The United States Wins In Brazil

By  |  7 / September / 2015

Surrender, without a fight

The right and the financial sector got the Workers’ Party (PT) and Dilma Rousseff’s government to agree to advance its neoliberal program and its close alliance with Washington.

There is something worse than defeat: assuming the enemy’s program without resistance. As history’s greatest strategist, Sun Tzu, wrote in The Art of War, “the greatest victory is that which requires no battle.” Brazil is experiencing a profound political crisis in which the PT government has not only lost the initiative, but also the morale, of battle. Dilma Rousseff is moving to the right, and taking on much of its program.

The government has taken on the right’s agenda to avoid the impeachment of Dilma by Parliament. This gradual defeat of the PT is clearly visible in three aspects: the hard fiscal adjustments against workers, the Agenda Brasil negotiation with the Senate president, and a dramatic change in the country’s international position.

The shift has generated a kind of relief, as the August 16 protests were less numerous than expected, with some 135,000 demonstrators in São Paulo and over a million in more than a hundred other cities. But this shift tends to break down the social base of both government and social movements. The movements are beginning to mobilize again, defending Dilma against calls for her resignation while at the same time criticizing her economic adjustment policies.

One of the most influential voices of Brazilian commerce, Itaú Unibanco’s president Roberto Setubal, gave a long interview with Folha de São Paulo recently. In it, he was full of praise for the president and flatly rejected impeachment. “Nothing I’ve seen or heard so far makes me think there are conditions for impeachment,” Setubal said, while affirming “there aren’t any signs she is involved in corruption.” On the contrary, he affirmed that “Dilma allowed a full investigation on corruption.”[1]

“What still has not been discussed is the country. There is much discussion about power, but little about the country,” said the banker. He asserted that the removal of Dilma “would create a ruinous instability for our democracy.”

In short, the principal director of the bank is saving the PT government. It is one of the most painful and demoralizing aspects of the Brazilian left.

Turn to the right

Two facts confirm the change in course. Contracts to build new highways will be open to foreign companies, an area that until now had been reserved for Brazilian companies. The Aeronautics Code Reform Commission in the Senate approved the complete opening of Brazil’s airlines to foreign investment, which until now was limited to 20%.[2]

Former presidential candidate for the Social Democractic Party (PSDB) José Serra wants to eliminate the requirement for Petrobras to have a minimum 30% stake in all investments in the enormous reserves along the Brazilian coast. This sentiment is predominant in the congress, and in the middle classes of São Paulo and the south-central part of the country.

Explaining how this situation came about is important. Economist Carlos Lessa, former president of BNDES under Lula’s first government, attempts an explanation focused on his area of specialization. In the first place, he explains that a “cruel adjustment” is being carried out because it concentrates “on families indebted by rising interest rates,” increasing their debts.[3]

This adjustment is intended to resolve the state’s fiscal deficit, but is cruel because it negatively affects poor, indebted families and small and medium businesses, and therefore generates more unemployment. However, the banks are benefiting. Lessa states that “spending cuts are being made on sectors that do not depend or live on the financial system.” In the last quarter, big banks—including Itaú, Bradesco and Banco do Brasil—had gains of 15%.

Banking had never earned as much as it has under the PT governments. In the eight years of the Fernando Henrique Cardoso government (1995-2003) —the neoliberal period—bank profits grew between 10 and 11%. During Lula’s term (2003-2011), bank earnings got to 14%. This deserves an explanation, which relates to a second consideration.

“Lula knew that Brazilians wanted to have a car, a refrigerator, to buy furniture, clothes, and go on vacation,” reflects Lessa. So he [Lula] prioritized household debt, so they could purchase consumer goods. That was the center of Lessa’s dispute with Lula, which led to his dismissal. Integrating families through consumption is “a completely misguided model” because “it only secures the future if quality employment grows, if you’re able to expand production capacity, Lessa affirms.”[4]

The trap for the economist is clear: integration through consumption-indebtment involves enriching the finance sector, which earns interest on household debt. Meanwhile, the government does not pursue structural reforms that could reduce the huge inequality. But at some point the economy declines (now due to the fall of commodity prices), and families cannot pay their debts. And neither can the state, which must cut expenses. Another criticism could be added: promoting consumption as a form of integration depoliticizes popular sectors. But perhaps that was the objective of the Lula government. To avoid social conflict. As an example, the car fleet grew by 9% annually in big cities during Lula’s tenure.

Brazil faces several crises: an economic crisis, because of the decline in export prices; a political crisis, because of the offensive against the president and the corruption in political parties; an institutional crisis, because of the delegitimation of institutions; and finally, a social crisis, because of the enormous gap between the aspirations of the middle classes and popular sectors. Lessa’s biggest criticism is that the government makes adjustments affecting debtors, rather than finance capital.

Agenda Brasil

What has come to be called “Operation Lava Jato” (because of money laundering between Petrobras executives and construction companies) has exacerbated the political crisis and weakened the government, to the point that the latter is accepting the entire neoliberal agenda: trade and financial liberalization, privatization, budgetary adjustment, flexibilization of the labor market, and reduction of the state, among other things.

According to ambassador Samuel Pinheiro Guimarães, one of the leading figures of Brazilian diplomacy and PT ally, the Dilma government has been left “lethargic, dizzy, and intimidated” by the offensive of the Right and the mainstream media.[5] The PT has been left without leadership, Lula being the only one able to keep initiatives running.

The opposition conquered the Chamber of Deputies by the hand of a member of the centrist PMDB, a party supposedly allied with the government. Eduardo Cunha has been attacking the government since he was accused of receiving a bribe of USD $1.5 million. According to Pinheiro Guimarães, the Public Ministry, which is in charge of investigations, “allows any individual attorney to begin prosecutions, based even on newspaper stories against any individuals.”[6]

The crisis of the judicial system is part of the country’s institutional crisis. The Federal Police act against the accused “with extreme bias, in the style of the media, making the individuals they arrest seem like highly dangerous individuals, and depriving them independent state power,” says Pinheiro Guimarães.

According to the ambassador, based on the statements of a senior Federal Police official in Parliament, [the Federal Police] “regularly receive funds from the CIA, FBI, and DEA amounting to $10 million dollars annually, deposited directly into the individual accounts of individual members of the police force.”[7] This is the police-judicial climate of the Brazilian crisis.

With the deepening crisis two perspectives in opposition arise: impose the dismissal of Dilma through the parliamentary impeachment procedure, or “domesticate” the government, so that it will carry out the agenda the Right wants. That program is called Agenda Brasil; Senate President Renan Calheiros has proposed it to Dilma Rousseff.

It is a truce engineered by the entrepreneurial class, which began to perceive that the dismissal of Dilma would be counterproductive and create a climate of ungovernability. A manifesto by FIESP (Industry Federation of São Paulo; the most decisive sector of the business class) that was published in newspapers says: “It is the time for responsibility, dialogue, and action to preserve the country’s stability. It is time to put aside personal or party ambitions and look toward Brazil’s best interests.”[8]

FIESP president Paulo Skaf was very clear. “It is the moment for serenity, balance. It’s time for Congress to vote on projects that are good for Brazil,” he said, referring to Cunha’s proposal to dramatically increase government expenditures, and aggravate the deficit.[9] It was, in short, a call for governability, as “it is time to put aside personal or partisan ambitions,” the industrialists said.

Like ripe fruit, Agenda Brasil was introduced days later. The impeachment of Dilma was left behind. Now it was time to negotiate. The agenda contained 27 proposals, which have since been expanded. Among the most controversial included the privatization of the Unified Health System (later withdrawn), increasing the retirement age, regulating labor outsourcing, revising the legal framework of indigenous territories, shorter terms for granting environmental licenses, and putting an end to Mercosur.[10]

Dilma accepted all proposals in principle, although there are negotiations with finance minister Joaquim Levy.

Defense in the spotlight

One the objective of the Right has gotten a lot of attention: to liquidate the role of state agencies such as Petrobras, BNDES, Caixa Economica Federal, and Eletrobrás, all of which would be privatized or have their functions reduced. The most serious case is that of Petrobras. In mid-August, Petrobras’ board decided to privatize 25% of BR Distribuidora, which controls 38% of the Brazilian market.[11]

But there have also been changes in foreign policy. Brazil’s exit from Mercosur had never been proposed in Brazil; it is tantamount to abandoning the project of regional integration. The day after the meeting between Dilma and Barack Obama (July 1, 2015), Brazil ignored its BRICS allies in the United Nations, voting for a human rights resolution against Syria sponsored by the United States.

But it is in defense where dramatic changes loom, as it is an area where Brazil was advancing strategic projects. There are intense debates between Brazil and the United States, promoted by Vice President John Kerry, to reach agreements in aerospace and defense industries.[12] After Dilma returned from Washington, a series of events took place that are important to remember.

On July 29, the US government initiated an unprecedented meeting in São José dos Campos (pole of the defense industry) to present investment opportunities for the Brazilian aerospace sector. Indeed, the SelectUSA program seeks to attract investments in order to enter the main global aerospace market. 50 representatives of Brazilian companies like Embraer (aircraft) and Avibras (missiles and rockets) attended the meeting.

The Brazilian crisis is affecting the aerospace industry, slowing down program schedules with budget problems. The KC-390 has been delayed two years; the Astros 2020 missile system, five years; and the Sisfron border surveillance system, some 14 years. Meanwhile, the US aerospace industry is growing at 7.7 per cent annually.[13]

On August 5, several officials from the US and the US embassy in Brasilia, and members of Boeing, Rockwell Collins, and BAE Systems, among others, participated in several meetings, including a round table discussion on Brazil’s National Defense Strategy, with the aim of strengthening relations between militaries.[14]

In the following days, there was a clash between Embraer and the Metalworkers’ Union because the company plans to move the production line of its Legacy executive jets from São José dos Campos to the US state of Florida. This will mean a loss of 1,500 jobs. The union argues that the production of the Legacy jets “is financed by the federal government through BNDES.”[15]

The “internationalization” of Embraer converts it into an American company, according to military page Defesanet, which baptized it “Amecoaer.” 75 percent of the shares belonged to foreign pension funds, which makes the Golden Share held by the government of little use.[16] Last year Embraer’s direction refused to receive a Russian aeronautics delegation with which the government was negotiating.

On August 11, Defesanet published a rare editorial, questioning the claim that “the move of the Brazilian Defense Industrial Base to the United States seems to be a buoy of salvation.”[17]

On August 12, the Brazilian Association of Defense Materials (ABIMDE) carried out an event at Southeast Military Command in São Paulo, where studies arguing that defense investments generate returns four times greater were presented. Between 2008 and 2014, GDP grew by 17 per cent, but investments in defense grew by only 12.9 per cent. The former finance minister of the military regime, Antonio Delfim Netto, was skeptical about the proposed migration of defense industry to the United States.[18]

On July 24th, Dilma’s government had denounced the long-term cooperation treaty with Ukraine for the use of the Cyclone-4 Launch vehicle, signed in August 2003. Space-Inform magazine interviewed Kuznietsov, VP of the Ukrainian Aerospace Association, on August 13th. He said that the divorce had occurred because “Brazil couldn’t handle the pressure from a bad mother-in-law.”[19]

In Kuznietov’s opinion, Brazil “will not be able to even think about achieving the status of nuclear power” in the next ten years, and the decision “will put the brakes on scientific and technological development,” losing for Brazil the opportunity “to gain independent access to space.” The interview was important because Kuznietsov stressed that the “bad mother-in-law” was not Washington, but Russia, who proposes to build a launch base in Alcántara.

Things are more complex than they seem. The Russian-American conflict is reflected in Brazil’s aerospace matters. In mid-August it became known that Russia and France had proposed the construction of a rocket complex at the Alcántara base.[20] Furthermore, Brazil and Russia are strengthening military ties and negotiating the purchase of anti-aircraft systems.[21]

However, experts believe that after a decade of failures, the Alcántara base “will be a binational base, where the United States and Brazil will share future launches” in partnership with or under the control of NASA.[22] For now, the big winners in the Brazilian crisis are Washington, the financial sector, and the Right in both countries.

Raúl Zibechi is an international analyst for Brecha of Montevideo, Uruguay, lecturer and researcher on social movements at the Multiversidad Franciscana de América Latina, and adviser to several social groups. He focuses on the South America region and issues of autonomy and grassroots movements. He writes the monthly “Zibechi Report” for the Americas Program.

Translation by Paige Patchin

Footnotes:

[1] Folha de Sao Paulo, 23 de agosto de 2025 enhttp://www1.folha.uol.com.br/mercado/2015/08/1672332-nao-ha-motivos-para-tirar-dilma-do-cargo-diz-presidente-do-itau-unibanco.shtml

[2] Agencia Senado, 19 de agosto de 2015 enhttp://www.defesanet.com.br/aviacao/noticia/20103/INSANIDADE—Integrantes-da-comissao-do-Codigo-Brasileiro-de-Aeronautica/

[3] IHU Online, 18 de agosto de 2015 enhttp://www.ihu.unisinos.br/entrevistas/545991-qessa-agenda-brasil-e-uma-fraude-a-prioridade-absoluta-de-uma-verdadeira-agenda-brasil-e-tomar-conta-da-rede-urbana-entrevista-especial-com-carlos-lessa

[4] Ibid

[5] Samuel Pinheiro Gimarães, “A ofensiva conservadora e as crises”, Brasil de Fato, 18 de agosto de 2015, en http://www.brasildefato.com.br/node/32702

[6] Ibid.

[7] Ibid.

[8] O Globo, 6 de agosto de 2015 en http://g1.globo.com/jornal-nacional/noticia/2015/08/federacoes-das-industrias-de-sp-e-do-rio-apoiam-apelo-de-temer-por-uniao.html

[9] Ibid.

[10] La Agenda Brasil completa enhttp://www12.senado.leg.br/noticias/materias/2015/08/12/agenda-brasil

[11] Brasil de Fato, 21 de agosto de 2015 enhttp://www.brasildefato.com.br/node/32743

[12] Para conocer los datos previos, véase “Los recientes acuerdos Brasil-Estados Unidos ¿El retorno del patio trasero?”, enhttp://www.americas.org/es/archives/15554

[13]Defesanet, 10 de agosto de 2015 enhttp://www.defesanet.com.br/bid/noticia/20014/BR-US—-SelectUSA-e-a-Base-Industrial-de-Defesa/

[14] Ministerio da Defesa, 7 de agosto de 2015 enhttp://www.defesanet.com.br/br_usa/noticia/19997/Comitiva-americana-conhece-Politica-e-Estrategia-de-Defesa-Nacional-do-Brasil-/

[15] Defesanet, 8 de agosto de 2015 enhttp://www.defesanet.com.br/embraer/noticia/20000/EMBRAER-ou-AMECOAER-(AMEmerican-COmpany-AERonautics)-/

[16] Ibid.

[17] Defesanet, 11 de agosto de 2015 enhttp://www.defesanet.com.br/editorial/noticia/20033/Editorial—A-Boia-Salvadora-/

[18] Defesanet, 12 de agosto de 2015 enhttp://www.defesanet.com.br/bid/noticia/20047/Delfim-Netto-alerta-para-as-falhas-de-investimentos-em-Defesa-e-o-risco-sobre-a-soberania-da-agua-brasileira/

[19] En http://brazilianspace.blogspot.com/2015/08/a-neblina-sobre-alcantara-se-dissipou.html

[20] En http://ciencia.estadao.com.br/noticias/geral,franca-e-russia-entram-na-disputa-por-alcantara,1737497

[21] En Defensa.com, 20 de agosto de 2015.

[22] Julio Ottoboni en Defesanet, 23 de agosto de 2015, enhttp://www.defesanet.com.br/br_usa/noticia/20120/Brasil-deve-fechar-parceria-integral-no-setor-espacial-com-os-EUA/

One comment

  1. How can you dismantle the master’s house using the master’s tools?

    Comment by K. Sudhir on September 20, 2015 at 1:10 pm

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