Brazil's Ordeal of Austerity

When Latin American leaders assembled in Caracas last week to discuss their debt problems, a conspicuous absentee was the Finance Minister for the biggest borrower of all. But Brazil's Ernane Galveas, who sent his deputy, had daunting problems at home. Brazil's new austerity measures, imposed in order to win needed loans from the International Monetary Fund and private banks, have aggravated the impact of recession and bad weather on the country's homeless and unemployed.

During the last month, Brazilians have been shocked by reports from the drought-stricken Northeast of starving families eating snakes, lizards and rats. "I have never seen the likes of this in my life," said Pontes Neto, a Red Cross official. "The children all have the same sickness, worms and chronic hunger." Shoeless looters roaming city streets have panicked retailers. All last week, heavy looting took place in Rio de Janeiro suburbs. In one wild afternoon, a mob of 400 sacked four grocery stores in the area, ripping down steel gratings and smashing windows. Says Security Guard Anzio Gomes Monteiro: "They seemed crazed, wanting to break everything, and said they were hungry and thirsty."

The problems are compounded by the government's efforts to slow inflation, currently running at an annual rate of about 150%. In return for roughly $850 million in loans from the IMF and commercial banks, the administration of President Joao Figueiredo is pledging to trim inflation to 55% next year and cut to zero the rate of growth of its budget deficit, which last year totaled an estimated $50 billion.

But a growing number of Brazilians running the political gamut from far leftists to conservative industrialists believe the President's stringency could cause a domestic disaster. Two weeks ago, Central Bank Chief Carlos Langoni, who thinks the government's targets are unrealistic, quit in protest and was replaced by Affonso Celso Pastore. An ally of Planning Minister Antonio Delfim Netto, the country's economic boss, Pastore is likely to support the domestic clampdown. Pastore, 44, is a former state finance secretary and economics professor at the University of Sao Paulo.

With social unrest growing, the Brazilian Congress seems increasingly likely to reject a presidential decree that, beginning last month, limited cost-of-living wage hikes for all Brazilian workers to 80% of increases in the consumer price index. The IMF had demanded such action as a precondition for further loans. Without such a law, the battle against inflation seems doomed. So far this year the price of bread has gone up 85%, rice 151%, beans 369% and potatoes 498%. Indeed, it may take another Brazilian economic miracle like the one in the 1970s for the country to reduce inflation to the targets set out by the austerity program. This file is automatically generated by a robot program, so viewer discretion is required.