Lost Decade Behind, Brazil Is Definition of Optimism

Turnaround in Latin America

When President Clinton visits Brazil next month, he'll encounter a people brimming with optimism. In its latest international poll, the Gallup Organization found that Brazilians are the most optimistic people on earth. Fully two-thirds of Brazil's population of 165 million expect this year to be better than last.

For many Americans, perceptions of Brazil are outdated. A recent Foreign Policy Association survey disclosed that 9 out of 10 respondents believe that the Brazilian economy is suffering from hyperinflation, that 8 out of 10 were unaware that Brazil is a democracy, and that 7 out of 10 wrongly assumed that Russia's gross national product was larger than Brazil's.

Brazil, once a paradigm of central planning, is in the midst of a significant transition as it adopts a "market friendly" approach to economic development.

Brazil's economic expansion, now in its fifth year, is displaying considerable resilience.

Pedro Malan, Brazil's finance minister, forecasts that by the end of 1997 the Brazilian economy will have grown 24 percent since 1993 - a far cry from the economic slowdown of the '80s, known in Brazil as the "lost decade." Direct foreign investment in Brazil, which was below $1 billion in 1993, will surpass $15 billion in 1997.

Credit for the economic turnaround goes to Brazil's president, Fernando Enrique Cardoso. While finance minister, he crafted the ingenious stabilization program (the "Real Plan") that has brought inflation down from four-digit levels in the early 1990s to 6 percent this year.

A massive privatization program and a repudiation of import substitution policies have given additional momentum to the Brazilian economy.

The Cardoso administration appears resolute in its commitment to liberalizing the Brazilian economy. It has taken the lead in building the Mercosur common market with Argentina, Chile, Paraguay, and Uruguay, creating a $1 trillion market that gives it leverage in its negotiations with the US for a Free Trade Pact of the Americas in 2005.

The stabilization of the Brazilian economy has benefited a large and growing consumer base (50 percent of the population is under 20) and spurred a resumption of investment in productive assets. Brazil continues, however, to have the most skewed income distribution in the world. Economists are concerned about both the country's current account deficit and an overvalued foreign exchange rate. Speaking of Latin America in general, Maurice R. Greenberg, chairman of American International Group, recently cautioned: "These economies are still fragile and they're very much tied to political stability."

Key to Brazil's development is its commitment to democratic governance. By every indication, Brazil's reform program will continue to evolve in an environment of political consensus building and negotiation. In a vote of confidence for his administration's policies, Brazilians recently enacted an amendment to their Constitution to permit President Cardoso to run for a second term.

With growth springing from an established manufacturing base and abundant natural resources, Brazil will become an increasingly important trade partner to the US. In addition to trade, other areas for cooperation between the two countries include:

* The Environment. Both Brazil and the US have a stake in combating global environmental degradation. The threats of global warming and deforestation are interrelated. Brazil possesses a significant portion of the world's original forests. Its Amazon region is twice the size of France. Sharing forest management expertise would have long-term benefits.

* Housing. Brazil faces an acute housing shortage. Nearly 20 percent of Sao Paulo's population of 28 million live in slums. Brazil could benefit from US experience with the structuring of a vigorous secondary market for residential mortgage loans to expand home ownership.

* Tourism. Over 800,000 Brazilians applied for tourist visas to visit the US last year. Brazilian tourists spend more per capita in the US than tourists from any other country. By contrast, significantly fewer Americans visit Brazil. The development of ecological tourism could be a boon to Brazil.

President Clinton's upcoming state visit offers an opportunity to update Americans on an important ally.

Today, Brazil's confidence in its future belies Charles de Gaulle's famous saw, "Brazil is the country of the future and will always be."

President Juscelino Kubitschek, who built Brazil's futuristic capital, Brasilia, less than 40 years ago, was fond of saying: "The optimist succeeds. The pessimist begins on the wrong track." To visit Brasilia is to experience the art of the possible.

* Noel Lateef is president of the Foreign Policy Association.

When President Clinton goes to Brazil next month, he'll meet the most optimistic people on earth.

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