Right-Wing Prosperity

CARNIVAL hits Brazil this week, and millions of cariocas, paulistas and other citizens will have more to celebrate than in years. Cynics have long said that Latin America's biggest country "is the land of the future--and always will be the land of the future." Suddenly, however, the future is right on the horizon.

After seven years of austerity, economic innovations and political repression, Brazil claims one of the fastest-growing economies in Latin America. Its gross national product last year advanced more than 11 % (to a still modest $40 billion). A wave of consumer spending has given fresh fuel to the world's eighth largest car industry, which last year increased production by 20%, to 500,000 units. Sales of consumer durables--TV sets, refrigerators, washing machines and other appliances --went up by almost one quarter in 1971. While Chile under its Leftist President Salvador Allende is nearly bankrupt, Brazil has prospered under a right-wing military regime. Even Brazil's many Latin critics are beginning to look enviously at the country's economic success.

Tax Credits. When the army seized power in 1964, Brazil was nearly broke and veering toward chaos after years of left-wing leadership. Overreacting, the generals used fear and torture to crush political opposition and curtail civil liberties. To cool the dangerously overheated economy, Economic Planning Minister Roberto Campos introduced an unpopular but necessary austerity program. In 1967 the government started pushing economic growth, and the generals brought in as Finance Minister Antonio Delfim Netto, a brilliant, bullying Sao Paulo State finance secretary and former economics professor. Delfim has been given a free hand in running the economy and now, at 43, is the second most powerful man in Brazil, after President Emilio Garrastazu Medici.

To open up the economy, Delfim relaxed consumer credit restrictions and postponed income tax collections. Wage increases were tied to productivity gains, about 3% to 4% yearly. Delfim also eased price controls; that gave a lift to production, but certainly did not help slow inflation. Last year prices accelerated by 20%, which would be horrendous almost anywhere except in Latin America, where many countries have often suffered even steeper price increases.

Delfim brought in many stimulative innovations. Under a special investment tax credit, Brazilians now can divert 12% of their income tax obligations into mutual funds and watch their earnings grow. This has not only enlarged capital sources for industry but has started an epidemic of investment fever. Many workers are also buying stock with their own money, and the Sao Paulo stock exchange is one of the world's most active bourses; volume last year rose by 250%. One enterprising stock vendor even sends agents out in canoes to sell along the rivers of the interior.

Yet the benefits of the new wealth have been largely confined to the middle-class minority, while the majority remains mired in varying degrees of poverty. Even President Medici concedes: "The economy is going well, the people not so well." As a start on redistributing the wealth, the government now requires employers to open bank accounts for all employees and deposit part of the firm's profits into them. Workers are permitted to draw on this account only to buy a house, pay medical bills or pursue other goals that the government deems worthwhile.

Foreign Welcome. The government has also budgeted $7 billion over the next three years for public works, notably the Transamazonian Highway, part of a 9,000-mile network that aims to open up the largely uninhabited interior. In the hardscrabble northeast, it is about to pour in $800 million to help attract industry. Rio's favelas, the infamous slums that once contained 950,000 of the city's residents, now house about 450,000; the last favela is scheduled for demolition within the next five years, and the favelados are being moved to cheap government-built housing far from the center of town. A government-sponsored project to teach reading and writing to 21 million totally illiterate Brazilians--almost a quarter of the 96 million population --is also under way.

Brazil has also welcomed foreign investment, especially from the U.S., which has sent $1.6 billion in Government financial aid to support the regime. Of the $4 billion in direct private investment in Brazil, almost half has been supplied by U.S. firms, including General Electric, Kodak, GTE Sylvania and IBM (Brazil's biggest exporter). As the country's industrial base expands, Brazilians are acquiring a new sense of pre-eminence in Latin America that is making some of their neighbors nervous. Brazil is not yet strong enough to pursue a really imperialistic course, and the generals still rely on an indefinite suspension of civil liberties to stay in power. But the country that has a third of Latin America's population and much of its natural resources obviously has a major role to play.

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