A "close" election in Brazil

Louis Proyect lnp3 at panix.com
Tue Oct 6 07:14:51 PDT 1998

October 6, 1998

Close Election Complicates Brazilian Economic Reform


RIO DE JANEIRO, Brazil -- Through the anxious weeks leading up to the national elections here on Sunday, as some $30 billion fled Brazil despite the doubling of domestic interest rates, international financial officials watched for the government to tackle cost-cutting reforms as soon as voting ended.

But Monday, as official returns indicated President Fernando Henrique Cardoso was barely squeaking through to re-election and governors allied to him were locked in runoffs later this month, the road to reform is looming longer and more complex. Polling groups and television stations that reported an overwhelming victory for Cardoso came under severe criticism.

Though exit polls reported Cardoso taking some 56 percent of the vote, official tallies Monday afternoon gave him 51 percent, with 56 percent of the votes counted. His nearest rival, Luiz Inacio Lula da Silva, of the leftist Workers Party, took 34 percent, substantially higher than the 24 percent polls predicted he would take. Cardoso's margin was just 1.2 percent higher than needed to avoid a second round of balloting.

Ciro Gomes, an up-and-coming former finance minister from the northeastern state of Ceara, took 11 percent, while Eneas Carneiro, a nationalist who called for Brazil to build an atom bomb, gained 2.2 percent of the vote. Though voting in Brazil is largely obligatory, the share of abstentions and invalid votes reached 30 percent.

Allies of the president did poorly in many of Brazil's most populous and politically influential states, weakening Cardoso's hand going into negotiations for reform.

Though Brazil has not yet submitted a formal request, Brazilian officials have been in Washington negotiating some form of assistance from the International Monetary Fund that will likely total $30 billion or more.

The country's failure to cut spending in two key areas -- social security and civil service -- and to simplify and improve tax collection, makes Brazil heavily dependent on foreign capital at a time when investors generally are fleeing emerging markets.

Brazil's budget deficit is exceeding 7 percent of Gross National Product, and its current account deficit, which includes its balance of trade as well as debt service and other payments, constitutes more than 4 percent of GNP. Government cutbacks of $5 billion, and the doubling of interbank loan rates to almost 50 percent, have slowed but not stopped the flight of capital. As of 6 p.m. Monday, some $300 million had left foreign reserve coffers, and the Sao Paulo stock market was down 4.47 percent.

Investors appear to be watching for lasting reforms from the government and for signs that wealthy nations will back Brazil.

But the political arena remained strangely silent Monday, almost suspended. By Monday afternoon, Cardoso still had not claimed victory, and da Silva had not conceded defeat. Sergio Amaral, the president's spokesman, said Cardoso would wait until official results were completely tallied before speaking.

Newspapers in Rio de Janeiro and Sao Paulo headlined exit polls showing the president doing vastly better than official tallies bore out, and in state races, polling institutes by and large underplayed the strength of leftist candidates, bringing them under sharp attack.

"The nation has watched the most shameful political and electoral manipulation heard of in recent history," said a statement from the coalition of parties that da Silva represented. It accused the polling institutes, media, and electoral officials of conspiring "to influence public opinion and alter the electoral will."

Mauro Francisco Paulino, director of opinion polls for Datafolha, one of the main polling services, denied any intentional manipulation of the results. He predicted the final results would support the exit polls. While it is illegal to announce exit poll results while voting is still going on, it is "traditional" in Brazil, he said.

Brazil's Congress, out campaigning for gubernatorial candidates, will likely not convene to consider reforms before the end of the month, however dire the international situation. Cardoso appears to be planning for a low profile in the coming weeks, with a brief vacation and a trip to Portugal coming up. He is not expected to openly campaign for any candidates.

Maria Dalvo Kinzo, a political scientist at the University of Sao Paulo, said the only factor that might make pushing reforms easier for the president this time is the urgency of the crisis. "There's a consciousness that the crisis is very serious," Ms. Kinzo said.

But she warned that with the strong showings of leftist candidates in important state races, and with half the deputies newcomers to Congress, the president's governing coalition was appearing more fragmented. "Now, he's going to have to really patch together support," she said.

Jose Augusto Guilhermo de Albuquerque, coordinator of the research center on international relations at the University of Sao Paulo, agreed. "His coalition will be larger and less ideologically committed than the current one," Albuquerque said. Party discipline, customarily half-hearted, will be even weaker in the new panorama, he added.

Copyright 1998 The New York Times Company

Louis Proyect


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