Armínio
Fraga Neto, who was a former hedge fund manager for the billionaire George Soros and
part-time teacher of International Finance at Columbia University was chosen to take his
place. His main credit is to have cooled consumer demand and drawn in foreign investment
by boosting interest rates to 45 percent. Since then interests rates have declined and are
continuing to fall.

At the end of June, while talking in Rio to other chiefs of state
during the summit between Latin America and Europe, President Fernando Henrique Cardoso
drew a rosy picture of the Brazilian poor, telling about their ambitions: "We noticed
that, besides wanting to master the Portuguese language, the poor people of Brazil want to
learn two other languages: the Internet and English." The President cited a
non-identified study in which a poor mother says: "If the IMF (International Monetary
Fund) is in Brazil why shouldn’t my children learn English?" As expected, Cardoso’s
comments were mocked by the local press who frequently accuse him of being out of touch
with the poor.

While DIEESE (Departamento Intersindical de Estatísticas e Estudos
Sócio-Econômicos—Interunion Department for Statistics and Socio-Economic Studies)
numbers show that 1.7 million people or 20% of the Greater São Paulo population fit for
work are without jobs, companies and job recruiters alike have used the excessive offer of
candidates to impose absurd requirements of them. As a way to trim the number of
applicants, one common requirement is that the candidates have completed high school even
for menial jobs like cleaning up.

Some companies want their secretaries to be trilingual even though
Portuguese is the only language they need for the job. And it’s not rare that experienced
sellers are also required to have their own car, cellular phone and computer. The practice
has come to such extremes that there are even firms advertising for "trainees with

In order to prevent people from fainting when waiting in
line—something becoming more and more common everyday—to apply for a job,
recruitment agencies have been offering food. The thousands of unemployed who line up
everyday at the Centro de Solidariedade ao Trabalhador (Center of Solidarity to the
Worker), which is maintained by workers’ unions in São Paulo, are offered a mortadella

Daily newspaper O Estado de S. Paulo cited unemployed Roni
Antonino de Carvalho, while waiting in line: "I think nobody really knows how
important this lunch is, what a blessing it is for people who like me have no money. When
the bread with mortadella arrives, I think about that time during mass when the priest
says, "blessed are those invited for the supper with the Lord".

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