A Brazil for All Brazilians
BRAZIL is on a crash diet. Rather, a cash diet. On March 16, the day after he was inaugurated, new President Fernando Collor de Mello introduced a lo-cal currency regimen, and he plans soon to reduce Brazil's fatty bureaucracy and starchy public-sector industries.
Mr. Collor's goal: In the short run, to break hyperinflation that each day was making Brazilians poorer between dawn and dusk (4,854 percent during the preceding year). In the longer run, to energize Latin America's largest country into the economic powerhouse that its natural resources, industrial capacity, and human capital portend.
In the harshest of the 26 measures Collor adopted or proposed four weeks ago, he froze 80 percent of the money in most private bank accounts for 18 months. With savings out of circulation, consumer demand has shrunk and prices have dropped. The frozen savings also are serving as a low-interest loan to the government to reduce its large deficit - regarded by many economists as the chief source of the runaway inflation.
Other steps planned by Collor include consolidating government agencies and laying off civil servants, selling state enterprises, lowering state subsidies, and cracking down on tax cheats.
Economists generally agree that Collor's all-or-nothing assault on Brazil's economic woes offers the best chance for success. They note that the half-measures attempted in other Latin countries facing hyperinflation and anemic productivity - notably in neighboring Argentina - have shown faint results.
Despite the near certainty of a recession, Brazil's Congress approved the austerity package last week. Collor's government now must do all it can to soften the downturn without rekindling inflation.
In the longest run, Collor needs to do more than just tune up Brazil's economy. He must get it working for all the people, not only the elites and foreign traders. So wide is the gap between rich and poor in Brazil that it has been called two countries. As the former governor of one of the nation's more impoverished states, Collor knows the crying need for better education, health care, and social justice.
President Collor has shown great courage in his first month. But let's hope we ain't seen nothin' yet.