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News > Latin America

Brazil Is About to Institutionalize Neoliberalism For 2 Decades

  • Brazil's President Michel Temer gestures as he attends an economics and politics forum in Sao Paulo, Brazil, September 30, 2016.

    Brazil's President Michel Temer gestures as he attends an economics and politics forum in Sao Paulo, Brazil, September 30, 2016. | Photo: Reuters

Published 8 October 2016

In an unprecedented move, Temer's government is about to adopt a constitutional change that will ensure spending on social welfare limited for the next 20 years.

A congressional committee in Brazil approved a constitutional amendment this week which would freeze the budget for public spending until 2037, an unprecedented move that will institutionalize neoliberalism across the board and force all future governments to limit expenditures in health, education, social welfare and public services for the next two decades.

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Called the Proposed Constitutional Amendment 241/2016, or PEC 241, the historic move is now one step away from being officially approved in the Senate after the lower house committee voted 23-7 in its favor. To be approved, the proposed reform needs to be decided on over two days inside the lower house as well as once in the Senate, with a three-fifths majority required each time. 

If approved, PEC 241 will apply to both Temer and the next five administrations, including any potential future Workers’ Party (PT) government that may want to adopt progressive policies. Temer's government expects it to pass.

The Numbers

According to a poll by Ibope in 2014 commissioned by the National Industry Confederation, the issues Brazilians believe should be addressed by the federal government are public order, health, public safety and education, in that order.

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However, PEC 241 is heavily aimed at significantly reducing health and education programs in Brazil, from hospitals to disease prevention campaigns, as well as funding for schools and university loans for some of the poorest sectors of society. The austerity legislation stands in stark contrast to the policies of former PT president Dilma Rousseff and her economic agenda, which focused primarily on social aid for Brazil’s working-classes.

The argument, according to Temer's government, is that PEC 241 will limit the amount of federal spending based on the rate of inflation. The bill states the budget for public spending each year will be defined by the growth of inflation in the country during the previous year, and no longer dictated by GDP revenue growth. This will reduce the nation's public debt and “stabilize” the country, according to the coup administration.

Brazil’s public debt in 2015 represented 66.2 percent of the country's GDP, according to Brazil's Central Bank. The Temer government promotes the idea that these are unsafe levels of debt, not only in the region but worldwide since in the same year Argentina had a public debt of 56 percent of its GDP and Chile had a debt of 17 percent.

What the Temer government has failed to acknowledge is that most developed countries have an ever-larger public debt. Spain currently has a national debt of over 100 percent and the United States 125 percent of GDP.

The Masterminds

The roots of Brazil's fiscal problems are rooted in the rapid growth in public spending under successive PT governments, according to Finance Minister Henrique Meirelles. This, the argument goes, has spiked interest rates and lowered consumer confidence.

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Both Meirelles and Temer have promoted PEC 241 among members of Brazil’s Chambers of Commerce as well as to foreign investors and multinational corporations. Just weeks ago, the new finance minister announced he had met with some of the wealthiest businessmen in society to assure them that stability through reform would guarantee profitable investments.

When the special committee in the Brazilian Congress’ lower house debated PEC 241 on Thursday, the finance minister expressed confidence it would pass. “Our assessment is that it’s going to be approved,” said Meirelles. “There’s a very, very high chance.”

Around 2,000 teachers, students and activists from other social movements gathered outside the lower house to protest the measure. Some even managed to break into the committee session but were swiftly arrested by police.

"The government says this will help the war on unemployment, but this is war on the unemployed because their health services will decline and there will be less money for education," said Alessandro Molon of the Rede Sustentabilidade (REDE) party on Thursday.

A Cruel Coup

After her impeachment, Rousseff promised she would continue to fight for the rights of Brazil’s most disenfranchised, the same rights the PT fought for from Lula’s first term in office in 2003 up until this year.

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But even if the economy in Brazil were to improve, and even if the PT were to one day gain power, a post-PEC 241 Constitution would forbid this from happening.

In a matter of months, the social policies of Temer’s government have proven to more resemble the interests of international monetary institutions such as the World Bank and the International Monetary Fund than the interests of Brazil’s disadvantaged peoples.

No policy reflects this more than PEC 241. "When the country's situation is not good, the state's role needs to increase, not decrease,” says lawmaker Luciana Santos from the Communist Party of Brazil. "The PEC 241 is the cruelest expression of the coup government against the people,"

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