| SAO PAULO/BRASILIA
SAO PAULO/BRASILIA Aug 22 Many of Brazil's
biggest retailers, homebuilders and carmakers are cutting jobs
as Latin America's largest economy teeters on the edge of
recession, a fresh blow to President Dilma Rousseff's
For years, low unemployment was key to Brazil's emergence as
an economic power and important gains in the fight against
The unemployment rate remains near record lows of around 5
percent and the leftist Rousseff regularly touts it as a success
of the ruling Workers' Party over the last 12 years.
But after a decade of good news, the labor market is showing
signs of weakness, possibly depriving her of a trump card in the
Industries from textiles to steel have been trimming
payrolls since last year due to weak economic growth, cost
inflation, high taxes and a tough exchange rate.
Now jobs are disappearing in retail, construction and food
processing, which had been reliable engines for growth and new
employment over the last decade.
Even automakers, one of the big beneficiaries of Brazil's
economic boom last decade, have cut thousands of jobs as they
idle assembly lines in the face of slumping consumer demand.
The economic slowdown has deepened since the World Cup
soccer tournament that ended last month, threatening to undercut
Rousseff's re-election campaign as retail workers like
27-year-old Evandro Dias lose their jobs.
"Sales were horrible ahead of the Cup, but everyone thought
things would rebound. Instead they got even worse, so here I
am," said Dias, who stopped by a Sao Paulo union on a recent
afternoon to register his layoff from an electronics retailer.
The low jobless rate is due in part to a shrinking labor
force as more young Brazilians pursue higher education and
technical training. Many economists expect unemployment to rise
as government figures show formal job creation slowing to its
weakest pace in over a decade. link.reuters.com/nuc72w)
Brazil's economy added less than 12,000 net payroll jobs in
July, the slowest pace for the month in 15 years, according to
official data released on Thursday. Most new jobs were low-skill
service and agricultural hirings.
Big companies have been careful to avoid mass layoffs,
cutting a few hundred workers at a time or leaving empty posts
unfilled, but the cumulative effect is seeping into the election
"We're not generating good-quality jobs here - or even
low-quality ones, according to the latest data," Senator Aecio
Neves, a pro-business former state governor and one of
Rousseff's top rivals, said in a recent TV interview.
Ahead of the Oct. 5 election, Rousseff is selling the
message of economic good times and greater opportunities under
Workers' Party rule. It is a key reason behind her lead in
opinion polls even though growth has slowed to less than 2
percent per year during her own four-year term and inflation is
running at around 6.5 percent.
Neves and environmentalist Marina Silva, who announced her
presidential candidacy this week, are focusing on the sluggish
economy in their campaigns and are almost certain to force
Rousseff into a runoff vote on Oct. 26.
A recent poll showed that unemployment is already the third
biggest concern of voters, after healthcare and crime.
Rousseff has a strong lead in polls for the first round but
looks vulnerable in a likely runoff vote, especially if she
"What matters more than the numbers is the news flow," said
Ricardo Ribeiro, a political analyst at MCM Consultores. "If
word of layoffs get through to the voter, it could create
anxiety about what's going to happen next in the labor market."
Job cuts are even appearing among "national champions," the
nickname for companies atop Brazil's strongest industries due in
part to government-sanctioned mergers.
Retailers alone eliminated a net 78,264 formal jobs in the
year through July, compared to average growth of 41,000 in the
same period of the prior three years, official data shows.
No.1 retailer GPA SA, Brazil's biggest
private-sector employer, eliminated about 3,000 jobs from April
to June, its biggest quarterly cut in over 15 years, according
to a Reuters analysis of earnings reports.
GPA ended 24-hour service at its supermarkets in April and
has been closing home appliance stores following a merger that
created its Via Varejo SA division. Executives say
workers at stores with cutbacks were offered opportunities
Ricardo Patah, the head of Sao Paulo's retail workers union,
said the only reason things are not worse is that shop owners
are wary of firing now and then having to rehire for the
year-end holiday season.
"If this were the beginning of the year, you can be sure the
knives would be out, slashing even more jobs," Patah said. "Next
January could be the worst ever for retail layoffs if this
crisis extends through the rest of the year."
In the first real test of post-World Cup demand, sales ahead
of Father's Day, which falls in August in Brazil, dropped for
the first time in five years.
Former GPA chairman Abilio Diniz has also brought a
cost-cutting campaign to his new boardroom at BRF SA,
the world's biggest poultry exporter.
As chairman at BRF, Diniz tapped chief executive Claudio
Galeazzi, known as "Scissor Hands" for running layoffs at
companies from retailer Lojas Americanas SA to
ceramics maker Cecrisa.
As part of a plan to streamline operations and increase
production overseas, BRF reported 73 million reais ($32 million)
in second-quarter rescission costs for "staff adjustments."
BRF declined to elaborate on the layoffs. Galeazzi said this
month he plans to step down at the end of the year.
Civil construction, which created an average 200,000 jobs
per year from 2010 to 2013, has added just 18,000 net jobs over
the past 12 months, as the country's biggest developers scale
back new projects due to weak demand.
In Bahia and Pernambuco, the biggest states in the
northeastern stronghold of the Workers' Party, construction
companies have cut over 14,000 jobs this year.
New project launches by homebuilders in the second quarter,
a leading indicator for construction jobs, fell 25 percent from
a year earlier, according to JPMorgan Securities analysts.
"There is no outlook for improved hiring among builders by
the end of the year," said economist Danilo Garcia of national
industry group CNI, which runs a monthly construction survey.
Public concessions of ports, roads and railways, Rousseff's
big bet for an economic rebound this year, have failed to pick
up the slack from a weaker housing market, Garcia noted.
In Rio de Janeiro, the site of public works projects ahead
of the 2016 Olympic Games, builders cut loose 2,500 workers in
Even in industries where Rousseff has been pouring on fiscal
stimulus for years, the tide is turning at the worst moment for
The auto industry, which contributes a fifth of Brazil's
industrial output, has enjoyed tax breaks and cheap credit under
Rousseff but cut its workforce by nearly 5 percent from January
to July as domestic demand dried up and exports tumbled.
Carmakers from Volkswagen AG to PSA Peugeot
Citroen have trimmed payrolls with paid leave and
employee buyouts as they idle assembly lines.
Some workers are putting up a fight.
A metalworkers union has challenged General Motors Co
over what they call a plan to furlough as many as 1,000 jobs at
a plant 60 miles (100 km) outside of Sao Paulo. GM has promised
not to permanently cut those workers for 10 months, but union
leaders warn it is a plan to eliminate jobs.
GM said the measure is aimed at adjusting production levels
to weaker demand from Brazilian consumers.
Government officials who extended tax breaks for automakers
in June said the companies had agreed to avoid mass layoffs, but
Antonio Ferreira de Barros, the head of the union in Sao Jose
dos Campos, said verbal agreements had not prevented job cuts.
"Even with all these incentives, President Dilma didn't have
the courage to protect our jobs," said Barros. "If the company
doesn't back down, we're planning marches, strikes, protests in
Brasilia. We'll follow her campaign all over the country until
we get her attention."
($1 = 2.28 Brazilian reais)
(Editing by Todd Benson and Kieran Murray)