It says something for the anxiety (and the maturity) of Brazilian voters that Mr Fernando Henrique Cardoso seems likely to be re-elected president in a first-round victory. Some results are still due from the more distant states but by Friday it is expected that Mr Cardoso will be deemed re-elected with slightly over 50 per cent of the votes cast, just enough to avoid a run-off in two weeks time. Mr Cardoso will make history by being the first Brazilian, since the founding of the Republic in 1889, to be re-elected president democratically. And he will make history in other ways if he can steer his country away from the economic collapse that is looming.
Brazilians are entitled to be anxious. The collapse of the Russian economy sent shock waves through the international investment community which then proceeded to pull funds out of all shaky economies. Brazil has seen more than $30 billion leave the country in the last two months. Selling of the currency, the real, in vast quantities prompted the government to raise interest rates to 50 per cent in an effort to hold onto funds and protect the real from fast and deep devaluation. It is a temporary cure only. Mr Cardoso told the electorate that there was no alternative but to slash spending and raise taxes but, as he delivered the impossible in his first term of curbing inflation and stabilising the currency, they clearly felt that only he has the credentials to tackle the latest crisis.
Mr Cardoso has a job on his hands. His biggest problem is that spending is out of control, particularly in the area of public-sector pay and pensions. Under the present system, 65 per cent of people retire before the age of 54 - and on high pensions. Last year, the cost of pensions for three million ex-civil servants exceeded the cost of the state pension for nearly 17 million in the private sector. Mr Cardoso spent most of the last three years trying to get pension reforms through Congress. If it takes as long to get approval for tax increases and spending cuts, then Mr Cardoso and the Brazilian economy are doomed to failure.
What Brazil also needs is money, perhaps $50 billion of it. Only when that level of support flows in will the pressure ease off the real. The IMF doesn't have that kind of money and a majority of the US Congress seems inclined to ignore President Clinton's appeal yesterday that the IMF be sufficiently funded. Mr Clinton too has a job on his hands but he is correct when he says that "urgent steps are needed" and that there is no time to lose.
Mr Clinton must persuade the other G7 nations to bail out Brazil. It is in their interests and it is particularly in the interests of the US. If Brazil is not strong enough to arrange a gradual and orderly devaluation of the real, then its value will drop like a stone. More than 400 of the 500 largest US companies have subsidiaries in Brazil, pitching for the considerable spending power of its 160 million citizens. US banks have loans out to Brazil of $27 billion. Mr Clinton is right to be extremely concerned but so too should the other G7 nations although they showed little of it at their meeting last weekend.
Brazil accounts for 45 per cent of Latin America's output. As Brazil goes, so goes Latin America. Mr Cardozo can only do so much - and with great difficulty. If the wealthy nations do not provide loans quickly, the troubles of the world's ninth largest economy could soon be dwarfed by troubles in the world's largest economy and the repercussions of that would spread right around the globe.