Collor Urges Competition in Brazil
SAO PAULO, BRAZIL
A RIDE down one of the Brazilian economy's new byways can be had on Avenida Santo Amaro. The gas stations along this traffic-clogged avenue are swathed in banners announcing price discounts that have been getting bigger almost every day. Some stations offer chances to win homes and cars.
The price war is a novelty in Brazil, where for years the government has set fuel prices and even forced stations to close at 8 p.m. and on Sundays. Now the government merely sets a price ceiling.
"You might have a degree in business administration but it was the government that always managed your gas station," says Luis Carlos Rivera, sales director for LavaBem, which has two of its 22 gas outlets on Avenida Santo Amaro. "Now you have to use what you learned in school."
Since coming into office in March 1990, President Fernando Collor de Mello has gradually opened up the economy to greater competition, both from abroad and at home. High unemployment and government spending remain to be tackled. But there are several positive signs for the nation's economy:
* In January Brazil signed an agreement with the International Monetary Fund (IMF), entitling it to $2 billion in standby loans.
* Inflation has gradually been coming down, to a monthly rate of about 20 percent in April.
* The country is raking in a record harvest, which should help to stave off food-price rises.
* In February, Brazil came to an agreement with the Paris Club of nations on its $21 billion government-to-government foreign debt. Negotiations on $41 billion of private bank debt are in the home stretch.
* In response to all this, business confidence has been on the rise, since late last year. The most recent survey of committee members at the United States Chamber of Commerce in Sao Paulo found steady optimism, approval of government policy for the fourth straight month, and an expectation of falling inflation.
Consumers have welcomed President Collor's changes and the efficiency they have brought.
Miguel Jorge, for example, recently was surprised at being able to easily get a phone line at his beach house, something his wife had wanted for years.
"Three weeks ago, I went out on a Sunday morning to buy bread, and there was a guy sitting under a tree on the side of the road" selling phone lines, says Mr. Jorge, who is a spokesman for Autolatina, a Ford-Volkswagen joint venture. "He showed me a list of numbers to choose from, and by 10:30 our phone was installed."
In Brazil, people must purchase the actual phone line for several thousand dollars, and it has traditionally taken phone companies two to three years to install a line even after it is paid for. But the Sao Paulo phone utility has recently been handing over its sales and installation functions to private companies.
However, such improvements in daily life are matched by pressing challenges. Unemployment is at a record high as industries experience one of Brazil's worst recessions ever, burdened by the high interest rates that the government must offer to finance its spending. Supermarket looting has spread in poor Rio de Janeiro neighborhoods.
The government is having difficulty meeting the goals it agreed on with the IMF, and economists doubt whether the country will be able to keep its new debt-related economic policy obligations.
The stock market, which was booming until this month, recently took a puzzling dip.
Inflation is still far too high.
And speculation about the permanence of Economy Minister Marcilio Marques Moreira, highly regarded for most of the year he has been in office, has become rampant almost overnight.
"I was very optimistic up to the Easter season, and I still am optimistic in the long term, because I see what [positive things] happened in Mexico, Argentina, and Chile," says George Niemeyer, president of Polaroid of Brazil. "What worries me are the short-term disturbances in the market." Like many businesses, Polaroid beefed up its executive staff earlier this year in expectation of an upswing in the economy.
WHAT'S behind most of the confusion and nervousness is a growing awareness that fiscal reforms are desperately needed to improve government finances and spur economic growth. Such reforms may not get congressional approval any time soon.
"There's a fiscal impasse. There's no one strong enough group in Congress to arbitrate the losses" that the reforms imply, says Arno Mayer, an economist at a think tank funded by the state of Sao Paulo. "This is aggravated by the fantastic inequality in income distribution."
Any reforms must be voted this year to become effective in 1993.
Mr. Collor has begun to address the problem. In a first test of his new political bargaining approach, he got Congress to approve a minimum-wage policy May 6 that is the less inflationary of the two under consideration.
Economists and political analysts say that only with fiscal policies that broaden the overall tax base, simplify the tax structure, and reduce corporate tax burdens will Brazil meet with the economic success of Mexico, Argentina, and Chile.