The news from Brazil in march are about the challenges to growth, the Inflation targets, the state governments and public safety, the Bush’s visit to Brazil and others.


The challenges to growth
Cold water
Inflation targets
Heterodoxy
State governments and public safety
Bush visits Brazil

The challenges to growth

“The name of my second term will be development. Development with income distribution and quality education.” The statement was made by President Lula and reproduced in his Government Program in 2006. In just over two months of a new term, he launched the Growth Acceleration Program (PAC), with forecast total investments of R$ 503.9 billion until 2010 –including resources from the federal government, state-owned companies, like Petrobrás and the National Economic and Social Development Bank (BNDES), and the private initiative–, with a high priority for infrastructure. Early in this month of March, a new set of measures forecasts 8 billion reais’ worth of investments in education until 2010. The Education Development Program, dubbed by some as the Education PAC, is to prioritize basic education.

In a note, the Ministry of Education informs that the plan will absorb a total of approximately 8 billion reais for the implementation of all of its proposals, that is, approximately half a percent of Brazil’s Growth Domestic Product (GDP), the sum of the wealth produced in the country. “Some measures, however, will only require funding in 2008. For this year, R$ 500 million are already earmarked. Another R$ 450 million may be obtained through supplemental allocations”, says the text.

The plan, discussed in a meeting involving the president and Minister of Education Fernando Haddad, contains measures ranging from youth and adult literacy programs to higher education, yet the emphasis is on basic education, which includes the primary and secondary levels. “Actually all the actions geared toward the remaining educational levels and modalities, in the case of literacy, vocational training and higher education programs, are structured toward the strengthening of basic education”, said Haddad.

The Education Development Program laid out by the Ministry of Education is going to be submitted to educators and specialists in the field of education for feedback and improvement. According to the minister, after it is discussed with educators, the theme will return to the president’s desk for later announcement. The minister’s expectation is that the plan will be announced in April.

Among the measures, Haddad highlighted the creation of a system to track and monitor the attainment of quality targets for the education area, whose indicators will serve as a benchmark for the assessment of partnerships and voluntary budgetary transfers from the Union to States and municipalities.

With the announcement of the Education Development Program, the government seeks to set an agenda for the country and refute the diagnosis by big media analysts and columnists that the government came to a standstill. Lula has been systematically criticized for his delay in concluding the ministerial reform. According to the president, regardless of the still-to-come announcement of the new cabinet, the government has been working, while social and infrastructure policies are practically phased in. “The government is working. We are now phasing in the PAC in the areas of basic sanitation, housing and slum urbanization. We have done practically everything with respect to energy projects, highway and railway projects, [and] the revitalization of the São Francisco River to take water to some Brazilian states”, Lula stated.

Expectations with regard to the new cabinet are high, particularly the composition of the economic team. The forthcoming years, as advocated by President Lula himself, must be marked by strong growth (not below 5% annually), employment expansion, rising income for the working class, and the social inclusion of millions of Brazilians still living below the poverty line.

Cold water

The existence of antagonistic forces inside the government waging a fierce battle to control the economic agenda is widely known. On one side, those who advocate a policy conducive to accelerated growth, fiscal rigor and inflationary control, as the Minister of Finance Guido Mantega himself. On the other, those defending the economic orthodoxy sustained by Brazil over the past four years, with a high-interest rate policy and primary surpluses that have resulted in puny growth, well below world averages.

In 2006, according to data released at the end of April by the Brazilian Institute for Geography and Statistics (IBGE), Brazil’s Growth Domestic Product (GDP) –the sum of all the wealth produced in the country– grew by a mere 2.9 percent, one of the lowest growth rates in the world, much below the 4.5-percent forecast made by the government itself at the start of the year.

Even the minister of finance pointed the Central Bank as the great villain in the whole story. Guido Mantega’s evaluation is that, in 2006, there were “higher interest rates” than today, which inhibited productive corporate investments. High interest rates drive those who have money to speculate in the financial market, an investment that yields less wealth than that made in productive activities.

Some entrepreneurial sectors, fueled by the result, complain that Brazil’s high taxation is responsible for the low growth. Blaming taxes for the low growth has an ideological component because it builds on the agenda of the country’s most conservative sectors: the debate on the size of the Brazilian State. In a note, the National Industrial Confederation (CNI) argued, “what prevents the acceleration of Brazil’s growth rate is the asphyxiating tax burden”.

Today the State collects 39% of its GDP in taxes, which is used to fund its expenditures with civil service, social programs, investments and debt interest payments. The more it spends, the more it has to collect. According to the business community, with the reduction of taxes, the production of goods and their consumption would become cheaper. Therefore, according to this reasoning, regardless of how high interest rates are, entrepreneurs would be earning more money if taxes fell.

The case for tax breaks comes together with the argument in favor of cutting government spending. In this case, the CNI, for instance, proposed overhauling the public pension system –i.e., reducing expenses with retirees. Now those who lean toward “developmentism” are calling for a reduction in debt service payments, a measure that also goes counter to the central bank’s base rate. In an interview to Carta Maior news agency, economist and public accounts specialist Francisco Lopreato, from the State University of Campinas (Unicamp), assures that “those who say the problem is the tax load and demand the pension system’s reform, are not willing to discuss about the interest rate because it favors the financial system”.

A fact that has drawn much attention over the past days was a change that took place in the Central Bank the day after the 2006 GDP result was announced. Director of Economic Policy Afonso Beviláqua, deemed as epitomizing high interest rate and the second ranking official in the Central Bank’s hierarchy, resigned the office he had occupied for four years. Another Central Bank director, Mário Mesquita, from the Special Studies area, was appointed to replace him, and will hold both posts for a still unspecified length of time. Central Bank’s Chairman Meirelles conceded that more changes are to come.

Some assessments, however, guarantee that the conservatism of the Central Bank will persist. To Unicamp Professor Maryse Farhi, a specialist in monetary policy currently preparing a comparative study on the performance of the Brazilian Central Bank with other emerging countries’ central banks, Mesquita has the same conservative profile as Beviláqua. In an interview to Carta Maior news agency, Professor Farhi affirms that the director’s credentials point in that direction. He was an economist with the International Monetary Fund (IMF) between 1997 and 2000, and a director for the Brazilian Federation of Banks (Febraban) from 2005 to 2006, when he left for the Central Bank.

Still according to Professor Farhi, a text jointly produced by Beviláqua and Mesquita was recently posted on the Central Bank’s web page. Written in English, the paper praises the interest policy adopted by the Central Bank in Lula’s first term. “The text reaffirms the option for a quick disinflation, even if it hampers growth. So if Mesquita is confirmed, it will just be business as usual”, she said.

On 7 March, at yet another meeting of the Monetary Policy Committee (COPOM), the body that sets interest rates once again showed its conservatism. Brazil’s two largest trade federations –the Single Central of Workers (CUT) and the Union Power– criticized the 25-percentage-point reduction, from 13 percent to 12.75 percent a year, a cut that was the same as January’s.

The CUT further declared that two days before the COPOM meeting the central bank had already signaled its “subservience to the financial system” by reducing yields on savings accounts and the Severance Pay Indemnity Fund (FGTS) individual accounts. The National Monetary Council (CMN), on whose board the president of the Central Bank has a seat, as do the ministers of finance and planning, nevertheless took the decision, condemned by the CUT.

According to information gathered by Carta Maior news agency, the CMN justified the reduction on the savings accounts’ yields by arguing that, since interest rates in general are falling in Brazil, it is natural that this be extended to savings accounts. It is known, however, that the idea was conceived by the Brazilian Federation of Banks (Febraban), which presented it last year to Guido Mantega, who accepted it. The ministry of finance accepted the idea because he needs banks and investment funds to keep rolling on a monthly basis Brazil’s one-trillion-real public debt in securities traded on the market. If banks decided, for example, to boycott the rolling of the debt, in retaliation for a possible veto of the federation’s proposal, the government would have problems.

Inflation targetsThe COPOM was created on 20 June 1996, during the Fernando Henrique Cardoso administration, with the aim of establishing the guidelines for the monetary policy and setting interest rates, following the example set by the Federal Open Market Committee (FOMC) of the United States Federal Reserve System and by Germany’s Central Bank Council.

Since 1996, the COPOM bylaws have undergone a series of alterations with regard to its objective, its meetings’ periodicity, its composition and the attributions of its members. Such alterations not only reflected upon the decision-making process within the Committee, but also entailed changes in the monetary regime.

Standing out is the adoption, through Decree 3088 of 21 June 1999, of “inflationary targets” as a monetary policy guideline. Since then, COPOM decisions were set with the objective of meeting the inflation targets defined by the National Monetary Council. In accordance with the same decree, if such targets are not attained, it is incumbent upon the chair of the Central Bank to release, in an Open Letter to the Minister of Finance, the reasons for the non-accomplishment as well as the measures and timeframe to bring inflation in line with the targets established.

Formally, the COPOM objectives are “to implement the monetary policy, define the target for the Selic (base) rate and the bias, should there be one, and analyze the “Inflation Report””. The interest rate set in the COPOM meeting is the target for the Selic rate (average rate of daily debt-funding, backed by federal bonds, calculated by the Settlement and Custody Special System), which is in force throughout the period in between the Committee’s ordinary sessions. Should the case arise, the COPOM can also define the bias, a prerogative of the chairman of the Central Bank to shift the Selic rate target in line with the bias at any given moment between ordinary sessions.

The COPOM is composed of the members of the Collegiate Board of the Central Bank of Brazil: the chairman, who is the swing vote; and the eight Central Bank directors of the following areas: Monetary Policy, Economic Policy, Special Studies, International Affairs, Norms and Organization of the Financial System, Oversight, Liquidation and Privatization, and Administration.

At the meeting, attended by the Committee members and the head of the Studies and Research Department (Depep), who is not entitled to a vote, the Monetary Policy and the Economic Policy directors, after analyzing updated inflation forecasts, present alternatives to the short-term interest rate and make recommendations on monetary policy. Next, the remaining COPOM members make their own considerations and present any other alternatives. In the end, the proposals are voted, seeking consensus whenever possible. The final decision –the target for the Selic rate and its bias, if there is one– is immediately published simultaneously with the release of the Communiqué through the Central Bank Information System (Sisbacen).

On the March 7 meeting, the 25-percentage-point reduction for the interest rate was taken by unanimous decision of the members of the council.

Heterodoxy

The good news was the arm wrestling opposing developmentists and the orthodox sectors of the economy. The government is nominating an economist identified with the market to replace one of the main advocates of developmentism as Brazil’s and other eight Latin-American nations’ representative to the International Monetary Fund (IMF). The appointee is Paulo Nogueira Batista Júnior, a professor at the Getúlio Vargas Foundation (FGV) of São Paulo City. He will replace Eduardo Loyo, who made a career at Rio de Janeiro’s Pontifical Catholic University (PUC) and was director of the Central Bank in the beginning of Lula’s first term.
The change was communicated by the Ministry of Finance, with whom lies the responsibility to make the nomination on behalf of Brazil and its eight partners (Colombia, Ecuador, Guyana, Haiti, Panama, the Dominican Republic, Suriname, and Trinidad and Tobago). The nine countries form a block that acts jointly at the IMF. The group’s interests are represented before the Fund, in Washington D.C., U.S., by an executive director.

Loyo was the director for two years, until mid-2006, when Minister Guido Mantega confirmed him for another term. As a Central Bank director, Loyo sided with Beviláqua’s conservative troops.

Paulo Nogueira, who should take over in April, will finish Loyo’s term. The FGV professor is known for his critical vision of the economic policy set in motion by the Fernando Henrique Cardoso administration. He is also critical of the globalization and is against the creation of the Free Trade Area of the Americas (FTAA), a theme about which he has already written a book –A Alca e o Brasil (The FTAA and Brazil). The economist was one of the voices listened to by Minister Mantega during the elaboration of the PAC growth program.

State governments and public safety

The barbaric death of João Hélio, a six-year-old boy who, caught in his safety belt, was dragged outside a stolen car for seven kilometers in Rio de Janeiro, triggered, partly by media hype, feelings of outrage, desperation and fear in face of the epidemic violence and profound crisis that affects public safety. The result was the launch by some parliamentarians of a campaign in favor of reducing the minimum age for crime conviction.

Among the proposals submitted, four reduce criminal majority age from 18 to 16 years of age; one reduces it to 13 years of age, in cases of heinous crime; and the other establishes criminal conviction “when the minor presents psychological age of 18-plus years of age”.

The outcome of such campaign is scheduled for late February, when the Senate’s Constitutional and Judiciary Committee would hold a voting session for a Constitutional Amendment Proposal (PEC) to initiate the process. An agreement by partisan leaders withheld the voting and set up a working group that, in 45 days, is to present a set of measures designed to combat violence, containing specific children-juvenile legislation. Among the items of the proposed reform are also an increase in the budget allocations for the justice and public safety systems, the unification of the police corps and alterations in the penitentiary system.

To PUC-SP professor, member of the National Council for the Defense of the Rights of the Human Person and prosecutor for the state of São Paulo Flávia Piovesan “on the one hand, on the preventive side, what stands out is the challenge of creating alternatives to crime, to the seduction [exerted] by drug dealing and violence, by means of efficient and creative social inclusion programs that enable valuing and resignifying the life of teenagers, particularly of those suffering with the most vulnerable conditions of poverty and exclusion”. According to Piovesan, in her article about the theme, the ‘banalization’ of death is a reflection of the ‘banalization’ of life, which denies the right to hope to a contingent of Brazilian youths. Thus, it is crucial to identify and scale up well-succeeded practices and policies especially those addressing urban youth.

The prosecutor also underscores that, with regard to enforcement, repeated studies have proven that it is pointless to toughen criminal legislation if the culture of impunity persists in the social imaginary. In other words, penal repression must not be exclusive to a given social class, but should make sure that authors of crimes of any nature will be punished. However, if the sentence is to have a retributive and resocializing character, what we verify is that the Brazilian penitentiary system does not fulfill any of these purposes. This system, at times under the control of organized crime – and of which the State becomes hostage– has only accentuated violence and brutalized inmates. As observed by Nigel Rodley, special UN rapporteur on Torture on visit to Brazil, it is unreasonable to treat inmates like animals, to later on return them to society pretending they were transformed into “ reintegrated and civilized persons”.

Extending the debate over a 45-day period might become crucial to allow this other understanding of the problem to gain more visibility. In an interview to Carta Maior news agency, Conanda’s chair and under-secretary for the rights of childhood and adolescence of the Special Secretariat for Human Rights, Carmen de Oliveira, declares that there has been an unbalanced coverage of the theme by part of the press, with an overwhelmingly favorable stance toward reducing penal majority age. An advocate of the constitutional amendment, Senator Demóstenes Torres acknowledged this pressure by citing a demand that would have been made by Rede Globo journalist Alexandre Garcia against any adjournment to vote the proposal.

The murder of João Hélio prompted even renowned intellectuals, as Renato Janine Ribeiro, to reconsider the death penalty in Brazil. In the article A razão distorcida (Reason Distorted), published in the Folha de São Paulo newspaper, Mais section of February 18, the philosopher says that “I also think –because I can still think amid this maelstrom of feelings– that there are different ways to impose the death sentence. Punishment by death is justified sometimes by the gravity of the crime committed sometimes by the disbelief that the criminal may recuperate. In this case, both reasons are present. They seem beyond unrecoverable, and their crime is heinous. I see no difference between them and the Nazis”.

The article spurred reactions in academia. Under the title Dar voz à barbárie? (Voicing barbarism?), full professor of philosophy at the Federal University of São Carlos (UFSCar) Wolfgang Leo Maar argues that “instead of valuing a democratic and peaceful society, the author [Janine] vents the worst, cooperating with its reproduction”.
To Leo Maar, Janine, rather than positioning himself as intellectual, states only what pleases –”feelings”. He seeks “reasons” for a purported “sensibility”, but only expresses with insensitivity the basest common place of immediate payback. The articles mentioned blur the distinction between the terrible situation in which one lives and the political, ethical, civil experience of a social formation that, by upholding liberty, does not bend to the impositions of the established behavior.

“Precisely from the intellectual it is expected that he/she will not surrender to the established. His/her ethical commitment resides in transforming the conflict with the established into the object of critical experience and progressive elaboration. That he/she will not only be governed by what the established sets as its standards of punishment, but is able to differentiate between what occurs under the control of violence and the possibilities of a social organization guided by mutual recognition, solidarity and aspiration for liberty. To have sensibility toward the other is to take a stand in favor of the rights to freedom and equality”, criticizes the philosopher.

Another article that opposed Janine’s thesis was that of the professor of Italian language and literature at the Federal University of Rio de Janeiro, Andréa Lombardi, to whom “fighting to diminish the penal age and defending the institution of death sentence just show dependence on the most trivial and brutal conventional wisdom, the contrary of common sense. This society hides the disease with a whole gamut of anti-depressants led by Prozac and its byproducts. Ribeiro’s words sound tantamount to Viagra –made to show more potency than actually exists–, and reveal that age and intellectual preparation do not necessarily bring wisdom”.

Bush visits Brazil

The president of the United States was in Brazil on March 8 and 9. On Bush’s agenda, meeting with President Lula and thereafter touring around other Latin-American countries. On his arrival, the American president had to put up with protests that sprang in several parts of the country.

The largest protest, organized by students, unionists and leftist parties, stopped Paulista Avenue, in downtown São Paulo, and gathered some 20,000 people. Many students’ organizations, political parties, women’s groups and landless workers joined the rally against Bush’s presence with slogans against the war in Iraq. Demonstrators carried banners saying “Out: Bush from Iraq and Lula from Haiti”, “Peace in Iraq” and “Equal wages for women and men”.

Always on March 8, Brazilian women take to the country’s streets with their struggle streamers. These demonstrations build on several themes, such as the ‘mercantilization’ of the body and life of women, fight against violence, the struggle for the legalization of abortion and a higher minimum wage. Every year the objective is to sensitize the population and other organized movements that no society will be fair and democratic if gender oppression is not eliminated.

This year, however, a coincidence with George Bush’s trip to the country prompted thousands of feminists, under the banner “Feminists fighting to change the world: for equality, autonomy and liberty”, to say no to the imperialism of the United States, to the neoliberal policy advocated by the American government and to the domination of the peoples.

Bush met with President Lula on Friday 9. On the meeting’s agenda an understanding on the biofuels market. Even without pledging to diminish surcharges charged on the Brazilian ethanol (US$ .54c per barrel), the United States will be Brazil’s major partner in the technological and economic processes of expanding the use of, mainly, ethanol.

“The Memorandum of Understanding on Cooperation in the Area of Biofuels signed today is, undoubtedly, our response to the great energy challenge of the 21st century. (…) The partnership we are inaugurating is ambitious and encompasses all aspects associated with the definitive incorporation of ethanol in the energy grid of our countries”, stated the president.

With the signing of the Memorandum of Understanding on Cooperation in the Area of Biofuels, whereby both countries propose to advance research on and the development of technologies, take the benefits of biofuels to other countries (especially Central America and the Caribbean), to stimulate the private sector to invest in the area and to expand the biofuels market with the establishment of uniform standards and common norms, Brazil and the U.S. have sealed a “strategic partnership”, in Lula’s words.

Bush wants to reduce to the utmost his country’s dependence on the Venezuelan oil, responsible for 25% of the American market’s supply. On the medium term, Brazilian sugar cane alcohol could replace the energy imported from Venezuela.

As compensation, Bush wants the alcohol produced in Brazil to have the same technological standard as the one produced in the States; to be registered as an energy commodity and not an agricultural commodity to dodge the international agreements that, within the scope of the World Trade Organization (WTO), regulate trades on this kind of commodity and eventually allow the U.S. to suspend protectionist barriers on alcohol imports. He also wants Brazil to allow U.S. capitals to control mills directly or through joint ventures.

According to Brasil de Fato news agency, at first sight the agreement seems to favor Brazilian sugar cane mill owners, who would be able to increase their exports to the most powerful market on the planet. Illusion. In case the barrier on the Brazilian alcohol is actually lifted,–says mill owner Maurílio Biagi Filho, there won’t be a boom in exports, but indeed a massive investment of North-American capitals in Brazilian mills. “Last year, 3.4% of the sector was non Brazilian; this year it will reach 5%. In ten years’ time, half won’t be Brazilian anymore”, says Maurílio, who sold the industrial facility of his Cevasa mill, in Patrocínio Paulista, to transnational Cargill in 2006.

The sector expects to export 4 billion liters of alcohol this year, up from 2.3 billion in 2006, when exports yielded 1.6 billion dollars, twice as much as in 2005. In four years, 2.5 billion dollars will be invested in the production of alcohol, while 77 mills will have been built by 2012.

Still according to Brasil de Fato, in Brazil, there are 6 million hectares of sugar cane plantations, an area that has grown by 13% over the last three years. In São Paulo, only in José Bonifácio, the harvested area has tripled in the two last crops. In the Center-South, the area should grow from 4.6 million to 5 million hectares.

Environmentalists and militants engaged in the movement in defense of the Agrarian Reform criticize the agreement and signal to an escalation in monoculture in the country, higher land concentration, more unemployment and rural exodus.