Energy Crisis, Economic Fears Anger Brazilians
RIO DE JANEIRO, Brazil - As the plane made its late-night descent, the man by the window peered out with a look of disappointment.
"Unbelievable. Usually it is blazing with light," said the man, a 40-year resident of Rio returning after an extended business trip. "Now it looks like it's down to just the streetlights."
The famous lights of Rio are burning more dimly these days, thanks to an energy shortage that seems to have crept up on Brazil without much warning. Households must cut their electrical use or face service cuts, and many Brazilians are blaming the government for failing to anticipate the problem. The energy shortage isn't the only thing making Brazilians grumpy these days. The economy, which has shone brightly for much of the last decade, has dimmed, too. Government economists have scaled back growth projections, and the value of Brazilian currency has slid about 20 percent against the dollar since the beginning of the year. The economic plight of neighboring Argentina, an important trading partner, has further raised the anxiety level in Brazil.
These setbacks, along with allegations of high-level political corruption within the ruling coalition, have translated into low marks for the once-popular government of President Fernando Henrique Cardoso. Mr. Cardoso won a first-round election in 1994 and re-election in 1998 after leading Brazil out of the woods with his economic plan in the early 1990's. But now, with new elections just more than a year away, his weakened coalition is in danger of falling apart, analysts say.
"The country is in a real funk right now," said an American living in Brasilia, the capital, who spoke on the condition of anonymity. "Everybody's in a bad mood now. There's not a lot of bouncy optimism."
"People are angry," said Raul Juste Lores, an editor at Veja, the country's largest news magazine. "People are angry at the government. People are angry about the energy crisis."
Brazil draws more than 90 percent of its power from hydroelectric sources, and lack of rainfall is the most direct cause of the current crisis. But David Fleischer, a professor of political science at the University of Brasilia, said the government contributed to the problem by failing to make adequate investment in generation and transmission facilities. And a murky regulatory environment has discouraged the private sector from playing a bigger role in energy production, he said.
Bolivar Lamounier, a political scientist and consultant in Sao Paulo, said the government's handling of the crisis has "cast an image of incompetence and carelessness."
"Everybody in the country is irritated at the disruption in their daily lives," he added, and this has led to a plunge in Mr. Cardoso's popularity and weakened his effectiveness.
Pedro Parente, Mr. Cardoso's chief of staff and head of the government's energy program, acknowledged that the crisis took the upper levels of the government by surprise. But he noted that the past year has been one of the worst on record in terms of rainfall. And he expressed optimism that the government would manage the crisis because Brazilians have had a "very good reaction" to the call to conserve.
Despite its current difficulties, Brazil has emerged as a model of political and economic stability in the last few years, U.S. officials say. After the Latin American debt crisis of the 1980's, Brazilian policies focused on economic stabilization, opening the economy to international trade and investment, and privatizing many state-owned industries. A turning point came in 1994 with the Real Plan, which Mr. Cardoso introduced as finance minister, along with a new currency, the real. Under the plan, inflation was reduced from the nosebleed heights of the early 1990's - when it exceeded 2,000 percent annually - to single-digit rates. Foreign investment poured in, and Brazil's economy posted steady gains. The gains have continued despite a painful currency devaluation in 1999. But the prospect that Argentina could default on its debt payments has clouded the economic picture for Brazil and other countries in the region. There are fears that an Argentine "contagion" could will drag down other developing countries, much as the Asian and Russian financial crises did in 1997 and 1998.
Ilan Goldfajn, director of economic policy for Brazil's Central Bank, said in June that earlier projections of 4.5 percent economic growth for the year have been scaled back to 3 percent, and that foreign direct investment was expected to shrink from $30 billion to about $20 billion. Some independent projections for economic growth have been lower, from 2 percent to 3 percent. Mr. Goldfajn said the economy remained fundamentally sound. "I believe that the economy is less vulnerable and more sustainable than it was," he said. "I think we are heading toward a more sustainable period of growth."
But the atmosphere of uncertainty, along with anger over the energy crisis, have weakened Mr. Cardoso's government and clouded the picture for next year's elections, analysts say.
Just a few months ago, there was a general assumption that Mr. Cardoso would be able designate a candidate who would be in a strong position to succeed him, the president's drop in popularity has thrown the field wide open, said Mr. Lamounier and other analysts.
Currently leading the polls is the perennial candidate of the leftist Worker's Party, Luis Inacio da Silva, known as Lula. The Worker's Party has staked out a more moderate position than it has in the past, pledging to maintain economic stability. But Mr. da Silva has had similar leads in early polls for past elections, only to lose out later in the process.
Health Minister Jose Serra, the potential candidate most closely associated with Mr.Cardoso, ranks well down in the polls.
Although Brazilians may be enduring a season of discontent, they remain confident that the country will continue on an upward trajectory, analysts say.
"There is a tremendous amount of confidence and hope, no matter how difficult things may be," said Mr. Lamounier, the political scientist. "Brazilians are optimistic," said Mr. Lores of Veja magazine. "We believe we are the country of the future."