Leftist Bloc Now Controls Major Brazil Pension Fund By JENNIFER L. RICH
SÃO PAULO, Brazil, June 2 -- In a political race that was major news in Brazil but little noticed abroad, a radical-left coalition now controls all three elected seats on the six-member board of the nation's largest and most influential pension fund.
Two radical leftist candidates who won seats in an election last month began their terms Thursday, joining an incumbent colleague on the board of the fund, known as Previ. That gives them power to block decisions that require a majority vote. One of the new board members is also the official responsible for recommending how the $17.5 billion fund invests.
The radical-left's strengthened position could have a major impact on the priorities of the 62 leading Brazilian companies in which the fund has a significant stake.
There is also the possibility that the radical-left board members, who oppose the speed and scope of Brazil's privatization of major industries, could exert their influence to slow or halt the process that began nearly a decade ago.
"We have a clear position against the government's privatization program, since it is more than evident that it has been harmful to the Brazilian economy," the winners said in their election platform literature. "In a case where the positioning of Previ could be decisive to stop the privatization, we should position ourselves accordingly."
The change has not rattled financial markets or worried foreign investors, who have been pouring billions of dollars into Brazil. Those investments have contributed to the country's rebound from a severe economic crisis in January 1999 when the national currency was sharply devalued. But the popularity of the radical-left's position on privatization and worker rights has clearly touched a nerve in Brazil, where many people have lost job security as a result of the shift of many industries into private hands.
The nearly 100-year-old fund, formally known as the Caixa de Previdência dos Funcionários do Banco do Brasil, or the Social Security Fund for the Workers of the Bank of Brazil, is governed by the board. Three members are appointed by the bank, and three are elected by the workers and retirees. Under a change in Previ bylaws, the three elected positions, which had previously been largely ornamental, were given executive powers on the board. This year's election was the first in which the winners would have real influence over the investment decisions of the fund.
Previ, which can invest only in Brazilian companies, is one of the largest institutional investors in Latin America. Its holdings include 27 percent of Brazil's largest exporter, the aircraft maker Embraer; 10 percent of the world's largest steel maker, C.V.R.D.; and 10 percent of Latin America's largest beverage company, Brahma.
Previ board candidates, who must have worked for the bank for 15 years, appeared from all over the political spectrum, eventually settling into four tickets: two were associated with left-wing political parties, one was a group of retirees and the fourth was said to have the support of President Fernando Henrique Cardoso and the Bank of Brazil board.
The candidates canvassed the country, spending an estimated $250,000 on mailings and personal appearances for 118,000 voters.
"Elections are an important way to add transparency to the fund by debating the problems and the strategies for the future," said Paulo Kliass, the secretary of the Supplemental Social Security Commission, the government agency that regulates pension funds. "But this was a radicalization of the process where it devolved more into finger-pointing than a debate of the issues."
The winners, from a coalition of the Workers Party, or P.T., and the Brazilian Communist Party, assumed positions as the director of participations and director of planning. The third elected board member, the director of security, who began a four-year term in 1998, is also a member of their coalition.
Even if their positions on privatization do not slow the process, there is some speculation that the strong left-wing influence on the Previ board could shift the focus of the fund's investment decisions away from a strictly financial one. The new director of participations, Sergio Ricardo da Silva Rosa, will be in charge of analyzing all future investments for the fund, the first time the left wing has controlled the seat.
"The P.T. tends to politicize the process," said Flavio Rabelo, a Brazilian pension fund expert and professor at a São Paulo business school, the Getulio Vargas Foundation. "It is not the function of a pension fund to create jobs or fight poverty."
But Arlindo Mogno, a coalition official and former board member, said the coalition's objectives reflected an international trend among unions and workers rights groups to take a greater role in corporate affairs.
"We plan to use our influence on the boards of these companies to make sure that the interests of workers are being protected," Mr. Mogno said. "This is something that is happening around the world."