Themes > Current Issues
22.09.2000
Jayati Ghosh
Rio de
Janeiro may well be the most beautiful big city on earth. The southern
part of the city, spread around its famous palm-fringed beaches and
with spectacular views of hills and sea, combines all the usual high-rise
and high-tech artefacts of the modern metropolis with wide open spaces
and lush green parks. Not surprisingly, the residents themselves (or
"Cariocas" as they are called) speak of their own city with
continual delight and appreciation.
Add to this extraordinary physical beauty a cultural milieu which is spontaneously exuberant and fun-loving, with uninhibited appreciation of not just music but all the sensual things of life, and it is difficult for the visitor not to be captivated. The city of Rio in particular captures the ethnic and cultural melange that makes Brazil so interesting, even though the larger urban conglomeration of Sao Paulo may have greater ethnic diversity, and Salvador in Bahia may show greater traces of the past two centuries of history.
Of course, the downside of this remarkably attractive place is also well known. Among developing countries, Brazil has a relatively high per capita income, but this is counterbalanced by the most unequal income distribution in the world. Urban poverty and squalor of a degree that would be familiar to Indians coexist with flamboyant first-world lifestyles among the elite. In Rio, this is dramatically illustrated by straightforward topography : the rich live, work and play in the delightful southern section by the sea; the poor fill the less interesting urban spaces with their congested high-rise blocks and carpet the hills with their favelas (slums).
The sharp inequality is reflected - inevitably - in high rates of crime and insecurity especially in the cities. The poorest of Brazil's people do not in fact live in the cities : they are the indigenous populations of the Northeast and in the Amazon region, who have been marginalised and further impoverished by the process of development so far. Even so, the plight of the urban poor and their living conditions are stark enough to make the contrast with the better off very prominent and visible, and also to generate resentment and criminality among the more deprived groups.
So it is that the city given to so much enjoyment and the celebration of life is also the city of violence and fear, where petty theft is so commonplace that it no longer merits comment, while more serious acts of violence are also treated as part of quotidian life. The attacks on groups of abandoned street children by self-styled private vigilante groups may have diminished somewhat recently, but the basic plight of such children persists, and some observers feel their numbers have increased. Meanwhile, as formal employment continues to fall in the wake of severe austerity measures imposed since early last year, the search for informal employment inevitably takes many forms, not all of which are entirely legal or socially desirable.
On the face of it, the Brazilian economy appears to have recovered quite impressively from the crisis of late 1998-early 1999, when private capital flight and speculation against the Real (the Brazilian currency created as part of President Cardoso's anti-inflationary plan of 1985) bled the country's official foreign exchange reserves and caused the government to go to the IMF for succour. The IMF imposed its usual, remarkably unchanging, set of conditions, and the stage was set for the usual pattern of recession, job loss and decline in the availability of public goods and services.
As always, this meant that the burden of adjustment was borne by the working people, while the elites who had gained from the earlier pattern of growth further improved their position. It is likely, therefore, that the latest round of recession and adjustment has further worsened income distribution from its already very unequal state. The current recovery, which is now is full swing, is similarly associated with substantial increases in private profits and little increase in employment.
The basis of the current recovery is the privatisation programme of the government, which has meant the sale of immensely lucrative state assets in petroleum, telecom, insurance and other activities, to private, typically foreign, buyers. This, along with other incentives to foreign capital, has encouraged more inflow of foreign savings to buy cheap assets and benefit from the potentially huge Brazilian market.
Of course, such inflow imposes further costs in terms of profit repatriation by foreign companies, the servicing of debt and so on, and makes the balance of payments problem over time even more acute. Thus, currently, because of import contraction and desperate measures to generate more exports, the Brazilian external trade account now shows a modest surplus. But because of major outflows primarily in the form of repatriation of profits by the new MNC owners of all the recently privatised assets, the current account is in deficit to the tune of as much as $ 24 billion. Meanwhile, the privatisation process has also been beset by problems, with chaos in telecom for nearly a year, and significant increases in premia and declines in claim settlement for consumers in insurance.
The current account deficit is being met at the moment through fresh capital inflows which are either in the form of Foreign Direct Investment primarily buying up domestic assets or investing in the newly liberalised telecom sector, or finance capital like portfolio inflows and external borrowing. International finance is currently pleased with Brazil, which is now being patronisingly described as "the IMF's star pupil". This has allowed for the stability of the Real over the past year, relatively low inflation of around 9 per cent as well as some modicum of growth after the recession of 1999.
But the pattern of the recent recovery makes it very clear whose interests it is in. Employment has still not recovered - indeed, the estimates suggest that jobs in the formal sector are still being lost. More retrenchment is on the cards as the full impact of privatisation is played out. In Brazil, as in India, poverty and the absence of a general social security system mean that open unemployment is not an option for most people, so official unemployment rates do not show the true extent of joblessness. But as the favelas of Rio and Sao Paulo show, the cities are full of poor people who engage in low paying informal sector activities, unable to find more productive and gainful employment.
Meanwhile, the financial sector has practically never had it so good. The government's orientation was made deliberately explicit in the appointment of Arminio Fraga, formerly deputy of the international private financier Goerge Soros, as the head of Brazil's central bank. It is now commonplace that developing country Finance Ministers are chosen in a manner designed to placate or please international capital, but this may be the most blatant expression yet of the subservience of national interests to the whims of global finance.
Despite the kudos it has received from the international financial press and from the IMF, the government's domestic popularity is at a very low ebb. President Cardoso's personal ratings in the polls have fallen yet again recently, and the recent municipal elections - especially in important states like Sao Paulo - have indicated substantial gains for the opposition, especially the populist Workers Party. There is a widespread sense that the government's priorities are inadequately focused on the needs of the people, and that its policies create continuing dependence on external finance.
Despite all these problems, there is still a sense of hope in Brazil. Partly, the significant success of some decentralisation experiments such as that in the town of Porto Allegre and the ability of public pressure to extract increased public spending on sectors like education have been responsible. But it is also true that - insofar as generalisations about national character have any value at all - the fundamentally positive, laid back and celebratory attitude of ordinary Brazilians themselves also has a role to play.
We in India are familiar with the amazing resilience of those living in poverty. This is also marked among the urban poor of Brazil. From the favelas come numerous stories of the urge to joy triumphing over all sorts of material obstacles. This is manifest for example in the annual carnival that lasts over four days and is apparently an uninhibited social outpouring of continuous revelry that defies description. Perhaps it is this more social feature, finally, that makes Rio such a beautiful city.
Add to this extraordinary physical beauty a cultural milieu which is spontaneously exuberant and fun-loving, with uninhibited appreciation of not just music but all the sensual things of life, and it is difficult for the visitor not to be captivated. The city of Rio in particular captures the ethnic and cultural melange that makes Brazil so interesting, even though the larger urban conglomeration of Sao Paulo may have greater ethnic diversity, and Salvador in Bahia may show greater traces of the past two centuries of history.
Of course, the downside of this remarkably attractive place is also well known. Among developing countries, Brazil has a relatively high per capita income, but this is counterbalanced by the most unequal income distribution in the world. Urban poverty and squalor of a degree that would be familiar to Indians coexist with flamboyant first-world lifestyles among the elite. In Rio, this is dramatically illustrated by straightforward topography : the rich live, work and play in the delightful southern section by the sea; the poor fill the less interesting urban spaces with their congested high-rise blocks and carpet the hills with their favelas (slums).
The sharp inequality is reflected - inevitably - in high rates of crime and insecurity especially in the cities. The poorest of Brazil's people do not in fact live in the cities : they are the indigenous populations of the Northeast and in the Amazon region, who have been marginalised and further impoverished by the process of development so far. Even so, the plight of the urban poor and their living conditions are stark enough to make the contrast with the better off very prominent and visible, and also to generate resentment and criminality among the more deprived groups.
So it is that the city given to so much enjoyment and the celebration of life is also the city of violence and fear, where petty theft is so commonplace that it no longer merits comment, while more serious acts of violence are also treated as part of quotidian life. The attacks on groups of abandoned street children by self-styled private vigilante groups may have diminished somewhat recently, but the basic plight of such children persists, and some observers feel their numbers have increased. Meanwhile, as formal employment continues to fall in the wake of severe austerity measures imposed since early last year, the search for informal employment inevitably takes many forms, not all of which are entirely legal or socially desirable.
On the face of it, the Brazilian economy appears to have recovered quite impressively from the crisis of late 1998-early 1999, when private capital flight and speculation against the Real (the Brazilian currency created as part of President Cardoso's anti-inflationary plan of 1985) bled the country's official foreign exchange reserves and caused the government to go to the IMF for succour. The IMF imposed its usual, remarkably unchanging, set of conditions, and the stage was set for the usual pattern of recession, job loss and decline in the availability of public goods and services.
As always, this meant that the burden of adjustment was borne by the working people, while the elites who had gained from the earlier pattern of growth further improved their position. It is likely, therefore, that the latest round of recession and adjustment has further worsened income distribution from its already very unequal state. The current recovery, which is now is full swing, is similarly associated with substantial increases in private profits and little increase in employment.
The basis of the current recovery is the privatisation programme of the government, which has meant the sale of immensely lucrative state assets in petroleum, telecom, insurance and other activities, to private, typically foreign, buyers. This, along with other incentives to foreign capital, has encouraged more inflow of foreign savings to buy cheap assets and benefit from the potentially huge Brazilian market.
Of course, such inflow imposes further costs in terms of profit repatriation by foreign companies, the servicing of debt and so on, and makes the balance of payments problem over time even more acute. Thus, currently, because of import contraction and desperate measures to generate more exports, the Brazilian external trade account now shows a modest surplus. But because of major outflows primarily in the form of repatriation of profits by the new MNC owners of all the recently privatised assets, the current account is in deficit to the tune of as much as $ 24 billion. Meanwhile, the privatisation process has also been beset by problems, with chaos in telecom for nearly a year, and significant increases in premia and declines in claim settlement for consumers in insurance.
The current account deficit is being met at the moment through fresh capital inflows which are either in the form of Foreign Direct Investment primarily buying up domestic assets or investing in the newly liberalised telecom sector, or finance capital like portfolio inflows and external borrowing. International finance is currently pleased with Brazil, which is now being patronisingly described as "the IMF's star pupil". This has allowed for the stability of the Real over the past year, relatively low inflation of around 9 per cent as well as some modicum of growth after the recession of 1999.
But the pattern of the recent recovery makes it very clear whose interests it is in. Employment has still not recovered - indeed, the estimates suggest that jobs in the formal sector are still being lost. More retrenchment is on the cards as the full impact of privatisation is played out. In Brazil, as in India, poverty and the absence of a general social security system mean that open unemployment is not an option for most people, so official unemployment rates do not show the true extent of joblessness. But as the favelas of Rio and Sao Paulo show, the cities are full of poor people who engage in low paying informal sector activities, unable to find more productive and gainful employment.
Meanwhile, the financial sector has practically never had it so good. The government's orientation was made deliberately explicit in the appointment of Arminio Fraga, formerly deputy of the international private financier Goerge Soros, as the head of Brazil's central bank. It is now commonplace that developing country Finance Ministers are chosen in a manner designed to placate or please international capital, but this may be the most blatant expression yet of the subservience of national interests to the whims of global finance.
Despite the kudos it has received from the international financial press and from the IMF, the government's domestic popularity is at a very low ebb. President Cardoso's personal ratings in the polls have fallen yet again recently, and the recent municipal elections - especially in important states like Sao Paulo - have indicated substantial gains for the opposition, especially the populist Workers Party. There is a widespread sense that the government's priorities are inadequately focused on the needs of the people, and that its policies create continuing dependence on external finance.
Despite all these problems, there is still a sense of hope in Brazil. Partly, the significant success of some decentralisation experiments such as that in the town of Porto Allegre and the ability of public pressure to extract increased public spending on sectors like education have been responsible. But it is also true that - insofar as generalisations about national character have any value at all - the fundamentally positive, laid back and celebratory attitude of ordinary Brazilians themselves also has a role to play.
We in India are familiar with the amazing resilience of those living in poverty. This is also marked among the urban poor of Brazil. From the favelas come numerous stories of the urge to joy triumphing over all sorts of material obstacles. This is manifest for example in the annual carnival that lasts over four days and is apparently an uninhibited social outpouring of continuous revelry that defies description. Perhaps it is this more social feature, finally, that makes Rio such a beautiful city.
© MACROSCAN 2000