SUNS  4296 Wednesday 7 October 1998

Brazil: Cardoso re-elected, but rough weather ahead

Rio de Janeiro, Oct 5 (IPS/Mario Osava) -- Brazil's president, Fernando Henrique Cardoso, will have a tough time maintaining the political capital renewed with his re-election, now as volatile as the foreign reserves the country had until June.

His categorical victory in the first round eliminates uncertainties and reaffirms Cardoso's leadership, thus ensuring suitable conditions for implementing fiscal adjustment and obtaining enough international financial aid to keep afloat the real - the national currency, threatened by the crisis.

According to voter surveys Sunday, 56% supported the President - although this figure had fallen to 50.66% Monday morning, with the official scrutiny of 83.99% of the vote complete.

The President also won with sufficient strength to push for the approval of reforms like those planned for the welfare sector which have been pending in the Congress for more than two years now.

But the unpopular measures he will have to adopt and the political pitfalls he must avoid could wear away Cardoso's authority before he formally begins his second term in office on January 1, 1999.

In 1994, when he won his first term, the economic stabilisation "Plan Real", of which Cardoso was the architect as finance minister, made him unbeatable. The runaway inflation afflicting Brazilians for more than two decades plunged in July of that year, three months before the elections.

The opposition accused Cardoso of applying the Plan Real with electoral more than economic aims. But millions of poor Brazilians who benefited from the stability of prices helped him attain a landslide victory at the time over the same rival he smashed once again on Sunday, Lula.

Fortune seemed to have abandoned him this year. The financial crisis that broke out in Asia reached Brazil, triggering the flight of $30 billion in the two month run-up to the elections, and forcing the government to adopt unpopular measures, such as a drastic hike in interest rates.

But it soon became clear that circumstances were once again running in his favour. Cardoso's approval ratings rose in the polls. The crisis accentuated the conservative tendencies of voters, who were reluctant to accept change in the eye of the storm. The financial turbulence would have perhaps affected his bid for reelection if it had reached Brazil earlier, giving the population time to feel the concrete effects expected from the crisis, such as a recession, rising unemployment and
major cutbacks to public spending, which will have a direct impact on the poor.

But the re-elected Cardoso, who begins his new term on 1 January 1999, may be running the same risk as former president Jose Sarney in 1986. Sarney had put off emergency measures until after the elections only to see his power deteriorate at a galloping pace. This manoevre destroyed both the economic stabilisation plan adopted nine months before and the legitimacy of the post he had won.

Cardoso took steps to avoid this, by announcing three weeks ago he would bring in tough measures if elected to stop the State spending more than society is able to contribute to it.

But this was a general announcement which did not reveal "the real proportions of the crisis" and the sacrifices which will be demanded of the population, said Luciano Coutinho, Economist from the University of Campinas.

Leading opposition candidate, Luiz Inacio Lula da Silva, of the left-wing Workers' Party, accused the President of having impeded debate on the crisis and national problems during the campaign. This
country is "on the edge of the abyss and the victims elected the man to push it over," he said.

"Now he will have to untie the knot into which he stuck the country," a left-leaning voter consoled herself after suffering Lula's third consecutive defeat.

When the tough measures presaged by Cardoso are implemented and the effects of the interest rate hike begin to be felt, the probable resulting recession and surge in unemployment could take the wind out of his sails, reducing his popularity and undermining the cautious vote of confidence seen in the elections Sunday.

According to experts and government reports already released, some $20 billion or 2.5% of GDP has to be cut in government expenditure. But any cut-backs are made difficult by the 1988 Constitution, already "old and anachronistic," according to former finance minister Mailson da
Nobrega. Former president Sarney blamed the constitution for making the country ungovernable, forcing public spending up without assuring State income.

In these conditions and in a period of economic stagnation or recession, experts consider obtaining the forecast primary fiscal surplus practically impossible without increasing taxes - an alternative strongly resisted by society.

Also, while Cordoso was reelected in the first round, the rest of the political make up is still unclear - in nearly half the 27 Brazilian states, the new governor will only be identified in the second round on
October 25.

Fiscal adjustment have to be negotiated with the individual state governments who are responsible for a large proportion of the deficit. In many cases negotiations will be needed with both the outgoing governor and the incoming one.

The oppoition has a bright chance of winning the governorship of the most important states. This is the case of former president Itamar Franco in Minas Gerais and left-wing candidates in Rio de Janeiro, Rio Grande do Sul and Sao Paulo, as well as in the Federal District of Brasilia.

In Sao Paulo, it is still uncertain who will stand against former mayor of Sao Paulo, Paulo Maluf, in the second round. At present current governor, Mario Covas, a social democrat like Cardoso, and Marta Suplicy, from the left-wing Workers' Party (PT) are running neck and neck.

Results for the Senate, where onethird of seats are up for election, were negative for the ruling centre-right coalition. The great victors were the Party of the Brazilian Democratic Movement (PMDB), divided in relation to the Cardoso government, and the PT.

The PMDB ended up with 10 of the 27 senators elected Sunday, meaning it once again had the largest representation in the Senate. The PT, which constitutes the most radical opposition, took a surprising six seats, while Liberals and Social Democrats of the official coalition took five and four seats respectively.
Another problem for Cardoso is that Congress must vote on indispensible fiscal adjustment measures before the end of the year - like the constitutional amendment of welfare reform and laws regulating administrative reform.

For, some politicians, mainly from the opposition ranks, refuse to accept the legitimacy of crucial decisions made by the current Congress, as many of these members were not reelected.

They have therefore proposed the immediate investiture of new deputies and senators, without waiting for the official date of February 2.