by John Fitzpatrick

After his address to the G-7 group of industrialized nations recently President Luiz Inacio Lula da Silva came back home and boasted that although, like most ordinary Brazilians, he did not speak English this had not stopped him getting his message across. What a pity the President has shown no interest in at least learning English because if he were to read T.S. Eliot’s poem “The Hollow Men” he might recognize himself and his top adviser, Jose Dirceu: 

    
“We are the hollow men
We are the stuffed men
Leaning together
Headpiece filled with straw. Alas!
Our dried voices, when
We whisper together
Are quiet and meaningless
As wind in dry grass”

Lula was in linguistically-friendly Portugal (where presumably he did not have to endure English being spoken all around him) when this announcement was made. According to Dirceu, Lula was prepared to accept the proposed changes “providing the principles which motivated the government’s proposals were not threatened.” In other words, how long is a piece of string?

The next few weeks should see whether this government has the political strength and/or guts to make its proposals stick or whether or it will give up further ground and accept a lower retirement age or shorter contribution period. The stakes are high and Lula has much to lose not only in terms of money but also in credibility. According to the government’s figures, its proposals would save the US$16.5 billion between 2004 and 2010. Oddly enough the proposed change to the government draft would save R$17.2 billion because it would raise the age of retirement from 60 to 65 for men, and from 55 to 60 for women. The thinking here is that the public servants would tend to stay on longer and, therefore, pay more in contributions.

This is wishful thinking to say the least. At the moment, about 75% of the government’s US$ 400 billion debt goes on paying public servants’ pensions. This crippling debt means sky-high interest rates and low growth. According to Forbes magazine, Brazil's public pension system was around 5% GDP last year compared with about 2% for comparative systems in Europe.

The response on the markets was swift. On Friday the Brazil risk rose by 2.6% to the highest rate since May and the São Paulo stock market fell by 1.34%. According to the Estado de S. Paulo newspaper, the Brazil risk has increased by around 21% since June whereas the increase for other developing countries in the same period has been 12%. The pension setback is the latest in a series of events which have shown that the government is fumbling and still not fully in control. These have included the inertia hanging over the Zero Hunger program, the public difference among members of the government over the level of interest rates, attempts by the communications ministry to weaken the regulatory body over tariffs combined with a row over telephone increases, and a surge of activity by the MST landless peasant movement which has started mass occupation of privately-owned land.              

In his two terms of office, former President Fernando Henrique Cardoso never managed to clear up the Augean mess of the public pension system which is not only unfair but corrupt. Lula has tried to tackle it head on and while no-one expected him to get his own way by giving in so quickly, especially to the judiciary, he has only given himself some temporary breathing space. His action will lose him political support from the majority of the population who do not benefit from generous pension schemes and credibility on the international markets.

Let us return to T.S. Eliot and hope for the sake of Brazil that his words do not become applicable to this government.