US trade curbs stir Brazil's troubled political waters

United States trade sanctions on Brazilian exports announced Friday are the latest blow to a deeply troubled Brazilian economy. But their political impact may be even more significant than the economic effects. The sanctions come as the Brazilian Congress is debating further restrictions on foreign investment in the draft of a new constitution and as it battles with President Jos'e Sarney over a possible reduction in his term of office. Mr. Sarney has been under increasing fire for failure to come to grips with Brazil's economic problems.

The President called the US sanctions ``unwarranted and discriminatory,'' and ordered a study of possible retaliatory measures.

The sanctions are an example of increased outside pressure on Brazil to open up its economy. Those pressures, plus doubts about foreign debt negotiations, the return of high inflation, and increased social conflict, have led many Brazilians to conclude that the government is losing control of the situation.

Yesterday, in a stinging defeat for the President, a congressional committee voted to limit his term to four years. If Congress approves, elections would likely be held in November 1988.

The sanctions came in response to a Brazilian decision not to allow Microsoft, a US software marketer, to sell its programs here. Brazil had previously agreed to consult with the US before taking such action. Brazil's laws protect the country's nascent computer industry by placing strict limits on what foreign companies can do here.

The sanctions, amounting to about $105 million, will have a limited economic effect, a trade analyst says. From January to August 1987, Brazil exported goods worth $4.3 billion to the US. But sanctions could hurt industries heavily dependent on the US market. The footwear industry would probably be worst hit. Whole towns are employed by local shoe factories, which would probably have to lay off many workers. The sanctions could also be applied to textiles, aircraft, orange juice, and steel.

There is disagreement here on the sanctions' likely effect on Brazil's debate over how to treat foreign investment in the new constitution. Some observers say the sanctions could push congressmen to retaliate by adopting harsh limits on foreign investment.

Last week, the congressional committee responsible for the constitutional draft approved an item barring foreign companies from distributing petroleum products. If the full Congress approves, non-Brazilian companies such as Exxon Corp., Shell Oil Co., and Atlantic Richfield Co. would have to close their gasoline stations here. The committee is also defining incentives to favor Brazilian-owned companies over foreign firms in a number of sectors.

Other observers say the sanctions may shake some sense into nationalists. ``Brazil cannot close its doors to foreign investment and still think it will sell to the international market,'' said a spokesman for Embraer.

One export analyst was optimistic the two governments would reach an agreement so that the sanctions could be dropped. But Finance Minister Luiz Carlos Bresser Pereira said the sanctions would not alter Brazil's position on the law protecting its fledgling computer industry.