speri.comment: the political economy blog

Austerity in the tropics

Despite growing protests Michel Temer’s government is set to embed austerity into Brazil’s constitution and risk unwinding the social progress of recent decades

Dr Valbona Muzaka, SPERI Honorary Research Fellow & Senior Lecturer in International Political Economy at King's College London

Valbona MuzakaA new joke is making the rounds in Brazil, in which an employee about to retire submits all the relevant documents and receives the distressing reply that the death certificate is missing. The joke is prompted by Reforma da Previdência Social, the government’s new reform of the retirement benefits system. The reform proposes to raise the retirement age to 65 for all, but access to benefits will now require at least 25 years of contributions and the full pension will not be available unless one has contributed for 49 years, almost half a century.  In the context of Brazilian socio-economic realities – and, importantly, an average life expectancy of 74.4 years that goes down to 70 years in the poorest states – it is clear that this reform will mean many pensioners will only enjoy the full fruits of their labour for a few years or, worse, many employees will die without doing so.

By way of comparison, in Austria, a country that spends more or less the same percentage of its GDP on pensions as Brazil, 15 years of contributions are sufficient and full pension can be achieved after 45 years of contributions, but the average life expectancy there is 81 years. Needless to say that those from Brazil’s lower income groups whose employment, if available, typically straddles the formal and the informal market – incidentally, the latter still accounts for nearly half of the total– will be hit the worst. Women, the disabled and rural workers will be worse off still.

Notably, the military has been exempted from the pension reform, despite the fact that the pension deficit attributed to the Armed Forces is estimated at nearly 45% of the total. It is a bitter irony that this institution should retain the social security rights and benefits afforded by the 1988 Federal Constitution, the crown jewel of the wide social movement that brought an end to the military dictatorship in Brazil (1964-1985).

Unlike other countries in the region, the new constitution laid the foundations of a welfare state in Brazil. For the first time in the country’s history, social rights became constitutionally universal: the Social Order Chapter of the constitution (Title VIII) explicitly lists healthcare, social assistance and social insurance as universal social rights and part of the condition of citizenship.  Yet, in the years that have followed, efforts to undermine – in principle and in practice – this constitutional paradigm have taken many forms and are responsible to a large degree for the de-universalisation of social rights in Brazil.  This is visible, for instance, in targeted social programmes, of which Bolsa Família is the best-known, and in the well-developed but socially exclusive private market that provides for nominally universal rights such as social insurance and healthcare to those who can afford to pay.  In this context, the Reforma da Previdência Social – justified by Michel Temer’s government on account of the necessity to bring public finances in order and regain investor confidence with the economy in recession – can be seen as a direct means of further unraveling the constitutional social security pact. Indeed, the Previdência reform is a constitutional reform: PEC (Constitutional Amendment Proposal) 287.

Besides needing the support of the military in walking the current political tightrope, Temer’s government also needs its support in a practical sense to deal with the various resistance acts that have sprung up across the country, especially against another constitutional reform: PEC 55 or ‘a new fiscal regime’. This reform is austerity writ large and, if the government has its way, it will be engraved in the constitution.  PEC 55 – called the ‘PEC of Death’ by its critics – proposes to limit real increases in government spending to zero for the next 20 years.  Just a few days ago, students of Universidade Federal de Minas Gerais (where I am currently staying as a visiting researcher) protesting against PEC 55 entered into a confrontation with the military police – the second such confrontation in the space of three weeks – that ended with the use of rubber bullets and tear gas against students inside the university campus, a space protected by federal law. Many buildings in the university are student-occupied and staff are also on strike against PEC 55.

This act of resistance is by no means an isolated case. Although numbers are hard to come by, it appears that at least 1000 high schools and over 190 universities/higher education institutions have been student-occupied across the country. Students – especially high school students whose early embrace of the occupy movement gave this wave of protest the label ‘Primavera Secundarista’, a ‘high school Spring’ – have been protesting for some time against a proposed reform of the high school teaching programme as well as against PEC 55 which, if approved, would mean less public spending on education in real terms. It would also mean the worsening of healthcare indicators and the possible unraveling of the SUS, the public healthcare system which, since the 1988 constitution was adopted, has been seriously underfunded: in 2012, for instance, total public healthcare expenditure was nearly half the 8.3 per cent GDP average of countries with a similar commitment to universal healthcare.

Temer has argued that the measures are indispensable and, although resisted today, ‘will be popular tomorrow’. The same day he uttered this promise to those who lack his government’s farsightedness, the UN Special Rapporteur on extreme poverty and human rights, Philip Alston, took aim at PEC 55 and argued that, if adopted, it ‘would lock in inadequate and rapidly dwindling expenditure on healthcare, education and social security’, placing Brazil in a ‘socially retrogressive category all of its own’.

PEC 55 has already been approved with an overwhelming majority in the lower house and recently gained the first approval needed from the Senate. Its fate is likely to be decided in mid-December and, with it, the social and economic fortunes of the majority of Brazilians.  When Temer launched his ‘A Bridge to the Future’ programme in December 2015 – ‘a document from the party [PMDB] for the nation’ – it was clear that this wishlist for markets and investors was meant to present him as the alternative to then likely-to-be-impeached President Dilma Rousseff. Having achieved this on 31 August 2016, Temer and his new government have lost little time – despite astonishing corruption cases that have seen six of his ministers resign – in building this bridge that promises most Brazilians a future not too dissimilar to the dark chapters of Brazil’s past.

Note: PEC 55 was approved by the Senate (53 in favour and 16 against) on 13 December 2016. The constitutional amendment is scheduled to be enacted by the Congress on 15 December 2016.

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