"We remain peaceful and happy, but now we are not dreaming anymore": Rio's rude awakening

The protests in Brazil began as a demand for cheap public transport, but are now so much more.

Sem violência. No violence. This was what protestors were chanting as police charged them in São Paolo, firing tear gas, pepper spray, stun grenades, and rubber bullets.

Caught in the middle of this, Paula Martinelli found a hiding place by the São Paolo Museum of Art. A few days later she wrote to me via e-mail:

The Tropa de Choque [riot police] had closed both directions of the avenue and surveyed it periodically – filling the lanes with their vehicles, trucks, motorcycles, shields and bombs. Between breaks in the police checks, people left their hiding places in order to return to the march – our safety spot was an atrium between two buildings, until the moment we were found by a policeman who, as if we were in a video game, aimed his gun toward us and fired rubber bullets and tear gas.

The protest had been organized in part by the MPL – Movimento Passe Libre, the Free Pass Movement – which seeks to make public transport free through subsidies to transport companies. After the State of São Paolo raised fares in early June from R$3.00 to R$3.20, people acted on calls to join demonstrations on the streets. The first passed peacefully on 6 June. By the third demonstration on 13 June, the mood had changed. The Government attempted to quell the growing movement, and police responded to protestors with heavy force, as Paula confirms.

If the protests were just about transport fares, few would be taking notice. But the fare increase was merely the last straw –the most recent of many injustices committed by politicians against the Brazilian people. Indeed, speaking to Brazilians reveals anger with a litany of grievances which have been long embedded in Brazil’s political and economic establishment. In a message to me, Sikander Santos, who has been involved in the Rio protests, explained that, “There are so many things which have outraged the Brazilians that it would be impossible to identify one single reason for the current events.” Nonetheless, he listed a few key points which have contributed heavily towards what he termed the “dissatisfaction and total disbelief in politicians.”

Government corruption is perhaps the central point from which all other problems arise. It has existed for many years, and this has meant that the political establishment long ago lost the respect of the population. As Sikander says, “Politicians act on their own account, only defending their own interests and receiving huge salaries, wasting public funds and unlawfully enriching themselves.”

Having won bids to host the 2013 Confederations Cup, the 2014 World Cup, and the 2016 Olympics, Brazilian politicians have already spent billions of dollars of public money to build stadiums while the country’s wider infrastructure deteriorates. Hospitals, schools, airports, and public transport are all well below standard despite the country’s wealth and high tax rates, resulting in relatively high infant mortality, ongoing rates of around 12 per cent illiteracy, crammed public transport, and traffic-choked roads.

Outrage has also been directed towards the fact that Brazilian politicians commonly commit nepotism, and pay themselves up to R$26,700 (£7807) per month while the police are known to be equally as corrupt. President of the Commission for Human Rights and Minorities Marco Feliciano is known to be a racist homophobe, while the PEC37 constitutional amendment seeks to allow only the Federal and Civil Police to investigate crimes, excluding the Public Ministry which has been key in some important recent investigations. This is an invitation to corruption. Along with this, drug trafficking, gangs, and gun crime are widespread and poorly dealt with, being effectively swept under the carpet when officials from FIFA or the Olympics visit cities like Rio.

But according to Sikander, “The scrapping of hospitals, education, public schools, and universities, along with the dismantling of the public security system is notorious. Daily news stories of fraud, corruption, impunity, and all sorts of problems are common. It is scary and that is what the politicians want. Poverty and insecurity are part of the game – the exploitation of fear that stifles the courage of the people and prevents them from acting politically.”

Prior to 13 June, “The governor had tried to discredit the movement, saying it was formed by a small minority of vandals – we knew it was not true and had to prove it to everybody: society and the press,” Paula told me. “So we went to the streets that day trying to have a peaceful march to legitimize our requests and our movement. The government also knew this and decided to go for all or nothing – to muffle the popular clamour once and for all, or eventually have to deal with something bigger.” They chose the former.

In Franklin Roosevelt square, Paula wrote that there were “hundreds of police surrounding us. The cavalry also approached. When we were surrounded, tear gas bombs and rubber bullets began to be shot towards the crowd. Many of those peaceful protesters were trampled. I ran to the door of the church, believing that there I would be spared – bombs and rubber bullets were thrown in my direction, violently hitting the doors of the church.”

During this protest, police were indiscriminate in their attacks, hurling tear gas bombs into the middle of traffic jams, hurting many who weren’t involved in the demonstration – women, children, and the elderly. The rubber bullets smashed windows and property, the damage of which was then blamed on protesters. Dozens of people were arrested just for bringing vinegar, which helps counteract the effects of tear gas.

Following these events, however, Brazil saw a change in attitude towards the protests, with the movement after 13 June becoming more diverse and attracting many more people. Despite this, it didn’t stop the establishment continuing to try and silence the demands of the people.

On 17 June Sikander took part in the march in Rio from Candelária to Cinelândia along the Avenida Rio Branco with around 200 000 others. “The people of Rio have a lot of humor, they like to sing and dance, and did so for most of the march,” said Sikander. This went on for a few hours, but then when the demonstration had almost reached Cinelândia “a gang of thugs armed with shirts covering their faces went ahead of the people and attacked a group of police officers who ran to the safety of the Legislative Assembly of the State of Rio de Janeiro (ALERJ)."

Soon, molotov cocktails were exploding on the steps, and ATMs were smashed. But Sikander believes this was a pre-planned action: “There were more than 100 rioters against 40 unarmed police officers.” They had no weapons, which is strange in such a situation. Sikander wonders if they had been ordered by superiors to leave their weapons behind. As the attacks continued, reinforcements were called, “…but they did not come. There were no police to defend the police. The dreaded Tropa de Choque arrived almost two hours after the start of the conflict. It seems strange, that delay – very strange. But not for me. The State Security is run by the Governor [Sergio Cabral]. The same corrupt Governor hated by the middle class – the middle class that is now mostly in the demonstrations. Such planned actions expose the entire criminal scheme of this government.” Sikander stated that, “the order was to allow the conflict so that the demonstration could be dispersed…Several videos posted show police shooting upwards. It was a kind of theater…staged with the sound of gunfire to intimidate.”

Over the past week Brazilian politicians have slowly begun to comprehend the force of this movement, but despite reversing the public transportation fare increases in a number of cities, protests have not ceased. In fact, they are spreading across the country and are meeting further violent suppression by the police. Cutting R$0.20 from transport fares will not stop Government corruption, and Brazilians remain extremely angry with how much money is being spent on the Confederations Cup, the World Cup, and the Olympics. At the same time, inflation is rising while wages are not, meaning many millions of Brazilians are affected by the increasingly high cost of living, drawing stark attention to the fact that Brazil is one of the most unequal countries in the world.

Many people in Brazil fought against the military government from 1964-85, which was involved in numerous assassinations, disappearances, cases of torture, and false imprisonment. Today, as Sikander told me, Brazilians along with many others across the world, are fighting to liberate themselves from “capitalist fascism, corruption, and inequality”. Though perhaps the movement is too disparate and idealistic for politicians to be able to cater to every participant’s demands, they must nonetheless make a real effort to free their country from corruption and prioritise effective public spending above the short-term greed of private enterprise.

Another particpant in the São Paolo protests, Paula Valério, wrote to me that these protests mark a critical point. “Although I love my country, I have always been a harsh critic of Brazil and Brazilian culture – for a lot of reasons, but mostly because I do not believe in a future without education, and we, as a nation, never truly invested in it, so I saw no real way of changing things. I felt powerless. Now, these movements have opened a door for change – they are making me hopeful and proud!

“Everybody is in the streets. We all want changes. But there’s no real leadership. The Movimento Passe Libre will not be a leader for all the changes, and I don’t think they should be. So there are two great dangers. The first is that it will all just fade away, because we won’t be able to organize ourselves. The second is, if people find a leader, what kind of leader will it be?”

Brazilians have accepted "bread and circuses" in favour of substantive democracy for too long. “We are a peaceful people indeed, [but] this has also caused us to passively accept a lot of absurd political decisions,” said Paula Martinelli. Democracy is more than just elections, and with these protests, Brazilians are showing they have the power to demand that politicians deliver on their promises. “The spectacle of growth is a fraud. The World Cup spending has not improved the infrastructure. These twenty cents represent yet another cost for the people who already have one of the world's highest tax burdens. It is no wonder that the slogan of the movement is ‘the people have woken up.’ We remain peaceful and happy, but now we are not dreaming anymore.”

Names have been changed to protect identities

A demonstrator holds a road name sign during clashes in downtown Rio de Janeiro on June 17, 2013. Photograph: Getty Images

Liam McLaughlin is a freelance journalist who has also written for Prospect and the Huffington Post. He tweets irregularly @LiamMc108.

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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