World Cup Woes – The Politics of Power and the IMF in Brazil

(Photo’s credits to BostonGlobe)

For some time now my Facebook news feed has been overwhelmingly devoted to two major uprisings in the world – the protests that started at Gezim Park and proliferated throughout Turkey, and the protests which began in Sao Paulo that are now proliferating throughout Brazil. It is only vaguely coincidental that these two protests are occurring at the same time, a fortunate happenstance of synchronicity, which allows us to ponder over both protests’ original sources: inherent inequality and the creation of a large disenfranchised lower class which is both necessary for, and the direct result of, the enactment of economic liberalization policies and the creation of a global neoliberal economic regime.

My research and personal experience do not allow me to write on the Turkish protests, and their geo-political and socio-historical contexts, but I can provide some insight into the origins of the demonstrations in Brazil. The involvement of international financial and neo-liberal institutions, most notably the International Monetary Fund (IMF), have created conditions that are ripe for protest, to the extent that we have witnessed hundreds of thousands, if not millions protesting in the past few days. When seeing these images it is hard not to recall the photographs of the 1968 hundred-thousand march against the military dictatorships, studied during my school years.

How did it Start?

The whole affair began with a demonstration at the “Confederation Cup”, an odd and rather recent tradition of organizing a “mock” World Cup in the hosting nation one year prior to the actual event. This is intended to evaluate how successful a host country has been in preparing for the subsequent larger, and more extravagant football World Cup. The demonstrations indeed began much earlier than most would imagine, and their neglect by the mainstream media as well as international alternative media (including this writer) begs questioning – how could we have ignored such a momentous happening?

Despite the development of Sao Paulo as a metropolis and the enormous amounts of foreign and domestic investment poured into the modernization of the city in lieu of the 2014 World Cup tournament and the 2016 Olympics, not everyone has been able to find a place on-board the steamrolling train towards “progress”. As a matter of fact, discontent, although largely ignored, has been expressed throughout the years during the decade of growth that characterized Brazil’s ascension to being a letter in the “BRIC” bloc’s acronym (Brazil, Russia, India, China): an acronym now synonymous with growth, emerging markets, nations and superpowers. The majority of the discontent was largely related to the fact that the sixth or seventh largest economy on the planet by nominal GDP (depending on where you’d like to source your data) has as yet, been unable to address the fundamental fact that it is within the bottom fifteen nations for income equality and distribution, according to the World Bank’s Gini Coeficient measurement.

The lack of income distribution and the increasing income inequality, alongside allegations of corruption (more later on this), culminated in the spontaneous protests and demonstrations which were sparked by the rise in price of public transportation. This hike in costs followed a catalogue of incidents which revealed a less-than-transparent relationship between state authorities and the companies which control the urban transport network – a relationship that was condemned by the “Court of Audits” of Brazil which denounced the fact that the increase in state transfers to these companies did not result in an increase in quality of services. On the contrary, the salaries of the workers remain frozen and the job of the Ticketmaster was eliminated; delegated to the driver in addition to existing duties.

Facing rapidly rising ticket prices and a decrease in the quality of service , in addition to the deterioration of working conditions for public transportation workers, the accumulated tension erupted in the form of the current ongoing demonstrations. Despite this, the protests we are witnessing have widened their scope and grasped the opportunity to denounce a wide variety of socio-economic problems within the country.

Corruption and Clientelism

Corruption and clientelism is widespread in Brazil; more so than you would expect from a country which has been praised in mainstream financial circles for allowing transparent foreign direct investment and one which claims to have been able to raise the standard of living for millions of its citizens. Although the Brazilian corruption culture has its roots in the neo-liberal puppet governments established by, or with the blessing of, the United States since the deposition of João Goulart in 1964 by a military coup, Lula’s and Rousseff’s governments have also been marred by such allegations.

Last year, over two dozen Lula government officials were condemned under the “mensalao” scheme of cash-for-votes that threatened to bring down de Silva’s government when it came to light in 2005. Despite the guilty verdicts, many are yet to be incarcerated due to a lengthy appeal process marred by delays, which has justifiably enraged Brazilian citizens. Rousseff’s government itself has witnessed the expulsion of almost ten ministers due to allegations or charges of malfeasance and corruption, despite the recent assurances by the Brazilian President that combating corruption is “state policy” in Brazil.

To add insult to injury, and despite the already inefficient and inadequate prosecutions of government officials involved in corruption scandals, a law is under discussion in Brazil that would curb the investigative powers of the federal judiciary police and magistrature; coincidentally, in cases of money laundering and corruption.

Continuous corruption, which has marked the rule of the Partido dos Trabalhadores (PT – Worker’s Party), is not the only factor that has led to the erosion of its support, even by many of those who have unquestionably supported them in the past. There is the evident disparity between the anti-globalization, anti-imperialist and populist rhetoric expunged by leaders of the PT and the opposing neo-liberal policies which they have enacted.

Fictitious Growth

The root causes of the ongoing socio-economic crisis in Brazil are not a simple case of mismanagement of the country ‘s resources. As a matter of fact, and as mentioned previously, Brazil is considered to be one of the most promising and rapidly growing world economies. The ongoing crisis is the consequence of the neo-liberal macroeconomic agenda pursued by the PT’s predecessors, and continued by Lula da Silva following his ascension to presidency in 2003 and it is now being continued under Rousseff’s presidency.

One must understand that Lula’s election in 2002 symbolized the hope of an entire dispossessed nation and embodied an overwhelming vote against globalization, as well as the pervasive neo-liberal economic model and policy framework pursued by his predecessor, Fernando Henrique Cardoso, which was perceived by the Brazilians as a US imposition and resulted in mass poverty and unemployment throughout Latin America. Failure to deliver on such promises and the favouring of the same model Lula condemned, represented an immense disappointment for a large number of Brazilians.

One of da Silva’s first tasks as President was the appointment of Henrique de Campos Meirelles as the head of Brazil’s Central Bank (Banco Central do Brazil – BB). Meirelles had been the president and CEO of one of the United States’ largest financial institutions (7th at the time) and Brazil’s second largest creditor institution (as of 2003), Boston Fleet, previously known as BankBoston. As such, the nation’s financial and monetary policies were not only owned and managed by Wall Street executives, but also by those who had a direct interest in further endebting the country while utilizing its resources to repay already existing debts. Meirelles was eventually charged with Tax Evasion in 2005 but denied any wrongdoing and maintained his post until 2010.

As a matter of fact, Boston Fleet was one of the financial institutions primarily involved in the speculative exchange-rate machinations against the Brazilian Real in 1998 and 1999, which was estimated to have made a 4,500% profit on its initial US$ 100 mln. investment for a total of US$ 4.5 billion. The speculative bubble which grew as a result of the “Plano Real” eventually culminated with the disastrous Brazilian Currency Crisis in January, 1999. The immediate effect of this plan was the insurance of a supply of cheap imported products, as well as forcing domestic producers to sell at lower prices in order to maintain their market shares.

It is worthwhile noting that Cassio Casseb Lima, who previously worked for Citigroup’s operations in Brazil and began his career under Meirelles’ tutelage in BankBoston in 1976, was put in charge of the Bank of Brazil (Banco do Brasil – BB) itself, rather than the central banking institution as a whole. In other words, the head of BB has personal and professional links to two of Brazil’s largest commercial creditors: Citigroup and Boston Fleet. “The new PT team in the Central Bank is a carbon copy of that appointed by (outgoing) President Fernando Henrique Cardoso. The outgoing Central Bank president Arminio Fraga was a former employee of Quantum Fund (New York), which is owned by Wall Street financier George Soros.”, stated Prof Michel Chossudovsky of the Global Research institute.

It is thus not surprising that upon taking these actions, Lula da Silva was praised by the then-Managing Director of the IMF Horst Köhler which stated:

” I am enthusiastic; but it is better to say I am deeply impressed by President Lula, indeed, and in particular because I do think he has the credibility which often other leaders lack a bit… under the leadership of President Lula, has demonstrated in its first 100 days of government is also impressive and not just airing intention how they work through the process on this huge agenda of reforms… I am assured and I am quite confident that President Lula and Brazil, the political system, will do their own job and I am confident this will pay off.” – Horst Köhler at a press conference in Washington DC in December, 2003.

And the job is indeed paying off! It is estimated that the total cost for the World Cup in Brazil has already surpassed the US$30 bln. mark and that the additional infrastructure for the subsequent Olympic games in 2016 will require an additional US$14.4-billion, a budget “just a touch higher than the combined budgets for the three other finalists.”. Although it could be argued that indeed South Africa received a GDP boost of 0.5%-0.7% from hosting the previous World Cup and similar results could take place in Brazil. But who will that increase really benefit? As pointed out in this video (what video?), the ice-cream vendor on the beach may make a lot of money during that particular week, but will the event actually change his life for the better? Far from it. Indeed, for a large number of people it could be quite the opposite.

The multinational, corporate, profit driven and multi-billion dollar infrastructural projects related to both the World cup and the Olympic Games have been wrought by corporate corruption. They have resulted in massive gentrification projects which have displaced hundreds of people, as well as further indebting Brazil to foreign creditors, allowing Wall Street to further tighten its grip on Brazilian economic policy. This is a common occurrence during mega-events, and took place in the London 2012 Olympics. Despite the fact that the gentrification-driven destruction of favelas in Brazil is of much greater magnitude than its London counterpart, and that as far back as a year ago reports were being circulated of this phenomenon, no particular notice was taken.
Human Rights

In Brazil, these policies (be specific – what policies exactly are you talking about here?) have resulted not only in a huge rise (31%) of homeless and unemployed in urban centres in the last couple of years, but they have also has failed to address the fundamental issue of indigenous rights in Brazil; instead allowing for the continuation of the exploitation of indigenous tribes and their lands for the benefit of domestic and multinational corporations in the process of industrialization of the Amazon. As part of the gentrification process in Rio de Janeiro, the Aldeia Maracanã centre of Historical Native Culture has been forcibly evicted in order to be transformed into the museum of the Olympic Committee. Citizens, and especially the Native Indian community, have been denied a part in the bidding process for the building, as well as any say in its future administration.

(Photo’s credits to The Guardian)

In addition to Brazil’s socio-economic woes, confidence has faltered with the government’s ability to deal adequately, and transparently with domestic Human Rights abuses. This might stem from the appointment of Pastor Marco Feliciano to the head of the Parliamentary Commission for Human Rights. Feliciano is known for his homophobic tendencies, defining homosexuals as “persons to be cured”, as well as for his strong stance against abortion, even in the eventuality of rape. As such, he is considered by many Brazilians to be inadequate to hold such a position, an opinion that is also shared by human rights associations, and one that has instigated heated disputes in the parliament in recent times.

With a compendium of factors, it is hardly surprising that the Citizens of Brazil have been rising up. The promise of freedom from Western-imposed neoliberal economic development for the creation of a “New Brazil” has resulted in exactly the same policies which they were supposed to address and rectify. Instead, the people of Brazil have been betrayed by the charming mask of “progressive” rhetoric of the PT, a mask that is quickly falling and revealing the true face of “Democracy”.

Ruben Rosenberg Colorni


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