BY HILDA CUZCO
The government of Brazilian president Fernando Henrique Cardoso announced a massive package of austerity measures November 10, including budget cuts and stiff tax increases. This latest move in response to growing pressure to devalue the real, the country's currency, was prompted after the Sao Paulo stock market plunged more than 6 percent November 7.

The 50-point austerity package is estimated to total at least $18 billion. It includes laying off 33,000 government workers, abolishing 70,000 vacancies, and replacing only one third of retiring employees. Over half of the amount will come from a 10 percent income tax hike and raises in taxes on gasoline, alcohol, and air travel. These and other measures are expected to be introduced by executive decrees, to be ratified by Congress after 60 days.

On October 30, the Central Bank of Brazil nearly doubled short-term interest rates to 43 percent to stabilize the real, after a week in which it spent about $8 billion of its $60 billion in reserves to keep up its price. In a sign of investors' worry over the devaluation pressures, the Bovespa stock market index in Sao Paulo registered a drop of 30 percent in late October, the same day markets dived from Hong Kong to Wall Street. A week later the Bovespa dropped another 5.5 percent November 6, despite the drastic currency stabilization efforts.

Cardoso's austerity plans call for cuts in government spending, reducing the 1.5 million-employee civil service, and "reforming" social security. The stated aim of these measures, which have been in debate in Congress for almost three years, is to reduce the government's deficit to an equivalent of 5 percent of gross domestic product. The steps taken to stabilize the real will exacerbate the deficit by increasing what the government must pay out in interest.

"The 1998 budget will have to be stricter than was initially planned in light of the economic events of the last week," said Sergio Amaral, Cardoso's spokesman. The government plans to trim the budget up to $2 billion by reducing investment or closing state-owned enterprises. The lower house in Congress is expected to vote for the second time on the civil service cuts on November 19. The government is pushing for approval on the reforms to the social security system and civil service by December 15, when Congress goes into recess.

Meanwhile, the Brazilian government is moving ahead in its effort to raise $90 billion from selling off state enterprises by the year 2000. A consortium of Brazilian companies, VBC Energia, purchased Companhia Paulista de Forca e Luz (CPFL), a Sao Paulo electricity company, for $2.73 billion, nearly $1 billion over the original bid offer. Four other groups entered bids for 57.6 percent of the company shares.

CPFL workers protested November 5 outside the Sao Paulo stock exchange as the bidding for the company was going on. CPFL provides around 6 percent of electricity in Brazil, serving an area the size of Portugal. The other state electricity companies for sale next year are CESP and Eletropaulo, also based in Sao Paulo.

"The fact that the [CPFL] sale took place has a lot to do with the trust in Brazil and the belief that it wouldn't be shaken by the crisis," said Mario Covas, the governor of Sao Paulo.

For working people in Brazil, the financial crisis means hard times. "I'm not going to buy another thing until it's safe," Isabel Ventura, 34, a government worker in Sao Paulo, told a New York Times reporter. "Brazilians have not forgotten how difficult it was during the time of high inflation, and we are not taking any chances." The high interest rates have dried up sales of cars and other items on credit.

In 1994, the Cardoso government began the "Real Plan" in hopes of lowering inflation and curbing economic instability. This included carrying out tough austerity measures; introducing a new currency, the real, pegged to the dollar and other international currencies; and selling off state-owned enterprises and lifting trade tariffs. As inflation declined 2,500 percent in 1993 to 5 percent today, investors felt confident to bring billions of dollars to Brazil's economy. But this "miracle" now seems on edge.

A currency fall in Brazil could have devastating consequences in other Latin American countries. Brazil's gross domestic product is $780 billion - more than twice of Mexico. "If Brazil starts having serious problems, it would indeed affect us," Finance Secretary Guillermo Ortiz Martínez of Mexico told Business Week. "It would affect the entire hemisphere." A devaluation of the real would put deflationary pressure on the Argentine government to allow its currency to drop, something President Carlos Menem has sworn he will not allow. Some 30 percent of Argentine exports go to Brazil. "If Brazil catches a cold, Argentina will sneeze," stated Argentine vice president Carlos Ruckauf.

Capitalism's world crisis
A smoldering international economic crisis - from Thailand to Japan and Brazil - is having a growing impact on world politics. There are no policies the capitalist rulers can adopt to avert the impending economic disaster, which will become a nightmare for working people around the world.

What's underneath the current crisis is a world capitalist market increasingly plagued by overproduction of commodities and excess industrial capacity; that is, by more output than capitalists can sell at a high enough profit to justify expanding their productive plants and equipment. That's what the auto plant closures just announced in Thailand and the growing "glut" of the world market with automobiles show.

And what do the Yankee and other imperialists offer in response to the currency crisis and the prospect of defaults in loan payments by Thailand and other oppressed nations in the region? Another "bailout," better described as usury imperialism as Bolshevik leader V.I. Lenin did in his pamphlet Imperialism; The Highest Stage of Capitalism. The result will be like the 1995 Mexico "bailout": after the loans were repaid with handsome interest to the empire to the north, wages of working people had been slashed, health and living conditions for workers and peasants deteriorated, and U.S. bankers and businessmen owned more of the patrimony of the country.

Even in the United States, the crisis of overproduction is beginning to result in scaling back production in a few companies, as the recent announcement by Kodak of an impending layoff of 10,000 workers.

Bourgeois commentators are increasingly pointing to the danger of a deflationary downturn similar to what unfolded in the last half of the 1920s before the Great Depression.

Social polarization is on the rise as well, as these developments provide fuel for fascist politicians like Patrick Buchanan who seek to gain a hearing among broader layers of people. They demagogically denounce the "Global Economy," which they blame for loss in "American jobs" and cuts in workers wages.

Working people should be unequivocally opposed to NAFTA, "fast-track" deals, the APEC forum, or any other imperialist trade pacts. None of these have anything to do with free trade, which, as Lenin explained, has virtually disappeared since capitalism reached its monopoly stage - imperialism. At the same time, the "economic nationalism" of Buchanan and the AFL-CIO labor tops draws working people into reactionary chauvinism and is part of preparing us to go to war against our brothers and sisters abroad to defend the interests and profits of the home bourgeoisie.

Above all, however, the world economic crisis and the attempted "solutions" by the imperialist powers are generating resistance by working people to the belt- tightening the bosses are attempting to impose on us - from Thailand to the Dominican Republic. Through these battles working people will gain confidence and the consciousness to go further than fighting for a slightly better portion of the surplus value the employers rob from the producers. Thousands will become convinced of the need to take state power out of the hands of the exploiters, establish a government of the toiling majority, and join the worldwide fight for socialism - a system of human solidarity and cooperation that puts human needs first, not dog-eat-dog competition and profits for the already wealthy ruling families.  
 
 
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