In this issue:

Chile's Lagos Pushes IMF-Style Plan vs. Mercosur

Brazilian Public Workers' Strike Expands; Lula's Ratings Drop

Brazil Seeks Italian Financing To Build Railroads

Ecuador's President Cracks Down on Labor, per IMF Demand

Industrial Layoffs, Collapsing Wages Slamming Mexican Economy

Central Americans in U.S. Send Billions of Dollars Home

Offensive by Transparency International Against Argentina's Security Forces Is Accelerating

Brazil Central Bank: Austerity Will Continue

From Volume 2, Issue Number 29 of Electronic Intelligence Weekly, Published July 22, 2003

Ibero-American News Digest

Chile's Lagos Pushes IMF-Style Plan vs. Mercosur

Chilean President Ricardo Lagos is trying to sabotage Mercosur as a customs union, proposing instead a more "realistic" form in the IMF style. In a July 13 article published in Folha de Sao Paulo, which was subsequently published in Argentina's La Nacion, Lagos states that, while the idea of a customs union is very important, it must necessarily be a very long-term goal. In the meantime, he said, it is important to send a "realistic" message to the world about Mercosur, the Common Market of the South, and to see what can be done "right now" to "make ourselves attractive in the world dialogue."

Lagos goes on to praise effusively the IMF-directed policy which the government of President Lula da Silva has so far imposed in Brazil. Lula's policy, which has "reestablished the confidence of the international markets, and the markets in his own country, has been highly beneficial, not only for Brazilians, but for the whole region," Lagos states. Not only did it bring down Brazil's "country risk" rate, but also the "regional risk rate," Lagos claims.

Lagos calls for "coordination of macroeconomic policy," for Mercosur, by which he means a kind of Maastricht for the region, where member government agree on austerity targets for inflation, fiscal deficit, monetary policy, etc. Above all, he warns, "we cannot confuse our long-term goals with the building of that which is within our reach today.... [O]ur challenge is to be credible."

Brazilian Public Workers' Strike Expands; Lula's Ratings Drop

Government concessions of minimal revisions to some aspects of the IMF-dictated pension reform have failed to convince striking civil servants in Brazil to call off their protest. In fact, customs workers, who have been striking only three days a week, are now saying they may walk off their jobs altogether, should the final version of the pension bill sent to Congress not contain the changes they want. Meanwhile, magistrates in four of Brazil's 27 states say they're willing to join the strike, and are awaiting a decision by the Brazilian Magistrates Association on the matter, to be determined at a meeting next week.

In order to force compliance from legislators belonging to the ruling Workers' Party (PT), the party executive voted 52 to 26 on July 12 to compel PT legislators in the Senate and the House to approve the pension and tax reform, or be expelled from the party. "Fundamental points" already in the text of the reform cannot be removed, the committee stated, adding, revealingly, that party statutes, which allow members to vote against legislation on moral or philosophical grounds, "do not apply" in this case.

Lula's popularity is suffering as a result. In the most recent poll by the CNT/Sensus agency, 10.3% of those interviewed gave Lula a negative rating, of which 5% said the government was a disaster, and 5% said Lula personally was doing a terrible job. The 51.6% approval rating in last May's poll has now dropped to 46.3%. Reflecting a sense of betrayal, Francisco Fausto, the man Lula named to head up the Superior Labor Tribunal, told Tribuna da Imprensa that Lula's pension reform, "as everyone knows, ... was imposed by the IMF and World Bank ... and by those international organizations which have for so long controlled Brazil's economy." The IMF and private pension funds will be the only beneficiaries of this policy, Fausto charged, adding that had Lula dared to go public with such a policy during his electoral campaign, he would never have voted for him.

Brazil Seeks Italian Financing To Build Railroads

Brazilian officials are seeking Italian financing to build railroads. The president of Brazil's North-South Railroad, Jose Francisco das Neves, has already travelled to Italy to discuss this, and a delegation of Italian officials has travelled to Brazil for the same purpose. Italy's Transport Minister Pietro Lunardi was scheduled to travel to Brazil as well, but had to postpone his trip, due to political tensions that erupted between Italy and Germany a few weeks ago. He is expected to reschedule it.

Superintendent of Railroads Jose Americo Azevedo says the Italians are interested in the project for a passenger train between Goiania and Brasilia, as well as a possible high-speed train between Sao Paulo and Rio de Janeiro. The North-South railroad project was begun in 1987, but then stalled during subsequent governments. When completed, it will cover 2,100 kilometers, from Maranhao and Para to Goiania, if connected to the Central-Atlantic Railroad grid. Government officials say they must seek additional financing, as there aren't sufficient funds in the national budget to build these projects.

Ecuador's President Cracks Down on Labor, per IMF Demand

Ecuadoran President Lucio Gutiérrez has just decreed legislation that will enable his government to slash the size of the country's public sector, as part of his pact with the IMF to win $205 million in fresh "aid" disbursements. The legislation mandates a complete hiring freeze, and stipulates that the number of government workers cannot exceed the size of the November 2002 state payroll.

While there are no numbers yet on how many jobs will be eliminated, Ecuador's public sector is expected to "cut its own fat," preparatory to eventual privatization of many of the services. This is the same process which, under the name of "restructuring," "reform," and "fighting corruption," is being carried out in Colombia, Brazil, Mexico, and elsewhere across the continent.

Industrial Layoffs, Collapsing Wages Slamming Mexican Economy

The latest manifestation of Mexico's unemployment crisis has surfaced in Puebla, where the near-bankruptcy of Volkswagen has triggered fears that more than 5,000 workers could end up jobless—2,220 immediately. The union is negotiating with the company to avoid the layoffs, by offering everything from four-day work-weeks and 20% wage reductions, to using pension fund resources, called AFORES, to help cushion the blow to the workforce. The head of the Businessmen's Coordinating Council (CCE), Luis Regordosa Valenciana, said the union's petition to use AFORES funds to balance workers' incomes at the Puebla VW plant was "not viable," and urged instead that the company take charge of the funds and speculate with them on the stock market!

Meanwhile, official reports reveal that contracted salaries in Mexico have gone down by 2% between January and May of this year, largely in the industrial sector (cement, petrochemicals, textiles, and rubber, in particular). According to a July 15 Washington Post article, workers in Mexico are earning far less than they did a decade ago, before the 1994-95 financial crisis.

Central Americans in U.S. Send Billions of Dollars Home

Regional officials cited by EFE July 14 reported that more than 4 million natives of El Salvador, Nicaragua, Guatemala, Costa Rica, and Honduras, who are living in the United States, are sending home more than $4 billion in remittances to their families this year. In Honduras alone, this more than doubles the total earnings from banana and coffee exports, the country's two leading export products. Salvadorans will be sending home more than $1 billion this year, equivalent to nearly 65% of the country's exports, 13.5% of the country's GNP, and covering more than 80% of the country's trade deficit. As much as $2 billion will be flowing into Guatemala this year from the 1.2 million Guatemalans who live in the United States.

Offensive by Transparency International Against Argentina's Security Forces Is Accelerating

An offensive by Transparency International against the security forces of Argentina is accelerating, led in the province of Buenos Aires by Security Minister Juan Pablo Cafiero, a Jacobin-leftist closely tied into the Sao Paulo Forum's most radical elements. Cafiero, together with Justice Minister Gustavo Beliz, a member of the rightwing Catholic Opus Dei, and asset of the anti-nation-state Transparency apparatus, is carrying out further "reform" of the police, historically linked to the Peronist political machine in the province, alleging that its "corruption" is the reason why crime has increased so dramatically. He makes no mention of the unemployment, poverty, and depression caused by the austerity dictates of the International Monetary Fund.

After the head of the Buenos Aires provincial police force, Gen. Alberto Sobrado, was fired because he failed to disclose a $333,000 overseas bank account, Cafiero delivered an ultimatum to 1,000 police officials, to reveal all their financial holdings or be purged. Many police themselves are criminals, Cafiero alleges, vowing to wipe out "white collar" and "political" crimes.

Cafiero's crusade matches that led by a nest of Transparency-linked human rights activists, lodged within various government ministries, who are directing the campaign to overturn the decree prohibiting automatic extraditions of military officers accused of human rights violations. A key development in this fight is President Nestor Kirchner's nomination of jurist Eugenio Zaffaroni to the Supreme Court. Also closely linked to Transparency International, Zaffaroni favors extraditing military officers abroad, and eliminating existing laws which pardoned military officers accused of human rights violations. His nomination has provoked enormous unrest among the Armed Forces, exacerbated by what many see as Kirchner's "confrontational" approach to the military.

Brazil Central Bank: Austerity Will Continue

Brazil Central Bank president Henrique Meirelles declared that any significant drop in 26% interest rates is not likely, when the bank's Monetary Policy Committee meets July 23. This insistence on suicidal policy is beginning to provoke responses from Brazil's business and industrial sectors, which won't survive under current conditions. Despite a deflationary trend in prices, Meirelles insists that "current monetary policy" will continue to keep inflation in check.

Brazilian industry produces largely for the internal market, where demand is now extremely depressed, making it difficult for companies to sell their large inventories, while exacerbating Brazil's inability to absorb imports from neighboring Mercosur countries. According to a study released July 11 by the SOBEET think-tank, for the first six months of this year, investment in industry and the service sector declined by 51% and 44%, respectively, compared to the same period last year. Economist Paulo Nogueira Batista of the Getulio Vargas Foundation warned that government policy "doesn't lead to growth but to recession. It has already produced one in the industrial sector, and can lead to a broader one affecting other sectors of the economy."

There is now a heated debate occurring within President Lula's cabinet over the direction of economic policy, in the face of mounting evidence of deepening depression. During a five-hour cabinet meeting July 17, the president of the National Economic and Social Development Bank (BNDES), Carlos Lessa, presented a detailed study for an aggressive infrastructure plan over the next four years, which Folha de Sao Paulo described as "an adaptation of Franklin Roosevelt's 'New Deal' for Brazil." How Lula will respond to this proposal, and whether he will authorize a shift in economic policy, remains to be seen.

All rights reserved © 2003 EIRNS