Inflation Stymies Brazil's Plan to Boost Economy

BRAZIL'S latest anti-inflation plan isn't working too well, and President Jos'e Sarney's government appears to be at a loss over what to do next. As prices rise faster than expected, analysts say, ensuing public discontent could have a negative political impact on the ruling party's prospects for this November's presidential election.

President Sarney's Jan. 15 economic plan, his third attempt to control inflation, froze wages and prices. But official figures put March inflation at 6 percent - double the expected figure.

Meanwhile, a meat shortage is taking hold as butchers have closed shop to protest the gap between wholesale prices and controlled retail prices. Earlier this week, employers walked out of talks with unions and government representatives aimed at finding a formula to make up for a loss in real wages incurred under January's ``Summer Plan.'' And striking workers across the country have disrupted public services, occupied factories, and snarled urban traffic with protest marches.

Last week, Bras'ilia took a timid step toward cutting government spending, which analysts see as a major cause of inflation and a political hot potato. About 14,000 public servants holding more than one federal job were given until April 19 to choose one job or justify their multiple status.

Analysts say the move won't have much of an impact, especially since the payroll cuts aren't immediate and there is room for many exceptions.

``The effect will be symbolic,'' says political scientist Walder de Goes. ``The cuts will have a small effect on expenditures.''

He and other observers say Bras'ilia hopes the lay-offs will help persuade a skeptical public that it is serious about fighting inflation. In a radio speech last Friday, alluding to this public distrust, Mr. Sarney complained that inflation has created ``a mentality of pessimism, of disaster,'' and caused people to ``forget that ... it takes time to build a life.'' BUSINESSMEN, labor, and economists have long called on the government to share the burden of halting inflation.

While workers and employers are feeling the pinch of the wage-and-price freeze, the government has been unable to restrain the spending that bolsters its shaky political support. For instance, Congress last week recreated several federal agencies that Mr. Sarney had tried to abolish as superfluous.

Keeping the original Summer Plan on track isn't easy either.

The officially set high local interest rates have dramatically increased Bras'ilia's own cost of borrowing.

And newly-released figures show that unemployment in greater Sao Paulo, Brazil's industrial heartland, was 9.7 percent in February - up from 8.6 percent last December.

Political and economic analysts say the unstable economy will continue to dog Sarney's lame duck government until the Nov. 15 election. Keeping inflation under contol, they say, will be the best way to avoid surprises at the polls.

Otherwise, candidates such as Luis Inacio ``Lula'' da Silva of the socialist-oriented Workers' Party or nationalist Leonel Brizola, of the Democratic Labor Party, could win, and make radical changes in Brazil's economy and international relations.

Both have supported nationalization of some private-sector businesses and have spoken out against repaying Brazil's $120 billion foreign debt.