BRAZIL: PROSPECTS FOR THE REGIME

Created: 4/25/1984

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Brazil: Prospects for the Regime

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BRAZIL: PROSPECTS FOR THE REGIME

THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL INTELLIGENCE.

THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS, EXCEPT AS NOTED IN THE TEXT.

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The Presoamial liiiiurl of Eeemomic Development! on iht PreueVrMlaJ Rite..

Chii look and Implications.

For Brazil

For US-Brazilian Relations

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SCOPE NOTE

Brazil it well at efforts lo understand whal may happen there-is probably gripped by greater uncertainty today- lhan al any other time since the military too* powerean ago Moat observers eiprrled that scene uncertainty would characterize the period dunrif which thean military transferred control over thr political process bach to civilians No one resitted, however, that this would happen at ihe same time that Brazil wai fn the throes of its greater economic crisis since the It

esult, the Brazilian Government conariety of forces that have placed It under tremendous stress. This Estimate measures and delineates this stress, assesses what chances the government has for coping successfully with it, estimates what kinds ol outcomes may occur over the next year or so. and indicates what these outcomes may mean for Brazil and US-Brazilian relation^

The US stake in whether Brazil makn it tiircrstfullv through these (win challenges is high. On the rrwrnu side, how well Brazil manages its foreignlargest among developing countries, at SOU billion by veareadconsetjueixrs for lhc well-being of thefinancial system The direct economic impiiea'ioas for the United States are aho Large, because US banks hold nearly one-fourth of this debt, and US export* lo this eatraanety Important market are io share decuoe On the politicalit wcaaldajor pcaalivc gain for the United Stales and other democratic nations if the liath meat porauious country in lhc world succetifully completed tbe next-to-last Stage in the transition to an open, democratic regime,ajor loss if Brazil returned lo repressive military rule or encountered severe political instability

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key judgments

lijr. Government is faced with two primary challenge* over the neit year: managing an ailing economy and holding glwBm foe the first civilian ptesadent in two decades In this last year of transition from military to civilian rule, attention will be focused on three central bauet

The economic proanccus and specifically whether Bratal makes encaagh ptrsgress toward Its IMF-mandated retrenchmem goals to be eligible for sufficient eitemal funds to get through the neat year

What rule* will govern the presidential election, what are the chances of the roost likely candidates, and whether It makes much difference as to which candidate wins.

The ratcnt to which economic developments are likely to affect politics specifically, what are the prospects for mahw political imtabditv. Including cancellation of elections, reintlitution of military rule, or massive social protestsJ

Prosper.ts for the Economy

Afterears of growth the Br arl ban economy has shrunk aboutercent In the last three years inflation reacheducfnd an aatirasaai'der ret* of the tabor force hand no mtn or ware

only marginally employed Brazil's international financial relator* are also in difficult strait) By the eodrazil had accumulatedillion In interest payment arrearages and only narrowly avoided having its US bank loans classified asu)

In our judgment, the fact that these expectations are modestood sign that Brazil will be able to maintain political stability at home and obtain adequate financial support from abroad. Il means that thereeasonable chance that most groups within Brazil will continue to cooperate with the austerity program, although very grudgingly, and lhat foreign financial circles will continue to fund Brazil, even if very reluctantly. For both audiences, decisions about whether to continue to support the Brazilian Government's economic program will revolve more around perceived progress toward4 economic goals lhan on actually attaining mandated or promised (tools. For domestic groups, the primary economic indicator of how well Brazil rs doing will probably be monthly inflation figures. If they drop to single-digit figures and remain there, we believe Ihere willidespread perception that Brazil has turned the corner economically and that ihe future will be better, even if not

For the foreign financial community, the main focus Is whether Brazil can earn enough foreign exchange to pay al least the interest on Its loans4 The rev 'hat will be watched here Ii monthly figures on the Irade surplus. If,razil can significantly increase its(lhc target Is byercentnd can hold imports almost level, then the IMF and foreign bankers are likely to belies* that Brazil's economy can eventually grow enough to enable It to manage its foreign borrowing needs successfully. This assumes that no adverse external events occur, suchise in interest rates or the price of olL

believe Ihe chances are reasonably good lhat Brazil will make Significant progress toward meeting4 economic goads, although It will probably not fully achieve any of them. Inflation, forikely lo be at least ISOdown to Ihe recently revised government targetercentubstantial enoughto persuade Brazilians to stick with the austerity program

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Similarly, Brazil Is likely loealthy enough trade surplus during the year to hold the car rent account deficit to close to3 deficit of aboutillion, somewhat higher than3 billion Urge! set by tbe government. Prospects for exports are continuing to improve because of the foreign economic recovery and because the agricultural harvest, especially for soybeans (the main farmill probably be much better than3 Stall, growing foreign protectionism and sluggish commodity prices willpercent export growth target not easy to achieve- Whether Brazil can fully reach its target for imports by not permitting them to expand much beyond last year's level Is also doubtfol. Evenood harvest there will be increased pressure during an election year to maintain an adequate food supply and, since Brazilian exportselatively high import content, more imports than Dinned may be necessary to prevent industrial material shortages-

Given ihe uncertainties surrounding these projections, we believe theremall but not insignificant chance that Brazil's economic performance will be considerably worse lhan outlined above In suchonfrontation would almost certainly occur between Brazil and Ihe IMF, with the IMF possibly demanding additional austeritybefore it would help to reschedule mounting debt or approve new loans- In this circumstance, the Figueiredo administration mightsimultaneously to placate international bankers by trying to tighten fiscal and monetary austerity and lessen domestic political opposition by replacing the government's economic learn. Nationalistic sentiments would be so arousedew collision with the IMF and ihe political atmosphere so heated up by the presidential election campaign, however, that it is doubtful that additional austerity measures, such as new wage restraints, would be accepted by the Brazilian business and pohrlcal ehtw.1

Even under these circtimstances. we doubt that the government would formally break with the IMF andoratorium on debt payment, althoughituation might have come into de facto existence as interest arrearages mounted. The most likely outcome ofsituation, in our view, is that the Brazilian Government and thefinancial community would use Ihe coming change of administration to postpone resolution of the Issues dividing them and that some sort of temporary rescue package, possibly involving the direct intervention of major Western governments, would he put together to present Brazil's US loans from being placednonper-forming" category al lhc end1 "T

The Presidenliol Succession

The Brazilian Constitution mandates the indirect election of the president. Despite widespread clamor by the public and by opposition

political parlies for direct elections, we doubt that the Brazilian Congress will muster the two-thirds vote necessaryhange these electoral rules substantially. Wc believe this will not happen because the military appears to be unalterably opposed lo opening up the political system lhat far at this point. It fears in particular that direct elections wouldeftist politician, such as Leone) Brizola (now Governor of Rio deo become president. We believe that the public and political opposition will be disappointed if direct elections are rejected, but most will continue to concur in tbe indirect procedure as an acceptable neit step In restoring civilian rule]

"The chances are good, therefore, that Ihe next president will be chosen ittdiTectly by an electoral college.onsequence, however, of Figueircdo's weak leadership and ibe insistence by the progovernment Social Democratic Party (PDS) members that tbey will make their own decision. Figueiredo has lost the power to impose his successor. With an overall majority In the electoral college, the PDS will retain the inside tjacfc for selecting the president if it can unifyingle candidate during its4 nominating convention. | "|

There It some doubt, however, that the PDS can achieve the necessary degree of unity actually toinning candidate. Three candidates hive announced for the PDS nomination. Tbe most favored, at this point, appears to be Paulo Maluf, an aggressive PDS federal deputy and successful businessman from Sao Paulo- Maluf is disliked by President Figueiredo, in part because be did not wait lor the President's nod before be began campaigning, and Figueiredo so far has refused to support him.

The second candidate is Interior Minister Marioetired colonel. Andreaoa Is the preferred choir* of Fltmerredo, an oHnd He has support from important PDS political bosses and the head of the National Intdligcncc Service Nonetheless, Figueiredo has noi come oul publicly in his favor, possibly because he doubts Andreazza can win, because his imagehrowback lo the worst of old-fashioned politics harms him among governmentincluding those within tbe military. I

Vice President Aurellano Chaves has also recently launched his candidacy for the PDS nomination. He Is respectedompetent, if somewhat colorless, administrator and is generally liked In military, government, and business circles for the effective performance he turned in as Acting President on the two occasions when Figueiredo was ill. He is perceived as the most honest of the candidates, which makes him popular among the general public but does not help him with PDS party bosses He has also gained in popularity as the only candidate whohange to direct elections'

It the opposition polilical parlies do not succeed in their drive for direct elections, they probably will attempt to take advantage of President Figtseiredo's unhappiness wilh ihe struggle for power going on in the PDS to persuade him toconsensus" candidate for the presidency Tbe major possibility at present foronsensus candidate it the -Governor of Minas Cerals. Tarscredo Neves. Neves leads the moderate wing of the major opposition party and is widelyin all the places that count, including Iheecond possible OTtuwisus candidale Is Vice President Chaves, if he is denied the PDS nominationegal stratagem, can be found to permit his nomination by an opposition party!

With respecf to the way in which presidential politics will unfold In the remainderowever, it probably will make little difference which of the possible candidates are actually nominated by their parties- The positions of all the announced candidates or likciy winners are very similar. Virtually all of them, lor example, are stressing that Brazil needs to renegotiate Its foreign debt on eascr terms if econornic recovery is ever to happen, None of them is proposing, or is likely to prrn?ose( permanenily breaking with the IMF, although if economic circumstances worsened considerably, all of them might callemporary and conditional moratorium on debt repayment if onlyes^Ulinu; tactic Any candidateerious chance lo win is likely to be relatively restrained In his criticism of the United States, even if relations with tbe IMF become difficult, because they would all probably perceive the United States as ihe only actor that might be able to putescue package that would enable Ibem to avoid having to take office with Brazil ineligible to receive additional Internaleans.)

The Likelihood of Significant Instability

Id our estimation, social unrest I* likely to rise during the next year, but not to the level that il will threaten the government's ability to maintain order or to conduct the presidential election. Virtually all groups in Brazil believe theyignificant slake In seeing tbe election take placeivilian president take office, and lite military is eager to put down the burdens of ruling and return to essentiallypursuits. In addition, one main aspect of the political culture tbat has continued even through three years of recessionelatively low level of political intensity among virtually all groups in the societv. In the past, ihfs has ledigh levell era rice for imperfect regime performanceendency not to translate personal aspirations or disappointments into organized political demands!

An alternative view, while In agreement with the conclusions of this Estimate, holds thai It does not give due emphasis to the risk ofpolitical turmoil this year in Brazil. According to this view, the growing public campaign for direct presidential elections hasthe intransigence of both the military and the opposition, and it could delay the negotiationolitical compromise. The holders of this view note, moreover,urther rise in International interest rates may undermine Brazil's commitment to the IMF-mandated austerity program Failure to resolve the succession controversy soon, coupled with ihe necessity of renegotiating the IMF rescue package, could, in their view, lessen the chances for an orderly transition to civilian ruic'1"

There arc few signs that any of the groups in the society, including politicians,abor, the middle class, or the left, arc successfully undertaking new kinds of organizational initiatives orew dass of leaders lhat might threaten to overturn these values- The extreme left, for eaample. which has always been small and weak, seemsomplete loss as to how to take advantage of an ostensibly fertile environment for growth of its influence. What little evidence exists of the attitudes of Cuba and the USSR toward Brazil indicates that neither sees much hope of stimulating significant popular agitation against the Brazilian regime any time scon j j

Some possibility for regime-threateninB agitation may occur,during the tenure of Figueiredo's successor. If tbe economy does not recover because another world economic slump or round of tight money policies frustrates even Brazil's best readjustment efforts, or domestic polilical pressures prevent the new president from bringing about structural chaitgcs necessary for restoring growth, then the basic values of the political culture could eventuallyove to shorten the scheduled six-year term of the new president andew one through direct, popular vote could delay major instability. But if decisionmaking stalemate continued and political chaos ensued, the chances would rite steadilyeturn to military rule sooner or later.

Relations With ihe United States

US-Brazilian relations have steadily improved over the last two years or so as Brazil has perceived lhat the United Stales is treating itature oesotiating partneride range of commercial, nuclear, technological, miliiary, and other matters. Moreover, Brazilian attitudes at the popular and elite levels have remained generally favorable

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toward Ibe United Stales even as fiictions with the IMF and interna-lionai bankers have developed, because the government and many in the private sector perceive Ihe US Government as essentially an ally thus far in their attempts to negotiate debt relief, obtain new money, and, despite many commercial frictions, expand exports. |^

We believe continuation of good if sometimes frank, relations will probably persist as long as Brazilians continue to believe lhat the US Government it doing its best to contain protectionist pressures in Ihe United States, is encouraging Ihe IMF and the banks to be asas possible, and is not perceived as attempting to undermine theforeign policy Brazil has been following We believeto expand relations with the Brazilian armed forces will be especially good if the United States can respond to their professional needs after they reduce Iheir political role, ij |

The one area where Brazilian-US relations could nsost likely become more strained over the course of the next yearso involves Brazil's continued need for IMF support, particularly if its economic performance falls noticeably short of meeting IMF goals. Before and, especially, after the election, there will probably be Increased pressure on ihe United States to support Brazilian requestsajorof Brazil's debt. These pressures will become very Insistent if Brazil fails to recover economically because of events over which it has nosuch as increased oil prices,ise in US Interest rates or protect ionisrnj

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DISCUSSION

Decide: of Change

cene SO rtan after having deposed Braril'i ho) civilian Prealoaoi, loan Coularl. lha Bmalian military it in lha process ol voluntanlv laming over powerew civilian cersident and largely removing iltall Irom direct imolveriienl in politics. The modailHei of rxeeanHr how thin will orour and the identity of ihe neil president are nil! uncertain, hoi ihe cbincn are very goodresidential election will lake place at scheduled inai that the new chid eaeooltve will lake office two i

S. The society that ihe nUhurv will return to the control ef civilian polittcatra It lar mora developed than theook charge o! in* In thehe country wai nil! largely agrarian, and per capita income wai low.owcier. per capita income had multiplied morereteritnd SO percent nf the populationin cities el mores compared with only aboutercent0 Total energy cauurnnuon doubled66 The labor force sire and atructoie aho changed. Increasingllhon person* annually in, as the rate of lob crasiIon doubled from the ivSOt.0 almostercent cf the labor force was engaged in noeasricu) lural ittivAr. at comparedlow tlian SO percent in

ubstantial gains In living standards and *eHjre wave achieved during rhU period by all economic clatm. ahhoogh aevere regional dopiriliei continoed aod the income gap between rich and poor grew. The educational tyitem wai eipanded rapidly, aa reflected in intreasrd enrollment rates and reduced illiteracy. Socialealth prugrtms were strengthened and eitended to over BO percent ol the urban and two-thsrdi of ihe niial nomilatiom; tha tcnteuurneei are evident most notably In declining infant meruitt> rate* Ccauaderable efforts ware aboeapended on hr*-ctst homing progtaim ler the poor and Improved provisioti of water, efeclrical. and sewerage services, overartem ol urbanIncluding tha occupants of Jsorlai turban squatterhave Word water and elacirtdtvp j

a. One paitieulailv important aspect ol that change was th* enormous expansion in the sue and Influence ol government throughoutt."ie frd> eral governmentor example, the financial rrtourcel under the direct al Iota live control ol the Inderal government were equivalent lo t5 percent of the grots domestic product (CDP) olhare of the econonsy seldom eieteuVd bv any public aeetor in the *orld outside the centrally plannedarge portion of these mooter* is directed into the production of goods and services not only byr -ccritreDtd firms but aka> by privately owned firms through transfers to the private sector threaten such means as nbiluVred credit Thii hat given the government ihr lead iole In duping nhncat all scnlficant eronoiric activiry In Bra ill In recent years, in chiding letting iuveMmrmt prkwitim.lectors) growth, controlling pilces andaior employer of labor and purchaser ofdetermining labor fmor laauipoalHM

these two decades. Branl hasemaikablr mole axletv coral daring theues of lipiH moderniaalian ibsougK nhichha*la part thb natality is attributable lo the eitrace-

hrouili ihn period, annual growth dropflercent only ooce. andumber of years it exceedederconlceisequence, Income disparities bctneen lhc large number of peer and th* rest of axietv widened,ere imponaivt result was that all testers of tbe populatlca benefited from the growth. sometiTej spectacularly |

other ma|oe andetianning to stability hu been lha milltaryi tuttm. al lean until recently, inoverning arraagement that hu beenan harmony with thoecU of Bitiili poliiical cult tie, in contrast uilh ibe populistofeneration ago. Manyhave noted lhat ihr out (ems of aulhorilr ttedl-rlonaHy preferred byinmtuticei ol the family through that ol thebeen basically pal tonal and hierarchical rather than phtral-

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m ard democratic Thta meant thai lhc mlhtaryi emctstnii or*through lane bureaucratic structural, while depthiKIilrei ihe middle taua, labor. ttudcMs.nd other matt elrmenti. wai eaaen-tlaHy neotrueM with thr Btailllin eaperienoe of koiiog to the burrauiracyan* reliable source ot benefits and channel (or ancisncei lhan to elected eaTa-tnh and pohtmal partita TV military's toccena until inr rnentli in ipvnnlaa in ihainby anmher cnaclnl aapect of the pohtscal ctJeore the retailla* and of aa art eel mnao infcia potto) aannatr. winch he.hnv loncai andwM Itaelf In aevnal useful wanmatarnlilng military/bureaucratic retime. Ir lendsf tolerance for imperfect regimeendency not to tianslalc pcrsoaal aaplialauu into ocganiirdemarkably aaiy capaeltt for cr> orMatlon af pryervtul nntn.tloe. groups by thosepower

President FigurteeJo's Principal Underlying Problems

oth of the eondihora that brought ilabiMy torapid economic growth and Innl in thr bitdeteriorated sharply since President Flgueiredo look officehS* many of the causes of deteriorating stability rKeoW fin adnunistthe shortcomings of his government havethree weaknesses that aie common to bureau-ceatlc authoritarian regimes generally. The first is the

no* aa lhaegree of autonomy and sell-interest that it increasingly falls to respondimely way to changing societal raeedi Thc second as the Strang dependence of this kind of system on relatively seralttve and InnovativeWith so few counterpowers or other self-correcting mechanisms available in themight be the ease If political part in and organized intercd groups weretop leadership must be able accurately to leont changingand to meet them. The third weakneathai Ihe long-termof such bureaucratic systems resti heavily on their ablhty toonsinnlly eipandlng stream of resources tothe absence of wtdetpread politicilwhich ultimate loyalty lo the system freguen'h' depeodt Th* Plgue* iredon serious trouble on all three frcwtij *j

DBclinrvg Reiourcei

S For the la" ihire yean. Bratil has been In rrcctfcor. CDF has (alien mmeercent Owe the begBi^irraaflaltaai hn> mere than doebardaaanag nl an aeanaal rataam an. real -amicocwd and an rstmaiadar tint ol the boar tore* have an fobs or are raargaullrho economic nSnakage hasakarpiythe rnoarento the Figjeuedo idmmis-trMion and hataax factor in under mini aa public confident* in lis abihtv to govern j

S. Tha lepuiatlon of the edmlnatrattnn has also been badJv damaged by its decitton to turn to the IntematSMul Monetary Fundot help when It essentially could no lungertiuntina interne-Itoool bJk For ii yean. Brarllvan governments of all pohtical varieliea had been cenwtirnf In denting that Branl wsmld nn njt-nii lUrll lo the hanh prmdibora iiepoaed b> ihe 1MIancni tooney. Ever. alter loamthe IMFroramema! benki wee* OtaaJrsed. Branli iMtrrwuonal financial rrlauont re-maaard very ahahy tlilrnas with US baa ha, aenaag fman tht legalto oiateol BrattTaerns la acategory when .rtfeietf oevnwUs on them leggedava. -aa only narrowly avtnded lata in the yearenin)ameenienl with ihe IMF and neajcrialMinew Jumbo mternalicral bank loanillion' Tansarge part of the evternal financing Brail! will need1 but complete dliburwmenl ol ihe money will require further adVreree fo lough domeillr* Jutfrrttvwhich ibe Braiihan public will he Increasingly loalh loif economicimh aa the rale ol Inflation-do not anon ihn- mm* ligm nl

Weok leodwihip

undamental oViuhi about the governlrarof theespecially of Ihe lecbnocrais who make and implement Braziliantoear or so alter President Kgueitedo took office TV fiitt noire btow to the Braxtllam"in their leaders occurred when Miraiter of Phoning UtUira Netto wis unable to use previously

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Imi* rawad "hen to Maum huwtl Im rrore uan SO am TTmmf.aaki rateUwa too ruin il uallkrlv

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ihe drop iaough about byil price check. Thete ccneueru weie compounded byleud between iwo top preaaaVotlal ad'Urr* which led lolhe reeisnencm of Ctocnlolbcrv douva id1 CcJbcrv wet ctmiicVred by ibe public robe one oi tbeitronjc* Influence*Icecvcnru>returning the govetntnenl to civilian control I

he meal recent bio* to tertujimcnt credibility hu eircr. occasioned by Pmidcnf Ftiurlredu'j wem'na Leek ol intern! In eovtmW* parikularlv ilnceeer Ht hetto nerctir landerihlp on moat of the difficult Ueuee ihe couniry 'ecee On the rtBfmrnlr side. der-Mimrnaklnt tt Ihe top and down through the bureaucracy hu *nir>idiy-lo-day attempticope wtih immediate prorirmi ind tbe governmentuiirmarti ibrial the eronoeir aod it* ceeueem tot coptrei -nr. edveraty ere Uriel. datrbrfd On Ihe pnhbcel now. the Piewoetrt hasVMr bit Mnahncel pert, tnd ibe

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f Iht three cenirel proMetai ibt Flguewedo govern rami Imn. ihe oneac*iU> Iran ropomi-ble lor ii ihe puUc perception thaivil bueeaue-racy had davrtoped tuch pnavr ind independence ihal il ii largely out oi corMiol Al ihe popular level the Male enltipiim In pertttulir are wm titd in many caen hv retired mlllliiv ollicen aho hive gained >ait wealth whale heading ihtee uoiwptniea| J

he ivilooomom behavior ol the Rite vnin-prneti fact, complicate Briul'i effotri to nvrnwv ill current eooncanie dif fwulrvm While the* were well lotted lo taking on tha mmenje develop irtr-ntal tuki thai ihe epveinrneettd in the din ofrnoidlv eipaiidinf etcavney. (bey have been largelyto adapt In UW or deeheoettTnetr oWicM haveaarn* ameue of tea-iaikmarr

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tel eat private OraVerpctaa. end ihrtr heavy fceeaDt botTp-aag haa coalnbuUd auhaaaluJh lo BraiiTirkfueeredo haa ailcaaplrdack tfreli role ii the ecaeiomt But ihey are io aril entrenched that tbeyall. been able lo maintain thttr oprteltnm and pmannel rotten, avoid sharp reduction! of their ctficeil in>ealmm beidgtti. and prcritct Ihrlt bailc eouirlet

The ImmediQie Cbollencjes

ery few people In Braul eipece iht Fieueimlo government lo accomplish very much lo ihr year it hai led in office. There il bttle eipectnlion thai any lemtdock athalriMratlon could undertake ihe policy iriiiiitivm thai would be ncceuary to attack ihtpolitical, androblem* nf the magnitude Braiil laces. In addition,f ihr Figuele-edo government are grealb' reduced brnuit of hi perceived poor QualityBraalhan ehlti and masies give Ibe imprewvon thai ihey would be juMilied ii tbe government rrttneled lurif primailly to dtmate-limitiog actrvilin in all ihree lectors I-

la tbe economic arena, foe til mole, there ii no eipectaOon thai Ihe government will succeed In re-itotlngterovith tnihe rail war. Aihcon irem to be tent-red aiound the prntibihly that ihe rate ulbegan to drop in November indote again an January andnd drooped once mora Inbe further reduced and lhat enough foreign eirhintr can bea combination ol upended einorl earn! no and. If aeecmery. newioiportl will not thrink lurlher. Both thew gotb will require conddarablt arlivily on ihe pait ed ihe Fi-gudredo admuititratUMi and are by ao rneam certain to be ii '1 but ihey are aeen at within thr reach of nana relatively tivak tovernoinrl. j

he go>ejoevere deteilosaiion in law and order. Scene additional itrlkei. demoratialioni. food-maikeland even ricti arc ibouiht likely. Crime in ihe form of break-ins and robberies, which icee iharply in ike laitot tipttted lo drchne dramalicallv eflher as long as then! ii no imprmetnenl. In Ibe economic iltuaiion Tnerc ii the ctpRiatiorv however, thai Ihe (ederal government will help provide ennugh resources lo the Bateand municipalilim to Ditventudden, further detertorittoo in lecurt-ly feu Ihe Individual There ll virtually no belief that Ihe Figueiredo government will take mceturri lo reduce corruplian. aril education ee health services, or other*be improve social conditions for iht middle clan or tha poor

ne general riprcletinn In iherena that seems lo be held by all vrcion of the Brazilian public- that the epvernment will rontinue lo do all ii can lo further the process of poetical liberal-iaatiOn (eoerlurdl soivilian preiidr-ni can take

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office Inn many iisprrM. telerelloo el the Figueirrdo -dmiruitralloo. with all its peieeived Ineptitude, teati on the belief that th*ommitted to thii eoal.

IIoraaeWtlc pubhenh* January presidential eWctioae -III take aad an Iheniaking phtni ae**aa aha pcentral anaaa aa iheyoeh* pontson of ana naaatidana a* aaantn* r. waab ih* ariwitl pufcoe may prefer dnwei naeltona. II anil acoi-ueeca in indirect electionieuoruhle rwit ttaa* In the poUtsenl Mbenhtallon procew Significant pobhr alarm would rxotably occur onlyedo

were wen lo be hacking away from hli uwnmllnwat to lAeriliiatBn. orppeared that he -ere kaaan controlrmcnts ol has admmlMiataB Ilia* rnlihl lavor ixsmmunlion of mlhtary rule.

Ift In thr imnwdiaie afnrtinaih ol naceaeafutyegociiimsvmiira! hanks for thedntwmec* freataw kwrn thatbe dsburwd to Brail! la thr netl lew mreehaaohCf gueariona do not rani hath on themmediair actlee igendi or In the prrtec-tioru of ih* public In fart, with lb*exception of foreign economic poaky. Ionian policy man are wJdom thettention Ineeauie foreign policy hu been bawdelalliafy beoad and unchanging iiinar-nsm beoauar It ban been perceived aa clearly lurthreim Branli hant internal, andai been earned outcmeeeny atiuTal and noeteadreaa^ttonal aaaane* Morco.ir. nanther Branlea nam ir nwTkwj.

twwTl iPVofrlfaTaS rWf *Rrgr%tpf

ninetuonivihan aenmrrnnl are being aay imraadieie imiwi on in neaMcononur foreign policyThane include Its efforu to oaaintain mod rebllorn with Argentina aad tha counlriea ol ihe moihern etna of Latin America generally. Iu luard aiiainn tha development of any tKUiilv threat on ha botdeti <ai il ii do ma In Swrlnama* to maintain aood rrlatioeu wtlk lha Arab Kates (especially Iran) lhat anain nnircc* of ml. lo avoid atroaal lesdrrihip poet How an North-South lamesot io trnir cc-^eiprcetwcthe biLatnra] liannn wilh any pnanht* anane* nfr naanar. anal when. irninlaa clearly acta Ccenmaniat. aa eaanatmn aa wide aa array as pcaaabe* uf good roaatanH arl. trnmtrteac. vaivliai -ieokalcal

oreign economic policy, racept for manage-meat of trie foreifnlso eaa-etially union!Thar* ar* concerns among builnewaaannotto cut back loo uu..Hy onand < i. 4uiatanee that

help make BtaUnin goods rotl compel illIn the iMemauonal market And there aho waa uiileienrew -the way en want* the ternral anvemenent look coeerolW nl al foreatntrawl [turn Rhr decree waa rceawtty revoke* whichit-emely difficult for many Braiiliar tuil-ma wtoe anata have an import ccenponenr lo pay their bills and obtain th* needed foreign ingredientiimely laahlon Thaw specific pioblrini have been compounded for both Brazilian and fee elan buiinen man by the aceenitatlr erratic anday ih* Biaaihaa bureaucracy has usterpreted and inuJrmrnr-ed reeatareK cwanaang man and iigaaatloea ni the nsiiiriua.nl haa atlenspted to cop* with theccswcaauc criaa NcwetVkwtile (undameiv iil uppntion to th* nor Ion that the country'iell-bittna depends tignificantb un Braail'i abdity

to aaport. and thai the primaryforeatn

cctmoraieo obtain the necrwarv mnrketi and

acilitate'

Z) Brasilia! approach lo handllm* earnnther maltee.haa nrown in the hm year or aapTfirad as the uriciecked tireeuwcvol ihr technocrats whothethe .van and. pmrHculiily. tkesr ituMtumrvoarilie when world economicay which thould have led to aBraallsan approach toign hotrowing. There at alto muchahoul the way le which the BraaitianeooaaaaK nam hat oenotiaied wilh th*ael.al* aetlue bunainthai Dacfan Netlo and hsa mililii haivBranlihile thereagreement on (he need for austerity andram* IMFinch is tuttingapendHiaJ. th* team is criticimlnn, larnett {luch aa an earletlo elUrmiM lo lower the mflatlon rale tofor falling to auk* any tlgnlfl

ranio restructure lhc eiitirc lorelgn debt. Th* arvarene aueeas* of th* go-am rami ia levutmg ihe new aaan pat kage from ta* IMF aad coaaminaal hanks haa metawManly amdiwion Bui dlaimat of tb* gewerriaseial is to ewrvaalv*n

terlain to rlj* to ngw heights ll Branl hai to return I*

an

&

i- relallvell - NOnethe-

Im. cutokletibW Irlcflon wilt ilmctt well Inlyihu proton, and uncertainty over finalwill remain high beccena both

rienond ut iba kind ol bajgainang and. in Ihcte

changing pobrlra'Uansi. ire ne* Mir of iheir

hu INhnWChrM

he pmaprcta and influent* ofhave revived ftronajy tuough io thehi vi li' iltow them to be ihnughl of. aflerIn the wHSrenea, ai Ugrwlleanl polltlrulbecaan* ihey have been power leu lor idportly bacauet they are ridingof Ipupwlnavor of reniorlrmrhrrargrr rolepoaaxulScene el their eeutgieu newbyrhcteuK loosed on attachingtreat and th* alkanlrllre>macvrt are having on ihc well brinemiddle cbua and poor. TV rjppcullion panlrimauipla.cmbanoW reuolullonIMF auiterily program andreakla Horn with the IMF. Theae activities, whileto Ik* percepera ihal the govcrtitnewldo not armory affect relet tornaehraaraurralMe and

JT ba eater maittn. an-nil. the peiilkaana hoveore* which th* nuculiv* breach nut reckon, rvpecieilv line* Flgiaeireelo rinainl Ink*i ol lb*Snrul Democratic Patty iXDS) lot graMed- Although lhaolilical pii lapinrnitd in the federal Chamber of Depu-IU* oattnilbry divide between Jlfl nwnibriri ol tbe PDS and tat mem ben oi bur cnjpoailinn partita,iuai in practice Thaation Ire ouaatly finch ihal It ana* aenoriale al heal ai vigor eaaahr with the leaden ol Ha own part, io eehetv* pannae of aawded legariaerw aadcuu wrih leaden cf the oovoeMka. beeuuae coogmwiorwl raruvbaet of ill political uripn have developed imtilullonel lovabkB to the Cungieaa thai take priority overn; wilhranch, they (art Iheir pitroggtlvei ai Icmtaluri ire being

Ignored.'

jrrcnibvr-tongrteiional relaOoru are lurtber complicated by thetrong dltUke for the apparent preferenceajority of the PDS lor the or evidential candidacy of PauloDS federal deputy front Sao Paulo. Faruetredo'i bltteineai over PDS support for Maluf hai caused Mm to state that he il uu lunger willing loire cr-xnina ol jcandidate andight beto engage Ib cooaultalluruide rang*grout* ineludlni mrmbm elauaWlalatha PD5 Baal he wouldtoeal -Ith ihe ocfon'vwloaupparted by ihu PDS ai

a loauenms'* prealdaMUl candidate, thereby liking the power ol uroidrivi.il choice awav flota ihe PDS

Tha MiKlory

M For mot) ol the tut two decades, military oflitwei. hfcaui* of ihe perceived eltu* UMeen mlacurilv and national devekxunrra. hay* gea nraDv believed iheir imbrurvaaal inWaaeti wrrridaatltai with ihosc ol the gr-eroawa* and that thwtr primary rofcr war loeppcrl el the Prefcdal aad bus eafvkern la ike leal law yuan, however, umnr olfiewri hev* become irwrewalnalv disturbed by ihe gownlack el dutttton and. partanaavrly. Flauevredo'l falhira loIred-rthip during tins period el iriereaaing ecnriomic trouble and politKel unccrlainly Thev ftar lhat the military will bt more and mar* blamed for themh'rma.n her damaging ill rrpueatiaei in rh* ryn ol tbt public Stimulated by evearU at Areeeagal. tbe. am ahc ecauawned with nanej popular reuristat uumwnrw aaeat, mm* ml ataeh ee earectrd al lha* aMhtan oflidell whe> hold oHiee in the mleuearlei aad sear* Thla eorvsna about coemption eilendi ihrough the ranks, with mm* middle- and mnlce-gixte offWn beghwilms lo worry about Ihe dfi-.li miareen of lau of public adeem fot ihe nsfJlUryi

SO. Ih* Miesa ol being taracti of publicreating torn* dlueniSnn within Ih* military Nonelhr-Imt. oVipile algna nl Internal divlUon. the Utaullan nuilitaiy high reenmand remaira kvnl lo Fajeiredo. amd lurrarchmal daaenalre1 vvibhin aW raata It trni Lnhir an rurhfr yean, there ai*any "bard lane- eflwwn aril in th* kuthee raub areuad wham cUapuntled effleen can rally Virtually all elfrcen ccnliaut to mppcrt lurtber pefiiieal liberaliiatimeturn lo civilian rule became they una thai avenue ai tht only way tht military can regain in prole-won el celttilition aad lb hWorlcally good repulillon

ctne top offlceri areai, alter the military leaves power, the eivtllani might be tempted to0 rSghli" violation! during Ihe

warn

SEC

ol mlKUry rute,tArgentine.lso wldeiorrad determination that ihc Wi, In ih* person, (orl former "lubvmh*-Uorwl Biiiolj, now Comw ol Pto o> Janeiro, noi be permit led tonl'nll lb) own member! ai powlhir mbrtruln for the current economic team, nor haa it Ined to onite behind a

preardtaeiai candidal* o pm-ate-aretor

eat rawer melon el raw Iba latapublic arc even laa pouticeBy etch* ihees the kanaama ccewmuem i. and there are lew aume thai aay al ihe nrcoon are urvdertiei-tj ih* hind of iwaariaitcaal manaCvei or produong the leaden that might bring about such activity Orjomxed In Aor. the mtddur deal, and even what little ealUt af an riirrnrare irurt un neal all aeten lo be content! al int on liSidlmt wait 10

ByitonoVa

ratilun biMnnmrt areunhappy with the Pitueiredo administration- Anttedmietstrn-lion (cehngs. already hath because of busirmi percep-lloni of inept eovonrneei performance, have been eteccrbaled bt basnrHmeii'i beliefs that Plinning Minister DeHlm hai fafleel fo demand or al least lo rvpcotute Hrenoouslt for more lenient conditions on IMF and coenrnercial bank loans and. In particular, that DeHlm haa treated the boUnest ronvmunitvavalier way. They believe, lor eaaraple. (hai the cosla ol austerity have been placed much more heavily on ibe private sector than en the many buwtvrnes run by ihc government and that even mode* growth rale* cannot be rMccad until iramding by itale enterpriin tt brought under control Thev aho behove Braril's foreign oVbt mutt bt restructured If growth Is to

n. [

espite Ihe inrenrily of their oepeettic* lo tha government, however. huflncuenen have engaged In relatively Utile pcklieul eeliv.tv beicod rhetoric. The influential Sao Paulo Stilt Federation cf Industries, lor rumple, hu noi devetoped ill own ccmpccheocive program fee combating the recession or boostedose aa Utile as they rane prrvni difficult times ralber than wwklng auyi Ice an immrdiaSr reversal of

preirril ecooomie and political Even

the Cotaoetr Church, which thru* yuan apunan developlDi graaaiooti rimmunity cgn/iuatlcei lhat might have aornt politicalnew wenri lo he cant-erCrat rg oa enevwagsng wtf-help peuweti amceel thr poet and kaaarr arrm edwcatamal eavjaraats with

labor thai have lathe- imawteMate rrvrvaar* no nanerial-

lewmawteeaT"!

here as caae general atinm that aB vector, appear no mare Ihala wnme de-.i- lo rtturnally open. com pelolilical intern headedlitctiy elected eivdian prewdeni While deeply dil-turhed bv the eronunti lamlicei that are being vblted upon the middle elan and lha poor, and alarmed bt ihe drift In government and th* national-level Itadtishlp vacuum thty pnetivt. niuat people believe that Figueiredo and hu government remain ccmminecl to continuing Iba tfarrfura procrsa. Many eapreo doubt that ih* country can generate Ihe hind

of sustained elfoel lhat will b* Decpuaiy lo lum

Ihe economic litualion until thereirectly etettrd penidrerl who willhr pcLtKal etout lo rein I* tnncialwhat they eSnimbated and uiereiooeaivt public beerwacrucv Seonbeirw. incrlred ilitttiauaadaet are a* wxeieable way alalaaa aa leeal ea aaarntum toward eveulaal duael rwrVvarwnet catah. | '

The Corrwno Yucr

a Brmd mren ih* hut year before Hi ached uledang level of unceriainly about how ih* economic illuaiino and Id ptdilMal oanniuenret, on the on* hand and ibe prrMdrniial uiccenion issue, oa the other, will resolve

IS*e* I* trail

Th* titram* left Inark*bty (mill lad

conndwing Ihr (will* ground for ia activities

michi b* thoeghl to nut btfxfuw cf widnp-reidnrl ernwina ntniai Ic dikionttnt Bui iv ihr middle and the poor.ihnr frustriticoi rtottii*

nlramrly ditficil lo organise for any purpoaea. and lhay ihuw no Mgns of being alliaded by IrflM cauws

f Ih* paw anJ lha dlssspotnlrd middle

tnsre imcep'.ltk lo leftist ijc*iii. Ihr iidgal loll

in Braiil ia noloil Ileaoka advantage cfldj ccoeomk and social dUconirm It pjHm from thm main problreAi

i.nunanii ixoanunfltital anaralia*-

llon hai laken away lhc amitatnK iuu iao blue on

ighteen cos naawtabte

riulun PHomv>

thatlnle room on Iht kfi lo agitate for graaiar wrialui cwn-ml

l*flh> groups ar* id racked "till Internal dlntat and peextmed by grmyramer' wnkv aad mHlfcgenc* ottaniiatioi* thii II wouldy dijlinili It* iay of ibesn lohrnri

The brsatt of ih* eilnoe Irflut groups, Iht Moscow hne Brixiiiin Cemmunin Parly (PCB1 orobabh- hai (owe.IXO membeei tod ccnrdecilar fewerII la atrhtoa a) hard for legaliaaiios fa my unhlely cc-perl)aiort* for

me Vflnl *

Itoieal protest* et dvllOlhei groups on lha rilrnma Ml an ewn

arnaiaDr haylnaew lulifJ members. Sam*

hat attempted lo eioDit street rtott aad ftodii^rr lootings, but none hu the capabtUrr ta oraanlwew of lham hex dUousrd baaneiiodirectat ihe urn mien haie ami illy bean cartful to loeeeringe* of ihe crowd) In order not to provole

ao>ertun*M

Attlv* lotelan irr-olvemeerithe enreme lefi In Brae) appears lo b* eaMrnal What nttlr ertdence null ol ihe iiliiudea of Cuba aad ihe USSRBran) indleim. for nimow, thwrovvrrnrneel beatver lane la aaaeh hoc* of movant in* ugnilscint populai agluiion aaalui the Bratiila* regie* lay Ilea*

*1

n ih* eeonomK/polltical dde Ihr maibr ihort-lerm qurtiiorvs art-

t that Brarll will make conullenl enough rxogresiMF-mandatedoab to persuade the banli tnIhe entire IBS Wesson new loan package completely and on time?

In the absence of sufficient peogrraa or in the cat* that new toani are needed from ih*community to enable Braiil lo gel through IBM. what additional ainlenly meaturei tnight be required? To what degree are ptiv-jinmlatrial moratretum on payment of the debt likely io grow?

What economic liges would periuade Brailllan bwineumrn and the publac that enough prstress was being made toward tuhtntatlon to make the government'! aiuterity program worth contlnn-log to tolerate and acceptr'1 Are there condition* under which buileeu. other efala. and ihe public would accept adrjitional aacrifiees-*

Does the government have sufficient poliiicalor maneuvering room to maintain reenpai-one* with Iti slabltiaiion program or tof new auiteritr

What happen! if it doer not?

t(onc**it Chdllongwi and Uncw1oinii*i

'.'iimi the Crtrseofraxiliam may haw1 laeneel thvvFnrh aeurthhiga*rvrhed h* November and December of tail year when glimmer! icveired that the worat of their economic downturn might be behind them. The rates of Inflation foe November and*eicrat.dropped from previousarget ofillion in trade lurplui for th* year wai tllghtly eiceeded. agieemenl on the new Jumbo loan wai reachrd.rowing number of buiiwumen (espe-cially In Sao Paulo) acknowledged thai lhc reteuion had cnuaed them to become *ff[cl*ait eiiouath lo begin torofit (or at least to stop loiina money) Clearly, then* are very fragile ognsurnamirid. They could prove to be momentary bllpt In adeepening rrcevion it no realade on the fundamental causes of the economic contraction, such at th* sit* of ih* public deficit, ot if adverse externa) events occur, suchiie in oil price! or international Inicrcst ram. Nmciholoa. these Hgns

m

Brazil: EconomicS-M

raitbe psychological Impartountryit- btovent orttimtan about the future hai beenpoiUiii underptnreng of put economic growth and political (lability. (See eharu of ccooomlc indicator))

hree bretkt Inom. combined with the liolidty tpiril and conginaimul leces that nccompariv Ihe ChrbrrnaaHhroiteh-Camlvil period, ladhree-

monlh reunite in public aad vceajitHional concemira-tion on how had thinai are economical ry aad, corrie-Quenlly.euerting of immediate prcwore on the (nvernment Donne ihu period the government aiw nouncedr.umbrr ol budgetary tlept* thai aim al Vcweriruj government eipendilura in the veer ahead TTicse raeasurrs. which include ending Intere* rate rubatdiet for agriculture and all etporli aad furthci cutting atate enterprise inveuimenl are oVart to tee note foreign Urvestori and debt hc4der> lhat Brazil will puraue auHeiliy* with al lead aa much vigor aa it dvd in th* lati ballbey areignal to the Breallan public that the govrmrnenl inlendt to continue lo move forcefully lo make atructural admit menu In the economy despite Ihe sterlfatet these edluttrnesWi call fot-j |

he teal test of Ibe government'! commitmentccenlnued auiterrly and. particularly. Hi abllily to momfe tbe itibaloalion program tuccwfuOy will probably begin tometime early an ihe second quarter

i

y that poirl prrudentlal cccumxt [olilici

ban heated up. and i- will beeome mere ippimiit how much ci oa tout preadcntial cancCatnmalt olmBili handling of Ik* rronemy and haw much new resiiunc* there will be In Con-taut and amoral Impoitini elite* lo holding firm on auilrr

40 By Ihew'nnlrn of ihe inwal quaiTrf

enouuh evidence will abo have accumulated Id brain lo dtaw coexiuiiom iboiil how eliwr.lyon. forminc to the economic tinted to which il has conymilted Itseh*ome of these targets were ritabhihrd as part of the lot IMP agree me ate uted is benchmarks for periodic release tiroiialciit

ittlethan hill ofmbo

Icon The three mijoi IMF-Imposed Urgetserei

the eioaraion of the moneyhe monetary bear fromercent> toerwrrt*

the pubwc-mcloe borrowing rtoulfemtr*ercent of CDF3 to II percent ni IBM

the cruaekro)ate at Inert asercentage Increases in Brail)-an inflation]

umber of oiWt targets are rfimpowel rather than formiily part of the Brull-IMF accord. Sonethelem they are al Wait as importanl as the IMF-impmed goab since ihey are more vtiible and uill probablyused by the Btualian pubhe and bv Iranian ubaetwera aa the hand tart meet! lew aadglng theiof success of lb* austerity program In partrru-tar. tht toverr.mtnti targets of holding the rate of inflationercent4 and reotruciiuj. the currrol aceount deficit3 bilk-on' will be closety (u)

ll of Ihethose lhat are part of the IMF egreemtnt and theoe lhat are letsambitloua, and Braail would bt in deep trouble if there were sertoji etpectaisoos lhat the court rr would ba out off from foreign loam unlets ihey were preoiatry reached Weowenrr. that Ridamcnts both withinto whether lo continue to cooperate, even (hough grudgingly, wilh the austerityin fmrugo financialto whether to rrneaMiate overdue debt or to

Bniflaca Os u*tettcr*emeu Kraml twbnv. 'vl

Iran new money, no mailer how reluctantlywill turn moeo cm perceived progress toward meeting lhathan on actually attaining Iheitt)

any ed Ihc factors that will determine how close Braill will come to meeting ill adjust mew teoib will be seriously effected by ealemal development-not under BriH)'s control. This is particularly true of the effort to reduce the current account deficit3 bilhon, which turns largely ca Braid's ability loede surplus of overillion4 by ratting eiporii ai leastercent from last year while bedding the import bill lo about the same level as3 Generallfaj this kind of irad* balincwart on bow aggrcuivdv Braail markets ib products, such as military tooth, and how successful Itin arraruging additional countertrade exchanges, men as the anm-for-oil deals it has with Iraq and Libya Bui it dependsti more on how open foreign markets remain to growth in Braitlian industrial products, such as urnilinhhed ileal, and commercial floods,K-ei and Imlllra. Another loclet over which ihe Braailians have little influence will bt the prices thev will receive (or such key agricultural exports as toy-beam, caenee (osee. eoflee.gir On tlie import side, it iiesaenlial lhat Biaall3 billion from its oil import bill in order to divert thai money lo buy other imports for replenishing low Hocks of critical rawnd intermediate goods, many of which are used for the production ofhis will depend in pan on Beaiil's ability to increase rapidly mica domestic oil nrodtxttoo from Inst year'* averagearrels per dayearend target ofd.s rqoitlythai world crude oilver which Bra;

Heady, because everyncrease in ihe price of'J million annually I

l the moment, prcepecii foe achieving ibe export large!illion look uncertain, although eiports -il! almost certainly grow from lastharp reduction in petroleum importsrosgtporti oi finished aod teendirwshed goods did combine to yield recced trade uirphuea In January. February, and March, but protcctkonUt force* In ihe Uniied Stales and Western Force* seem to beId addition,harp decline in agricultural production3 because of droughts and floods, harvnu praspecti1 are greatly Improved. Tbt pon-ibility ihat the soybean crop wil be close lo record propcetlons is fwcctally important because tbe Braol karu are counting on thai one commodity alone (in

ey owvpetc with th* Unwed Sulci Id be ihr world! lead me eiporleil lo produce mm*illion In foreign enrhnntw etrrvrtgi* rleacrwrie thu (oil dependi nlaarh on pne* ai on qaantit v. however, ami her* th. irantileti nr* notgood At of tor* Irnprr.on bnrarr werenfya lor. Thd co-id drop mnimuillionwil cnni tht world matin tn Aped, pmatirtf agiin to th* tetradl IlkM Mcritical lime Icr lb* Brinliiri *ionom>(

ith rctpect lo that pari of th* *cc*ir*rue

pictureuch net* under Brinliancontrolf ptotrimieduction ol th*lot. cut thr now*li devalue theo eneintea*aeaprtiUvtiiewatraaa aaaaaal th* Jimthai leedw* rapert rh*ta tand ratrform-anc*mJoiabroad dovfct the Farueo-edo adaHalnnlWI tammiimeat toai at an impce-ant aceeenplria-mentit) work In th* anwarneaant'twilh

forewrn wnkm NoMiraerw. there to collider able

doubt aboul ai ability to carry out rfiecti.aiy th* many uvfulai rwd'itina atata mterpraeand lupprewinc waitII hat Initialed to nebthie the acorony. Moreover, normal ilippaec due ininefficiency and lutceoti-bllilv1 ding by ipetal Inlerait fioupi willintreai* heciaic ol the ellorli o( varioui parli of the governance* Id pro-nd* an ad inlinethe politl-

f*al rwrvrhdwrivrw ti Twrytdewttal in Jitm Ivriiw

idy. In addition. If mane ol lha auateiity meatum reallyap*ciaBy reducing thendal leaat at drat

willurl he- ret*impart an ihe pi

ecame an batgaator gejorfa andn the pwhlk arete* Ta avaad a'.-roaring the prWeature*i. ihr amerrjneu ma* be terrrot* ed toy loaaraang aoeaewhnt the naocrze on eraahi. trxn iTaakdaht. olad import}.

Mggaajanja-an. ol that ihrniag* we doubt Branl can cut uillalMn in Iaaaercentthan protected inlUlnn. hi turn, will further hinder, achieving th* public .ettordrop required by tbe IMF agreement In addirtnn, we doubt that Braiil ran hand ihr current accrual data*en although we beLev* ilroeavbr. at*anoed bat .ear.deli-cat of HI buVor, Our au. dewbt* hot* mvt-rW wiwttw. Breril canlafhr

Th*of igncukora] ciportt planned in view of the need to maintain adequate domettlup-pUe*ear of political feimenl

Th* iMManal eitiartnon foeecall for impnrlt in view ed pouitblc brtlienetkt Inr production of rumiti thai could rouh (roen ind till (III material ahnrlag.

Overall. *nrh* aaeat Utriy etanaonait growlh icenano Ic* Brataleethneeroml.han thr drop of appro*ercent3 but trilleturn lo pmittw growth mat* I

/telariowr WilhIUF. In our eadgment. economic parformanc* in ihn rang* will peoUtMy be perceived ai teawnabic h> the (uelgn financial com-munily, and Braiil will be able to proceed with It* aaldlli ill hi program with ill futrian tteilitot baching generally inlaol deipn* miuinaperformance laigett. We bebeie ihai the IMF -ill accept-and the Braiiliaro at* certain to laatat on ihn that (hehai done Ihe be* II ran underun aancet. even if lhat meam Brarll -HI need addjuotpl ^-

ii* aVuili wai imrutktt

aarHatwil woorllb nolinowwnoaly"lili iheIS1.U3

2 6

advene world economic irtsnh, domestic pohitcil ptrviures. end gross economic riisrrjnigemeBt by Brasilia. Inonfrnnutson would almo* certainly occur between Bruit and tbe IMF

altempts lo require additional austerity meuum that

tbe IMF would believe aie ersentsel bafora neaothv ttoos could even seriously begin on nischerhaung debt and obuiotng the adchnotatl loreign kneu Branl would need. In thii cticurastiriee. the Flgueiiedo administration, which baa Haled Ita entire pchtkol

reputation on maintaining good relatSOra witii the IMF

and foreign bankeri, alter nanoeiatlfw menuouriv might aitempi lo Introduce decree* acd lega'aiton embodying now austerity measures auch as further wage rest taints Simultaneously, tt might make such gestures lo clacitc domestic opponlltir as rep'acing the curieo economic team and, poeabit, ollrr.na to luc-port an opposition candidate for the presidency in eacbarage for congrmaipnal tnsaage ol th* new rBeas-ures *|

ici andfurjhi

J

y this lime, however. nauanalfitie pRrHirnerrtS in Bra ai) would be SO amused, support for aanterlly so low among virtually all elites, and sucecssim pollciei so tar along that il ii dubious lb* Fsguetredo govcm-iiinihe baching Vt would need to reach agreemenl with the IMF. We doubt that, even under these circumitaaccs, the government would formally break with tbe IMF andnilateral mortlon-um on debt payment.ihianon would have probably come into de facto existence, however,necotiatiorii with th* IMF and the banks would be ttaJkTrnated, and Braatl would probably be faQlrai further and further behind in meeting III trpaymeiil vhedi

SO. In this turmoil, the chances might increase that either elect teen would be careeled and authoritarian ml*that the government could obtain the power it would need to increasea sudden move In eiaelly the opposite direction would occur toward direct ejections. We doubt, however, lhat either of these options is very lately. If anything, weran* ccndltion* would Intensify thefervent desire of the militarv to get out of politics and ihedoniib<litv for cevirtg with complri goverrtna problems We behove the mihtarv would, nonetheless, like forceful pleasures, ifarv. to ecotntn social riots and prolm. ircluding interveningaior urban areas Such at Bin doao Paulo il prceest icUeJies there bexan toescsUl*iignlfkantly. Thb would probably be done, however, as an effort to keeo the political process moving ahead, rather than to end at. On the other hind direct elections in this kind of superheatedwould probably not be accept able to tbe military and other oonaervativ* mourn, who would fear that antmslhtary leftist or populist. sufh aa. Brlinla. might gain election In luch condlQengf

he mora likelyurwoukl be that elections would occur on scheduai. and that the

Branlian CoverrimeM and the International linanclil

cc-mmunliy would us* the comma cravge of admirus tration to puslpuiw molulion of lhc iiran dixding them Some kind of eleventh houi lltiannal [menage, possibly uivoMng the darnel inter-cMlon of maior Western governments, would be pat together so that Branli LS loans would east br cWied ast the end af the roar Bui the staarsnate bet-eew Bran andiders weak! have led tn sever* new reeannnnary gaeanaiea a* lb* BriiJ sen eeoaomy|

ign. f.tonossnc perform-anc* in Ih* aarry month, of thai sear wai brhe government'i wtllingneva and obaatr lo Gay an prevent auttenly courae folk-wing are nwrtw of the important signa to watch In order to see In which direction the economy is going

The rate of inflillon. Inflation fur Jimmyittle under IQ pntonnt. some-hai more than the governcneM hod aiprcttd Inot*etornl and In March it rkropprd again to IDlear drop to HrauVdlgil price In-eteasei in the iieit two ot thee* rnmlhi houUort the nmion lhatndertudy drop Inrohabli theoat important thing lhat raiM letiuale Buiil tem dust ceeeiewaorking and KfM be lugspcelnd Th* failure of inFlarian *r> darlsn* -albe read assau ofandarwdgmg aeeepeancc of suet raolstica as wag* rearnlrw will aheeeay dueiwth

Ihe size of IB* sovrw-an harvew and neiuliin ahihty la sell th* crop al good price) before the US crop comat oa th* matiM

Tb* slianglh and opannru ol the United Slates and.calar degree, th* reetw-ndei of Ih* OtXD market lor Btail'jn industrial product!

Tbe composition of Branlian Impotli to see if od imports can br cut back and material essentia!

6

t

erports increased without greatly Incrceslna tbt import bill

The degree of government success in catting beck iht operalins oVftetts of ihe site enter-prom Invnbncnl outlays, because they ateeen cater to target but the real Inl of Flgurlicdn't rfforb to gain ctatrcJ over Ihe public sector will be the eetent to which hu administration can reduce day-to-day ceetrat-ing eipeedRuret for tuch thing*ages and employe* benefits

Imernational interest ralte, becaUMceeent rite In the rate Brutl pin oa Ht foreign debt coata the0 million!

Tha rVeiidorrtrol Slice anion

aaacrtrtMt rrootdural Chan it. Al

one point la th* peath* question of bow Betid would choose itt neil president appeairxlnsettled lhat even draitlc proposals, tuch at twitchingyttem In which ItKjerihipbe dividedrime rrUtaatetresident, were at least mentioned in some top pofali-cai circles. As tbe time horiron ihortero, however, selection processes that would require raebcal chuigei in eteet wr, ot other laws become less and let* likely By (hb point, It appears possible virtually to rulewitch.ny procedure thai wouldorutitu. liceul arMndrrptnt to bring about Thishangeurhimemtiryealignmenl of Ihe political party structure loew party of ihr center that wouldidely backed, "moder-ate' candidate, aad.ove to direct ptgndenWal eltcttceia laS The idea ol direct elections dadomr beeat ir.3 when Figuetrcclo announced tkul be In theory, preferred ibal procedure lo ihc present indirect proc-ea OppcuStson pohtlcuns. Including ell tbe non PDS (mernors, ipoke out strongly at that paintang* toilirr^alottsoraind there hasroundsill o! public support for the Idee. In particular, major public demons! rations in fiver of direct electkom have been held in several catict since January. Thisevgned to peak in laic April when Ceeagresi is toropcaed constitutional amendment to per rot. direct elections f

il The chances thai the change to direct elect torn uill actually occur, however, are slim. Tbe military hu let at be blownoes not faror taking the risk of opening the political system that far al thb lime. PDS politicians show en iigja of being willing to let go ol their presumed advantige in crux-Una ihresi-detg through their votingbe electorollege. And no powerful individual (such aa the Pi eu dent, who was persuaded by theommand to withdraw wipixel fot bis own idea) ortUtnificani pr4ihcal group in rhe legislature has stepped leeward to won forcefully for ihe Iwo-thirdi vote la the Clasjnber of Deputies and ibe Servile that would be required to institute the direct electoral

MotlUktly Indirect Scenarios. ThetwornoH likely tcmarka (or choorog tb* naal president leeture. therefore, different kinds of contests for the votes olndividuals who make uped oral college. The firrl maior scenario, which rcititraight-liae praiectieo of the correct statin quo. wouldtruggle among several caedidates to win Ihn PDSal Iheir4 parly convention, with election to the presaSencv following almostinS became of the PDS control ol the electvjfcVgB Right now. the three major candiditei (ee lhat nommitmn are Paulo Maluf. the aggressive PDS Deputy from 5ao Paulo, Interior Mln-Hter Mario Andreaira. and Vic* President Aurrllano Chaves (See rural paae.lj

By mostalufohd lead in rounding up the nncmuary votes for nominalnd he has claimed commitmentsajority ot delegates Kit it length derives from his early start in bard campaigning, his astute mi ring offcti-cal techniques (luch at coenpo to-basednd oadiaibiceiol favor granting, hat laige peesooal fortune, Slid hli lakeetHltishlp

andidacy, winch hu been very slow to takeajorebruaryolilical boas in the Northeast, who coot rollDS convention votes, useipectedly dtckued in latct of Andreaaa rather thin Chaves.he pi ef erred candrdaie of those among th* technocrats and wghin the PDS whs would like lo tot the trast possible change In who governs Bran) and who bitublic coffin it the country shifts Ironsmibarv/buieuucrailc to en ostensibly more open, llilfcin iheiiliiilnil poltKal system. He wu initially hurl by Flgotiredo'v failure to designate him at ihe government candidate, but hb candidacy remained ilut beet uie Figueiredo dad not crane out In favor ol anyone els* either Despite Andreaaa't recent gains, Maluf rarobatrly remains ibe favorite in the PDS, becausemagehrowbackhe

"Off olktotird potato* harms him unarm governrceW supporters including those withinlilaryl

ice PiaSdrnt Chairs announced his enndida-cy in carlr February but has onlr begun to campaign and hu siictafh is difficult to measure- II* ts respectedompeted! administrator and ia serwraDy liked in nsiiltacy, anvernmeni. and bust tiers circles for thn

Hleclive performince he turned In as Actingon the two occasions when raguelredoID He ts perceived as tSe molt honest of tbe candidates, which, along with his opeti supftoet of tha idea of direct eaecbons, makes kirn popular among the general public. Yet lo take the nomination from Mahtfdream, he will probably have to be wiling to match their wheeling and dealing in bidding loe the vote* of individual PDS delegate*.

W The one key actor who could givehance, cc posih'y lip lhc nomination toresident Fiauelredo If he remains publicly neotial. as he atated he would in December, leaving tbe battle solely to be decided among PDS politician)ecret vote. Maluf will probably haveedge. If. however, be declares openly for Chaves, it throws ba rapport to ease of the darkbersewho are almost certain to appear in the neat few months. Maluf and Andreon* might be Bopped. Maluf acpears aU to stimulate very strong personal loyalties among those who now my they will vote foe him. suggesting that his strength could autckly wane if serious doubts developed aboul his abilily to win. Andraainai mndt-lary *oc*ak only to ifaoe* who wnnt to see the current ruling group, no matter howremain In power. To the eilent that they believe ihey will have to answer to their constituents, few politicians would relish, this prospect Wilh regard to Chaves, cien though hit candidacy might appeal lo the average PDS politician, he Ii unlikely to get the boost ha isandi from Figiseircdo because ofi-denl'i uriyiridmi pet soil) in Ii pithy to him!

SO In the end. Ftgueiredo la not likely to come out stronglr lot any of the PDS candidates He dislikes Maluf and Chaves too much to support them openly, and the unacceptability cf Andreana toide ipeetrum of BraaJlans, including many in thewill probjhly dmude ham from throwing his reputation behind lhat tsandidacy. If the election proceduie temsins unchanged thetefore^we brlie-v* Makuf will win (he preridencyi -3

hr other direction the presidential lucceiaion process Is meal likely to take it the cosiieniut candidate roule Movement toward this seeutfon would probably Intake ihe following kinds ol decisions within top poBtieal circles-

Agreement among oprarttlon political panics lhat direct elections right nowead itste and that they could gain significant political strength by having one ol iheir ownii-.even if ha enteredjI clout that would comeopulat mandaie

Maintenance by Malufecisive edge for lie PDS nomination and tha decisionarge minority of PDS members that they have more to stain politically by supportoderate opooiitioo politician for president thanp-porting Maluf.

Forceful political aoti-ity by Ftgueiredo in flier of an opposition candidate on ihe grounds that he cannotaluf victory, and he cannot develop orHther candldale within the PDS who can beat

he rareopetti that th* electoral situation will etotvc in thn direction dependumber of changes in the status quo and. therefore, It does not have asotability as ihe first scenario. None-tbriess.ighly feasible poanbilily since it does not require any rnaiorn election rules, and events could drive each of the major political actors lo make the nc-wary decsuoni to I

i bring il about. [

t thebe opposition politician who would most likely receive ihe trd as conaensusU tbe present Cosemor ol Mlraaa Cerals. Ten-ceado Navea hieves Is widely respected, in all ihe places that count: among politicians ol all polmcil stripes, by the miliury and several of tbe Pretklrni'i top id users, within business circles, and by the genet il public. In addllion, he huengthened hli power within the mam cpposiliun party, tbe Branlian larmocrailc Moveraetund would alrnotl certainly be Mi choice for president if the PMDB believed ilhance to win. Vice President Chaves has aho reonlly picked up atreriglhotslbjeandidate If he should be denied the PDS nomination. It may be difficult, however, for an opposition political party tu nomsmte him. became he may legally be unable to twitch paitn* thuefcue to the ewetjemj *|

m

n* set ol circumstances that could change live odds lo favoi the eomeniusark> mlghl beeterioration in BnUlvan economic conditions. Particularly if ibe PrratdVnt were temotedo to ih* Congress for new austerity irtfcUlion either in order to persuade the bank) to release addibonalen ihe alreadyillion loan or ia an effort to wek(com. he would probably need to increase hb beigaininf Hreogib to have any chancel of SUCCOl Certainly, if economic conditions worsen in thr neet anetal months, opposition to theUbili-laiion procram Is likely lo be so widespread and Intense thai il would lake inrnolbint as sitnifiosnl as the of let of the presidency lo create even the chance of putt laara Scion that would agree to

additional r

Ire* hlrrueH of this eonatraiM Figueiredo alto would probably have lo commit himself lo an *benative candidate in lha FDS by ihal umc period loibe chance of denying Maluf the PDS ocentnlllcrv

he second tomptjcttion that arhes^_ 1by reluuni to make

an open choicenviting (rout* from all tidee lo put increasingly heavy prevure on him to decide in their lavor.mpenuabie lo know if Figueiredo would actually resign as Presided if the oolllicking around him became loo heavy, buih* one kind of prtnaur* in the pail that his led htm lo talk ed resigrvatioa Being subiecied lo slrong criticism and prtnsure also team corrrlitcrl wiih icrre cf Hu nv> menu of moodiness. wiihd:awil.(

Hole. The me in enigma inwhat turn Mestdcnisal politics will take In the near luture is our inability lo know what President FVeuelrtdo will do Even wilh the large Ices ofht has sufferedeader, the power of the presidency and the cultural predisposition to respond to leadership by rhe president are SO ilreog that he might be able to eiercuc decisive influence over the outcome, should he choose lo do to Yet ht refutes lo lake definitive action either to affect the choice of candidate or the choice of electoral process j

Fitwriredo'i lack of committed action create* two potential complications fee determining how the pecceM will evceitualy evolve, first, it may delav

i movement toward ihe consensus rsndlflite route lone enough virtually lo forectoie th* option, becuuae state governors mutt resign five months in advance. The indivtduol who has the greatest possibili-ikes of uniiUig enough of the PDS and the political opescestion lo beat Maluf In tbe electoral college. Tancredo Neves, would has* to resign as Governor of Minos Coast byugust to be ehgible lo run. It teems doubtful, however, tbat he would give up Ihe remaining Iwoalf years of hit governorship to run lor president unless begnificant chance ol winning Thai chance may net rjevelop ifdoes not commit himself openly to the consen-lut-candldat* procedure and, probably, lo Neves atbest candidate by May at the taint. The ether possible coeoeriiui candidate. Vice Ptettdeci Chaves, is not required to resign, bail he if ineligible to run for

president ll he Serves even one day at acting president

in ihe ll> monlhi before tbe election. Consequently. Chaves, too. is thinking of resigning his pnsl by July lo

II this hanpenes Iwlc

Chaves resigned to run for ihe presideney. ihen the political rituabon would pretoblr remain rrSi'l.ely liable, Tnp mlhtary leaden In that circumstance would probably support Chaves's accession lo the presidency through normal conwitutional wc cession, and (he prraktcnUal election would bt heldn outside chance, however. Ihii_ if tbe removal of figueiredo or hb resignation coincidedtgh level of social protests becauseew economicandora's boa of additional pcesblbtles might open. These could rangehort delav ba holding the electionuch longer dotty and the rHmpnsl'lee of reieesslie miliary ruV. if military leaden decided that restoring social ptace uhnuldIhr hlthrtt priority and could be assured no other way. I

Import of Economic Development! on the Presidnntiol Roc*

p io this petni. the course of Brazils recent cewnorate fortunes has had lesi influence onla presidential succession polities than mtghi have been nprered. except to intensify almostdrsKe to changelvlhaa regime We believe lhat economic decisionmaking and the outcome of th* presidenriil rare will continue largely lobe influenced by separate factors unless lb* economic situation lakes an uneipectedlyrn (or the worse. The choir* oi method formideeit. (orill be determined meat likely by the druggie among

P

ocal them* lot many groups that nowccept (he necessity ol endingbsdlei, restraining wages led credit, aod Ihe Ue- In ibis situation, the government, undo open attack Irons ed bJci. wcaild be lorceid to yield tnofe on austerity than il oWirea, and It would b* imder great pressureuch harder bargaining^ stance wilh the IMF despite its seemingly greater than ever need Ice IMF

ven under these ccee eitreme conditnni. however, wt doubt thai such widespread social hoce or civil disobrd-ence would occur as to threaten the basic Habilityhe society during the lime frame of this Etfimate. The (undunenial values of tha

polilxal culture, which stressnd compeo

enisc over violent cbowc. would take longer to under-mine than the months thai would remain until Ihe presidential election. The prospects of changing the regime through election*ivilian-domini'.rd one would alio probably continue to appeal to even Ihe. meet beleaguered groupshe best available way out of lha country's dilemma Moreover, ll would most likely it ill be perceived by (be correct rulers is an aecreHabl* rnethod of railargely diserrrdited regime, which was standing aside in favorew group ihal might possibly have new am wen, j

hich erne cf the leading presidential cancB-ebtes as actually cbcaen prebably makes very littfc diflerence In tbe? way Biaiil will be run alter the new regime lakes cf flew. The election of Maluf. Chaves, or Nevn would probably be received with much greater popular acclaim than tbe evsvation of Arsdteutxa aUur the brier it so tied to the il.mnlitrd currenthet wtuld ease Chiveu's or Neves's relations wilh Congress early in iheir ao^mlnlatrtnoo. althoughibe PDSiould probably face strong noa-PW congie-wlonii Political oocxaetkm from lb* beginning. Nonet be laa, in terms el what any of the candidates is likely to do, iheir piatformt are very nmahar and none cf the candidatesharp break with Iradilion Moreover, at long as the neit persedent is elected indirectly,bcaen will probably have made commitments to Misting poweras Ihe military, ibe polilical party bosses,ariety of economic interosli .irarfudirig the stateensure his elect ion and lo rciuurc there thai there will be no drastic ee unexpected changes in pchcvopular political baa* from which to draw support, such as the one Argentine

frevdrrt Alfonsin has. in> nf the indireclKil dates would probably be equally bandicipped in taking action* thai would significantly reduce thr influriKr or olherwlie adversely affectower broken afler ihe election Thus, it ii unlikely lhat any of lha canddatcv Inehidlng View President Chaves, despite hb reputation for honesty,an credo ratves, kf Ihe cppoiition winsorueeous candidate, would, as prtiidtnt, investigate very rigorously poasi-blc human rights abuses bv the military, institute corruption ryoceedings against many former top gov nromeal olficials. or cut back very much Ihe role cf the itale enterprises in ihc Brazilian economy.!-

7ftt Nudes toward ihe IMF and Bmiil'i foreign debt would probably not differ greatly cither. Any ef (hern will be under cortsiclrtabfe pressure to reset late much more strenuously vrth the IMF and ibe commercial banks than did ihe present economic team, seeking lower lot cresttretched-oul grace period, longer maturities, more easily attained performance goals, and the like. If these negotlabona go badly, economic natsc-vssllsm will Hie aharplyemporary delay In interest payments may result, but virtually any peesdent of Brail) over the next year or so will probably conilnu* to iry to reach agieerncnt with the IMF ret her than lake ihe im" stivefor an Indefinite suspension of payments onebl Bratil ii limply too In need of imports, trade credits, and upon markets for any responsible leader voluntarily lo lake any other Hrategv Since none cf ihe foreseeable choices as president as likely to have even the leeway permitted the present government with rtsprct to pursuing austerity, ihe really critical decisions on ivhetbrr Braid wilt continue to receive loan money and trade credits5 probably will rest mote with the IMF and ihe bankers than il will with the Brazilian Covernmenl

n ihe longer term, ihu lack cf freedom of an indirectly elected Braillian president lo lakenew economic initiatives could leaddditional severe daJlusionment em ihr part of tbe public with tba government and Its ability to return Israeli to Ih* path of (he* minimumrrcent growth it nerds for future stability htaior structural readjustments are needed to reduce thr economic weigh! ef govern0 hold inflation to tolerable levels,enal hen Ihe country's ability lo earn foreign eichange. andur back lb dependence on foreign borrowing Without theseniitTiU. it will be virtually irrnxneSble for Brazil to meet ill large debt servicing requirements in thes loan repaymer'a contracted in the

J 2 6

ome due In (act. even wilh mott ofeadiuBments. Bearil will probably bo unable lo both Pay back lb roam aad begin to trow again unless either the international economic emirooinrotavorable (or lha neat five yean oror Ihe Biarilianegularly renegotiated durlrai thu period in order lo lighter) the debt burden and provide the resource margin (or growth. Anorhrrr world economic dump or round ol tight money poh-dee in the induMruined countries would probably frustrate even BltJVVl best readyustrnral ef(crtt.question at to whether Brazil could pull out eded on manestructuring ol debt tional financial cocaiwunlty bos bacons* Increasingly difficult This has occurred because Brazilian leaden believe ih* US Government hasoncerted effort to improve the level of information thr two governrneat) tichangrroad range ol rtets. has approached Brazil as an actual In attempting bo solve problems, and is understanding ol Its need to differ with the Uniied Stales on some foreign policy issues In areas such a* tha Middle Fast The Brazilian Govern men! (and many in th* private sector) also terce_.es the US Government as essentially an ally al this point in its attempt! to negotiate deb! relief, obtain new money, aad, despite numerous commercial fric-|jt>ni ripard t

II Ihe want happen! anH lb* new prcKdrnt either cannot bring about tbe necessary structural changes ee world eceromlc condition! defeat Brazils best efforts, then qodtroos about theong* term stability wilt probably arise Brazil has remaining one option, hewever, thai might at leastownward spiral into widespread political violence and sode! breakdown on the one hand,ctmpnti-lion of authorilarian military rule, on the other: direct, popular elect vomew president Right now ih* appeal of direel elections is very strongublic lookingeader who tan galvanize ihe society and resteer tbe presidency lo its traditionally powerful, highly respected function Even under rdativetycircums'incm. there will be many pressure* on any indirectly elected president toxist itrevision that will out short hi* sli-iear term In favorow. directly elected president If economic ocesoactoru do not mrwUnriaUv nnbv Ihe endhirs* uraurei will probably become aleaott iritilitiblti 1

ForVilioni

n the last decade or so, the stale ol US relations with Brazil seems to haveroduct more of Brarillan perceptions of the respect with which the United States It (reeling Bruit!f the current level of economic well-being or distress. Hell (tors reached their lowest point In yearsor eaampor. despite Ihe relatively good privalt-srctor commercial and financial relations that misted at thai point, because Bead) felt lb* US Government was atlempting to dictate to it on nuclear and human right* mailers On lha othertiona have steadily improved over the last two years or so even atuoclalioo wilh the US-dominated

owtlnuillon el this trend toward frank, generally good, relations depends on whether these peiceptioea continue to hold Even if negotiations wilh the IMF and th* commercial banks become more strenuous latere believe tht chances are good thai relations will coniinuc on Iheir upward course as long at tb* Brailllaru believe the USis doing lis best to contain protection it pressures in the United States, benrouragrnglh* IMF and banks to br as forthcoming withs possible, and Is noi attempting to urge on Brazil any strategic relationships Of ioant actions lhat would tend lo cornpromia* itsforeign policy. Ai the Brazilian military returns lo focus primarily on professional pursuits, we better* the eenyortunitirs fot strengthening relations with it will br especially good if ihe United Slates can respond lo its profeasionallaat ion needs without pre* si:ring itay that would arouse its easilysentiment*

elators In ihe nuclear area areelicate balance There has been aome improvement over the last two yean or so ai the United States has become less CO-cerned thai .Brazilear-term p:ation threat

ANNEX A

FIGUEIREDO'S PROBLEMS IN MORE DETAIL

Thenrtirition nF Prevdnnl FiguriM-ilo hit

cr In of audibility With tbc fsmrlhan people over tbe lut three yean or solass are three fundamental weaknesses that would be key vubieiahllPles to any burraucntlc authoritarian political legimc but which are woeeltlh. darnaitnf to the governing captbiiAlct of the Figueiredo regime. In brief, the ability of tbe regime to rule effectively tt bring undercutharp drop ia available rownrcta, weak leadership from the President and his prireiwl liruienan'.s.rucKannve buceiueucy

Declining ReacurcM

2 Forrt three yean, the Brail Iran economy hai been in decline, iharply hmitina the resources available to the Figueiredo ndminutratitm ind under-mining pubbe conltdVoccbility to govern at Imrve aod lo improve/ Brad'i intercuttatus Grots doitvestic product fell aboutercenttainntedrd fell apprnnmitely another IS percenthese ate the fust years of negative CDP growth llnoi lha BratilUni began lo keepincome account! iner capita GDP abo dropped in all three yean. Inflation, on the other hand, was closeercent1in! roseltlrwemplov-

period to what are probably close lo hatorical ht&hn; br ihe and3 an estimatedercent of (he tabor force was affected Government Survey) havelhat real wages dropped2onfirming public belief lhat. lor tbe first lime sinceadian rconomic "miracle" beganeneral living vandards have dec lined.]

i. Branl'i tattmitsanal econemtc standing bat abo biIfortd In ihe but two yean. Partrculaily damaging lo ihe PiguMiedo governnseM. araactally hi terms of protectina the image ef BtaiileuMry in charge of Hi own dtstiriy. wu ihe need to have recourse to tbe Intevrvatioral Monetary Fund IMF!2 By lhat point, Brad limply could net rtrn enough through riportt to pay lis mounting international bins. In addition, turmoil in sntteneliocul financial market) had caused sources of new financing virtuaBy lo disappear, and Brad's foreign reseries arrc dropping;

dangeroislv low. Weighed downillion in foreign debl. Brad .nilore loan from ihe IMF in2 While ihe action came as no turpriie lo the Braillian public because it was the logical result ofinancialoriethelrv. was peeoefvwd as somethingational humiliation Braiilisn governments, civilian and military alike, hadoint of denying Bratil would ever submit itself to ihe conditions imposed by tbc IMI (or eccra to Its money ever since President Kubitscitk bad broken of! negotiations fee an IMF loan1

raill'i ralatkons with the IMF and commercial bunks war* very uncurtain3 at the government's inability to achieve certain Internalteals consistent with ia agreement with the IMF caused the IMF lo suspend disbursement ed ihe loan funds and required revising the Brad-IMF agreement twice. Both of lag revisions created an additional anti-IMF backlash ainong many political and bunness sectors in BraoL even among scene politicians wbo ostensibly ire supperten ef ihe govem-Callinilateral moratorium on debt -re heard from tome of these lectors ind. in (act. Brad) had3 billion in interest payment arrearages by tbe endrbis with US beaks was avoided eedy by iraMie tett-miswte ueeitUfm. with tb* IMF and hanks, whtcb secured enough money to pay off those aneaiagee that would have been more ihanhm ovttchve bveeenvew loan packageillion ncgotialcd with the IMF and Brad's commereial crerjiton baaarge part ed the external financing; Breiil will needut continued access to this money may require further tough domestic austeritywhich the Braillian public will be iMieu-iiilr loath to accept il domestic economicas ih* rate ofnot sec* show signs of tmptovnmenil-

Leadership

S Al long at Braall was tampering economically, at it did in the, most foreign and domestic otterven belieivd that national policy was in the hands of competent leaders. Even after growth rates began to drop off and inflation peeked up in the

e*

aftermath o( th* fiiji oil price shockoncern about lb* quant, of lcadcri In the Bioillbui Govern-

nwnlot widely eipreised.1 the ability of lb* militarytbe technocrat* who nuke andpotter probably really began to growear or so aficr President Figuci.-edoThe fir* male* blow So the Biaillians'in (he abuitv of theiroveforward on ihe path lo pandtza oceurredlo (be evident failure of Minister ofto adapt Branlian economicto Ihe consequence* of the secondelfim had the reputation oftemming Irotn hit dayt as economicBraiil was achieving double-dun" growlhHI* attempt to correct Branl*fortunes0 bv applying thepolicies that had worked well duringperiod. foflowedharp swing1 thai were applied in an uncertainfashion, brought widespreadabout whether technocrats knew what theyThese growing concerns were probablybv the abrupt departure fromolbert1 doihn InCokbery had served as top political adviserCastellond topredecessor. Pimidmt Einelto CeHelwas generally considered one ol thein governmentoMlnued, if{aberlara) of the political system thatevcMuallreturn to ctvlfcu controlson becauae uf policy differences withwith another close ptrudential adviser.Aguiar de Medeiree, Chief of theServicetimulated publicihe government's political astuteness andof its commitment to aberlvr*

6 lhc final decline Innrivpnts cretbtxllty and public confidence in BraaH'i leaden took place fehowinat Figuelredos return to office bi3it-week absence because of heart surgery. Figuetredo had en loved wide popularity dunng Ids first rran In office, primarily because of public appreciation of his clear com nut men! to carrying out the reocess of political liberalisation. By the fallowever, two yean ol recession had considers-bly eroded Its popularity and publicl hit kfadenhlp abiliiy. These doubts were eiacerb*ltd ins report) began to circulate {and were

7 At this point, the puhlic and alrnosi all imc elites have lost cct'ldenc* that Brasilia knows whit it is doing or that anyone in the governmentision of how to lead the country out of its presentOn the economic side, decisi^nmakirig at th* top and down through the bureaucracy has degenerated Into day-to-day stlernpti to cope with Immediate problems, hesitation to takex"tsibllity to make difficult decisions, and general drill andOn the political side, ihe President has clearly Inst control over bis own political party and tbe abtbty to impose hit tuccetaojj

ne of tbe prerogatives lhat Flgvelredo ihousrhl he was aranirVna when he aeeerned the ncewOcncv In

a* the power to choose or at kail have the lead role innext president a* hi* two moil item! predecessors had done. The first signs lhat his control over this process migbt be threatened appeared Inas It became apparent that the proaovernrnent Social Democratic Partyesult of the November legislative eketicoi. might lore Its malority in tbe federal congress, the institution which heretofore had functioned as an electoral col* bra* to ratify prtvloua miliury presidents' choice* ofo obviate ihii problem, the government quickly brought about oonstilutiorial changes lhatelectors io the electoral college from the state assemblies, thereby restoring the PDS's majority be-cause il was almiv inlaw in retain control el the 'late

legisbtiacsj

his strategy worked msolar as the PDS nowoting edge In the dec oral college What

T

and ml advisers hid not foeesenn. hovvever. -thai Paiakiewly ctectrd PDS federal deputy (torn Sao Paulo, would not wailit choice lot lha predaVney. Insured. Maluf beganell-furacled and aUghly jvof rational campaign to bet up ai many PDS eleetor-tl voles at i" could to Ihal ha could win ihn PDS riomlnnbOn forregardless of whatever prd-trtnee Figueiredo might eventually announce Per-haca in part because of ihn effrontery. Figueiredo hata known he lled to Mahrf Yrt hb failure to indicate who la hb preferred ciixbdtltcr to uw tbe Immense patronage and other powers of thr

presidency to stop Maluf have essentia! ly lalen tVe

cenlrol from him 1

lb* Bureouc-ocy

Of the three central prcUrnvs the Figueiredo government (aces, tbo one it is probably leas)for is ibe public perception thai the civil bureauc-laey has developed such poacr and independence that it is largely out of control Thbosl often cartcled agaimt ihe Maie-tnmed enter prists or "psias-tatak" Al Ihe popular level, the state enterprises are seen as baronies, led In many cases by retired mihlary officers who have gained vast wealth while heading these companies Tha media (rrauently play up ihe perouWes thm cars. taratMlve-avish parties) ciistomtnly acexrnipanyine these positions, claiming that Ihe state enlerprb* oflieiaU are flaunting these ttatui svmbob even as ih* real of ec-ciely ia having lo lighten beats because of eeetation and austerity. I |

ore lundamenlal level, th* autonomous behavior of thr state enterprise is, inasse complicating factor inffort to Overcome ils current economicThe role if lha slate tmerprtse in Bra ill Is greater lhan In any other latin American couniry. Thr loprazilianBt of Ihere parattatab.roup, they account (orercent of CDP.eecenl of domestic imvelmtrrl. andrf nonoil Imports Thev employ close to IS million people,00 lormer militery otfmersFn

he state enterprises haverucial role ia ikr economicofften taking on prefects ibal were too large (or the privalrandle or not wlfievr-rriry attractive as invesimeni risks They have been particularly suited to taking on the immense deveOopnu-atal leaks assceiated wilh the military's aliampi lo harness Braiili greal natural in Ih drive toward grandem As long a) it economy was otpandrog rtpvdly. ihey were very arxeoprlatr engines of change. Because of ihe momentum they developed, however, in favor cf gigantic eipcnditures o( money and human resources to solve problems, ihey have been very slow to adaptoaatrictiag eeoevorny.1or eumpk, as ihr overall economy shrank, ibe eipeedi-lure* of Ihr state enterprises grew byndercent, respectively Their2 percent of CDP1ercent inmalar sources of inflationary pressure Their preferential access lo domestic credit markets crowded out private enferprue at credit availability shrank, and their heavy fce-tgntheir share ol the foreign debt rate from7 lo almostercent insubstantially to Bratil'iThe Hate etrterrshies also coatlwued to hire new personnel duels* mow cf the tail three years, long after ihe employee rosters of ihe rest of the economy began lo drop as part ot austerity! |

epsrlredo entered olfice9 promising lo reduce lb* federal governments rcte in ihe economy. His administrationetted (he state ee-ercrises, which he and his advisers believed had become an large and powerful that the cumulative effect cf their activities could urtdermine overall ecceyamac policy. Ai part of that effort. Figueiredo9 created tbe Secretarial for ihe Control of Stale> t) under the Manning Ministry The new agency was charged with selling Itmai on the oataitttak* foreign borroutng. spending. Imports, and prices fot goods and services. SEST has had some marginal impact For thr firstonsoldated budget for all the stale rolerprism wu created, and twice lasteries of new budgtlparticutai-ry inordered Noriethelesi. the lf-Oaeaee cf especially the largest of the stateuch, and their role In ihe economy ii to well tnirnnched. ihal they are often able to avoid mandal-rd restrict ions. In general, ihey haw been able to maintain Iheir oceralioris and personnel renters, avoid sharp reductions of their official irtvetlrneni budgets, and protect their basic equities I

m

HE POLITICAL ACTORS

Al prnefil tbe cumber of roups with significant Rations! poli'ica! influence is Quite limited. The ruling elite today csaentiillv conthls of Ihe Picssdeot and his closest teehoocrjtit miliary, and political advisers,mall gr&ip nf pohtKians with whom tbe eveeuttve nssafl now nnJWiata in assure passage ci legislation.

? Most other groups, tnclurting the bulk of the military and businessmen arc basically bystanders in ihe poetical process At the system continues to open, ho-ever, (hate smsssps and others feasibly representing the middle data could become more active politically.Th* Ruling EBla

S Ai long as Branltrcng picstdcro. the locuspower within the system was centered on him and his closest idviseri hs the past, the latter usually Included the brads of theivilian and militaryh* Army (preeminent).and Airhe head of the National tr*dti*enre Service (SNR and tha economic caar (usually the minister of phrtnfcg) The Army high commaad (all tbe four stir generals) also carried major influence, especially on matters touching on (broadly defined) national leturiiy when tbty acted to protect the mitary's imtiluiioni! interests. The IrchnocraU were gi>en conatderable btitude In run the day-to-day business of crvernmeot. but, with the exception of tbe economic car. they did not often originate major policlm and their Imitative* aere usually suhlrxl lo veto bv the miliury. cktsinessenrn simllaitv rbd not often inspire new power, but their interests and those of the government were generally in harmony, and they had frequent aad easy recourse ro the sources of-whenompsaini Procrneinment poliltctttu were tolerated fas was an official opc-osition party) and were eipected to pass whatever legislation was called for by the

* The group tbst rules lodav no sorter* contains, e> en as junior partners, thend buiincn cntrepreneun In addition, the military highhat retreated ccotfderibly from Hs previous policy rede and attempts much lest often to eiert institutional iniluence Moil of the polltlcallv relevant statements now emanating from the generals emphs-sire their desire to renvoi* th* alutarv from politics, returning it entirely to orofessxeiil military pursuits.

K The reiniortshlp among those who remain In the rulingpresident and hi*hendchanted quite sharply. Decision ma king power, fort much more fragmented. Technocratslha miatdrtet and the state enterprise* now repinaeat. afterears ol growth and accumulation ofeparate power bate, no longer directly dependent on tb* military lor iheir positions and thdr authority. The politiciana. as an outcome of lb*transition back toward civilian rule, haver also acquired sepaiat* interests and an independent polltt eal bate now thai they have popular condltuanclns to represent and to answer to At thb stage in tho political transition prcent, there ii no center of gravity: the miliury it witbdra-ing from pohttts. the bureaucracy It Wrong enough to protect itself from outside control but does not have the power ofnd the politicians are powerful enough to interfere with the nuhrs of the eiecutive branch bat not yet strong v. wdl orgaolicd enough lo impose their authority, j

sulf ioient leadership to cope wilh even that amount of confusion if he eieicised ih* potr anilo him

hu tit eilmple. Idt Biucn ol uSe daily enures runnirat th* Office of the Presidency to hit SNI chief, Caneral Octavio Aguiai d* Madeiras,llngt with politicians and th* Congress to head of th* civilian household Lei tao da Abreu. and virtually all economic decision making to Pliming Mimste* Delfim Netlo The two problems alth this arrargement arc thai the throe adviten do not trust each other and Wave difflcidty ccordinailngnd that Flgueir-edo's relations with Leitao do Abrea and Medclros are mcreu^ngly poor. The growingetween FigueHedo and Meddroa tt particularly Import* it. It has allmlnaiod the possibility that Medelrcn

might be chosen as Ttajueiredo'* presidential nomine*.very stratawo yearsThe distance bet worn the two has aho reduced the influence ol the SNI ai an institution, especially in termshe policy retamtrwncUtion) the SNI had been aeeuaaomed to having accepted by previcu* military pre*seVott Fe gumredo ia aho en (angod from Vice ftesjdeiw Chaves.

7 The reeieh ol this disarray within the ruling group hairop In ihe prrdlctability of ihe decision! the tnlntral system yselda.both iht likiJy daretasn ami rxostrciuentc* id dtcieei nurd br ih* eaetutrw heanch and the pro bob il lanaent ol SnDslannn paaawj bv Ih* Cssnattaav TW eaten! ol the rulingighlighted by the nriassrl* 'hai took place reeenlly whileai luster* enough lo satisfy the IMF

The eaacuHve bianch had to issue the. live decrees wild progressively toiletedon how in i. I. wages couJd be permittedr.n pan iiilla'ion before it arrivnd at case thai could be used as the bnii for Bwroratiut nmn* sat itnh Congress

The tender ol the federal Cknaabi olember of ihe uiDgaiFDS. wasertil in preventing the esaeutn* frrenarticular parliamentary ttratrwy Ice pamng tha first venien ol Ihe decree law when it became clear it would not pa* vn Hi own menu

- For the first time unco the beginning of mililary rule, the Freaaaaasl waa amend into teal Beapxia-

h pulHIcsnna lo obtan passage of erwrtel

Irgislatan

ously

enforce the

Even newage bill has been pasaatt ttfirrrtaiary resgna ai lots preenasans for no* percaiing wan* rtare. on the .i- to increase falter thanon will be afjpKed equally to Ihe privalr and public nsctors or will be used primarily lo aitampi to bring down the latter's wanes In anv cant, there is curatdersbla doubt lhat the to-ttriiiieiit will attrmpt strenu-

limiting provisions

Tha Poatkol Clou

8 The prospects and influence of professionalhave revived strongly enough In the last year or so to be thought ol. afterears in the wilderrevt. as significant oolllital actors Stare ihemgiesilonal elections, when oppnaitiori parliessselorjty in thr federal Chamber ofha ge-ernrweni has IrwrnccL afbril slowly and often reloc-undy.sset treat oeeateaaa* at tsetoan partni-panls io lha gtiaaimetg process, even thniashhe Congress irseai resnaln fairlyrvsi it utvotu that can be PUj^ipuialtd by strong and deterinlnnl president*]

9 Kaa>oricallv. political tartars in lira ill have been artificial lop down crrariora. often nraUahad pri

aaafilyromote lha fortunes nl indlvsauel rsetW

caaaa aneolaiyiiraais of miaamsl laagawtanc* in sasdcrslandini lha poae-sai the partiei see hkWv to lag* en ataues. They often crouo Quite drears* iister-aats.nter into and kat ooalatawn easily on different issues, and. partly becaaa* ol their lack of tdralcajsral ler-or. lake relatively aaodeialf ralhat than oilianiui stands Their rrstmbotihipi are also frequentlynd parties usually aie composed of iidigroupa thai often are in combatihesr own leadership Th* hrariban Congrruh-ctsafltrv*od rraagh ramman ground and ntnnsgtb of corto ii alip aa owneisapesafal

Current Btarilian politKil ptttin and Ihehave these same weaknesses.. partly became ihey have been powerlessong and parity Iseeiaua* they ar*ave ol tremendous popular sentiment In favor of restoring civilian rule, they are lueoattlisDyarger ink in Use political process Sim* of their riergir. air ctaeumed by strung ihetorec focsnrd on atiaclih* governeam and th*ect its peaiese* ar* having no thebe tag af the middle cast and pot* Ihe oprassiren pauseseeonhinding rnotmkm decrying lha IMF austerity program andr*ak In relations with itie IMF These artivSiiei, while they contribute lo ihe prrceptiun lhat th* gnvernmetl is brleiguied. do not seriously alleet lelations between ill* admlnis-IralHsn and

Altrvough the fiie pouiica)cpreseoted in the Initial Chamber of Depjtsrs onrrnlbiv divide hMaaaa tSS asrsabera af thesanas FDS.aeasbers of four opejoutire padn this dtmrwacas basset hs practice The aaaiaitatriliin fre-qutnih findsust negotiates

cully with ihe Irwilavs of the PDS lo achieve Lawaae of

ketuilatioo is It dor. with Intdert cf threcause ronmnsiceitJ memberi of all pohl teal ttilpra have developed irwiitut tonal le-yahlwi to lb*ake priee-riv over put. ihflrrr-reei when, tfi UrumuVs with thera rub Ihr. fart iheir idilno* lamed'

It Una* bet-wee the parnet bate tax bece.ee idtnineaeaJ cavnsWx* tttaael litem are aa impreeuu. Botb aiatur parttev bet particutirlv the tanectpel orpoaliinn. th* Brut-Han Deissmeratsr ktovemtnr Ptrtr IPMDBI it* Mb emery hetrTeetencoui Rreuplnrp Th* PMDO. (or rumple,ong daoloaicil lamulrivet* entrrptiie-oewpied tlahttinlil krlt Th* PDS. while sc-mewbal lest divert* idrokulcttpllt betweenmaiorilr ilial Irndt In lupparl ihr lovrrnmeniute minority llheparal Ion*whet ue an cribcel oi ihe taminulitionI cec-nomtr praaetat aa art mac, in the (areaal rnapaMn

f the three small perbea. the moathe tceaebee Braarhan labor Part. (PTBJ. .tuch Kb enough irtm to ceovtde the govrrnnwnialm Itv In lha Chamber of Oepit leian heed lb* PDS In bran PTR deputies are not committed lo anr particular polilical philosophy and. ai wu dtmnaalrat-

rd In imiiirih th*-riwe* bill in

can tomer won over wilh appropriate rwirob an of Ian In lhat rait, they agreed towith ibe go-etnrrsrne la eartuusge ht* the peomaw ihal one of then memberitwld br named lo hradimnnlri an oflhat ihe PDS bat not ret aeha-nwd gVwgct* as standing aa lha aalaaaabtraea.aa rawttT-

Tha Mililory

or mow or Ih* bat iwo rfccedtv tnJnar. offlctri have eenerally believed iheM kievtuilonul Inlrretli wet* virtually lelentMal -ith theae ol iht government In partirubi. il wat bailc doclrln*n! nrwdid rapid accnamie development and re-uate (ronawtict in order lo nave oil ihreeti IreeaintpoaaetS abetted bv Cub* ted the SewsUi lessoej aad toeneue aftwrt at attain major power aaatea bv the ead of ih* eewtetv Ta* primary reaV af th* naihtan. an taaa ntunllaa. uea lo emapy many ol tb* main govt-nmenl si deiiuoo-melung of float, lo provide support for cielllea (ecBro-cittipply their developmental pulicin deeit.il challengt. and lo mainialn firm hierarchical dlaelpllne in aupport of the president and hit td.twvs

enior oHiim have become incieeiitiglrrbed bv Ihe tovemeaterTi Inch ol directand, particularly. Flgutwrdo's failure lo provide leide-ibi; dunne rhrnr but several mantle of iarr*mn*juejlui and pofacal aatiHtUvty They (ear ihal th* aaltaaty will be mart and more blamed far therobl*mi. thereby further daiw igma UsIn the eyei ol ihe public sibv orui In Argentina, ihey are alto concerned wilh clang popular reaction aeiinst corruplliici In government, some ol whichecitd at those military cflH-iaU

who bold ef line In ebt nua series and ilal* enlerpei-ws

Tata ccascern about rutiueaiosa ealewcb down ibroveh tbe rankv wtih mm* midrfle- and ninm-trade cfticrsi beginning to worry about (he effects oa thru careen ol loss of public cvteem for ihe military j

he Ureta cf being target-ulillc crilicilin b

creating some diaiensilm wllhin thr military Virtually all oil ken continue to support continued political liber all aal ion and n? return lo civ lain rule because they sec lhat avenue as the only way lb* miliiary ctn regain Ui peolrmiinal orsentMasn Neawtawknu. differ-meet ef cguruonsloped witaanear met bow to evaluate Fttaaaiedoi perfetasaaee aa Piea-denl Scene beheve he hataaitts andiitah* lo elacl hum to rhe olltre. Others beHfv* he hai don* aa well at could br ei petted ander dillicull ciroumiiaiscra Some Air Fore* and Navy olliceri are Ulter tnwaid the Army.wilhimi politicians thai poetre-vcJurion goveramrmi. led by Army ufficen. have ccaT-mlttndlundeis Ihal have cauaed the cn-otry to lute some of aa eccetoer.ie to'iriigagy aed tb* naahtan aaeae ef Is lyaust Istauot of (scan of al ae-nsee* aa* whaxeis with their yaw leaderu who appear to be eoVifl tke eariear acuaoowc crrsa. who may heorruption irwmteives. and who are net ipeetlna. out feecoliilly lo defend the military ficen whal ihese offf len unfair critlclunj^-

ITest sates of internal divuloe. Ihr Rr ail ban miliiary high command iemiim loyal to Fierurwedo. and hartarchkal discipline within tht raaht laarlier. there air lavaieS ae "ha ratflrcesi leftthe kasrhcr racas

around whom dfSe/unelrd olivets can rally time.

through tkillii! um of Ibe premnlitui pmema. Fieues redo and Army Minister Pireiewarded loyahv aad removed potent IIIew retiredhie timken In terms cf possibly removing Flaun redo but at this point ikev have virtually no inthsrnre

(tie active-duty senior officer thai lair personnel might have tallied aicoiil -head ol the Branlle military command and formal chief of the SNI in Bio dea the vetae of heing removed fiom hli command and foetihl,od bv tht Army Minister brcauieublic lemper tan tram with the media that einbarraned live Army. I

The Bunnell Community

nay i

raiilian buiinmsmen. now suffering ihtr>-ghcurth year of recession, are massively unhappy with the Ftgueiredo admlnMration. Math of the discontent ia tha natural outgrowth of bad business timet alier many yean of expartdmi markets and huh profits and prubably would have been directed at any aoverrrrrienl that had to adopt austerity pohele* to combat biob inflationevere balance-of oay-menu eranch AmbdnsinistralhNi feelings, already high because ol business perceptions of Inept economic aWissrmrnalrJng and eieeution by tho aovernrneivt,een etacerfaoted by businessmen's belief that DeUlm has failed toat leaat rwsjotitte strreucattlylenient conditions on IMF and commercial bank loans and, in particular, that Deltini bat treated the business communityavalier way. la bbear view. Branlia has moved from one stopgap austerity measure to anotherargely unsuccessful effort to combat receutoo. That frequent shifts In policy have disrupted business pUwiica.ide array of unevenly appted goeriinvent rrauastiuiu has made day-ioday business operations cxctcdioglyMost Important private bjsmeutren grrerilly (InckVdiDg tht rxrtentially powerful kvduMriellttt of Sao Paulo) beaeve they have bttle of the iniluence with Farseiredo and hb ministers that they had. andthey daseeved because of their general suppori of military rule, with previous admiiustrationi. In particular, they believe the coats of austerity have been placed much more heavily on the prtvaie sector than on the many biiiirseaac* run by the government They pereel -e. quite accurately, that tbey have had to absorb much more uremplovment. voueetr on profits, and cull sr> Investment capital, for eiorapfe. than have state erxeipewes In addition, they have come.lastccess to credit and toforejgn emhantomport billsj

.tachl

IH Int few months, whalevct WPtXat Ite.'e

mighl have once existed in the business ooanmunity fee

I'e IMF austerity program has largely dissipated Thereidespread belief that the program sets unobtainable talis, will be counter productive in thaii inhibit Industrial conduction (and thus eapmtil. arid does col allack what private-sector bwr-essmen consider the key ft metarriereturn to economic growth, the site of tbe public-sector deficit Many industriabls and other entrepreneurs fei.ently bellme thii no goseriunenl program lo being back even modest growth rates can succeed tsnbst ipending by state enterprises is brought under control on the domestic side and. internationally, the Braiilian for-eaga debt is restructured

p to now, business unhapplnos baa been reflected more in rhetoric than It hai in politicalIn Augustroup of leading Sao Paulo IrjcVmtrialuts dad release an unusual public lettertht harsh antirecession actions demanded by tbe IMF and acquiesced in by the govetament. and they urged Brasilia to counter the recension instead by simulating consumer demand In addition, tome of ibt congressional opposition to earlier lentoes of the tcneminent-ipceaored wage bill wai undoubtedly spirted by buslrtcsconstituents. Nonetheless, the Sao

Fauks Stale Federation of Industries, which is by far ihe best or (suited and most influential business ccga-tnaation In Brazil, hai not devekiped Hi own eompre-hemive program for ceanbatirag the rtceaWa. argued la favor of any of its own mtmben at prassshle substitutes for the current economic team, ce tried toniied front toresidential candi-Oalt sympathetic io pilvate-sector Interests^

Tht Othar Svn^tmdnrt tone*

SL From time to time, organised bbot, which represents onlyf all Brarllien workers, gives tbe appearanceorce ready to break mil of Its arstorfcallv weak pmltton and to eaett meet Influence rationally, both on bread-and-buttor bbor Issues andational pohtical actor..s the pohtical lyttarn began to open and merit became more tolerant of the potent sillyactivity, workers struck successfully in record risen bees foi higher wages and belter working eondi tiont1 the level of union activism and rhetoric bad eecvluled to the point thai Labor leaders were meeting to attempt toingle national labor eredcdeiaiion,rominent former union chief. Liii InncSo da Silvt (better known asas In

the mtdu ol organlilaei BiiBi't firi* grassroots labor patty. Ih*etty 1PTJ |

beurwere not wllnoul remits AL- pnauiltalrd bv Brasilia in Novembercoeuudmeboi kbuthitd "fsu oa'tialS tfuauleSadail Ubor pence And Lola, urine the-Ii pottliraJan For foventc* ol Sao PaulaNoi sen be-events

war* lo danaonttratn thai ceganliedailc weak-

inaUiiii ol iu leaders lo galvan.r* wnrkrn

io be

bdand comrub. Irarrliuaraaaarand lb* lubaar umc* of afltoaa lo lb*ed^l*or tigunoar. eVuaate the dectuw in real wattet. workers have hacrune uiiieaiir.gly rrliactanl so risk their taht bv thiealeniro: walkouti at uriemrsliryrneM bu continued to riar. The hrrrilent Hept toward hbor moreover, have (altered ai union burden have apke into two atwupe. racko creuWj ooan-petlng rai-ienl labor ceoledeeatiUra. On ike poli-aai ude. Lata'a run Ie* ajuvuiaor waalukari Ha re-reived onlyercent ef thearl and tosld ma even carry torn* Sao Paulo nd an rial treat where PT-affiliated ucwont were supposed to be strong. Nalkml-Iv. (lie PT did elect eight htderal deoutln |iu (rom Sao Paulo) but It thnwed bltle ttreaith ceiltttW in hoene ttatc. Al prrurnt, ib itrreerih doei not teemread wtarfe. if it ruwlin.aa. nilakeual petty after thettrtlceu. Arectdouj to cjrrenl rtnlceal ruses, al partita muat poll alercent ol th* total >cteinimum of biu* aapaiat* itutta la thetction to retain Iheir regiiiisiiuo The PT rtacbed ihal floor In oslv ihrt* vtatet

he main barrier to tbe cvoJjuon of (eaaruied Uc-or into anprJ-tlral ac-ftsr Ii tke rUeot to arkuchynuwat Lieut ima passed in the lOTOa. which remains baawalli la force today, presentee the ilruclur* ol union orunJaatHn and th* permissible scope nf lahort political and

CCtnoOHCactivitiesiteilinli the lilor

internennaaent butraurrarv which nunltcn union actlvilita ltd hat ihu power hi e. phase aad even remove unon leaden lot' illegal" acta ta addition- da* bJk ef eaaoo funds come Into the auttrnauiH. end atdy itaawapprovtd urMonioney Ucet tariportiist. lb* rank aad fib accept thb pelron-cwent association ai the prapet relationship between gnsemrnrnt and labco. andittle lertimtnt in (avoe of chine)ri| il drauliwllsj

TH* Middle Chan

hand economic trrow-th in the lit-aaane aed larraaaiaadyeioVJh ehua waark eatf the la* two Mart ar to. evovldcd aiueh id th* political baa* for lb* military/ ttconooratie rtaiaee Thb croup la etllmaledinion people, or abouterieul cf the peculation Miutl< rmploied in tarvieei and in-duatrv. the nuddlr chats recMvaa more than ooe-thnd of tbe coantrit pennnal income aad account! Ie*

The maSdkt da. haa been hit Mttlcuearlv hard byman aed bv tba coveruH*rri> poll-ciev The aovommenlt wag* policyhich aalard on irWryctim cost-of-ll*rni uvtttaiel for thoee in the mirlille and upper lalary bracketiun* ef aceeaeranrti IrHariaa, hatemiikceM leea cf incoua* They ecuacl leaa aauwaaaroer rent ef Ihatr caareaibaB puechaaiaai power cbeiea Ihe ntilhe rale of pricert. which reached moteeecerrloei net iferline.ontinued iu* mi ururmteoy-ment and undernniplovmeet among Ihe middlelto likely In ihnnr circuiMUncaaQ

TheiiatnMaM cf tha group haa aaready bad ekrai Ifcewak hcnXrd. pDlrieal repercuj-uVMt It urufcuoeedlyejnrlicM role in tbe November IH2 riMtinru, when middla-lecum*shifted in la re* numbers to the oppmitkm., Combinedote cf Int privileged groups, enabled opaositijn parllnt lo gain control of HritJl'i wtalthietr and nvveutn The eHwvwayn* of them cseituwrrti abo cvoc-blr roeUrauiUrd to efevtueaa in the PDS ltd th*of oppoaitvan parturs as Ihey resiled jutal ame-nmenl eflarti in the faH3ats in* new -age-restraint leajslttlon. Direct economic protasis by the meddle clua have abomore Irtouteil In May andany homeo-ren ihrratrnrd not to pay rtaing moe-gaee peymeoes.il mcvuntv strsack Ice Kg*it par aad sub trerarrv Thrvaaantty of atate-tsstetprue taaalwaaamirldl* ehua and wekV paecl aVmnautmted aatairsst cuts in budgets aad coai-ixnsatieei[

wo other nuiet eoncerm of tlie middle class are the rue in crime eiper-enced in most Mies in the last year or so, butio de Janeiro and Sao Paulo, and escelanng corrupt ion Informal polls rondurerd by the media indtcuie thai almost everyone

imcrviewed hu been of know* someone who hu born ruhlird.orruption, many people feel it hoi reached intolerable proportions In port, this ii due toperception that lhos* mutiny officials who paiiKipBte In gpiernmerii have become tainted, an imag* which eonfteti directly with thai which the

tnililaiy helped iiarad when 11 entered jowrr ir-

itlramint ot moraJiiiiia fore* with th* duty of eornballrat nich influenza in redely, la part, the reaction against corruption hai abo been cauied by In perceived maspiitude and pci.isi>enesi Thereeneral belief that no one In th* public bureaucracy will do anythingribe Thii beeoax* particularly difficult to accept ai dnpotahle incomeiter for those In the private actor than formployed by th* government P

onsidering the strength of middle classagainst the govemmeeil. what is perhaps moil ncteworthy has been the relatively restrained politico' cotisetiueiicea v> far ol their unhiBpirevsentcv. iheiiiiic.it haa diverted part of tbe ariger by nuking small, even if complete!v* lnadaouete. getturei in the direction of dealing with mm* of th* problems Ihe governments of Sao Paolo andor etimple. have increased police patrols in the better parti of towns and have mad* big media exnli out of the delivery of small amounts of already ordered police equipment Much more important, bo-ever. is the fact that middle-class Braitliaas, even when their rising eipectaiioni ar* bring frustrated, tend lo focus thdr energies more on finding private ways lo cop* with the situation than on organising public ways to thing* pohesrt or offkiih The rrsctfon of mlrrdle-

iriixTir (am-lieseconcenic diltteii. if.as

focused primarily on culling cash eiptnseshrough paitiCipauon in the rapirily eipandingbarterenerar.nstomc through emplovinerrl of more family members or. second or even third jobs for Ihe main bread-winner, and searching out inccoKrus ways of beating thea* discovering pretests forforced savings from ihe National Housing Bankf"

Th* [xtrgen* left

E9.almost any standards, the est rem* left In Branl is remarkably small and weak consider log the fertile ground for ris acthsiics that might he thought to eiiit because of the widespread and growing economic discontent The majority ol Braillians.aillmn ar aboutercent nf the raspula-

impoverished and have been growkna more

so in thr kit Iksraa yntra Tknt ranks havesVd by scan* who had reached th* lo-cr ranks ol th* naddke clam aadassssl* hacaaa* cf atsssaa-ptcveneat. have falra back snao ihrcoeae groan Pricearttraawly far food,ieaaedieawid*3 hnwa rspeciaBy barl th* poor Aermdlaai In lie Bern fain press, the minimum wag* will not bey enough feed for even on* adult al turteni price*.

espite ibeir growing ecoromic problem<the poor, for the most part, remain unavailable to the radical left They are generally difficultrgarnae foe anyIn the urban slums, unlike In several other Latin American countries. Ruhcr than being attracted to leftist values and causes, most of the poor ai* mor** rustfor (hose at the top of the bwer income spectrum. In aspiring to middle-classthey are In taking to tbe streets to agitate against tbe

h* foods!cee lootings lo April and again in September and3 raised the pambihly that th* poor might be becoming more volatile. These .letings. brnvevcr, aire generally not accompanied by violence, were fairly isolated and contained by thes, and probably acred moreafety valve for hungry people (particularly sine* the police didhan they didarbinger of more widespread violence to come. Q

St Even l' the'and theed rnvddte

dots) war* mot* suscaptihle to leftisi appeals, tha radical left in Braiil is notosition todvantage of growing economic and social discontenL The one possible leader on the left who might have national appeal ts Leond Brixola. the Cove-root of FUo de Janeiro Britoia. ei-Prendenl Ceularlsn-lawormer radical leftist who had his political rights canceledlimned aby winning the governorship In the November clecilnns with widespread popular support. Since that time. Ins imaae as an effective leader hashowever. Polk indicate that many people in RM de Janeiro.he lower classes where be was strongest, believe br hasery poor governor. In addition, he ha* alienated many on the left by bis refusal to speak out against the Figurircdo idnslnatra-lion (which he dependi on for the resources to run his state) and by the way he bat maneuvered in state

. weikin* vote* from tht center in tbe Kale legislature at the coat ol hu cad-lane, leftist suppoitms BriBola's strategy it to build suijpori in the center-Mi. hoewng ihii he can run lor preii dent whenever direct rteotioiH aie held, Most military oil iters remain strergjy eppened lo tha prospect, however, end Bei-job hu made no progress inational polllienl ban* or in raising ihe murer hr would needaiional uropaianj general labor itnleational student strike or to sponsori barvret- Its It Utegy ts lo ptav for the mucherm, hopingeturn lo civilian ml* WtC evoitaany allow It greater freedceri of actton

Internal diiarenlun and taiht lutveillanee bysecurity and intelligent* ma* minidiminish Ih*olerrialr>it.ulrecently aior rumple, IIthe San Panics Slate Central Committee werefrom the PCB fur cvtnsiisg thepa bin And eailaar, InheFederalidedh Coivains ofarresting many rreranbars of thr national

therwa leftr* was prcoperingW row man an Party af Braasl (PC da hX a

Trotskyrle (ftwssaiti Ha aat)growpaf

aree iswaafcawi and See

of irreet ran iraf^ntftsr* knstnap ir Sao Paulo inat it too Id cssiei no crrdll forhtrd (roup,r.ober

Bevoiuti isn ary Movraneatt abn barely anvt

After atlrmpt.ng. lo ruo threefor rlection in th*oll! into three giuisps One leaned ihe PMDB shortly after the election, and iW swordth* PCB Inhird faction of ZOO to WO remains active in Suo Paulo and ii ill em pi (tie. without much taiecea. to become InJiyjcntlftl tn the popular miricrrienl fortliOfll|

ST. Active foreign involvement with the eitrerse left In Braiil appears tu he mmiitvsl What little evidence asms of Soviet and Cuban atUudes toward Brazil Indicates, for eiample, that neither government believesuch hope of slimulailEg significant popular agitation against Ih* Brstiuan regime any tim* soon The SovWti almost cerulray agree wilh the PCB's eiahmlim lhat iheir only chance for eiiandrd Influence la to tag alone with the legal opposition, hoping that the (lunarivilian-cent rolled political system ail) eventuallyts benefit. Theome trtinlnn hi Cuba toembers Innd may have funded the training and travel to Nicaragua9 olctivists who fought wilh th* Sandinistas against ihe Somen gov. eminent With the virtual demise of tbeow. however, that cgvporiuniiy no kmger exists

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