The Price of Progress in Brazil

...The guerrilla movements that several years ago carried out a sensational series of bank robberies and kidnappings highly embarrassing to the regime have been broken by sophisticated police work, torture and the lack of popular support...

...The attack was turned aside by the Finance Ministry, which issued yet another declaration of the benefits of foreign capital and the nation's ability to control the activities of the multinational corporations...

...hopes for the developing nations, having been guided by men steeped in the economic and technical knowledge of the West and accelerated by massive foreign investment and loans from international development agencies...

...As the world's major source of iron ore, sugar cane and coffee, and a large source of many other vital raw materials, Brazil will be at the forefront of the effort to secure higher prices for Third World exports...

...Nor could a democracy have ignored the angry dismay of businessmen and industrialists threatened by competition and extinction from more efficient foreign enterprises...

...Indeed, there is probably no other major economy outside the Socialist bloc where the private sector is so subject to government pressure and direction—through tax incentives, access to credit, and direct controls on wages and prices...

...He lost out in the subsequent infighting of the high command...

...still, he may make some concessions to nationalist sentiment...

...The main organized opposition is the clergy of the Catholic Church (Brazil is the world's most populous Catholic nation...

...During this same period his brother Orlando was Minister of War under President Medici...

...At the 1973 Stockholm Conference on the Human Environment, it will be recalled, the Brazilian delegate argued that the problems of underdevelopment were more pressing for most of mankind than ecological purity, and that pollution was welcome in his country if it meant factories and jobs...

...in soybeans...

...As head of the military household of President Humberto Castelo Branco, leader of the '64 coup, Geisel was associated with those advocating a large economic role for private industry and foreign investment, as well as limited political repression...

...And unfortunately for those who would wish Brazil both high growth rates and democratic politics, there is no denying that the military dictatorship has been causal to the economic boom...

...Its leaders have taken some courageous stands on issues of social justice, but they have been reluctant to enter into a major confrontation with the junta because they would almost surely emerge the loser...

...Brazil today sells computers to Japan, machine tools to Germany and, in a remarkable reversal, will shortly begin exporting automobile engines to the U.S...

...The animating spirit of Brazil's economic advance has been less the laissez faire of Adam Smith than the state capitalism of Otto Bismark...

...The tragedy is that much of this cost is unnecessary...

...With the collapse of virtually all significant resistance to the dictatorship, the question uppermost in many Brazilians' minds is whether Geisel will maintain existing levels of repression or allow a period of "decompression," as suggested by his recent dropping of the 1964 decree against members of previous democratic governments...

...The statistics have a Great Leap Forward ring to them: Motor vehicle production has been climbing 20 per cent annually and will exceed 700,000 units this year...

...In fact, few observers doubt that the junta's candidate would win a free election, especially if the campaign period were kept short— though the generals, like Fidel Castro, are unwilling to put the matter to the test...

...Brazil imports more than it exports and is particularly dependent on fuel from abroad, for domestically produced petroleum satisfies less than a third of national needs...

...The regime's defenders attempt to answer these charges by pointing out that the "two-nation" phenomenon is nothing new: Brazil has always been abysmally underdeveloped with a thin veneer of prosperity...

...Writing for a Rio de Janeiro newspaper in 1972, Campos argued that the issues facing Brazil—and Latin America as a whole—involved three sets of cruel trade-offs: development or democracy, development or redistribution, and development or nationalism...

...The charge overlooks the fact that Washington has been in conflict with Brazil over its claim of a 200-mile limit to territorial waters, various trade restrictions, price-fixing for coffee exports, and its refusal to sign the nuclear nonproliferation treaty...

...A self-described "neocapitalist," Simonsen champions the slogan "no premature distributions" and insists there is a "fundamental incompatibility" between the high savings rates necessary to growth-generating investment and a more equal sharing of income...

...The junta's greatest triumph, however, has been the performance of the economy...

...With the junta still in total control, of course, the restoration of limited rights to over 100 formerly prominent politicians —including three ex-Presidents, Jus-celino Kubitschek, Janios Quadros and Joao Goulart—will have little practical effect...

...standards, and in the face of the blandishments of a bourgeoning consumer society their savings are minimal...

...electric capacity, new road milage, and steel and cement output have all more than doubled since 1964...

...The chaos and stagnation inherited—or, more accurately, wrested—from Goulart has gradually been supplanted by a period of sustained growth unequaled in any of the world's other major economies...

...The political situation remains relatively stable...

...The 64-year-old career Army officer is the fourth military President to be selected by the high command since March 31, 1964, when it ousted the democratically elected Goulart...

...Dissension within Peter J. Reichard is a New York attorney who recently returned from two years of working on foundation projects in Brazilian universities...

...Instead, the military has remained in power, convinced that an early return to democracy would be incompatible with rapid economic development within the framework of "Western Christian civilization," i.e., private property and anti-Communism...

...Even with vastly widened participation, however, the result would be closer to a corporatist authoritarianism than a constitutional democracy...

...Although General Geisel is not expected to initiate any radical departures from the junta's present policies, there is much speculation about what changes he will make in the "Revolution" as it enters its second decade...

...Those who consider Brazil subservient to the U.S...

...Coffee remains the largest export crop, but Brazil now harvests more cane sugar than Cuba and is second only to the U.S...

...The second trade-off, between development and redistribution, determines who receives the benefits of economic growth, and when...

...In reality, most of Brazil's "rich" are rather middle class by U.S...

...can count on hearing more such dissonant notes from its southern neighbor in the future...

...the creation of capital markets to make private savings available to local industry...

...But nationalism has never been bound by the rules of logic and it is undoubtedly an issue that will arise again...

...For the past six years the gross domestic product has increased at an average annual rate above 10 per cent...

...More likely, widespread economic discontent would lead to greater repression, the emergence of the kind of full-scale fascism that overtook the conservative revolutions imposed from above in prewar Germany and Japan...

...Though agriculture has not matched the spectacular gains of industry, production of beef, wheat and citrus fruits has been substantially increased...

...Moreover, while the short-term outlook is favorable, over the longer haul continued economic growth is dependent upon a widening of the domestic market—in other words, an improvement in the pattern of income distribution...

...A serious payments deficit could imperil investor confidence and diminish the flow of foreign capital, resulting in a curtailment of growth...

...Similarly, in 1973 the civilian Minister of Agriculture, Luiz Fernando Cirne Lima, resigned with a bitter denunciation of foreign penetration of the economy...

...It stands as a powerful refutation of the argument so widely accepted in the '50s and '60s that only Communist regimes could provide underdeveloped countries with the will and endurance to break the hold of the past and lay the foundations for sustained economic and social development...

...Of the 25 firms with the largest assets in 1971, some 17 were state-owned...

...World Bank President Robert McNamara has publicly criticized these disparities as incompatible with the essential aims of development (though the country continues to be the Bank's biggest borrower...

...In the economic realm, Geisel's naming of Simonsen as Finance Minister indicates that he does not intend to tinker excessively with machinery that is working so successfully...

...And this corporatist tendency is as strong today as it was during Getulio Vargas' dictatorship of 1937-45...

...Private enterprise—particularly the multinational corporation—has played a large role, but Friedman errs in giving it sole credit...

...Brazil's democratic tradition is tenuous at best...

...tractor usage is rising faster than anywhere else in the world...

...Aside from persisting inflation, the only cloud visible on the economic horizon at the moment is the specter of a balance of payments constraint...

...For a thoroughgoing analysis suggests that the chief engine of the miracle has been government investment in an array of infrastructure and heavy-industry projects...

...But he did not introduce any institutional changes to make Brazil a freer society, despite the lip service he and his fellow officers consistently paid to the notion of an eventual return to expanded civil liberties...

...The U.S...

...as the largest single source, and the Arabs are talking about large inputs) and the lengthening of minimum time terms for loans from abroad...

...HREE CRUEL RADE-OFFS The Price of Progress in Brazil BY PETER J. REICHARD By allowing a 10-year ban against certain political personalities to expire last month, Brazil's newly installed President Ernesto Geisel has inspired speculation about whether he intends to alter the course of the "Revolution" he and his fellow generals embarked upon after seizing power a decade ago...

...at the beginning of the 1960s...

...Even the military appears to recognize this, for it has taken at least some steps toward redistribution: Spending on education— including a massive drive against illiteracy—has increased enormously and now accounts for a fifth of the national budget...

...The junta will also continue to oppose Leftist governments (a dwindling species in the Hemisphere) and movements generally...

...hence the jibe that Geisel was the only eight-star general in the Army...

...During his 1969-74 term, Medici curbed some of the more brutal aspects of the repressive apparatus (there appears to have been a decline in the incidence of torture of political prisoners, for instance, though the practice is said to continue...

...As President, however, he can no longer be all things to all men...

...and, most impressively, the indexing of financial instruments such as bonds, notes, contracts, and leases to automatically compensate for annual increases in the cost of living (which, at over 15 per cent, is still considerable...

...In 1969, for example, General Afonso Albuquerque Lima, with strong support from younger officers, made a bid for the Presidency on a platform of national control of the economy, increased popular participation in government, social justice, and income redistribution—in short, a program akin to that proclaimed by the military dictatorship in Peru...

...Their innovations include the crawling peg system of periodic currency devaluations to compensate for inflation, thereby keeping exchange rates realistic and exports competitive...

...Manufactures, accounting for approximately a third of the country's exports, totaled $6.2 billion in 1973...

...also fail to recognize the nation's sense of historic mission to be an independent force in world politics...

...Presumably this could be done by turning the official pro-government party, the National Renovating Alliance (arena), into a genuine source of power and direction—as opposed to the approving chorus for the regime that it is today...

...In a rare recent instance of the humor Brazilians were once famous for bringing to their politics, the two official parties have been dubbed "Yes" and "Yes Sir...

...Since the pie is so small, contends Delfim Neto, Finance Minister from '67 to March of this year and father of the economic miracle, to divide it equally at this point would be short-sighted and self-defeating...

...Like other societies sharing a Catholic, Mediterranean ethos, Brazil exhibits a historical attraction to hierarchical organization along economic and professional lines, rather than parliamentary politics with competing parties and interest groups...

...Geisel has shown an interest in devoting somewhat more resources to the modernization of agriculture, where higher production is essential to reduce the price of foodstuffs...

...Possible starting points for Geisel include restoring the right of habeas corpus, relaxing censorship of the press, reestablishing an independent judiciary, allowing the Congress more substantive powers, and permitting the direct election of state governors...

...Perhaps the most notable aspect of his career is that at successive stages it linked him to the major bodies of opinion holding sway in Brazil today...

...Meanwhile, most of the politicians replaced by the generals have meekly subsided into an impotent Congress whose only significant function is to provide an appearance of democratic legitimacy...

...The volume of government investments can be expected to prolong the economic miracle even if the demand for consumer durables slackens somewhat, and the outlook for exports is favorable, especially for raw materials now that global terms of trade are shifting in their favor...

...Thus there is some pressure on Geisel to expand the rather hesitant start his predecessors have made in this direction...

...As evidence of the government's ability to dominate foreign capital, the Ministry pointed to the diversification of outside investment (Japan may soon pull ahead of the U.S...

...This strategy has had a price, in terms of foreign debt (now over S10 billion) and in foreign dominance of several sectors of the economy...

...From the safety of exile former Congressman Marcio Moreira Alves has decried the system as "Stalinism for the rich...

...The economic miracle has undeniably made the military regime popular...

...Recognizing that the management of the economy is beyond their competence, the generals have entrusted it to a group of well-educated, surprisingly young, sophisticated technocrats...

...Nevertheless, in a significant way Brazil's industrial advancement is an embodiment of U.S...

...Officials speak of their immense and still largely un-exploited land mass as a future "granary for the world...

...Regrettably, also, the multinational corporations flocking to Brazil have not adapted their technology to labor-intensive modes of production that would provide more jobs to the enormous reservoir of un- and under-employed workers...

...In foreign affairs, the Geisel regime can be expected to seek a larger international role and to stay aloof from the more radical positions of the Andean group in South America...

...At the time everyone, even the officer corps itself, thought military rule would be a brief interlude of the kind that had regularly punctuated the nation's politics in the past...

...In both contexts it can be seen as an attempt to preserve the paternalistic features of a traditional society while simultaneously engaging in a process of very rapid industrialization...

...The generals—acting, in the words of a respected Brazilian sociologist, as an "ad hoc committee of the bourgeoisie"—launched their coup to halt what they perceived to be a disastrous slide toward socialism...

...The final trade-off, between development and nationalism, has been the most sensitive issue because it has placed the junta in opposition to powerful segments of civil society, and because it touches directly on the military's central mission of fashioning Brazil into an economically advanced, independent state capable of playing a leading role in Hemispheric and world affairs...

...The combination of abundant natural resources, modern technology and cheap labor makes Brazilian goods quite competitive on international markets...

...Yet it encourages the hope that Geisel's pledge of "gradual but sure progress toward democracy," made when he took office March 15, represented more than mere inaugural rhetoric...

...the military over the course being taken appears to have been resolved through adroit promotions and retirements, a practice of forcing line officers to commit themselves on controversial issues, and the popular success of the policies adopted by the ruling clique...

...One of the most coveted pleasures for the architects of Brazil's rapid economic advance is that of being taken more seriously by an international community often condescending toward the Latin American countries...

...on many international issues, radicals frequently accuse it of being a servant of American imperialism...

...From all appearances, the Church has resolved to persevere in the role of a reformer inside the system rather than a revolutionary outside it...

...Brazil now has the largest industrial complex in the Southern Hemisphere and is turning out a full range of manufactured products, from trucks to transistors...

...To begin with, it is highly unlikely that a democracy would have permitted the technocrats to rein in the raging inflation (over 100 per cent per annum) by drastically cutting the real income of the urban working class during 1964-68...

...They opted instead to keep the investment environment hospitable and to use foreign capital and technology—and the access to export markets that accompanies them—to accelerate economic development...

...Given the economic power of the state, it is obvious that the heavy sacrifices required for rapid development could be shared more equitably...

...If Geisel and his colleagues are serious about "Institutionalizing the Revolution," they will have to broaden its base and give civilians a larger voice in the decision-making process...

...The reasons for this have perhaps been most clearly sketched out by Roberto Campos, who served the military as Minister of Planning in the mid-'60s...

...a comprehensive tax plan that has increased government revenues appreciably even while using incentives to encourage private investment in priority areas (e.g., reforestation) and regions (e.g., the impoverished Northeast...

...and social security programs have been extended to virtually all workers...

...Government-managed enterprises dominate banking, steel, mining, petrochemicals, electric power, and transportation...

...According to the 1970 census, under the junta Brazil's few rich have gotten considerably richer, and the many poor slightly less poor...

...Were the current boom to sputter, the least probable outcome would bs a return to democratic government or a Socialist uprising...

...It has already passed that mark, and if present growth rates can be maintained over the next 26 years, it will reach roughly the same level achieved by the U.S...

...But Brazil's experience also demonstrates that the journey to material abundance can be harsh and exact great cost in terms of human freedom...

...In 1967, when Herman Kahn wrote The Year 2000, he predicted that Brazil's annual per capita income at the end of the century would be only $500, a continuing case of unrealized potential...

...Yet just as it would be a mistake to think of the generals as mindless agents of the capitalist elite, so too it would be erroneous to presume that the purpose or effect of their takeover has been to turn the country over to international investors...

...only in the 194664 period did the nation achieve a plausibly representative government, and then nearly half of the adult population was excluded from voting by literacy requirements...

...The generals, however, went even further—assuring political stability, suppressing populist-redistribution-ist politics, ending the right to strike, prohibiting militant union activity, and silencing nationalist rhetoric—to make Brazil an attractive investment opportunity for the national bourgeoisie, international agencies like the World Bank and the Inter-American Development Bank, and the multinational corporations...

...This argument combines a truth (current consumption must be sacrificed to investment) with a half-truth (the wealthy minority must be the source of investment capital...

...There is some guerrilla activity in the Amazon Basin, but it does not pose a serious threat to the regime...

...At the same time, the overriding goal of rapid growth has been well served by the regime's policy of dampening the nationalistic urges that have cropped up periodically in the officer corps and parts of the business community...

...Mario Henrique Simonsen, the brilliant economist General Geisel designated as his Minister of Finance, has promised to continue Neto's policies...

...He is reputedly one of the most intelligent officers in an Army that emphasizes academic achievement, but surprisingly little is known publicly about his views...

...Like every nation that has crossed over to industrialism, Brazil must put high growth ahead of increased consumption, he argues, and invest in the productive capacity that will enable future generations to live at levels of material decency...

...Furthermore, the current boom is not a South Sea Bubble wafted aloft by one or two natural resources, as was the case during the successive heydays of sugar, gold, rubber, and coffee...

...The son of German immigrants and the country's first Protestant chief executive, General Geisel was the personal choice of his predecessor, Emilio Garrastazu Medici...

...What this all adds up to, as Chicago economist Milton Friedman recently noted, is an economic "miracle" no less worthy of the accolade than the postwar performances of Germany and Japan...

...One of Brazil's top young economists has characterized the present income distribution pattern as "a Belgium within an India"—meaning that roughly 20 million people live at European levels of affluence, while the remaining 80 million exist at Asian levels of misery (on annual per capita incomes of under $300...

...The leaders of the '64 coup and their successors believed that too often in Latin America economic nationalism has been a demogogic and self-limiting pseudonationalism...

...the government is raising minimum wages faster than inflation...

...Because of Brazil's growing economic hegemony in the region and its staunch support for the U.S...

...These men, centered in the finance and planning ministries, and in several specialized development banks, have applied the lessons of neo-Keynesianism (and the Chicago School) with more inventiveness and success—and in the face of more formidable obstacles —than their North American counterparts...

...And only a dictatorship, he suggested, could consistently put development ahead of the other options...

...From 1969-73 he presided over Petrobras, the state oil monopoly and a bastion of economic nationalism...

...Heirs to the influence of Comtian positivism in Latin American thought, they pride themselves on being "above politics," yet in fact their pragmatism has deep ideological consequences...

...These figures are not the result of a limited exercise in import-substitution behind protectionist walls, either...

...But as a military judge from 1967-69, Geisel was noted for the severity of his sentences on political dissidents...