The Squeeze on Workers: Recession and Global Competition

It's a grim sign of the times in Brazil. Every weekday, a small army of hot dog, ice cream, and soft drink vendors, part of the country's vast informal economy, sets up shop at the Sao Paulo headquarters of influential labor confederation Forca Sindical. But it's a dubious business strategy. The 3,500 unemployed people who line up outside Forca Sindical every day to seek help finding a job are hardly brimming with disposable income.

Just ask Mauricio da Silva. The 29-year-old fired truck-fleet inspector was standing in line one day recently to register his name on a database for job-seekers. Forca Sindical later found da Silva a three-month stint as a driver for a publicity agency, but now he is making half the $750 monthly salary he took home as an inspector. Da Silva is still looking for a full-time job, but he has little hope things will improve anytime soon. "I'm just doing the best I can with this situation," says da Silva.

Historically, unemployment is low in Brazil. Low wages and a closed economy helped keep jobless rates below 6% for most of the past three decades. But in the 1990s, Brazil has opened its borders to competition from abroad. Since President Fernando Henrique Cardoso squashed hyperinflation with his Real Plan in 1994, foreign companies have bought scores of bloated state-run and private-sector companies and cut payroll. Other Brazilian companies were forced to do the same to compete. As a result, unemployment has risen to 8%, the highest in some 15 years. It will likely rise to 11% this year.

CRASH COURSES. Forca Sindical, an umbrella group of skilled-workers unions, is one of the few rays of hope for Sao Paulo's unemployed. Its Workers Solidarity Center, partly funded by the federal government, offers free courses such as small-business management and telephone marketing. Da Silva, for example, was signing up for a computer course and a class on driving dangerous cargo. Brazilian companies, because they are now forced to compete in a global economy, are demanding "more specialized workers who use new machines and production techniques," says Rogelio Salgado, the center's manager. "Brazilians are trying to make up for lost time."

In fact, lack of formal education is the biggest obstacle for the unemployed. Brazilians average just four years of schooling, low even by the standards of developing nations. In neighboring Argentina, for example, the average is nine years.

Though it is fighting to reduce joblessness, Forca Sindical could turn out to be an enemy of the government's effort to keep inflation from spiraling out of control. Paulo Pereira da Silva, the group's new leader, says he'll demand wage increases for his 7 million members if prices continue to rise. He says that as soon as prices rise 10% for the year, the union will demand inflation-indexed raises for its workers. Due to the 35% devaluation of the Brazilian real since Jan. 13, inflation for the first two months of the year is estimated at 6%.

The government is desperately trying to avoid a return to indexation, a tool Brazilians used as recently as the early 1990s to keep wages in line with inflation. That method was beneficial to some Brazilians, particularly those who had enough money to invest in high-interest bank accounts that outpaced inflation. But even with indexation, the wages of low-income workers lagged behind price increases. Furthermore, indexation helped perpetuate a cycle of economic chaos that a vast majority of Brazilians were happy to leave behind in 1994.

By Ian Katz and John Kolodziejski in Sao Paulo

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