Protests begin against IMF austerity measures

By Molly Charboneau, Workers World, 29 October 1998

On Oct. 15, Indians from several nations in Brazil demonstrated in the capital against a harsh government austerity plan that has been imposed by the International Monetary Fund in exchange for $30 billion in loans to the Brazilian government.

Warriors from the Kaiapo tribe demanded that frozen federal funds be released for essential food and medicine. We believe that the government cannot put Brazil's 215 Indian nations on the negotiating table at the IMF, said Marcos Terena, a Terena tribal leader.

The Indigenous peoples' demonstration is the first of what will likely be many protests over some $25 billion in severe cutbacks and layoffs demanded by international finance capitalists to secure their Brazilian investments.

With a capitalist economic crisis sweeping the globe, the imperialist bankers and CEOs fear Brazil's $800 billion economy, the world's eighth largest, may be the next to crumble due to contagion--foreign investor flight. The stakes are high for U.S. finance capital. Brazil purchases nearly 20 percent of U.S. exports, and thousands of U.S.- owned factories are located there. So the IMF is preparing a loan package for Brazil, but extracting a stiff price in return.

BACKGROUND TO FINANCIAL CRISIS

The fifth largest country in the world, with 163 million people, Brazil accounts for 45 percent of goods and services produced in Latin America. Over the last four years, under President Fernando Henrique Cardoso, the Brazilian government lowered inflation from over 2,000 percent to about 4 percent and introduced a new currency, the real. But all of this was dependent on large inflows of foreign capital.

In fact, Cardoso became president by allying his Social Democratic party with conservatives and embracing neoliberal or imperialist policies. These included further opening the country to foreign finance capital, privatizing state-owned companies and reducing the role of big government. In other words, increasing exploitation and cutting social spending won by the workers--sort of a Contract on Brazil like the Contract on America.

The world financial crisis began affecting Brazil in 1997. The country's trade deficit rose because it could sell fewer exports in Asia. Cardoso raised interest rates to 50 percent to keep foreign investment in Brazil, but this brought the economy to a standstill.

Unemployment climbed as high as 18 percent in some industrial areas, according to Brazil's unions. Food prices skyrocketed. Landless farmers, hard hit by drought, ransacked food stores and liberated food shipments to avoid starvation. The government deficit grew to $100 billion or about 8 percent of gross domestic product. The gap between the wealthy and the poor is now the widest in the region.

HEMORRHAGE OF $2 BILLION A DAY

In August, Russia devalued its currency and defaulted on foreign loans. Fearing similar losses in Brazil, finance capital began to flow out of the country at the rate of up to $2 billion a day--roughly $29 billion so far. Foreign reserves were drained, threatening a devaluation of the real.

Devaluation would mean fewer U.S. goods could be bought in Brazil, not to mention a pay cut for all Brazilian workers. And the Brazilian government, companies and banks could not afford dollar debts, meaning foreign debts might not be paid.

Under heavy pressure from imperialism, the Brazilian government has been scrambling to replenish foreign reserves. The government has auctioned off lucrative state- owned banks, businesses and utilities--built by the labor of Brazilian workers--for hard currency.

The government has also gone to the IMF for a bail-out package. Lula da Silva of the Brazilian Workers Party accused Brazil's finance minister of asking for the IMF's blessing on his knees. In return for the IMF loans, the Brazilian government promises to take back billions of dollars in educational, health and social service benefits from the workers.

Planned structural adjustments include forcing civil service workers to be evaluated and fired if they fail their reviews; cutting and capping social security and pension benefits, and requiring workers to contribute more to them; and passing along more costs--including costs for health care and locally distributed social services--to state and local governments.

The budget adjustment will be dramatic, definitive and permanent, promised an aide to Brazil's central bank president. But Brazil's workers, landless farmers, Indigenous peoples and other oppressed, with their rich history of struggle, will not be passive spectators to this wholesale robbery.