Brazil: Even the BRICs are showing signs of crisis and social fragmentation

Despite the obvious differences, the economic and political achievements of Chavez and Lula are essentially based on two factors. The first is the abundance of strategic raw materials such as oil and, in the case of Brazil, also iron mines. The second is the possibility of spending the crumbs from these revenues to support their electoral base and guarantee power in populist guise, smuggled in as socialism, or something of that ilk. The international crisis has shown, however, how these experiences in Venezuela and Brazil are simply tied to different forms of state capitalism despite the privatisations in President Dilma Rousseff’s Brazil.

The recent demonstrations which erupted in all major centres, from Sao Paulo to Brasilia, from Belem to the cities of the interior, are demonstrating an economic and social hardship that goes beyond the demands themselves. What had been over-hastily called one of the BRIC countries economic paradises has suddenly become an inferno, whose flames are igniting the whole country. The spark that started the fire was the increased cost of public transport and the money/spending allocated for the organisation of the World Cup of 2014. In a country where football has always represented "the opium of the people", this episode of revolt becomes even more severe and symptomatic of a dire social reality, full of unpredictable outcomes.

Setting aside for a moment the shining showcase of recent Brazilian economic successes, a deeper analysis of the economic factors that triggered the riots shows the reality is clearer and more dramatic, both in terms of a slowing down in the machinery of production and in the social conditions of the majority of the population.

In the first place it has to be noted that the international crisis has not spared the BRIC countries and certainly not Brazil, if only by a drastic decline in exports on which the economic "miracle" of Brasilia was based for the last decade. Some facts: GDP growth went from 6.3% in 2008 to the current 0.6%. A significant decrease accompanied by a reduction, although less relevant, in foreign investment. Domestic credit has contracted in the face of a strong private indebtedness, both for businesses and households. The new government of President Rousseff, chosen heir by Lula, decided to revive the economy by devaluing the national currency, the Real, but the manoeuvre has not had the desired effect. On the contrary, it has had serious consequences for workers' wages and salaries. The government has also reduced tax incentives for consumption, thus encouraging household debt, and in a similar manoeuvre decreased the amount of the guaranteed minimum wage, which, in addition to the institution of the "Bolsa Familia" (which aims to grant micro-credits for mini-economic activities and support for school costs), has been the workhorse of the scheme, or rather the ruling party (Workers’ Party or PT) since the time of Lula. The ruling party has always worked closely with the energy giant Petrobras, the real pivot of the entire national economy, the provider of profits and corruption, extortion and jobs. The pact between the government and the energy giant was simple and effective while things were going well. The government guaranteed a monopoly to Petrobras, it indulged all its economic and legal requests, including those relating to the "needs" of deforestation and devastation of the environment to enable the pipelines carrying the "national wealth” to pass through. In return, a portion of oil revenues ended up in the coffers of the ruling party which ensured the continuity of policy and the management of the country by granting some crumbs to “business”, to the electorate, to working-class neighbourhoods and the favelas, with economic aid, schooling of children and employment “guaranteed”.

The wind of the international crisis that now blows over the Amazonian nation has been enough to alter the fragile balance on which the fortunes of Brazilian capitalism are based as well as its relative social peace, bringing it turbulently into crisis.

In the space of five years, as we already said, GDP has declined to almost zero. Exports not only of oil, but also of iron, soyabeans and coffee have significantly declined. In the textile industry, production has decreased by 10%. The welfare state has begun to be dismantled. The 110 billion Reais of loans to the Bolsa Familia have been significantly reduced. In this regard there are no official figures, but the domestic press is denouncing the phenomenon. In addition the institute for the minimum wage (guaranteed by crumbs from declining oil revenues) is tottering dangerously.

While the crumbs are declining, the board of Brazilian capitalism offers a new “diet” for young people and proletarians. The poor are increasing in a society where poverty has always been on the agenda and not just in the favelas. The large agricultural concentrations were allowed to create a "rural proletariat" numerically reduced in the face of a peasantry which works in the large private farms at the level of near slavery. Wages are very low and, very often, not even enough to eat and sleep, for which workers are forced to borrow from the masters, thus becoming a form of property based on debt and blackmail. Brazil is one of the countries where the gap between the concentration of wealth in a few hands and the extent of poverty is highest. The most dispossessed, as modern capitalism teaches are women and young people. Faced with this situation, the state has budgeted to spend billions of Reais in preparation for the World Cup in 2014. Billions that are taken away from health care, from the schools and from other items of the welfare state that the government itself was boasting about. In addition, inflation has reached almost 6%. It is destroying the purchasing power of wages and salaries. If it is true that over the last decade wages have on average increased by 700%, it is equally true that the cost of consumer goods has increased by 1500%, or more than double. Today, a worker in the public sector earns about 1200 Reais, slightly less than 400 euro per month, while a worker in the private sector has barely 300 euro.

It is in this context that the conditions for the protests have matured. The withdrawal of legislation to increase public transport fares and the promises of the President on television are worth nothing. Something quite different was boiling in the cauldron of Brazilian society, and perhaps this is just the beginning.

fd

Wednesday, June 26, 2013