BRAZIL: R–Austerity

Three weeks in office had given President João Café Filho the inside details he needed to judge Brazil’s economic plight. Last week, in an emotion-choked broadcast over all the country’s radio stations, he laid the somber facts on the line. Brazil is in a “dreadful crisis,” and the public has to face it. Revelations, all dated from the regime of Getulio Vargas, whose suicide brought Café Filho to power:

¶The budget deficit for the fiscal year will hit $825 million, much of it chargeable to the “ridiculously low” rates of the San Francisco Valley Hydroelectric Agency and other government agencies.

¶Dollar income is drastically down. “Instead of [normal] revenues between $70 and $100 million monthly . . . the Bank of Brazil got only $36 million in July and $29 million in August.”

¶Printing-press inflation is spinning out of hand.

¶The recently doubled minimum wages raised production costs and prices.

Who is to blame? Generously—for he was not a Vargas man, and became Vargas’ Vice President only through a whim of politics—Café Filho said that “it is not to the point now to investigate origins or guilt.” But the disastrous errors were, in fact, made by Vargas to keep the political support of 1) electricity consumers, 2) planters who demanded the high fixed price that, as an unintended result, forced coffee revenues down, 3) credit-hungry businessmen, and 4) wage-boosting labor.

Perhaps because it was so starkly realistic, Café Filho’s speech was well received. Vargas’ old Finance Minister, Oswaldo Aranha, who had gone along with some of Vargas’ measures even though he knew better, commented that the President was “on the track of truth . . . We shall live again in order and equilibrium if this advice is complied with.”