Brazil - Future trends

The continued success of economic measures adopted by Fernando Henrique Cardoso upon his re-election in 1998 depends upon the ability of the government to maintain a tight monetary policy and maintain fiscal restraint facing both national and international economic pressures. In the long run, the government needs to implement structural reforms, such as reforms of the tax and social security systems, decentralization of governmental spending to state and municipal governments, and privatization of major enterprises. Most of these measures require additional constitutional amendments or legislation.

The presidential election on October 2002 will have a strong influence on the political, fiscal, and economic programs adopted by President Cardoso. The triumph of the leftist parties shown in the 2000 municipal elections suggest that there is a disapproval of the harsh measures taken by Cardoso to restore stability. Since there is no popular candidate from the governing coalition for the 2002 presidential elections, there might be difficulties passing unpopular laws if the opposition comes into power. Contentious legislation such as tax reform and social security payments from retired civil servants may not be considered until after Cardoso's presidency ends. The passage of such laws would greatly improve the quality of the fiscal situation.

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