This supplement continues the story where the book left off, at the beginning of Cardoso's second term in office.  It will be updated periodically.  Last revision:  Sept 18, 2001.  A revised and updated version will be published by the end of April, 2002.

As 1999 began, Cardoso had been re-elected to a second year term as President of Brazil.  His premier accomplishment as President, and as Finance Minister before that, had been taming the hyperinflation that had plagued Brazil for decades.  As a sociologist with a Marxist background, he was committed to fundamental political and social reforms.  However, the policies he had used to end inflation seemed to be collapsing, and Brazil had been forced to allow the real, Brazil's currency, to float.  Many commentators predicted a return to hyperinflation and a general socio-economic collapse.  Cardoso, on the other hand, was convinced that his policies were fundamentally sound and that fiscal stability, economic growth and social progress could be sustained with a floating currency.   For the background to this supplement, read the book.

On February 2, 1999, Cardoso stunned the financial world by appointing a new head of the Central Bank, only three weeks after Gustavo Franco was replaced.  He appointed Arminio Fraga, a Brazilian economist whose most recent job had been as an advisor to billionaire currency speculator George Soros in New York.  Fraga had worked as a director of the Central Bank in the past, and was certainly well qualified, but the left naturally viewed this appointment as a sellout to international speculators.  It was generally reassuring to businessmen and investors, however, and the public seemed to accept the idea that, since the country was so vulnerable to international markets, it was good to hire someone who knew them inside out.  It was a signal that Cardoso fully intended to continue with the policy of integrating Brazil into the global economy.

During the reelection campaign, critics had urged that the currency be devalued and modest inflation permitted to keep the real at realistic levels.  With hindsight, it seemed that they were right.  It was simply not possible to maintain an overvalued real indefinitely, and it would have been better to have devalued slowly at a time of Brazil's choosing instead of having been forced into it by world markets.  But Cardoso and his advisors had been afraid that devaluation would spark a return to the inflationary cycle.  Once the inflationary process was seen to be starting again, they feared that everyone would jump on the bandwagon.  Manufacturers and stores would raise prices, workers would demand pay raises, and inflation would once again cycle out of control.

Now events forced them to undertake exactly the policies they had so adamantly resisted.  Fortunately, their fears turned out to be exaggerated because the psychology of the country had changed.  After living for five years without inflation, people inside and outside of government were determined not to let it get out of hand again.  Economic growth had slowed to a standstill, and people feared that devaluation would lead to a major recession.  It simply was not the time to raise prices or to demand large wage increases.  The government made it clear that indexing would not return, although they had to concede some increases for government employees, based on previous wage agreements.  Most people seemed to feel that as long as inflation was in single digits, under 10% a year, it was reasonable.  That, after all, is the norm in the developed nations.  So the Cardoso administration resolved to keep it within those limits..

Politically, Cardoso's major problem was the standoff with Itamar Franco, governor of Minas Gerais, who had declared himself in open fiscal rebellion against the federal government. Governors have considerable autonomy in the Brazilian system, and the last thing Cardoso needed was a long, mutually defeating battle with the governors. The key to this issue was the other governors.  Would they rally behind Itamar's banner, or would they support Cardoso?  Cardoso's ratings in the opinion polls was very low, because people naturally resented the devaluation which came just after he had won reelection on a platform of defending the real.  Itamar clearly hoped the other governors would see him as vulnerable and force him to go back to the older system where the federal government picked up the states' debts and made up the difference by inflating the currency.  If Cardoso had done so, his entire economic reform would have proved a failure.

Cardoso believed that Itamar Franco was motivated primarily by a feeling that he should have been elected President in 1998 instead of Fernando Henrique. In an interview in his office in the Palace of the High Plains, he pointed to his red leather chair and said, "Itamar wants to sit here."(1⁾ But, Cardoso said, "he is acting on a false assumption, because I still have four years in my mandate. Unless Itamar wants a coup d'état, which is also out of the question, because for this one must have votes, powder and the people." Cardoso believed that he could use the powers of the Presidency to control Itamar's rebelliousness.  The main thing was not to elevate Itamar's prestige with the public in the process, allowing Itamar to present himself as the defender of the national interest against the forces of globalization.

Politically, the key point here was to manage the relationship with the other governors. Itamar was demanding a meeting in which the governors would renegotiate the relationship between the states and the federal government.  As the newspapers observed, however, Cardoso was always available to meet with governors.  And Cardoso was open to renegotiating federal/state relationships. What Itamar wanted, and Cardoso needed to avoid, was a big dramatic meeting with a polarization between him and the governors. He said that no big meeting was necessary until an agenda had been worked out.  Instead, he met with the various governors individually and in small groups, talking about practical arrangements for dealing with the each state's fiscal problems. The governors were eager to use the opportunity to work out their fiscal problems, and they knew that they could not do so without the federal government. Simply defaulting on their obligations, as Itamar kept threatening to do, was not a solution since they were so dependent on continued federal funding.

Fortunately, although Cardoso's popularity with the general public was low, the large centrist majority of Brazil's political elite still respected him and, most important, believed that it was critical for Brazil that his economic policies succeed.  As long as he was willing to meet the governors half way, they were willing to work with him.  The press reported on a series of productive meetings with governors, each of whom reported that he had won important concessions for his state. Brazil's political establishment simply did not believe that the country needed a power struggle between Itamar Franco and Fernando Henrique Cardoso, nor did they believe that Itamar would be likely to win such a confrontation. The integrity of the democratic process was important, and Cardoso had just won a fair election, which gave him the legitimacy to govern. The economic crisis and forced devaluation of the real had highlighted the country's economic vulnerability, and most leaders wanted to give Cardoso's team a chance to put things back together.  Franco became more and more isolated from the other governors. Cardoso avoided any personal attacks on Itamar, stating that "I owe a great deal to Itamar, but he also owes something to me. There is a reciprocity."(2⁾ When he finally called a meeting of all the governors, he urged Itamar to attend, but Itamar chose to attend a student protest rally instead. Cardoso refused to overreact to protest demonstrations, saying "protests are part of democracy, I am accustomed to this... This is normal. As I struggled much against the authoritarian regime, I can only say, 'this is good'." ⁽³⁾

The other fact that helped Cardoso enormously was strength of the Brazilian economy, which proved "surprisingly resilient," in the words of a New York Times reporter.(4⁾ The International Monetary Fund and other international agencies were eager for Brazil to succeed, and renegotiated their agreements to adapt to the new foreign exchange policies. Economic indicators were better than predicted. After a 3% decline in gross domestic product in the first quarter of 1999, in the aftermath of devaluation, the economy recovered and ended the year with a very slight but positive increase in GDP.  Brazilian businesses have had long experience with economic crises, and have developed ways of dealing with them.  Bankruptcies were much lower than many observers had predicted.  Emilio Alfieri, an economist for the São Paulo Commercial association said that, "unlike the Southeast Asians, we're used to repeated, traumatic recessions and high interest rates. Surviving these crises has resulted in Darwinian selection."(6⁾

By the time of the Carnival and Easter holidays, the sense of crisis had abated. The economy was reviving, Itamar Franco was increasingly isolated, and Congress had passed many of the key reforms Cardoso had been urging for years.  Cardoso's personal popularity remained low, and intellectuals and state employees continued to be resentful, but Cardoso could live with their unhappiness because he did not have to face another election.  By mid April, 1999, he felt confident enough to leave the country for the first trip abroad since his re-election - a trip to Germany, Britain and Portugal.

The decline in Cardoso's personal prestige meant that he was more dependent on political allies, including particularly Antonio Carlos Maghalhães in the Senate.  This was not entirely bad, since lasting reform must depend on a broad political consensus, not on a single leader.  And these leaders were fundamentally in agreement on the direction Brazil needed to follow.  But they sometimes did not share Cardoso's sense of urgency about structural reform.  When the sense of crisis abated, the political system tended to slip into politics as normal. In the opinion of The Economist, "a return to normality means headaches, not relief.  Rather than push ahead with Mr. Cardoso's agenda of structural reforms - of taxes and the political system, as well as further measures to reorganize pensions and the public administration - his allies in Congress are turning their attention to more congenial tasks, such as squabbling for position and investigating alleged malpractice in other branches of government."(7⁾

The left, meanwhile, squandered its energies on denunciations of Cardoso.  On April 21, Leonel Brizola and Barbosa Lima Sobrinho, the head of the Brazilian Press Association, spoke at a rally in Rio de Janeiro. Brizola spent much of his time explaining, in a didactic tone, the Constitutional provisions which apply to the resignation of a President and Vice-President. He and his supporters hoped that mass demonstrations would force Cardoso and his Vice President to resign, leading to new elections. The demonstration, however, drew only a few thousand participants. Most were from Brizola's Democratic Labor Party, with little turnout from Workers' Party members despite the presence of Workers' Party functionaries on the podium.

In Ouro Preto, a touristy historical town in Minas Gerais, Itamar Franco organized a larger demonstration with participants coming from all over the nation. As many as 30,000 people were expected to participate, marching behind a huge cloth figure with the body of nineteenth century Brazilian traitor Joaquim Silvério dos Reis and the head of Fernando Henrique Cardoso.  Cardoso, however, was not upset about these rhetorical gestures.  He said, "there is no sense in repeating these gestures over and over.  I am not concerned about this, I am concerned about Brazil." He said he was going to Europe with the message that "Brazil is succeeding (está dando certo). This is what the people want from a government. They do not want a government that puts on shows, they want a government that does its work."(8⁾

Cardoso was able to do this because the economic collapse many Brazilians expected after the devaluation simply never happened. A story in the New York Times on April 23, 1999, was titled "Brazil's Once-Jittery Economy Is Getting Under Self-Control".  It reported that the Brazilian economy was bouncing back, with the stock market having risen 50% since the lowest point of the crisis in January. Foreign confidence had increased, allowing Brazil to return to the capital markets, selling $2 billion worth of five-year notes.  Privatization had also resumed, with a local gas company selling for $1 million more than anticipated.  Cardoso said, "I suppose we are entering the end of the hurricane, my feeling is that we are overcoming it."  Foreign economists agreed and the country was well on its way to compliance with the terms of its $41.5 billion dollar agreement with the I.M.F. The real had recovered its value more quickly than anticipated. Cardoso dismissed the protests led by Itamar Franco as "without consequence," and his advisors said that he was more concerned with leaving a sound economy for his successor than with enacting populist measures to help his short-term popularity.

Cardoso's ability to push for his reforms during his second term was threatened by several factors. First, the devaluation had weakened the "mystique" of his Presidency. He was the man who had conquered inflation and brought monetary stability to Brazil, and he had been forced to abandon his exchange policy. Second, although the economy was stabilizing, unemployment was high and people's standards of living were not growing as they had in his first term.  Before the 1998 election, he had told the country that economic conditions would be hard after the election, and that belt tightening would be needed.  But most people did not take this warning very seriously, and seemed to expect that the country would continue to enjoy the cheap imports that an overvalued currency had provided.  And, third, there were a number of scandals which undermined the prestige of his administration and caused him to lose some of his key advisors.

The details of these scandals are not particularly important. Generally, they involved accusations of favoritism or insider contacts between government agencies and private companies. One involved alleged contacts between a failing bank seeking aid and employees of the Central Bank. Another involved the accusation that members of the administration helped one company prepare for the auction of the nationalized telephone companies.  The employees involved said they were merely trying to make sure that there was a healthy competition with a lot of bids.  These scandals did not result in anyone being convicted of any crimes, but they occupied a tremendous amount of energy, particularly on the part of Congress. Congressional Inquiry committees were formed, hearings were conducted, and much time was taken up in debating and posturing.  By late April, 1999, there were three Congressional Inquiries going on at once, consuming so much time that Cardoso and others were worried that the country was becoming ungovernable.  Congressmen often find it easier to moralistically point the finger at others than to face up to issues such as tax and fiscal reform, political reform, the new fiscal responsibility law requiring states and municipalities to be responsible for balancing their own budgets, the "Green Tax" on gasoline and diesel fuel, administrative and social security reforms, a more efficient, cost-saving Ministry of Defense, and negotiations on the budget for the following year.  Each of these issues runs the risk of alienating constituents whose interests are threatened, while berating officials accused of wrongdoing is cost free.

Despite these distractions, Cardoso made slow and steady progress on many of his reform measures. On June 9, 1999, the Senate passed the final version of the law which defined the criteria for sacking public servants with job stability. Under the law, this could be done when a government's payroll had become too large a proportion of its revenue: over 60% in the case of state and municipal governments and 50% for the federal government itself.  Employees without job security were to be fired first, then those with less service, then those with the largest salaries, and then those who were younger. If all criteria are equal, the employee with the fewest dependents would be let go.

There were also highly publicized political fights between Cardoso and Senator Antonio Carlos Magalhães, particularly around the issue of tax incentives to be given to Magalhães state of Bahía to subsidize a new Ford Motor Plant. This idea was opposed by another Cardoso ally, Governor Mario Covas of São Paulo, whose state has been the traditional center of Brazil's auto industry. Automobile production and other industries have been moving to other states where costs are lower, including Minas Gerais, and he unemployment is particularly high in São Paulo. Cardoso vetoed most of the provisions of the Bahía deal, which particularly upset Magalhães.

These disputes were not so important for their substance, but because they gave the impression that Cardoso was losing control of his coalition and his administration. Cardoso felt he had to clamp down. On June 21, 1999, he took the occasion of a speech to the Superior War College to announce that he would have a policy of zero tolerance for members of the administration who dissented publicly from the government policy line. The next day he acted on this policy by firing the Directorate of the Bank of São Paulo, which had been nationalized by the government. They had gone to court and gotten a ruling exempting their employees from tax measures which the Cardoso administration had imposed. Although Cardoso's temperament favors working differences out in negotiations, he felt that this swift action was necessary to counter the impression that he was too weak to control his own government.  He could simply not tolerate officials in his own administration filing legal cases against his own policies.

On July 16, 1999, Cardoso announced a comprehensive reorganization of his Cabinet, along with a number of important changes in the staff in his Presidential Office. This new reorganization showed that Cardoso was moving strongly to regain control of his administration and the agenda of the country. His primary concern at this point was not his electoral popularity, but his legacy. He wanted to continue with the reform process so as to leave the country in sound fiscal and organizational shape for his successor.

As a response to continuing pressures and polemics from the sem terra movement, Cardoso's brilliant young Minister of Agrarian Reform, Raul Jungmann, developed a program which required farmers to borrow money to purchase land. They have several years grace to begin making payments, but the responsibilities of ownership were placed clearly on the individual farmer. This capitalistic land reform conflicted sharply with the priorities of the Sem Terra movement, which is ideologically opposed to private ownership.  Cardoso's policy could be seen as attempting to shore up a family farm system which is behind the times in an era of large scale corporate agriculture.  But Jungmann explained that Brazil has a large agrarian population which cannot be absorbed in the cities.  In the past, there were unskilled industrial jobs in the cities, but with the modernization of industry, industry requires workers with more education.  Since there is little alternative for this agrarian population, the best solution is to subsidize them as farmers in the most efficient way possible.  In the long run, better education and health care are needed to help this population compete better in a modern economy.  The Sem Terra movement continued with a tactic of massive protests and land occupations, including an attempt at occupying Cardoso's own family farm in Minas Gerais.  Their radical tactics, however, cost them support from the majority of the public, which wants to help poor farmers but also values the rule of law.  Even the Workers Party tended to pull away from the sem terra movement out of a concern that its militancy would cost them votes.

In 1999, Cardoso suffered several organized assaults on his prestige and ability to govern. The first was a national trucker's strike, which caught his administration off guard due to a lack of adequate intelligence.  This contrasted with his masterful anticipation and handling of a petroleum workers' strike early in his administration.  Most merchandise in Brazil moves by truck, so the truckers are in a strong strategic position.  Truckers' strikes were central to bringing down the Salvador Allende administration in Chile in 1973, when truckers opposed his leftist administration.  Brazil's truckers are not ideologically motivated, but simply angry about increases in fuel costs and tolls on roads, without a compensating increase in fees. Truckers used their vehicles to block key roads, strangling commerce. Military Police in São Paulo were called out to unblock key roads. Cardoso threatened to call out federal troops to open other roads, but eventually worked out a settlement. This had the advantage of cooling tensions with the truckers, but set a dangerous precedent for other groups that also wanted concessions from the government.

A second assault on Cardoso's prestige came from Antonio Carlos Magalhães, the Liberal Party leader from Bahía who has been one of his key allies. Magalhães proposed a "War on Poverty" which would give control over large amounts of money to a Council consisting of the four vice presidents of the Republic, the Senate, the Chamber and the federal accounting court, along with a representative from the National Council of Catholic Bishops. As it happens, three of the four vice presidents were from Magalhães party. Magalhães proposal seized the political initiative from the left which has not managed to put together any comparable vision of its alternative policies.

Magahlães' initiative highlighted the fluidity of party and ideological lines in Brazil. Magahlães was allied with military governments in the past, and many on the left attacked Cardoso bitterly for making an alliance with him.  He is one of the "neoliberals" the leftists are always denouncing.  Yet, his proposal was exactly the kind of thing the left always proposes, more spending on the poor, on social programs, and so on.  And it suffered from the same critical problem: a failure to specify where the money would come from other than simply inflating the currency and placing an increased burden on the poor. The large majority of Brazil's current social spending actually goes to the upper income groups, which qualify for high social security pensions and other benefits.

Further assaults on Cardoso's presidency came from marches on Brasília by groups demanding increased benefits. The first was from farmers (landowners), demanding debt forgiveness. They mobilized 15,000 people and 2,000 farm implements for their demonstration. The second was from a coalition of leftist groups which announced a "March of 100,000" against the FHC administration. They did not actually achieve the magic "100,000" number, according to the most reliable reports. This number is used because is recalls marches against the military dictatorship in the 1970s. The Landless Farmers' movement was part of this demonstration, but they were "lost in the crowd" as myriad other groups demanded benefits from the government

All of these groups had two things in common: a demand for more money from the government and anger at Cardoso for not giving it to them. As President, however, Cardoso, was responsible for maintaining financial stability and keeping spending under control. His inclination was to give partial concessions to the pressure groups, whose demands were usually based on real needs, but making concessions often just encouraged more militant demands. He sometimes appeared to be "muddling through", seeking a middle road between hard-liners on the left who wanted massive spending increases and hard-liners on the right who wanted him to stand firm against all demands. This satisfies no one, and does not help his popularity, but it maintains the integrity of the democratic system.

In the beginning of September, 1999, Cardoso attempted a second "beginning" for his second term with a 55 minute speech to a gathering of 3,000 of Brazil's leaders, including Cabinet ministers, congressional leaders, and 12 of the 20 state governors. He made an impassioned presentation of a new "four-year, Pluri-Annual Plan" designed to highlight development objectives for the country. This appeared to be a reaction to the August 27 "March on Brasília," although the government insisted it had been in the works for years. The slogan was "Advance Brazil," which was also Cardoso's 1998 campaign slogan. Cardoso's first term had focused on stability, privatization and reforms; his second would focus on development and growth.

In Brazil, a priority on "development" usually means increases in government spending, and Finance Minister Pedro Malan made it clear that development spending would have to be kept within fiscal limits required to keep inflation and debt under control.  This was apparently not the understanding of Clóvis Carvalho, Cardoso's close personal friend and former chief of staff.  Clóvis Carvalho had just taken over the post of Development Minister, and he thought that new development initiatives were more urgent than maintaining fiscal stability. On Saturday, September 4, 1999 Malan and Carvalho appeared together on a panel on "Development with Stability" organized by the Teotonio Vilela Institute, a think-tank maintained by Cardoso's political party. Malan emphasized stability, insisting that this was the necessary platform for sustained economic growth in 2000.  Carvalho disagreed vehemently, arguing that the government should take greater financial risks to stimulate development.  The audience was stunned at this open defiance of Cardoso's policies by one of his own ministers.  Minister Malan refrained from responding, but it was obvious from his face that he was furious.  The entire interchange was taped by television reporters, so there was no way to cover it up.

Carvalho had thrown down a gauntlet - Cardoso had to choose between him and Malan.  Choosing Carvalho would have meant abandoning the economic strategy Cardoso had followed since he was Finance Minister in favor of a "developmentalist" freer spending regime.  It also would have meant a tremendous loss of face for Cardoso as a leader, since it would appear that he was forced to change by a subordinate.  His only real choice was to let Carvalho go, so he did, despite the fact that Carvalho had been a close friend from the days at the University of São Paulo before the coup d'état of 1964.

This split between "developmentalism" and "growth with stability" was been a major focal point of the conflict between Cardoso and his opponents throughout the second term.  On October 26, 1999, Finance Minister Malan met with the monthly meeting of the National Council of Bishops.  Malan gave a strong speech, focusing on eliminating poverty and hunger and using World Bank statistics to argue that the situation in other parts of Latin America, Africa and Asia was much worse than in Brazil.  He insisted that any "war on poverty" would take several years and would depend on fiscal stability and sustained economic growth.  The Bishops were not persuaded.  The head of the Council, Dom Jayme Chemello, reminded Malan that he had studied in Catholic schools where he had recited the Lord's Prayer, and he should remember the phrase "give us each day our daily bread."  Malan struck back, arguing that the Church's opposition to family planning and sex education was leading to unwanted teen pregnancies which contributed to poverty.  He reminded the Bishops that Brazil's poor had voted strongly for Cardoso in 1994 and 1998, believing more in his ability to improve their lot than in the ability of leftist politicians the Bishops supported.

In an additional discreet challenge to the National Council of Bishops, Culture Minister Francisco Weffort made a well
publicized visit to the Ilê Axé Opo Afonjá temple in Bahia, where he presented the "Medal of the Order of Cultural Merit" to Candomblé leader Mãe Stella de Oxossí.  The Brazilian Church has been waging a campaign to maintain the purity of Catholic religious doctrine, attempting to stem the the Brazilian historical tradition of syncretism between Catholicism and African religions.  By recognizing Candomblé, the tradition which merges African and Catholic practices, as an important part of Brazil's cultural heritage, Weffort and Cardoso were appealing directly to segments of the population the Bishops claimed to represent.

Sociologically, Cardoso believed that many important groups in Brazilian society were poorly represented by established Brazilian pressure groups.  In an interview with Jorge Bastos Moreno of O Globo published on August 8, 1999, Cardoso expressed the view that a "New Society" was emerging in Brazil as a consequence of the modernization of the economy.  In this New Society, certain groups were losing status and prestige.  Others were increasing their social position, although they had not yet mobilized to express formal political power.  The declining classes included the organized industrial working class, especially in the industrial centers of the ABC region of the state of São Paulo and the "bureaucratic Middle Class" which was dependent on jobs in the state bureaucracy.  These state employees, in his view, frequently defended positions which they thought of as in the interest of the nation, but which really just expressed their own privileged position in the old Brazil.  The emerging new middle classes, on the other hand, were frequently employed in the informal sector and lacked state protections and privileges.

Much of Cardoso's life was taken up with battles with the priviliged state employees.  One of these groups is the Judges, who are often paid very high salaries, up to R$12.270,00 a month.  These judges also have the power to declare many of Cardoso's reforms unconstitutional, especially those which cut into their own salaries or pensions.  On September 30, 1999, the Supreme Federal Tribunal invalidated the government's increase in social security taxes for federal workers.  This increase, from 11% to 25%, had been passed by the lame duck Congress in January, 1999, when Brazil was under severe financial pressure due to the devaluation.  Congress also imposed for the first time a tax on retired federal employees, of up to 25% of their benefits.  These taxes were imposed on a priviliged group;  retirees on limited pensions were exempted.  This reversal of a much needed reform placed a heavy financial burden on the government, making it even less able to afford the kinds of social spending the advocates of "development" demanded.  These advocates, however, were seldom, if ever, heard opposing special privileges for the bureaucratic elite.  Many of them, in fact, are beneficiaries of federal pensions.

Another group Cardoso had to confront on some issues was the military.  For the first time in Brazilian history, Cardoso removed the top generals in the Army, Navy and Air Force from his Cabinet, making them subordinate to a Civilian Minister of Defense.  Establishing a Ministry of Defense was difficult, since Brazil has no tradition of civilian control of the military, and there are few civilians with the professional expertise required to administer a defense establishment.  The Brazilian military has long adhered to a statist economic model, believing that key "strategic" industries must be maintained by the state.  The Air Force managed the nation's airports and insisted on national control of the Embraer aircraft company which produced military aircraft.  At the end of 1999, the Cardoso administration privatized the airports and sold shares in Embraer to a French corporation.  The Air Force was outraged by these actions, and openly snubbed the new Minister of Defense, Élcio Alvares - a former Senator and Governor of the PFL party, with little military background.  Cardoso had to relieve the Commandant of the Air Force, Brig. Walter Werner Bräuer of his command.  At a retirement dinner for Bräuer, a Congressman who had formerly served in the Air Force publicly said that Cardoso should be shot for his actions.  Cardoso reacted coolly and appropriately, suggesting that it was up to the Congress to censure its member for violations of decorum.  The confrontation with the Air Force ended up strengthening Cardoso's image by making him look strong and decisive.

Throughout the term, Cardoso remained strongly committed to maintaining fiscal stability, despite pressures from "developmentalist" advocates at home and abroad.  This  commitment was not due to pressure from the World Bank or International Monetary Fund.  Indeed, these international institutions have moved in the developmentalist direction, advocating a new "social agenda."  At an IMF meeting on September 16, 1999, the "social agenda" was brought up by the United States and by Germany, but Brazil turned a cold shoulder to it saying, in effect, "we already have our social programs."  Pressure to move in the "developmentalist" direction also came from some social democratic leaders in Europe.  Cardoso'  Social Democratic Party, for example, was turned down for membership in the Socialist International on October 28, 1999.  Socialist International President Pierre Mauroy (a former French Prime Minister) explained that the International was more sympathetic to the Worker's Party and the Democratic Labor Party, and opposed the Social Democratic Party's alliance with the Liberals.   Britain's Prime Minister Tony Benn had been the primary advocate of admitting the Social Democratic Party. Cardoso insisted that the Party had not requested admission and had no desire to be admitted.

By the end of 2000, Cardoso's stress on fiscal responsibility was paying off.  Economic growth had been under 1% in both 1998 and 1999, but it was 3.89% in the first three quarters of 2000, and the final figure for that year was expected to top 4%.  Growth was particularly strong in the industrial sector, and economic forecasters were forecasting sustained growth in the future.  Economist Edmar Bacha, one of the "fathers" of the real and Cruzado plans, predicted that Brazil could achieve several years of 8% GDP growth if Cardoso was successful in completing three key reforms that would further reduce business transaction costs:  tax/fiscal reform, labor law reform and social security reform.  Lincoln Gordon, the American Ambassador to Brazil from 1961-1965, was reported to be about to release a new book tentatively titled "Brazil's Second Chance."  Gordon believed that Brazil had its "first chance" to become an affluent, developed country during the the Kubitschek Presidency, from 1955 to 1961.  This period of national growth was aborted by the resignation of
President Jânio Quadros in Aug, 1961 and by the military golpe in 1964.  Now, Gordon believes, under Cardoso Brazil has achieved the political stability and sound economic policies necessary to maintain sustained economic growth.  If these policies remain in place, Brazil should enter the club of developed nations by about the year 2020.

Cardoso's success in the eyes of observers such as Edmar Bacha and Lincoln Gordon contrasts with his remarkable unpopularity with Brazil's general public.  In this, he shared the fate of other world leaders who found themselves unable to live up to unrealistic expectations.  In an interview with the New York Times on November 4, 1999, for example, Czechlosvakia's Vaclav Havel suggested that disappointment with him came from people who had unrealistically idealized him in the past.  He said, "Without striving for it, I became a character in a story, in a fairy tale,"  Ten years later, he observed, ""they are beginning to wake up from this dream, and instead of being angry with themselves for falling asleep, they are angry with the character from their dream....It's not my fault that I became a character in someone's dream...neither is it my fault that the person woke up."  On January 1, 2000, Russian President Boris Yeltsin surprised the world with a retirement speech, apologizing to the nation for failing to meet its expectations.  Brazilians thought that Fernando Henrique Cardoso should do the same, but by comparison to Russia or the Czech Republic, Brazil was doing remarkably well.

As the nation entered the new millennium, Cardoso believed that the Brazil needed a new industrial policy to replace the old statist one he was still dismantling.  This policy would stress technology, including agribusiness, biotechnology and the internet.  He was excited that Brazil was participating in the Internet2 project, an effort by American and other universities to develop a new level of high bandwidth internet technology.  Social improvements were necessary, but little would be possible without economic growth.  He continued to be optimistic that real progress was being made.

The government planned major celebrations to commemorate the 500th anniversary of the founding of Brazil, but these turned out to be problematic because groups that felt themselves "excluded" from Brazil's success used them as a focus point for protests.  There were massive demonstrations in Bahia on April 28, 2000, and the police were harsh with marchers, many of whom were Indians.  The director of the government agency responsible for Indian affairs, Carlos Frederico Marés, resigned in protest.  A scandal erupted when it was revealed that $14.1 million reais were channeled to an organization funding a Brazil 500 celebration at an international fair in Hanover, Germany, in March 2000.  The group organizing Brazil's pavilion at the fair was controlled by Cardoso's son, Paulo Henrique.  Paulo Henrique insisted that he did not receive even one cent personally of this money, but they money was apparently advanced prior to its official authorization.   The press was critical of the money spent on the celebration, arguing that the pavilion was not worth the cost and that the bidding was unfair.  The United States had passed on the opportunity to have a pavilion at the Expo 2000 in Hannover.

Although Cardoso's first priority throughout his Presidency has been on economic reform, this does not mean that social policies were being neglected.   On April 11, 2000, the Inter-American Development Bank in  Washington sponsored a seninar on "Brazil 500 Years: Social Progress and Human Development."  Most of the speakers were officials of the Cardoso administration, and the presentations were generally excellent with solid data and insightful interpretations.  It was clear that a serious effort was being made to lessen the severe poverty and high rates of inequality that have been a persistent feature of Brazilian society for many decades (as long as statistics have been available).  These persistent problems are due largely to weaknesses in primary education and public health, not to short-term policies such as those often denounced as "neoliberalism."  Solving these problems involves taking resources from programs that primarily benefit middle class civil servants and pensioners, and spending them on public education and health.  Unproductive state enterprises must be privatised and corrupt officials must be prosecuted.  These actions are often unpopular, because they threaten the interests of many organized groups.  Inflation must be kept under control, debts must be paid, and the fiscal system must be kept in order.  This means that populist measures, such as increases in the minimum wage, cannot always be allowed in response to public demand.

In its issue of July 29, 2000, The Economist published an article which neatly summarized the paradox of Cardoso's Brazil in the year 2000.  It contrasted Cardoso's "Good Economics" with his "Bad Politics," with economics measured by growth in the gross domestic product and politics measured by popularity in opinion polls.  This contrasted with the situation of Venezuela's president Hugo Chavez:  Venezuela's economy is declining rapidly, but Chavez's popularity is immense.   Of course, Chavez had been recently elected, so he is benefiting from a "honeymoon" period which Cardoso also enjoyed when he was a new president.  Cardoso's popularity was high until the economic crisis of late 1998.  But the economy has recovered and his popularity has lagged.  Why?

Critics from the left would argue that his "neoliberal" economic policies are to blame.  But the surprising fact is that Chavez, also, is by any objective economic standards a "neoliberal."  A new biography of Chavez, by leftist journalist Richard Gott, points out that Chavez's attacks on "neoliberalism" are purely rhetorical.  He reports that "in spite of all his rhetoric against neo-liberalism, Chavez is desperate for foreign investment.  He has to steer a difficult and almost impossible course, telling his nationalist country what it wants to hear, and making the right kind of reassuring noises that will not frighten the foreign investor.  In this, of course, he has the warm support of Fidel Castro...Castro told Chavez that `his principal preoccupation was to secure the last US dollar for Cuba, because the only revolutionary way to secure development today is to open up the entire country to foreign investors." Although the country was delighted to get rid of the "neo-liberal fundamentalists" of the previous administration, Chavez was continuing most of their policies.¹¹  Of course, it remains to be seen how long Chavez will succeed in maintaining this balancing act.  Perhaps his charisma and communication skills will be strong enough to persuade the population to accept the need for a realistic economic policy involving necessary sacrifices.  If so, it will be a remarkable accomplishment.

The December, 2000, issue of the InfoBrazil Internet Newsletter published an interview in which Cardoso expressed his view of his administration's accomplishments.  As a sociologist with a long term perspective, he was encouraged.  He stated that:  "A few years from now, we will look back to the turn of the century and recognize it as a period in which Brazil went through one of the deepest structural transformations in its history".  InfoBrazil asked if Brazil was on schedule in these accomplishments.  Cardoso replied:

Your question is an interesting one, as it brings up the issue of time and change. How long does it take for a country the size and complexity of Brazil to change its course? The answer, of course, is that the time of historical changes is necessarily long. In contrast, a rapidly evolving society as ours sets its demands, and it is only legitimate to do so, in a much shorter time frame. As a result, one often has the feeling that things are changing only too slowly. And yet, this is a misperception.

These are solid accomplishments that can be documented statistically.  Many of these statistics are presenteg graphically in  Sete Anos do Real:  Estabilidade, Crescimento e Desenvolvimento Social [Seven Years of the Real:  Stability, Growth and Social Development], a document available on the Presidential WEB Site.  The presentation begins with a dramatic graph that contrasts the success of Cardoso's stabilization efforts with the failures of a string of previous efforts (the Cruzado, Bresser, Verao, Collor I and Collor II plans).

1.  Jornal do Brasil (online), February 20, 1999. "O Itamar quer sentar aqui." "Ele está agindo errado, porque ainda me restam quatro anos de governo. A menos que Itamar queira o golpe, o que também está fora de cogitação, pois para isso é preciso ter voto, pólvora e povo." 2. Jornal do Brasil (online), March 19, 1999. "Devo muito ao Itamar, mas ele também deve a mim. Existe uma reciprocidade"

3. "Protestos fazem parte da democracia, estou acostumado a isto... Isso é normal. Como eu lutei muito contra o regime autoritário, só posso dizer 'está bem'."

4. Simon Romero, "Brazil, Though Struggling, Proves Surprisingly Resilient," April 6, 1999.

5. Ibid.

6. Ibid.

7. "Democracy gets back to business," The Economist, April 17, 1999, pp. 40-42.

8. Jornal do Brasil, online edition, April 18, 1999.  "São tantos gestos que se repetem que já não fazem mais
sentido. Não me preocupa com isso. Estou preocupado com o Brasil."  "O Brasil está dando certo, "  "É isso que
o povo quer de um governante. O povo não quer que o governante faça shows. Quer que trabalhe."

9.  From David Fleischer's Brazil Focus of Sept 3, 1999.  Also reported in all Brazilian newspapers.  See also Fleischer's  special report on the firing of Clovis Carvalho.

10.  From David Fleischer's Brazil Focus of  November 1, 1999.

11. Richard Gott, In the Shadow of the Liberator:  Hugo Chavez and the Transformation of Venezuela,  London:  Verso, 2000, pp. 173, 175.

12. From David Fleischer's Brazil Focus of August 25, 2000.