Brazilians' confidence in the future fading. Economic crises and government weakness stir uncommon pessimism
Sao Paulo, Brazil
Ligia Sttefano, age six, has learned to appreciate yogurt. Brazil's latest economic crisis forced her mother, Angela Sttefano, to cut back on the family's groceries. And Ligia's yogurt, which used to be an object of daily indifference, has taken on a whole new luster, now that she only gets it once a week.
What Ligia doesn't know is that her mother is worried. Her rent is going up, and she's going to have to move. And she wants to change jobs, but is afraid to risk her 12 years of secretarial experience for something more challenging. Last year, she and her husband, a band percussionist, saved $1,000, less than two months' income. But they're afraid to spend it on things they need, because they might need it for rent.
Most people in Brazil are worried these days. Inflation hit 266 percent in the 12 months ending in August. And it seems only now to have begun responding to treatment, the ``new cruzado'' inflation-fighting plan, announced at the end of June.
Unemployment is growing. A record 40,000 workers were let go in the month of July alone in Sao Paulo, Brazil's industrial heartland. Research by the local Gallup Institute shows that confidence in both the future and in the government is ebbing, according to Carlos Eduardo Meirelles Matheus, the institute's director.
Mr. Matheus noted that the confidence decline is most marked among the upper classes, who have more access to information than do poorer Brazilians. Part of the grim outlook comes from disappointment with last year's failed final solution for inflation. The ``cruzado plan'' cut off three zeroes from the currency and changed the name from cruzeiro to cruzado.
Brazilians, rich and poor, have seen a lot of bad times in the last few years, but this crisis, they say, is different. ``There's much more uncertainty than ever before,'' says Ibrahim Eris, a consultant and Sao Paulo State University economics professor. ``We've had four finance ministers in the last two and a half years,'' Mr. Eris says. ``It's the same thing in the Central Bank. We've never had such a troubled period, during a time in which important decisions are being taken.''
Pessimism, which is out of character for Brazilians, is taking hold. For the first time in the country's history, there are newspaper stories of immigrants pulling up stakes and returning to their native lands (although this probably has much to do with the upswing in the Italian economy and Portugal's recent entrance into the European Common Market).
And many foreign companies are reconsidering their investments here. Eris also notes that the Feb. 20 decision to declare a moratorium on the interest payments for the country's $68 billion debt to private foreign banks has added to the uncertain investment climate.
One of the most important domestic issues has been price controls. After instituting a general price freeze from March 1986 until early this year, the government announced another in June, as part of the ``new cruzado'' plan. This one lasted 90 days. Now, the country has entered a so-called ``flexibilization'' period, and many businessmen and consumers are confused about what will happen to prices - and the economy.
There is talk of a deeper recession, of product shortages, and renewed black market commerce, the return of hyper-inflation, and the prospect of going back to the International Monetary Fund (IMF), for standby loans and approval of national economic policy.
Brazil hasn't had a formal accord with the IMF since late 1984. No one knows for certain what will happen. The strategy, then, is to live and work on a day-by-day basis.
``You don't get into the office and calmly sit down to read the paper,'' says Giulio Sofio, an Italian-born partner in a Sao Paulo candy factory. Mr. Sofio explained that his first order of business is to see how yesterday's events affect the company, and then do something about it. ``I always look at the cash flow. Yesterday, it took all day to find the money to pay a supplier.'' He has hedged his bet on Brazil by exporting to the United States, where he sells candy to retail chains.
Analysts agree that the main cause of Brazil's current economic troubles is politics. The country is in a transition phase, from a 22-year military dictatorship that ended in 1985, to a full democracy.
Now, Brazil's Congress is drafting a new Constitution, and tensions are high over questions such as the length of the President's term, restrictions on foreign investment, and agrarian reform. The basic problem with the transition is that the people didn't elect President Jos'e Sarney.
Instead, he took office when President-elect Tancredo Neves, himself voted in by an electoral college, suddenly died. The weakness of the President and the government he heads is apparent to all. ``It's hard to say what this government is doing,'' says Eris. ``...It's hard to find a point of contact between rhetoric and real action. ... We don't have the politicians capable of taking economic decisions. We have a weak President, and the situation demands a great statesman.''
Eris added that political immaturity has kept some golden opportunities beyond the country's reach. ``The world economy is in a five-year boom, and Brazil is on the outside.'' He explained that questions about the status of foreign investments, the new Constitution, and the economic system as a whole, scare off would-be investors.
Economists agree that the politicians must cut government spending, a major cause of inflation. Cuts have been promised several times in the last two years, but with no significant effect.
Cynics have long said that Brazil is the country of the future - and always will be. But analysts explain that the country is going through a painful growth process - and that the future is still rosy.
What's happening is a struggle between old and new, according to Alexandre Barros, a political scientist and risk analysis consultant.
``The old-time politicians, long used to a system of interlocking favors, depend on the government for survival. But modern-minded reformers want to trim government, which controls over half of the Brazilian economy, and give more dynamism to small and middle-sized business and farms.''
``The political structure belongs to an era of 40 years ago,'' he explains, while Brazil's rapid economic growth began in the 1970s and has featured some of the world's top technology. ``Lags exist in all societies,'' says Mr. Barros.``Society changes first, and then it's reflected in the political structure. When you read history in a book, the interval is one paragraph. When you are living it, it takes a longer time.''