Economy & Trade, Financial Crisis, Headlines, Labour

BRAZIL: Rise in Unemployment Revives Labour Movement

Mario Osava

RIO DE JANEIRO, Jan 16 2009 (IPS) - The global financial crisis has hit Brazil’s labour market and shaken the trade union movement from its slumber after several years of economic boom and employment growth.

Avoiding lay-offs is the aim of negotiations launched this week in meetings between central trade unions and the Sao Paulo Industrial Federation (FIESP).

The business community argues that cutting hours and lowering wages is the only way to slow the rise in unemployment in the face of the sharp drop in demand and production.

Força Sindical, which represents 4.8 million workers in the state of Sao Paulo, has accepted the proposal, but is calling for guaranteed job stability for all affected workers for a set period of time, the union’s secretary general João Carlos Gonçalves told IPS.

Furthermore, the wage cuts must be 40 percent smaller than the reduction in hours, the union argues. For example, workers whose hours are cut 20 percent would lose 12 percent of their wages, Gonçalves explained.

Executives of large industrial corporations, however, have already stated that they cannot offer job stability guarantees for any period of time, and that they want the reduction in hours to equal the reduction in wages.

The Central Única dos Trabalhadores (CUT), the country’s largest union, which is allied with the left-wing government of Luiz Inácio Lula da Silva, has refused to negotiate any wage cut.

But one of its member unions, which represents the employees of a chemical company, has accepted the formula, Gonçalves pointed out.

“We have to take advantage of every possible negotiation to prevent workers from losing their jobs,” he argued, defending the more open stance taken by Força Sindical.

But the union leader clarified that the reduction of wages to save jobs would be directly accepted or rejected by the workers’ assemblies in each company, and would depend on the specific conditions in each case.

The central trade unions are only negotiating “umbrella agreements” in search of alternatives, he said, noting that local unions are not under any obligation to follow the agreements, because they directly represent their workers and are responsible for signing their own contracts.

The employment level in Brazil has gone up in recent years, which makes “the fall even harder now,” and all sectors of the economy are looking at dismissals as a result of the economic crisis, said Gonçalves, who added that the negotiations undertaken by the central unions are aimed at “anticipating” the rise in unemployment by discussing possible solutions with companies.

The central unions are also taking action on other fronts, pressuring the government to adopt new measures against layoffs. A reduction in the extremely high prime interest rate by the Central Bank is one of the measures they are calling for. Força Sindical is planning a demonstration next Wednesday in Brasilia, the capital, when the Central Bank plans to announce the new benchmark interest rate that will be in effect for the next 45 days.

The spare parts and construction industries will be hit hardest by dismissals, said Gonçalves, because the strongest impact of the crisis has been felt by the car industry, whose sales are heavily dependent on credit, which has become scarce.

As large corporations, car makers are in a position to weather the fall in sales for a time. But that is not the case of spare parts companies, which are mainly small and medium-sized outfits and must cut costs in the face of any drop in revenues, said the trade unionist.

The car industry was one of the sectors that benefited from government measures adopted in December, which included tax reductions and new sources of credit. Car sales rallied slightly in the following weeks, although the recovery was insufficient to offset the drop experienced in October and November.

Some car makers have laid off employees, especially temporary or outsourced workers. Labour Minister Carlos Lupi sharply criticised the dismissals by companies that benefited from the government measures, arguing that it was their responsibility to keep employment levels up in exchange for the incentives.

With newspapers reporting new waves of layoffs every day, the crisis that had shaken the financial world and had businesses quaking in their boots has reached the population at large. Industry has been most heavily affected, which is why the rise in unemployment was first felt in the state of Sao Paulo, which accounts for 40 percent of manufacturing in Brazil.

Industrial output shrank 13.5 percent in December, according to the Getulio Vargas Foundation, one of Brazil’s most prestigious business and public administration schools.

Official unemployment figures lag slightly behind other economic indicators. The latest statistic on industrial employment in Brazil is from November, when the Brazilian Institute of Geography and Statistics (IBGE) reported a 0.6 percent fall with respect to the same month in 2007 – the worst performance in five years.

Although it is clear that unemployment is on the rise, the figures do not yet reflect the magnitude of the phenomenon, which will only begin to show up in the statistics in the next few months, Roberto González, head of the labour and income section at the Institute of Applied Economic Research (IPEA), a Planning Ministry agency, told IPS.

Unemployment generally grows in the last and first months of every year, after the stepped-up production of the previous months which is aimed at meeting higher year-end demand. But this time the normal cycle has been compounded by the global economic crisis that originated in the United States, he said.

In the face of the uncertainty, businesses have begun “to react with caution, preventively,” and large corporations have cancelled the contracts of temporary workers and are doing without outsourced services, to delay “more drastic measures like firing their permanent employees,” said González.

In December, Brazil lost 600,000 formal sector jobs – nearly twice the number that disappeared in December 2007, said the labour minister, citing preliminary data.

These numbers have awakened fears of economic recession in Brazil, which had been identified as one of the countries least vulnerable to the global crisis, whose consequences are impossible, however, to predict.

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