Brazil under a Labour government part two

Contemporary Review, Oct, 2004 by Joaquina Pires-O'Brien

FOR reasons that can only be speculated upon, the usual truce that the media tends to give to new incumbents, seemed to have extended beyond the first three months of Brazil's new government. By the middle of 2003, however, two distinct perceptions of this Labour government had begun to emerge in the press. On the one hand there was the surprise of the sceptics, and on the other, the disappointment of the sympathisers.

Lula da Silva's announcement that he intended to carry on with the reforms, surprised the sceptics and disappointed his sympathisers. Both groups kept a close eye on the new President to see what his next move would be. Once the fun of the election was over, the time arrived for Lula da Silva to show some action, especially by tackling the growth of the internal deficit, which represented some 5 per cent of the country's GDP, and by continuing to pay the instalments of Brazil's foreign debt, estimated at US$ 210 billion.

The discontent that had been brewing within the Workers' Party soon came out into the open. Hardliners, including many privilege holders, accused President Lula da Silva of betraying his socialist grassroots by adopting the neo-liberal position of his predecessor. They demanded much more from the President than those outside the government. To them, it was not enough to manage the economy responsibly, while keeping inflation at bay, and saving up hard currency to pay off the debt. They wanted the President to do all that and to push the extensive social agenda of the Workers' Party, plus sorting out the country's energy shortage. If such a tall order coming from the ranks of his own party came as a surprise, Lula da Silva's unabated conviction that he could do it all was an even greater surprise.

If the first year of the new government ended without things to boast about, at least the predicted melt-down did not take place. There were even a few positive outcomes, such as the much welcomed cut in interest rates by 'Copon', Brazil's Monetary Policy Committee. The biggest cuts in interest rates came between August and December, when 7.0 points were cut, bringing Brazil's interest rate down to 16.5 per cent. Although this figure is still large and further cuts are expected in 2004, part of it is due to the 6.5 to 7.0 per cent rate of inflation embedded in it.

Another positive sign from the new government is the fact that it seems keen to solve the energy shortage in both domestic and industrial usage. Although the supply still outweighs demand, the reverse situation occurred during 2000 when production fell due to the low water level of certain hydroelectric dams. Increasing the capacity of Brazil's power plants solves only part of the problem. Due to Brazil's large territory, there is also the problem of bringing the power from the place where it is generated to consumers. At present Brazil's grid fails to cover some of its most remote parts, like the Upper Solimoes river, in the state of Amazonas, and a strip that goes from Southern Para to the Atlantic coast. The grid also misses a number of pockets in the states of Tocantins, Bahia and Maranhao. It is estimated that some ten million Brazilians still live without electricity. The government hopes to solve this problem by 2008, mainly through investments from the private sector.

An extensive social agenda consisting of a series of programmes like Fome Zero ('Zero' Hunger), Bolsa Familia (Family Assistance) and Primeiro Emprego (First Job) was set up to fulfil the socialist expectations of the new Labour government. During 2003, only a few of these welfare programmes were implemented, due to the self-imposed financial austerity aimed at controlling the country's finances. The Labour government announced that it hoped to push these harder in 2004. Critics of the new welfare programmes have argued that they are short-sighted and populist. Monica Weinberg, of Veja, pointed out that the Workers' Party had simply reintroduced old programmes with a new spin, like the Bolsa Familia programme, which is an amalgamation of existing federal social programmes, created by the former government. To her, the cost-effectiveness of the Bolsa Familia programme has now worsened by its repetition at the level of local government. Another critic of the government's social programmes is Antonio Ermirio de Morais, a leading Brazilian businessman and owner of the Votorantim Group, to whom the government's social programmes are mere charities that only serve to detract from Brazil's biggest problem, which is unemployment.

Unemployment is indeed the biggest worry of Brazilians, as several research polls have confirmed. The Workers' Party is not unaware of the problem, and one of the campaign promises of President Lula da Silva was to create ten million new jobs. On 28 August, 2003, on the occasion of the twentieth anniversary of CUT, Brazil's largest trade unions syndicate, the President spoke about the need for a labour reform aimed at facilitating job creation in the private sector.