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Stable Economy All but Clinches Brazil's Election


RIO DE JANEIRO — It was an aside during an explanation of monetary policy, on the eve of Brazil's most recent attempt to halt the spiraling inflation that has plagued this country for more than a decade. But as economist Helio Portocarrero reflected three months ago on the anguish and turmoil that he and other Brazilians had endured under 2,500% annual inflation, he unknowingly summed up the almost certain outcome of this week's presidential election.

"I'll tell you what," he said, "anybody who can make it so that when people go to the grocery store, the prices are the same that month as they were the month before, he could be anything in this country he wanted to be."

Fernando Henrique Cardoso, 63, is the man credited with making that happen. As a result, pollsters and analysts say that barring a miracle, Cardoso will be elected the next president of Brazil.

"Cardoso will win," said Carlos Augusto Montenegro, president of IBOPE, a polling organization. "The only question now is whether he wins on Oct. 3 or Nov. 15."

If no candidate wins more than 50% of the presidential vote Monday, the top two contenders will face off in November.

The key to Cardoso's success is an economic plan he devised earlier this year while serving for six months as finance minister. The plan both curbed government spending and overhauled Brazil's currency.

First, the government balanced the budget through tougher measures against tax evasion and a special constitutional amendment that allowed it more discretion in spending. Then it launched a new currency, the real, to replace the old cruzeiro. One real was made the equivalent of one dollar.

Since the plan went into effect in July, inflation has dropped from 50% a month in June to less than 1% in August. And as inflation and prices dropped, Cardoso, who resigned his post to run for president, shot up in the polls, leaping from 15 points behind to 20 points ahead of socialist candidate Luis Inacio (Lula) da Silva in two months.

Cardoso's emergence reflects a dramatic turnaround in the mood of this vast country. Just six months ago, the nation's electorate was poised for a major overhaul of the federal government. The current president, Itamar Franco, was being vilified daily in the press and among the populace as incompetent or at best inconsequential.

Years of political corruption--including a presidential impeachment two years ago and a congressional budget scandal last year, involving scores of legislators and hundreds of millions of dollars in kickbacks and outright thievery--had turned a vast number of frustrated voters toward Lula, a former union leader and grade school dropout. Defeated in a presidential runoff five years ago by the later-impeached Fernando Collor de Mello, Lula promised radical reform; Lula's Workers' Party boasts about its nearly unblemished record of honesty.

Lula was so far ahead in the polls that, as late as July, analysts were debating whether he could capture the presidency in the first round.

But since the introduction of a new currency under the Cardoso-designed economic plan, Brazil has discovered a nearly forgotten sense of economic and political stability; a quiet optimism has crept across the nation. Franco, for instance, suddenly enjoys an 82% approval rating.

"You can feel that sense of optimism all around," said David Fleischer, an analyst and political science instructor at the University of Brasilia for 22 years. "The main factor is the currency and falling prices. Right now, you have a general tone of confidence in the discourse of Cardoso and his group--and that's changed the electoral tone. People have decided not to 'throw the rascals out,' because maybe the rascals aren't rascals because they stabilized the economy."

The economy has taken a decided turn for the better. Exports are up, having posted a record $4.2 billion last month. Imports are up, which means prices should remain stable or continue to fall. For the first time in years, consumers can buy stoves and refrigerators on credit and do something as simple as budget their earnings.

Foreign investment is pouring into the country. Net foreign investment has jumped 50% since July. In August, it was a record $1.5 billion. "And it could go as high as $3 billion a month if Cardoso is elected," predicted Julius Buchenrode, director of investment management for Chase Manhattan Bank in Brazil.

Many financial analysts speculate that Brazil may be returning to the high growth and low inflation that made it the "miracle economy" of the 1970s.

The successes generated by the plan and widespread approval have allowed Cardoso--author, scholar, former senator and briefly a political exile during the country's 21-year military dictatorship--to easily ride out political missteps that might otherwise have severely damaged his hopes.

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