Brazil's democratic shift tests economic and political systems

The motto on the Brazilian flag is ``Order and progress,'' but lately there's been very little of either here. Brazil is in the midst of a difficult democratic transition period begun in 1985 after 20 years of military dictatorship. Added to the political confusion are severe economic problems which no government - civilian or military - would find easy to solve.

Last week, Luiz Carlos Bresser Pereira, Brazil's third finance minister so far this year, resigned, and there are few volunteers to take his place. Mr. Bresser Pereira left office because he disagreed with President Jos'e Sarney over how to increase tax revenues.

Dissatisfaction with the government is at a record high. Brazilians blame most of their troubles on the ever-weakening Sarney government.

When Mr. Sarney announced the revolutionary ``cruzado plan'' in February 1986 to fight Brazil's persistent inflation, political cartoonists depicted him as a brave and handsome lion tamer. Now, he is portrayed as helpless.

Brazilians blame Sarney for the failure of the cruzado plan, and the subsequent attempts to control inflation. Despite a second wage and price freeze last June, year-to-date inflation topped 300 percent at the end of November, with inflation for that month alone totaling 12.84 percent.

Many economists predict hyperinflation for next year. Some say the government will try a third round of price controls, though few people expect this will have a lasting effect.

Companies, including multinationals from the United States, are openly defying government price controls - which the companies say are unfair. With real purchasing power down, public- and private-sector workers have staged strikes for wage increases, while even military personnel have also staged wage protests. At the same time no one is happy with news of an individual income tax increase that is considered necessary to finance the Brazilian government deficit - which is one of the prime causes of inflation.

State governors have also criticized the government. Until recently, the governors did not play an important role in national politics. ``The government ... has timidly faced the economic and social questions, which are worsening, to the point of setting up a crisis that could jeopardize the final phase of the political transition,'' says Miguel Arraes, governor of the poor northeastern state of Pernambuco. Mr. Arraes notes that even though the government party won big at the polls in 1986, Sarney did not take advantage of such support to make policy changes.

There is international pressure, too. The US government recently announced it would impose trade sanctions on Brazilian exports if Brazil didn't loosen restrictions on US computer software imports.

Discontent with Sarney has brought to a head discussion on the length of his term. Sarney, an appointed vice-president, came to the presidency in 1985 when president-elect Tancredo Neves died. The Constitution calls for a six-year term and a presidential system similar to that in the US.

But Congress is drafting a new constitution, and the most recent draft calls for a four-year presidential term and a parliamentary system of government. It's still unclear whether this means Sarney would have to take on a prime minister, and if presidential elections will be held next year. To confuse matters further, some politicians have suggested a full cleaning of the slate next year, for everyone from city aldermen to president.

Congress is battling over the question of the presidential term. A new multiparty conservative bloc has formed and is trying to come to an agreement with the liberal wing of the government party - the Brazilian Democratic Movement Party (PMDB) - on how much the current draft constitution can be changed at this point. The drafting process began last March and is now expected to be finished sometime early next year.

The constitution has gone through a first, fairly conservative draft to a second, more liberal one. Observers hope the two sides will arrive at an acceptable compromise the third time around.

``The transition is the biggest difficulty, in the post-military dictatorship period,'' says Democratic Movement Congressman Basilio Villani, secretary of the conservative bloc.

Mr. Villani and other congressmen favor greater congressional power, with the formation of new political parties.

The conservative bloc, which has gained ground in the constitutional debate, wants a presidential system with a five-year term (which would apply to Sarney). Block members also want to change items they say will hurt free enterprise, such as a reduction in the workweek, land reform, and special treatment for Brazilian-owned companies.

Until the political picture becomes clearer, many companies will continue to stop investing. The situation has led some analysts to invent a new word for their worst fear: Argentinization. They say that, unless steps are taken, the current recession could be the beginning of economic stagnation.

Jos'e Julio Senna, executive director of the Boavista Bank and an economics professor, says action must be taken on four fronts: education, the supply of technology, worker mobility within the economy, and investment - both local and foreign. ``If these four things are not corrected in time and the government doesn't get out of the economy, we face the danger of entering a chronic recession,' he says.

Although many people speak wistfully of the law-and-order days of the military regime, few really believe the Army will come back into power. The military handed power back to the civilians partly because it couldn't get the country out of a recession, which began in 1981.

Despite many complaints, there have been some positive aspects of democracy for Brazil. New groups have appeared, representing the interests, for example, of business, rural landowners, and military personnel. The labor unions have grouped themselves under two large confederation umbrellas.

``In fact, Brazilian society has taken big leaps in its capacity to organize itself,'' says Francisco Weffort, a member of the Workers' Party national directorate and a political science professor at the University of Sao Paulo. ``There are lots of pressure groups, and lobbies that didn't exist two years ago. Something good is happening underneath all the confusion.''