In Brazil's industrial hub, crisis starts to bite

Sun Jan 25, 2009 8:53pm EST
By Stuart Grudgings
VOLTA REDONDA, Brazil (Reuters) - Rust-colored iron ore trains still rumble through Volta Redonda, but workers in this steel town are feeling the strain as economic crisis slams the brakes on the industries that fueled Brazil's recent boom.
Plunging factory output and mounting job losses show that Latin America's biggest economy is being hit hard, only four months after President Luiz Inacio Lula da Silva dismissed the market turmoil as a U.S. problem with the words "what crisis?"
In Volta Redonda, a center of Brazilian industry where few people's lives are untouched by dominant steel firm Companhia Siderurgica Nacional (CSN), the announcement last month of 300 job cuts has sent shivers through the community.
"This crisis isn't easy for anyone, but why are they firing fathers of families?" said Thiago Amorim da Cunha, a 22-year-old who is one of those laid off by CSN, among Latin America's biggest steelmakers.
Another 3,000 workers were put on temporary leave last month by CSN, which has about 8,000 workers at its main plant here about 90 miles northeast of Rio de Janeiro, and the union fears 1,800 more jobs will go this month.
The popular Lula, who rose to national prominence as a feisty union leader, says proudly that Brazil created more than 1 million formal jobs last year while millions were lost in the United States and Europe.
But the job losses at CSN are part of a growing toll and the severity of the crisis has taken the government by surprise as industries all over Latin America reel from tumbling exports and scarce credit for businesses and consumers alike.
With Brazil now shedding jobs for the first time since Lula came to power in 2003, a sharp downturn could threaten his ability to get a hand-picked successor elected in 2010.
The economy lost 655,000 jobs in December, the biggest fall in a decade. A 6.2 percent yearly drop in industrial output in November was the worst since 2001, and double-digit plunges in Asian countries' factory output underscore how the crisis has spread from the United States and Europe to most of the world.