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doubled, from $159 billion to $327 billion. Debt servicing—that is, interest payments—grew even faster: the average Latin American country used more than 30 percent of its export earnings just to service its debts. Brazil paid nearly 60 percent.30 Journalist Andres Oppenheimer explained, “As the old debt gets more expensive it begets new debt; to meet their interest payments the major Latin American countries have had to rely more and more on emergency loans from the International Monetary Fund and commercial banks. In effect, they are receiving with one hand and paying back with the other.”31 As public debt soared, the Brazilian currency lost value until chronic inflation became hyperinflation, hitting 1,765 percent by the end of the 1980s.32

Austerity

The solution to the crisis came in the form of IMF- and World Bank–enforced austerity. In 1983 Brazil had the largest foreign debt of the developing world: $83.8 billion. Just to service its debt, it had to borrow more and more in a downward spiral. In early 1983, Brazil went to the IMF for $6 billion, then the single-largest loan in the Fund’s history. In return, Brazil agreed to a brutal austerity program: to cut inflation, growth was strangled, public spending cut, the currency devalued, imports restricted, public assets privatized, and exports boosted.33 In São Paulo, workers soon rioted.34 Over the next decade the crisis dragged on.

Brazil’s military government did push back a bit, resisting the Bretton Woods institutions’ more draconian stipulations. As Finance Minister Dilson Funaro explained in 1986, “The way out of the debt crisis is through growth, and the IMF formulas don’t provide growth.”35 But, in the end, neoliberalism won; deflationary austerity, deregulation, privatization, aggressive exporting, unemployment, suppressed wages, hunger, corruption, crime, and migration all defined the economic landscape.

Unfortunately, Brazil’s export drive took place amidst falling commodity prices. Two factors contributed to this. The Bretton Woods institutions were simultaneously pressuring other Third World debtors to export more; meanwhile, deep recessions and high interests rates in the richer countries held down consumption. Increased supply plus reduced demand meant plummeting prices. Sugar, copper, aluminum, and other raw materials all hit deep lows.

The IMF’s structural-adjustment program resulted in higher unemployment, rising poverty, and growing urbanization as the rural poor went to cities in search of work. From 1980 to 1990, Rio’s overall population growth rate was 8 percent, but the favela population surged by 41 percent. As economist and Latin America expert Mark Weisbrot explained, “From 1960–1980, income per person—the most basic measure that economists have of economic progress—in Brazil grew by about 123 percent. From 1980 to 2000, it grew by less than 4 percent.” Weisbrot estimates that, had Brazil not embraced neoliberalism, “the country would have European living standards today. Instead of about 50 million poor people as there are today, there would be very few. And almost everyone would today enjoy vastly higher living standards, educational levels, and better health care.”36 Even if Weisbrot overstates the case a bit (Which Europe? Rural Greece or urban Holland?), his larger point about neoliberalism’s damaging impact is valid.

Human Costs

Had Brazil not embraced neoliberalism, violence would surely be less of an issue. As poverty increased and the favelas grew, social relations within them frayed. Amidst this neoliberal transformation, the Comando Vermelho and other gangs grew to become guerrilla armies minus the ideology or political cause, employing only the methods and organization of war.

“By 1991 the CV had become purely criminal. There was no ideology anymore,” explained Commander Rodrigo Oliveira of Rio’s Civilian Police Special Forces when I met him in his office to discuss the gangs and the war on them. “Now their goal is power, plain and simple—not even huge private fortunes for the slum ‘owners,’” he said, using the