RIO DE JANEIRO — In the past two months, Brazil's latest economic stabilization program has yielded some impressive gains, including a dramatic decline in inflation and a record trade surplus.
Nothing is certain concerning the battered Brazilian economy, which has behaved with manic ups and downs in the past year and a half, but hopes are high for continued improvement.
"I think there is a good chance for this thing to work," a foreign bank's top executive in Brazil said. "The important thing is that the general perception is becoming more optimistic."
If sustained, the economic successes could set the stage for a resumption of the suspended interest payments on Brazil's huge foreign debt. But even if gains make debt payments easier to meet, Brazilian officials are preparing to drive a hard bargain for softer payment terms when negotiations with foreign bankers begin in September.
Brazilian inflation was raging at a record rate of more than 20% a month when President Jose Sarney imposed a freeze on prices June 12. He also announced deep cuts in government spending and a 9.5% currency devaluation.
The freeze did not come soon enough to keep June's inflation from growing 26%, an all-time high that would amount to nearly 1,500% compounded for a year. In July, however, inflation growth officially dropped to 3%. Officials predict that the August figure will be about 4%.
Interest rates have fallen sharply, easing pressure on indebted businesses and lowering a barrier to new investment.
Inflation's drain on the buying power of workers' salaries has subsided, although real wages have yet to recover. One study showed that the average urban salary, in real terms, declined by 31.7% between December and May.
Recovery of the trade surplus had begun even before the stabilization program was put into effect. Stimulated by more favorable exchange rates, exports surged to a record $2.8 billion in July, producing a trade surplus of $1.4 billion, also a monthly record.
The surplus, which had dropped below $200 million a month early this year, appears to be headed for an annual total of more than $9 billion for 1987.
Fairly gloating, Sarney said in a recent radio message: "Inflation is at planned levels, down to 3%; wages are beginning to recover their purchasing power, winning the war against prices, and the whole economy shows signs of recuperation."
Nevertheless, analysts point out numerous potential obstacles to lasting economic stability.
A major contributor to inflation has been the government's deficit spending. The stabilization program set a goal of reducing the government deficit to 3.5% of the gross domestic product--from an estimated 7% or more--but economists and even some government officials now say that the 3.5% goal will not be achieved.
"I have no doubt that excess government spending is the principal threat of failure to the program," Roberto Bornhausen, president of the National Confederation of Financial Institutions, told a reporter.
The government has begun readjusting some frozen prices and plans to begin the delicate task of gradually lifting the freeze on Sept. 12. Business leaders and economists alternately warn that if prices are not increased enough to cover production costs, shortages and even business failures could result--but if price increases snowball, inflation could surge.
In the first half of the year, runaway inflation and high interest rates had eroded consumption and production, raising fears of a recession. Retail sales revived in July, with an 11% increase over June, but some skeptics warn that a recession still looms.
The Federation of Industries of the State of Sao Paulo reported last week that nearly 2% of the state's industrial jobs were lost in July, the biggest drop since a 1981 recession.
"The recession is there, caused by the government's economic policy," said Joaquim dos Santos Andrade, president of the national General Confederation of Workers.
The current economic stabilization program is Brazil's second in little more than a year. At the end of February, 1986, Sarney imposed a freeze on prices and wages, lopped three zeros off the inflated currency and changed its name from the cruzeiro to the cruzado.
Growth in monthly inflation plummeted to less than 2% from more than 16%, and the country enjoyed an eight-month consumption boom. But that program, called the Cruzado Plan, collapsed amid widespread shortages of consumer goods and shrinkages in the foreign trade surplus.
The government thawed prices and wages, and inflation returned early this year with a vengeance.
Meanwhile, deficits in the balance of payments had reduced Brazil's foreign currency reserves to less than $4 billion in early 1987 from more than $7 billion a year earlier.
On Feb. 20, to stop the drain of foreign reserves, Sarney announced the suspension of interest payments on about $70 billion in loans from private foreign banks.
The private bank loans account for the bulk of Brazil's $110-billion foreign debt, larger than that of any other country except the United States.
Brazil has scheduled negotiations for September, in New York, with private bank representatives. Among softer terms Brazil will seek from the banks are a reduction of interest rates to equal the London interbank rate and billions of dollars in fresh financing for overdue interest.
"In these two years we are going to pay something like $12 billion in interest to the private banks for loans of long and medium term, and they are going to finance $7.2 billion for us," Finance Minister Luiz Carlos Bresser Pereira predicted in a newspaper interview this month.
Foreign banks want Brazil to enter into an agreement with the International Monetary Fund, setting firm economic policy guidelines, before they grant any new credit. Brazil, however, insists that the agreement with the private banks must come before any talks with the IMF.