Brazil’s Leaders Tout Austerity (Just Not for Them)

by admin March 5, 2017 at 1:30 am

Outside such rarefied circles, Mr. Temer’s austerity measures are igniting a fierce debate over how the richest and most powerful Brazilians are protecting their wealth and privileges at a time when much of the country is enduring a harrowing economic decline.

“This government talks about austerity for everyone, but of course forces the costs on society’s most vulnerable people,” said Giovana Santos Pereira, 25, a schoolteacher. “It’s ridiculous to the point of being tragic.”

Much of the ire revolves around the centerpiece of Mr. Temer’s austerity drive: his success in persuading the scandal-ridden Congress to impose a cap on federal spending for the next 20 years.

Mr. Temer, who rose to power last year after supporting the impeachment of his predecessor, Dilma Rousseff, says the cap, which would limit the growth in spending to the rate of inflation, is needed to scale back ballooning budget deficits.

Investors have applauded the measure as a turning point for Latin America’s largest economy. But critics are lashing out at the spending cap, saying it could harm the poor for decades to come, especially in areas like education. Philip Alston, the United Nations special rapporteur on extreme poverty and human rights, said the spending cap placed Brazil “in a socially retrogressive category all of its own.”

The debate is all the more caustic because Mr. Temer’s government is resisting calls to raise taxes on wealthy Brazilians, who still enjoy what some economists describe as one of the most generous tax systems for the rich among major economies.

For instance, Brazilians remain exempt from paying any taxes at all on dividends from stock holdings, and they can easily use loopholes to significantly lower taxes on other sources of income.

Economists at the government’s Institute of Applied Economic Research said in a 2016 study that a 15 percent tax on dividends could generate nearly $17 billion in revenue a year, but such proposals have failed to gain traction in a government that has shifted to the right.

“The system is engineered to perpetuate inequality, and Temer is doubling down on bets that Brazil needs Greek-style austerity,” said Pedro Paulo Zahluth Bastos, an economist at the University of Campinas, drawing parallels between Brazil’s multiyear slowdown and Greece’s seemingly interminable economic crisis.

Mr. Temer has not been a popular president, and his approval ratings stand at just 10 percent. But his supporters point out that his leftist predecessor, Ms. Rousseff, sought her own austerity measures before her ouster last year, and that his government has promised to maintain some widely popular antipoverty programs expanded by her party years ago.

Mr. Temer’s government says it is reversing the free-spending ways of previous governments. Brazil’s economy shrank about 4 percent in 2016, when its political class was consumed by infighting over the impeachment. But last month, the finance minister, Henrique Meirelles, claimed that “the recession has ended.”

Photo

President Michel Temer of Brazil aims to impose a cap on federal spending for the next 20 years.

Credit
Andressa Anholete/Agence France-Presse — Getty Images

Some promising signs of a recovery may be emerging. Foreign investment has increased and, after performing poorly, Brazil’s stock market was one of the best performing in the world in 2016, creating a windfall for the relatively prosperous Brazilians who put money into equities. Mr. Temer is especially bullish, predicting that the economy will grow 3 percent next year.

But the conditions on the streets of cities around Brazil tell a different story, reflecting devilishly complex structural challenges as millions of Brazilians fall into poverty.

States are facing crippling strikes by public employees over unpaid or inadequate salaries. In the state of Espírito Santo, in southeast Brazil, a police strike last month produced an anarchic week marked by looting and a surge in homicides.

Rio de Janeiro, which hosted the Olympics in August, showcases the complex issues Brazil’s states face. In desperate efforts to slash deficits, the authorities in Rio are shutting down restaurants that provide subsidized meals to the poor, raising taxes on residential electricity service and eliminating welfare programs for the state’s poorest residents.

Yet Rio’s governor, like his counterparts in other Brazilian states, enjoys the use of a private jet for jaunts around the country. And Rio’s judges, already well paid, were pressing ahead with plans to spend millions of dollars hiring new servants for their chambers — until the public got wind of the plan. The ensuing outrage forced the judges to shelve the idea.

At the same time, the state is having trouble finding money to pay for food for the poor. The cost — about 65 cents a meal — was straining the state enough that one state legislator, Pedro Fernandes, suggested taking meals “every other day.”

“I don’t know if what I’m saying is absurd, but it’s something to ponder,” he said.

The ability of elected officials and elite public employees to secure what Brazilians call “super salaries” and outsize benefits for themselves has long been a contentious feature of the country’s political system.

But while Brazilians fume over the issue at a time of national belt-tightening, some officials say they are entitled to special treatment. Brazilian judges, who can easily make about $200,000 a year, have been especially outspoken in demanding raises in a country where roughly half the population scrapes by on a minimum wage of about $4,000.

“There’s no shame whatsoever in this,” Ricardo Lewandowski, a Supreme Court justice, recently told a conference of judges to a round of applause. “Building maintenance fees go up, real estate taxes go up, gasoline goes up, food goes up, and the judge’s salary can’t go up?”

As many poor and middle-class Brazilians absorb the brunt of austerity policies, the protracted economic slowdown and a dizzying array of graft scandals involving the nation’s political leaders are fueling anti-establishment sentiment ahead of presidential elections in 2018, paving the way for figures outside the mainstream to gain momentum.

Alarming some politicians, Jair Bolsonaro, an ultranationalist congressman who excoriates immigrants and defends the torture of drug traffickers, is polling well ahead of traditional contenders like Aécio Neves, a senator from the Brazilian Social Democracy Party.

According to a survey last month by MDA, a Brazilian polling company, just 1 percent of respondents said they would vote for Mr. Temer, reflecting his dismal nationwide standing. It may not even matter, since Mr. Temer’s conviction for violating campaign finance limits could make him ineligible to run. His popularity sustained another blow in recent days after his government spent thousands of dollars to upgrade the president’s luxurious residence, only for Mr. Temer to move his family back to another government-owned palace in the capital, Brasília.

The poll was conducted from Feb. 8 to 11 through interviews with 2,002 people, with a margin of sampling error or plus or minus 2.2 percentage points. It also showed a former president, Luiz Inácio Lula da Silva, as a potential front-runner.

But Mr. da Silva, a leftist who has been condemning Mr. Temer’s austerity measures, could also find himself ineligible to run if he is convicted of graft charges in connection with his ties to construction companies that profited from public contracts.

Given the volatile political landscape and the weak economy, a sense of hopelessness afflicts many Brazilians.

Ana Cristina Silva, 49, lost her job in December at a company in the southern city of Porto Alegre that assembles furniture.

“They just think about themselves,” she said about Mr. Temer’s government, expressing indignation about the pay increases granted to some public employees while much of the country is still reeling. “It’s absurd. Those who don’t need it get a raise.”

Correction: March 4, 2017

An earlier version of this article misidentified the recipients of a raise in the country’s public sector. Civil servants in the judicial branch, not judges, received a 41 percent raise. The same error appeared in an earlier version of the capsule summary with this article.

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