Inflation has never been this low in recent times, in Brazil. The
country is enjoying record exports ($3.8 billion in March alone), the harvest (78 million
tons ) has never been so abundant, and in March the Revenue Service collected $7.2 billion
in taxes, the biggest in the last ten years. The Brazilian economy will increase the
equivalent to a Chile this year. Crime is being dealt with, with the use of the Federal
Police, the President is personally engaged in a fight for better education and people
have been spending money like crazy. Why in the hell then is everybody still complaining?
“What’s happening to our Fernando Henrique?” The question was recently put to
a friend by ex-vice-president Aureliano Chaves, a politician known for his circumspection
and economy of words. Chaves was wondering aloud about the changes Fernando Henrique
Cardoso has undergone since being inaugurated president January 1. The 100-day trial
period has just passed and the rest of the country seems to be asking the same question,
as though everyone felt personally betrayed by the President.
His old friends from the left remembering that Fernando Henrique Cardoso had to live in
exile due to his views accuse him of abandoning his socialist ideals. Former allies such
as ex-presidential candidate Lula, ex-Rio Governor Leonel Brizola and Pernambuco Governor
Miguel Arraes have even created a united front to fight his Social Security reforms and
favor maintaining the state monopoly in several areas. His more recent friends on the
right have been castigating him for reneging on his promises of opening the economy and
privatizing most of the state monopolies.
Despite all these complaints the Brazilian President has ended his first 100 days in
better shape than his predecessors. His biggest accomplishment has been to maintain the
inflation rate at less than 2% a month, in a country where a 40% a month inflation rate
had become the rule. He has been praised by political analysts for humbleness, something
seemingly incompatible with his famous vanity. Having won in the election’s first round,
with 34 million votes in a field of six other presidential contestants, Cardoso and his
closest aides seemed convinced that the President had so overwhelming a mandate that he
would be able to reform instantly the constitution with an assured majority in Congress.
This didn’t prevent the President from suffering at least three important defeats in
Congress. One, when the Senate approved a new law limiting annual interest rates to 12%.
The measure was classified as an “atomic bomb” by José Serra, the Planning
Minister. The other lost battle was the heavy opposition to the Security reform that
forced the President to retreat and restudy his position. More recently, Congress voted
for the abolition of the Referential Fee (TR) a fee used for correcting agricultural
loans. With this reversal the federal government, through Banco do Brasil, might lose $3
billion.
The biggest change in Cardoso’s behavior since he assumed the presidency has been his
abandonment of precaution when making promises. He has been announcing the construction of
infrastructure projects with parallels only to the economic miracle times of the 70’s,
with the difference that he has no money in the bank and no forthcoming foreign loans to
help him. To Nícias Ribeiro (Pará’s PMDB — Party of the Brazilian Democratic
Movement), for example, he promised to pave not only the 400 km. of Transamazônica
roadway as requested by the congressman but also the remainder 2.400 km of the road.
In confidences to friends Fernando Henrique has said that he has been shot three times
since taking office. He was referring to the Mexican economic crisis, to a Central Bank
resolution that depleted the treasury, and to his inability to build bridges with the
Congress. Except for the Mexican fiasco, which has forced an overhaul of the exchange
policy, the other shots referred to by the President were caused by his own doing. And,
maybe as a courtesy to his predecessor Itamar Franco, he didn’t mention another very
dangerous bullet: the import feast promoted by Itamar and his Finance Minister Ciro Gomes
which while giving an ephemerous first world air to Brazil, significantly helped to
consume in a few months one third of the Brazilian reserves. In February, Brazil’s
commercial foreign balance closed with a record $1,095 billion deficit.
In addition to imports former Finance Minister Delfim Netto, who called the measure an
“elephantine mistake” nobody seems to have raised their voice against the
administration when the president decided to raise to 70% the import tariff on 109 durable
goods, mainly on auto’s and appliances. The main target of the bitter pill was foreign
cars which in February were imported in record numbers, contributing $655 million to the
deficit. But there were also motorcycles, bicycles, toasters and even orange juicers on
the list of undesirables.
Mário Henrique Simonsen, another ex Finance Minister, justified Cardoso’s action.
“The alternatives,” he said, “would be a heavy devaluation of the real,
which would send inflation through the roof or we would enter into a very serious
recession.” A real devaluation would make every Brazilian a little poorer overnight
and would also serve to increase inflation . There’s fear now that inflation will soar
anyway since the imported products were being used to spur competition and keep down
domestic products’ prices.
In announcing the tariff , Malan had insisted, ” The decision does not represent
— I want to underline the ‘not’ — in any way — an abandonment of Brazil’s
opening policy towards the rest of the world.” According to Simonsen it is pure
semantics and a waste of time to debate whether the administration’s measure should be
called a retreat or a detour. For him, all the difficulties Cardoso’s policies have
endured have to do with unrealistic expectations.
The Real, the new currency created by Cardoso when he was Finance Minister of the
previous administration, has been the biggest vote-getter for the President. But,
according to polls ordered by the government itself, people grew accustomed to the new
money and don’t feel any special emotion towards the currency anymore. That led Fernando
Henrique to declare to a group of Ministers, “We need to regain the emotion towards
stability.”
The President, who has participated in protests against the government beside the
steelworkers of Săo Paulo’s ABC during the 60’s, feels uncomfortable on the other side of
the fence. Since March 17 when Cardoso had to face a protest against his government in his
native Rio, where 500 protesters calling the President a safado (rogue) and other
epithets confronted an Army battalion causing light injuries to four civilians, he has
been the target of discontented chants, boos and an arsenal of tomatoes and eggs.
Protesters were again in the streets of Săo Joăo do Jaguaribe in Ceará where he had
gone to give land titles to new farmers. The President called the 30 or so hecklers
present as belonging to the “false left and to the old putrefied right”.
On March 22 with the help of Brasília’s governor, ( who lent buses and brought food to
public workers ), 10,000 people protested at the Federal Capital’s Esplanada dos
Ministérios,( where the Ministries buildings are located), to condemn the Constitutional
reforms. At the end of March, the President canceled a trip to Conceiçăo do Araguaia,
state of Pará, after the Federal Police found out that 3,000 people were planning to boo
and pelt him with a battery of rotten eggs and tomatoes. On April 7, in Pernambuco, in a
protest organized by CUT (Unified Workers Federation) the protesters armed with eggs,
sticks and stones were repelled by police.
Every morning, the President has been stretching and reserving at least half an hour
for swimming. These activities are less to keep Cardoso in shape and more to help relieve
his back pains. However, these problems have not slowed the President, who also has made
three trips abroad. He went to Uruguay for the inauguration of President Júlio Maria
Sanguinetti. He called on Chile in a nostalgic journey and it was there that he first took
refuge when forced to leave Brazil after the 1964 military takeover. In April he came to
the US where he met President Bill Clinton on April 20.
After 100 days and beyond it’s clear that the most powerful man in the cabinet after
the President is the Planning Minister, José Serra, whose last name means saw. He made
good on his fame by expanding his control and won the nickname of Moto-Serra (Chain-saw),
a nickname he seems to relish. His power can be shown by the number of cellular phone he
pilots: four, and the number of visits to the President cabinet: at least one a day.
Choosing him as the interlocutor for the tributary reforms that the administration wants
implemented by Congress, Fernando Henrique has snubbed Finance Minister Pedro Malan, who
would normally be the presidential spokesman in this area. It was Serra who also convinced
Cardoso in the administration’s first week to announce a $4-billion budget cut.
Another mighty aide is Communications Secretary Sérgio Motta, called Serjăo by
friends. For more than three decades he has been a partner, friend, and adviser to the
President. He has been holding down a heavy workload that starts at 9 in the morning and
often extends until midnight. According to another aide, “It’s Serjăo who says the
things that the President would like to say but might put him in a bad light.
Right on
ˇ Inflation is low and the IPEA (Institute for Applied Economic Research) forecasts
that the index will not go over 2% a month until the end of June. To accomplish this the
government has not used any type of price freeze or savings confiscation as in past
administrations.
ˇ The Palácio do Planalto had its structure overhauled. Chief of Staff Clóvis
Carvalho went back to his managerial function after a fruitless stint as political
articulator.
ˇ Public expenditures have been reined in. Finance and Planning Ministries as well as
the National Treasury have been strictly keeping their accounting books.
ˇ Tax collection has been at record highs. It’s estimated that the federal government
will get $63.5 billion in 1995, 11.5% more than in the last year.
Stumbling
ˇ The House of Representatives, in a symbolic vote, approves the $120 a month minimum
wage. The President gets mad and says the measure would break the government.
ˇ Government has lost its first battles on constitutional reform for lack of an
effective dialogue with
ˇ Congress. The same shortcoming is delaying the discussion of the Social Security
reform.
ˇ Cardoso until now has also been unable to communicate to the public his thoughts and
policies. A telling example was the change the administration made in its exchange policy.
The confusing communiqué from the Central Bank provoked more confusion and a run on the
stock market.
The fingers
Fernando Henrique Cardoso used
the fingers of his hand to announce his
five-priority electoral platform.
How are they surviving the
reality onslaught?
Agriculture 1. Record crop announced: 81.6 tons of grain 2. 1 million hectares
of rural land expropriated. 3. More than 16 thousand rural families settled.
Education 1. Campaign “Wake up Brazil, it’s time for school”. 2.
Proposal to end vestibular, the exam which now is the sole determinant for
admission to college.
Health – 1. Tighter monitoring of 150 pharmaceutical industries. 2. Debt payment
of the Universal Health System (SUS)
Jobs – Reissue of presidential decree on employee’s profit participation.
Security – 1. A bigger contingent of Federal Police to participate in Operaçăo
Rio, an operation against crime and drugs. 2. A pact between the US and Brazil to fight
drugs.
On reverse
Opening of the economy – Import fees for autos and other durable goods have
reverted to levels from the military government.
Political council – The idea to dialogue with all parties has shrunk to contacts
only with Cardoso’s own PSDB (Party of the Brazilian Social Democracy), in addition to the
PFL (Party of the Liberal Front) and the PMDB (Party of the Brazilian Democratic
Movement).
Privatization – There is no talk anymore about privatizing two huge state
monopolies: the oil and the communications sectors.
Social Security – Fearing being defeated in Congress, Cardoso has slowed
considerably his push to change the system.
Tributary reform – Government is resigned to keeping things the way they are
right now.
He said…
“Let’s not talk about the first one hundred days, about bombastic announcements,
but about four years of continuous advancements towards reforms.” (December. Two
weeks before being inaugurated.)
“This year will be better. And the next even better.” “Brazil is in a
hurry.” (January. Inauguration speech.)
“When the Republic’s powers fight, it’s Brazil that ends up losing.”
(February)
“While it’s not possible to pay at least $100 (as the minimum wage), the ministers
will do without the recently created job gratification, which represents about 25% of
their salaries, and so the President and the vice-president will do with their
salaries.” (February)
“There are the professional pessimists — some because of temperament, others
because of naďveté and still some out of bad faith who continue to preach
‘failuremania.’ They try to scare the country with the ghost of the Mexican crisis. Our
reserves continue high: around $38 billion. Our exports have reacted: we had another
surplus in January.” (February)
“We are living in a time of tests. The financial market has tested our economic
policy by attacking the Real, Congress is testing the reforms and, meanwhile, people test
our ability to find solutions.” (March. During a meeting with aides.)
“Only those with any sense of responsibility will not retreat. When one sees a
mistake one retreats. In battles whoever does not retreat, will lose.” ( March – In a
press conference)
“Or democracy puts an end to injustice or the injustice — I’m not even going
to utter the rest, but it is true.” (March. Same press conference)
“The same as you. This is a demagogical question. What would you do? The
individual gets desperate. And we cannot let millions fall in despair. So we have to do
the reform, so we have to be serious and not little jokers.” (March. Same press
conference, answering to William França from Folha de Săo Paulo who asked,
“What citizen Fernando Henrique Cardoso would do if he earned the minimum wage of
$80?”)
“These are not complaints, they are interests. I have to take care of the national
interest. Then they take care of their own.” (March – Answering a question why
businessmen were complaining about the non-privatization of Telebrás and Petrobrás
— state monopolies for communications and oil, respectively.)
“They have lost the elections. They have the germ of backwardness in their heads
and they want to win by shouting. They have despaired and have lost their minds too.”
(End of March. Commenting on street protests against him in Rio.)
“We have changed the course of the economy because the world has changed. We are
not going to repeat what was done during the cruzado (a currency created in place of then
current cruzeiro) time when President José Sarney didn’t have the courage to take
unpopular measures. We will take every required measure be they popular or not.”
(March. Talking to Ireland’s President Mary Robinson.)
“We are living an extraordinary moment, but everybody seems to be
afraid.”(April)
“Brazil cannot have the luxury of not having a surplus in its commercial balance.
And luxury is a good word for this. We were importing billions and billions in luxury
cars.”
Day by day
January 1 – Fernando Henrique Cardoso is inaugurated.
January 1 – Communications Minister Sérgio Motta provokes the fist argument accusing
PFL’s (Party of the Liberal Front) senator Antônio Carlos Magalhăes., an ally of the
President of “using politically” that ministry in the 80’s.
January 4 – Administration suffers its first defeat in Congress. For lack of a quorum
Pérsio Arida is not sworn in as the Central Bank Chief. That will happen on January 10,
after some concessions by the government.
January 11 – Finance Minister Pedro Malan announces that the foreign deficit has
reached $884 million, a record.
January 18 – House symbolically votes in favor of raising the minimum wage from $80 to
$120. Cardoso announces veto and loses prestige.
January 19 – The foreign balance deficit for December is $884 million reveals Malan,
after previous announcement that the amount was only $47 million.
February 3 – The President goes on TV for the first time and talks about the need to
veto the minimum wage increase.
February 10 – Cardoso pummels the table while defending reforms before Paulista (from
Săo Paulo) businessmen.
February 14 – President says to unionist he is not a neo-liberal. This talk about him
being one, he says, is nothing more than nhenhenhém. The little used word from
Tupi-Guarani origin which means idle talk becomes a star in the media.
February 18 – Vox Populi poll shows 75% of Brazilians against the promised veto against
the minimum.
March 6 – Reacting to Mexico’s economic crisis, real is devalued and government
institutes the system of exchange bands. The dollar starts to fluctuate between 0.86 and
0.90 reais.
March 9 – Central bank spends about $5 billion trying to stop the dollar’s fall on the
black market.
March 17 – Cardoso faces in Rio the first organized protest against his administration.
March 24 – New protest. Now in Ceará.
March 27 – Former Rio governor Brizola and ex- presidential candidate Lula get together
in Rio and launch the front against government reforms.
March 28 – Government retreats from the Social Security reform after noisy protests
from the public and Congress.
March 29 – The import tariff on 109 products is raised to 70%.
March 30 – National secretary for Social Communication, Roberto Muylaert, presents his
letter of resignation and accuses Cardoso of asking from him what he was not supposed to
do.
April 5 – Congress ends the use of the TR (Referential Fee) to index agricultural
loans. CUT (Unified Workers Federation) promotes a nationwide day of protests against the
reforms.
April 7 – New protests in Recife.
April 10 – Day 100 for the president.
