Elections Over, Brazil's Real Battle Begins

`LIKE buying a ticket to a bullfight and being forced to watch classical ballet,'' was the way one Brazilian journalist described this week's presidential election.

Indeed, what had threatened to be a bitter ideological battle between the free-marketeer Fernando Henrique Cardoso and his socialist rival Luiz Inacio (Lula) da Silva, turned out to be a cordial election.

The candidates reminded voters of their 16-year friendship and hinted that they might work together for social reform no matter who won.

But now that exit polls have declared Mr. Cardoso's victory, the bullfight may finally commence.

Brazilians, who for 30 years have not seen prices stay the same for more than a week, voted en masse for the former finance minister after he devised a program that slashed rampaging inflation and stabilized the economy.

With 40 percent of the votes counted, Cardoso had a commanding lead of 54.5 percent to Mr. Da Silva's 25.6 percent.

But the Real Plan, as Cardoso's program is known, is already showing signs of unraveling. Prices for basic foods rose 4 percent last week; workers are clamoring for a return to wage indexation, and inflation is expected to rise for the first time since the Real Plan was introduced in July from 1.51 percent in September to between 2 and 2.5 percent this month.

To win the battle against inflation, most observers agree, Cardoso must convince Congress to pass revisions to reduce the budget deficit and keep inflation down, or his economic plan will become Brazil's seventh in eight years to wind up with its currency in Central Bank ovens.

Congress out of order

And convincing Congress would not be easy. Brazilian members of congress are infamous for absenteeism and their inability to agree on policy. This year's budget has still not passed for lack of a quorum.

Analysts say that although the new legislature is expected to welcome 60 to 70 percent freshmen, it will probably resemble the last one: a fractious assembly of some 19 political parties, who show overriding loyalty to regional bosses and their own interests.

In fact, Brazilians are so disgusted with Congress that early election results show blank votes leading senate races in 22 of 26 states.

``What worries me the most is Congress,'' said a US diplomat. ``Cardoso won't have a majority and will have a tough time passing needed reforms.''

When he takes office on Jan. 1, 1995, Cardoso will push to overhaul the nation's tax and social security systems, accelerate privatization of state-owned companies, and give more fiscal responsibility for education and health to state and city governments. Those changes would ensure a sizeable reduction of the $10-billion deficit and a balanced budget.

Cardoso knows that selling state firms was how Mexico and Argentina balanced their budgets and tamed inflation.

In Brazil, only nine out of 35 companies slated to be auctioned this year have been sold, raising $500 million.

Cardoso plans to sell off $15 billion in state corporations while courting foreign investment.

``We have 16 hydroelectric dam projects paralyzed,'' he says. ``Why not have foreign capital participate?''

Nor does Cardoso intend to stop there. He says he will end government patronage, crack down on widespread income tax evasion, and streamline the bloated government bureaucracy.

The federal government is so poorly organized that officials are not sure how many people work for it or even how much property the government owns. Cardoso says he will cut the number of federal ministries from 27 to between 12 and 15.

If these changes took place, economists could foresee a stable Brazil entering a decade of between 6 and 8 percent annual economic growth, attracting billions in foreign investment - especially from the United States, Brazil's largest trading partner and foreign investor.

`An unjust country'

Cardoso also says a stable economy would allow him to modernize infrastructure and implement social reforms.

About 40 percent of Brazil's 150 million inhabitants live in absolute poverty, 32 million are on the verge of starvation, and 69 percent lack any sewage link-up, according to official figures.

``Brazil is no longer an underdeveloped country. It is an unjust country,'' Cardoso has said in reference to the nation's distinction of having the world's widest gap between rich and poor after the African country Botswana.

A Cardoso initiative proposes spending $100 billion on roads, electricity, and telecommunications and $4 billion for a ``Community Solidarity'' program, in which the government would provide poor communities with materials for homes, schools, health clinics, and sanitation while its residents provide the labor.

Much of this money is dependent on revenues from privatization, and some analysts remain skeptical that Cardoso can pull off his ``revolution,'' as one aide described it. But others point to several auspicious signs.

During his 11-year stint in the Senate, the president-elect was known for his negotiating talent.

And his popular mandate has brought many on his bandwagon, suggesting he'll get a honeymoon period during crucial early months when reforms will be needed to keep the Real Plan afloat.

To ensure that there will be enough time to revamp the state, the Cardoso team is likely to add another revision to their constitutional wish list: presidential reelection. Currently presidents are limited to one four-year term.

``In a country like Brazil, a four-year term is like 20 minutes,'' says Richard Foster, editor of the Brasilia-based business newsletter, Brazil Watch.

``Brazil's problems are generational.''

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