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Brazil: Grassroots Referendum on Foreign Debt

by Axel BuggeReuters
August 23rd, 2000

BRASILIA -- Worries by Brazil's government over plans by a grassroots movement to hold a plebiscite on the country's huge debt costs gathered steam this week as the vote aiming to force attention on deep social inequalities approached.

The plebiscite, planned for five days starting Sept. 2, has raised concern in the government as it aims to draw attention to what organizers of the vote say are deep spending shortfalls on the welfare of Brazil's millions of poor.

The head of the politically active National Bishops' Council -- one of the organizations spearheading the vote -- discussed the issue with President Fernando Henrique Cardoso Tuesday. The council has scheduled a press conference on the vote Thursday.

As the date of the referendum approached, the government has raised its voice. Critics say failure to pay foreign debt could unravel economic stability gained through the 1990s.

Analysts said if many voters turn up, it could be a blow to already unpopular free-market economic policies.

"I think it is completely out of place and a disservice to the country to propose at this stage a default on external debt and the same for internal debt," Finance Minister Pedro Malan said Monday. Cardoso's spokesman said the president's position is the same as Malan's after the Tuesday meeting.

The plebiscite, which is not legally binding, aims to make the issue a public debate "so that the population becomes aware that internal and foreign debt is one of the main causes of deepening social division," the organizers said.

The plebiscite will also ask voters whether Brazil should maintain a loan program with the International Monetary Fund, which is blamed for deep spending costs over the last two years.

Voters will be asked whether Brazil should end its accord with the IMF, whether Brazil should pay its foreign debts without a public review of debts, and whether government should dedicate so many public funds to debt servicing.

Urns will be placed across Latin America's biggest country at trade union headquarters, churches, schools and other public places. The urns will be open for five days from Sept. 2 in the hope that a large part of the population will vote.

Plebiscite organizers say Brazil pays exorbitant rates on its foreign debts and too many funds are dedicated to debt servicing, leaving few funds for vital areas like education and health. Nearly half of Brazil's 165 million people live in poverty.

"To pay the external debt, the government is increasing the social debt," said father Alfredo Goncalves, member of a Catholic social commission involved in the referendum.

According to government figures, Brazil's public sector will have $96 billion in long-term foreign debts at the end of 2000, up from $84 billion in June 1999. Brazil's total local and foreign debts are about $235 billion, roughly a third of annual economic output.

A dramatic currency devaluation last year worsened the situation, as debt payments ballooned with the costs of servicing foreign debts rising in local currency terms.

Brazil's leftist opposition Workers Party (PT) is actively supporting the referendum and has tabled a motion in Congress to make the result of the vote legally binding.





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