History of Brazil

World Facts Index > Brazil > History  Page 1

Despite its vast natural resources and economic wealth, Brazil has an overwhelmingly poor population. Relatively few Brazilians have benefited from the economy. In a country with some of the world's widest social differences, grinding poverty and misery coexist with great industrial wealth; 20 percent of the population is extremely poor and 1 percent extremely wealthy. Brazil's Gini index in 1991 was 0.6366. According to the UN, Brazil had the most uneven distribution of wealth in the world in 1995. The richest 10 percent of Brazilians hold 65 percent of Brazil's wealth (GDP), while the poorest 40 percent share only 7 percent. Brazil placed sixty-eighth out of 174 countries in the UN's 1997 human development index.

In the mid-1990s, at least one-fifth of the population, or about 32 million people, lived in extreme poverty, making less than US$100 a month. However, the anti-inflation policies of the Cardoso government helped pull 13 million Brazilians out of poverty, according to the Applied Economic Research Institute (Instituto de Pesquisa Econômica Aplicada--IPEA). During Cardoso's first three years in office, the number of people living below the poverty level dropped 9 percentage points to 21 percent. Thus, poverty in Brazil today is proportionately less, even though it is more visible and shocking, especially in the cities.

An estimated 45 million children and young people live in inhuman conditions, and the number of child workers has been as high as 10 million. Children from large poor families start working from the age of ten in order to help their parents. According to the IBGE, in 1995 there were 7.5 million Brazilian workers younger than eighteen, a group that represents 11.6 percent of the work force. However, the IBGE reported that the number of children between the ages of ten and fourteen who were employed decreased by 163,000 from 1993 to 1995. Some 3 million workers are between ten and fourteen years of age. Nongovernmental organizations (NGOs) estimate that anywhere from 500,000 to two million Brazilian children are forced into prostitution every year.

The vast substratum of the population lacks adequate housing, employment, education, health care, or any social security. An estimated 10 million Brazilian families are homeless. The government spends only US$80 per person annually on public health, less than a third of what Argentina spends. Consequently, the health system is struggling to survive; its employees are often overworked and underpaid, and corruption is endemic. In this context, the new law that took effect January 1, 1998, mandating organ donations for transplants unless the person applies for an exemption, sparked fear and outrage.

Brazil stands out for its sharp regional and social disparities. Of Brazil's 39.1 million poor in 1990, 53.1 percent were in the poverty-stricken Northeast and 25.4 percent were in the prosperous Southeast. According to the IBGE, in 1996 the more developed Southeast and South regions had 63 million and 23.1 million people, respectively, who generated about 75 percent of the country's GDP. By contrast, the Northeast had 45 million residents and generated only about 13 percent of Brazil's GDP. The huge North and Center-West (Centro-Oeste) regions, which occupy 64.1 percent of Brazil's total area, had 11.1 million and 10.2 million residents, respectively, and also generated only about 13 percent of Brazil's GDP.

In 1988 the GDP per capita income of the Southeast was 43.6 percent higher than the national average, and that of the Northeast was 37.5 percent lower. Brazil's GDP per capita income was US$5,128 in 1997, as compared with US$3,008 in 1994, according to the IBGE. However, the 1997 GDP per capita was practically meaningless because of the vast disparity between north and south or, more specifically, the Southeast and Northeast. Whereas Sao Paulo State had a US$7,000 GDP per capita in 1994, Pernambuco, a relatively prosperous Northeast state, had only US$1,500.

Brazil's regional and social disparities are also reflected in the great inequalities of its education system. Illiteracy is widespread, particularly in the poor states of the Northeast and North. In 1995, according to Ministry of Education statistics, 18 percent of Brazilians over fifteen years of age could not read or write. Brazil will enter the twenty-first century with an estimated illiteracy rate of 16 percent. (Functional illiteracy in Brazil is as high as 60 percent.) Half of students nationwide repeat the first grade through a system of routine flunking. It takes an average of 11.4 years for students to complete the first eight years of education, and only 4.5 percent of all students who start school end up enrolling in a university. In 1994 UNICEF rated Brazil's basic education system as being in last place in world ranking, with large rates of nonattendance in poor states. As much as 68 percent of the electorate, or 65 million people, never finish primary school. In a hopeful development, however, primary education in Brazil is being radically reformed.

In 1995 the countrywide average salary was US$650 per month, and the minimum wage amounted to US$780 per year. In April 1995, the Cardoso government reluctantly raised the minimum monthly salary to 100 reais. In 1994, when the minimum monthly salary was R$70 a month (about US$58), half the population earned less than US$240 a month, and about 15 million people, including 11.5 million pensioners, were on the minimum wage. The income of about 12 million Brazilians is less than US$65 per month.

Brazil's official statistics on employment, incomes, consumption, and living standards do not provide an accurate portrayal of the real Brazil. The black market enables millions of Brazilians to get by in a country where household appliances, automobiles, compact disks (CDs), restaurant food, and other consumer items cost more than in France, Germany, or the United States. The country's vast informal economy produces from US$200 billion to US$300 billion per year, according to figures from the IBGE. Brazil's informal market, consisting of thousands of small to medium-size businesses that neither abide by government regulations nor pay taxes, is three times larger than the Portuguese economy and equal to that of Sweden. The illegal market provides an income for an estimated 30 million Brazilians. According to an early 1997 estimate by the weekly Sao Paulo newsmagazine IstoÉ , about half of the country's workforce is employed in the black market. In Sao Paulo only 52 percent of the workforce is employed in the formal economy, according to the Interunion Department for Statistics and Socioeconomic Studies (Departamento Intersindical de Estatística e Estudos Sócio-Econômicos--DIEESE). In Rio de Janeiro, one in every four persons works in informal jobs.

Brazil's regional income disparities have produced massive migration to favelas, particularly in Rio de Janeiro and Sao Paulo. By 1996 the country's poverty had become predominantly urban. The IPEA estimated that 23 million of the 30 million poor live in cities, with 9 million of them in big cities--half of them in Rio de Janeiro and Sao Paulo. In Rio de Janeiro, which has the largest concentration of poor migrants, 17 percent of the city's metropolitan population, or 1 million people, live in hillside favelas. Although rampant crime and disease remain entrenched in the favelas, steps have been taken to improve the living conditions. For example, Rio de Janeiro has slowed the growth of its favelas by prohibiting new settlements, and more than 300,000 residents have been moved to new homes. Sao Paulo's huge Cingapura project has been replacing 243 favelas, containing 500,000 people, with low-rise blocks of apartment buildings offering low-interest mortgages.

Brazil is steeped in five centuries of Roman Catholicism, but the religious affiliation of the Brazilian population has not remained unaffected by a decade of corruption, inflation, and economic hard times under civilian rule. About 93 percent of Brazilians identified themselves as Catholic in 1960; by 1993, however, the figure had dropped to 72.5 percent. Only an estimated 10 million of Brazil's Roman Catholics attend Mass regularly, and most Brazilian Catholics ignore the conservative Roman Catholic Church's teachings on family planning methods. The rapid growth and spreading influence of evangelical churches, such as the 3.5 million-member Universal Church of the Kingdom of God (Igreja Universal do Reino de Deus), have put into question the Vatican's characterization of Brazil as the world's largest Catholic country. Millions of Brazil's poor have turned away from the Roman Catholic Church and the liberation theology that it began to espouse in the 1970s.

Instead, poorer Brazilians--more interested in spiritualism, hard work, sober living habits, and individual advancement than the political causes promoted by liberation theologists--have embraced Protestantism by the millions. By 1994 about 22 percent of the population (an estimated 35 million Brazilians) was Protestant, as compared with only 3.7 percent in 1960. Protestantism has swept the country because Brazilian culture, which is both spiritual and pragmatic, interacts readily with the Pentecostal message delivered by plain-speaking, blue-collar evangelical pastors, many of whom are blacks, in contrast to the Latin language of a Catholic Mass. The Pentecostal churches offer more social support in prayer groups and give rural migrants a feeling of security in large cities.

Competing with the evangelizing Protestants is the Catholic Charismatic Renewal, whose members practice an estatic prayer style, emphasizing lively music, "healings," and speaking in tongues. With a claimed 8 million active Charismatic Catholics, Brazil is considered to be the world's leading center of the movement.

Other former Roman Catholics have been lost to espíritas , a cult founded by a French mystic, and Afro-Brazilian religions, such as the Afro-centric candomblé and the twentieth-century cult more reflective of Brazilian urban life called umbanda . Owing to a Brazilian proclivity toward magic and mysticism, Afro-Brazilian cults have attracted members from all social classes, professions, and ethnic groups, including Brazilians of German, Italian, or Japanese ancestry. However, Christian evangelical churches have been drawing increasing numbers of former candomblé and umbanda worshipers.

At least 44 percent of Brazil's much-touted "racial democracy" is black (6 percent) or of mulatto (mixed) heritage (38 percent), while at most 55 percent is of European (mostly Portuguese) descent. In socioeconomic terms, the subsistence-level living standards of the black population reflect a long history of racial discrimination. Tens of millions of Brazilians living in poverty are overwhelmingly black, the descendants of slaves. Racial friction is a relatively new phenomenon. President Cardoso, author of a classic study on Brazilian blacks, admitted in November 1995 that discrimination against blacks is still a problem. For example, the Northeastern city of Salvador, which is 80 percent black, has never had a black mayor. Blacks are almost totally absent from high government and military posts, although President Cardoso's cabinet has a black member (soccer legend Pelé, the minister of sports). Two black women were elected to the Senate in 1994, but there were only eleven black federal deputies out of 513 in November 1995. Celso Pitta, a black, was elected mayor of Sao Paulo on October 3, 1996. Few blacks occupy high positions in business and other professions.

Largely marginalized, Brazil's blacks have an illiteracy rate twice that of whites and an average income less than half that of whites. Nearly 40 percent of nonwhites have four years or less of schooling. Very few blacks make it to the university; blacks and mixed-race people represent a mere 1 percent of the student body at the nation's largest university, the University of Sao Paulo (Universidade de Sao Paulo--USP). Black and mixed-race Brazilians were invisible in the print media until the founding of Brasil Raça (Brazil Race), a magazine geared to them, in September 1996 (300,000 copies of the first issue were sold).

Brazilian women, although constituting more than half of the population, traditionally have also been marginalized in politics. Only 868 women out of 12,800 candidates ran in the 1994 general elections. Only six of eighty-one senators and only thirty-four of 513 deputies are women. Only 171 of 4,973 mayors are women, and just 3.5 percent of 55,000 city council members nationwide are women. However, as a result of a 1995 quota law that requires at least 20 percent of the candidates of each political party to be women, an estimated 75,000 women participated in the October 3, 1996, election for mayors and members of city councils. According to Professor Fleischer, for the first time, two state capitals--Maceió and Natal--had exclusively female runoffs, and three other capitals had a woman in the runoff. He also noted that about 100,000 women ran for city council in 1996, as compared with only 869 in 1992.

In the countryside, land concentration, landlessness, homelessness, and joblessness are major issues. At least 500,000 rural jobs have been lost since the government formally ended its traditional protection of Brazilian-made goods in 1990. In the early 1990s, just under 2 percent of farms occupied 54 percent of arable land, while 15 million campesinos worked farms with fewer than 10 hectares of land. Of Brazil's 3 million rural properties, only 58,000 account for about half the farmland. Moreover, about 42 percent of all privately owned land in Brazil lies idle.

Rural unions claim that 12 million peasants are landless, a figure that is disputed by government officials. The Landless Movement (Movimento dos Sem-Terra--MST), now Brazil's most powerful, grass-roots movement, is leading a pressure campaign on behalf of the landless. The MST claims that 4.8 million families have no land but want it and that Brazil has 78.9 million hectares of fallow lands, properties that mostly belong to wealthy farmers who live in cities and use the land for tax write-offs. Land reform has been promised since colonial days, but has yet to take place. Sociologist José de Souza Martins has described the landless situation as the "conflict between archaic Brazil and modern Brazil." Since its establishment in 1980, the MST has resettled permanently 150,000 families on land they originally occupied illegally. Led by more than 5,000 highly organized activists, the MST has 220,000 members and some 4 million followers. It reportedly enjoys the moral support of up to 90 percent of Brazil's population.

In 1995 the MST stepped up its aggressive occupations of land. Encouraged by trade unionists, left-wing politicians, and even Roman Catholic clergy, thousands of campesinos have resorted increasingly to land invasions to obtain a parcel to farm. After the Military Police massacred nineteen landless activists in El Dorado de Carajás, in northern Pará State, on April 17, 1996, the Cardoso government urged Congress to give priority to its agrarian reform measures. In addition, President Cardoso created a new cabinet-level ministry, the Special Ministry of Agrarian Reform. The government claims to have given land to more than 100,000 families. Although Cardoso promised to award land to 280,000 families by the end of 1998, and some 60,000 families had been granted land by the end of 1996, the Chamber of Deputies voted in May 1996 to halt his land-reform plans. Tension has continued to build in the many squatters' settlements in the countryside.

The Cardoso government found itself at odds with the Roman Catholic Church in the first half of 1997 as a result of President Cardoso's complaint to Pope John Paul II in February that Brazilian priests and bishops were actively abetting MST-organized land invasions. In late June 1997, Cardoso, exasperated with the MST, signed a decree making government land expropriations quicker and simpler but also penalizing occupation of land by peasants.

Landowners and miners have reacted violently to people who have gotten in their way. In Amazônia they have killed numerous peasants and rural labor leaders, including the renowned rubber tapper and rural union leader Chico Mendes, in 1988. Alarmed by the MST's activism, landowners have turned to hired guns (pistoleiros ) and resurrected an organization linked in the past with strong-arm tactics, the Ruralist Democratic Union (Uniao Democrática Ruralista--UDR). Apprehensive that the situation will only get worse unless there is an effective distribution of land, the military reportedly has been as anxious as the left to see rapid implementation of land reform. There has been intermittent violence resulting from land-reform problems, with much of it occurring in Pará State. About 1,000 people were killed in land conflicts during the 1985-95 period.

Since Brazil's recession began to be felt in 1989, many rural workers have fallen victim to another form of violence--slavery practices, involving imprisonment for debt and coercion to prevent workers from leaving their employers. According to the Pastoral Land Commission (Comissao Pastoral da Terra--CPT), a nonprofit group sponsored by the Roman Catholic Church, documented cases of forced labor in Brazil, mostly taking place on large estates called fazendas , rose from 4,883 in 1991 to 25,193 in 1994. The actual figure is believed to be closer to 85,000. In November 1995, Brazil, the last Western nation to abandon slavery (in 1888), celebrated the 300th anniversary of Zumbi, a seventeenth-century Afro-Brazilian. Zumbi led raids to free slaves from sugar plantations for more than twenty years, using Palmares, a fortress in Alagoas State, as his base of operations.

The huge, widening gap between Brazil's great potential and the reality of the large, poverty-stricken majority of its population has inspired national cynicism about the country's once-vaunted identification of its destiny with grandeza . During 1992-94 Brazilians reportedly were beset with self-doubt, disillusionment, and frustration at their country's lack of progress and were concerned that their grand future would never arrive. "Brazil is the country of the future--and always will be" has been a familiar Brazilian aphorism since the early 1960s.

Beginning with the economic crisis of the 1980s, many Brazilians, including scientists, already had given up on the Brazilian dream and moved abroad. In the second half of the 1980s, for the first time in the country's history, more people emigrated from Brazil than immigrated to the country; many moved to Canada and the United States (Brazilian migrants to the latter totaled an estimated 332,000 by 1994). An estimated 1 million Brazilians were living overseas by 1993.

Entering the 1990s with GDP per capita income no higher than it was in 1980 and monthly inflation raging at an unprecedented 30 percent, Brazilians were pessimistic about their economic future. Brazil was still squandering its riches, missing opportunities, and sinking deeper into misery. However, Fernando Collor de Mello (president, 1990-92)--young, athletic, and elegant--made Brazilians dream again with promises to make the country a developed world power through free-market policies that would bring inflation under control, create high economic growth, and attract foreign investment.

The 1992 presidential corruption scandal and subsequent impeachment of President Collor delayed action on economic reforms. In September 1992, Brazil became the world's first democratic country to impeach its president on charges of corruption. Collor's downfall reflected the endemic corruption that was undermining Brazilian democracy in the early 1990s. The principal result of a poll taken by the Gallup Institute in March 1991 was that 78 percent of Brazilians surveyed in the major cities remained convinced that Brazil was still a paradise--for corruption. The reputation of the judicial system was further undermined by Collor's acquittal on corruption charges. The crisis over Collor's impeachment nevertheless had a positive side. As President Cardoso explained in an address given in New York on October 23, 1995, it "clearly signaled the political maturity of a civic culture undergoing rapid consolidation."

Collor's replacement, his vice president, Itamar Franco (president, 1992-94), a civil engineer by profession, was out of step with the short-lived Collor administration's reform agenda. Initiatives to redress fiscal problems, privatize state enterprises, and liberalize trade and investment policies lost momentum. The Franco government continued timidly along a free-market course, while inflation soared to 50 percent a month. By the end of his first year in office, Franco nearly reached the índice vaia , or get-lost level, of unpopularity.

The same Congress that ousted Collor on corruption charges became engulfed in its own graft scandal in late 1993. Judges, lawyers, government officials, and politicians were accused of conspiring in a US$1.2 billion scheme to defraud the social security system through inflated labor court settlements. In a poll taken in Rio de Janeiro in June 1993, respondents ranked Congress near the bottom (15 percent) of a list of Brazilian institutions that earned their trust; political parties had the least credibility (5 percent), while the military ranked near the top, with 58 percent.

By the end of 1993, the National Accounting Court (Tribunal das Contas da Uniao--TCU) had investigated and found that 1,500 current and retired politicians were unfit to hold office, again because of corruption. A report produced by the Congressional Investigating Committee (Comissao Parlamentar de Inquérito--CPI) named nine firms that it said had defrauded the government systematically since 1985. The CPI claimed that fifty-five politicians were part of the secret cartel, as well as all the governors of the sixteen North and Northeast states, with the exception of Ceará's governor, Ciro Gomes.

In December 1993, President Franco's fourth minister of finance, Fernando Henrique Cardoso, unveiled his controversial stabilization plan (Brazil's seventh since 1986), which caused a furor over its proposal to raise taxes. Nevertheless, Cardoso accomplished an essential first step in implementing this plan, restoring order to public finances, and eliminating the estimated US$22.2 billion budget deficit (5 percent of GDP). Cardoso pressured Congress in February 1994 to pass a constitutional amendment setting up a US$16 billion Social Emergency Fund (Fundo Social de Emergência--FSE), renamed the Fiscal Stabilization Fund (Fundo de Estabilizaçao Fiscal--FEF), to be financed by tax increases. Official figures show how skewed the economy had become, thanks to the unbridled growth of bureaucracy.

A few days after announcing his presidential candidacy on March 30, 1994, Minster of Finance Cardoso launched the third phase of his financial package, the Real Stabilization Plan (Plano Real ). It consisted of three stages: the introduction of an equilibrium budget mandated by Congress; a process of general indexation (prices, wages, taxes, contracts, and financial assets); and the introduction of a new currency, the real , pegged to the dollar, on July 1, 1994.

The legally enforced balanced budget would remove expectations of inflationary behavior by the vast public sector, which includes the national telephone company, many public utility companies, and several banks. By allowing a realignment of relative prices, general indexation would pave the way for monetary reform. Through monetary and fiscal adjustments, the Real Plan succeeded in reducing inflation, which was ascending at a stratospheric rate of 7,000 percent a year, to almost 2 percent by that October.

By September 1994, Cardoso had become the embodiment of Brazil's economic transformation. Cardoso's spectacularly successful Real Plan (which he coauthored with Pedro Malan, who later became his minister of finance) propelled him to a resounding presidential victory in the first round of the October 3, 1994, election. Voters were forced to choose between a social democratic, free-market model of modernization and a reworked model of corporatist or syndicalist socialism. The former was advocated by Cardoso of the Brazilian Social Democracy Party (Partido da Social Democrácia Brasileira--PSDB) and the latter by Luis Inácio "Lula" da Silva of the Workers' Party (Partido dos Trabalhadores--PT). Striking alliances to the right of his own PSDB, Cardoso marginalized the previously favored Lula.

The 82.2 percent voter turnout for the 1994 presidential election was impressive (as compared with the United States). Cardoso, a former tucano (Sao Paulo) senator and minister of finance, placed first in every state except the Federal District and Rio Grande do Sul, where Lula, a grade-school dropout and long-time lathe operator, was victorious. Cardoso was aided by the support of not only the poor but also conservative parties, Sao Paulo industrialists, and the powerful media network of Rêde Globo. In the congressional and gubernatorial elections, all 513 seats in the lower house, the Chamber of Deputies (Câmara dos Deputados), and fifty-four of the eighty-one Senate seats were up for reelection. However, Cardoso supporters were deprived of a first-round victory in Sao Paulo, Minas Gerais, and Rio de Janeiro, where abstentions and spoilt or blank votes accounted for more than half the total.

One of the most academically qualified presidents in history and a brilliant intellectual, Cardoso is a world-renowned sociologist and the author of more than 100 monographs, including two dozen books, many of them written in English. In addition to Portuguese, Cardoso speaks English, French, Spanish, and several other foreign languages. His wife, Ruth Corrêa Leite Cardoso, is a leading Brazilian urban anthropologist who specializes in studying community movements by women and blacks in Sao Paulo's favelas and who heads the Solidarity Community (Comunidade Solidária) social-action program.

For most of his life, Cardoso was a university professor. He taught at the USP until 1964, when the new military regime persecuted him and banned him from teaching. He then chose to go into exile in Santiago, Chile, from 1964 to 1968. During that period, he coauthored, with Chilean sociologist Enzo Faletto, Dependency and Development in Latin America , considered one of the most influential interpretations of twentieth-century Latin American structural dynamics. It attributes Latin America's underdevelopment to the once-influential doctrine that Cardoso cofounded, dependency theory, and the region's dependence on foreign capital and technology.

Cardoso also taught in France at the University of Paris (the Sorbonne), Britain (Oxford), and the United States (University of California-Berkeley, Princeton, Stanford, and Yale). In the 1970s, he became the best-known critic of the Brazilian nationalistic developmental model, which was based on the now obsolete strategy of state-led import-substitution industrialization. In the early 1970s, when Cardoso distributed pamphlets outside factory gates, Brazilian business-men viewed him suspiciously as an unreliable leftist politician. Returning to Sao Paulo by the late 1970s, he established a think tank and entered politics in 1977. He served as a senator (1986-94), and, in 1988, helped to found the PSDB, a center-left party that opposed corruption.

As the son, grandson, and nephew of generals, Cardoso retains strong ties to the military. His father, General Leonidas Cardoso, was elected deputy by the Communist Party of Brazil (Partido Comunista do Brasil--PC do B) in the 1940s and was persecuted by the military. President Cardoso's grandfather, General Maurício Cardoso, was considered to have been the most brilliant officer of the Brazilian Army (Exército Brasileiro). Fernando Cardoso's uncle, General Henrique Assunçao Cardoso, has been characterized as an extreme rightist. In 1969 Cardoso himself was arrested, blindfolded, and interrogated by the military.

After three civilian presidents of mediocre abilities, many Brazilians who had been despondent about their country's economic future viewed Cardoso's election as highly auspicious for Brazil, and most foreign observers agreed. Fellow sociologist Alain Touraine, a professor at the Maison des Sciences de l'Homme in Paris, commented to O Estado de Sao Paulo that Cardoso's election represented a victory of the future over the past at a moment in which the entire world is engaged in economic "globalization," a road that Brazil had rejected thirty years earlier. In addition to stabilizing the country economically, Cardoso was expected to stabilize Brazil's erratic record of incomplete presidencies. Not a single democratically elected Brazilian president had completed his term of office since 1926; the presidents either resigned, were forced from office, or, in one case (Getúlio Dorneles Vargas, president, 1930-45, 1951-54), committed suicide.

By the time Cardoso assumed office on January 1, 1995, at age sixty-three, the monthly rate of inflation was less than 1 percent, unemployment was low (about 5 percent), and Brazil had a comfortable and unprecedented level of foreign-exchange reserves, at a record US$40.8 billion, thanks largely to the influx of foreign capital into the local financial market. The conditions were favorable for essential reforms of the statist economy, the bloated federal government, and the overgenerous pension system. The latter had allowed privileged groups--teachers, airline pilots, soldiers, judges, journalists, and politicians (politicians after only eight years)--to qualify for 100 percent pensions in their fifties (some at age forty-five on a pension 20 percent higher than their last wage). One governor complained in October 1995 about a retired Military Police colonel who had accumulated twenty-six personal pensions and was drawing the equivalent of US$80,400 a month. By January 1995, the pension system was running an estimated annual deficit of 10 percent of GDP, or US$3 billion.

Whereas the public sector's wages accounted for only 3 percent of GDP in 1980, the government in 1993 employed one-third of the total workforce and paid 11 percent of GDP in wages. In 1995 the federal bureaucracy's wage bill rose by 40 percent, and states were spending 80 to 90 percent of their income on running the bureaucracy. The bloated bureaucracy is filled with thousands of nominal workers who receive salaries but do no work. The state governors, desperate to get thousands of civil servants off the state payrolls, have been Cardoso's most resolute allies in the battle for administrative reform and capping bureaucratic expenses at 60 percent of the government's revenues. However, privatization of state-owned companies is opposed by associations of civil servants reluctant to lose their privileges, particularly the officers (maharajas) in charge of state companies who are paid salaries (up to US$19,000 a month) that are high by Latin American corporate standards. (In late 1995, there were 6,471 civil servants in seven states earning more than President Cardoso's salary of US$8,800 a month.)

Cardoso's election also marked an ethical backlash to institutionalized corruption by traditional politicians, a reversal that began with the ouster of Collor. A report by government investigators published on January 1, 1995, noted that corruption within the Brazilian government was costing the country about US$20 billion and accounting for 40 percent of the national investment budget. Cardoso refused to trade 20,000 to 30,000 patronage jobs for congressional support, vowing to fill the jobs with qualified nonpoliticians to avoid corruption and to control spending. Cardoso's government sought to circumvent the corruption-ridden state and federal cronies by transferring most of the responsibility and funding of health, schools, and infrastructure to municipal authorities. Nevertheless, corruption has remained entrenched in the bureaucracy.

In his first 100 days in office, Cardoso was unable to deal effectively with the status quo forces in Congress, causing a further loss of public confidence in democracy. A poll conducted in April 1995 indicated that the percentage of Brazilians preferring democracy to any other form of government declined from 54 percent in the previous September to 46 percent, and the proportion regarding a dictatorship as better than democracy rose from 13 percent to 18 percent.

In 1996-97 President Cardoso attempted to further reform the constitution in order to reduce the state's role in the economy, revamp the federal bureaucracy, reorganize the social security system, redefine the federal-state relationship, simplify the tax system, and strengthen political parties. He succeeded in getting some major economic and political reforms enacted. Discarding the anticapitalist, theoretical nostrums that he had espoused during his academic career, he called for the implementation of a sweeping market-oriented reform, including public-sector and fiscal reform, privatization, deregulation, and elimination of barriers to increased foreign investment.

Cardoso's goals are to expand privatization measures, including elimination of constitutionally established monopolies. His initial economic reforms, adopted by the Congress in early 1995, permit the entry of foreign capital into previously exclusive areas, categorized as "strategic assets." These may include the oil extraction, mining, and telecommunications, and the banking, electricity, health, insurance, and retirement-plan sectors. Privatization sales in 1996 may have reached US$10.2 billion. On May 21, 1996, a consortium of Brazilian, French, and United States companies purchased a 34 percent share of the state-owned Power Services, Inc. (Serviços de Eletricidade S.A.--Light) in a transaction valued at US$2.2 billion, Brazil's then largest privatization. Cardoso administration officials hoped the sale of Light would revitalize Brazil's often criticized, delay-prone privatization program.

By April 1997, the government had sold fifty-five of 135 state-owned companies for a total of at least US$15 billion, since the inception of the program in 1991, including all of its steel companies. Most of those sales attracted little attention.

In early May 1997, however, in Latin America's largest, most historic privatization to date, the government sold its 45 percent controlling stake in the Rio Dôce Valley Company, Inc. (Companhia Vale do Rio Dôce S.A.--CVRD) to a consortium led by Brazil's largest steelmaker, the already privatized National Iron and Steel Company (Companhia Siderúrgica Nacional--CSN), for US$3.1 billion. Vale, as the firm is known, is the world's third largest mining company; it is the largest producer and exporter of iron ore (accounting for more than 18 percent of the global market, or 100 million tons annually, with reserves of 4 to 5 billion tons) and Latin America's biggest producer of gold (eighteen tons a year). Vale is also Brazil's largest exporter (US$1.2 billion in overseas sales in 1996) and a symbol of Brazilian nationalism. In addition to its railroad system, which carries almost two-thirds of Brazil's rail freight, Vale owns two ports (Sao Luís and Vitória). The government planned to sell its remaining 31.5 percent of ordinary shares in Vale, a company valued at US$11.7 billion, in late 1997. Some Brazilians protested the expected loss of Vale's tradition of providing jobs and grants for cultural and other activities.

Other giant state companies were slated for privatization, including Sao Paulo Power, Inc. (Eletricidade de Sao Paulo S.A.--Eletropaulo), which sells 15 percent of all of Latin America's electricity, and Brazilian Electric Power Company, Inc. (Centrais Elétricas Brasileiras S.A.--Eletrobrás), one of the world's top five power companies. Brazil's largest company, the Brazilian Petroleum Corporation (Petróleo Brasileiro S.A.--Petrobrás), with sales of US$18 billion, is the world's fifteenth largest oil and natural gas company and a world leader in deep-sea drilling. Nevertheless, the inefficient Petrobrás faced a process of accelerated deregulation in 1997 that may open the country's vast resources to joint exploration and development by foreign multinational oil companies.

The opening of the telecommunications sector to foreign private investment capital actually will not become effective until the next government takes office in 1999. Under the Cardoso government's proposed new regulations, as approved by the Chamber of Deputies in May 1996, foreign private companies would be permitted to purchase up to 49 percent in voting shares of state-owned telecommunications companies. Thus, new international joint ventures are changing the face of Brazil's long-introverted business world. The government expected to receive US$25 billion to US$30 billion from the privatization of telecommunications in 1997-99.

The telephone business is one of the largest Brazilian industries to be opened to foreign investors. In April 1997, in a move that was a precursor to the planned privatization in 1998 of the state-controlled telephone holding company, Brazilian Telecommunications, Inc. (Telecomunicações Brasileiras S.A.--Telebrás), which could establish Brazil as a major destination for foreign investment, the government auctioned off the regional cellular foreign investment concessions for minimum prices totaling US$3.6 billion. In addition to electrical generation and transmission companies, the government planned to sell banks, railroads, and the Rio de Janeiro Metrô in late 1997.

With its large and quite diversified economy, Brazil still has the potential to regain its former dynamism, despite the economy's considerable structural and short-term problems. According to some economists, radical fiscal reforms are crucial to the consolidation of Brazilian economic stability and to lay the groundwork for self-sustained economic growth. The goals of these reforms are to redefine the scope of the Brazilian nation, its functional profile, and the extent of interaction with the private sector. Reducing the unsustainable disparities in income distribution is considered to be an essential component of overdue structural reforms. However, political factors have slowed the Cardoso administration's progress on vital structural reform.

The Real Plan imposed a harsh new period of constricted profits and consolidation on Brazil's banks. The banking sector, employing 960,000, began to downsize. In 1994-95 the Franco and Cardoso governments intervened in many banks and closed more than a dozen others. In August 1995, the Central Bank of Brazil was forced to take over the giant Economic Bank (Banco Econômico), Brazil's first private bank, based in the Northeast state of Bahia, after it ran up debts of US$3.6 billion. After his approval ratings and Brazil's stock market plummeted at the news of the federal bailout, Cardoso reversed course and instead sought to sell the bank to private investors. The Cardoso government also intervened to put the Sao Paulo State Bank (Banco do Estado de Sao Paulo--Banespa), which owed domestic and foreign lenders US$58 billion, under Central Bank control to save it from collapse and to put the Rio de Janeiro State Bank (Banco do Estado de Rio de Janeiro--Banerj) on the auction block. A US$12 billion government rescue package for private banks that was introduced in late 1995 laid the groundwork for a wave of mergers, privatizations, and liquidations.

By the end of 1995, President Cardoso, by employing pragmatic, free-market economics, had led Brazil's inflation-prone economy to its greatest stability in a quarter century. Cardoso's continued popularity resulted in large part from his ingenious handling of the economy. In the first twelve months of the new currency, the real and its associated fiscal measures brought strong growth, a flood of new investment, the creation of half a million new jobs, a temporary fall in unemployment, and an inflation rate of less than 25.9 percent a year. Nevertheless, the widening public deficit, combined with congressional resistance to the three reforms submitted by the Cardoso government in the second half of 1995--administrative, tax, and social security reform--threatened to undermine Cardoso's Real Plan. In the view of Cardoso's critics, he missed his chance for radical reform of the state by failing to move aggressively at the outset of his administration.

By 1996 Brazil's high public deficit (4 percent of GDP) from a rising public payroll, high interest rates, the mounting foreign debt-service costs (US$15 billion in 1996) and amortisations (US$18 billion), and the high level of social security payments were of increasing concern to investors. The cost of social security payments rose from US$25.4 billion in 1994 to US$32.9 billion in 1995. Social security showed a deficit of R$5 billion in 1996. Some analysts have expressed concern that the deterioration of the fiscal situation at the same time that credit is being regenerated to restart the economy adds up to a dangerous combination, considering that the pace of structural reform has apparently slowed down. In this view, Brazil faces a volatile situation reminiscent of Mexico in 1994. Economist Sebastian Edwards contended in a Wall Street Journal op-ed on November 7, 1997, that "without immediate action on the fiscal side, the Real Plan may be unsustainable." Other analysts believe that the deficit problem looks worse than it really is.

Cardoso's Real Plan succeeded in reducing inflation to 16.5 percent in 1996, the lowest in nearly half a century, thanks to an overvalued currency. Brazilians began to take economic stability for granted. However, since early 1996 some economists have warned that Brazil's exchange rate is too high. In June 1996, economist Rudiger Dornbusch, who predicted the 1994 Mexican peso crash, suggested that the real was overvalued by about 40 percent. In his analysis, which angered Brazilian officials and instigated a debate, Brazil has been controlling inflation by means of a highly overvalued currency and high interest rates. Conservative economists led by Deputy Antônio Delfim Netto (PPB), a former minister of planning, called for accelerated devaluation. In the view of these skeptical economists, the Cardoso government's economic policy dooms Brazil to remaining the country of the future. By some estimates, the real in early 1998 was overvalued by 15 percent. Whether Brazil can continue to sustain a monetary and exchange-rate policy that is inconsistent with its large and growing budget deficits without a major devaluation remains to be seen. Some economists expect a devaluation in 1998.

For much of 1997, Brazil continued to enjoy its greatest stability in three decades, with foreign reserves totaling US$57.5 billion by May. However, the growing trade deficit, which reached US$10.93 billion in 1997, had become a top concern of the government. In 1997 the current account deficit rose to US$32.3 billion. Of the main Latin American economies, only Brazil in 1997 had a fiscal deficit as high as 3.4 percent of its GDP.

Forced to choose between lower economic growth (estimated to be 3.2 percent in 1997) and a quick currency devaluation, which might aggravate inflation, Brazil's economic policy makers chose the former. In early November 1997, President Cardoso staved off financial speculators, who tried to force Brazil to devalue the real , by quickly raising interest rates and propping up the real with billions of dollars in reserves. He then unveiled an economic austerity package that will include higher taxes and reduced government spending. By announcing a series of fifty-one drastic measures to bolster revenues by as much as US$18 billion, Cardoso demonstrated decisive leadership and a willingness to take tough measures to maintain confidence in the real . To that end, his government won an important legislative victory on November 20 with the approval by the Chamber of Deputies of a key constitutional reform proposal to dismantle job protection for most civil service workers by giving the government new powers to dismiss them. The bill, which was expected to win approval in the Senate, would eventually cost about 280,000 of 537,053 public servants their jobs, thereby eliminating a major impediment to the country's fiscal health.

As a result of the 1996 municipal elections and strong opposition by powerful vested interest groups, the Cardoso administration's more challenging reforms--administrative, social security, and fiscal--languished in Congress and awaited passage in 1997. The opposition that Cardoso's bill to reform the deficit-ridden social security and pension systems encountered in Congress, among the state governors, and even in the Supreme Court has highlighted the constraints under which a Brazilian president operates. In January 1998, the Cardoso administration estimated that Congress would approve the social security bill by April. In addition to the social security bill and a new labor reform proposal, the Cardoso government resubmitted its proposed administrative and fiscal reforms to Congress. The lower house approved the basic text of the administrative reform on November 19, 1997.

Despite congressional resistance to his reform proposals, President Cardoso further consolidated his power in early February 1997 when his candidates for the positions of speaker in both houses of Congress were elected. This led some observers to wonder whether the presidency was entering a de facto imperial era. Referring to "Emperor Cardoso," political analyst Villas-Boas Correia argued in a Jornal do Brasil article that no democratically elected president had ever accumulated so much power in Brazilian history.

In January 1997, the Chamber of Deputies passed an amendment allowing for immediate reelection of presidents, governors, and mayors. As a result of the Senate's approval of the amendment in June 1997, President Cardoso may stand for reelection in October 1998. His main opponent was Paulo Maluf, a right-wing populist and erstwhile presidential candidate of the Brazilian Progressive Party (Partido Progressista Brasileiro--PPB), as well as the largest party in Congress, the Brazilian Democratic Movement Party (Partido do Movimento Democrático Brasileiro--PMDB). However, Maluf decided that Cardoso was still too popular to run against, so he entered the race for governor of Sao Paulo State instead. On November 30, 1997, Luis Inácio da Silva announced officially that he will run for president on the Workers' Party ticket. But Cardoso's efforts to maintain a low rate of inflation, expand the economy, make progress in solving major socioeconomic problems, and reduce corruption and congressional immunity have lowered the left's chances of being elected to power in the October-November 1998 presidential, congressional, and state elections. Cardoso's reelection is generally considered likely.

Brazilian diplomacy had a landmark year in 1995 with Cardoso's assumption of office. The first former minister of foreign affairs to be elected president of Brazil, Cardoso personally led Brazil's most important diplomatic initiatives in 1995, bringing new credibility and respect to Brazilian foreign policy and the country's international relations profile. Having redefined Brazil's foreign policy objectives, the Cardoso government improved Brazil's relations with the United States and adopted a more assertive role within the South American region.

Brazil's priority in 1995-97 was to consolidate Mercosul (Common Market of the South) among Argentina, Brazil, Paraguay, and Uruguay. In the four years before Mercosul took effect on January 1, 1995, regional trade almost tripled, reaching US$10 billion by the end of 1994, as compared with only US$3.6 billion in trade among the four full member countries in 1990. Exports to Mercosul countries accounted for 15 percent of Brazil's total in 1995, as compared with 13 percent in 1994. Mean tariff rates were cut back from 32.2 percent in 1990 to 14.0 percent in 1994, while at the same time the tariff ceiling was brought down from 105 percent to 40 percent. Trade between Brazil and Argentina in 1995 was US$10 billion, amounting to 80 percent of all trade within Mercosul and making Argentina Brazil's second largest trading partner, after the United States.

In addition to removing trade barriers, Mercosul commits members to the coordination of policies on agriculture, industry, transport, finance, and monetary affairs. Argentina and Brazil see Mercosul primarily as a means of attracting foreign investment. Although Brazil's Mercosul partners were shocked when Brazil announced on March 25, 1997, its unilateral decision to impose restrictions on imports, Brazil alleviated fears of a trade shutdown by allowing an exemption for Mercosul goods.

Cardoso made a very successful state visit to Washington in April 1995. The Clinton administration welcomed Brazil's constitutional amendments opening up the Brazilian economy to increased international participation, especially the breaking up of state monopolies in the areas of petroleum and telecommunications, but intellectual property rights remained at issue. Veja reported in mid-April 1995 that United States firms were losing US$800 million a year as a result of piracy by Brazilian companies. However, the Cardoso government subsequently modified Brazil's intellectual property rights law to coincide with stricter trademark and patent provisions. The new Patents Law, enacted in 1996, meets international standards. Nevertheless, Brazil's software piracy rate was about 68 percent, accounting for nearly seven of every ten computer software programs sold in the country, according to a Price Waterhouse study released in May 1997. During his official visit to Brasília and Rio de Janeiro in mid-October 1977, President Clinton emphasized trade, education, and environmental issues and succeeded in improving Brazilian-United States relations.

Brazil's history has been relatively free from major conflict with its ten contiguous neighbors, with the main exception of the War of the Triple Alliance (1864-70) with Paraguay. In the twentieth century, Brazil has been a gentle giant; the only major power with which Brazil has fought a war was Germany in World War II. After the war, however, 1,500 Nazis, including the infamous Josef Mengele, moved to Brazil, according to the World Jewish Congress. Moreover, Rio de Janeiro's O Globo reported in early 1997 that President Vargas, a Nazi sympathizer, confiscated US$46 million in assets from Brazilian Jews in 1947. In April 1997, President Cardoso created a special commission charged with investigating Nazi assets.

In the first half of the 1990s, Brazil's national security interests were reshaped not only by the new, post-regime civil-military relationship, but also by Brazil's greatly improved integration with Argentina and other South American countries through various security accords and a regional trade agreement, Mercosul. One of the Collor administration's most important national security actions aimed at the Brazilian Armed Forces (Forças Armadas Brasileiras) was to expose the military's secret nuclear bomb program, the so-called Parallel Program (Programa Paralelo), and bring it under civilian oversight and international monitoring. On December 13, 1991, Brazil reached a nuclear cooperation accord with Argentina, thereby accepting International Atomic Energy Agency (IAEA) safeguards.

President Collor also implemented other significant national security measures. He continued to reduce defense spending to the lowest level in decades and allowed the country's arms industry to collapse without any state intervention to sustain it. For example, the Collor administration announced that the Brazilian Aeronautics Company (Empresa Brasileira Aeronáutica--Embraer), the producer of planes such as the Tucano trainer and the subsonic AMX jet, would be privatized. In an attempt to demilitarize the government and institute a more democratic governmental structure more likely to help improve relations with the United States, Collor abolished the military-dominated National Intelligence Service (Serviço Nacional de Informações--SNI) and the National Security Council (Conselho de Segurança Nacional--CSN) and formed the civilian-headed SAE (Strategic Affairs Secretariat).

However, the Collor government's policies soon reverted to a more pragmatic approach that was more independent of the United States. Prior to Operation Desert Storm against Iraq in January 1991, Brazil found itself aiding the wrong side, with controversial arms sales, construction contracts, and transfer of missile technology to Iraq. Brazil subsequently altered its close commercial relationship with Iraq.

In the second half of the 1990s, Brazil, strengthened by Mercosul, is evolving into a major intermediate regional power. Under Cardoso, Brazil has sought a more active international role, both in the UN and in bilateral relations. Traditionally, Brazil has played a leading role in collective security efforts and economic cooperation in the Western Hemisphere. For example, in early 1995 Brazil negotiated a cessation of border fighting between Ecuador and Peru. Cardoso believes that Brazil's international influence will be shaped by the extent to which regional cooperation in Latin America and the Caribbean, particularly the South Atlantic, is strengthened.

The Brazilian proposal for the creation of the South American Free Trade Association (Área de Livre Comércio Sul-Americana--ALCSA, or SAFTA), also known as the Free Trade Area of the Americas (FTAA), by 2005 is also an important step in Brazil's efforts to promote regional integration. At a May 13-15, 1997, meeting in Belo Horizonte of the thirty-four countries participating in the FTAA, Brazil opposed the United States preference for a faster timetable than 2005 and bilateral negotiations instead of discussions among trading blocs, such as Mercosul and the North American Free Trade Agreement.

Cardoso also sees a need for Brazil to develop alliances, coalitions, and partnerships on a global level, as distinct from a merely hemispheric level, be it with Asia, Europe, Africa, or the Middle East. The Cardoso government has focused on developing dynamic trade partnerships with the European Union, Japan, and China as a counterweight to United States dominance. Brazilian exports to China of agricultural products and byproducts grew by 46 percent in 1995. In dollar terms, the figures rose from US$226.4 million in 1991 to US$1.2 billion in 1995, an increase of 430 percent.

In other national security areas, the Brazilian Armed Forces have been seeking a new role in the 1990s in the absence of any external threat to national security. They no longer have their two traditional "enemies": Argentina and communism. Since ending their regime in March 1985, the armed forces have continued to assert themselves politically under civilian rule. Their political influence, however, has diminished under the 1988 constitution, which places them under presidential authority, while the policy-making influence of the presidency, Congress, and civilian ministries has grown. In the absence of a defined security policy and a common project, the armed forces have been mired in bureaucratic rivalry.

Brazil's defense budget in 1997 totaled US$12 billion. The IBGE reported that investment in the armed forces as a percentage of the government budget declined sharply from 9.03 percent in 1985 to 1.70 percent in 1995. Not only is Brazil spending proportionately little on the military, some critics have argued, but the money is being spent badly and is being used to maintain an archaic and top-heavy bureaucracy. In the early 1990s, the army proportionately had more generals (164, of whom 141 were on active duty) than the United States Army. Critics have also singled out as "wasteful" the funds spent for the construction of a nuclear submarine, scheduled to be launched by 2007 at a cost of US$2.2 billion.

Brazil's new National Defense Plan (Plano de Defesa Nacional--PDN), approved on November 7, 1996, rules out "all possibilities" of conflict with Argentina. The PDN states that areas of future possible conflict are linked with "drug trafficking, narcoterrorism, and the presence of armed groups in Amazon regions bordering other countries." However, the "security and development" school of military thinking of a new generation of military strategists at the War College (Escola Superior de Guerra--ESG) disagrees with this threat assessment. It sees poverty and inequality as the main destabilizing influences.

The Clinton administration hoped that Brazil would significantly improve its efforts to stem international drug smuggling across its territory from Andean neighbors. The Amazon has become an international drug-trafficking route in the 1990s, and Brazil has become a major cocaine exporter. Increasingly, smugglers have been sending small shipments hidden in luggage or riverboat cargo. Under a new cooperation agreement signed in April 1995, the Clinton administration expected Brazil to improve coordination with the United States Drug Enforcement Administration (DEA). Stressing the threat posed by drug trafficking to Brazilian national security, President Cardoso announced on April 17, 1996, that the armed forces would join the drug enforcement effort in border areas, in the Northeast, and in the Amazon region. Mafia groups are gaining strength in Brazil. Nearly fifty Mafia kingpins were living in Brazil by mid-1997, either in Rio de Janeiro or Sao Paulo. Brazil had become the Italian Mafia's third area of activity, after Italy itself and the United States.

Brazil is becoming the largest market for money laundering in the world, according to the Federal Police (Polícia Federal) and Ministry of Justice. The Cardoso government calculated in 1996 that some US$490 billion evade taxes every year as a result of money laundering. In mid-1996 the government submitted a bill to Congress containing measures to combat money laundering.

Within Brazil, national sovereignty over the Amazon region has been a continuing security concern of the military, as evidenced by two projects: the Amazon Region Surveillance System (Sistema de Vigilância da Amazônia--Sivam) and the Amazon Region Protection System (Sistema de Proteçao da Amazônia--Sipam). The Sipam and its sensor component, Sivam, involve superimposing a state-of-the-art surveillance system that will, by 2000, monitor 5 million square kilometers of the Amazon. It will transmit digital data from satellites, fixed and airborne radars, and other high-tech sensors (to be built under the Massachusetts-based Raytheon Company's US$1.4 billion contract with the Brazilian government) to computerized processing centers and hundreds of "user-nodes" dispersed throughout the Amazon region.

The concept of ecological security in regions such as the Amazon has become a major national security interest for Brazil. In the Cardoso government's view, the Sivam and Sipam projects are examples of how technology can be applied to rescue neglected regions. Sivam, which is coordinated by the Ministry of Aeronautics and the SAE (Strategic Affairs Secretariat), is promoted as an environmental initiative, with emphasis on the protection of the Amazon region, such as the monitoring of illegal logging and mining, forest burning, and even incursions into indigenous reserves. The system will be used to demarcate boundaries and monitor the use of Indian reservations, national parks, and other preserves. In addition to collecting ecological data, Sivam will monitor migration and settlement.

However, Sivam was conceived as a military project related to the development of an air traffic control network. Thus, Sivam will eliminate a radar blind spot for commercial airlines and facilitate the policing of illegal flights, estimated at as many as 3,000 daily. These illegal flights involve the smuggling not only of drugs, but also of consumer goods and ores. Most attention is focused on the 722 kilometers of the Brazilian-Colombian border, an area where most clandestine flights by drug traffickers take place.

The Sivam, which was signed in May 1995, was bogged down in the Senate throughout 1995 and much of 1996 amid objections over the cost, United States involvement, and allegations of influence peddling by a top aide to President Cardoso, whom the president subsequently fired. Ultimately, thanks to the personal intervention of President Cardoso and lobbying by the United States, the Raytheon Company's first financial contract with the Brazilian government to build Sivam was signed in October 1996. Raytheon signed Sivam contracts with two Brazilian firms on March 14, 1997.

Despite its efforts to monitor the Amazon region, one record set by the Cardoso administration has been in destruction of the Amazon rain forest. Deforestation in the first three years of the Cardoso administration reached 60,257 square kilometers, an area almost twice the size of Belgium. On January 26, 1998, Brazil's INPE (National Institute of Space Research), which is headquartered in Sao José dos Campos, released its report on deforestation of the Legal Amazon (the nine states in the North and Center-West regions), showing a declining trend in 1996-97 from a record level set in 1995. The new INPE figures, based on Landsat satellite images, show that, contrary to the government's claims that deforestation had slowed during 1992-97, the destroyed area in 1995 was 29,059 square kilometers of rain forest, the largest annual deforestation total recorded since the satellite monitoring began. The 1995 figure represented more than a doubling of the deforestation recorded in 1994 (14,896 square kilometers) and a rate even greater than that during the 1970s. The 1996 figure was well below the 1995 rate, but still a total of 18,161 square kilometers, an area almost as large as Israel, disappeared that year. The projection for 1997 is 13,037 square kilometers destroyed.

Another significant study, entitled The Use of Fire in Amazônia: Case Studies Along the Arc of Deforestation , was released in October 1997 by the Woods Hole Research Center in Massachussets and its newly established research center, the Institute of Environmental Research on Amazônia (Instituto de Pesquisa Ambiental da Amazônia--IPAM), based at the Federal University of Pará (Universidade Federal do Pará--UFPa) in Belém. This report found that cutting and burning have dried out the forest to the point that it could burn out of control.

On January 28, 1998, the Chamber of Deputies approved an environmental crimes bill to grant the "federal environmental agency" legal authority to enforce environmental protection laws. The "federal environmental agency" refers to the Brazilian Institute for the Environment and Renewable Natural Resources (Instituto Brasileiro do Meio-Ambiente e dos Recursos Naturais Renováveis--Ibama), which is under the Environmental Affairs Coordinating Secretariat (Secretaria de Coordenaçao dos Assuntos do Meio Ambiente--SMA) of the Ministry of Environment, Hydraulic Resources, and the Legal Amazon. The bill, which had languished in Congress for seven years, provides criminal penalties for damaging the environment and grants the "federal environmental agency" the right to levy fines, prosecute polluters, and order companies to correct environmental hazards.

Environmentalists supported the legislation, which includes significant provisions requiring companies to pay the cost of cleaning up environmental damage that they are proven to have caused (up to R$50 million), prohibiting proven polluters from signing government contracts, and setting daily fines for companies that refuse to clean up their damage. Although President Cardoso on January 30 disputed the results of the INPE's Brazilian Amazon Deforestation Appraisal Program (Programa de Avaliaçao do Desflorestamento da Amazônia Brasileira--Prodes), he signed the new Environmental Crimes Law on February 12. The president vetoed ten articles, including penalties for noise pollution, traditional slash-and-burn agricultural burnings, and automatic liability of companies to clean up their environmental damage and compensate victims. The watered-down law takes effect in April 1998.

Since the early 1990s, Brazil has actively sought to develop nonproliferation credentials. In September 1991, it signed the Mendoza Declaration prohibiting chemical and biological weapons. On February 9, 1994, Brazil began addressing international missile proliferation concerns by establishing a civilian space agency, thus ensuring that Brazil's space projects are exclusively peaceful. In addition, on May 30, 1994, Brazil finally ratified the 1967 Treaty for the Prohibition of Nuclear Weapons in Latin America (Treaty of Tlatelolco). Brazil was one of a half-dozen countries in the world that had not signed the 1968 Non-Proliferation Treaty (NPT). However, on June 20, 1997, President Cardoso submitted a request to Congress asking it to approve Brazil's adherence to the NPT.

In an attempt to overcome its reputation for transferring missile and nuclear technology to countries such as Iraq, Brazil signed the Missile Technology Control Regime in October 1995, committing itself to abide by the MTCR guidelines. Brazil hoped to convince MTCR members--such as the United States, France, the United Kingdom, and Germany--that Brazil can be trusted with sensitive technology.

Brazil's space program since 1991 has been restricted to creating satellite launchers for scientific and commercial purposes. Unlike Argentina, Brazil was able to join the MTCR without having to abandon its program for the development and construction of its Satellite Launch Vehicle (Veículo Lançador de Satélite--VLS). Production of the VLS got underway in May 1996. With MTCR membership, Brazil could reach new agreements with Germany, for example, in the field of space and nuclear technology cooperation and produce and export long-range rocket equipment and technology. However, Brazil's fledgling space program suffered a setback on November 2, 1997, when controllers were forced to destroy the rocket that was to carry the nation's second Data Gathering Satellite into Earth's orbit to collect information on the environment.

During then United States Secretary of State Warren Christopher's visit to Brazil on March 1, 1996, the Cardoso government reaffirmed Brazil's new attitude of partnership and cooperation with the United States. On that occasion, United States and Brazilian officials signed a new bilateral agreement for cooperation in space that emphasized the use of space technology for environmental research and analysis. Officials of both countries also pledged to cooperate in protecting the Amazon rain forest. In addition, a United States-Brazil Agreement for Cooperation on Peaceful Uses of Nuclear Energy was adopted.

The Cardoso government articulated a strategic vision of Brazil's future. This vision, as explained by Ronaldo Mota Sardenberg, secretary of the SAE, recognizes that the new world order is based on knowledge, communications technology, and services; Brazil must insert itself into the international community and South America by reducing social inequalities, increasing national integration, and emphasizing science and technology. Thus, the Cardoso government sees strategy as a long-term socioeconomic concept to overcome underdevelopment. It believes that Brazil will not maintain its status as a middle-income nation, much less climb into the developed world, if a large proportion of its population is excluded and entire regions of the country continue to be underdeveloped.

To better prepare Brazil for the strategic information needs of the twenty-first century, President Cardoso charged the SAE with collecting economic and political information and focusing on detecting social conflicts that could occur during his presidency. Cardoso also proposed the establishment of the Brazilian Intelligence Agency (Agência Brasileira da Inteligência Nacional--ABIN), an autonomous organization also under the Office of the Presidency. The ABIN is expected to replace the former SNI apparatus in 1998.

The new ministry of defense to be established by Cardoso in 1998 will merge the four military ministries. The current military ministries will be reduced to commands. The commanders of the army, air force, and navy will be directly subordinate to the minister of defense. The new ministry's budget for 1998 totalled 2.9 billion reais , almost US$3 billion, making it the third largest budget in the government. Sardenberg was expected to become the supervisor of the incumbent military ministers, thereby undermining the decision-making power of the military.

Cardoso succeeded in repairing Brazil's international image to reflect an economically and politically stable and reliable country that can achieve its development potential, compete for new markets, attract productive investment, and acquire foreign technology. He also appeared to have restored Brazilians' self-esteem and national pride. According to the results of a Vox Populi poll, reported in January 1996, a majority of people (2,000) questioned said they believed Brazil was well on its way to becoming a great power. In addition, 84 percent expressed pride in being Brazilian, and 79 percent said they had no wish to emigrate.

Brazil's 160 million inhabitants and rich resources make it a country of tremendous potential. Realization of Brazil's potential, however, will depend on implementation of the needed administrative, social, and tax reforms. According to a 1997 study by the University of Sao Paulo, their passage would result in annual GDP growth of 7 percent. By late 1997, little real progress had been made in the areas of health, education, homelessness, land squatting by rural peasants, transportation, and so forth. Nevertheless, Cardoso's Plano Real has aided the poor more than any other social class, raising their standards of living and their spirits by giving them greater purchasing power (as well as debts) and a sense of upward mobility. Although Brazil, with annual inflation of 7.2 percent in 1997, is clearly on a steadier course than it was in the first half of the 1990s, the country still has a long way to go in reversing the ever-widening socioeconomic inequities between rich and poor. Many regard Cardoso as the last, best hope for Brazil (at least in this century) to take the actions needed to get the country to realize its enormous potential and its destiny in the twenty-first century.

In the early months of 1998, rampant drug-trafficking and destruction of the Amazon rain forest rose to the forefront of threats facing Brazil. The country's drug trafficking and other drug-related crime have expanded much more rapidly and insidiously than the capability of Brazilian society to perceive the threat. Three laws enacted in late February 1998 demonstrate the higher priority to be accorded by the Cardoso government to drug enforcement. First, President Cardoso ordered the creation of the Special Secretariat for National Drug-Control Policy (Secretaria Especial da Política Nacional do Contrôle de Drogas--SEPNCD), directly subordinate to the presidency of the republic. The SEPNCD will give priority to border surveillance and control and coordinate the activities of state and local security agencies with fourteen federal agencies that combat drugs. It will also develop strategies and national policy on drug control. Second, Cardoso signed a newly passed money-laundering law, which will create mechanisms to identify "dirty money" and set prison terms of three to five years for money laundering. And third, Cardoso signed a law authorizing government agencies to shoot down hostile aircraft.

In the second half of March 1998, fires brought on by the worst drought in memory and queimadas (burnings) by slash-and-burn farmers swept Roraima, destroying vast swaths of savanna and the rain forests that were home to the Yanomami Indians. Roraima is the state with the lowest population density in Brazil (one inhabitant per square kilometer), but it has the largest indigenous community in the country, with about 14 percent of the nation's native American population. The conflagration was the worst in the history of the Amazon Region, according to the National Institute of Amazon Region Research (Instituto Nacional de Pesquisas da Amazônia--INPA). Indeed, in the assessment of the United Nations (UN) representative in Brazil, Walter Franco, the fires constituted an environmental disaster unprecedented on the planet. They consumed more than 36 million hectares, or 33,000 square kilometers, an area larger than Belgium and constituting 15 percent of Roraima's territory. Although the Brazilian military rejected a UN offer to help combat the fire as an intrusion into Brazil's sovereignty, the Cardoso government accepted it.

In the largest conservation step ever in the Amazon, on April 29, 1998, President Cardoso committed Brazil to tripling the area of Amazon forests under formal government protection by 2000. The agreement, to be carried out with the financial and technical assistance of the World Bank and the World Wildlife Fund, would turn 10 percent of the Brazilian Amazon, or 25 million hectares, into parks and preserves.

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