Military Rule Ends : Brazil’s New Era: Crisis --and Hope

As Brazil returns to democracy today after 21 years of authoritarian military rule, a social and economic crisis stands in the way of the old nationalist dream of transforming this Latin American giant into a modern world power.

Tancredo Neves, the president-elect, has said: “If we all want it and remain united, we can make this a great nation. And we will do it.”

But the 132 million people of Brazil--a nation larger than the mainland United States and more populous than all the rest of South America’s countries together--are not in agreement on how to share the burden and distribute the benefits of national development. They know only that they want a change.

Millions Attend Rallies

There was broad support for ending the period of military rule, the longest since the republic was established in 1889. Millions of people calling for civilian government turned out for rallies last year in major cities. They took place even before the formation of the opposition front that elected Neves over the government party candidate in January.

Neves, 75, has spent 50 years in public life, as a congressman, a Cabinet minister and, most recently, as the elected governor of Minas Gerais, Brazil’s second-largest state. A moderate reformer and pragmatic nationalist, he is seen by the major political parties, by businessmen and by most of the military as a good choice to lead the transition. Labor leaders and social progressives, including many Roman Catholic bishops, are more skeptical.

The new democracy that Neves will lead, based on a fragile coalition of parties, is saddled with critical problems. Brazil is experiencing the worst inflation in its history. The foreign debt of $100 billion is the largest in the world, and economic growth is restrained by annual interest payments of $11 billion on the debt.

Poverty Gap Widens

As the population continues to rise at an annual rate of 2.4%, the gap between the rich and the impoverished majority is widening. Two-thirds of the people are inadequately fed, according to official surveys, and infant mortality rates in the poorest states exceed 120 per 1,000 births.

“We have two countries here under one flag, one constitution and one language,” observed Gov. Wilson Braga of Sergipe, a small state in the backward northeast region. “One part of Brazil is in the 20th Century, with high-technology computers and satellite launches. And, beside that, we have another country where people are eating lizards to survive.”

“The military wanted to develop a modern state, and they knew how to . . . build highways and power dams and put settlers on the frontier,” said Adroaldo Moura da Silva, an economics professor at the University of Sao Paulo. “But they never learned how to supply health services or schools or community development. They didn’t see these as part of national security.”

The malady that strikes hardest at the average Brazilian is inflation, which pushed prices up 225% last year. Wages are legally adjusted only every six months, so

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has reduced the workers’ purchasing power. Mortgage contracts are automatically adjusted at a faster rate than wages, and as a result it is hard to buy a house or a car or other goods on credit.

The insecurity caused by inflation has spread a sense of anxiety through a once-confident middle class. Unemployment is increasing, and urban crime has risen to a level that has made private security services a major industry.

The pessimistic mood is reflected in a Brazilian rock group’s song “Nervous Tic,” now on the local hit parade. It describes a day in the life of an urbanite who loses his job, gets mugged, runs out of gas on a freeway and finally goes home to an empty refrigerator.

“Before, everyone thought about success,” the lyric goes. “Now, you can’t make it to the next day.”

Brazilians remember that during two decades of forced industrialization and construction of huge energy, transport and communications projects, the military leaders also preached the doctrine of national power.

Economic Miracle of ‘70s

For a while, during the so-called economic miracle of the 1970s, the Brazilian economy achieved annual growth rates of more than 10%. Industrialization, based on vast agricultural and mineral resources and an expanding urban consumer market, put Brazil’s economy in eighth place in the Western World, producing goods and services valued at more than $200 billion in 1980.

For the ruling elite--the military leaders, bankers, corporate executives and mass-media owners--Brazil was no longer an underdeveloped Third World country. There was optimism in the new middle class of managers and technicians, who could buy homes and automobiles. Skilled labor benefited from high employment, and real wages increased.

However, the massive oil price increases of 1979, followed by a sharp rise in interest rates when the United States began to import capital, brought growth to a halt in 1982. When Brazil’s foreign debt reached $100 billion, international banks stopped making new loans. Recession drove down industrial output by 30%. Unemployment spread through the large cities, and a five-year drought in Brazil’s northeast region brought millions of landless peasants to the brink of starvation.

Weaknesses Bared

The breakdown in growth laid bare some of the weaknesses of the economic model chosen by the military and its advisers, led by Antonio Delfim Netto, the all-powerful minister of planning in two of the five military administrations, including the last six years under President Joao Baptista Figueiredo.

Delfim, a professor of economics at the University of Sao Paulo, soon made it clear that he could wield political power as well as theorize about economic growth. With Congress’ powers severely limited under the military, Delfim concentrated all major decisions on economic and social policy in the Ministry of Planning.

The ministry and the central bank, which Delfim controlled, allocated virtually all budget resources and supervised the huge spending programs of the major state enterprises, which have more investment resources than the federal government. Through the central bank, Delfim also managed credit for the private industrial sector and agriculture.

This highly centralized system also set up a vast system of subsidies, promoting programs such as sugar plantations for production of alcohol to substitute for imported petroleum fuels. Many of these programs have been riddled with administrative scandal, leading to expenditures to cover huge deficits.

As the finances of the federal government and the state enterprises became an increasing drain on the treasury, resources were diverted from social programs, such as health, education and low-cost housing, to cover deficits incurred in the construction of steel mills, hydroelectric plants, telecommunications networks and other priority projects.

Modern Improvements

As a result, Brazil raised steel production to 17 million tons a year, built the world’s largest hydroelectric plant at Itaipu and increased telephone lines from 1 million to 10 million in 20 years. A modern highway system covering 225,000 miles integrated the country’s transportation, and microwave towers and communications satellites extended television programs to audiences of more than 60 million.

These transformations in Brazil’s economic and social structure have propelled part of the population into a modern way of life. For instance, a huge expansion of the banking system, providing branches in the most remote towns of the interior, has attracted 7l million savings accounts.

But another part of the population, probably a majority, is barely in the market economy.

The government’s own research staff, at the Institute for Economic and Social Planning, reported last year that 86 million Brazilians, two-thirds of the population, were consuming less than 2,240 calories a day, which is the minimum for human needs established by the U.N. Food and Agriculture Organization.

Total production of grains and oil seeds in Brazil has been stagnant at an annual level of 50 million tons for five years, after brisk expansion in the 1970s. However, the problem in Brazil is not a shortage of fertile land or the absence of a rural population able to produce for the urban market.

Shortage of Food Money

Claudio de Moura Castro, who directed the government nutrition survey, said, “We have everything necessary to produce food, but one essential thing is missing: People don’t have enough money to buy the food they need.”

While Brazil’s economy was growing, it is evident to economists now, the benefits were being concentrated in the upper-income level, representing about 40 million people. Only a fraction of the increased consumer output trickled down to the lower two-thirds, made up of urban laborers and peasants.

Cardinal Paulo Evaristo Arns, the archbishop of Sao Paulo and a militant social progressive, commented: “If the national income has tripled over the last 20 years, why is it that 80 million Brazilians don’t get enough to eat to work and live with dignity? This has to change.”

The Brazilian Roman Catholic Church is the largest in the world, with 380 bishops. Brazil was the first country to create a national conference of bishops, which has taken strong public positions in favor of human rights, restoration of democracy, and economic policies that “humanize” the development process.

Well-organized progressive priests, following the “commitment to the poor” called for under the so-called theology of liberation, are promoting labor unions, peasant associations and community groups that mobilize public pressure for better wages, land reform and shantytown improvements.

‘Working Class Suffered’

Jair Meneguelli, 37, a former tool-and-die worker at the Ford plant outside Sao Paulo, is president of one of the most militant unions, the Metalworkers of Sao Bernardo and Diadema, with 160,000 workers. He is also president of the church-backed National Central Union, which is one of two such umbrella organizations.

In an interview at his union headquarters, he said: “The working class has suffered a lot from the policies under the military, but we have also learned a lot.”

In 1983, Meneguelli was banned from union leadership for life by a military order, but it was overturned by an appeals court.

“The main thing the workers want is the legal right to organize in free unions and the right to strike in support of contract negotiations,” he said. “I don’t have any illusions that we will get anything from the new government unless the workers show they can organize themselves.”

There are more than 300,000 auto workers in Brazil, and they are paid, on average, $150 a month, about a tenth of what their counterparts in the U.S. auto industry are paid. But the Ford, General Motors, Volkswagen, and Mercedes-Benz plants here are modern operations, with exports last year of more than $2 billion in vehicles and parts. Some Brazilian-made vehicles go to the United States for assembly.

Huge Arms Industry

The big steel and automotive industries here are the basis of Brazil’s arms industry, which is the largest in the developing world. In exchange for Iraqi oil, Brazilian manufacturers have supplied armored vehicles, armed with laser-guided cannons, and rocket launchers to Iraq, which is at war with Iran. Brazil’s aviation company, Embraer, is setting up production of a fighter-bomber in a joint venture with Italy. Embraer has exported hundreds of commercial passenger aircraft.

It is this modern industrial capacity that accounts for Brazil’s entry into world markets on a large scale. To pay the interest on its massive foreign debt, Brazil has had to promote exports, which reached $27 billion last year.

About $9 billion of this amount went to the United States, where industrial interests have put up strong resistance to imports of Brazilian steel, shoes, textiles, alcohol and other products. The Americans base their resistance on charges of unfair competition as the result of Brazilian government subsidies.

But Brazilian goods are woven into the daily life of virtually every American household. At breakfast, there is coffee and orange juice; Brazil is the world’s largest exporter of both. Children going to school may be wearing Brazilian-made shoes; this country sent more than $1 billion worth of shoes to the United States last year. The family automobile may contain Brazilian steel or parts; Brazil exported more than 6 million tons of steel last year.

Major Soybean Exporter

In Western Europe and Japan, Brazilian soybeans compete strongly with U.S. exports. Brazilproduced 15 million tons of the crop last year and plans to raise the total by 10 million tons in joint ventures with Japan, which is a major importer. Western Europe and Japan also absorb most of Brazil’s iron ore exports, which reached 80 million tons last year, the largest volume in the world.

The nationalist dream of Brazilian industrialization once emphasized import substitution and supply of the local market behind protective barriers. Now, Brazilian industry and mining are increasingly linked to world markets. And the Brazilian foreign debt is a permanent link to the world economy. It is more important than foreign investment, which in the case of the United States represents $6 billion, a relatively small amount.

Keeping exports growing is vital to Brazil. The expansion achieved in productive capacity in the last two decades makes Brazil a new participant in the international market, with strong competitive advantages in natural resources, cheap labor and business organization.

Shift in Emphasis

But the new democracy risks an upheaval of discontent and labor protests if it postpones a shift of emphasis in public investment from big construction projects and external expansion to the long-neglected social sector.

The Neves coalition of the center-left Brazilian Democratic Movement and the new Liberal Alliance, led by Aureliano Chaves, the new minister of energy and mining, has 18 months before a national election for Congress and state governors puts Brazilian democracy to a major test. Before then, there will be the election of mayors of all state capitals.

The new political order will emerge from these elections. Opposition figures are already lining up to challenge Neves. They include Leonel Brizola, the populist governor of Rio de Janeiro, and Paulo Maluf, the former governor of Sao Paulo, who lost to Neves in the presidential race and now plans to run for governor again.

Next: The “social debt” facing Brazil.