Brazil to Cut 60,000 Jobs, Freeze Wages

The Brazilian government Sunday imposed a wage-and-price freeze, revamped the currency and announced it will lay off as many as 60,000 public employees as part of a sweeping program to control soaring inflation and trim a huge budget deficit.

Union leaders threatened to call a nationwide strike to protest the measures, which eliminated an automatic monthly indexing of wages to inflation.

“Inflation should fall drastically and abruptly,” Finance Minister Mailson Nobrega said at a press conference. Nobrega said the measures were the “toughest” a Brazilian government has taken at any one time.

Today and Tuesday were declared bank holidays to allow time for the financial system to adapt to the new measures, which included a 17% devaluation of the cruzado and creation of the so-called “new cruzado” worth 1,000 old ones.

5 Ministries to Go

Among the measures designed to slash the massive public spending deficit were the elimination of about 60,000 civil servants’ jobs in the next 45 days, the elimination of five Cabinet ministries and the closing of 42 state companies and organs.

It also scraps the automatic monthly indexing of contracts, savings accounts and most financial transactions to cost-of-living increases.

The reform package put together by President Jose Sarney and his economic advisers also includes a 45-day price freeze on about 200 basic commodities.

Brazil is the developing world’s largest debtor nation, owing foreign creditors $115 billion. In 1988, the economy sputtered as inflation soared to 934%, an all-time high.

Needs Congressional OK

Under a constitution approved last year, Congress must approve or reject the measures within 30 days. A rejection would nullify the reform and further destabilize the already shaky Sarney government.

Union leaders criticized the elimination of the wage index that gives workers monthly wage increases. Union figures show that in the past two years, workers’ purchasing power has dipped in real terms by about 40% because of losses to inflation.

Under the new measures, workers will receive a last monthly increase in January. In February, wages will be adjusted according to the average inflation over the past 12 months and then frozen for an indefinite period.

‘Furious Workers’

“We weren’t consulted about the measures, which will cut into worker’s salaries,” said Luiz Mederos, leader of the Sao Paulo metal workers’ union. “I have no doubts furious workers will react negatively, and they will have our support in organizing a nationwide strike.”

The program is the fourth anti-inflation plan since Sarney--Brazil’s first civilian president after 21 years of military rule--took office in 1985.

Inflation in December rose to 28.8%, well above the 25% limit set by business, social and government leaders in a “social pact” announced in November.

Brazil’s public sector deficit, widely believed to fuel inflation, is running at about 6% of the nation’s $300-billion gross national product.