Brazil continues to be one of the leading countries in the world in income inequality, occupying sixth place alongside such extremely poor countries as Namibia and Swaziland. Between January and August of 2003, expenditures with interests on the public debt reached 102.4 billion reais, 68% more than during the same period of 2002. These expenses represent three times the allocation of the federal government to health, 334 times the spending on housing, and 10.2% of the gross national product, or around 30% of all expenses at the three levels of government.

External and Internal Debt and
Human Rights in 2003

Sandra Quintela*

The payment of debt constitutes a systematic, flagrant, massive, and persistent violation of economic, social, and cultural rights. Billions of reais (the Brazilian currency) are withdrawn from public funds for the payment of external and internal debt. Brazil must constantly contract new loans, in foreign currency, to cover the payment of previous debts.

In addition, the social and environmental debt increases, as well as poverty and the concentration of income and wealth. The result is environmental degradation and further extraction of natural resources.

The "Atlas of Human Development"1 indicates that the inequality of income in Brazil increased between 1991 and 2000, meaning that fewer people hold more of the income in the country. We continue to be one of the leading countries in the world in income inequality, occupying sixth place alongside such extremely poor countries as Namibia and Swaziland.

Between January and August of 2003, the expense with interests on public debt reached 102.4 billion reais, 68% more than in the same period during 2002. Federal, state, municipal, public funds, the central bank, and state agencies make these payments to the international banks, investors in the stock market, the International Monetary Fund (IMF), the World Bank, the Interamerican Bank, and other governments. These expenditures represent three times the federal expenditure on health, to 334 times the allocation for housing, and to 10.2% of the gross national product, or around 30% of all expenses at the three levels of government.

The 1998, an agreement with the International Monetary Fund (IMF) restricted public expenditures at federal, state, and municipal levels. The Brazilian government started to collect taxes mainly for the purpose of paying the external debt. The so-called primary "surplus" (excess of proceeds over public expenditures reserved for paying the debt) of the federal budget reached R$ 49 billion by August. Total expenditures on social programs by July of that year reached approximately R$ 40 billion, while payment of the services (penalties and interest), on both the internal and external debt, reached R$ 53 billion (see the table).

The situation in 2003 worsened due to the last renegotiation of the agreement with the IMF in 2002, enacted in March of 2003. Among other conditions, it was stipulated that the primary "surplus" of tax proceeds over public spending be 4.25% of the gross national product. In 2002 it was 3.85%. This target caused cuts in social expenditures of R$ 54.2 billion by September, according to the goal established by the IMF.

With the total sum of resources generated for the primary "surplus," it would be possible to construct 2,465,000 houses, 35 square meters in area on lots of 200 square meters, at a cost of R$ 25 million. It would be possible to increase by 29 times the funds for Fome Zero (Zero Hunger campaign).

the Federal Government's Budget

The numbers below summarize the budget for actual expenditures in the period between January and July, 2003.

Federal Government - Report of Budget Expenditures

January to July, 2003
Selected Items / Budgeted for year / Expended by July / % Expended

Public Security / 2,763,243 / 1,082,738 / 39.18
Social Assistance / 8,611,537 / 3,944,988 / 45.81
Health / 27,783,936 / 13,548,355 / 48.76
Education / 14,518,836 / 6,411,900 / 44.16
Culture / 348,555 / 79,571 / 22.83
Urbanization / 912,976 / 21,880 / 2.40
Housing / 296,063 / 0 / 0.00
Sanitation / 224,239 / 171 / 0.08
Environment / 2,329,203 / 264,906 / 11.37
Science and Technology / 2,093,428 / 679,370 / 32.45
Agriculture / 8,998,344 / 2,015,066 / 22.39
Agrarian Reform / 1,599,299 / 242,870 / 15.19
Energy / 2,138,639 / 837,947 / 39.18
Transportation / 5,394,047 / 614,393 / 11.39
Total of Social Expenditures / 78,012,345 / 29,744,155 / 38.13

Service on the Debt / 141,185,711 / 53,583,212 / 37.95
Service on the Internal Debt / 110,450,648 / 38,474,979 / 34.83
Service on the External Debt / 30,735,063 / 15,108,233 / 49.16
Source: www.stn.fazenda.gov.br

This is a very simple table. It demonstrates, through some selected items - health, education, sanitation, agrarian reform, etc. - how much was allotted for expenditures on each category. And, finally, in the last column, the percentage value of how much was spent in relation to the total budget.

In some items like health, education, and social assistance, what was spent until July corresponds proportionally with a graph of expenditures divided evenly by the months of the year: data was collected in July and these expenditures are approximately 50% of that foreseen for the year. In items like housing, transportation, sanitation, agrarian reform, and environmental activities, expenditures are far below the allocation; the most extreme example is housing, where nothing was spent from the federal budget. This absence of expenditures, for certain, is not the result of a lack either of people who need shelter, of popular organization demanding housing, or of unproductive urban or rural areas that might be used. The primary surplus cut, in February of this year, 87% of the budget for the Ministry of Cities. In other words, to reach a cut of R$ 54.2 billion accepted by the IMF, the Brazilian government "took the scissors to" and "tightened the belts of" social programs.

In this way, a social moratorium has been decreed for those who need the 6.6 million homes that were to be constructed or the reforms to 15 million houses that were considered inadequate. A suspension of payment has been decreed for the social debt to the 53 million people who live in misery and in poverty in Brazil.

Returning to the table, in the item "service of the debt" (penalties and interest), almost R$ 53.6 billion was spent servicing financial debt. This would give enough to spend a million reais on each million people that live in exclusion, in this interval of six months alone.

Financial Moratorium

The International Agreement on Economic, Social, and Cultural Rights, adopted as Resolution 2,200-A (XXI) by the General Assembly of the United Nations, on December 16, 1966, and ratified by Brazil on January 24, 1992, established a series of rights that the member-states ought to seek to respect. Its first article recognizes the right to self-determination, the right for member-states to define their own political statutes, and the right to freely secure their economic, social, and cultural development.

To recover a right to shelter from the financial debt as a prerogative of sovereign states should be proclaimed as a condition for the fulfillment of the International Agreement on Economic, Social, and Cultural Rights.

Like the external debt, the internal debt also violates human rights. According to research by the Revista Carta Capital (August 13, 2003), between trades, exchange, penalties, commodity transactions, derivatives, and titles on the external debts, around R$54 billion is moved each day in Brazil. The greatest part - R$ 52 billion - is exchanged in the Bolsa de Mercadorias e Futuros (the market in stock and futures) in São Paulo. The "Paulista Casino" attracts investors from the whole world to enter into their negotiated contracts in state bonds and actions, in debt titles, in commodities, and in similar financial instruments. So-called investors enter and leave these contracts, that is, enter and exit from the country, with complete facility, without control. 2

The Market, depending on its mood, indirectly defines whether or not cuts will be made in social investments with a variety of mechanisms, such as the value of the dollar and indices such as the Brazilian investment risk. The increase of the primary surplus from 3.85% to 4.25% means, in practice, cuts in spending in the social area like the guaranty of payment of high interest and high investments to so-called foreign investors. The greater portion of public spending, according to both the Federal Government of Brazil and the IMF, ought to be directed to the payment of debt financing.

Through this mechanism, the internal debt today consumes the greatest volume of payments. On table 1 we see that, of the R$ 141.2 billion paid to service the public debt, R$ 110.3 billion was destined to the payment of internal debt.

These debts are the result of a political and economic choice. Therefore, to at least begin the payment of the social and environmental debts, the social moratorium needs to be lifted and a financial moratorium declared.

Proposals for action 3

In the campaigns for debt cancellation, we have been working to investigate the link between debt and violation of human rights. During the World Social Forum in 2003, we organized various activities in order to build a working plan. Here are some proposals:

· To seek forms to show the responsibility of the IMF and other international financial organizations regarding these policies, which cause poverty and hunger;
· To investigate, denounce, and demand reparations in cases in which loans were used to sustain dictatorships;
· To study and use legal arguments - Odious Debt, Greater Force, etc. - to work for canceling the debt;
· To call for the end of structural adjustment programs;
· To change the idea that we have a debt, since people in the South are creditors of a historic, ecological, social, and political debt;
· To denounce the responsibility of the IMF and other international financial organizations for the fiscal and structural adjustment policies that are creating so much poverty and hunger in the countries of the South.

External Debt, 1999 to 2003, in billions of US dollars.
External Debt / 1999 -Dec/ 2000-Dec / 2001-Dec / 2002-Dez / 2003-Mar/May
Public Debt / 100,682 / 92,358 / 93,182 / 110,420 / 114,347 / 116,835
Private Debt (1) 140,786 / 143,798 / 132,886 / 117,269 / 119,345 / 119,175
Total External Debt / 241,468 / 236,156 / 226,067 / 227,689 / 233,692 / 236,010
Source: Banco Central
(1) Includes the debt of the public financial sector.

External Debt, 1999 to 2003: How much was paid in billions of US dollars
Debt in 1998 (Dec) 220.350
Interest (Jan 1999- Aug 2003) 161.530
Penalties (Jan 1999- Aug 2003) 76.935
Penalties and interest paid (Jan 1999- Aug 2003) 238.465
Debt in 2003 (May) 236.010

* Sandra Quintela is a socioeconomist of the Institute of Political Alternatives for the Southern Cone (Instituto de Políticas Alternativas para o Cone Sul , or PACS). Translator Greg Downey is Assistant Professor of Anthropology at the University of Notre Dame.

1. Published in October, 2003, by UNDP (United Nations Development Program), IPEA (Institute of Applied Economic Research), and the João Pinheiro Foundation

2. Take for example, the case of Banestado: US$ 30 billion left the country legally, being illegal money. Mechanisms like the CC5 permit a Brazilian company that has a subsidiary in a fiscal paradise to remit money freely

3. Proposals are excerpted from the summary of activities held during the FSM 2003 (Jubilee Campaign South/Brazil, Jubilee Campaign South of Asia, Africa, and other countries of Latin America and the Caribbean, and the Committee for the Annulment of the Foreign Debt of the Third World - CADTM)