Brazil's 'miracle worker' faces trial by history

Fernando Henrique Cardoso was inaugurated for a second term Jan. 1 as Brazil's first reelected president. He is well aware that failure of his economic policies could taint his place in history as a modernizing leader. Many Brazilians still consider him a miracle worker for taming chronic hyperinflation from 50 percent a month in 1994 to about 3 percent a year in 1998 and introducing a new stable currency, the real.

Before the real, Brazilians could never count on paying the same monthly sum for such basic necessities as food, rent, utilities, or even bus fare. In the past 30 years, Brazil has changed the name of its currency seven times, a concept most Americans could not imagine with their bedrock dollar.

Hyperinflation began in earnest in the 1950s after President Juscelino Kubitschek launched Brazil on a path toward rapid economic development and spent billions to build in the middle of nowhere a futuristic new capital, Brasília, which he guessed correctly would help develop the nation's interior regions.

Between 1964 and 1985, a succession of military dictators launched their own "development at any cost" campaign with such projects as a nuclear plant, the Trans-Amazon highway, and Itaipu, the world's largest hydroelectric dam. The result was skyrocketing inflation, which had been 4,850 percent in the 12 months before the real plan began in July 1994.

Enter Mr. Cardoso, the second democratically elected president since the military returned to the barracks. He dedicated his first four-year term to stabilizing the economy and converting Brazil into South America's keystone of trade. Billions of dollars of foreign investment poured in, and millions of Brazilians joined the consumer ranks, since salaries were no longer eaten up by inflation. Brazil became the largest developing-world trading partner of the United States. Economic stability caused even cynical Brazilians to have their first genuine faith in capitalism and Brazil's ability to realize its enormous potential.

But that was before the Asian and Russian economic meltdowns.