U.S. Backing for Brazil Is Key

Winning reelection on Sunday will be easy for Brazil’s popular President Fernando Henrique Cardoso. The hard part will come when he tries to persuade Brazilians to throw their country into thorough economic reform.

However great the resistance might be, there is no acceptable alternative. Failure to shake off its doldrums will set the nation of 160 million on a path remindful of Latin America’s past debacles. And Brazil would not go down alone. It is the 800-pound gorilla of Latin America, and its problems cannot be ignored.

The difficulties, as might be expected, revolve around the world financial crisis, which is buffeting Latin America as harshly as most other regions. Foreign reserves are tumbling as investors take cover. Treasury authorities have raised interest rates from 29% to nearly 50% to try to stem the outflow, but in these days such daring moves also carry the risk of ballooning deficits.

If Washington finds merit in helping Tokyo and Moscow, surely it must understand the value of somehow helping the massive economy of Brazil, which has a gross national product of about $800 billion a year, double Russia’s. Each day’s delay exacerbates the predicament. Cardoso has done his part, promising fast action and endangering his popularity among voters by hinting that taxes will be raised to drive down the budget deficit.

Reaction to Cardoso’s remarks was swift. Antonio Ermirio de Moraes, head of the country’s largest conglomerate, claimed that Brazil’s tax burden is already the world’s highest, equal to 32% of GNP. Other business leaders warned that Brazil is headed toward 8% unemployment next year if the crisis is not checked--a figure not alarming in the global ranks but shocking by Brazilian standards.

The developments are being closely watched abroad. U.S. Treasury Secretary Robert E. Rubin hailed Cardoso’s promises of prompt action. But investors can hardly look past the dim statistics. Many are pulling out of Latin markets, despite the region’s courageous and politically perilous efforts to tear down tariff walls.

If Washington wants to find a bold figure standing against the tide, it is Brazil’s Cardoso. The Clinton administration should give strong support to his regime, including economic aid as necessary, for Brazil is the rock on which Latin America must stand.