Latin America: The Struggle Against Neo-Liberalism

by Michael Murphy in Socialist View No 10, Spring 2003.

THE LAST three years have seen a storm of political upheaval sweep through Latin America. Country after country has experienced mass protests against the 1990's neo liberal offensive which resulted in a sharp increase in inequality. 5% of the region's population own more than 50% of the wealth while mass unemployment, rampant corruption, and wholesale privatisations have wrecked public services.

These mass movements have also resulted in the election of people like Lula in Brazil, Gutierrez in Ecuador and Chavez in Venezuela. Parties associated with capitalism and the ruling elite have suffered an erosion of their support.

It is highly fitting that these movements against neo liberalism are taking place in Latin America. Throughout the 1990's, this region was held up as an example of how the twins of "democracy and the market" would transform the lives of people and reduce the age-old problem of poverty. In reality, the inequalities have been accentuated in that period.

There are 17 million people unemployed in Latin America, the highest level since the 1980's. The unemployment rate is 9.2%, up from 8.1% in 2001. Only one in three workers have any access to a social security system.

Minimum wages are falling three times as fast as they grew in 2001. Economic growth reached 0.5% in 2001 but shrunk 0.8% in 2002! As the world economic slowdown deepens, the offensive by the bosses will intensify as workers are made pay for this crisis. The inspirational struggles of the people of Latin America have valuable lessons for workers internationally.

Argentina's economic collapse

In 2002, the world watched as over one million Argentineans took to the streets in a protest which became known as the "cacerolazo" or mass banging of pots and pans against a litany of austerity measures implemented by the then President, de la Rua. After three years of public spending cuts, labour reforms, tax rises, and recession, de la Rua was forced to resign by the mass movement. Over the course of the next 12 days, four more Presidents would be kicked out and the country would default on a $95 billion loan, the largest debt default in history. The current President, the Peronist Duhalde, has managed to cling to power but faces elections in April of this year. Some commentators are claiming that the recession which has gripped Argentina for over four years is coming to an end because there have been three consecutive months of economic growth. However, economic production for 2002 was down 12%. Unemployment is running at 20% and 58% of the population or 19 million people live in poverty. From May to October 2002, the number of poor increased by 9%. 27 children die every day of hunger in a country which the IMF held up as a miracle of economic growth, a model of the riches that awaited the poor nations that opened up their economies to foreign investment.

As 2002 opened with the Argentinean poor and working class mobilising to defend their existence. 2003 opened with the election of a new left wing President, Lula, in Brazil and the populist President Chavez under siege from right wing opponents in Venezuela.

Lula's victory

Brazil is the most important economy in Latin America as it occupies a landmass comparable with the United States and has a population of 160 million and it is also the world's 10th largest economy.

In October 2002, Lula, the Workers Party (PT) candidate received the largest vote in Brazilian history. He received 52.7 million votes (61.7%) in a landslide victory over Jose Serra the candidate for the outgoing right wing coalition government of Cardoso who was backed by big business and the International Monetary Fund (IMF). The PT also increased its representation in the congress and state legislative assemblies from 59 to 91 seats and doubled its senate representation from 7 to 14 and now has the biggest parliamentary representation in states such as Sao Paulo.

The victory of Lula is an enormous step forward for the Brazilian working class and represents a defeat for the capitalist class in Brazil and internationally, who had conducted a campaign against him. It opens up a new stage in the class struggle in Brazil. This overwhelming victory also represents the enormous desire for change among the Brazilian masses. Eight years of Cardoso's neo liberal offensive has resulted in a country where 54 million people live in poverty and 30 million in conditions similar to sub Saharan Africa. Unemployment is at 7.3%, violent crime is rampant, public services have been wrecked due to privatisation, and the vast majority of the land is in the hands of a tiny minority.

The IMF has given Brazil a loan of $30 billion negotiated with Cardoso just before the election. Lula has since committed himself to honour this and all other debts. Brazil's public debt jumped from 30% to 60% of GDP in 2002. The reliance on foreign capital means the threat of debt default hangs over the country. It was precisely this situation which sparked the Argentinean crisis in early 2002. 80% of the total debt is held by domestic creditors. If the government defaults on the debt, banks and businesses will collapse. A moratorium (debt default) by Brazil was only avoided by the IMF loan. However the situation is unsustainable. The IMF deal ties the government to a minimum of 3.75% budget surplus with 6% being the real figure sought. This will mean hard choices for Lula if he is to achieve this level of budget surplus against a background of the world economic crisis. It will mean there will be limited finances available for social spending.

High expectations

It is against this very difficult economic background that Lula has come to power but there are enormous expectations among the Brazilian masses. Everywhere he goes he is met with massive crowds wanting to see him. At the moment, he is undertaking a "Misery Tour" whereby he is bringing his 30 cabinet ministers on a tour of the poorest regions of Brazil to give them a dose of reality. This type of tour will only further heighten expectations. In one of the shantytowns in northeast Brazil. Irma Dulce, people carrying placards welcomed the new President bearing slogans like "The only hope we have left in the world is in God and in Lula". 77% of Brazilians expect the new government to be "excellent or good". This gives a glimpse of the sheer weight of expectations on Lula to deliver a new era for the poor of Brazil.

He has taken some positive steps, including the announcement that a $450 million deal to purchase 12 new jet planes for the Brazilian air force would be postponed and the money put towards the government’s "zero hunger" campaign instead. The new government has also announced cuts of almost $177 million in defence spending. The "zero hunger" programme aims to feed the 46 million Brazilians who survive on a dollar a day. In two pilot projects, 700 families will receive $14 per day in a social welfare type payment. $500 million has been earmarked for the "zero hunger" programme. The target is to extend the programme to 1.5 million families by the end of 2003.

However, Lula has already begun to dampen down expectation by telling people to be patient. At the World Social Forum in Porto Allegre this month, he told the crowds gathered that "running a government is like running a marathon. "You can't rush otherwise you'll end up panting at the first street corner". These words may buy him some time but this honeymoon has a limited lifespan. Lula is playing a dangerous game. On the one hand, attempting to deal with the massive expectation that he will sort out Brazil's problems, while on the other trying to prove to international capitalism that he is no threat to their system. He will only be able to straddle these two horses for a limited period. Initially the anger of Brazilian workers and peasants may turn against international finance capital. However Lula's inability to deal with the deep problems facing Brazil if he refuses to break with capitalism will mean the anger of the masses will eventually turn against him.

PT moves to the right

Founded in 1980 against the back drop of the struggle to overthrow the military dictatorship the PT won a mass base very quickly developing deep roots amongst the Brazilian working class; its anti capitalist positions made the party a pole of attraction for the combative left in Brazil and throughout Latin American.

In the 1989, presidential election Lula lost out narrowly to Collor a corrupt capitalist politician. This defeat coupled with the collapse of Stalinism throughout Europe and the former Soviet Union and the defeat of the Sandinistas in Nicaragua marked the beginning of a turn to the right, which characterised the PT leadership throughout the 1990's. In 1992, the Collor government was toppled by a mass movement but instead of demanding new elections, the PT leadership supported the then Vice President Itmar Franco. This gave the bourgeois time to reorganise and launched the "Real Plan" with Cardoso as their candidate for President. Cardoso went on to win in 1994 and 1998 by bringing about a certain economic stability and the reduction in hyperinflation which was running at 5,000% in 1994.

However the "success" of reducing inflation from that high to 10% was achieved through massive spending cuts and a sharp rise in inequality which laid the basis for the victory of Lula and the PT. The authority of the PT over the masses in Brazil is still very high and the expectations enormous but Lula will not deliver. There is a need for the building of a genuine socialist alternative to the left reformist programme of the PT leadership in order for the Brazilian working class to end the rule of capital which is responsible for the poverty and deprivation which plagues their country.

Chavez an embattled president

Events in Venezuela demonstrate the difficulties which face the PT. Capitalism is based on the ownership of the wealth and means of production by a tiny minority whose profits are accumulated at the expense of the working class and the poor. The demands for ordinary people for a decent life cannot be satisfied without breaking that stranglehold.

Under the guise of a strike by oil workers, the ruling class and big business interests in Venezuela have attempted to overthrow the democratically elected government of Hugo Chavez. This is the second attempt in the space of a year to oust Chavez. The first, a coup in April last year assisted by the US government, was defeated by a spontaneous mass movement of the poor from the shanty towns, many of whom are organised in committees called "Bolivarian Circles". Some 30,000 of these circles, incorporating up to half a million Venezuelans, exist and have the support of sections of the army rank and file. Hugo Chavez, the populist President of Venezuela, came to power on a wave of popular support following a landslide election victory in December 1998 and won a further six years in office in 2000. The current 'strike', which has been ongoing since late November last year, is organised under the umbrella of the "Co-ordinadora Democratica" which is made up of older capitalist politicians, the employers' organisations, Fedecamaras, the Catholic Church hierarchy and the corrupt CTV trade union leadership.

The key demand of the 'strike' is for a referendum on Chavez's right to be President. The Venezuelan constitution allows for a recall vote half way through a President's term, which in Chavez's case would be August of this year. The CWI's prophetic warnings after the April coup attempt, that the counter revolutionary forces in Venezuela aided by the national ruling class and US imperialism would regroup and come back, has been borne out graphically by the current 'strike'.

Unfortunately, instead of seizing the initiative after the coup to organise a mass movement against the conspirators, Chavez tried to placate the ruling class. Chavez is repeating mistakes that have been made by many in his position, particularly Salvador Allende in Chile in 1973.

After an attempted coup to overthrow Allende, he invited the military including General Augusto Pinochet to join the government, who then proceeded to plan a successful coup 3 months later. This paved the way for a vicious and bloody campaign against the Chilean people over the next two decades.

Chavez, unfortunately, has not learnt these lessons. Following the April coup he reinstated the sacked director of the state oil company PVVSA and even removed some of his own supporters! The 'oil strike', which is more like a "voluntary lockout" as employers have continued to pay the wages of those on strike has been joined by sections of the middle class, some skilled workers and by some other workers such as dockers.

The 'strike' has crippled the already weakened economy. Venezuela is the world's fifth largest exporter of oil. Oil output dropped from just over three million barrels per day at the start of December to just 400,000 barrels per day at the height of the 'strike'. This had increased to one million barrels per day by mid January due to an intervention by the military and Chavez supporters. Oil provides 70% of export revenue and half of government earnings.

Economic crisis deepens

It is predicted that the Venezuelan economy could contract by up to 40% in the first quarter of 2003 and by 9% for the year as a whole. The Bolivar has tumbled 32% against the US Dollar since 1 January. Inflation has soared to 30%, unemployment is 20% and 70% of Venezuelans live below the poverty line.

There has been a massive flight of capital from Venezuela with $8 billion taken out of the country in 2002 alone. This represents about 8% of the Venezuelan economy.

It is this economic nightmare that is assisting the "strike" leaders. They have been able to exploit the economic crisis to mobilise section of the middle classes against Chavez. There have also been marches in defence of Chavez. Because of this and also some support by the newly elected PT President in Brazil, Lula, Chavez has managed to hold on. There have been indications of cracks beginning to appear in the strike. Many retail outlets reopened over Christmas, not wishing to miss out on the Christmas spending bonanza. The leaders of the strike announced on 2 February that they would ease the strike to prevent business bankruptcy. However the "strike" at the state oil company is to continue.

Having come to power with such popular support Chavez's popularity now stands at 30% in the polls which, even allowing for some inaccuracy, is a significant drop. Among the most oppressed layers in the shantytowns and the poor he retains mass support, it is among the middle classes that his support as been eroded.

He has moved against corruption, introduced reforms including the distribution of unoccupied land to the peasants, built thousands of new schools and introduced free places at universities. He has taken steps to root out corruption, which is a huge issue not just in Venezuela but throughout Latin America. However, he has not been prepared to break with capitalism and adopt a socialist programme based on a nationalised and democratically planned and controlled economy.

Masses must be mobilised

April's coup gave a warning, this 'strike' is the second shot across his bow. Polarisation is now so pronounced that there is a real danger of a civil war developing. Many of Chavez's supporters amongst the poor are determined to fight the attempts to remove him. This determination must be given concrete expression if the right wing is to be defeated. If it is not organised and does not find a clear revolutionary socialist expression, this mood of defiance could eventually evaporate when faced with a decisive blow from the right wing. It should be remembered that only one week before Pinochet's coup, 500,000 marched demanding arms. When the decisive moment arrived, however, the workers' movement was left paralysed because of the failure of its leaders to carry through the necessary preparation and action to defeat the coup.

The class polarisation in Venezuela may yet force Chavez to take further radical steps in the short term. The army has been used to break open a Coca-Cola bottling plant closed by the management. Soldiers distributed bottles of water and drinks to the poor. Chavez has ordered military units to take similar action against companies guilty of 'hoarding goods': "Those who attempt to deprive the people of food and then complain that Chavez is arbitrary are traitors to the nation", he declared. This has frightened capitalist commentators: "US corporations with interests in Venezuela are facing increasing risk of government intervention, or even expropriation, as President Hugo Chavez moves to confront a general strike and consolidate his position, business leaders warned yesterday" (Financial Times, 20 January 2002).

A socialist Venezuela

There is an urgent necessity for independent action and organisation by the working class. The Bolivarian Circles, set up by Chavez, must be expanded and strengthened to include elected representatives from all the workplaces, shantytown dwellers and rank-and-file soldiers. Armed defence detachments must be created in each local area. The Bolivarian Circles must also be linked up on a local, city-wide and national basis, and a national congress convened with the aim of forming a democratic government of working people with a socialist programme that will break with capitalism.

An emergency programme for the economy needs to be established. The basis of the programme would be the nationalisation of the major companies, banking and finance, controlled and managed democratically by the working class.

The call should go out for skilled workers and the middle class to join the struggle to rebuild the economy; planning it to meet the needs of the mass of the population and not just the rich elite which exploits the middle class as well as the workers and oppressed.

The establishment of a democratic, socialist Venezuela, if linked to an appeal to the masses of the whole of Latin America for solidarity action and to overthrow capitalism and landlordism, would win massive support. It would gain the backing of "latinos" in the USA and, through them, the North American working class. Ultimately, it is the only way to defeat US imperialism and capitalist reaction in Venezuela.

If Chavez succeeds in riding out this crisis, the current social and political issues will remain. There will be other attempts to overthrow him, including the possibility of a military coup. This would provoke massive turmoil throughout Latin America. The situation is not the same as the 1970s however. There is a profound hatred of military dictatorship following the experience of living under the "iron heel" of the likes of Pinochet. In Argentina, where in many respects conditions are ripe for military intervention, even the armed forces have opposed taking this road at this stage.

This does not mean that it is excluded, but that it will be more complicated than in the past. Despite the fact that Chavez's radical regime has not brought about significant economic gains for the poor, he retains enormous support. Chavez is seen as the only one "who speaks for us and cares about us". The poor in the shantytowns are aware of what a return to the old dynasty would mean for them and remain resolutely opposed to it. The stormy events in Venezuela are at the heart of the social and economic crisis which is now unfolding throughout Latin America. They illustrate, above all, the need to build new independent mass parties of the working class with revolutionary socialist policies in Venezuela, Argentina, Brazil and throughout Latin America as the only way out of the impasse which exists under capitalism.

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