Brazil's Labor Challenges President's Austerity Plan

A LONG and violent strike came to an end late Monday, with an accord between auto workers and their employer, Ford Brasil. The seven-week strike was one of a series of events that is Brazilian labor's first serious challenge to President Fernando Collor de Mello's economic policy.

The strike and its resolution after three severe instances of factory vandalism are part of an adaptation process to a new economic reality, analysts say.

```We're not going to change, and we're going to show you this,' workers are telling employers,'' says Alexangre de Barros, a political risk analyst. ```Let's see who's stronger.'''

Workers demanding pay raises to keep up with prices are the biggest threat to the success of Mr. Collor's attempt to do away with inflation. Last month, officials began a new phase of the austerity plan that utilizes tight fiscal and monetary policy, imposing a recession on the economy. And that phase has yet to show results: The rate of inflation is expected to be 11 percent this month, still high, though down from last month's 13 percent.

The agreed-on 52 percent wage increase at Ford is ``not enough,'' says Vicente Paulo de Silva, Sao Bernardo metal workers union president. ``We will want an increase every month when there is inflation.''

Many labor categories are scheduled to renegotiate wages next month and analysts say this could spark new strikes.

Mr. Silva's union, Brazil's most organized, directed the strategic strike of 900 Ford assembly-line workers that started June 11 with a demand for a pay raise. With these workers idled, the rest of the assembly line had nothing to do. When Ford decided July 20 not to pay any of its 6,500 workers, some began burning cars and setting fires inside the factory. At the end of the week, an entire two-story building had been destroyed.

On Monday, workers accepted a previously rejected Ford proposal, which included the reinstatement of 80 fired employees.

Partly in an attempt to respond to Brazilian workers needs, the government announced a measure July 27 that provides a $36 August bonus to the roughly 80 percent of wage earners making less than $274 a month. The measure is also meant to head off attempts by Congress to reindex wages to inflation. Officials who in March did away with indexing and announced a policy of free-wage bargaining say reindexation would only build more inflation into the economy.

But the bonus will not help people like Durvalino Jos'e de Paixao, who lost his job as an industrial maintenance electrician in April. He is one of 171,000 workers laid off so far this year in the state of Sao Paulo, Brazil's industrial heartland.

``[The bonus] is charity. A worker doesn't need a bonus, he needs a job,'' he says, standing in a line waiting to file for unemployment compensation. Unable to pay for his seven children's milk and school materials, Mr. Paixao sympathizes with the strikers.

``Wages are frozen,'' he says. ``Everything else has gone up. ... A strike is worthwhile, because without a strike the bosses don't give anything. The government doesn't either. You have to have a strike.''

A strike continues at the financially troubled state-owned steel mill in Volta Redonda, just outside of Rio de Janeiro. At the giant mill, 22,000 striking workers are entering their fourth idle week and have persuaded many local merchants to shut down in solidarity. They want pay increases to help make up for their wages' eroding purchasing power. But the government refuses to negotiate until the strike ends, and is making plans to sell the mill to a private owner.

Yesterday, 80,000 federal electrical workers began a strike for a 240 percent raise, according to the daily newspaper O Estado de Sao Paulo. Rio de Janeiro dock workers also threaten to walk off the dock yesterday.

Another threat comes from public service and military, whose real wages have also fallen. Last week, members of the military met to discuss a 24 percent wage increase for officers, according to Veja, a news weekly. Soldiers are eligible for the August bonus says Mr. Barros. ``It's complicated for public servants and the military, because their pay is frozen until the end of the year.''

It is too early to say if, as a result of the Ford agreement, workers will protest less about their wages - or whether employers will be more generous, fearing violence. But analysts say it does appear likely that Congress will not be able to stand up to Collor's position opposing indexing wages to inflation.

Congress ``will be demobilized by the [October] election campaign, and the progovernment representatives can obstruct things,'' says Walder de G`oes, a University of Bras'ilia political scientist. ``Things will stay on a bonus basis until October; the government can decide on additional ones.''