Brazil Chief’s Popularity Fades : Riots Follow Price Boosts; Economy Heating Up

President Jose Sarney tamed runaway inflation, slashed unemployment and set off a carnival of consumer spending after taking office in 1985. The result was a bonanza of popular approval for Brazil’s first civilian president since 1964, but now the approval has suddenly faded.

In its place has emerged widespread fear that the economic gains have been illusory, too good to last.

Sarney, 56, finds himself in an uphill struggle to regain public confidence, important for making his economic program work and easing the transition to democracy in Latin America’s largest country.

“We are facing difficulties, it is very true,” he said last week in a televised speech, “but be sure that we will overcome them all. No way is Brazil going to walk over a cliff.”

Unpopular Measures

On Nov. 21, to cool the overheated economy, Sarney decreed a series of price increases and other measures that proved to be extremely unpopular. The public reaction included riots in Brasilia, the national capital.

Public approval of Sarney’s performance in office, as measured by an opinion poll in Rio, dropped to 45% from 84%.

Criticism has come in avalanches, even from Sarney’s party, the centrist Brazilian Democratic Movement.

The party’s candidates won a landslide victory in nationwide elections Nov. 15. Brazilian political analysts, and Sarney as well, said the government’s economic program was the key to electoral triumph.

Sweeping Victory

Sarney’s party won 22 of 23 governorships and majorities in both houses of Congress, which will write a new constitution. The elections were the first nationwide since the armed forces left the government in March, 1985, 21 years after seizing power.

A longtime senator for the party that backed the military government, Sarney switched to the Democratic Movement to become a compromise candidate for vice president. He was not elected by a popular vote but by an electoral college that chose Tancredo Neves as president.

Neves fell fatally ill on the eve of assuming office, and Sarney assumed the presidency at a time of growing inflation and other economic ills.

By February, 1986, inflation was approaching an annual rate of 500%. It fed on indexing, the longtime Brazilian practice of regularly readjusting prices, wages, interest rates and other values to bring them into line with the cost of living.

At the end of February, Sarney knocked three zeros off the Brazilian currency and changed its name from the cruzeiro to the cruzado. At the same time, he took drastic action aimed at stifling the growth of new zeros.

Froze Prices, Wages

His Cruzado Plan abruptly ended indexing and froze prices for most consumer goods. After granting a hefty raise to workers, the plan also froze salaries.

Officially, from February through November, inflation totaled a little over 10%, although some economists say that real inflation was closer to 20%. Whatever the rate, it is far below the triple-digit spiral that had relentlessly eroded consumer purchasing power.

The stabilized cruzado quickly sparked a consumer buying spree. Commercial and industrial activity increased to meet the new levels of demand. By October, unemployment had dropped to a record low of 3.1%, less than half the rate of October, 1984.

Some industries reached production limits while others, unsatisfied with the frozen prices, curtailed production. Many things, ranging from milk and meat to automobiles, became scarce.

Price-gouging began, and the government fought it by mobilizing legions of volunteer enforcers called “Sarney’s overseers.”

Huge Foreign Debt

Economic growth was projected at more than 10% for 1986. But savings and investment were down while imports were up, jeopardizing the favorable balance of payments needed to service Brazil’s $105-billion foreign debt, the biggest in the Third World.

Sarney waited until after the November elections to take corrective measures. His government decreed price increases of 80% for automobiles, 60% for gasoline and alcohol fuel, 45% to 120% for cigarettes and 80% for alcoholic beverages.

Charges for postage and telephone service increased by 35%, and electric energy prices rose on a sliding scale by up to 60% for heavy users. Much of the revenue from the higher prices will go directly into the public treasury.

The news magazine Veja estimated that the added revenue represents 4% of Brazil’s gross domestic product, “one of the most gigantic transfers of income to the public sector, in one blow, that the country has ever seen.”

Changed Inflation Index

The government also altered its method for calculating the official inflation index, eliminating many items subject to price increases. Critics complain that the move was aimed at presenting an artificially low inflation rate.

The lower the government keeps the official cost-of-living index, the longer workers will go without a raise under the Cruzado Plan. The next raise will come only after official inflation reaches 20% since February.

Orestes Quercia, governor-elect of the state of Sao Paulo and a member of Sarney’s party, criticized the altered price index as an attempt to hide inflation. “It is very clear that the intention is to keep inflation from reaching 20%,” Quercia told reporters.

Official Cars Torched

On Nov. 27, thousands of workers in Brasilia demonstrated against the new measures, sacking stores and burning official vehicles. It was the most violent outburst in the capital’s 26-year history.

Brazil’s main labor confederations, which helped organize the protest, are now calling for a general strike Friday against the government’s economic policy.

In his televised speech last week, Sarney appealed to Brazilians to ignore the strike call. “You cannot be tools of those people who want a scorched-earth policy,” he said.

The president defended the new economic measures as necessary adjustments to the Cruzado Plan, which he said will continue working to the benefit of Brazil’s poor majority.

“Our nation has no reason for pessimism,” he said. “We are in the best period of our history.”