Abomination of Desolation [put in a place where it shouldn't be].

Louis Proyect lnp3 at SPAMpanix.com
Sat Dec 4 17:49:22 MST 1999

Carlos Rebello wrote:
>Hello list mates- My Internet server moved last Saturday, and the
>recently privatized telephone company of Rio de Janeiro (a "national"
>private group who is presently making huge profits out of scrapping the
>physical capital received from the state in a shadowy bargain) made the
>already usual mess; therefore, I stayed for almost a week unplugged.

The New York Times, December 2, 1999, Thursday, Late Edition - Final

Carrying the Flag For Free Trade;  Brazil Still Embraces Globalization

SAO PAULO, Brazil, Dec. 1

Acquiring a telephone was a distant dream for Rene Vieira da Conceicao
Muniz, a maid in a small town in southeast Brazil. The government's
inefficient telecommunications monopoly made telephone lines a luxury of
the upper classes, far from the reach of Ms. Muniz, a mother of three whose
monthly salary is the equivalent of $57.

But the privatization last year of Brazil's phone system, part of a much
wider opening of the nation's economy to foreign investment, trade and
competition from abroad, has changed the situation. Two months ago,
Telefonica, the Spanish telecommunications company that bought the local
telephone operation in Ms. Muniz's region, began an installment plan for
low-income clients to buy cellular phones over several months.

"Before, I would have had to save for many years to get a phone," Ms.
Muniz, 31, said, "and then it would have cost 2,000 reais," or about
$1,036, compared with the $150 she will spend for her cell phone. Recently,
the local priest called her to see if she was available to clean twice a
month for about $10. "My life is hard, but it is better," she said. "My
dream now is to buy a computer for my son."

Brazil, one of the biggest emerging-market members of the World Trade
Organization, points to itself as an example of the positive economic
change that can come from policies advocated by the 135-nation group. And
despite the financial turmoil that struck this nation earlier this year,
Brazil remains committed to freer trade and globalization as the best way
to improve the standard of living of ordinary people.

The anti-trade protests this week at the W.T.O.'s meeting in Seattle have
focused attention on what critics call the evils caused by free trade --
economic disruptions, environmental degradation, exploitation of cheap
labor by rich multinational corporations. But advocates of open markets
argue that most developing countries that have joined the W.T.O. are better
off than before and note that the largest emerging-market country, China,
is about to join the organization in a move aimed at lifting itself up the
next rung of the economic ladder.

Before the opening of Brazil's economy, the availability of basic
technological services to people beyond an urban elite was virtually
unthinkable. The government in Brasila was unable to invest in such things
as it scrambled to deal with the more pressing priority of hyperinflation.
And officials were wary that the entry of foreign investment threatened
national sovereignty.

Then, in a policy shift at the start of the 1990's, Brazil took the first
steps toward embracing the global economy. It began by auctioning several
state companies and lowering many of its steep import tariffs. Barriers to
the entry of goods ranging from Compaq personal computers to artificial
flowers to Harley-Davidson motorcycles were reduced. With the onset of a
more competitive marketplace, the first Brazilian multinational
corporations were groomed and began to prosper.

Nowhere are the changes more apparent than in the country's consumer and
business cultures.

As large swathes of Brazil's population of 165 million benefited from
advances like the expansion of telephone service or were provided with an
opportunity to buy imported goods, Brazilian business underwent a
metamorphosis. Since 1996, Brazil has received $81 billion in direct
investment from abroad, as foreign concerns took notice of the potential of
the world's ninth-largest economy.

WEG, a company based in the southern Brazilian state of Santa Catarina, is
a product of this new environment. Founded nearly 40 years ago in an
enclave of descendants of German immigrants -- Weg is German for road --
the company, a producer of electric motors, embarked on a dizzying
expansion spree in the 1990's. WEG is now the fifth-largest producer of
electric motors, selling in markets from New Zealand to Mexico.

"We knew early on that to survive we had to become competitive abroad,"
said Decio da Silva, WEG's president. "That's why we were prepared when
Brazil's own form of protectionism was eased."

Another example of a new generation's flexing its muscle abroad is Empresa
Brasileira de Aeronautica, or Embraer, a privatized producer of small
passenger jets. Strong sales in Europe and the United States transformed
Embraer from a money-hemorrhaging state enterprise into Brazil's largest

In fact, Embraer's success has led to one of the W.T.O.'s most high-profile
mediations of a trade dispute this year, as Bombardier, a Canadian
competitor, accused the plane maker of benefiting from overly generous
government subsidies. Embraer has tried to politicize the dispute by
promoting itself as a symbol of Brazil's new industrial might.

Or there is Gerdau, a steel producer that has aggressively expanded through
acquisitions in Latin America and North America. Thanks to companies like
Gerdau, Brazil surpassed Canada last month as the largest supplier of
foreign steel to the United States.

Of course, there is a flip side to this transformation, as free-trade
opponents are quick to point out. In this city, for instance, not too far
from the glimmering postmodern skyscrapers housing the local headquarters
of large multinationals, there are neighborhoods like Barra Funda, a
sprawling district of low-slung warehouses and old, abandoned brick
factories. This is where Lorenzo Bertini has his office.

Three years ago, Mr. Bertini was the owner of Seda Flor Industria e
Comercio, a company producing artificial flowers made with silk. He had a
factory that employed 120 people. Then the government started to lower the
tariffs on imported artificial flowers -- from 73 percent to 16 percent.

"You know how a wave wipes out a castle made of sand?," Mr. Bertini said.
"That's what happened to us."

In an illustration of how Brazil's opening has added to unemployment
problems, especially in cities like Sao Paulo, Mr. Bertini's company has
only 10 employees. He closed his factory and now runs a wholesale operation
from a converted warehouse, selling flowers imported from countries like
Thailand and South Korea.

Like Mr. Bertini's company, some Brazilian companies that have come under
strain are struggling to reinvent themselves. And many have failed in the
current economic downturn, helping to push unemployment close to a 14-year

Nonetheless, public support for freer trade appears to be growing. For
instance, in a recent poll conducted by a Sao Paulo newspaper, most
respondents were in favor of opening the airline industry to foreign
competition if that would bring ticket prices down.

"Brazilians at large are very friendly to the opening efforts," said
Gustavo Franco, a former president of the central bank and one of Brazil's
leading economic thinkers. "A constituency supporting liberalization has
been created, and it is not averse to voicing its concerns."

Still, Brazil has a long way to go before thoroughly reaping the rewards of
free trade. Brazil's share of world trade is still relatively tiny,
accounting for only nine-tenths of a percent of the world's exports.
Mexico, with an economy about half the size of Brazil's, accounts for 2
percent of the world's exports. While exports of goods and services account
for 6 percent of Brazil's gross domestic product, they represent 26 percent
of G.D.P. in nearby Chile.

To increase exports, Brazil, with the backing of the United States, is
pressing Europe and Japan to ease restrictions on the entry of agricultural
goods. That would help Brazil, as the world's largest coffee producer and
the second-largest producer of soybeans, to expand its share of the foreign
market for such basics. Marcus Vinicius Pratini de Moraes, Brazil's
agriculture minister, said this was the least the rich industrialized
countries can do after Brazil opened its economy to so much foreign

For the time being, though, it seems Brazilians are content to continue
linking with a global consumer culture. This year, for instance, McDonald's
became Brazil's largest private-sector employer. Or there is the Brazilian
experience of Harley-Davidson, another icon of globalization.

Four years ago, Brazil unilaterally increased tariffs on imported
motorcycles above 70 percent. After United States trade representatives
pressed their Brazilian counterparts, the government agreed to reduce the
tariff to less than 20 percent. Subsequently strong sales led Harley to
build its first assembly plant outside of the United States, in the
Amazonian city of Manaus.

Louis Proyect
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