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Issue 36, March 1999

Latin American rising

    Poverty and inequality
    Dollar dependency
    Populist politics
    Precarious presidents
    Struggle and strategy

The onset of the crisis for the Brazilian currency, the real, signals the end of the dream of the continent's ruling classes that a new dawn of stability and growth had begun. For the working class, unemployed, peasants and land workers it will mean worse poverty and exploitation. TONY SAUNOIS, Secretary of the Committee for a Workers International, looks at the likely effects of this continental crisis.

FOR 2,800 FORD workers in São Paulo, Christmas 1998 began when they received redundancy letters from their employers on 24 December. The New Year began with all of the sacked workers reporting for work and refusing to accept the lay off. Two demonstrations of more than 10,000 workers marched in support of them. At the same time, the state of Minas Gerais imposed a moratorium on debt repayment to the Federal government and triggered the devaluation of the real, which had previously been pegged to the US dollar. Since then the real has plunged by approximately 50%. And the crisis is only just beginning, in Brazil and in the rest of the continent.

The scale of this calamity and its impact on the whole region should not be underestimated. Brazil, the world's eighth largest economy, accounts for more than 40% of the total regional GDP. This crisis will provoke further shocks throughout the world economy. For more than a decade Latin America has been portrayed as the success story for the application of neo-liberal policies. Trade tariffs have been lowered and Mercosur, the southern cone trading area, was developed. The prospect of Mercosur growing into a Latin American version of the EU was trumpeted by a series of capitalist commentators.

The scourge of hyper-inflation that swept the continent in the 1970s and 1980s had been burnt out of the system through the application of 'sound' monetarist policies and privatisation. Record growth rates were obtained in Argentina. Chile, which achieved average annual growth rates of 7.8% for more than a decade, was adopted as the 'Tiger' of Latin America. By 1992 it had attained 34th place out of the top 117 countries ranking in per capita purchasing power.

Now, under the impact of a new world economic crisis, these 'advances' are poised to be reversed. The new contradictions that have been built into the continent during these developments are certain to unleash new conflicts and upheavals.

  top     Poverty and inequality

DESPITE THE ECONOMIC growth that was achieved, the gap between rich and poor has not been reduced or the poverty of the masses on the continent alleviated. Even the Chilean Tiger remained in the 'top ten' of regressive income distribution, with 50% of national income going to the richest 10% of the population and the other 50% being divided amongst the remaining 90%. Although productivity has increased by 60%, average wages in real terms are still below the level achieved in 1972, under Salvador Allende's Popular Unity government.

In Brazil more than 50% of the work force still receive less than US$2 per day and the richest 10% of the population take more than 50% of the total income. The staggering concentration of land ownership is amongst the worst in the world. This says everything about the distribution of wealth in the economic powerhouse of the continent. One percent of landowners control 44% of productive farm land. Less than 3% of the population hold nearly two-thirds of Brazil's half billion arable hectares. At the bottom end of the scale 53% of farmers survive, rather than live, on 2.6% of the land.

The mass of the Latin American population has gained nothing from the last period of economic growth. Throughout the continent an estimated 65% of the population live in poverty. This average figure masks the desperate situation that has developed in some of the poorest countries such as Bolivia, Paraguay and Peru. Bolivia is now one of the poorest countries in the world. Over 70% of the population live in poverty and life expectancy has fallen to less than 60 years.

Apart from the increased poverty, the ending of military-police dictatorships has still left a legacy of struggle against repression and for democratic rights. Many of the 'democracies' offer a fig leaf of parliamentary democracy that is combined with the use of repression by the state or unofficial death squads. The 'elected' regime of Alberto Fujimori in Peru amounts to little more than an 'elected' dictatorship. The army still occupies the universities, in which Marxism remains banned under the guise of fighting terrorism. In Brazil, according to the Catholic church, 1,000 activists of the landless movement - the Movimento Sem Terra (MST) - have been killed or disappeared since 1990. In Argentina the police retain the right of arrest if you appear to 'walk nervously' or look 'suspicious' when passing a policeman in the street. There are numerous reports of torture and beatings of youth and activists.

  The policy of privatisations has resulted in a tightening of the grip by imperialist powers throughout the region as foreign multinationals have bought the privatised sectors of the economy. The collapse of the Brazilian real has immediately unleashed tensions and conflicts within Mercusor. In European terms, it is not comparable with the collapse of the ERM in 1992 - it is more akin to the German DM being devalued by 40%. Capitalist economists are now writing research papers with such titles as, Requiem for Mercosur.

The first major impact has been felt in Argentina, 30% of whose exports go to Brazil. These exports have already dramatically slowed down as costs have increased. At the same time, there has been a surge of imports into Argentina from now cheaper Brazilian goods. Although exports only account for 8% of Argentinean GDP, the industries affected include chemicals, steel, car production, motor parts and textiles, all of which are of significant importance to the economy. Exports from the chemical industry are down 30% compared with the same period in 1998.

The question of introducing 'anti-dumping' measures and even raising tariffs has been brought up in emergency meetings of Mercosur presidents who are desperate to try and limit the impact of cheaper Brazilian exports. To date these measures have been avoided, but the introduction of some mild controls is a harbinger for what is likely to follow. These measures are what Mercosur was supposed to break down through the construction of a common trading zone. Yet as the economic crisis has begun to bite, the ruling classes of the different countries are coming under intense pressure to take steps to protect their own interests. The Brazilian government has not shown any enthusiasm for policies aimed at limiting its exports. Like Japan, Brazil is hoping to use increased exports as a counterweight to the impact of the crisis on its domestic economy.

  top     Dollar dependency

THE DEPTH OF the crisis has been underlined by the proposal of Argentine President, Carlos Menem, that the US dollar should be introduced as the national currency - the so-called 'dollarisation' of the Argentine economy. This would remove the possibility of a devaluation of the Argentine peso which is currently pegged one to one with the US dollar. The same question has also arisen recently in Mexico, following the steep decline of the peso during the last half of 1998.

Menem is attempting to inoculate Argentina from the effects of the crisis that has hit Brazil and steer the economy towards NAFTA and the 'security' of the US economy. In fact, if the world economy was in a period of substantial growth and Argentina was rapidly expanding, the 'dollarisation' of its economy could not be ruled out. However, this is not the situation. The US economy is likely to slow down into recession and Argentina is already facing the prospect of zero growth this year, even before the effects of the real crisis begin to bite.

If 'dollarisation' were achieved it would turn Argentina and Mexico into little more than larger versions of Puerto Rico - into client states of US imperialism with their economic policy-making surrendered to the US Federal Reserve - only with much greater economic instability and social upheavals. It is extremely unlikely that US imperialism will want to accept either country under such conditions. The policy of 'dollarisation' would prove to be unworkable given the vast divergence that exists economically and politically between Argentina, Mexico and the US. These are much greater than those that exist within the EMU.

Also, the attempt to take such a step would be certain to provoke political convulsions and upheavals. This is especially the case in Argentina and Mexico, which have long traditions of struggle for independence and to break free from the stackles of imperialism. This task still remains to be completed, but can only be achieved by the working class overthrowing capitalism and imperialism.

  The fact that important sectors of the ruling class in these countries have now proposed such a policy reflects two factors. On the one hand, it is a reflection of the internationalisation of the economy that has taken place and the increased domination of such countries by imperialism. This illustrates how far the national capitalist class of these countries have capitulated to the major imperialist powers and are incapable of playing an independent role in the struggle against imperialist domination and control. It also reflects the desperation of Menem and the Mexican ruling class who are terrified at the prospects that confront them as the crisis develops.

It is more likely that further devaluations of the Brazilian real, which are likely if the debt crisis and recession deepen, will result in the Argentinean peso being unpegged from the US dollar and devalued. This would shatter what has been the corner-stone of Menem's economic policy. Today, Menem is ruling out such a summersault in policy. But Brazil's president, Fernando Cardoso, also refused to admit that devaluation was going to be accepted until it was actually forced upon his government. It should be remembered that the linking of the real to the US dollar was one of the pillars of Cardoso's economic programme, which began in 1994 and allowed him to win two successive elections. His government decided not to use more currency reserves propping-up the real. The Brazilian government had learned something from the Mexican crisis of 1994/95 when the government used almost all of its currency reserves to prop up the peso at an unsustainable level.

Brazil's reserves had fallen from US$70 billion in August 1998 to US$30 billion by mid-January 1999. This has been followed by massive devaluation, recession, unemployment and a debt moratorium. Cardoso's support has collapsed only weeks after he was installed as president for a second term in January 1999.

If Menem is forced to devalue, the consequences for Argentina will be even more catastrophic than they have been for Brazil. It is partly out of desperation that he has raised the proposal to adopt the US dollar as the national currency. Menem's Peronist movement faces the prospect of contesting a presidential election in the autumn of 1999, with economic forecasts only pointing to a zero rate of growth in the economy. This is before the effects of the real crisis fully impact on the economy. The prospects of the crisis now spreading to the rest of Latin America's southern cone is terrifying the ruling class internationally. Partly this is because of the consequences that it will have on the world economy and partly because of the social and political upheavals that it is sure to usher in. Latin America accounts for 18% of total US exports and recession south of its border will directly affect its economy. US banks are exposed in Latin America to the tune of US$64 billion or 17% of their capital. European banks are even further exposed at US$155 billion or 23% of their capital. With a deepening recession the prospects of debt defaults loom.

This is a threat that world financial markets thought they had removed from the agenda during the years of neo-liberal policy. The debt moratorium imposed by the state of Minas Gerais has once again raised the spectre of this being repeated, not only by local states, but by national governments in Latin America and throughout the ex-colonial world. Minas Gerais is the equivalent of a small country with a population of 16.6 million inhabitants, making it the third most populous state in Brazil. In economic terms it is the second largest state, with a GDP of US$50 billion. The debt repayments to the federal government meant that Minas Gerais was faced with the choice of either paying the debt or the wages of 318,000 state employees.

  top     Populist politics

MANY OF BRAZIL'S 27 states still face the same dilemma. On a state level, it is what Brazil faces nationally with a mounting budget deficit of 9%, now rising as a result of the crisis. Minas Gerais' debt moratorium was imposed by state governor, Itamar Franco. A former colleague of Cardoso, Franco was elected as a member of the governing coalition, the PMDB. As a capitalist politician, he has been forced to take to the road of populist measures as a consequence of the crisis and fear of provoking a social explosion. He was also positioning himself for the next presidential elections in 2002. However, others at state and even national level may also follow the path of debt default.

In Venezuela, the former army officer and leader of an attempted coup, Hugo Chávez, was swept to power in elections in December 1998. The economy has been devastated by corruption and the effects of falling world oil prices. His programme included the introduction of capital controls, a referendum on elections to a constituent assembly to re-write the undemocratic constitution, and a promise to use oil revenues to subsidise industry, agriculture and increase expenditure on social services.

Following his election, this programme was tempered to pacify imperialist investors and capitalism, resulting in a rise in stock markets. However, since December the stock markets have plunged by 30%, partly as the result of the Brazilian crisis and partly due to fears that the new government may be pushed by the crisis to adopt more 'radical' and populist measurers. Populist policies, such as those put forward by Chávez, are likely to be adopted under the impact of this crisis at a certain stage. This would represent an important change in the situation which has existed for the last ten to 15 years. The economic growth and dominance of the world markets has compelled all governments to accept the uniform policy of neo-liberalism.

The effects of the developing economic crisis and the threat of social convulsions are beginning to force a change in policy. However, confined to the limits of capitalism, such policies will not be able to solve the problems of mass poverty confronted by the working class and other exploited classes. Any change of policy in this direction will not represent a return to the period of lengthy reforms carried out by Juan Perón in Argentina and Getulio Vargas in Brazil. In a period of capitalist crisis, populist policies will not be sufficient to allow a lasting programme of reforms, but will give way to further attacks on the working class.

  It is possible that other states in Brazil will also follow the stand of Franco and confront the federal government that is attempting to impose the latest IMF-backed austerity package. This has already raised the question that Brazil nationally should do the same.

The massive debt crisis in the various Brazilian states and some elements of diversity in industrial, commodity and economic interests, could also give rise to greater demands for autonomy from some of the local states. This could even lead to an element of fragmentation of Brazil if the crisis deepens.

In order to head off this crisis the government has been compelled to partially bail out Minas Gerais. However, this concession may only encourage other states to take a similar stand.

This movement in Minas Gerais has also taken place as the movement of the Ford workers in São Paulo has erupted, with the support of other workers in the motor industry and other sectors. The powerful MST is also preparing for a renewed offensive of land occupations and the prospect looms of a struggle of students and college teachers. Unemployment in São Paulo has reached record levels as the recession begins to bite. During 1998 land occupations in the North East were accompanied by the looting of supermarkets by the hungry to stave off starvation.

  top     Precarious presidents

CARDOSO'S SECOND TERM as president started as these events unfolded. He was elected last October on the basis of 'safety first'. Many who voted for him did so with the hope that he would be the best bet to protect the economy from the effects of the international economic crisis that had rocked Russia and Asia. Cardoso's programme had taken Brazil out of the clutches of hyper-inflation - so he claimed.

The Partido dos Trabalhadores (PT - Workers Party) leadership and its presidential candidate, Lula da Silva, offered no alternative to Cardoso and accepted many of his claims. However, following the election, Cardoso has enjoyed the shortest 'honeymoon' in history. As he was sworn in as president and the crisis began to hit home, opinion polls were taken in São Paulo. Seventy percent now believe that Cardoso has lost control of the economic crisis; 59% think that Cardoso deceived them by promising not to devalue the real; and 50% of Cardoso's voters said that they would change their vote if an election was called again!

As a consequence of the impact of the economic crisis Brazil is threatened to be plunged into a new wave of upheaval and turmoil this year. It cannot be discounted that a movement could erupt to bring down Cardoso like the one which developed in 1992. That movement toppled Fernando Collor, the first democratically-elected president following the military dictatorship.

The main obstacle to this development, however, is the absence of a lead being offered by the PT and the powerful trade union confederation, the Central Unica dos Trabalhadores (CUT). Although during the current crisis the PT leadership has declared its opposition to the government, the party leadership also stated that it is opposed to anything that will undermine the 'governability' of Cardoso. The PT and the CUT also initially failed to support or mobilise for the 'Collor Out' movement in 1992, but were compelled to do so as the mass movement exploded. In some states this may happen again, especially where the party is more heavily influenced by more combative and radical forces.

The right-ward march of the PT leadership has already resulted in conflicts within the party. However, the process of the PT fully embracing capitalism and becoming a capitalist party, like the European social-democratic parties or the Partido Socialista Chileno (PSCh), has not been completed. There was uproar in the party at the end of 1998 when Lula, behind the backs of the party, held a secret meeting with Cardoso. The onset of the crisis may slow down the development and could result in a split taking place in the PT.

  The unfolding movement in Brazil in response to the crisis is an indication of the upheavals that are also pending in Argentina and Chile, where presidential elections are to be held later this year. Menem and the Peronists are attempting to change the constitution to enable him to stand for a third term of office. It is not discounted that he could be re-elected because of the absence of any alternative. If, however, the recession hits hard prior to the election then workers could take revenge on him.

In Argentina the adoption of neo-liberal policies by the Peronist governments of Menem - 'Menemismo' - has eroded the historical basis of the populist nationalist Peronist movement. This sharply poses the need, as in other Latin American countries, for the building of a new mass workers' party that embraces the programme of revolutionary socialism to break with capitalism if the struggles that are developing are to be taken to a successful conclusion.

Throughout the continent the traditional workers' parties have moved to embrace the market and capitalism, along with radical capitalist movements, such as the Peronists in Argentina. These forces have lost their basis, but as yet new workers' parties have not emerged. In Mexico, the emergence of the Partido Revolucionario Democratico (PRD) in the late 1980s reflected the weakening of the Partido Revolucionario Institucional (PRI) regime which has ruled for more than 70 years. The PRD initially swung to the left as a radical, populist capitalist party before moving back towards the right.

Reflecting the mass movements that developed amongst the workers, and the rise of the Zapatistas amongst the indigenous peoples of Chiapas, the regime of the PRI began to crack and split. The crisis of 1994/95 forced this process further forward. However, the PRD, although wining recent elections, has increasingly assumed the role of a 'democratic' face of the PRI. Many of its candidates in elections and much of its leadership, have been rejected by the apprachiks of the PRI. It was the struggles of the indigenous peoples, and the EZLN (Ejército Zapastista de Liberación Nacional) in Chiapas, which were brought to the fore during the Mexican crisis.

  top     Struggle and strategy

THIS KIND OF struggle will be repeated on a more combative basis in other countries as a result of the crisis in the agricultural sector and the catastrophe facing the peasants and rural workers. It is likely to result in the emergence of new guerrilla forces in some countries like Peru or Bolivia. Recent events in Chiapas and some other Mexican states, and the land occupations of the Mapuche indians in the south of Chile, show that the question of the rights of the indigenous peoples, the poorest of the poor, has also come to the fore. The rights of language, culture and land, and the demand for autonomy, have been raised in these and other struggles.

Like the traditional workers' parties, the guerrilla organisations, such as the Fuerza Armada Revolucionario Colombiano (FARC) in Colombia and the Frente Sandinista Liberación Nacional (FSLN) in Nicaragua, have embraced the market and the policies of 'social democracy'. The EZLN in Mexico, although opposed to neo-liberalism, failed to offer the alternative idea of socialism and was drawn into the swamp of 'civil society', demanding a more 'human' and democratic capitalism. Against the background of a changed international situation and in the midst of an international crisis, the impending struggles are likely to take a much more anti-capitalist and anti-imperialist character than during the last decade.

The consequences of the current crisis are graphically seen in Colombia where, despite on/off peace negotiations, the civil war has continued. Here capitalism has merged with the drug cartels, as have sections of the guerrilla forces, including the largest of them, FARC, which has 15,000 combatants. The guerrillas control two-fifths of Colombia, a country twice the size of France. The ongoing war makes Colombia the most violent place on earth, with 27,000 murders every year. This human catastrophe illustrates the dangers facing the Latin American masses if an alternative to capitalism is not offered. The consequences of the corruption and economic devastation were illustrated in the recent earthquake. Rescuers only had a small fraction of the equipment they needed. Survivors were forced to loot supermarkets to get food and the death squads began to intervene.

The crisis sweeping through Latin America is unfolding against a different international situation than that which existed in 1994/95. The ruling class has lost the optimism and confidence that it then enjoyed. The crisis is a global crisis of capitalism. It will pose the need for the working class to establish its own independent political voice even more sharply.

  This is the case in Chile, which previously boasted the strongest workers' parties in Latin America. The PSCh today enthusiastically applies neo-liberal policies in a coalition government with the Christian Democrats who backed Pinochet's coup in 1973. The party has de facto dissolved itself into the government coalition to the extent that the presidential candidate will be chosen from a primary system involving all the coalition parties.

The accidental arrest of Pinochet in London, combined with the first onset of the economic crisis, has nonetheless opened up a new chapter for the Chilean workers. Wounds that the Chilean ruling class thought they had erased during the 'transition' have been re-opened. Cuts in government expenditure have provoked strikes by teachers and health workers as presidential elections loom at the end of the year. The likely candidate of the coalition will be Ricardo Lagos from a satellite of the PSCh, the Partido Popular Democratico. A supporter of the government's economic policy and its stand on Pinochet's arrest, he will offer little by way of an alternative to the working class. As he recently stated, 'I stand for the tradition of the government not the tradition of Allende and the Popular Unity.' His probable victory at the polls will be based on opposition to the candidate of the far right. The likely onset of the crisis and the role of Lagos during the recent Pinochet crisis may also point to a substantial increase in the vote of the Partido Communista Chileno. This was evident during the local elections in 1998, and reflects the desire of workers and youth for a radical alternative.

A new wave of struggle and political radicalisation and polarisation is poised to engulf Latin America as the crisis bites deeper into the continent. A revolutionary socialist alternative needs to be built to ensure that the impending struggles are taken forward to victory.

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