The Great Whirligig

After Leftist Joao Goulart was deposed last March, Brazil's new government declared all-out war on three items that had become Goulart's trademark: Communism, corruption and inflation. By last week President Humberto Castello Branco and his revolutionaries had dealt forcibly with the first two. Inflation is proving far more difficult. Nowhere in Latin America is inflation so deeply and strongly rooted --until it has become as much a part of Brazil as carnival and the inky cafe-zinho Brazilians sip at corner coffee bars.

Papered with Money. Many economists argue that a little inflation is healthy in a young nation, stimulating investment, production and growth. In Brazil, where everything is larger than life, the theory got out of hand. Ever since World War II, successive governments have felt a compulsion to build by spending wildly--and to pay their bills by printing more money. As President in 1956-61, Juscelino Kubitschek performed prodiies of development: a new inland capital of Brasiilia, a vast network of roads, thriving new steel and auto industries, all at a cost of giddy inflation and staggering debt. His successor, Janio Quadros, recognized the dangers, but quit after seven months, leaving the economy at the mercy of Goulart. In a 31-month spending spree, Goulart literally papered the country with money, tripling the amount of currency and raising the cost of living 340%. When the military finally toppled Goulart, the cost of living was on its way to a 144% increase for 1964.

Castello Branco is determined to slow the whirligig. His new Minister of Economic Planning, Roberto de Oliveira Campos, 57, onetime Ambassador to the U.S. and a brilliant economist, has eliminated $200 million a year worth of subsidies for wheat, oil and newsprint, has raised taxes and tightened collections. One of his first moves was to end the 75% to 100% salary increases of the Goulart days; he set up credit bureaus to expand farm production and lower food prices. To encourage more investment, the government is also liberalizing profit-remittance laws. This month the Brazilian Congress finally set aside $188 million to purchase the assets of American & Foreign Power Co., part of which were expropriated under Goulart.

Campos' goal is to hold inflation to 70% this year and reduce it to a "normal" 10% by 1966. The program already shows some progress. Brazil's monthly rate of inflation is down from a prerevolution 7% to an average 4%.

Nothing to Save. For Brazilian consumers, however, a few percentage points do not a revolution make.

"Prices still rise practically every day," says one Rio householder, noting that salt went from 90 to 128 cruzeiros a kilo in August alone. Some Brazilians hold two and sometimes three jobs to make ends meet. Hardly anyone has money to save. Every extra cruzeiro is socked into time payments for autos, refrigerators, TV sets and other nonperishable inflation hedges that hold their value.

At one Rio department store, a customer can have anything on the floor for 50-c- down--and the crush makes Macy's basement seem deserted by comparison. Another store gives twelve months to make the first payment. "A house is always a house," bugles a full-page ad in Rio's Sunday papers, urging people to buy not one, but two or three houses as "investments." "Your holidays free for the rest of your life," teases another come-on for resort-hotel investors. In a switch on air travel, some Brazilians pay now and fly later.

In the meantime, the hard-goods business throbs with activity. Brazil's infant auto industry went from scratch in 1958 to more than 200,000 cars last year. But the gains are often more apparent than real. Costs still climb so fast that businessmen find their capital and profits eaten alive by inflation.

There is no guarantee that Brazil will win its war on inflation. Indeed, one recent survey by Rio's Getulio Vargas Foundation finds "an almost fatalistic acceptance" of inflation among many Brazilians. Yet Castello Branco's campaign has made some important gains, and it certainly distinguishes itself by its persistence.

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