Brazil's Plan Takes Toll on the Poor
TOUGH ANTI-INFLATION PROGRAM
SAO PAULO, BRAZIL
ARLINDA MARIA FERREIRA DA SILVA, a poor housewife and mother of six, is buying more meat these days, a month after Brazil's president Fernando Collor de Mello announced his drastic inflation-fighting plan. ``Now, I buy two kilos of meat and leave one to marinate in the refrigerator,'' Mrs. Da Silva says. ``Before, I used to buy only one kilo.'' Her husband, a carpenter, and her daughter, a factory seamstress, are still working and bringing home their earnings.
Just down the street from Mrs. Da Silva's plain concrete house, three teenage girls sit idly on the stoop of their wooden shack built onto the top of a rough hill an hour's bus ride away from the city center. They were looking for work before the plan, and still are. But the plan has made unskilled jobs scarcer.
``The plan is good,'' says Rosemeire Gomes. ``Lots of things got cheaper, like rice. But jobs for minors - it's really bad.'' Living on the 150 cruzeiros a day (about $3.30) that their mother earns cleaning houses, the girls can't buy notebooks and other needed school materials. And they can't spend 90 cruzeiros a day in bus fare to look for jobs.
After its first month, President Fernando Collor de Mello's plan has leveled the rate of inflation (more than 80 percent in March). As intended, the middle and upper classes are making the biggest sacrifice, since the plan froze most of their savings and investments. Businessmen and consumers alike complain that the government went too far, that they are giving up too much.
But the poor - the fifth of the population earning less than the monthly minimum wage of about $80 - may not be spared either. Unemployment is on the rise at every level.
``There used to be 80 men on this job,'' says Joao Carlos Freitas, a foreman on an office building site. ``Now there are 30.'' Pointing to three construction sites across the street in one of Sao Paulo's biggest real estate growth areas, he adds that building there has come to a total halt.
Most of Brazil's construction workers come from poor rural areas in the northeast, where droughts periodically wipe out crops and push people southward. Last week, a Sao Paulo newspaper reported the only full buses leaving the city were those headed back for that region.
In March, industrial employment in Sao Paulo, the nation's economic heartland, fell 1.36 percent with a loss of 27,947 jobs. This is the worst tally for March since 1981, the year Brazil's last recession began.
Those still working are worried. One of a five-man city crew cleaning out a sewer pipe, Pedro Venancio, a young single father, says the plan hasn't affected him. ``Lots of things got better at the supermarket, now let's see about employment,'' he says. ``If it doesn't mean more joblessness, it's OK.''
His brother, a mason, is waiting to see if a house he was to build will get off the ground,since the customer's construction funds were frozen by the Collor plan.
The Collor government says that its blockage of savings accounts affected only the 10 percent of savers who had more than $1,190 equivalent in the bank. It is counting on wage earners to step in and power the economy by buying more basic goods and services, while the wealthy trim the superfluous.
This is happening. Supermarket and low-end retail sales are up, while top restaurants and boutiques are practically empty. But political and economic analysts point out that over the long term, the poor to a large extent depend on the rich minority's spending capacity.
``You have a giant industrial complex directed at the middle class,'' says Walder De Goes a University of Brasilia political scientist. ``How can poor people buy cars? The solution is not in guaranteeing the situation of the poor, but in bringing them in to the middle class.''
The fate of the poor, who have long suffered a severe lack of health care, housing, and education, depends on the success of the plan. And about this there is much speculation and little certainty.
Many economists say Brazil stands at the beginning of a depression. They predict growing unemployment and the return of inflation in as little as two months.
``Inventories are high, wages are up in real terms, but there's a liquidity squeeze, so prices drop,'' says Andre Lara Resende, a Sao Paulo economist. ``Sales will increase and there will be a consumption bubble.'' But, he adds, once inventories are exhausted, producers won't be able to pay for raw materials and labor, so they will stop manufacturing. Joblessness, shortages, and inflation will follow.
The government says it can prevent the worst from happening.
``There will not be a deep recession,'' says Luis Eduardo De Assis, the Central Bank's monetary policy director. ``By controlling liquidity we can provide the right dosage [of money to business]. We have already made some exceptions and this will continue.''
The government has moved to loosen credit terms both for consumers and for business borrowing in hard-hit sectors. Thursday, President Collor announced a $681 million credit line for the construction industry.
But many analysts say this won't work for a variety of reasons. They say that Brazilians have lost faith in banks and will prefer to consume or pile cash under the mattress, instead of saving or investing in something productive. Such behavior would further fuel inflation.
``The plan is like dropping a bomb on Hiroshima. Once you've dropped it, you've lost control,'' says Professor Goes. ``It doesn't matter what the government plans or doesn't plan.''