Brazilians' confidence in the future fading. Economic crises and government weakness stir uncommon pessimism
Sao Paulo, Brazil
Ligia Sttefano, age six, has learned to appreciate yogurt. Brazil's latest economic crisis forced her mother, Angela Sttefano, to cut back on the family's groceries. And Ligia's yogurt, which used to be an object of daily indifference, has taken on a whole new luster, now that she only gets it once a week.Skip to next paragraph
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What Ligia doesn't know is that her mother is worried. Her rent is going up, and she's going to have to move. And she wants to change jobs, but is afraid to risk her 12 years of secretarial experience for something more challenging. Last year, she and her husband, a band percussionist, saved $1,000, less than two months' income. But they're afraid to spend it on things they need, because they might need it for rent.
Most people in Brazil are worried these days. Inflation hit 266 percent in the 12 months ending in August. And it seems only now to have begun responding to treatment, the ``new cruzado'' inflation-fighting plan, announced at the end of June.
Unemployment is growing. A record 40,000 workers were let go in the month of July alone in Sao Paulo, Brazil's industrial heartland. Research by the local Gallup Institute shows that confidence in both the future and in the government is ebbing, according to Carlos Eduardo Meirelles Matheus, the institute's director.
Mr. Matheus noted that the confidence decline is most marked among the upper classes, who have more access to information than do poorer Brazilians. Part of the grim outlook comes from disappointment with last year's failed final solution for inflation. The ``cruzado plan'' cut off three zeroes from the currency and changed the name from cruzeiro to cruzado.
Brazilians, rich and poor, have seen a lot of bad times in the last few years, but this crisis, they say, is different. ``There's much more uncertainty than ever before,'' says Ibrahim Eris, a consultant and Sao Paulo State University economics professor. ``We've had four finance ministers in the last two and a half years,'' Mr. Eris says. ``It's the same thing in the Central Bank. We've never had such a troubled period, during a time in which important decisions are being taken.''
Pessimism, which is out of character for Brazilians, is taking hold. For the first time in the country's history, there are newspaper stories of immigrants pulling up stakes and returning to their native lands (although this probably has much to do with the upswing in the Italian economy and Portugal's recent entrance into the European Common Market).
And many foreign companies are reconsidering their investments here. Eris also notes that the Feb. 20 decision to declare a moratorium on the interest payments for the country's $68 billion debt to private foreign banks has added to the uncertain investment climate.
One of the most important domestic issues has been price controls. After instituting a general price freeze from March 1986 until early this year, the government announced another in June, as part of the ``new cruzado'' plan. This one lasted 90 days. Now, the country has entered a so-called ``flexibilization'' period, and many businessmen and consumers are confused about what will happen to prices - and the economy.
There is talk of a deeper recession, of product shortages, and renewed black market commerce, the return of hyper-inflation, and the prospect of going back to the International Monetary Fund (IMF), for standby loans and approval of national economic policy.