SUNS 4502 Friday 3 September 1999

Brazil: Social plan to boost Cardoso's waning popularity

Rio de Janeiro, Sep 1 (IPS/Mario Osava and Carlos Castilho) -- Analysts say the targets outlined by an ambitious social investment plan with which Brazilian President Fernando Henrique Cardoso is seeking to shore up his waning popularity will not be easy to meet.

The announcement of the $575 million, four-year plan came on the heels of the so-called "March of the Hundred Thousand", organised Aug 26 in Brasilia by leftist parties, trade unions and the "landless movement."

The protesters, who numbered between 40,000 and 120,000 according to the source, demanded changes in the government's economic policy, which they labelled "inhuman." The demonstration was originally organised to demand Cardoso's resignation.

Further protests, dubbed "the cry of the excluded," have been announced for Sep 7 - Brazil's independence day - to be held simultaneously in all of the country's 27 states.

The impact of the Aug 26 mass demonstration in the capital was such that even allies of the president have begun to call for policy changes. In the wake of the protest, the local press quoted several government officials who believed the administration needed to reassume the initiative in the terrain of social policies.

Cardoso's approval ratings have hit the lowest levels ever since he first took office in 1994. According to opinion polls, nearly two-thirds of Brazilians are critical of his administration today.

The president described the new government plan, "Avanza Brazil", as "a revolution carried out silently, while the people were shouting in the streets."

He added that the funding for social programmes was made possible by the economic adjustment measures implemented during his two terms, which although harshly criticised by the opposition allowed public finances to be put in order.

The figures announced Tuesday by the president are impressive: 8.5 million new jobs, 4.0% economic growth next year, 4.5% in 2001 and 5.0% in 2002 and 2003.

The plan aims at guaranteeing primary school coverage to all Brazilian children, expanding high school enrolment, eradicating dangerous forms of child labour, handing out plots of land to 287,000 families and increasing access to credit by small farmers.

It also entails incentives for small and medium companies, as well as a gradual reduction of interest rates.

A majority of the $575 million, or 59.4 percent, is to go towards "social development," 21.6% to economic infrastructure and 13.7% to the productive sector. The rest is earmarked for the environment and "information and knowledge."

But the plan will face difficulties in parliament, where its approval depends on amendments over which even the ruling coalition is divided.

The fact that the country's poorest region, the northeast, is to receive 40% less funds for infrastructure according to the plan than the rich southeast "is an injustice that must be corrected," protested parliamentary Deputy Inocencio de Oliveira, leader of the government's main supporter, the Liberal Front Party (PFL).

Governors in the northeast want a larger share of the funds for their states, and protest that projects essential to the development of the impoverished region were left out, such as a plan to modify the course of the San Francisco river and a programme to provide irrigation for fruit farming.

Critics also maintain that the impressive-sounding figures hide the fact that a full two-thirds of the funds assigned to the social area are retirement pensions and benefits rather than investment in social programmes.

The president of the Senate, Antonio Carlos Magalhaes, also a member of the PFL, said the proportion assigned to poverty alleviation programmes was insufficient, and announced that he planned to attempt to modify the government plan.

The opposition, meanwhile, criticised the plan as unrealistic. Deputy Jos Dirceu, president of the leftist Workers Party, the largest opposition force, termed it a "virtual plan".

An unpopular head of government like Cardoso "has no possibility of implementing it, due to his lack of authority," argued Leonel Brizola, the head of the Democratic Labourist Party.

Part of the criticism of the president's plan was based on his failure to complete the previous 1996-99 plan, in terms of both social and infrastructure targets.

In that period, gross domestic product grew just 6.2%, a far cry from the projected 14.1%. Infant mortality stood at 36.7 per thousand live births last year, far from the target of 23 per thousand, while illiteracy, which was to be brought down to 10%, remained at 14.7%.

And generation of electricity, which currently stands at 64,000 megawatts, would have to grow 25% in the second half of this year in order to meet the announced target.
The impact of international economic crises since 1997 partly explained the government's failure to live up to the goals set in Cardoso's first term.

Compliance with the new plan, meanwhile, will depend on the government's success in overcoming the problems it is currently facing, and avoiding a repeat of internal and external financial turbulence, say observers.

Many economists are skeptical of the feasibility of the new plan. Projecting a gradual reduction of interest rates to 13.4% by the year 2000, a requisite for accomplishing four percent growth, is overly optimistic, according to Eduardo Gianetti da Fonseca, with the University of Sao Paulo.

The business sector also expressed doubts. Without the tax and social security reforms which the government is struggling to push through Congress, and without a significant drop in interest rates, the plan's targets will be impossible to meet, according to Roberto Faldini, director of economy of the Federation of Industries of Sao Paulo.

A full one-quarter of the projected investments depend on participation by the private sector.

Another difficulty facing the so-called "development" stage of Cardoso's government will be securing the 12.7% increase in tax revenues projected in next year's budget, announced along with the social plan.

Parliamentary leaders have already indicated they will put up strong resistance not only to any increase in taxes, but also to proposed extensions of several provisional taxes, such as an additional 2.5% tax on high incomes, which was to expire at year's end.