Back with Backing from Abroad

When the 1964 Brazilian military coup ousted Leftist Joao Goulart and installed President Humberto Castello Branco, one of the country's most desperate needs was an infusion of private foreign capital. Goulart's free-spending ways had so fanned chronic inflation that the annual increase in the cost of living was nearly 150%. Foreign investors had started paring their spending plans. Many companies had contemplated shutting down and forgetting the whole thing; one, International Harves ter, did just that. Now, only 21 years later, a dramatic reversal is under way.

Dimes and dollars, francs and yen are again swinging down to Rio and the rest of Brazil.

Last week Alcoa won final government approval of a proposal to spend $56 million building a new aluminum plant. Also last week United Brazilian Minerals, which is 49% owned by Cleveland's Hanna Mining, was granted the right to mine and export iron ore and eventually to manufacture steel, an ambitious $600 million enterprise. The two new projects were only the latest in a spate of similar announcements. Phil lips Petroleum plans to pump in some $60 million, starting with a new fertilizer plant for which ground has already been broken. Union Carbide will expand its operations to the tune of $62,300,000. International Harvester has not only reopened; it is also spending $30 million to expand its truck line and build its first tractors in the country.

Climate: Favorable. Strongest showing of all is in the Brazilian auto busi ness, among the world's top ten and the country's biggest industrial employer.

Volkswagen, already Brazil's leader, plans to up production from 420 to 500 vehicles a day within a year, will spend at least $100 million for plant expansion.

Willys-Overland is sinking $60 million into new facilities, will make a new line of Renaults by 1968. Ford is introducing its first passenger car, a version of the Galaxie, in February at a cost of $30 million. General Motors will put up $52 million and also enter Brazil's passenger-car market, probably with its Opel. Even Japan's tiny Toyota is planning at least $5,000,000 worth of expansion.

The reasons for the foreigners' return start with Castello Branco. While he has slowed but by no means halted inflation (the cost of living is up 39.5% this year), he has demonstrated an encouragingly tough-minded intent that investors do not think will be reversed. The cruzeiro's exchange rate has been held at 2,200 to the dollar for more than a year, taxes are being collected more diligently, credit has been tightened, and the constant wage increases have been slowed. Moreover, his persuasive economics minister, Roberto Campos, has beat bushes abroad convincing hesitant investors that now is the time to get in. Says National Economic Development Bank Director Jayme Magrassi de Sa: "International businessmen have always looked on Brazil as an excellent long-term prospect. Now there is a favorable political climate."

Common & Political Sense. Of course, the rosy resurgence would not be Latin if it did not include a few thorns. For one thing, it comes at a time when many predict that the country is headed for a recession. The tightness of credit has dried up cash, and consumers have little to spend. Christmas shopping is the slowest in memory. Worse still is the spreading fear that all the foreign money means that Brazil is losing its national identity. American advisers are so much in evidence at the economic ministry that Brazilians bitterly joke that more English than Portuguese is spoken there. Some nationalists consider Roberto Campos so pro-U.S. that they commonly Americanize his name to Bobby Fields.

The danger of economic denationalization is not entirely imaginary. Cash is so short that most Brazilian businesses could be purchased with dollars for just 40% of their assets, though the government is not likely to allow that to happen often or in any major companies. Nonetheless, foreign capital's share of private industry has been estimated to have increased to as much as 50%. And the national-identity issue is an increasingly emotional rallying point. With his military support, Castello Branco never had to worry about such gripes from the voters; newly elected President Artur da Costa e Silva is not so lucky. He is now painstakingly studying the economy. When he takes over in March, his common sense may well want to follow the current course, but his political sense might overrule.

This file is automatically generated by a robot program, so reader's discretion is required.