Brazil Is a Contrast of Promise and Poverty

Brazil is booming. But when a society as big, complex and inequitable as this one undergoes a revolutionary economic transformation, the process brings agony as well as ecstasy.

Ask Romulo Fisher. Although the surging Brazilian computer market portends a dynamic future, the computer analyst still depends on an apocalyptically erratic telephone system that embodies the past. After Fisher spent an entire day trying unsuccessfully to connect to the Internet, he wrote a Web page condemning Rio’s telephone company; it was titled “I Hate Telerj.”

The page became an overnight cyberprotest sensation and prompted more than 14,000 complaints about the phone company: crossed lines, 10-minute waits to get a dial tone, two-year delays to get a phone installed.

“People saw this as a civil action,” Fisher said. “I even heard from people abroad who couldn’t get through to their relatives in Brazil.”

The laments may fade as Telerj modernizes and Brazil privatizes a telecommunications industry expected to generate up to $100 billion for the government by 2003. Bell South’s recent $2.6-billion acquisition of Sao Paulo’s cellular phone concession marked Latin America’s biggest sale in this industry--one of the giant opportunities in the Brazilian market.

Fisher’s story says a lot about the Brazil that President Clinton will visit Monday. The government has rescued and revitalized the world’s eighth-largest economy. The results have benefited everyone from computer programmers to slum dwellers to foreign investors. For the perennial country of the future, tomorrow appears to have finally arrived.

Nonetheless, gulfs still separate future and past, aspiration and reality. Bloated and rapacious public-sector bureaucracies threaten long-term economic health. And in a nation where the richest 10% of the population control half the wealth, 30 million Brazilians are trapped in precarious lives in places like Mangueira, the hillside favela (slum) that Clinton will visit Wednesday.

People in Mangueira have been down for so long that they doubt anyone will help them up, said community leader Celso Peres, climbing a steep street through a brick-and-wood jumble of shacks ruled by the teenage sentries of the drug trade.

“Thank you, President Clinton, for visiting Mangueira, something our own leaders never do,” Peres said. “I’m sorry, President Cardoso: The speeches are very nice, but the results have not been enough.”

A heavily guarded Clinton will visit a sports complex on the edge of the slum, an area where educational and health programs are funded by grants from Xerox and other U.S. corporations. As for President Fernando Henrique Cardoso, polls suggest he will win an easy reelection next year because most Brazilians believe their lives have improved and their president is moving in the right direction.

“What can damage my popularity?” Cardoso asked rhetorically during an interview last week in Brasilia, the capital. “Two things: the cost of living--inflation--and corruption. I have to keep a very close eye on inflation. . . . And I cannot be lenient with corruption at all. That is an asset of this government.”

The president’s odyssey has been as intriguing as the nation’s. He is the quintessential Latin American intellectual-turned-statesman, equally adept at quoting De Tocqueville and Lester Thurow and maneuvering legislation through the swamp of his congressional coalition.

During the dictatorship that ended in 1985, Cardoso was a respected leftist sociologist who taught at U.S. and European universities. He grew increasingly pragmatic and moderate as he became a senator, finance minister and finally president in 1994.

Inheriting a shambles of hyper-inflation and pillage left by the preceding administration, Cardoso unveiled a currency stabilization program known as the Real Plan (the “real” is the monetary unit of Brazil). Inflation plummeted, easing the plight of the working class. In Mangueira, an infusion of spending power and credit has filled the favela with new televisions, refrigerators and other comforts. National sales of electric appliances jumped by 66%.

Although Cardoso dislikes being called a neoliberal, he reversed a history of protectionism that had created one of the region’s most industrialized and closed economies. His first targets were the dinosaurs of state-run industry. He used privatization profits to improve infrastructure and social programs.

“I took a decision: Let’s start by breaking monopolies,” said Cardoso, 66. “I was elected by the majority of the Brazilian voters, but my party won 62 [congressional] seats out of 500. So how to govern? . . . I’m in favor of democracy. So the only democratic way is to negotiate in Congress.”

Pushing reforms through laborious legislative procedures required titanic politicking and a record 16 amendments to the constitution. But it paid off: The opening of the market has attracted investment from around the world, especially the United States and Europe.

The auto industry exemplifies the boom. Brazil is expected to become the world’s fifth-biggest car maker by 2000. The industry makes 2 million cars a year. Domestic auto sales have more than tripled. The Fiat plant in the state of Minas Gerais rivals the size of Italian plants, and, Cardoso hastens to add, 50% of its employees own cars.

Brazil’s overvalued currency and recent stock volatility, blamed on a financial crisis in Southeast Asia, have raised fears of a similar calamity here. But Brazilian leaders and analysts believe their new economic machine is solid. There are almost $65 billion in foreign reserves, the banking system has been fortified, and Cardoso says he has no qualms about raising interest rates if necessary.

“Our market is a solid market, an expanding market,” Cardoso said. “We are not a platform for exports. We have an internal market. We are closer to America in that sense. The direct investment is growing very fast--$16 billion expected this year, and that’s nothing. I hope for more next year.”

An immediate challenge: remaking social security, public administration and tax systems rife with waste, abuse and inefficiency. Omnipotent and outrageously well-paid bureaucrats are known here as “maharajahs.”

States such as Alagoas in the north are stumbling into bankruptcy because they spend more than 100% of their budgets on payrolls. Civil service rules protect even convicted murderers from dismissal. Cushy pension plans permit retirement at 120% of salary and continue granting raises and promotions to retired civil servants.

The social security system, already facing the demographic pressures felt by most nations, has been looted on a grand scale: A lawyer named Georgina de Freitas was arrested after fleeing to Miami and was charged with stealing $200 million through fraudulent claims.

The slow pace of reforms in these areas, which officials admit are crucial to budgetary stability, exposes the limits of Cardoso’s coalition-based approach, critics say. Powerful interests have blocked or diluted attempts to strip public officials of privileges and force the rich to pay more taxes.

Brazil is not a poor nation but an unjust one, Cardoso says. He can rightfully assert that he has done more about injustice than his predecessors. In response to his most vocal critics, the highly organized Movimento Sem Terra (Landless Movement), he points out that in three years the government has expropriated 9.6 million acres for landless peasants--a territory larger than Belgium.

But the president’s open acknowledgment of social crisis raises the inevitable question about how much the macroeconomic progress benefits the bottom half of the population.

In Rio alone, at least 2 million people live on the edge of society in slums such as Mangueira. Pavement, sewers and other basics have only recently arrived. The police are seen as brutal invaders.

Drug gangs, entrenched in hilltop firing positions in the tumbledown warren of streets, are a major economic force and potential employer--as in the ghettos of Los Angeles--for youths scrambling for jobs that pay the monthly minimum wage of about $120.

The salary for teachers in Mangueira’s cramped school is about $300 a month. The local three-room health clinic, found at the end of an alley where one day recently a drunken, shirtless man raged among oblivious, swarming children, is primitive and depressing. The public hospital isn’t much better, residents said.

“You have to go there at 5 in the morning and wait in line to make an appointment,” Peres said. “Then they schedule an appointment for you in two months. If you can’t make it until then, you die.”

The fall of inflation hardly erased deprivation. To some, indignant middle-class protests on the Internet about telephone service seem part of another universe: Telephones are exotic objects in Mangueira. The homeowners association hopes to set up a cooperative in which every 10 households would share a line.

“Depending on our governmental system is the worst,” Peres said. “Our health system is precarious. Our educational system is precarious. Our employment system is precarious.”

Education, a central theme of the Clinton visit, offers the fundamental long-term solution, according to Cardoso. Change requires time, the president said.

“We have had four centuries of inequality in Brazil,” he said. “It is not easy to solve the problem in two years, or three years, or four years.”

*

Paula Gobbi of The Times’ Rio bureau contributed to this report.

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Brazilian Boom

Inflation has fallen dramatically and has stayed down. . .

1994: 941% 1997*: 6%

. . .while direct investment from foreign sources has risen

1997*: $14.2 billion * from September 1996 to August 1997 Sources: Study Center for Latin America, Central Bank of Brazil