Brazil: Another Kind of Vote

As Brazil contemplates the unsettling results of the gubernatorial elections just held in eleven states (see THE HEMISPHERE), another kind of vote is making its impact on the country. It is a vote of confidence in Brazil’s economy, and it is being cast every week by foreign investors.

Brazil has not nearly solved all its economic problems, but so many of them have been brought under control—inflation, an antiquated capital market, wide currency fluctuations—that money frightened off a few years back is once more flowing into the country. The flow is being hastened by Planning Minister Roberto Campos, the main architect of Brazil’s economic resurgence, who likes to take potential investors out on a yacht in Rio de Janeiro Bay, when sun and sea have weakened their resistance, press upon them the advantages of investing in Brazil. It seems to work.

This week two subsidiaries of Brazilian Traction Light & Power Co. will sign a $40 million loan agreement with the U.S. Agency for International Development as the first step in a fiveyear, $228 million program to double their service. The Inter-American Development Bank and ADELA (Atlantic Community Development Group for Latin America), a private, multinational investment group that has invested $12.7 million in Latin America, have just joined with Brazilian Millionaire

Israel Klabin to set up a $25 million pulp-and-paper mill in Brazil’s interior.

Private industry is also stepping up its spending. Volkswagen is laying out $100 million to double its plant capacity, and Ford is investing $30 million to enable its truck and tractor factory to assemble automobiles as well. Alcoa has set up a pilot company as the first step toward establishing a $51 million aluminum works. The most hopeful investment field is in petrochemicals, where the government recently broke the long-held monopoly of state-owned Petrobras to attract more efficient private companies. Some ten corporations, including Jersey Standard, Gulf, and Phillips Petroleum, are now actively studying the investment possibilities. Brazil hopes that they will end up investing about $200 million each.