Brazilian Official Quits in New Setback for President

Brazil’s beleaguered President Itamar Franco, battling steep inflation, a stalled economy, and a bickering Cabinet, was rocked again Thursday when his influential finance minister and closest adviser suddenly left office.

Eliseu Resende, embittered and drawn, announced his resignation before dawn, hours after a nightlong meeting with Franco at the president’s residence in Brasilia, the capital. Resende had been in office 81 days and had unveiled an economic recovery plan only three weeks ago.

In the turnstile politics of Brasilia, he was the third person to head the Finance Ministry since Franco took office last September after the impeachment of Fernando Collor de Mello on corruption charges.

Franco immediately named Foreign Minister Fernando Henrique Cardoso to replace Resende, recalling Cardoso from a diplomatic mission in the United States. Speaking from New York, Cardoso, a respected sociologist, said he will not alter Resende’s economic plan.

Resende told reporters he was deeply “hurt” and “humiliated” by recent charges that he helped his old employer, the Norberto Odebrecht company, win a sweetheart contract to build an irrigation works in Peru.

Earlier this month, Resende was called on the carpet by the Senate, where he bared his personal expense accounts to defend himself against allegations that he pressured the government to release $115 million to finance the irrigation project in Peru. Although the Senate accepted his explanations, Resende said he was offended by the challenge to his integrity.

“I felt very hurt inside with this episode,” he told reporters. “The economic plan needs credibility and must not be affected.”

Leaders in business, politics and finance all hailed the choice of Cardoso as finance chief. The stock market rallied and the black market dollar, the economy’s most nervous index, remained stable. “He knows what to do to fix the Brazilian economy,” said federal Congressman Luiz Eduardo Magalhaes, leader of the the centrist Liberal Front Party.

Cardoso told reporters he intends to implement Resende’s recovery plan, which proposes to accelerate privatization of state companies and invest more than $13 billion in jobs, housing, agriculture and health.

Echoing Franco, he attacked Brazil’s “ruinous” domestic interest rates, now running at about 20% above inflation, but said he will bring them down “in accordance with the rules of the market.”

To the relief of creditors, who are renegotiating $44 billion of Brazil’s outstanding loans, Cardoso said he will “without a doubt” honor the foreign debt. He also discarded suggestions of an economic “shock plan,” such as a wage and price freeze.