Brazil: Which Way to Prosperity? Two energetic Brazilians represent the choice their countrymen face in coming elections.


Guido Padovano juggles phone calls and meetings in a small corner office overlooking the Avenida Paulista, Brazil's Wall Street. One company has a client that won't pay; a United States businessman calls to negotiate a contract to distribute Brazilian-made computer parts; and meetings spill over after office hours into the Padovano family's living room.

As a venture capitalist, Mr. Padovano is working hard to carve out moneymaking niches in Brazil's roller-coaster economy.

On the other side of town, Jos'e Dirceu rarely takes it easy either. Drawing up his party's presidential election platform keeps him up late at nights, and reporters keep badgering him about rumors of party infighting. As a state legislator for the Workers' Party (PT), Mr. Dirceu is working to bring modern socialism to his country.

Young and enthusiastic, these two men have linked their lives and fortunes to competing visions of Brazil's future. And these visions, embodied by various centrist and leftist political parties, highlight the two main choices facing Brazilian voters this fall, as they elect a president for the first time in 29 years.

Centrists say a swing to the left will delay the next necessary step in Brazil's economic development: the removal of barriers to trade and technology and integration into the world economy. Closer ties to the developed world, they say, are the only way to attract investment and absorb the growing number of young job seekers.

Leftists say that if they do not gain the presidency, the gap between rich and poor will worsen, and social tensions will jeopardize Brazil's potential as a world power. The gap can only be closed, they say, by doing away with payments on the $120 billion foreign debt, cleaning up government corruption and inefficiency, and focusing policy on social needs.

Like most of their compatriots, Padovano and Dirceu agree that the main issues in the coming election are Brazil's staggering social and economic inequalities. But they differ sharply on how they should be addressed.

``The Brazilian economy as organized today has no future,'' says Dirceu. ``There will be no economic growth, no income distribution, with today's private-property system.''

The former student leader, who was exiled to Cuba in 1969, says business monopolies must end, the bureaucracy be overhauled, and taxes on capital and profits be increased. Over the next 10 years, he says, Brazil can continue to develop and ignore increasing inequalities - and risk civil war. Or it can shift priorities to focus on the needs of Brazilian workers.

Dirceu left his job as an agricultural planner in Cuba and returned to Brazil under a false name in 1975 because he felt the country ``would undergo a great transformation, and I didn't want to be left out of it.... I believe the country, no matter what political system it has 10 years from now, may be a country with lots of problems, but a country with liberty, democracy, more social equality ... because it has potential.''

Since 1980, when the military regime granted amnesty to exiles, Dirceu has invested in his vision of Brazil's future.

He has run Workers' Party candidates' campaigns, helped create strategy, and worked to increase legislators' power over state spending and over the state police force. His party, which grew out of a 1970s union movement in the Sao Paulo industrial belt, has rapidly gained strength across Brazil. The PT elected mayors in several major cities last November, and PT founder Luis Inacio (``Lula'') da Silva is one of the leftist candidates with a good chance of winning the presidency this fall.

Padovano's work also is rooted in his student days - at Stanford Business School in the early 1980s. ``I had heard about venture capitalists, but it became real to me while I was there,'' recalls the Italian-born investor.

Padovano is betting on his vision of the future by investing his and others' funds in small high-technology businesses. His efforts have paid off. PAD, his venture capital company, has invested in five companies and is about to help finance a sixth. The first venture, an IBM peripherals maker, took PAD's $140,000 seed money in 1986. This year, it expects sales of $3 million, with a $500,000 profit.

``I do believe that the economy will expand in three, four, or five years' time, and that people who have invested [will find] it will pay off,'' explains Padovano.

Enterprising businessmen in Brazil face many of the problems that the Workers' Party would like to solve. Because the economy is so unstable, banks don't lend on a long-term basis.

And individuals with funds to invest usually speculate in the money market or real estate, rather than invest in business activity. There's lots of government red tape. And given the connections needed to finance a business and get past the bureaucracy, chances for success are sometimes slim.

But Padovano says he doesn't believe that a different kind of government, socialist or otherwise, is needed to change things.

``When the country begins to grow, the pressure to pay people better will increase. This comes with greater competition,'' he says.

``It reminds me a lot of Italy. For decades, the [Italian] government tried to develop the [poor] southern region and it didn't work,'' he says.

Once the Italian economy began to take off, businesses began investing in the south and paying better wages. Italy's income distribution improved, overall, in a natural and gradual manner.

Padovano agrees with Dirceu that Brazil's government must oversee and fund basic services such as education, health, transportation, and energy.

But he wants the state to turn its industrial activities, such as steel and chemicals manufacturing, over to private business. Monopolies will break down, he says, when government has less power to grant favors and create subsidies.

Though Dirceu would keep strict controls on capitalists like Padovano, his stay in Cuba taught him they shouldn't be driven away.

``If you remove private property, you may do it for military or political reasons. But from an economic point of view, there's no reason. On the contrary, the country needs to grow, to liberate its productive forces,'' he says.

But in Padovano's mind, Dirceu also has a limited place in Brazil's future.

``If the PT runs the country, Brazil will lose 10 years ... [but] what people like him can do is to continually pressure the rest of society, reminding us every single day that there are people whose basic needs are not satisfied.''

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