The Falling Cruzeiro

Four months after Janio Quadros' abdication as President of Brazil, Latin America's largest nation is lurching along in a way that may turn dangerous. At first the question was whether Labor-Boss Joao ("Jango'') Goulart as President or Tancredo Neves, a financier-turned-politician, as Prime Minister would actually lead the country. In fact, neither does. Nobody does. In remote Brasilia, the fractious Parliament carries on politics as usual. The far left hopes to proceed from chaos to power. It is up to dedicated second-echelon technicians to slow inflation and keep the nation running.

Chief among the technicians is Finance Minister Walther Moreira Salles, 49. A liberal-minded banker who was twice Ambassador to the U.S., Moreira Salles has tried hard to shake Brazil out of its economic nightmare--a looming 1961 budget deficit of $600 million, with inflation rumbling into the wheelbarrow stage. Moreira Salles turned off the spinning cruzeiro presses, laid plans to slash government spending 20%, drew up a sense-making tax-reform bill. The cruzeiro free-exchange rate, fallen 33% (to 360 to the dollar) firmed up to 340 and seemed about to right itself.

Last week, however, the small recovery melted like a snowball on Copacabana beach. The tax-reform bill bogged down. But another bill, full of demagogic appeal, raced through the House. It would forbid foreign firms to sell stocks and bonds in Brazil. It would prohibit foreigners from taking over enterprises "being exploited" by Brazilian capital.

The brainchild of a Castroite bloc of Deputies, and supported by extreme right-wing businessmen fearful of foreign competition, the bill posed such a threat to badly needed investment dollars that even do-little Prime Minister Neves was trying to get it watered down in the Senate. (President Goulart declared in favor of the bill.) Moreira Salles' finance ministry estimated that the measure would cost Brazil $250 million a year in investment and cause unemployment for 1,000,000 Brazilians. At week's end, the cruzeiro plummeted to a new record low of 400 to the dollar.

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