ECONOMY-BRAZIL: Carnival Keeps Spirits Up as Market Goes Down

By Mario Osava Reprint | | Print |

Commentary Mario Osava

RIO DE JANEIRO, Feb 16 1999 (IPS) - Carnival this year brought a brief respite in daily tension over the financial market crisis, temporarily removing worries of possible bankruptcy and allowing Brazil to recover some self esteem.

“Brazil exists beyond the Stock Exchange,” summed up minister of Sport and Tourism, Rafal Grecca, in an interview with Brazilian daily the ‘Jornal do Brasil.’ “The best thing about carnival Sunday is that the stock exchange stays shut on the Monday,” he added.

For four days the country could breathe easy without keeping one eye on the dollar exchange rate, share prices and the performance of interest rates. The banks, stock exchanges and economic activities in general will only start working normally again Wednesday afternoon.

Carnival celebrations are increasingly important as a factor of national identity to hold onto as the globalisation led by financial capital converts countries into banking entities which can only continue to exist if they offer guaranteed profitability, keeping credibility before investors.

What the country produces, its culture and its people, are not as important as the stability of its currency, its balance of accounts with the exterior, its fiscal situation, the level of liberalisation of its market, and the possibilities for profit and security offered.

In many countries the most important function has become that of the Central Bank. The currency tends to become unhinged from the rest of the nation, in order to improve “banking” performance in world competition.

The euro and the latest proposals for the total ‘dollarisation’ of the Latin American economy, led by Argentina, point in this direction, along with the fusions and mergers of companies and banks building powerful conglomerates.

This forms a great threat to countries – especially those of the so-called emerging economies – raising the spectre of speculation attacks, identical to the runs on banks which occur when depositors lose faith in the entities.

Bankruptcy is almost inevitable and international “aid” brings with it the renunciation of sovereignty and reduction as a nation.

In this game, exchange reserves mean little as a guarantee against a run by investors.

Brazil trusted in the 74 billion dollars which accumulated up until the beginning of 1998 and saw these drop to a third in early January, when it was forced either to stop defending the stability of the currency, or to remain with practically no reserves.

And the outlook is gloomy. Economists of all strains are predicting inflation of more than 10 percent, a brutal economic recession of up to a six percent fall in Gross National Product and a corresponding increase in unemployment.

Celso Furtado, leading figure of political economy in Brazil, predicted the moratorium, the recognition of bankruptcy, will be inevitable within “two or three months.”

The country got too far into debt in recent years and, as an immediate solution, increased interest rates, which meant further debt. Now it cannot meet its obligations now and will be forced to renegotiate its foreign debt in order to avoid total bankruptcy, he said.

The government and the majority of economists reject the moratorium, arguing that this would represent a rupture with the international financial community, which already cost the country dear in the last decade, when this choice was taken.

Getting out of this financial is no easy matter, as is proven by the tortuous negotiations between the government’s economic team and the International Monetary Fund, in desperate efforts to maintain the 41.5 billion dollar loan agreed in November.

The IMF sent a two-week mission to Brasilia and is now receiving a Brazilian delegation in Washington to conclude revision of the agreement, based on the new conditions of the Brazilian economy.

This is expected to take two weeks more, delaying the payment of a second aid installment of nine billion dollars from March to April.

Meanwhile, anguished by the crisis, but excluded from the decision-making process which will affect their future lives, the Brazilian population endeavoured to get as much enjoyment as possible out of the carnival in the crisis.

They also welcomed a strong wave of tourism – the source of many jobs.

Rio de Janeiro received 85,000 national and foreign tourists this carnival, said Alvaro Bezerra de Mello, president of the Brazilian Association of the Hotel Industry.

The hotels were at more than 80 percent capacity. Lower than last year’s figures, but this is still an excellent result, considering the crisis, said De Mello.

President of the Turismo concern of the Rio de Janeiro mayor’s office, Gerard Bourgeseau, was more optimistic, stating that the city had received 150,000 visitors. Mayor Paulo Conde announced carnival’s contribution to municipal government resources will be doubled next year.

Investments in carnival, as in tourism in general, are expected to be the main source of employment during the economic recession.

Carnival is calculated to employ 40,000 people in Rio de Janeiro, 5,000 directly in the preparation of the great spectacle formed by the parading samba schools.

Thus, carnival brings back a small part of national self-esteem and offers an opportunity to soften the effects of the financial crisis.