Wrong Choices

This is a (translated and edited) text of the blog of Miriam Leitão, economist and columnist for O Globo
The response of Lula’s government to the financial crisis has serious defects: some market sectors are benefiting but not the entire economy, and incentives are given without something in return. The car, a product for the middle class and the rich got a tax waiver, the employees of the automakers received an employment guarantee, but the sugar-alcohol sector has neither, not even a guarantee of the labour laws.

In the United States, aid to the automakers was given under the condition of environmental improvements. Here, nothing was requested from the automakers, except to keep labour employed, which creates a distortion in the economy: all Brazilians can be dismissed, except employees of the automotive sector and public officials.

March 30 was the “Day of Cars”, here and in the US. There, the president of General Motors fell in disgrace because the government refused his plan for the adjustment and adaptation to the requirements. I do not want to compare the aid of billions of direct tax-dollars to the coffers of the auto-industry in the US, to the tax waiver here, but insist that this was a great opportunity to induce changes upon the Brazilian auto-manufacturers.

The new president of GM will have 60 days to submit a new plan, but already started to say that the new cars will be different. Frederick Henderson said that the automaker is one or two generations behind in green technology for cars and that the company will have to learn to make money on light cars, and not just SUVs. Another requirement is that of a fiscal adjustment in the company, which will separate good assets and problematic liabilities difficult to digest, such as the employees’ pension fund.

Over in the U.S. it is entirely different, but it is important to see the attitude of governments, in helping the industry. The Obama administration has asked something in return. The Lula government extended the reduction of the IPI-tax for cars and trucks requiring only keeping employment at the same level. It is worth remembering that the manufacturers of trucks did not meet the requirement, from the beginning of 2009, to manufacture only trucks with clean diesel engines. After seven years of delay, they said they were not prepared and needed three more years to deliver here in Brazil, what they deliver in other countries already for years. This, for example, could have been a consideration, a quid pro quo.

The complete absence of concern of the Lula government for the environment is shocking. Yesterday the government reduced the IPI-tax to zero for electric showers, high consumers of energy, and a product which has been abandoned in other countries. Electric showers have had a reduction of the IPI before and have now been set to zero along with other conventional building materials such as cement and brick. The Ministry of the Environment had asked to equalize the tax for the electric shower (which was 5%) with solar panels (which pay 18%). The decision "has not yet been taken” and is still in consideration by the Treasury.

End of March Banco do Brasil got authorized to extend the credit line of the FAT Giro Rural for two years. The credit line is BRL 4 billion (USD 1,8 billion) and the first trance will be paid from April 1. The agribusiness is getting an aid package for the sugar-alcohol sector and the production of meat, two flagrant champions of slave labour. Livestock breeding is directly related to the deforestation of the Amazon. The BNDES (Development Bank) will make a classic rescue operation, supplying BRL 200 million (USD 87 million) for a bankrupt slaughterhouse, which operates in a deforested area. In none of the aid programmes any change in conduct was negotiated, neither in relation to the workers, nor in regard to the environment. This all happens as if the Brazilian government is not of this world.

The vehicle per capita in Brazil, according to Anfavea (Automobile Manufacturers Association), is one vehicle for every eight inhabitants. This is the overall average, taking into account the population and the fleet of 25.5 million cars. Just to compare, the same density in the US. is one vehicle for every 1.2 inhabitants, in Japan it is one vehicle for every 1.7 inhabitants, in Mexico it is one for 4.7 inhabitants, in Argentina it is a car for every 5.2 inhabitants, all data from Anfavea.

The 2000 census said that 54.4 million Brazilians lived in households that had one or more cars, which then represented 32% of the population. Imagining that this percentage has grown a bit, as the sales of vehicles increased - though most new cars have been bought by the same families who had cars before, but some new entered the market - who owns a car belongs to the middle class and from there upwards. The two figures show that the motorized do not reach 40% of the population. The ones who buy a new car are exactly the ones who have a higher income.

The government did something that will benefit only the middle class and the rich, protected only employees of automakers and support the agribusiness without requiring any change of conduct.

Lula is losing the chance to change opened up by the crisis.

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The Battle against Slave Labour in Brazil

One of the items on the FSM (World Social Forum) was the slavery. But always when I talk or write about slave labour, I get commented that I have to show pictures to prove my case. My words are apparently not credible enough or the horrific and the disgrace of contemporary slave labour rise above the human mind and should be underlined with hardcore photos. Slavery in the sex industry is widely recognized as existing, but slavery in the "normal" industry, especially in the sugar cane, is often seen as excessive. And the "evidence" is often no more than words, because pictures are almost never available.

To my joy Leonardo Sakamoto published on his blog a video, which I like to copy here. Expect no images of slave-drivers with swinging whips, the modern slave-driver is more subtle: He simply is a crass sweater. I translate here his short text:

”The battle against slave labour in Brazil”

Click on the picture above, the video opens in a new window.

This video "Frente de Trabalho", made on behalf of the Sindicato Nacional dos Auditores Fiscais do Trabalho (Sinait = Union of Labour Inspectors) addresses the battle against modern slave labour in Brazil. Director: Caio Cavechini.

Caio, one of the best directors among the young makers of documentaries, also directed "Correntes" (Chains), in cooperation with “Repórter Brasil”, among other national and international award-winning documentaries.

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The World Social Forum - Preparation and Opening

The event was outlaid so ambitiously that it had to go completely wrong. The organizers had clearly forgotten that they had to do with the Federal State of Pará with its public administrators and political leaders, who are still unable to look up the word 'organization' in the dictionary, let alone find the word.
During the six-day forum (from Jan 27 to Feb. 1), 2400 activities were scheduled, which means that some 200 activities were held simultaneously about topics such as the environment, global warming, poverty, child- and slave labour, exclusion of poor countries, and of course, the destruction of the Amazônia region and alternatives to the capitalist system, which threw the world in an economic and financial crisis (I am sure, that Davos is anxious to have a look at the proposals). But the farmer, he ploughed on, so if everything raised by somebody should be found important, then it might come to something ... ever.

The World Social Forum (WSF) is regarded as the largest marketplace on the planet of ideas, with discussions for everyone.
But a month before the international event, the city was still looking for solutions to its problems. Lack of security, traffic chaos and deficiencies in public transport are some of the most serious problems of Belém. And for years it is no different. On top of all this the complaints of the population of the capital of Pará itself.

During the forum, the hotels and pousadas in town were fully booked - even the motels, normally operating as centres for lovers and other sex activities, had their faces adapted to accommodate participants of the event. Another 15 thousand houses were rented, the rent up to BRL 2 thousand (€ 660) for the 5 days of the forum. The hotels did not stay behind and reached the, for Belém, exorbitant price of BRL 900 (€ 300) per day, including breakfast, lunch and dinner.

To house the event and guarantee the safety of the participants the state government invested BRL 143 million (€ 48.5 million), with a third for the purchase of police cars. Ten field hospitals were built on the campus of the Universidade Federal do Pará (UFPA = Federal University of Pará) and the Universidade Federal Rural da Amazônia (UFRA = Federal Agriculture University of the Amazon), where also an encampment for 30 thousand young visitors was raised. An additional 270 hospital beds were reserved in the public and private hospitals for emergency situations.

During the days of the event about 600 thousand male condoms from the Program for the prevention of sexually transmitted diseases (STDs) and AIDS were distributed. (nb, 1 condom per day per participant)

Until Sunday, February 1 (the last day), the organization of the Forum hopes to greet 120 thousand people from 150 countries, including ......... continue reading and see more images

Seven Federal States and the Federal District Concentrate 80% of the GDP

And nevertheless Pará is the champion of economic activity.

About 80% of the Gross Domestic Product (GDP) of Brazil is generated by only eight of the 27 states of the Federation, concentrated in São Paulo, Rio de Janeiro, Minas Gerais, Rio Grande do Sul, Paraná, Bahia, Santa Catarina and the Federal District.

The concentration of the GDP in eight regions reduced by 1% (from 79.7% to 78.7%, equivalent to R$ 23.7 billion (USD 10.8 billion) between 2002 and 2006, while the Northern Region increased by 0.4%.. São Paulo alone realizes some 34% of the Brazilian GDP.

The survey of the IBGE also shows the per capita GDP in the regions. At this moment, the Federal District still has the highest GDP per capita (USD 17,090), almost three times the national average (USD 5,767) and well ahead of São Paulo with USD 8,885 and Rio de Janeiro with USD 8,043.

Pará, with all its minerals (iron ore, gold, diamonds, bauxite and whatever you want) letting his soil be robbed for a pittance, Pará with its obviously inexhaustible stock of hardwood illegally cut down and disappearing, Pará with its abundance of fish in its inner waters but ransacked scot-free, Pará does not belong to the above mentioned list of Prime Producers, Pará has just officially an insignificant share in Brazil’s GDP.

Nevertheless Pará is the undisputable leader. A sad leadership. Ranking No. 1 at the list of slave labour.

Pará remains at the top of the list of slave labour in Brazil. According to the Ministry of Labour and Employment (MTE), just this year, the Special Group for Mobile Labour Inspection held 28 operations throughout the state, during which 592 workers who were in conditions similar to slavery were “freed”. Above that a 1.000 bookings for misconduct were issued and for more than R$ 1.6 million (USD 730,000) payments for compensation and arrears of wages cashed.

The MTE calls attention to the growing rates of slave labour in states that until then, did not appear on that list. Among them, Goiás and Alagoas.

According MTE, this scenario is directly linked to the expansion of the sugar cane industry, a major protagonist in the international market for bio-fuels. And in the southern region of the country, an increase in the number of enslaved labourers is detected in fazendas which grow pine, a species widely used for reforestation. In both cases, the indecency is that slave labour is being used to support activities theoretically sustainable, for which the basic principles as respect for the environment and concern for the social aspect should be fundamental.

'Methanol is a 'clean' energy in regard to the environment. But we need it also to be clean in the sense of respect for those who work in the production of it", said the president of the Sindicato Nacional dos Auditores do Trabalho (National Association of Labour Prosecutors), Rosa Campos Jorge.

To prosecutor Jonas Moreno, the increase in the number of ‘freed’ labourers reflects the intention of the Brazilian government to step up the enforcement actions to repress this rank injustice.



In other words there are still a lot of slaves out there to be ‘freed’.

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An irreversible trend - It's the economy, stupid!

In Brazil energy products derived from sugar cane were responsible for 16% of the total energy supply in 2007, holding the second position in the total of consumed energy, surpassing for the first time hydraulic power, which supplied 14,7% last year, according to preliminary data released in the balance by the Empresa de Pesquisa Energética (EPE), Brazilian’s Energy Research Company. The fossil-oil and derivatives remained in first place as an energy source, with a 36,7% stake.

The energy consumption rose with 13,5 million tonnes and of this more than 70% was from renewable sources. Once again, renewable energy of sugar cane grew most with 41,4%. The share of renewable energy in the matrix of Brazilian energy increased from 44,9% in 2006 to 46,4% in 2007.

The number of vehicles using bio-fuel exceeded five million in April 2008.

According to the chairman of EPE, the domestic consumption of energy, which takes into account any final energy consumption by individuals, companies and processing, grew 5,9%, more than the GDP, which advanced 5,4%. Of that total, according to him, there was an increase of fuel consumption with a 7,3%, against a 5,4% increase of electric energy, compared with 2006.

“For the first time energy supply from cane sugar exceeded hydro electric energy and became the second source of the Brazilian energy matrix, after fossil oil. I believe it is an irreversible trend” the president of EPE stated. At the end of the presentation of the energy balance of 2007 he defended the production of Brazilian ethanol, saying: “In Brazil, we have sufficient soil to increase the production of ethanol without affecting the production of food”, when asked about the criticism that the production of ethanol affects the prices of food in the world market.

Obviously so far so good. Brazil is a world example for renewable (green) energy resources, thanks to President Lula’s cuddling of his darling pet, promoting his fads and fancies with pride and little essential knowledge during all his official international visits with potential buying countries. Stubbornly fighting off his critics as even his Latin American colleagues call him a traitor.

It is a fact, the country’s emergence is partly accelerated by bio-fuels as bio-fuels have become the vanguard of the green-tech revolution. For politicians and corporations the trendy way to go as most of the damage created by bio-fuels is less direct and less obvious.
Indeed only a tiny portion of the Amazônia region is being torn down to grow the sugarcane that fuels most Brazilian cars. The shocking explosion of deforestation is a result a subtle chain reaction: Farmers in the USA are selling one-fifth of their corn to ethanol production, so US soybean farmers are switching to corn, as a result Brazilian soybean farmers are expanding into cattle pastures, so Brazilian cattlemen are displaced to the Amazônia.

Amazônia rain forest pushed back by large areas of soybean fields in the state of Mato Grosso

So far Lula’s ‘green’ positioning on bio-fuels is correct. Sugar growers here have a greener story to tell than do any other bio-fuel producers. They provide 45% of Brazil's fuel (all cars in the country are able to run on ethanol) on only 1% of its arable land. They've reduced fertilizer use while increasing yields and they convert leftover bio-mass into electricity. With the slogan: "Grain is good for bread, not for cars. But sugar is different." their trade group expects production to double by 2015 with little effect on the Amazônia.

So far, they are right. Corn ethanol and soy bio-diesel produce about twice the emissions of gasoline. Sugarcane ethanol is much cleaner, and bio-fuels created from waste products that don't gobble up land have real potential. So, obviously the Amazônia region is safe.

But take a look at the Cerrado, south of the Amazônia region, an ecological jewel in its own right.

Map of the Cerrado eco-region. The limits of the eco-region are marked in yellow.

Photo: NASA

The Amazônia gets the ink, but the Cerrado is the world's most bio-diverse savannah, with 10.000 species of plants, nearly half of which are found nowhere else on earth, and more mammals than the African bush. You can watch toucans and macaws, find puma tracks and admire a carnivorous flower. The Cerrado's trees aren't as tall or dense as the Amazônia ones, so they don't store as much carbon, but the region of some 2 million km2 (50 times the Netherlands) stores its share. Or should we say ‘stored’ its share, as it is transforming by the march of progress - first into pastures, then into sugarcane fields.

Caracteristic vegetation in the Cerrado

But also in another way sugarcane is a shady business. Sugarcane is a typical product from the slave era and that is exactly what it still is.

In 2007, the federal government freed 3.131 “sugar cane” slaves. In the same period the Brazilian Bank for Development released 3,6 billion USD for projects of the sector.

The Cerrado near "The three lakes" - Mato Grosso do Sul

Almost daily there are stories in the news papers about rescue of sugarcane labour (including children) working under - what is now euphemistically called – a “degrading situation”, but in fact is just pure and simple slavery.
But let us just have a look at one:

In March 2008 the papers headlined, after the Ministry of Labour and Employment visited the premises of a company called Brenco (Brazil Renewable Energy Company, note that this Brazilian company has an English name and you will see why):
- Workers of Brenco are living in precarious housing
- Investigating Brenco ends with 17 labourers freed and 140 “slave” contracts terminated

Brenco is commanded by the former president of Petrobras, Brazil’s giant state-owned petroleum company, Henri Phillipe Reischtul.
Brenco has, among its shareholders, the former US President Bill Clinton, James Wolfensohn, former World Bank chairman, Steve Case, former America Online (AOL)-Time Warner, and Vinod Khosla, multimillionaire Indian rooted in the United States who founded the Sun Microsystems. Not by any means the ordinary slave driver you should expect.

But the story does not end here. In August 2008 Brenco reached the headlines of the news papers another time:
The BNDES (Brazilian’s Bank for Development) releases 1,2 billion USD to deploy four units of sugar cane processing in Mato Grosso, Goias and Mato Grosso do Sul (all Cerrado states). In all, the units will install 15 million tonnes of sugar cane grinding capacity per season, producing 1,4 billion litres of alcohol. And the market could sell up to 220 MW of energy through cogeneration. The project has an estimated investment of 1,8 billion USD, with the BNDES entering with 2/3, although, the BNDESPar should get only some 15% to 20% of the shares of the venture. According to the bank, the venture will generate 8.400 jobs and will run a fully mechanized harvesting.



In regard to the “progressive social policy” of a President who was a militant union leader first, do you understand this? No? Neither do I.
But Clinton himself gave us the answer to this apparent contradiction when he was campaigning for US president in 1992: "It's the economy, stupid!"

Note:
For this post I used some text extracts from the article in Time Magazine “The Clean Energy Scam” by Michael Grunwald published March 27, 2008. The story and facts relating to slavery I took from the websites of Leonardo Sakamoto and Repórter Brasil. Both websites are worth visiting, although unfortunately they are only in Portuguese.

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