Brazil’s postal workers were ordered back to work after a four-week national stoppage this week, following a final arbitration deal by the country’s top labour court. Banking sector employees are still out on strike over pay and auto sector workers also walked off some factory floors in September, also in demand of higher wages. With inflation running at over 7% annually, real wages are under pressure, in a labour market with nigh-on full employment.
The left-wing labour government led by President Dilma Rousseff is politically fortunate in that the minimum wage is set to increase sharply in real terms (by about 7%) in 2012, when the new administration will face its first test in scheduled municipal elections. The higher-than-usual increase, which is simply by virtue of a standing formula, is well timed. Although no-one in the administration has dared to give voice to it yet, growth in Brazil is slowing down, and fast. The economy may have contracted in the third quarter, with real annual GDP growth forecasts for 2011 slashed to 3.2%.
According to the national federation of postal workers (Fentect), about 40,000 of the 110,000-strong work force at the Post and Telegraphs Company (ECT) have been on strike since 14 September, after months of talks over a new collective bargaining agreement for about two-thirds of ECT staff.
On 11 October the superior labour court, along with the official arbitrator Mauricio Godinho Delgado, set the final terms of a deal, based on a pay increase of 6.87% backdated to August, in addition to a nominal monthly salary increase of R$80 (US$45) from 1 October 2011. Postal workers currently receive a basic monthly wage of R$807 (US$459). According to the central bank, the average salary in Brazil was US$1,000/month in July. In the public sector it was a higher US$1,400 (compared to US$797 in the private sector). With some justification then, the postal workers argued that they were not feeling the benefits of Brazil’s economic miracle.
The workers were also given a one-off bonus of R$575 (US$324), which they will receive in December, as well as benefits like extra food stamps, worth an additional R$140 (US$79). The court also ruled on the sensitive issue of whether the workers should be penalised for striking. That very issue had prevented a deal a week earlier. Under Brazilian labour law, the court could have docked a day’s pay for every day not worked (28 in all); however, the arbitrator decided that the workers had behaved themselves on the picket lines and that the strike had not been “improperly called”. Workers will thus lose seven days’ pay (six of which were already docked by the ECT in September’s pay envelopes), and they will be able to work off the other 21 days of the strike by putting in extra hours between now and May 2012. The labour minister, Paulo Bernardo, expressed satisfaction with the deal but was critical of the unions, saying that they were distracted with internal disputes. He warned Fentect that they had a responsibility to the public and that the competition was snapping at their heels.
Rivaldo Jose da Silva, the head of Fentect, accepted the ruling. The union faced a R$50,000 (US$28,000) fine if workers did not comply with the return-to-work order. The ECT put a special task force of administrative staff and overtime workers in place over four weekends during the strike to sort and deliver the backlog. The force delivered 47m letters and parcels, with another 97m due for delivery this week, the ECT president Wagner Pinheiro de Oliveria said on 10 October.
Modernising the ECT
In the midst of the strike, President Rousseff signed into law on 20 September legislation to reform the postal service, allowing the state-owned ECT to expand. Under the new framework the company will be able to offer new services like e-mail, “integrated logistics” and also financial services. It will be able to set up subsidiaries, acquire stakes in other companies and form partnerships with private sector firms. It will also be able to offer its services outside of Brazil for the first time (see sidebar).
Clouds forming
Domestic retail sales fell on a monthly basis in August for the first time since April, declining 0.4%. On an annual basis sales rose a healthy 6.2%, but that was the slowest growth since March this year. The August result was only the second negative monthly figure this year; nonetheless local retailers took it as a sign that the slowdown in the productive sector of the economy is finally spreading to the heretofore booming consumer sector. Eight of the 10 retail categories registered contractions, including supermarkets and furniture. The impact of earlier-year interest rate increases, higher food prices and also a weaker Real dampened sales in August. With one eye on the turbulence in global markets, Brazilian consumers are also getting a bit more cautious.
The Rousseff government now admits that real GDP growth will come in below forecast in 2011 at between 3.5% and 4%. The central bank is now expecting the lower figure. The treasury still expects growth of 4.5% in 2012, well above the local private sector consensus forecast of 3.7%. Inflation remains stubbornly above target at 6% in 2012; however, the Rousseff administration may decide to live with slightly higher inflation for a while in order to preserve domestic economic growth. The fact that the government seems happy enough with the prospect that the Real will depreciate to R$2.0/US$ by January 2012 is evidence of that decision. The central bank is in any case banking on an external shock to kill off inflation. The way things are going in the US and Europe, that is probably a safe enough bet.
- Postal reforms
The ECT reforms are in keeping with the evolution of postal companies in places like the US and the UK. Although the ECT has long had an effective monopoly in Brazil, it is facing direct competition from foreign logistics companies and premium courier services.
- More presidential jaunts
Having only just returned from the US and Europe, President Rousseff will earn plenty more air miles between now and Christmas. Next week, she heads to Durban for the fifth summit of the Ibas group (India, Brazil and South Africa). She may also take in Mozambique and Angola, key trade and investment destinations for Brazilian firms. After that she will attend the G-20 summit in Cannes, France, on 3-4 November. There are also tentative plans for a trip to Russia in November, at the invitation of President Dmitri Medvedev. In December, she will go to Venezuela for the summit of the Community of Latin American and Caribbean states.
