THE OUTLOOK FOR BRAZIL

Created: 8/8/1961

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NATIONAL INTELLIGENCE ESTIMATE

THE OUTLOOK FOR BRAZIL

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THE OUTLOOK FOR BRAZIL

THE PROBLEM

To estimate the situation in Brazil over the next few years, with emphasis on the character of the Quadros government and its foreign policy orientation.

SUMMARY AND CONCLUSIONS

Brazil the pace of change is greater than in any other Latin Americanexcept Cuba, and its national sense of achievement sets it apart from the rest of the continent. Brazil is conscious of its growing strength and population, and powerful drives for more development and international standing underlie thepolitical and social ferment. Consequently, Brazil's relationships with the US and the rest of the world are changing swiftly.

Janio Quadros assumed the Presidency1 following five years of headlong economic development under President Juscelino Kubitschek which went far toward modernizing Brazil, but cost the country economic stability. Theand free-wheeling Quadros was the popular choice to rescue Brazil from its economic difficulties, to set theand administrative house in order, and to enhance greatly Brazil'sprestige through an "independent" foreign policy. He has restored aof economicbyexternalhasood start toward introducingreform and reducing )

The financial problems the Quadros government inheritedarge foreign and domestic debt, and serious pressures on the balance of payments. However, Quadros will probably be able to engineer some improvement in the Brazilian financial and economicover the next year or so. He isto press for additional large-scale external assistance from the West and will also accept Bloc trade andoffers when he thinks it will be advantageous. )

Despite his auspicious start Quadros is finding it difficult to make rapidon Brazil's main problems, and the period throughhenelections are scheduled, will be critical. He has already encountered criticism from conservative forces,the military, the press, and the Church, primarily on the ground that his foreign policy favors the Bloc. In Congress, he cannot countorking majority and he faces other difficulties in

dealing with labor, and theVice President, Joao Goulart. Both the political parties and the laborare fragmented and can mount only comparatively weak opposition. Also, his conservative foes will probably beto run the risks of immediate action against him. On balance, however, we believe Quadros will be able to maneuver more or lessree agent until after2 elections.)

The outlook beyond2 elections is less certain. The congressionalwill be the administration's first major political test; should the outcomeote of confidence, Quadros will be less dependent on manipulation of existing political groups, and will almost certainly step up his efforts to reorganize and reform crucial phases of Brazilian national life. We believe that he will be successful in carrying outadministrative reforms in an atmosphere of financial stabilization. Moreover, it is likely that he will obtain sufficient foreign assistance so that he can claim that he is maintaining arate of development. Also, Brazil has been for many years one of the most politically mature countries in Latin America and its record in this respect weighs heavily in favor of Quadros. On balance, therefore, it is probable that the Quadros administration will stay in office until the completion of its term

The Communist Party (PCB) and its pro-Castro allies will probably be able to keep the poor, rural northeast inThere,memberLeagues, led by pro-Communist, pro-Castro Francisco Juliao, haveowerful force for social agitation among the rural laborers and tenant farmers. In general, the Communists will probably come into increasingwith the administration, particularly on stabilization and other matters ofpolicy Quadros, however, will probably bear down on them whenever necessary to maintain order. In view of this watchfulness, the Communists and their pro-Castro allies are unlikely toerious threat to Brazil's politicalover the next several years.

The largely pro-US armed forces will continue to be the major limitation upon Quadros' freedom of action, although they will continue to support hisand economic reforms and probably willonsiderableof neutralism in his foreign policy. Quadros' authoritarian bent probably constitutes the most serious threat to his survival as President. His determination to impose his own policies, together with his high-strung temperament, could lead to some hasty action on his part which might cause the military to lay aside their preference for constitutional order and oust him. This wouldikelihood should he move recklessly to reduce the special position of the armed forces, or to abandon Brazil's ties with the West, or should he take definite steps tohimself in powern contravention of the constitution.)

Quadros will almost certainly continue his unorthodox methods toore important role for Brazil in world affairs Although he is unlikely toull-fledged neutralist position, he willdrive hard bargains in future

tiations with the US. It will be difficult to persuade him to renew the agreement, expiring iniving the US rightsuided missile trackingon Fernando dc Noronha.Quadros is unlikely to jeopardize the basically close ties existing between the US and Brazil, although he may riskthem to considerable strain. Should his ventures Into world affairs prove unrewarding, he may be disposed, from time to time, to Improve hiswith the US. )

uadros is committed to respect Brazil's inter-American obligations, and seems certain to insistey role in any important community action,his ambitionstatesmanbeyond the continent. He will almost certainly continue to oppose OAS or US intervention in Cuba, and isto turn on Castro as long as the issue provides him with considerable leverage with the US. He also hopes to develop closer ties with thenations, especially the Africans; thus, Brazil is likely toore anticolonialist spirit in the future.)

uadros' eflorts to demonstrateof the US have resulted intrade and diplomatic relations with the Bloc. He will almost certainly re-establish diplomatic relations with the USSR before the ende mayBrazil's delegate to vote for the seating of Communist China atession of the UN; eventually he may go so far as to establish formal diplomatic relations with Peiping. To the extent that Quadros can obtaintrade and economic assistance both from the Bloc and the West he will, by his example, encourage other Latin American states to seek closer relations with the Bloc.

DISCUSSION

General

pace of change In Brazil isIn any other Latin American countryCuba, and its nalionul srr.se olsets it apart from most of the restcontinent. Blessed by largeand power resources, Brazil'shas scarcely been scratched, andways it stillrontierHowever. Brazil is conscious ofstrength and population, anddrives for more development and athe international sun underlie thepolitical and social ferment. InBrazil's relationships withand the rest of the world are

razil is the largest country in Latin America both in area and in population. It is about the size of the US and its population of someillion is growing rapidly. It expected toilliono Brazilian statistics, over half of the population isremainder is mostly Negro and mixed blood. Brazil is stillrural; aboutercent of itslive in the countryside. Nearly half of the populace livesew hundred miles of the Atlantic Coast (seeheis especially dense in the southeast, where theconomic activity isthe vast Amazon basin in the north and the central western sections of Brazil are sparsely settled. More thanercent of Brazil's population is underears of age. More than half is illiterate.

Latin America, Brazil has an(or political stability andconstitutional and representativeNevertheless, like most of thecountries, itation withof poverty and wealth, ofand sophistication.been rapid in recent years, butis still dependent onsome mineral exports. The ruralvirtually untouched by change,fuel supplies, andare far from adequate.

B. Recent Political and Economic Trend*

Over the last five years Brazil has been deeply involved In an ambitious program of economic development undertaken byJuscelino Kubitschek. whoears of progressisstressed the construction of roads,power facilities, petroleum refineries, an automotive Industry,ewthe hitherto neglected interior. Development was also the keynote of Brazil's external policies through Operation Pan Americaroposaloint crusade against underdevelopment in the Western Hemisphere.

Kubitschek made considerable progress in development, but at the cost of Brazil'ssolvency.9 Kubitschek refused to accept an International Monetary Fund (IMF) proposal to reduce subsidies on certain essential Imports US unwillingness tonew financial assistance to Brazil in the absencetabilization agreement with the IMF led to difficulties in US-BrazilianIn addition, soaring Inflation andlarge-scale corruption spurredsocial unrest.

All of these factors intensified economic difficulties, and thus created widespreadthat it was timehange in national leadership. However, as Kubitschek neared the end of his term and Brasiliaeality, the President's personal popularity rose and national pride swelled.

II. THE CURRENT POUTICAL SITUATION

Janio Quadros' resounding victory in0 presidential election amounted toa personal vote of confidence Hecorrectly tbe national yearning (or economic stabilityeduction of ad ministratlve Inefficiency and corruptionrenouncing further gains in development His past accomplishments,erm as Governor of Brazil's most important state. Sao Paulo, were sufficiently impressive tothe electorate that he was the man who could set Brazil's financial and administrative house in order. Quadros' huge pluralityhim with unusual strength andand left him virtually free of party or other commitments.

Quadros' campaign was skillfully shaped to appeal to conservatives while making gains in leftist and radical nationalist ranks. His promises of sound monetary policies and far-reuching reforms In government attracted business and middle income groups. Sao Paulo's influential bankers and industrialists were Impressed by promises of undiminished progressalanced budget. Quadros gained additional conservative support and access to national political machinery bythe nomination of the NationalUnion (UDN) Party. By attacks on the shortcomings of the Kubitschekwaste and graft (his favorite elec-Uon propeglect of public health and education, and high living costs, Quadros associated himself with theurban labor vote His promises oftrade and political relations with the Bloc, and an "independent" foreign policy, appealed to the left and strongly nationalistic elements.

On entering office. Quadros set the tone of his admlnstration by demanding sacrifice and hard work from all Brazilians and movedhirlwind pace to Implement his policiesost of reform and austerityHe dismissed upwardsne-year freeze on federal hiring, cracked down on the multi-million dollar coffee smuggling business, and Instituted exchange reforms affecting certain

important imports and exports, includingMoreover, Quadrosubstantial reduction in federal expenditures.

Nevertheless, in the short time since the new administration came lo office thoof Ihe President himself and some of his policies have begun to dampen the initial widespread enthusiasm for Quadros and to provoke new political tensions. Quadrosomplicated and controversial personality, whose flair for showmanship and emotional oratory often obscures hishrewd politician and successfulEssentially conservative inaffairs, be is liberal in social matters, but defies attempts to labelolitical lone wolf with pronounced authoritarianhetrictly one-man showof any opposition, and has proved toaster of the art of divide and rule.

A "Braiiluadros sees himself as the symbol of national unity and purpose. He is certain of his ability to lead Brazil to new heights on the international scene, and In this wayrominent niche forin Brazilian history. Apart from his political predilections, Quadros' behavior is to someanifestation of his erratic personality; hean noted for emotional outbursts and an Irritable and moody nature. Friends and foes of the new President have often charged that his definition of Brazilian self-interest hinges on what he believes is good for Quadros. His critics point as one example to his plans to Increase the power of theoffice and to cut the armed forces down to size, both literally and figuratively.

Quadros has appeared impatient toPresidential dominance over the armed forces and has instructed officers to stay out of politics. He has put those disobeying his orders under house arrest. These actions, along with budget cuts and personnelhave resulted tn rising discontent in the military, which has traditionally enjoyedautonomy. The majority of the higher ranks, believing close Brazil-UScooperation lo be essential, is alsowith Quadros' foreign policy because it fears he has moved too close lo neutralism by treating the US coolly and expandingwith the Bloc.

ong an important stabilizing element on the political scene and largely devoid ofand party loyalties, the Brazilian armed forces are publicly committed togovernment They are, however, disposed to intervene in politics to preserve established institutions, as they diduadros is aware of this and has acted to blunt their criticism by assigning to thea prominent role in rooting out graft in the government

In Congress. Quadros cannot countorking majority, since parties now aligned with him hold only about one-third of the seats- Brazil'segal parties are in general all highly pcrsonalistic. and only three arc organizedationwide basis. There is increasing factionalism in all of the parties, partly due to their heterogeneity, and partly to the bitter competition among party On the other hand, the profusion of parties and absence of sharp ideologicalamong them have frequentlyIn coalitions for short run or local Quadros will probably exploit this condition, as well as widespread allegations of corrupt practices by Congressmen. the present Congress still has overonths to run. and it reflects the electoral strength of the parties as it was nearly three years ago.

Quadros faces other difficulties In dealing with the organized labor movementofocals affiliated with aboutederations or other independentstablished under the Vargas dictatorship, the trade unions were modeled on those of the Italian corporate state, and as such becameart of the government structure.1

Sab*equen--lT. ther wondegree ot latitude in eonducUn* their own affalra. but thehit the hint to grant or withhold unionpprove elected officers, control union Income and expenditures, and determinewka ha* the rtfhi wAlao. atrteultural worker*l wr.-nt* are not permitted to join union*

Moreover, since only aboutercent ol the estimatedillion members paid dues, the prc-Quadros administrations were able to make union leadership heavily dependent upon the federal government for funds and patronage. The Braxilian Labor Party (PTB) acted as the agent of the government in channeling funds received from the Ministry of Labor. Commerce, and Industry (and the social security and pension agencies) to the labor movement, and thereby enhanced its position among the workers. Quadros' efforts to win mass labor support and to neutralize the rabble-rousing and fellow-traveling Vice President, Joao Ooulart, who is also head of the PTB. have resulted in recurrent clashes between the two men.

he President has also encounteredfrom conservative forces, the press, and the Church, primarily on the ground that his foreign policy favors the Bloc. In addition, his austerity measures and occasionalwith the press and radio haveaffected Influential groups.

eanwhile, the President is finding It difficult to make rapid progress on Brazil's main problems despite his auspicious start. Even though he has already secured from the US and international bankingin new loans and postponement of debts, there are enormous obstacles to maintaining the momentum or development. Publicover continuing price rises IsChronic budget and balance ofproblems persist, and state and federal agencies are flooding Brasilia with rcquesis for funds.

Quadros is confrontedpecial and urgent problem in the economically depressed northeast, which comprises one-sixth of Brazil's land area and includes about SOof the total population. The inland area (scrtflo) of the northeast suffers from chronic drought, while in the crowded sugarcoastal area, land is unequally distributed and badly utilized

Quadros is quite properly fearful of these conditions which are already resulting in rural agitation and unrest and he is trying hard lo follow through on his campaign pledge to take prompt steps to improve the lot of the peasant.0ear program drafted by Celso Furtado. head of SUDENE (the northeast developmentarious local revenues equal0 million are earmarked for developmentS grantillion in the form ofocal currency funds Isextended for various small-scale projects in the urea and more massive US help may be providedonsequence of the recent visit of Celso Furtado to Washington.

he Ligasumberingnd led by pro-Communist Francisco Jullno, haveowerful force for social agitation among the rural laborers and tenant farmers. Juliao has visited Cuba andChina, and the Leagues are heavily infiltrated by Communists. Many of their members are sympathizers with the new Cuba. They are the only organized peasantin Latin America looking to Cuba (and also to Communist China)odel of agrarian reform. They are organized ingroups in villages and on plantations, andorps of lawyers to defend the rights of tenants; the leaders use their Influence on the peasants to whip up revolutionaryIn the area.

The northeast apart. Castro's impact in Brazil has been slight and has declined from its high-water markctively pro-Castro groups are composed chiefly ofand their sympathizers. Much of Castro's strength lies among the students but even In this group his ardent supportersmall minority.

The illegal PCB is in no position to challenge theongstruggle has cost It severely Inand numbers; Its overall effectiveness has declined. However, itsembers, drawn mainly from intellectual and student circles and industrial workers,isciplined

termed the Sontdadef-aiarla don Plantadores de PcrnamDuco (SAPPi

hard core whichotential for more effective action against theThe Communists opposed Quadros in the election despite his pledge that he would not oppose legalization of the party Athe has the Communists of! balance through his policies of recognition and ex-ponded trade deals with the Bloc, and the party is divided over the question of whether to support or oppose him.

III. THE ECONOMIC PROBLEM

Brazil is one of the two or three most highly industrialized countries In Latin America and has by lar the richest potential of any It is moving out of its traditional roleroducer of raw materials and Is now largely self-sufficient in essential consumer products (major imports are wheat, fuels, and heavyhe modem sector ol the economy, centered In Sao Paulo and vicinity, has demonstrated great vigor In the pastor two and produces aboutercent of gross national productevertheless, in spite of Brazil's wide range ofand the abundance of its resources, the country Is still underdeveloped and. although the economy Is expanding and becomingeconomic growth is uneven. Rail and road links between the coast and interior are few and far between and even those along the coast are largely outmoded or inadequate. There is no through rail connection between the important southeast industrial complex and the rest of the country, and, apart from the Amazon, rivers are little used for transport. Meanwhile, rapid urbanization is straining public sen-ices and giving rise to serious slum conditions. In the decade0et movement from rural areas to cities and towns of about three and one-half millionoccurred: since then the rale has been greatly accelerated by waves of migrants from depressed areas.

Agriculture and related industries employ more than hair of the labor force, and earn almost all of Brazil's foreign exchange.for domestic consumption has, however, barely kept ahead of population growththe past decade and in the northeast and Amazon regions, farming at scant subsistence levels Is widespread. Moreover, agriculture is generally backward and mefficient and only two percent of the land is under cultivation. Poor land utilization, uneven populationpoor health conditions,igh degree of Illiteracy stand as major obstacles to Improved agricultural output.

Brazil has extensive mineral resourcesthey are largely underdeveloped as yet due to nationalistic pressure againstby foreign capital, poor railand other factors. However, Brazil isa leading producer of strategict has about one-fifth of known global Iron ore reserves, much of whichan extraordinaryercent of iron. Its high grade manganese reserves arelo be overillion metric tons, fourth largest In the world. However. Brazil lacks coking coal and produces onlyf Its crude oil needs. Presentand exploration give little hope forincreases in crude oil production,there are some possibilities in theof the extensive Parana shale oil reserves. Soviet interests are already dealingrivate Brazilian shale oil concern in Sao Paulo state.

Brazil derives aboutercent of itsearnings from agriculture, including chiefly coffee, cotton, and cocoa: all hare been hit by declining world prices. Coffee alone provides aboutercent of Brazil's export earnings. However, with the weakening of the world price for coffee, earnings from this commodity slumped1 billion63 million0 Byhe government had stockpiled aboutillion bags, yearly world consumption is aboutillion bagsThe Quadros government hasolicy of eliminating the worst

"They include beryl, mica, monazite, quartzrutlle, tungsten, cantallte. and ilrconium among others

'nnual quota for tale to tradition*:determined by the International Coffeeillion bags, lu annual crop varle* fromoillion bags

aspects of the coffee subsidy arrangements that contributed to overproduction andof large stocks- The new policy aims at fostering the production and export of high quality coffee (only aboutercent is now of exportaking uneconomic plantings out of production, and freeing land for other agricultural output.

The postwar period has been one of notable economic progress in areas other than agriculture, and record production andlevels have been attained. The economy was spurred on6 billionprogram andustained high level of foreign and domestic Investment. GNP in recent years has been growing at the rate ofercent and0 was aboutercent of total Latin American GNP. Investment In this same time span has been nearlyercent of GNP. Although much lower in certain areas, such as the northeast, overall per capita income Increases over the last decade have averagedercentooming population growthercent annually; average annual per capita income Is

The Quadros governmentarge foreign and domestic debt. Quadros' most pressing problems have been to refinance Brazil's foreign debt5 billion, of3 million was due1 (as against total estimated exchange earnings ofnd to obtain new development funds. He had to grappleudget Imbalance of nearlyercent while attempting to bring down the cost of living, which had risenercent from0 to1 in some areas. Moreover, he was forced to deal with the balance of payments deficit brought about in large part by inflationary credit and exchange policies, including subsidization of several major imports.

In1 Quadros cased his financial problem by negoUating an aid "package" of3 billion with International lending institutions, US Government andbankers, and other Western governments, to assist In meeting his ImmediateIn addition, he launched histo secure new markets for Brazilian commodities and to seek nondollar capital goods by expanding trade links with the Bloc" and with Western Europe. In an effort to balance the government's budget and stabilize prices, he has reduced borrowing from the Central Bank and proposed drastic newrequirements for commercial banks and measures to curb inflationary private lending. He hasree-exchange system, eliminating former costly trade subsidies; has begun to curtail government payrolls, and to reduce official graft; and is attempting to place Inefficient state enterprises, especially the railroads,ound economic footing.

he financial reform instituted byplus the foreign aid packagefrom both the Western countries and the Soviet Bloc, will probably bring about anin the Brazilian financial andsituation over the next year or so.grumbling over austerity measures will be softened by flexibility in their application and

US agreed to reschedule payments overears ofmillion of Brazil'sQ million debt to EXIMBANK. and to provide new credits8 million. US commercial banks agreed torepayment obligations4 million. The IMP agreed to reschedule0 million debt and toew standby credit0 million. Inumber ol European countries agreed, In principle, to extend new loans0 million, and Lo postpone exlsUng obligations amounting to0 million. In the periodrazil obtained credits amounting to overillion from the IMF, the US, and private US banks, but the pace of developmentradual worsening of the terms of trade In those years ledepletion of Brazil's foreign exchange reserves.

1 Brazil has signed ortrade pacts with Albania. Bulgaria, Rumania. Hungary. Poland. Czechoslovakia, and Bastclaimed to provide lor total trade goals4 billion, cumulative, over the next five years. In addition, an agreement calling for total tradeillion over the next year was signed with the USSR and trade talks were begun with Communist China. These agreements as drawn envisage an increase during the next five years In Blocin Brazil's total trade from about ft percent to aroundercent. However, if the Bloc is to increase substantially its share of Brazilian trade greatly Increased coffee Imports must consUlute the bulk of its purchases.

the provision of funds for development and welfare in there-election bargain with labor to hold down wage demandsear should also give Quadros some economic leeway over the short run.

he pace of economic development hasbeen slowed during the current period of adjustment to new exchange and price policies. Quadros is, however, aware of the national commitment to economicand of the severe political penalties for failure to meet expectations among manyof the population. Resources andare most likely to be directed toward remedy of social evils that threaten political sUbillty and toward correction of thein growth between the urban and the agricultural sectors of the economy. Into the northeast development plans, Brazil is expected lo presentyear development program for the countryhole. Quadros Is certain to press for large-scale external assistance and will also borrow from the West to the limit of his country's capacity. In addition, he will accept Bloc trade and development offers when he thinks lt will be advantageous.

uadros' quest for an expansion of trade with all countries is already in full swing, especially in pursuit of nondollar sources of supply. Establishment of diplomatichas already accompanied negotiation of numerous trade pacts with the Soviet Bloc. In the case of East Germany, it Is probable that only trade relations will be fostered in the near future. In all cases. Brazil can be expected lo Insist on the present policy which avoids extension of credit to the Bloc.

uadros seems certain to continue toforeign Investment butoreand restrictive basis than Kubitschek Profits and remittances may be limited,in the eventevere balance of payments crisis: foreign banks may be pushed out of certain lucrative lending operations; nationalistic policies regarding shipping and

r US private diroct Invesimeni la mainly Inand amount* loillion dollars insurance can be expected; and pressures against foreign exploitation of mineralwill probably increase. He has already put before Congress legislation lo accomplish some of these alms. His determination to stabilize Brazilian monetary policy at home and abroad, coupled with his success Inlarge-scale external assistance, will probablyong way toward restoring Brazil's international financial standing. On the other hand, If Quadros* monetaryefforts fail or foreign aid provesto provide political and economicpressures on foreign interests, especially US. can be expected to Intensify.

though the prospect over theIS for at least some alleviation ofand economic plight, the roadbe far from easy. Overproductionand balance of payments problemsof Brazil's situation, andon current foreign debts will drag ondecade or more. Moreover, as theterm unfolds, he probably will findmargin for maneuver in dealing withrange of economic and financialnarrow. However. Brazil's wealthresources, its great potential inand sugar, its growing industrialthe riseiddle andsuggests that the country'soutlook Is good.

IV. EXTERNAL AFFAIRS

is convinced that Brazil isa world power. He believes thathasten this process by pursuing aand independent-minded policy inaffairs. Although he declares nobreak Brazil's heretofore firmthe West and probably does notull-fledged member of thehe has been impressed by thethe world scene of such prominentTito and Nehru. This has contributedhope that, by building up hishe can command respect forIn addition to obtaining economicfrom both East and West

In the past Brazil hasolicy of close and friendly relations with the US and almost automatically supported US policies. BrazilS ally in both World Wars. However, shortly after World War II Brazil felt that Its aspirations for development and international standing were not receivingsupport from the US. This led tobetween the two countries and Brazilprogressively less responsive to US leadership. Strong US support for Argentina in recent years and US failure to back OPA were new causes for Brazilian Irritation.0 it began to appear that the traditionally easy relationship between the two countrieshing of the past.

Given this situation, Quadros found aatmosphere for his attempt to place US-Brazilian relationsew footing, one calculated to demonstrate Brazil'sof the US. He will probably drive hard bargains In future negotiations with the US. It will be difficult to persuade him to renew the agreement on the Fernando de Noronha guided missile tracking facility, which expires ine will be underpressure from the military to renew, but he will probablyery stiff price. If the US is unwilling to give what he considers an adequate quid pro quo, Quadros may wellto satisfy the ultranationalists at theof US-Brazilian relations. Nevertheless, Quadros is unlikely to jeopardize the basically close ties existing between the countries,he may risk subjecting them tostrain. Should his venture into world affairs prove unrewarding, he may be disposed, from time to time, to improve his relations with the US.

Partly to balance off ties with the US and the West, Quadros has expanded diplomatic and economic relations with the Bloc.' He

1ebruaryiplomatic relations have been established with Rumania, Bulgaria, Hungary, and Albania. Brazil has hud formal diplomaticwith Czechoslovakia and Poland for some time. In this connection Quadros also terminated formal relations with the Baltic states'

has accepted an Invitation to visitdate not yetwill almost certainly re-establish diplomatic relations with the USSR before the ende has already been assured substantial trade and economic assistance from that quarter as the price of recognition. He has announced that he will no longer support the moratorium on the Chinese representation Issue, and mayBrazil's delegate to vote for the seating of Pciplng in the UN at its next session Eventually he may go so far as to establish formal diplomatic relations with Communist China. To the extent that Quadros cansubstantial trade and economic assistance both from the Bloc and the West, his example will encourage other Latin American states to seek closer relations with the Bloc

Quadros is committed to respect Brazil's obligations in the inter-American community, and despite the secondary priority he assigns to things Latin American, he seems certain to insistey role in any importantaction. Quadros' actions indicate that he does not believe Castro's Cuba tohreat to Brazil or the Western Hemisphere, and like many Latin Americans he finds itto treat the Castro problem as if itilateral one between the US and Cuba. Quadros has shown considerable sympathy with the Cuban revolution and will almost certainly continue to oppose OAS or USthere. He is unlikely to turn onas long as the Castro issue provides him considerable leverage with the US.

Quadros hopes to develop close ties with the underdeveloped nations as part of histo upgrade Brazil's internationalHe has already devoted specialto establishing diplomatic and cultural relationsumber of African states. Much of Brazil's Interest there is economic, but the Brazilians also see themselvesridge of western Influence to Africa. While Brazil Is reluctant to sacrifice its strong bonds with Portugal, It Is likely toore active antlcolonlallst spirit thanin the UN and elsewhere, as it expands relations with the Afro-Asian states.

V. THE OUTLOOK FOR THE QUADROS

The period throughhen the entire lower house of the legislature, two-thirds of the Senate, and half the governors are to be elected, will be critical for thegovernment. Quadros" measures to cope with pressing economic and politicalthe home front andcontinue to arouse opposition from Influential groups whose interests are adversely affected. If there is no noticeable economic and social progress, the public will become increasingly disillusioned. Moreover, his failure toauthority and his often high-handed way of governing seem certain to breed newtensions.

The armed forces will continue to be the major limitation upon Quadros' freedom of action. They will continue to support his administrative and economic reforms and probably willonsiderable degree of neutralism in his foreign policy. On his side, Quadros realizes the deep attachment of the military to the West, particularly the US, and is unlikely to act inay as to Jeopardize his tenure by provoking the armed services on this account. Nevertheless, he will almost certainly persist In attempts to increase his control of the military. In thesethe outlook Is for new frictionsthe armed forces and the President, as well as emerging divisions within the military along pro- and anti-Quadros lines.

However, Quadros has impressive short run advantages. He came to officepopular support which will, at leastime, counteractarising from his differences with theand his lack of whole-hearted support from most political parties. He is striving energetically to strengthen his direct ties with the masses. Certainly, his early success inarge-scale aid package from the West will go far toward meeting criticism of his distant attitude toward the US and of his "soft" policy on Cuba and closer relations with the Bloc.

Failure to produce positive results from his austerity policies or from his social and economic improvement programs mightissues which could be used againstin the period Immediately prior to2 elections. However, both the political parties and the labor movement are fragmented and can mount only comparatively weakAlso, his conservative foes will probably be unwilling to run the risks of immediateagainst him. On balance we believe Quadros will be able lo maneuver more or lessree agent unLil after2 elections.

We are less certain of the course of eventshe congressional election will be the first major political test for theadministration, and the outcome cannot be forecast. If the results are such as toa vote of confidence, Quadros will be less dependent on manipulation of existing political groups, and will almost certainly step up his efforts to reorganize and reform crucial phases of Brazilian national life.

We believe that Quadros will be successful tn carrying out substantial administrativein an atmosphere of financialIt Is also likely that he will obtainoutside help so that he can claim that he Iseasonable rate ofMoreover, Brazil has been for many years one of the most politically matureIn Latin America and Its record in this respect weighs heavily in favor of Quadros. Former President, now Senator, Kubitschek probably will be careful to avoideputation as an obstructionist, since he plans toecond bid for the office of Chief Executivey and large, therefore, congressional opposition will probably be more responsible than it has been In the past.

The Communist Party and its pro-Castro allies will probably be able to keep thein ferment. Quadros is likely to hold to his campaign promise not to opposeof the PCB. and it is possible that the PCB will become legal In the next year or so. PCB legalization, coupled with expanded Blocwould probably increase Communist respectability and potential. Thewill probably come into increasing

flict with the administration, particularly on stabilization and other matters of domestic policy. Quadros, however, will probably bear down on them whenever necessary to main-tain order. In view of this watchfulness, the Communists and their pro-Castro allies are unlikely toerious threat to Brazil's political stability over the next several years

uadros' authoritarian bent probablythe most serious threat to his survival as President. His impatience with theprocess and his determination to impose his own domestic and foreign policies, together with his high-strung temperament, could lead to some hasty action on his part which might cause the military to lay aside theirfor constitutional order and to oust him. This wouldikelihood should Quadros move recklessly to reduce the special position of the armed forces, or lo abandon Brazil's ties with the West, or should he take definite steps to perpetuate himself In powern contravention of the constitution. Onit is probable that the Quadroswill stay in office until theof Its terra

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