More 'Mature' Brazil Rapidly Moves To End an Era of State Ownership

IN just the past 30 days, Brazil has moved swiftly to catch up with its modernizing neighbors by ending state monopolies over shipping and natural gas - and this week, telecommunications and oil.

"It shows that the 1950s patriotism which won votes with slogans like 'The Oil is Ours,' is over," TV commentator Boris Casoy told viewers.

"And it shows that what counts today is pragmatism. What's best for the consumer? What works, what doesn't? The moves prove Brazil has matured, he added.

Legislators voted to change the Constitution to allow foreign companies to compete for contracts. Specific regulations have yet to be debated and could take several months to be approved.

After a nonremarkable first 100 days in office, President Fernando Henrique Cardoso is enjoying new momentum.

Most political observers here point out that the president's personal lobbying increased after he returned from an April visit to the United States. Brazil's Congress then became more receptive to his reform package.

The votes represent a stunning political victory for the former sociology professor, who has promised fundamental economic change for the world's 10th-largest economy. Opening up the two most lucrative state industries - Telebras (telecommunications) and Petrobras (oil) - challenges more than four decades of strong nationalist sentiment.

On Monday, Cardoso predicted the reforms would "turn a page in Brazil's history."

When legislators finally voted in Brasilia Wednesday to end the 42-year Petrobras oil monopoly, hundreds of protestors - some wrapped in flags - crashed through glass doors and pushed their way past congressional security forces into the gallery to observe the vote.

"It's an ethical and moral question of defending the nation's sovereignty," Workers Party President Luiz Inacio Lula da Silva told reporters earlier in the day.

The two-time presidential candidate argued that the government was more interested in benefiting foreign businessmen than average Brazilians.

Because of the reforms he is proposing Cardoso has been worried about his physical safety. As he has traveled around the country in the past few weeks, his bus has been pelted with rocks and eggs. He has been forced to expand his force of bodyguards and wear a bulletproof vest.

Yet while a militant minority has been fighting hard to block the reforms, recent polls by the polling firm Vox Populi reveal nearly 50 percent of Brazilians favor ending both oil and telecommunications monopolies because of poor service and high prices.

Even Green Party Deputy Fernando Gabeira, a former leftist revolutionary, who once participated in the 1969 kidnapping of a US ambassador, voted for the reforms.

"I've been called a traitor, but the left can no longer preach state control of the means of production," he said. "It's a failed policy."

Congress also voted Wednesday to give foreign companies that locate in Brazil the same legal rights as their Brazilian counterparts.

Partly due to lack of investment, Petrobras now produces only 55 percent of the oil Brazil needs for domestic consumption.

Officials estimate Petrobras needs $4-7 billion a year in investment, yet the government can only provide $2.5 billion. Gas currently sells for $2.40 a gallon.

In telecommunications, only seven out of every 100 Brazilians have telephones, with millions waiting for a line. Communications Minister Sergio Motta says Telebras needs $33.6 billion to modernize its facilities, while the government can afford to pay only $12 billion.

"Sovereignty is cheap gas and a telephone for everybody," said Luis Antonio de Medeiros, president of a pro-reform trade group.

Cardoso insists that Brazil's sovereignty was never the issue. Unlike Mexico, where telecommunications was simply sold off, the Brazilian approach will be to end the state's monopoly over the services, allowing private companies to compete. Cardoso calls it "flexibilization."

Also helping Cardoso was the recent 31-day strike by 50,000 oil workers for salary hikes and an end to flexibilization, which soured public opinion against the state-monopolized oil system.

Analysts say flexibilization could eventually allow private firms to take on activities once exclusive to the state like drilling for oil and providing cellular phones.

Some economists, however, believe major foreign investment won't occur until the end of 1996.

Flexibilization represents a "fundamental structural change in the Brazilian economy," says former Central Bank president Carlos Langoni.

"But investors need first to see the rules of the game established," he added.

The Senate is expected to approve the Constitutional change in August.