BRAZIL Toward Stability

In the past nine years, one President of Brazil nearly spent the country into bankruptcy, his erratic successor resigned after seven months in office, and the next man did his best to deliver the nation to Communism and corruption before the military threw him out. Brazil's economy naturally remained in a state of chaos, and its political life was a bruising free-for-all. Now all that is beginning to change. After 21 months in power, President Humberto Castello Branco's tough-minded revolutionary government is giving Brazil a breath of political and economic stability.

Yes & Yes, Sir! Politics, in fact, is growing so tame that Castello Branco finds it slightly embarrassing. Last week so many politicians were clamoring to join the government's newly organized official party (aptly named the National Alliance for Renewal) that the President was having trouble scraping up even a token opposition.

A month ago, Castello Branco dissolved Brazil's 14 fractured political parties and ordered them to reorganize under strict new rules designed to eliminate all but the biggest and most representative. The rules required at least 20 of 66 federal Senators and 120 of 409 federal Deputies to form a party. What the government hoped for was two, possibly three parties--its own, plus a moderately vocal opposition. But as one Senator put it: "Who's crazy enough to risk his mandate by outspokenly opposing the government?" Only 117 Deputies and 18 Senators pledged themselves to the opposition--five short of the minimum. It took considerable backroom maneuvering before five selfless souls finally agreed to go over to the other side, which dubbed itself the Brazilian Democratic Movement. Said one politician: "We have our two-party system all right--the party of 'Yes,' and the party of 'Yes, sir!' "

Reform & Recession. That may be just what Brazil needs, considering the way Castello Branco's government is running the country. When the revolutionaries took over in April 1964, Brazil was approaching bankruptcy, with foreign-exchange reserves of less than $150 million, and a cost of living that was soaring at the fantastic rate of 144% a year. By last week Brazil's foreign exchange was back to a safer $300 million, and the inflationary price rise had been cut more than two-thirds to 45% for 1965--"still pretty bad," says one Washington official, "but for Brazil that's sensationally good."

Most of the credit goes to Castello Branco's Minister of Economic Planning, Roberto de Oliveira Campos, 48, a U.S.-trained economist and Brazil's onetime Ambassador to the U.S. Campos is doing more than trying to reform an economy; he is trying to discipline a national mentality. For a starter, he eliminated $200 million a year in government wheat, oil and newsprint import subsidies, thus halting a wasteful drain on Brazil's treasury. He then ended labor's inflation-producing 75%-to-100% wage hikes, slowed down the money presses, and began reforming Brazil's sievelike tax system to plug loopholes and improve collections.

The all-out attack on waste, inefficiency and inflation brought on a minor recession earlier this year. Yet by last week industrial production posted an estimated 4% overall gain for the year. Many Brazilians still gripe about this year's 45% rise in the cost of living, but businessmen give Campos a rousing cheer, and foreign investors are registering their votes with money. Alcoa is planning a $50 million aluminum project, Volkswagen is spending $100 million to double its 60,000-car annual production, and Ford is building a $30 million plant that will turn out all-Brazilian Galaxies in 1966.

Better still, the World Bank--absent from Brazil since 1959--agreed to lend $80 million early this year for power projects. The International Monetary Fund, another long-absent investor, chipped in $125 million, plans to offer $120 million to $180 million more in new standby credit next year. And the U.S., which cut Alianza aid to Brazil to a trickle under Goulart, has granted more than $500 million in technical and economic assistance.

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