SAO PAULO, Oct. 29 — Immediately after the Oct. 27 landslide election of Workers Party (PT) presidential candidate Luis Inacio (Lula) da Silva, editorials in the world major financial daily newspapers began telling Lula, as he is known widely in Brazil, exactly what he must do in the economic arena if he is to be true to his electoral pledge of fiscal responsibility and respect for the terms of the recent US$30 billion IMF “rescue” package. The Financial Times editorialists (Oct. 29) wrote:
“Mr. da Silva must act quickly to gain a reputation for economic responsibility. That means making the right appointments to senior economic positions, delaying pledges for social change and concentrating instead on a credible commitment to even tighter fiscal policy [than the current Cardoso government] until the debt to GDP ratio has fallen.”
For his part, Kenneth Rogoff, senior economist at the International Monetary Fund, warned that any way you look at it, “structural adjustment in Brazil, which the da Silva government must pursue, cannot be implemented without pain. … There is no other option if international economic confidence is to be maintained and Brazil’s entire financial system is not be wiped out.”
Herein lies the problem: If Brazil is to continue paying back the onerous foreign debt to its international creditors, it will have to earmark 3.6 billion Reais (Brazil’s flagging currency) toward debt repayment each and every month. This is money that will have to be taken out of the budget for public hospitals (already on the brink of collapse), schools and wages for public workers.
The watchdogs of international finance capital — that is, the IMF and World Bank — are demanding tighter fiscal policies than existed even under eight years of the Cardoso government. What would this mean, for example, for public workers in Brazil?
A letter addressed to Lula prior to the election by the Federal Workers Union in Brasilia underscores the impossibility facing the Lula government of addressing the needs of the mass of Brazilian workers — who voted for him and for the PT, seeking to put an end to eight years of fiscal austerity — while also abiding by the dictates of the IMF and World Bank. The federal workers wrote, in part:
“During the past eight years, our wages have been frozen. We need urgently a wage increase of 89.12% just to keep afloat. This figure was sent by the National Federation of Federal, State and Municipal Employees to the current president of the republic, Fernando Henrique Cardoso. It was accompanied by an entire list of demands regarding parity between active and retired public workers, recognition of a master contract for all public workers across Brazil, the restitution of essential public services that have been wiped out through privatization and deregulation, and the recognition of 56 basic rights for public workers that have been eliminated, among others.
“Mr. Cardoso has ignored our demands. He has signed an agreement with the IMF on debt repayment that will impose a Draconian structural adjustment plan and will leave Brazil even poorer than it was before. The condition dictated by the IMF for paying back the interest on the debt in the year 2003 would require cuts of an additional 53 billions Reais in the budget for public services alone.
“At the rate things are going, with Brazil being delivered to those who are simply pillaging our country and bleeding us to death, even the payment of our current salaries and retirement payments is under threat.
“Comrade Lula. We are convinced that now is the moment to change course. It is now or never. It was for this moment that the Workers Party (PT) was built 23 years ago and that it has grown into a mass party of the Brazilian working class. Today, millions of working and oppressed people are supporting your candidacy because they see in you and in a PT electoral victory the possibility of moving toward a dignified future for the youth and for those who work for a living. They see the possibility of paving the way to the creation of a truly democratic and sovereign country, where it is up to the people — and not the IMF — to determine our destiny.”
In his first public statement after winning the Oct. 27 election, Lula pledged swift action to reduce malnutrition and other social ills while also seeking to reassure investors that he would pursue a “moderate” and “responsible” economic course.
“Even with budgetary restrictions,” Lula stated, “we are convinced that from the first day it will be possible to act fast and creatively in the social area.” Lula went on to point to the example of Workers Party governments in Brazilian states, cities and towns to underscore his point that fiscal responsibility and “creativity in the social area” can go hand in hand to meet the expectations and aspirations of “all Brazilian civil society.”
What “Acting Creatively” Meant in Porto Alegre
The concept of implementing fiscal responsibility while also promoting “creativity in the social area” is not a new one for the Workers Party, or at least for a certain wing of the PT.
In the city of Porto Alegre — and then at the level of the entire state of Rio Grande do Sul — this “creative” balancing act went under the heading of “participatory budget.” The PT city government of Porto Alegre was the first to implement this “participatory budget” process 13 years ago, calling it “an innovative form of governance.” Other municipalities and states governed by the PT later followed suit.
Today, many of those who, both within and outside the PT, advocate the creation a “Social Pact” among “all actors of civil society” in the aftermath of the PT landslide of Oct. 27th are pointing to the example of Porto Alegre’s “participatory budget” as the way forward?
What is the “participatory budget” and why has the World Bank characterized the PT-led city government of Porto Alegre as the “best pupil” of the World Bank and IMF?
The budget of Porto Alegre, like that of all Brazil’s cities, lies within a framework set by the federal government. This framework demands that each state contribute its share in servicing Brazil’s crushing $300 billion foreign debt. The state government, in turn, allocates to the municipalities in its own jurisdiction the share of the foreign debt they must pay. In this way, all state and municipal governments are tied directly into payment of the foreign debt. It is not left to the federal government to take care of.
The “participatory” aspect of the state and municipal budget allocation pertains only to a relatively small percentage of the overall budget. Whether or not to pay back the foreign debt, for example, is not up for discussion — even though this is the largest budget item. Payment of the debt is automatic, and has not — in fact — been questioned by the PT mayors or governors implementing this so-called “participatory” process.
In what sense is this process participatory? Associations, trade unions, NGOs — all on an equal plane — are called upon to define the budget priorities based on what is left over — after the payment of the debt. In other words, they are asked to determine how to “distribute” the budgetary shortfall; that is, they are co-opted directly into the administration of poverty. This is why PT activists across Brazil who disagree with this model have dubbed it “participatory austerity.”
For example, which is the priority: to repair the sewers, which break down on a regular basis, with deadly consequences in the shantytowns and poor districts — or to pay civil servants, who sometimes go for four, five, or even eight months without pay? Should a district healthcare clinic be closed, thus depriving thousands of working-class families minimal care, in favor of installing running water? Or should the reverse be prioritized?
By enlisting organizations — particularly trade unions — into making these debasing choices, what really happens is that these organizations cease to defend the specific interests of their members. Instead, they are transformed into relays for the policies dictated by the IMF.
The World Bank’s “Best Alternative”
It is therefore not surprising that the World Bank has translated, published and distributed widely a propaganda handbook written jointly by the past PT mayor of Porto Alegre, Tarso Genro, and Urbitaran de Souza under the title: “The Participatory Budget: the Porto Alegre Experience.”
In this World Bank handbook we learn, for example, that during the year 2000, 140 municipalities across Brazil – 73 led by the Workers Party and 67 led by “center-right” city governments – have implemented the “participatory budget.”
Likewise, the Brazilian mainstream press has devoted a great deal of attention to the “participatory budget.” A full one-page interview with Victor Vergara, World Bank administrator for Brazil, published by O Estado de Sao Paulo on March 5, 2001, gives further insight into the usefulness of the “participatory budget” for the proponents of the IMF and World Bank Structural Adjustment Plans (SAPs).
Vergara answers a reporter who asks him how the World Bank assesses the “participatory budget”: “It is one of the most positive and innovative administrative experiences to come on the scene in Latin America,” Vergara stated. “It is a modern method of governance that has awakened great interest throughout Latin America. … The World Bank has translated into Spanish the book by Porto Alegre Mayor Tarso Genro on the subject. We have already distributed 2,500 copies of the book in nine Latin American countries.”
When asked why the World Bank views this model so positively, Vergara replied: “It is a modern form of governance in that it transforms representative democracy into participatory democracy, into decision-making by consensus.”
When asked if such a model can be implemented only by “left” governments, his answer was unequivocal. “Not at all. The participatory budget has no ideological origin. It is simply a method for making decisions. … We are not saying that it is the ideal model, but it seems to us that it is the best alternative.”
Method to “Avert Social Explosions”
This “method of decision-making” is, in fact, fully in sync with World Bank policy. For many years now, World Bank President James Wolfensohn has been warning that as a result of the implementation of World Bank-IMF Structural Adjustment Policies, “the number of social conflicts and social explosions is likely to increase, the quality of our environment will be worse, and the disparities between rich and poor will be wider.” (Address to the Board of Governors, Washington, DC. Sept. 28, 1999)
To avert the risk of such social explosions, Wolfensohn has argued repeatedly for the need to co-opt the trade unions and social protest movements. Addressing a meeting of NGOs in Prague on September 22, 2000, Wolfensohn declared:
“What we are trying to do in as oblique way as we can is to convince the governments that you cannot impose development on communities or groups of people, that what you need to do is to consult so that they could own the process and that we don’t design something in Washington or La Paz, but that it includes the people.”
The World Bank president made specific the role ahead for the NGOs and, more broadly, for “civil society.” It was necessary, he said, “to give people a voice in development. … This means giving people an opportunity to actively participate in the identification, design and implementation of World Bank projects and lending.”
The World Bank’s World Development Report 2000/2001: Attacking Poverty summarized this strategy: “Social fragmentation can be mitigated by bringing groups together in formal and informal forums and channeling their energies into political processes instead of open conflict.”
Participatory Budget is Rebuffed at the Polls
Riding on his credentials as the PT mayor of Porto Alegre, Tarso Genro set his goals on a higher office, running for governor in the state of Rio Grande do Sul in the recent October 6 elections.
The results of this election were at odds with the results experienced across Brazil by the PT candidates for public office. Everywhere but Rio Grande do Sul, the PT vote increased dramatically over previous years. Ana, a leader of neighborhood organizations in Porto Alegre and member of the PT, explained in an interview with O Trabalho newspaper, her assessment of this electoral setback for the PT candidate for governor. She stated:
“Across the state, Tarso Genro obtained 11% fewer votes than his counterpart, Olivio Dutra, did in the 1998 election. In the case of Porto Alegre, his vote total was 16% lower than Dutra’s. And this occurred at a time when in city after city across Brazil, the PT vote skyrocketed in the first round of the election. Hence, the PT, which held the governorship of the state now risks losing that post. [Note: The interview with Ana was conducted before the second round of the election, held Oct. 27. Now the results are in, and Genro ended up losing the election. The PT hence has lost the governorship of Rio Grande do Sul.--JP]
When asked if the PT’s record implementing the “participatory budget” had anything to do with this loss of votes, Ana responded:
“There is no doubt in my mind. All you have to do is look at what happened to Ubiratan de Souza, budget chief for Porto Alegre and co-author, with Tarso Genro, of the World Bank’s handbook showcasing the model of Porto Alegre. De Souza ran for the National Assembly under the slogan, ‘I am the candidate of the participatory budget.’ Everywhere he went — on the TV, the radio, at PT rallies — he could not stop hailing his record as the overseer of this ‘participatory budget’ process.
“What was his result in the first round on Oct. 6th? De Souza obtained only 8,000 votes in the entire state of Rio Grande do Sul, when he needed a minimum of 25,000 just to qualify for the second round.”
The interviewer pressed on, asking how she could be so sure this vote total was, in fact, a rebuff by the voters of the consequences of this “participatory budget” process. Ana responded:
“Look. People aren’t stupid. At first we believed what they were telling us — that we would finally have a voice in determining the budget priorities of the population. And we were patient, realizing that not everything can change overnight. But then we began to see that the priorities we put forward were never selected for review and implementation by the overseers of the budget process. We were always told that others were worse off than we were, and that our issues were ‘not a priority.’
“Little by little, we began to see what was going on. We came to understand that the PT municipalities working under this ‘participatory’ process were dutifully paying back the debt to the foreign investors — who, we should point out, did not invest a cent to help the Brazilian people. Why should they, the rich and super-rich who have simply speculated on our resources, get paid back when we are hurting so badly? We were told that the issue of the debt could not be discussed or challenged. How democratic is this?
“We learned that they were abiding strictly by the Camata Law, which — at the behest of the IMF — requires that wages paid to public workers not exceed 60 percent of the budget. In fact, in Porto Alegre, they ‘bested’ the IMF by reducing this amount to 48 percent — which meant massive layoffs of public workers, and, naturally, mass strikes by teachers and other categories against the architects of the ‘participatory budget.’
“But most important, we saw that our basic needs were not being addressed, and that things, in fact, were getting worse and worse. … The people saw through this “participatory budget” fraud and simply wanted nothing more to do with it.”
Ana went on to recount in detail how the neighborhood organization which she leads was lied to time after time, and how the neighborhood health clinics were gradually shut down.
So today, just days after the election of Lula to the presidency, Brazil’s working people have served notice that they want change — not more austerity via “responsible fiscal policy.” They have also served notice that they are no longer easy prey for the promoters of “creative” and “innovative” social policies premised on “Social Pacts” and “participatory budgets.”
What the Brazilian people want is a PT government that begins to address their demands and that breaks with the IMF precisely so that it can fund the jobs and social programs that are needed to put Brazil back on its feet — free from the dictates of the multinational corporations and the international institutions of global capitalism.