recession that explains today's The basis for the "economic miracle" of 1968-1974 was laid by the cyclical downturn of 1962-1967, which permitted a restructuring of the economy. The basic precondition for this cyclical upturn was the enormous increase in the rate of exploitation ensured by the military regimes that followed the coup of 1964. This qualitative shift in the relationship between capital and labor was accompanied by a strong process of concentration of capital, embodied in the policy of "positive insolvency, " which drove smaller capital units to the wall. Although the post-1968 economic recovery was largely based on the utilization of previously idle capacity, the new elements in the situation must not be underestimated. The orientation toward the world market and the stimulation of manufactured exports is one of these elements: between 1964 and 1974 Brazil's participation in world trade more than doubled and the participation of manufactured exports in relation to the total increased by about 20%. Together with the marked increase in foreign investment after 1968, this process resulted in a much closer integration of the country into the world economic system, with a partial and sectoral incorporation of the Brazilian economy into the international circuit of expanded capital reproduction. A crucial element in the last phase of capital accumulation in Brazil has been the development of an incipient finance capital (that is, banking capital invested in the
BRAZIL:
RECESSION
_by JUAN SOSA productive sector). After 1964 a system of consumer credit was developed which was instrumental in the recovery of the durable consumer goods sector. Then, since 1968 there has been a development of a capital market through the formation of investment banks, the reorganization of traditional financial sectors, the fusion of financial groups, and the development of a stock exchange. Clearly, the concentration of industrial capital had as its complement a process of concentration
TABLE 1
COMMERCIAL DEBT
853
933
981
6079
3635
69 70 71 72 73 74 75
37
BRAZIL in the financial sphere. The development of finance capital in Hilferding's sense (fusion of banking and industrial capitals) is, however, incomplete inasmuch as this sector is largely speculative, based on the increasing external debt and only partially articulated with the real process of production.
TABLE 2
FOREIGN DEBT
22000+
17165
12571-
9521-
6621-
5295.
1403
69 70 71 72 73 74 75
In a previous issue of INPRECOR (No. 16/17, January
16,1975) Pierre Salama had already noted that the
Brazilian economy was at a turning point, with expansion based on the dynamic of the durable consumer goods
38 sectors beginning to reach its limit. At the same time, inflation was beginning to reappear and the balance of payments was becoming a serious problem. We must now analyze how this crisis has developed and how the Brazilian bourgeoisie is attempting to further reorient the The economic expansion of the 1968-1974 period came into question fundamentally at the level of the balance of payments and through the increase of the foreign debt. Tables 1 and 2 quite clearly illustrate the evolution of the trade deficit (table 1), and the sharp rise of the external debt to cover this (table 2). Now, it is precisely the growing foreign debt that has become the linchpin of imperialist domination in this period. One of the ways the imperialist countries have responded to the recession has been to tighten commercial and financial protectionist policies, and this is condensed in Brazil at the level of the balance of payments. A more precise breakdown of the balance of payments is outlined in table 3.
TABLE 3 Brazil's balance of payments 1973 197-3% 1975* (us5 millions) Exports (fob) • 6.109 7.967 $.655 Imporis (fob) -6.192 - 12:30 - 12.169 Trade balance (nct) - 1.563 - 3.514 Services deficit - 1.722 - 2.315 - 3.500 Transfers (net) 23 Current account balance - 1.655 -6.885 - 7.074 Capital modemoni: inct 3.512 5713 5.807 Errors and omisin; 354 124 Net balance of Tallnea?s 2.178 - 1.029 - 1.357 International reserts at
31 Doher 5.400 5.300 4.000 sternal 102t gros 12.000 17.300 22.345 sternal debt inu 6.500 12.100 1$.345 *Central bant: figures **Preliminary figures from For Faced with the overwhelming problem of the balance of payments, Finance Minister Simonsen seems to have opted for the politically dangerous course of encouraging a recession so as to allow for increased exports through a curbing of internal demand. A deflationary policy was blocked last year by the most significant sectors of industrial and commercial capital. This was in a context in which the world recession had not hit Brazil too hard, and investment was maintained since high growth rates still seemed likely. In fact, business reports now indicate a 60% inventory reduction over 1975. When an "anti-inflation" policy was finally implemented, it led to a deepening of the economic recession which had by then affected Brazil. The current situation is that inflation is running at 4% per month, and the rate for 1976 is likely to be around 50%, the highest figure since 1965. In fact, inflation was 11.3% in the first quarter of 1976, compared with 6% for the same period of 1975. Prices of vegetables and grains have rocketed in recent months; beans have doubled in price since January and patatoes have more
than trebled. According to the trade-union statistical department DIEESE, the cost of living in São Paulo has risen 15.16% in the first quarter of this year. This figure can be broken down to 13.65% for high-income groups and 16.75% for low-income groups. If we return to the table presenting the evolution of the balance of payments during the past three years we can appreciate the current situation. The foreign debt has grown even further, having now broken through the US$25, 000 million mark, but of course only the bankers know how big a foreign debt Brazil will be allowed to incur. President Geisel's visit to France and Britain last May did achieve a number of deals and a reported USS1, 000 million in credits, but further international assistance is still open to question. However, even if exports reach the government's target of US$9, 500 million this year (which is unlikely since they were down 5% for the first quarter of 1976 compared with the first quarter of 1975), the debt/export coefficient is still expected to rise to 2.8:1 by the end of 1977. In terms of normal banking risk evaluation this approaches a critical level. By all accounts, the US$40,000 million mark will be reached by 1980, although Business Trends estimates that this will occur much earlier. The "well-informed" bourgeois organ Business Trends maintains that Brazil "could be in a worse situation tomorrow than it is right now. This is a decidedly uncomfortable situation to be in and only an all-out boost to exports could turn the situation around. " Brazil's position on the world market is not so clear cut and the tendencies are far from unilinear. On the one hand, there is the growing burden of oil imports, which are likely to cost US$4, 000 million in 1976, compared with US$3, 000 million in 1975. On the other hand, the soaring price of coffee in the world market, which we note in the graph below, provides a substantial boost considering that coffee is still Brazil's principal export.
COFFEE spot position £ per tonne 1.4001 1,450 11.200 + 1,000 N 800600-1
Some of the other agricultural exports such as sugar, maize, cotton, rice, and soya on the other hand have suffered the effects of low prices in the world market. The situation is generally unfavorable, at least in regard to the terms of trade, which have evolved as follows: 1969: 100; 1970: 108; 1971: 103; 1972: 108; 1973: 119; 1974: 96; 1975: 93; 1976 should be lower still. As we noted earlier, the whole "model" based on the expansion of the durable consumer goods sector (primarily the automobile industry) and the concentration of income has been in crisis since 1970. Since 1974 the military government has been faced with the task of reorienting the economy in the context of an extremely unfavorable world economic situation. The crucial point in this reorientation of the economy is neither the dilemma between "statism" or "state capitalism" and private enterprise, as the heated debates in the economic press might lead us to believe, nor between nationalism and further integration into the world capitalist economy. The key aspect is rather the need to carry out the rearticulation of the economy after the end of the substitution of durable consumer goods cycle, and to lay the basis for a new level of capital accumulation capable of substituting for the import of "capital" goods and guaranteeing the provision of basic industrial inputs such as steel and energy sources such as hydroelectric power. This reorientation of private and state investment toward Department 1 and the production of fixed capital is clearly expressed in the economic plan for 1975-1979. However, this does not particularly help the automobile industry, whose unsold stock is mounting and whose growth is declining sharply. Those sectors which no longer occupy top priority - the auto industry, consumer goods export, the speculative financial sector, etc. - perceive these changes as an attack and ignore the objective situation of the market. In the past year this has led to an increasing level of conflict between the various sectors of the bourgeoisie and has increased President Geisel's difficulties in maintaining hegemony within the ruling bloc. If during the upswing everyone spoke of "big power Brazil, " the talk now is of conspiracies, statism, and government errors. Thus, in spite of the fact that the government's policies are a step forward for capitalism as a whole and could lay the basis for a renewed and intensified accumulation of capital, some bourgeois sectors, such as those based in São Paulo, oppose these policies. While the primary difficulties for the regime now lie within the ruling classes, one must not underestimate the potential of the popular masses for struggle, for strikes have been occurring increasingly since the end of 1975, and the municipal elections in November may well pose massive difficulties for the Brazilian regime. It is rather ironic, in the context of a world recession, that in 1968 the then dictator Medici said that the "economic miracle" would "place Brazil, in a period of one generation, in the category of advanced nations.
39
economic order?
anew by C. A. UDRY The expression "new