THE Clinton administration, bankers, and businesspeople in the United States have long eyed Brazil as a vast, unexplored frontier of commercial opportunities.
The recent election of President Fernando Henrique Cardoso, who campaigned on promises of opening his country's closed markets, has freshly peaked the US's interest. A pro-democracy leader once exiled by Brazil's former dictatorial regime, Mr. Cardoso assumed office in January. His popularity arose from a stabilization program he administered as finance minister that drastically lowered Brazil's raging inflation rate.
A nation that had been among the worst of the ''debt distressed'' in the 1980s, seemed to be on its way toward economic revitalization.
But just as Brazil's prospects were brightening, the Mexican peso debacle prompted the financial world's retreat from ''hot'' Latin American markets.
Cardoso insists that his 160 million people, living in an area roughly the size of the US, represent a great opportunity for American firms marketing everything from consumer goods to power generators. He carried his message to the US last week, meeting 1,200 US private-sector executives in a sold-out New York crowd and hobnobbing with assorted officials in Washington, including President Clinton.
Cardosa is striving to win domestic economic reforms from a recalcitrant Congress in order to lure reluctant private foreign investors.
A hot prospect
The US Commerce Department two years ago named Brazil one of the 10 best prospects for investment, and continues to be bullish. ''With Cardoso and his reform plan, Brazil has the best opportunity in recent history to break out as a leader in the region,'' says David Rothkopf, the Commerce Department's undersecretary for international trade-policy development. The Latin nation, he says, ''is right up on the top of our list, with China,'' the world's fastest-growing economy.
A top Latin official says Mexico's misfortune should not be generalized to Brazil. ''There's no reason for panic. The government has nearly $40 billion in reserves, its export capacity is very good. You would never think about a breakdown in the Brazilian economy.''
The Latin official has a qualifier: Brazil's success is contingent upon its ability to modernize through radical reforms. If Cardoso manages to win the necessary two-thirds vote in Congress for reforms, ''Brazil's economic future is excellent,'' he says.
Such success would benefit the US. US Trade Representative Mickey Kantor predicts that by 2010, US exports to Latin America will exceed exports to Japan and Europe combined.
''You have to recognize that Mercosur [a free trade zone between Brazil, Argentina, Uruguay, and Paraguay] and the North American Free Trade Agreement are key pieces,'' Mr. Rothkopf adds. ''Ultimately those two pieces will have to come together for hemispheric free trade to be a reality.''
Money is key. The flow of capital to Latin America ebbed from $64 billion in 1993 to just $42 billion in 1994. The Inter-American Development Bank and commercial bankers attribute the decline to Mexico's troubles.
Foreign investment to drop
The scenario looks even more bleak for the coming year, according to the Washington-based Institute of International Finance (IIF), a group representing many of the world's largest commercial banks. The IIF projects that net private foreign investment in Latin America will plummet to a mere $1.3 billion in 1995. Behind that data is a substantial outflow of capital from the region, spooked by events in Mexico.
Loans from governments and international agencies for the region, however, are slated to jump from last year's $1.9 billion to $29.6 billion this year. Most of that new money consists of the $20 billion plus peso-rescue loan package to Mexico.
Since the Mexican peso crisis, General Motors Corporation, Ford Motor Company, Germany's Volkswagen, and Italy's Fiat have all made big financial commitments in Brazil.
A new IIF study cautions that Latin American countries will have to show fiscal restraint, increase their domestic savings rate, boost exports, and privatize costly state-owned enterprises in order to attract investment.
To atract capital, Cardoso is vigorously pursuing a host of reforms -- from removing preferences for domestic companies in the competition for mining and other rights to the privatization of major industries, including telecommunications and oil. Many of these goals disturb his political opposition. The Congress has become fractious, and reforms have moved slowly. The government itself, in a concession to lawmakers, raised some tariffs, including those on autos. US officials say they hope Cardoso will resist such backward steps as he seeks congressional approval for his reforms.