Low-Income Brazilians Cheered by Monetary Reforms

“This is the first time in my life that I have seen someone in power do something for the poor,” a thin, dark-skinned woman said the other day at the Disco supermarket in Tijuca, a middle-class neighborhood of Rio de Janeiro.

Regina dos Santos, 26, was comparing prices stamped on packages of noodles with prices on a government list. The list, published on Feb. 28, puts a ceiling on the prices of more than 1,000 consumer items.

Dos Santos, smiling with delight, found that some brands of noodles were priced even below the official level.

New Era Begun

A new era appears to have begun for a generation of Brazilians caught up in a seemingly endless effort to keep abreast of inflation.

For consumers and wage earners, the unexpected hero of the hour is President Jose Sarney, who has announced a new offensive in what he calls the “life or death” struggle against inflation. It includes price controls and monetary reform--a “strong” new currency, the cruzado, in place of the old cruzeiro.

Sarney’s program has elicited popular support to an extent that exceeds the government’s most optimistic expectations. When a bakery where Dos Santos shops overcharged for its bread, customers called the police, and the baker was hauled off to pay a substantial fine. Episodes like this have been reported all over Brazil.

“Now the gougers know that we are going to fight back,” said Dos Santos, a housemaid who lives with a married aunt.

Inflation Means Hunger

She said her family has a combined income of less than $150 a month. Asked what runaway inflation has meant for her in recent months, she replied, “Hunger.”

For Dos Santos and millions of other low-income Brazilians, as food prices have soared, wages have limped along behind. They have no savings that could be put into high-interest investments, a practice that has kept wealthy Brazilians ahead in the inflation game.

Throughout Brazil, millions of shoppers like Dos Santos have enlisted in a consumer revolution. Armed with the official price list, they have become vigilantes to enforce price controls.

Since March 1, the effects have been electrifying. The price spiral has been stopped. Finance Minister Dilson Funaro, the architect of the anti-inflation plan, is predicting that the rate of inflation, which raised prices an average of 15% a month in January and February, will be zero or even reversed by the end of March.

Wholesale Price Cuts

With prices frozen at the consumer level, the controls are forcing price reductions at wholesale and producer levels. Eighty trucks arrived in Sao Paulo’s produce market the other day with bananas priced at 1,500 cruzados a ton. Fruit vendors said they could not pay that price and sell at the controlled retail prices. The bananas were promptly marked down to 1,000 cruzados.

Will the price freeze bring lasting stability? Will there be food shortages or a black market? Will there be a recession and unemployment? Will wages be increased as annual labor contracts expire? Will interest rates drop along with prices?

These and many other questions raised by the anti-inflation plan are being hotly debated by government officials, businessmen, union leaders and consumers. Opinion polls show that most people think the plan will work.

What is not disputed is that Sarney’s bold attack on inflation is the most important political event in Brazil since democracy was restored last year after 21 years of military rule.

Asserting Personal Control

At a stroke, Sarney has won the confidence of Brazil’s people as a leader capable of making difficult decisions that the majority support. He has asserted personal control over the turbulent political coalition with which he governs and has disconcerted his opponents on the left.

On the whole, Sarney has also won the respect and cooperation of businessmen, farmers and bankers. Most potential investors realize that Brazil’s economic future as a major new industrial country of 135 million people depends on sound, long-term investments, not speculation in a fevered inflationary climate.

Sarney, 56, took office as president a year ago as the result of a political accident. He was substituted for the popular president-elect, Tancredo Neves, who was hospitalized for surgery on the eve of his inauguration and died five weeks later.

Initially, Sarney was not trusted by the leaders of Neves’ Brazilian Democratic Movement, which had a majority in Congress and most of the Cabinet posts. Until shortly before Neves chose him as his running mate, Sarney had been president of the Democratic Social Party, the political arm of Brazil’s military leaders.

Break With Military

Sarney and other dissidents broke with the military over the choice of an official presidential candidate. They ended the military regime by backing the opposition presidential candidate, Neves. But no one, Sarney least of all, foresaw that he might be president during Brazil’s transition to democracy.

For 20 years, Sarney had been governor of the backward northeastern state of Maranhao and a member of Congress, first as deputy and then as senator. But he was not a national figure.

During his first months as president he was diffident, almost apologetic for trying to fill Neves’ shoes. He said he would carry out Neves’ program of moderate social reforms under a new constitution designed to strengthen democratic institutions.

Sarney began to show a mind of his own last year when he rejected recommendations for recessionary policies to reduce inflation. He authorized a national wage increase in July that was higher than inflation. This fed a consumer boom that reactivated Brazil’s economy, which grew 8% last year, one of the highest rates in the world.

First Cabinet Change

In August, he made his first Cabinet change, installing Funaro, a Sao Paulo industrialist, as minister of finance. Funaro refused to submit Brazil’s economic policy to austerity controls by the International Monetary Fund. He said production growth and more employment would overcome inflation.

But inflation continued to rise, and the booming economy did not provide workers and low-income consumers with the price stability that has become an obsession.

Sarney seemed hesitant to make a bold move. He had not been elected by a popular majority. But he had a team of young, imaginative economists working in secret, under Funaro’s direction, on the anti-inflation plan.

In January and February, he distracted national attention with additional Cabinet changes and publicity stunts, such as flying Indian medicine men in from the Amazon to treat the mysterious ailments of Augusto Ruschi, a famous naturalist.

Erosion of Authority

The political authority of the government was eroded, though, as inflation surged. In February, the leadership of the Brazilian Democratic Movement virtually broke with Sarney over his Cabinet appointments. By the end of the month, the left-wing Central Workers Union was openly preparing for a national strike in May.

Leonel Brizola, the dynamic governor of the state of Rio de Janeiro, began a national campaign to shorten Sarney’s presidential term and call a direct, popular election for a new president next year. Gen. Leonidas Pires Goncalves, the minister of defense, said any reduction of Sarney’s term would be “destabilizing.” But Sarney was on the defensive.

The unexpected announcement of the anti-inflation program and the massive show of popular backing for price controls changed the political picture dramatically. The unions have postponed talk of a strike. Brizola has grudgingly admitted that Sarney is helping consumers. The Brazilian Democratic Movement has closed ranks behind Sarney, giving full support to the anti-inflation program.

No More Ugly Duckling

As a result, Sarney has been transformed from a political ugly duckling into a swan. Public opinion polls show that over 85% of Brazilians support his economic program, which calls for continued growth with “zero inflation.”

If the program approximates this goal, the center-left Brazilian Democratic Movement can look forward to a winning platform for its candidates in the November elections for state governors, a new Chamber of Deputies and two-thirds of the Senate.

The election will also produce a constituent assembly to modernize the Brazilian constitution. Among other things, the assembly will decide on the length of Sarney’s presidential term, which could be six years under the present constitution.

Ricardo Noblat, a political columnist for the daily Jornal do Brasil, commented recently: “With the support Sarney has won with the monetary reform, Brizola is going to have to wait for a long time before he can run for president. The (Brazilian Democratic Movement) is going to be the majority party in Brazil for a long time.”