Brazil Economy Struggling after President's First Year Government Begins to Focus on Fiscal Reform and Foreign Investment

Article excerpt

IT has been one year since an unknown politician took over the Brazilian presidency from a deposed Fernando Collor de Mello.

Honesty and decency were Itamar Franco's most commendable credentials. At the time, that was enough. Outraged by the corruption and influence-peddling scandal surrounding Mr. Collor's administration, Brazilians took to the streets, demanding the ouster of their country's first democratically elected president since 1964.

The question now is whether Mr. Franco's honesty and decency are still enough. They have not been sufficient to beat inflation, which was 35 percent in September, the highest since Collor dramatically devalued the nation's currency in March 1990. By so doing, he temporarily stemmed what was then the worst inflation in Brazilian history. Today, monthly inflation is higher than annual inflation in Argentina, Chile, and Mexico.

"There's apathy and disillusionment in the country after the people participated in that popular movement to take Collor out," says Carlos Alberto Grana, a secretary-general of CUT, Brazil's largest labor union. "Franco's government is like lukewarm water."

The rest of the population seems to agree. A recent Gallup poll shows that Franco enjoys only a 14.5 percent approval rating, down from 36 percent in February. But that does not match Collor's lowest rating, 8 percent, at the end of his term.

In his year in office, Franco has appointed four different finance ministers and unemployment has gone up to 5.6 percent compared with the 4.6 percent unemployment rate after Collor's first year in office. All this is in a country where half of the 150 million citizens are already living in poverty.

But Jose Andrade Vieira, minister of industry and commerce, says there is light at the end of the tunnel. "Growth in the economy has already begun - it's just that last year was so bad that the improvements aren't recognized," he says. The industrial sector grew 10 percent this year, but inflation "annuls a big part of the benefits" that such growth brings, adds Roberto Jeha, secretary of the Sao Paulo Federation of Industries.

Other signs that the economy is picking up include a $3 billion increase in foreign reserves from $22 billion to $25 billion, a reduction in interest rates for Brazilian corporate bonds, and an increase in trade. Exports in August were $3.45 billion, up 17 percent from August 1992. …