We're Not Mexico, Brazil Chief to Tell US

Cardoso to reassure investors after the peso crisis

AFTER a contentious 100 days in office, embattled Brazilian President Fernando Henrique Cardoso is reaching out to the United States for reinforcements in his battle with Brazil's Congress over his ambitious package of reforms.

His five-day state visit to the US that begins today is expected to include meetings with President Clinton and investors eager to support his reforms. Support for his package will modernize Brazil's political system and open the economy to more foreign money, he says.

US officials are watching the fight with great interest. The second-largest US trading partner in the hemisphere, Brazil is also the first in direct investment from the US with $41 billion. US exports from Brazil have shot up by more than 30 percent in the past year.

''The stakes are quite high,'' says US Ambassador Melvyn Levitsky. ''Brazil is an extremely important country for us.''

Mr. Cardoso also plans to meet with the heads of the World Bank, Inter-American Development Bank, and International Monetary Fund. He is expected to lobby for a permanent seat for Brazil on the United Nations Security Council and woo potential investors put off by Mexico's financial crisis.

''It's become a national obsession to point out that we are not Mexico,'' says prominent journalist Gilberto Dimenstein, referring to Brazil's three straight years of sustained economic growth rate of 5 percent, a more developed export market, ample dollar reserves, and policies that should soon transform its monthly trade deficit into a surplus.

To enact constitutional reforms, Cardoso needs the support of three-fifths of Brazil's 513 deputies and three-fifths of its 81 senators. But according to a recent survey by Veja, Brazil's leading newsmagazine, most congressmen are linked to powerful lobbies ranging from construction companies to evangelical churches.

''Everyone in Congress is a political party,'' says Walder de Goes, a Brasilia-based political analyst. ''They don't answer to party discipline or to the voters.''

Among other reforms, Cardoso wants constitutional changes to allow foreign companies to win contracts with state oil, electricity, and telecommunications companies; end workers' rights to retire after 30 years of service at age 48; and give more fiscal control to the government over monies sent to states, ending pork-barrel projects.

With those reforms in place, Cardoso argues he will be able to keep inflation low, balance the budget, and start changing Brazil's reputation of being the nation with the world's widest income gap.

Congress is studying eight of his proposed amendments, but has rebuffed several bills, including a measure on social security pensions. The gridlock has surprised most Brasilia observers. ''It was supposed to be a cakewalk,'' says Dick Foster, editor of Brazil Watch here.

Cardoso won support after his economic plan reduced inflation from 50 percent to a compounded 3.7 percent in the first three months of 1995, the lowest level in 25 years.

No other Brazilian president in recent history has entered office with such favorable conditions: low inflation, a growing economy, and wide support. Most important, his coalition seems to have enough congressional support.

But observers say he has taken Congress for granted and failed to rally the people. ''There's no fire in his belly,'' says Mr. Foster. ''Cardoso seems to be too enamored with intellectual ideas when he should be engaging in political combat.''

Congressman Delfim Netto, a former finance minister, says ''His message to us has been 'Pass my reforms because I am the light and you are the darkness.' That's incredible arrogance.''

Since taking office, Cardoso has refused to trade 20,000 to 30,000 patronage jobs for congressional support. He says he will fill the jobs with qualified nonpoliticians to avoid corruption and control spending. Observers say he is being blackmailed: no jobs, no reforms.

''He's got a real moral dilemma,'' says Foster. ''He can't lubricate this 19th-century spoils system on one hand and practice modern management austerity on the other.''