Brazil’s pension reform seems in jeopardy. By showing weakness
against the judiciary, the
Lula administration has put its credibility
at stake. Voters are starting to wonder whether Lula is a
paper
tiger and foreign investors are selling off Brazilian securities.
The Brazil risk is rising once again,
as is the dollar.
by:
At the time of this writing, President Luiz Inácio Lula da Silva should have been packing his bags. He was due to visit
South Africa and Namibia as well as three Portuguese-speaking countriesAngola, Mozambique and São Tomé and
Príncipe. However, domestic problems arising from the government’s pension reform proposals have led to the trip being
postponed. Lula’s top advisers want him around to have the final word on last-minute alterations if the government is to win the
first vote on the issue, which is set to take place in the Lower House on August 6.
While one can see that this might not be the best moment for the President to spend 10 days in Africa, one cannot
help but ask whether postponing the trip was really necessary. After all, the government has had the whole of July, when a
special session of Congress was held at great public expense, to resolve points of contention. Modern technology means that
Lula could be in virtual contact throughout the trip, and still make key decisions.
However, this is a pointless criticism made by a foreign observer who should know better by now. The Brazilian
way of facing a crisis is simply to ditch everything at a moment’s notice, even though this may cause offense to others, and
tackle something which, with a bit of organization and preparation, should have been settled before it flared up into a crisis.
The fact that Lula is staying at home shows that either he cannot trust his ministers and advisers to deal with the
issue, or that he is a hands-on person who wants to be involved personally. The former is the more likely reason. Having made
this decision, let us hope that Lula also does his homework, and understands what is involved before making any more
concessions.
His presence will not ensure that the original proposals will be passed. Not only does his own PT party have a
significant number of people who disagree with key aspects of the proposals, but support among the other seven parties in the
mosaic which forms Lula’s alliance is shaky. The fear is that the proposals will be watered down so much that, in the end, they
will not be enough to lift the crushing financial burden currently imposed by the pension system on public finances.
Government Gives Ground to Threats
A small but tenacious group of civil servants who went on strike, and members of the judiciary who threatened to go
on strike, have shaken the government. Instead of taking on these groups, the administration has given ground. Although
Lula lashed out at judges and prosecutors last week, and accused them of wanting privileged treatment, it looks as though this
was just rhetoric and his words will not be backed by action. We will have to wait and see what happens in the coming week,
but if Lula has postponed his African trip just to stay home and oversee further concessions, then he will be doing the
country an injustice.
By showing weakness against the judiciary, the government has put its credibility at stake. Domestically, voters are
starting to wonder whether Lula is a paper tiger and, externally, foreign investors are selling off Brazilian securities; the Brazil
risk is rising once again, as is the dollar. On Friday, August 1, the U.S. dollar rose by 2 percent against the real, and crept
over the R$3 level to end the day at R$3.03. The Brazil risk jumped by 8 percent and here, at home, the São Paulo stock
market, the BOVESPA, fell by just over 3 percent.
MST Gets the Blame As Usual
It was interesting to see in some reports that the latest activities by the landless peasant movement, the MST, and
urban homeless people’s groups, have also been held responsible for this loss of confidence in Brazil. Since the media is
overwhelmingly hostile to the MST, it is difficult to accept much of its coverage of the MST’s activities. The MST has been around
for a long time, and the idea that foreign investors are suddenly becoming jittery because of it is hard to believe.
This increased tension over the MST’s activities led to a small demonstration in São Paulo this week by a
shadowy, reactionary organization called the TFP—the initials stand for Tradition, Family and Property. This is part of an
international anti-Communist grouping, which also claims to be Catholic. Its members are generally creepy-looking, middle-aged
older men who wear medieval cloaks, and are the kind of people who supported military rule.
Although they claim that the family is one of their sacred causes, it is noticeable how often they are accompanied by
younger, rather simple-looking men, and teenagers as they walk about the upscale Higienópolis district where they have their
headquarters. In nearby Santa Cecilia they have set up a "shrine" consisting of a small statue of the Virgin Mary, which they
say was bombed by Communist terrorists in the 1960s. Having people like this on the streets is a much more serious threat
to Brazilian democracy than peasant squatters.
John Fitzpatrick is a Scottish journalist who first visited Brazil in 1987 and has lived in São Paulo since 1995.
He writes on politics and finance and runs his own company, Celtic Comunicações
www.celt.com.br, which specializes in editorial and translation services for Brazilian and foreign clients. You can reach him at
jf@celt.com.br
© John Fitzpatrick 2003
This article appeared originally in
Infobrazil, at www.infobrazil.com