BRAZIL

After Getúlio Vargas was forced to resign from the presidency in 1945 (see Chapter 5), a second Brazilian republic came into being. In 1949, Vargas was elected to the presidency. But he was unable to solve Brazil’s economic problems, especially its soaring inflation, and in 1954, af- ter the armed forces called on him to resign, Vargas committed suicide. Subsequent democratically elected presidents had no better success in controlling inflation while trying to push rapid industrialization. In the spring of 1964, the military decided to intervene and took over the government. The armed forces remained in direct control of the country for twenty years, setting a new economic course, cutting back somewhat on state control of the economy and emphasizing market forces. The new policies seemed to work, and during the late 1960s, Brazil experienced an “economic miracle” as it moved into self-sustaining economic growth, generally the hallmark of a modern economy. Rapid economic growth carried with it some potential drawbacks. The economic exploitation of the Amazon River basin opened the region to farming but in the view of some critics threatened the ecological balance not only of Brazil but of the earth itself. Ordinary Brazilians hardly benefited as the gulf between rich and poor, always wide, grew even wider. In 1960, the wealthiest 10 percent of Brazil’s population received 40 percent of the nation’s income; in 1980, they received 51 percent. At the same time, rapid development led to an inflation rate of 100 percent a year, and an enormous foreign debt added to the problems. By the early 1980s, the economic miracle was turning into an economic nightmare. Overwhelmed, the generals retreated and opened the door for a return to democracy in 1985. In 1990, national elections brought a new president into office—Fernando Collor de Mello (b. 1949). The new administration promised to reduce inflation with a drastic reform program based on squeezing money out of the economy by stringent controls on wages and prices, drastic reductions in public spending, and cuts in the number of government employees. But Collor de Mello’s efforts—reminiscent of Menem’s in Argentina—were undermined by reports of official corruption, and he resigned at the end of 1992 after having been impeached. In new elections two years later, Fernando Cardoso (b. 1931) was elected president by an overwhelming majority of the popular vote. Cardoso, a member of the Brazilian Social Democratic Party, introduced measures to privatize state-run industries and to reform social security and the pension system. He rode a wave of economic prosperity to reelection in 1998. But economic problems, combined with allegations of official corruption and rising factionalism within the ruling party, undermined his popularity, leading to the victory of the Workers’ Party in elections held in 2003. The new president, ex-lathe operator Luiz Inacio “Lula” da Silva, however, immediately cautioned his supporters that the party’s ambitious plans could not be realized until urgent financial reforms had been enacted.