Source:
Jubilee South - Brazil
Wed Jan 17 2007
Brazil paid off its debt to the IMF ahead of schedule. Therefore, according to the government, we would have stopped being a colony. Right? Wrong. The country has never lived under the threat of so many neo-liberal reforms as it does nowadays. Social Security Reform, Labour Reform, constitutional changes to cut social spending, privatisations. These are some of the measures under study by the government for 2007.
Maintaining primary surplus at 4.25 per cent of GDP also represents a "dogma".
Social Security Reform
Regarding social security reform, for instance, a recent document by the government’s economic team proposes delinking the minimum wage from social security benefits, delinking readjustments corresponding to active workers and pensioners, and setting full retirement age at 67; before that age, it would only be possible if subjected to lower benefits. Other measures under study are the eligibility criteria and risk-benefit calculation, such as health insurance and disability and death pensions. The government also stated that in February 2007 it will be putting the regulations of the 2003 Reform to the Social Security System on the right road, thus opening the way to Pension Funds. It is worth remembering that in Argentina pension fund assets were allocated to debt bonds and lost most part of their asset value when the Argentine government announced a 75 per cent reduction in the value of its debt. The recent case of Varig also showed how serious can the lack of security of these Pension Funds be, with retired people having to return to work in order to survive. This shows the risks being faced by workers in the light of social security privatisation through these funds. Social security means safety rather than risk.
Labour Reform
With respect to the labour reform, this was in part carried out by means of the recent approval of the so-called “Super Simples”, which will comprise nothing less than 80 per cent of Brazilian companies. The latter will be exempted from basic procedures such as placing “Working Plans”in their facilities, registering workers’ leave in their respective books or files, communicating the Ministry of Labour and Employment about collective holidays being granted, or about the employment or registration of their trainees in National Learning Services. Thus, the possibility of job supervision aimed at verifying the fulfilment or not of workers’ basic rights by companies remains dramatically constrained. Another measure of the “Super Simples” project is the impossibility of penalising entrepreneurs who fail to comply with labour regulations.
Social spending cuts and privatisations
The policy proposal aimed at cutting spending within the next 10 years, drawn up by Delfim Netto and accepted by Lula (the so-called “Zero Nominal Deficit”) was translated into some recent proposals made by the government’s economic team. Among them is the modification of the Constitutional Amendment No. 29 – ensuring an annual increase of health resources by earmarking a percentage of the nominal GDP growth rate. The idea of the government is to create another index that would halve said annual readjustment during the next 10 years. Another possibility is to include health spending together with sanitation for the purposes of Amendment No. 29, which therefore implies that the government would be allocating fewer resources to the health sector.
A further measure consists in limiting expenditure growth corresponding to civil servants’ wages for the next 10 years (which wipes out the possibility of recovering previous losses). Another possibility – recently made known by the Minister of Planning – is an increase in DRUs (de-earmarked federal revenues), which allows the government to freely allocate 20 per cent of revenues related to certain type of social spending.
With regards to the minimum wage, in a recent meeting between the government and trade unions, it was agreed that the annual readjustment rate for the next four years will be based on inflation plus GDP variation over the past two years. That is to say, given the last projections for Brazilian economic growth in the next few years, the minimum wage will barely increase by 3 per cent per year in real terms. It is always worth remembering that the “minimum wage necessary” (calculated by DIEESE - Inter Trade Union Department of Statistics and Socio-Economic Studies) stood at R$ 1,510 (1 U$S = 2 R$) in October 2006. This is the amount that ensures the fulfilment of Article 7 of the Constitution, according to which the minimum wage is a workers’ right capable of satisfying their basic living needs and those of their families with housing, food, education, health, leisure, clothing, hygiene, transportation, and social security. However, with the readjustment rate defined by the government and trade unions, 50 years will be necessary for the minimum wage to reach the amount of R$ 1,510. And this considering an annual 3 per cent GDP increase during the period.
Another measure under study by the government is the expansion of the Pilot Investment Programme (PPI), which by IMF imposition, can only comprise those undertakings that bring financial returns. Most part of these investments take place in the transport sector, such as the reparation or construction of roads. Once the state makes major expenditures, these undertakings can be transferred to private initiatives, which will be charging fees or tolls. That is to say, the PPI is truly another way of financing privatisations.
Collective Action Clauses (CACs)
Another IMF imposition is the adoption of the so-called “Collective Action Clauses” (CACs) in external bond issues. It should be highlighted that several countries adopted this clause in 2003, once the IMF have given up such proposal, idealised by IMF Deputy Managing Director, Anne Krueger. Said proposal stipulated that main creditors could end up setting the terms of debt renegotiation in case of non-payment, which represents an insult to sovereignty. Curiously enough, according to media reports, CACs bear the same principle: holders of 75 per cent of the debt value will be able to define renegotiation terms before New York courts, which alsoo represents a lack of respect for sovereignty.
Even more absurd was the recent answer from the Economy Ministry to the information request submitted by Senator Heloísa Helena (P-SOL/AL), who requested the content of CACs: “With regards to the contents of current CACs in bond contracts, information will be supplemented later on, once the translation of contracts is completed ”.
That is to say, beyond not revealing the content of clauses, they also made it clear that contracts had been signed in a foreign language.
Preparing the struggle against neo-liberal reforms
In 2007, we have to continue and strenghen social struggles in view of the threat posed by neo-liberal reforms, and in view of the intensification of the current economic policy and the subjection to the impositions of lenders.
At the present time, it is important to remember the victory of French people against the “First Employment Contract” bill in early 2006. On such occasion, all workers, both young and old, civil servants, and other active workers and retired people, joined together for massive demonstrations, thus organising a huge opposition that resulted in the withdrawal of the bill, besides compromising the political future of Prime Minister Dominique de Villepin.
But that was only made posible because everybody managed to sense the extent of such reform which apparently would just affect young people. This is also our challenge.
This article was first published in Portuguese language by the Citizen Debt Audit - newsletter Nº16
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