Committee for the Abolition of Illegitimate Debt

Brazil : Popular referendum on Public Debt and Privatizations

Jubilee South Brazil continues its struggle against the illegitimate debt on several fronts: the Citizens’ Debt Audit, training courses on the budget, and in particular the popular referendum to be held next September 1 to 7, similar to those held in 2000 on the External Debt and in 2002, on the Free Trade Area of the Americas (FTAA). The principal theme of this year´s plebiscite are the privatizations, in particular that of the Vale do Rio Doce Company (Sweet River Valley Company, best known as “O Vale” or “The Valley”), the second largest industrial metals and mining company in the world and Latin America´s most important gold mining firm. The company was privatized in 1997; one of the motives invoked for its sale was to meet payments on the external debt claimed of Brazil. The Valley was sold in 1997 for 3.3 billion Reales, at a time when its patrimony was valued at 95 billion Reales. A clearly illegal and fraudulent operation.

In Brazil, privatization in general has occurred in a fraudulent manner. That is way the Jubilee South Brazil Network, together with some 60 other popular and social movements, is organizing this referendum focusing on the Valley case. Such privatizations cannot be allowed to continue. They always occur with the excuse of resolving the public debt problem, yet despite all the social and economic sacrifices – including the privatizations – that have been inflicted on Brazil in order to meet the fiscal goals promised to the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org , the primary surplus has not been enough to cover interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payments or avert further growth of eitherthe domestic federal debt. In February, 2007, that debt had already reached 1,153.5 trillion Reales. In absolute terms, the domestic debt grew by 150 billion Reales in 2006, an amount equivalent to more than four times the federal budget for healthcare that same year. The Valley´s profits in 2006 were 12 billion Reales and in the first half of 2007 they had already reached 10.9 billion Reales. The bulk of these earnings will be remitted to stockholders outside the country in the form of dividends.

The external debt claimed of Brazil has also grown sharply, despite its policy of advanced payment. In September 2006 it stood at US$ 183 billion and in just one month, it grew 7.6% to reach US$ 197 billion; the principal cause of that jump was the foreign loan made to the Vale do Rio Doce in order to purchase the Canadian firm Inco. By February, 2007, the external debt claimed of Brazil had swelled to US$ 203.1 billion. If we compare what was received for the sale of the Valley (3.37 billion Reales) with what was paid out in interest and amortizations to the holders of that public external debt during 2006 (275 billion Reales), we can appreciate that over that one year alone, the Brazilian government paid out the equivalent of seven “Valleys” a month to its pretended creditors!

For popular and social organizations in Brazil, debate the policy of privatizations necessarily implies debating the problem of the public debt claimed of Brazil. The Popular Referendum will consist of four questions, including one that asks if “the government should continue to prioritize interest payments on the internal and external debt, rather than invest in the betterment of the Brazilian people’s employment and living standards?” We believe that this kind of referendum is a pedagogical and educational tool, a critical means of dialoguing with the people and a form of direct popular participation in the fundamental decisions of Brazil. It will also continue to build popular support behind the call for a Parliamentary Debt Audit.

Jubilee South Brazil Network, August 2007