You've come to an old part of SW Online. We're still moving this and other older stories into our new format. In the meanwhile, click here to go to the current home page.

Latin America suffers the consequences of "neoliberalism"
Pushed to the edge by the IMF

August 23, 2002 | Page 5

THE BRAZILIAN economy remains in turmoil even after this month's record $30 billion bailout loan by the International Monetary Fund (IMF).

As Socialist Worker went to press, speculators continued to drive down the value of Brazil's currency, the real, which has fallen by more than 20 percent this year. Meanwhile, Brazilian government officials were in New York to plead with U.S. bankers to extend credit.

While Washington and the IMF blame the financial panic on fears of a left-wing victory in Brazil's presidential elections in October, the root of the crisis is U.S.-backed free-market policies. These "neoliberal" policies have caused economic crisis to spread from one end of Latin America to the other. The number of unemployed has doubled over the last decade, and some 44 percent of Latin Americans still live in poverty as economies stagnate and decline.

LEE SUSTAR looks at the devastating impact of neoliberalism in Brazil and Argentina--and the growing resistance to the free market.

- - - - - - - - - - - - - - - -

U.S. TREASURY Secretary Paul O'Neill caused a stir--and a financial panic--when he declared that any money loaned to Brazil by the IMF would end up in "Swiss bank accounts." He should have looked a little closer to home.

"IMF Loan to Brazil Also Shields U.S. Interests," the New York Times admitted in a recent headline. Explaining why Brazil got an IMF loan while long-suffering Argentina has not, the Times pointed out that Brazil's "external debt of $264 billion is more than double that of Argentina, and American banks like Citigroup, FleetBoston and J.P. Morgan Chase have much greater exposure to Brazilian loans than to Argentine ones."

The IMF loans were designed to give Brazil access to hard currency to repay those loans--most of which are tied to the value of the dollar. And the value of U.S. direct investment in Brazil last year totaled $39 billion--more than in Mexico.

Yet so far, the only result of the IMF "bailout" has been a binge by speculators, who are cashing in, just as they did in 1998-99, when the IMF and the Brazilian government spent $50 billion to prop up the value of the real. As currency speculator-turned-reformer George Soros put it, "Brazil's problems cannot be blamed on anything Brazil has done; the responsibility falls squarely on the international financial community."

But if the IMF and Washington have their way, Brazilian workers will pay the price--just as workers in Indonesia, South Korea and other East Asian countries suffered under vicious IMF-imposed austerity programs after the financial crisis of 1997-98.

The $30 billion loan is contingent on the Brazilian government running a fiscal surplus of 3.75 percent--even as George W. Bush's military spending and tax cuts push the U.S. government's budget deep into the red. Achieving a surplus in Brazil will mean huge cuts in state employment and spending--after years of such policies have already driven down living standards.

Opposition to neoliberalism has made Luiz Inácio "Lula" da Silva, of the left-wing Workers' Party, the frontrunner in the presidential election campaign. Both Lula and his top rival, Ciro Gomes of the Labor Front, have left open the possibility of renegotiating Brazil's debt. But both have pledged support for the IMF loan--"essentially obliging them to support the current government's austerity program," the New York Times reported.

Under the terms of the IMF deal, the next president must agree to meet the target surplus to get the money. And outgoing President Fernando Cardoso is trying to get all of the presidential candidates to explicitly accept the terms to reassure foreign investors.

Whether or not Lula and Gomes sign on, there's no guarantee that the IMF deal will stop further financial panic and a wider economic decline. In those circumstances, cuts in social spending and other austerity measures would only cause a further economic collapse--just as happened in Argentina. What's more, a first-ever presidential win by the Workers' Party would raise the expectations of millions of Brazilian workers who are demanding a break from free-market policies.

Next month, millions are expected to participate in a "popular consultation" organized by the Movement of Landless Workers (MST) to mobilize opposition to the proposed Free Trade Area of the Americas.

Whatever the outcome of the October election, the battles ahead in Brazil will have a major impact on the struggle against neoliberalism across Latin America.

Resisting the free-market madness

FOR YEARS, Argentina was hailed by the champions of neoliberalism as the model for what the unrestrained free market could achieve. Under the presidencies of Saul Menem and Fernando de la Rúa, privatization turned over big state enterprises to European and U.S. investors, deregulation allowed foreign banks to move in and "flexible" labor policies chipped away the power of unions.

Today, Argentina is still a showcase of neoliberalism--but not the way that Washington had planned. A largely industrialized society that once had the highest standard of living in Latin America, Argentina now has a poverty rate of more than 50 percent--some 18 million people. Statistics show that between January and May of this year, an average of 25,000 people fell into poverty every day. Unemployment has shot up to more than 25 percent as industrial production continues to decline.

And in the country with the world's highest production of food per capita, malnutrition is widespread. In the municipality of Matanza, an industrial suburb of Buenos Aires, a study of three public hospitals showed that 26.6 percent of newborns were below normal in birth weight and height--a telltale sign of their mothers' malnutrition.

But horrific evidence of Argentina's suffering hasn't led to new aid from the IMF. On the contrary, Argentina's move to default on earlier debts prompted the IMF to demand even more austerity measures. And since European capital has more to lose than the U.S., Washington is willing to let the Europeans pay.

But mass revolt--which drove de la Rúa from office last December and three other presidents soon afterward--has prevented the government from giving the IMF what it wants. Last December's uprising showed the revolutionary potential to challenge the free-market system that has wrecked Argentine society.

The struggle to present an alternative continues. Organizations of the unemployed--known as the "piqueteros," still routinely block highways to win concessions from local and regional governments. Popular Assemblies, based in the neighborhoods, coordinate other protests and pressure officials to make concessions.

Employed workers in the country's three union federations--two of which are closely tied to the ruling Peronist party--haven't been central to the struggle since December. But workers at a number of bankrupt and closed factories have occupied them and begun to revive production.

Meanwhile, the government's seizure of dollar bank accounts has radicalized the middle class, undermining the entire political establishment--and giving rise to the slogan, "que se vayan todos" ("they all must go").

A recent wave of protests--in which two piqueteros were killed by police--forced the unelected and unpopular President Eduardo Duhalde to call early presidential elections next March. Opinion polls show that the two leading candidates are liberal reformer Elisa Carió and independent socialist Luís Zamora.

The inspiring struggle in Argentina shows that it's possible to resist even the most savage attacks of neoliberalism. The challenge ahead is to build an alternative based on workers' power.

Home page | Back to the top