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August 8, 2012 7:54 pm

Brazil’s central bank staff go on strike

By Joe Leahy in São Paulo

Employees at Brazil’s central bank are striking for a 23 per cent pay rise to keep pace with rising prices, even though one of the institution’s roles is to curb inflation.

The central bank staff have joined a wave of strikes among government workers to demand higher salaries, putting pressure on efforts by President Dilma Rousseff to control a swollen federal budget.

“We’re not asking for a pay rise – we just want them to restore our purchasing power,” said Aparecido Sales, head of the São Paulo branch of the central bank’s union, adding that salaries at the institution had not been raised since the middle of 2008.

“The government is acting like a tenant in an apartment that has been there for years but refuses to keep up with reality and pay more rent.”

One of Brazil’s most prized achievements over the past decade has been to control inflation, which in previous decades grew at runaway rates – in 1993 alone the rate rose to 2,477 per cent.

But annual wage negotiations, which are often accompanied by strikes, put the government under constant pressure to award above-inflation salary increases.
Rising wages are leading to fears that Brazil’s competitiveness is being eroded at a time when it is losing its mantle as the region’s highest growth large economy to Mexico.

The central bank strike, under which staff have agreed to maintain operations most important to the markets but to go slow on other functions, comes amid similar industrial action at universities, regulatory agencies and other federal government departments.

“The week of mobilisation begins with a “panelação” [protest in which demonstrators bang pots and pans] starting at the department of health and moving in the direction of the department of planning,” the federal public servants union, Brasília branch, said on its website.

“Everyone is invited to make a racket at the door of Miriam Belchior [planning minister].”

The protests for higher wages comes as Brazil’s inflation rate is beginning to rebound after a mostly subdued start to this year.

Inflation in July was up 0.43 per cent month-on-month, compared with analysts’ expectations for a 0.37 per cent increase.

Year-on-year, inflation quickened to 5.2 per cent from 4.92 per cent in June, above the middle of the central bank’s target of 4.5 per cent plus or minus 2 percentage points.



Economists are concerned that inflation in Brazil’s services sector, one of the biggest areas of job creation in the economy, is costing the country its competitive edge.

“Rising incomes have led to greater demand for labour-intensive services,” said Tony Volpon, economist for Nomura, in a report that predicted Mexico could overtake Brazil again as the region’s largest economy by 2022.

He said the problem for Brazil in the services sector, which accounts for 57 per cent of the economy, was that the room for productivity improvement was more limited.