Brink of Bankruptcy

It took months to prepare the way. An emergency plan had to be designed to curb Brazil's breakneck inflation, which has raised the cost of living 5-5.4% since February 1962. President Joao Goulart, who built his political reputation as a wage-boosting leftist demagogue, had to take steps aimed to prove that his ways had changed. Last week, when all was ready--or as near ready as possible, Brazil formally asked the U.S. to save it from bankruptcy.

Broad Potential. In many ways, the man who brought the rescue plan to Washington was characteristic of today's Brazil. Finance Minister Francisco Clementino San Thiago Dantas, 51, is broad, myopic, ambitious, divided between left and right, and fairly bursting with brilliant potential. He graduated from the . National Law Faculty of the University "of Brazil at 20, went on to become one of the most successful corporation lawyers in the country. But in 1958 he turned left, joined Goulart's Brazilian Labor Party, and got himself elected a federal deputy from Minas Gerais state. In 1961, when Goulart succeeded the erratic Janio Quadros as President, Dantas was the man named to be Brazil's Foreign Minister.

"Brazil will uphold its inter-American and Western alliances," promised Foreign Minister Dantas. But at Punta del Este, Uruguay, in January 1962, though he condemned a "Marxist-Leninist government in Cuba," Dantas refused to vote with a two-thirds majority of the hemisphere's nations to expel Cuba from the OAS. His performance so outraged conservatives at home that they blocked Goulart's attempt to make Dantas his Prime Minister. Goulart waited until last January, then made him Finance Minister.

Tackling the Mess. Whatever his game in international affairs, Dantas has never been anything but a thorough conservative in economics--and all the more so as Brazil's economic indicators have gone from bad to worse. Last year Brazil imported $100 million more than it could pay for with exports. Even if it imports nothing this year, it will still owe international creditors $800 million. New foreign capital dwindled from $266 million in 1961 to $62 million last year, frightened off by expropriations, political strife, and a restrictive remittance-of-profits bill. Brazil's gross national product, which averaged 7% growth a year for five years, slowed to an estimated 3.5% in 1962, which means barely keeping ahead of Brazil's 3.1% growth of population.

Tackling the mess headon, Dantas, Goulart and Economic Planner Celso Furtado (architect of the ambitious development plan for Brazil's blighted northeast elbow) ended costly subsidies on imports of wheat and petroleum, even though high-test gasoline prices immediately doubled. They raised the fare on Rio commuter trains from 3 mills to 1 1/2-c-. They limited bank credit, froze steel prices at the government-owned Volta Redonda plant, and persuaded auto, truck and clothing manufacturers to hold the price line. Goulart, who rose to power as labor's pal, even promised a group of industrialists that he would hold wages firm so long as they restrained prices.

Swipes at the Reds. A statement attributed to U.S. Ambassador to Brazil Lincoln Gordon, and published last week in a House Foreign Affairs subcommittee report, says flatly that Communists have infiltrated Goulart's government.* Yet Goulart, if he has not seriously cleaned house, has at least taken a few swipes at Brazil's Reds. He forbade his own brother-in-law, Yankee-baiting Federal Deputy Leonel Brizola, to broadcast over government-owned radio stations. When a group of Brazilian Castroites announced plans for a meeting of Latin American leftists, the foreign ministry issued orders to refuse the travelers Brazilian visas.

In Washington last week, Goulart's emissary insisted that he wanted no new loans. Brazil's financial woes, said Dantas, stem from "loans negotiated over recent years without any serious planning on how to repay them." What Dantas does plead for is a stretch-out of the money Brazil already owes to the U.S. and to international aid agencies, including $900 million that comes due over the next two years. "If I return from the U.S. with a plan for rescheduling our payments, for example at $300 million per year," he said, "I believe I shall have negotiated a better solution than a $1 billion loan payable within a year, without anyone knowing how or with what." The word around Washington after an "astonishingly frank" 1-hr. 20-min. talk between Dantas and President Kennedy: the U.S. is agreeable, but only if the Brazilians continue their economic reforms.

*Brazilians blew up, and the State Department tried to still the anti-Gordon storm by assuming complete responsibility for the statement and claiming that the ambassador's name appeared on it by mistake.

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