Behind the veil of Soccer and Samba

— Sundaram

For anyone who at the beginning of the 21st century still harbours doubts about what exactly terms like ‘imperialism’, ‘corporate globalisation’ or ‘neo-liberal economics’ mean the perfect cure is a trip to Latin America. Of course such a trip is recommended for even those who understand the terms — if only to see first hand the unbelievable extent to which these concepts come alive in the region, in frighteningly copybook fashion.

Here you really get to see what it means to be the ‘backyard of US imperialism’ where ‘slash and burn cultivation’ refers to sending the aspirations and dreams of the poor up in smoke, ‘weeding out’ means the physical elimination of all dissidents and ‘pruning’ is the process by which national elites are cut to size and brought in line with the dictates of international capital.

I had the opportunity to travel through three Latin American countries recently Brazil, Uruguay and Colombia studying the impact of privatisation of the power sector or moves towards such privatisation in each of them. What follows is a very impressionistic account of not just what is happening to electrical power but to the entire concept of power itself in the region — social, cultural and political — to which everything else is so intrinsically connected.

The first leg of my trip was to Brazil — probably the region’s most well known nation thanks to football and the samba. But behind this fog of song, dance and sport remains hidden the story of one of the most unequal, exploitative societies anywhere in the world.

Consider the simple facts — Brazil has a landmass three times the size of India and its population of 170 million is roughly one-seventh that of India, it is one of the world’s largest exporters of food and yet a whopping 36 percent of its people go hungry surviving on less than a dollar a day. Less than 1 percent of the population owns up to 50 percent of Brazil’s arable land (which is almost the size of India) while up to 5 million farming families are left without land to cultivate. There are individual landowners who have land more than the size of the Netherlands.

A little bit of history is due here. After three centuries of Portuguese rule in 1822 a national elite comprising of large landowners, commercial interests and slave-owners took power. Experimenting off and on with electoral these elites, democracy in the first two thirds of the twentieth century, settled for an outright military rule to protect both their own interests and those of foreign capital, mainly from the US. Since 1985, with the return of civilian rule there has been a gradual spreading of basic political rights (though it still averages one political assassination a day) but in the realm of economy the dictatorship continues.

Over the years the domestic elites have racked up an external debt of over 250 billion dollars making the economy extremely vulnerable to severe currency fluctuations, flight of capital and hyperinflation. In the late eighties and early nineties, high inflation (of up to 2000 percent!!) hindered economic activity and investment.

“The Real Plan”, instituted in the spring of 1994 by the social-democrat government of Fredrique Henri Cardoso, sought to break inflationary expectations by pegging the Brazilian currency, the real, to the US dollar. The Real Plan at the time it was conceived was hailed by neo-liberal economists and the financial speculators as a stroke of genius and Cardoso — a firm proponent of the Tony Blair style ‘Third Way’ was canonised as their latest icon. Inflation was brought down to single digit annual figures and foreign investment started flowing into the economy and the Plan seemed to work on the surface for a few years. But by 1997 itself the Brazilian economy started to unravel from the shock waves of the Asian economic crisis hitting its shores. After crafting yet another fiscal adjustment programme and making more pledges about progress on structural reform, Brazil received a $ 41.5 billion IMF-led international support programme in November 1998.

In return for the IMF’s endorsement and the backing of large international investors the Brazilian government since the mid-nineties has been implementing the neo-liberal mantra of liberalisation and privatisation. While in earlier decades the Brazilian national elites had sought to build up a somewhat strong state sector in key areas of infrastructure, public services and played an interventionist role even in the agricultural sector, in the nineties they have been forced to sell off all these family jewels to keep foreign financial interests happy.

The true long-term impact of these policies can be understood by looking closely at what has happened to Brazil’s power sector in recent years. When it comes to electricity Brazil — with its vast supplies and potential for hydropower — has in the world a similar position to the one of Saudi Arabia in petroleum. Generous hydrographic basins with hundreds of permanent and torrential rivers flow through various parts of this vast country producing some of the cheapest electricity anywhere on the globe.

A major policy initiative to invest public funds into electricity production undertaken in the 1950s saw the installed capacity in the country jump from 3,500 MW to 55,000 MW between 1957 and 1995. As a Brazilian analyst nostalgically says about these decades, “Foreign specialists in hydroelectricity used to come to us, to learn and envy us. Which country would not like to have clean, renewable, cheap energy system, capable of stocking fuel for five years, capable of transferring great blocks of energy from one distant region of the country to the other? Which planner would not dream of presiding over an energy system that gave him/her several years of time to make decisions? Who would not like controlling companies that had a vast network of plants, all already paid for and highly profitable supplying energy to the population at extremely low prices?”

This rosy situation of Brazil’s state-owned power sector started changing in the eighties itself when under the twin pressures of ballooning foreign debt and domestic inflation successive governments started pawning them off to raise funds. Not surprisingly it was just a matter of time before the country’s power companies racked up huge debts for reasons that had nothing to do with its intrinsic performance or efficiency levels. Under conditions imposed by the IMF to keep the ‘fiscal deficit’ under control the state owned power companies were prohibited from further investment in maintenance or development of their existing capacities. The stage was thus set for privatisation of the sector and of course all this in the name of ‘higher efficiency, productivity and accountability’.

In a mirror-image of the power sector deregulation that took place in California in the mid-nineties (pushed for and manipulated by the now defunct Enron Corp.) the Brazilian government too undertook reforms that made electricity a commodity like any other to be produced both in the private and public sector and traded on an energy exchange. To make sure that the so called ‘market forces’ did not entirely run away with their baby the policy makers appointed as a ‘nanny’ a regulating body called the National System Operator.

Despite all the noise made at the time of privatisation about how foreign companies will bring in new capital and technology and make the power sector more efficient what has happened in Brazil offers a salutary lesson in what the concept of privatisation is really all about. Since the mid-nineties foreign investors from the US, France, Belgium, Spain and Chile have gobbled up large chunks of the former state-run power production capacity, thrown thousands of former public sector employees out of work, hiked up costs of power to the consumer and to top it all actually brought down the overall installed capacity in the country.

In the summer of 2001 after the rains failed to pour as usual and the country’s dams were running low on water supplies, Brazil, where the term ‘blackout’ had not been heard for many decades, suddenly woke up to a nationwide breakdown of power supplies. For the first time in a generation citizens were forced to adopt a system of rationing electricity and the country had to import power from neighbouring Argentina and Uruguay — something as unimaginable as Saudi Arabia importing petrol.

Crippling the country’s existing power supplies has not been the only grand contribution of privatisation — the market fundamentalists have even managed to mortgage Brazil’s energy (and economic) future by pushing through a massive project to produce thermal power using natural gas imported from neighbouring Bolivia. Under the excuse of ‘reducing dependence on hydropower’ the project, backed by the infamous Enron (which controls the gas fields in Bolivia) has managed to get the Brazilian government to agree to pay for the power supplied in US dollars and indexed the costs to the price of petroleum.

In an echo of what Enron managed to get the Indian government to do with its Dabhol Power Plant the Brazilian authorities have even agreed to pay for the power supplied by the gas-fired thermal power plants even when they don’t necessarily use it. As a result now Brazil, in years of good rain, will be forced to throw away freely available water and use expensive gas (in hard currency and linked to the price of petrol) for meeting its power demands!

With all this turmoil and controversy over the privatisation of Brazil’s power sector it is not surprising that the issue has found its way into the debates between various candidates vying to become the country’s next president in polls this October. The two main contenders for the Presidency- Inácio da Silva, known as Lula, of the Workers’ Party and Ciro Gomes of the Popular Socialist Party have both come out strongly against the privatisation process and promised a correction of course.

But given the brutal realities of the Brazilian economy and the ever present guiding hand of Uncle Sam in the region it may be difficult for both these candidates to really reverse the privatisation of state utilities if they come to power. Showing the devastating influence that foreign investors wield over Brazil’s so called democracy in late July this year the Brazilian currency fell by a massive 30 percent in just one week ostensibly over fears of a possible default on debt payments by the government.

The outgoing Cardoso government, which bowed and scraped before the gods of free market orthodoxy for the past eight years, was forced to borrow another US $ 30 billion from the IMF. Among the various conditions attached was that the presidential candidates pledge their support for the bailout package!

Anyway nearly 24 billion of the package is to be disbursed only after Brazil’s new government takes power on January 1, 2003. A key requirement imposed on the new government is to maintain a budget surplus of 3.75 percent through 2005, which means that any ‘leftist’ coming to power will actually be forced to preside over a further brutal cutting of state subsidies and social welfare measures!

Already financial analysts and commentators in the mainstream media are openly talking of turning Brazil into ‘another Argentina’ if a future government decides to even think of defaulting or renegotiating its huge debt or reversing any of the liberalisation, privatisation measures implemented by the previous regime.

“When it comes time for the rest of the money to be dispersed in Brazil, because they have quarterly targets and reviews, the first time that Lula misses they can tell him he’s not getting any more money”, said Walter Molano, a market analyst with BCP Securities was quoted as saying in the New York Times. “That’s what they did to Argentina last year, saying there would be no waiver, and they will do the same to the next administration in Brazil.”

In the coming months of Brazil’s elections and its aftermath we will know how real these threats are, whether the new Brazilian government will join its predecessors in toeing the neo-liberal economic regime imposed on it and what level of resistance the Brazilian left is capable of putting up to such naked imperialistic hijacking of their country’s sovereignty.

(To be continued)