Brazilian President Joao Baptista Figueiredo last night announced sweeping economic reforms that he promised would "redirect the course of the national economy" and enable Brazil to "maintain the process of economic growth" in the face of its rapidly deteriorating economy.
The far-reaching measures were seen by businessmen and economic analysts here as likely to lead to a further increase in Brazil's staggering foreign debt -- now estimated at $50 billion -- and sound the death knell for the military government's "economic miracle," which since 1964 has transformed Brazil into the tenth largest economy in the world.
Figueiredo siad his actions would end artificial prices, bureaucracy and other distortions that have sprung up in the Brazilian economy under the military. He argued that the measures had been made necessary be recession in the industrialized world, three years of drought in Brazil, rising oil prices and the skyrocketing foreign debt.
Most of Brazil's foreign debt is owed to U.S. banks, and Brazil has the largest outstanding debt to the United States of any country. It also spends about $7 billion a year for oil imports, a figure that is expected to rise significantly.
The most dramatic of the measures decreed by Gen. Figueiredo in a televised address was an immediate 30 percent devaluation of the cruzeiro in relation to the dollar.
The Brazilian leader also ended official export subsidies to Brazilian industry, eased restrictions on overseas borrowing, lifted the 100 percent prior deposit on imports and abolished legislation that had been the cornerstone of Brazil's ambitious import-substitution program.
The Brazilian president also said he would impose a tax to limit export of basic foodstuffs. He said their scarcity in the domestic market contributed to an annual rate of inflation that had passed 65 percent by November. Brazil is one of the world's largest exporters of agricultural products.
The changes had been signaled by the government late Thursday, when the suspension of all currency transactions was ordered for the first time in 37 years. That action came in response to a wave of financial speculation that had driven the black market value of the dollar to 35 percent above the official rate and, in the words of one Sao Paulo newspaper, had "turned all of Brazil into a giant casino."
Uneasiness over Brazil's economic situation had been accelerating since late November, when a group of respected economists predicted that Brazil was likely to run a $20 billion balance of payments deficit next year. The economists also predcted that December's inflation rate could be high as 10 percent.
Brazil's need t import 85 percent of its oil supplies has led since 1974 to declining growth rates, a quadrupled foreign debt and the biggest oil import bill in the Southern Hemisphere.
To curb energy consumption, the government earlier this month decreed a 58 percent increase in gasoline prices, pushing the price of a gallon of gas to $2.75 and provoking a nationwide taxi strike. Last week, a 55 percent increase in electricity rates was also announced.