Brazil elections over, Cardoso faces fiscal battle
Reuters, Monday, October 26, 1998 at 00:23
By William Schomberg
BRASILIA, Oct 26 (Reuters) - President Fernando Henrique
Cardoso saw a friend elected in Brazil's most important state
on Sunday but allies elsewhere were defeated, making his
already daunting challenge to save the crisis-torn economy even
harder.
Cardoso, who was re-elected earlier this month, needs all
the political support he can get to stop Latin America's
biggest economy from becoming the latest victim of a global
financial crunch that has already claimed much of Asia and
Russia.
With the state governor elections out of the way, the
government's economic team is expected to unveil a $20 billion
austerity plan either Tuesday or Wednesday.
But Sunday's results raised doubts about how effective
Cardoso will be in getting the plan through Congress quickly to
qualify Brazil for a multibillion-dollar credit line led by the
International Monetary Fund.
The expected $30 billion credits are crucial to restoring
investor confidence in Brazil's sagging economic recovery and
to its chances of avoiding a currency crisis that could drag
the rest of Latin America into recession.
"Things were already looking hard for him ... but the
election results have raised a question mark about his
firepower," said Ricardo Pedreira with consultants Santa Fe
Ideias.
Cardoso's ally and friend Mario Covas won re-election in
Sao Paulo, Brazil's economic powerhouse state. Covas will
bolster Cardoso's influence over the country's unpredictable
Congress where state governors have considerable influence.
But the victory of opposition candidates in Brazil's three
other big states -- Rio de Janeiro, Minas Gerais and Rio Grande
do Sul -- might complicate the president's attempts to include
local-level governments in Brazil's fiscal drive.
Leftist Anthony Garotinho who won in Rio de Janeiro, did
not rule out his support for the austerity measures, but said
he would not accept a proposed clampdown on the distribution of
tax revenues to Brazil's spendthrift states and municipalities.
"(The measures are important) but they cannot jeopardize
the states and municipalities," he told national Globo Network
television. "Therefore I will support them with restrictions."
Rio, like Minas Gerais and Rio Grande do Sul, spends
roughly 80 percent of receipts on it huge payrolls, making them
key players in Cardoso's as yet unannounced fiscal plan.
Former president Itamar Franco, who has blasted the
pro-market policies of his former minister Cardoso, won Minas
Gerais. Hardline leftist Olivio Dutra was comfortably ahead in
Rio Grande do Sul.
Cardoso's plan is likely to include immediate spending cuts
and tax increases but will also rely heavily on reforms to
overhaul Brazil's loss-making public sector.
Those bills are close to completion having been stuck in
Congress for nearly four years. But the government still has a
fight on its hands to get them fully approved, meaning likely
further delays in the freeing up of IMF-led credit for Brazil.
Finance Minister Pedro Malan was due to speak with senators
Thursday to explain the austerity measures and begin the
government's long push for their approval.
"There are signs that the IMF is not going to sign a blank
check until Congress passes these things," said David
Fleischer, a politics professor at Brasilia University. "That
means they might not have full IMF support until November or
December."
Copyright 1998, Reuters News Service |
