Tension rises in Brazil over economic woes. Government hints at strong response if public unrest gets out of hand

Except during the harshest years of military rule, Brazilians have never been shy about criticizing their government. So when Beto Faria, a taxi driver, points to the hillside slum where he lives and says, ``Up there, they're talking about revolution,'' it comes as no surprise.

But such statements have taken on a new significance in recent months as public discontent, stemming from Brazil's economic crisis, has repeatedly turned violent.

Authorities are concerned, for instance, that a nation-wide 25 percent increase in bus fares scheduled for Sunday could spark riots in the major cities.

Their fears are not unfounded. On June 30, thousands of Rio residents poured into the streets to burn buses and ransack stores. Incensed by a 50 percent increase in bus fares, the rioters were largely undeterred by tear gas and charging riot police. The destruction ended only after the fare increase was revoked. By then, at least 60 people had been injured and 80 arrested.

A week earlier, demonstrators stoned a bus carrying President Jos'e Sarney and his entourage.

In mid-July, six people were shot and wounded when police opened fire on an assembly of 2,000 striking bus drivers in the northern city of Manaus.

Over the same period, there have been numerous sackings of food markets. Some of the looting has occurred in slums on the periphery of the country's largest cities. Dozens of other cases have been reported in small towns in the impoverished northeast.

Few analysts believe such incidents signal the start of a mass revolt by Brazilians, whose purchasing power has dropped by more than half this year. But what many are concerned about is that additional outbursts could elicit a repressive response from Mr. Sarney's civilian government.

``In the large cities like Rio and Sao Paulo, you have a tinderbox situation, where a slight spark can inflame the whole thing very quickly,'' says David Fleischer, chairman of the political science department at the University of Bras'ilia. ``When something flashes like that, it's almost impossible to control. The only way you could control it is by very, very heavy repression on the part of the regular Army.''

The right-of-center government already has sent a number of unequivocal messages to those who wonder how it might react to further unrest.

In a display of military might, troops have been present in large numbers at demonstrations and at public appearances by the President. On one occasion, 800 soldiers armed with automatic weapons stood outside the National Cathedral in Bras'ilia, as Sarney attended mass.

Meanwhile, Sarney and his ministers have accused union leaders and opposition politicians of sponsoring the violence to destabilize the government. As proof, they cite statements by adversaries such as Jair Meneguelli, president of one of the country's two largest trade union federations, who described the June riot as ``an example to be followed by the entire world.''

For the first time since 1982, police have used the so-called national security law to charge three leftist activists who participated in the disturbances. A relic of the military regime, whose 21-year rule ended in 1985, the law allows authorities to hold prisoners incommunicado and to circumvent the normal judicial process by resorting to military courts.

Political observers see this as a move to placate certain military leaders alarmed by what they consider an erosion of central authority. ``I believe that one should not apply this excessive law when the [civilian] penal code resolves such cases perfectly,'' says Congressman Ulysses Guimaraes, head of the Brazilian Democratic Movement Party, which controls Congress.

Such measures come at a particularly delicate moment in Brazil's transition to full democracy.

Congress is entering the final stages of drafting a new constitution to replace the one imposed by the military 20 years ago. Legislators also will set a date for the first direct presidential elections since 1961.

When the Brazilian Democratic Movement Party held its national convention July 18-19, Sarney urged party leaders to vote to delay elections until November 1989. Instead, they left the question open, forcing him to face the threat of a shortened mandate any time he takes an unpopular stand.

It is precisely such a stand, in the form of strict austerity measures, that foreign bankers are demanding.

That will be difficult, since prices rose by a record 26 percent in June, pushing the year's accumulated inflation rate to nearly 200 percent. In June, industries in Sao Paulo laid off 16,000 workers, the largest decrease in the work force in four years. After months of indecision, the government moved to halt the economic deterioration by imposing a 90-day freeze on most prices and wages.

``The government is trying to give the impression that the economy is improving, but it's really too early to say,'' economist Nilo Neme says. ``The only sure thing is that millions of people are very unhappy. You have the seeds of a national movement, if the economic situation continues to be as bad as it is now.''