Brazil: It's the Economy, Chapa

Presidential candidates joust over inflation-braking reforms ahead of Oct. 3 ballot

Earlier this summer, presidential candidate Fernando Henrique Cardoso was looking like a Brazilian Michael Dukakis.

The sociologist could not get his campaign on track. Polls for the Oct. 3 elections showed him lagging 20 points behind the left-of-center Workers' Party front-runner, Luiz Inacio (Lula) da Silva. At a photo opportunity in Brazil's poverty-stricken northeast, journalists poked fun at Mr. Cardoso when he climbed on a mule wearing a regional cowboy hat, looking as awkward and stiff as Mr. Dukakis during his notorious tank ride.

Unlike the former Massachusetts governor, however, Cardoso had an ace up his sleeve. Recent polls show Cardoso leading the race, with as much as 47 percent support, followed by Mr. Da Silva's 23 percent. The five other candidates have a total of 16 percent combined. About 14 percent say they are undecided.

Why the dramatic turnaround? ``It's the economy, stupid,'' as Bill Clinton strategist James Carville said before his boss's 1992 victory over George Bush.

Cardoso, who resigned as finance minister in March, devised Brazil's new economic program, known as the Real Plan, which has abruptly ended the rampaging yearly inflation rate of 5,000 percent. It went into effect July 1, replacing the cruzeiro real with the real, a currency loosely pegged to the dollar.

From 50 percent a month in June, inflation fell to 1.51 percent in September. Prices have stabilized for the first time in years and prices for some goods have even fallen. And in a sign of the times, city streets are no longer littered with coins made worthless by inflation.

The place to invest

Foreign investors are also excited. Merrill Lynch says Brazilian stocks have shown the best growth in the world, and stockbrokers expect even more growth if Cardoso wins.

``Now that there are some clear marching orders,'' former finance minister Mario Henrique Simonsen recently told the Rio daily, Jornal do Brasil: ``Brazil will again assume the economic leadership of Latin America just as it did from the 1950s through the 1980s.''

Brazilian voters are rewarding the centrist Cardoso as the ``inflation killer'' and fear that Da Silva, known here as ``Lula,'' may scrap the real if he is elected.

Indeed, Da Silva, the former labor leader who is campaigning to become Brazil's first socialist president, is the plan's most vocal critic. He charges it with ``freezing poverty'' because the minimum salary is now fixed at $70 a month. Salaries are no longer indexed to match cost of living but are adjusted annually.

Da Silva dubs Cardoso a puppet of the rich for advocating free-market policies, and claims the lower inflation is timed to last only until the election.

``The rich don't need another president,'' he says. ``The poor need their first president.''

Prices for most staples are high for many Brazilians, who live in one of the world's worst nations in terms of social equality. The top 20 percent of the population receives 66.5 percent of the national income, while the bottom 60 percent gets only 16.4 percent, according to a 1993 World Bank study. Some 32 million are said to go hungry daily.

Yet Da Silva badly underestimated popular support for the Real Plan - even among the poor - and most voters appear ready to select Cardoso to ensure it continues to work.

Cardoso's television spots have also convinced voters that he will solve the nation's social ills. His effective slogan ``He'll put people first,'' was suggested by Clinton campaign strategist Mr. Carville, who has been secretly working for Cardoso as an ``informal adviser,'' according to Brazilian press reports.

But you don't have to be a political mastermind to see how anxious Brazilians are to support a candidate they believe will end chronic inflation. In recent weeks, polls show voters ignoring political scandals involving the Cardoso team that may have ended US campaigns.

Cardoso's runningmate, Marco Maciel, was recently accused of receiving illegal contributions from a former associate of impeached President Fernando Collor de Mello, who masterminded a multimillion dollar corruption scheme.

Even proof confirming Da Silva's claim that the government of President Itamar Franco had been helping Cardoso didn't make a dent in the polls. In a television interview, Finance Minister Rubens Ricupero inadvertently told viewers early this month that he was secretly using the Real Plan to boost Cardoso's chances. ``I have no scruples,'' he said, unaware that the ``off the record'' chat with a reporter was being transmitted over a satellite link. ``What is good, we take advantage. What is bad, we hide.''

The Teflon Brazilian

But in the Teflon tradition of Ronald Reagan, nothing stuck to Cardoso. The only casualty was Ricupero, who resigned insisting that he had been a ``victim of an electronic breakdown.''

As a result, some political observers are now predicting that the voters will give Cardoso an outright victory on Monday. According to Brazilian law, if no candidate receives 50 percent of the vote or more votes than all the other candidates combined, the two top vote-getters meet in a run-off election on Nov. 15.

``If Fernando Henrique Cardoso is elected in the first round, he will have won political capital unprecedented in this country,'' said an editorial in Folha de Sao Paulo.

A first-round victory could give Cardoso the mandate to seek changes in the 1988 Constitution to keep his plan on track.

This includes reforms to balance the federal budget, accelerate the privatization of state industries, and improve tax collection.

``I've joked with Fernando that if there are no constitutional revisions within six months of his presidency, he might as well quit,'' said Cardoso adviser Sergio Motta.

In the meantime, Da Silva will have visited 10 major cities this week in a last-ditch effort to recharge his campaign and force the election into a second round. Six more weeks of breathing room would give the Real Plan more time to unravel if inflation rises, workers clamor for renewed wage indexation, and angry consumers complain of higher prices and interest rates.

Finally, Da Silva supporters say the polls are not always right and point to the 1985 Sao Paulo mayoral election that Cardoso lost after leading in most surveys. ``Fernando Henrique has always been good with polls and bad with the vote,'' said Da Silva's running mate, Aloizio Mercadante, in reference to his two electoral defeats.

``In Brazil, anything can happen,'' adds Richard Foster, editor of the Brasilia-based business newsletter Brazil Watch. ``Things can change here as suddenly as the weather in Newfoundland.''

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