Newspaper article The Christian Science Monitor

Why Brazilians Dance on an Economic Tightrope Latin America's Engine for Growth Faces a Need for More Reforms This Week to Avoid a Recession

Newspaper article The Christian Science Monitor

Why Brazilians Dance on an Economic Tightrope Latin America's Engine for Growth Faces a Need for More Reforms This Week to Avoid a Recession

Article excerpt

Brazil is a key player in today's global market, and many economists say a Brazilian economic collapse would cause Latin America to suffer an Asia-like meltdown.

The financial world awaits the results of President Fernando Henrique Cardoso's strenuous efforts to prevent such an outcome - and so do individual Brazilians trying to cope with economic setbacks along with his highly unpopular austerity program.

Even Rio's famous carnival will become the "crisis carnival," as the press here has dubbed it, with sponsors harder to find for the marching samba schools, and elaborate floats reduced to recycled materials. Today Congress begins a special session during its usual January break to speed up passage of reforms. The stakes are high, both in the region, where Brazil is the principal motor of economic growth, and in the United States, whose largest developing world trading partner is Brazil. Brazil is Latin America's largest market, with 162 million people, more than half of South America's 300 million. A deep recession in Brazil would be expected to jeopardize the future of Mercosur, the southern trade pact including Brazil, Argentina, Uruguay, Paraguay, and associate members Bolivia and Chile. Argentina, one of Latin America's strongest economic performers, would be especially threatened, with its economy closely tied to Brazil's. US companies have invested billions in Brazil in recent years. Collapse here would send shockwaves through the US banking community, which has loaned billions to Brazil - for example, Citibank, $3.7 billion; BankBoston, $3.4 billion. "The financial stability and prosperity of Brazil is of vital importance to the United States," said US Treasury Secretary Robert Rubin in September. It's also of vital importance to Dionisio Lemos dos Santos and his family. Mr. dos Santos, a boat mechanic, was laid off after working 16 years for the same firm at Rio de Janeiro's port. Forced to work as a freelancer, he watched his salary sink from $3,000 a month to an average $1,260, causing major lifestyle changes for him, his wife, Claudia, and two small sons, Bernardo and Andre Luiz. He borrowed money from relatives, pleaded with a pre-school director to keep Andre Luiz in class without paying tuition, and applied for a scholarship at Bernardo's private elementary school. "Asking for favors has been the toughest part in dealing with this economic crisis," he says. As 1998 ends, dos Santos and millions of other working Brazilians are having to tighten their belts still more. While many economists say the austerity program is the only sensible way out, critics say it is causing too many hardships for average Brazilians. They say it will force the economy into a recession, increase unemployment, accelerate destruction of the environment, aggravate decaying public services and infrastructure, and, most important, increase poverty in a nation where nearly half the population is already considered poor. Financial troubles began after economies in Asia and Russia took a nose dive last summer, and nervous investors pulled out $35 billion from Brazil, the world's ninth-largest economy. …

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