Brazil's new finance minister inherits an economy on the brink
Rio de Janeiro
Brazil's changing of the guard in finance ministers may ease tensions between this nation and international bankers. But the new minister's task of shaping up the battered Brazilian economy will be difficult. Luiz Carlos Bresser Pereira, now science and technology secretary in Sao Paul state, was named finance chief on Tuesday. He replaces Dilson Funaro, the ``superminister'' who drove a hard line on debt negotations with foreign creditors and authored some of the nation's most controversial economic policies. Mr. Funaro resigned earlier this week.
Mr. Bresser Pereira's job will be to try to keep the country from continuing to drift toward the twin gulfs of recession and hyperinflation. He is also expected to follow a concilatory line in Brazil's critical negotiations with foreign banks over debt payments, although he told reporters after his appointment that he would ``continue the policies of Funaro and [former planning minister] Joao Sayad.''
Bresser Pereira got his masters in economics from the University of Michigan and has been received favorably by rival parties in Brazil's fractious political scene. A complicating factor, however, is that Bresser Pereira was not Sarney's first choice. The president surprised his own Brazilian Democratic Movement Party by first offering the job to a fellow northeasterner, a young industrialist and governor of Ceara state, Tasso Jereissati. The party leadership boycotted Jereisatti and Sarney relented, naming Bresser Pereira.
His predecessor, Mr. Funaro, was a longtime friend of President Jos'e Sarney and assumed office in November 1985. His mission was daunting: to retrieve Brazil from a then-ruinous rate of inflation and deepening dissatisfaction with the policies of a fledgling civilian president.
In a country where finance ministers are usually reviled as bearers of bad news and austerity, no one wanted to hold his breath. Yet Funaro implemented an audacious economic reform, the Cruzado Plan, that froze prices and put more money in consumer's pockets. The unexpected bounty sent Brazilians on a shopping binge and Funaro and President Sarney rocketing to the top of popularity polls early last year. But by year's end, the Cruzado Plan collapsed due to mismanagement and tardy reforms.
Inflation has soared once again to 14 percent a month, identical to the rate Funaro inherited 20 months ago. The economy is sputtering and foreign lenders are clamoring for the country to resume payments on the $108 billion foreign debt.
Brazil suspended debt payments in February because it was nearly out of money. Things are no better now as Bras'ilia announced its meager March trade surplus of just $136 million, a billion dollars below the monthly balance one year ago.
The two-party government alliance supporting Mr. Sarney is fissured, and an emboldened opposition has renewed the cry for direct presidential elections. These could come as soon as next year.
Funaro had come to be blamed for most of the woes of the Sarney administration. Brazilian industrialists said Funaro listened obstinately to his own voice. Foreign bankers found him consistent but belligerent for his refusal to allow monitoring by the International Monetary Fund and insistence on a substantial reduction in debt payments.
Many of the young economists who helped design the Cruzado plan became frustrated and quit when their advice on lifting the price freeze and tamping down consumer spending was ignored.
``Instead of acting to prevent crises, the government waits until the situation becomes desperate,'' says Alexandrede Barros, a political scientist in Bras'ilia. ``It moves like a dinosaur.''
The question is, Can dinosaurs learn lessons?
``The solution is not just switching faces, but changing policies,'' says Edmar Bacha, an economist who quit his post in government last year over policy disputes. ``We are probably going to see a couple years of low economic growth, yet there is a problem of high expectations. People want more and we have less. The problem is, how do you bring the bad news? And can Sarney accept that?''