Rough First Year for Brazil's Collor
INFLATION still rages in Brazil like an Amazon land-clearing fire. After a year in office, President Fernando Collor de Mello hasn't succeeded in getting it under control. The smoke from the inflation blaze tends to obscure gains Mr. Collor's government has made in opening trade, protecting the environment, and halting the military's plan to develop nuclear weapons. Collor, the charismatic young candidate who came out of political nowhere to capture the presidency, has tried to dampen the hyperinflation. On taking office last March he announced wage and price controls and froze 80 percent of people's savings accounts to lower demand. When these measures faltered, Collor imposed new wage and price controls in January. Even so, prices are rising at double-digit rates - per month.
The persistence of the debilitating inflation has begun to erode the hopefulness of Brazilians - a characteristically resilient people despite a roller-coaster history of weak governments and military coups. Loss of confidence is reflected in opinion polls, and in some capital flight - common in many Latin American countries but rare in Brazil.
The inflation must be cooled, not only for economic reasons. The Collor government's ability to take other important steps, including programs to narrow one of the world's widest gaps between rich and poor, depends on a restoration of credibility. That credibility sinks as prices climb.
Collor's biggest failure has been in subduing Brazil's enormous public sector. Until he curbs public spending, efforts to slow inflation through short-term wage, price, and monetary manipulations will be so much tinkering. The president must press ahead courageously with plans to privatize state-owned industries, consolidate government agencies, and reduce the public work force.
To achieve these ambitious goals, Collor must gain finesse in forging political alliances in the fractious multiparty legislature. The former governor of one of the nation's smallest and poorest states, he was elected without the support of a major party. A recent change of Collor's top political adviser may prove helpful in improving relations with both congressional leaders and Brazil's powerful state governors.
It has not been a wholly wasted year for Collor. Brazil, which has long been defensive about exploitation of the rain forests, has started to work less suspiciously with global environmentalists and the United Nations on the issue. Also, inheriting a history of protectionism that led the US to brand Brazil as a trade outlaw several years ago, Collor has started to lower some barriers and is working toward a satisfactory conclusion of current multilateral trade talks.
There's little outsiders can do to ease Brazil's summer of discontent. But the US should stand ready to work with Latin America's largest nation in overcoming trade differences and to offer debt relief when a viable economic-restructuring plan is in place.
