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Debt moratorium gives Brazil's Sarney room to breathe

To Brazil's foreign lenders, President Jos'e Sarney's decision last week to suspend payments on its $108 billion foreign debt probably came as no great surprise. For months, the South American megadebtor had been sending out distress signals. The once-robust trade surplus and ample cushion of hard currency reserves - the sources for payments on the debt - were steadily vanishing. The solution was a matter of arithmetic, the government seemed to say.

But it was also an act of politics. Mr. Sarney's ``technical moratorium'' may have been aimed not so much at creditor boardrooms as just across the way at the Brazilian Congress. For the President has fallen into difficult times, and his own survival depends on marshaling some new allies.

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His speech Friday night seems to have won some breathing room, just as a move had begun in Congress to promote a ``civilian coup,'' to shorten Sarney's mandate or curb his powers by passing immediate constitutional reforms.

Since November, the President had been sinking ever deeper in a crisis of politics and popularity. His audacious economic reforms to battle inflation had collapsed. The economy had slowed down and inflation climbed up to three digits. The party coalition propping up the government had come close to splitting.

Some even worried that the economic turmoil could threaten the survival of the country's democracy, which completes its second year next month.

But there is nothing like a crisis from without to glue together the fractiousness within. Sarney vowed in his speech that the country would honor its debt, but not by ``compromising national development.'' And there were rumors of efforts by ``international bankers'' to topple Dilson Funaro, the finance minister who has pushed hard for major concessions from banks on debt negotiations. Suddenly the problem became one of national security and sovereignty.

Immediately, the spatting politicians joined ranks. The two-party governing coalition fell in line behind the President, warning of the ``danger of the moment.'' Even the small, tendentious parties of the left offered a ``qualitative support.'' Once more, Sarney appears to have politicked his way out of a tight spot - for now, at least.

``Sarney still has no definitive mandate and continues to face a tremendously fragile political situation,'' says Walder de Goes, a political scientist with the University of Bras'ilia. ``The move on debt may help stay the crisis for a short while.''

Fortunately for Sarney, and for the country's democracy, the armed forces have stood by the President. In fact, if anything, the current crisis may have strengthened and not weakened the democratic process. Sarney has been forced to seek support in Congress for the policies that a year ago he decided by himself.

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