Possible I.M.F. Bailout Stirs Brazilians' Bitter Memories of 80's (fwd)

[Robert Weissman <rob@essential.org>]

The New York Times

October 1, 1998, Thursday, Late Edition - Final SECTION: Section A; Page 19; 
Column 1; Foreign Desk LENGTH:
585 words

HEADLINE: Possible I.M.F. Bailout Stirs Brazilians' Bitter Memories of 80's

BYLINE: By DIANA JEAN SCHEMO

DATELINE: RIO DE JANEIRO, Sept. 30

BODY: With the International Monetary Fund's annual meeting about to start 
in Washington, with officials'
weighing the cost and wisdom of bailing out Brazil from its deepening 
economic crisis, the prospect of a rescue
package, however urgent, is stirring bitter memories among a cross-section 
of Brazilians. Although Brazilian
officials have been negotiating the size and conditions of possible aid for 
weeks, and the I.M.F. said today in
Washington that it was negotiating a substantial aid package, the issue is 
so sensitive that President Fernando
Henrique Cardoso, hoping to be re-elected on Sunday, has not announced a 
formal request to the fund for
assistance. That has not stopped Mr. Cardoso's main opponent, Luiz Inacio 
Lula da Silva, of the left-of-center
Workers's Party, from attacking Mr. Cardoso as a slave of foreign bankers. 
In the free air time that candidates
receive, the Workers' Party shows Mr. Cardoso with head bowed as an 
announcer discusses the sacrifices that
foreign lenders demand. Mr. da Silva has called the administration's 
attempts to negotiate an accord with the
fund a crime and said it would "tighten one more knot on the neck around 
Brazilians." A cartoon in Jornal do
Brasil, the newspaper, struck the same theme, showing a drowning man being 
thrown a noose. The outcome, due
after the elections, will depend on the winner and the course of 
negotiations with the monetary fund. Talks with
the United States and the fund have focused on a loan package most likely to 
exceed $30 billion. Brazil had a
bruising experience with the fund in the 80's, and the effects linger. A new 
accord, even attached to billions of
dollars, is widely seen an admission of the Government's failure to put its 
house in order and a humiliating
surrender of sovereignty over economic policy. The Government in has recent 
years made once unimaginable
strides in cutting inflation, from 3,000 percent a year four years ago to 3 
percent this year. But its budget deficit
has ballooned, to 7.2 percent of the gross national product, and a broad 
measure of the flow of goods and
services, the current account, is running a deficit close to $35 billion. 
Deficits are not new. But the shortage of
credit for emerging markets has pushed Brazil to the brink of crisis. Since 
the Russian crisis began last month,
foreign reserves have shrunk, from $70 billion to $42 billion, despite moves 
to protect the currency by doubling
interest rates. Brazil today is different from the country that defaulted on 
its foreign debt in 1981. It is six
economic plans later. Many of the officials who lashed out at the monetary 
fund for imposing stiff conditions for
aid 10 years ago are struggling to hold firm to stability and have answered 
the crisis with pledges to cut
entitlements and other costs. But among ordinary Brazilians, the I.M.F. is 
associated, if not faulted, for a
punishing recession through the 1980's and with issuing spending limits that 
Brazil failed to meet. "There was
the idea that by freezing prices and other gimmicks you could get 
somewhere," said Sebastian Edwards, a
professor of international economics at the University of California at Los 
Angeles who wrote "Crisis and
Reform in Latin America" (Oxford University Press, 1996). Although it signed 
11 agreements with the monetary
fund throughout the 80's, Professor Edwards said, Brazil insisted that 
because of its size and importance, it
should not be subject to the same conditions as other nations in trouble