THE BRAZILIAN Congress a few days ago rejected by 252 votes to 1 a bill to hold down wage increases. That's a bad omen. The defeated bill is not part of the economic stabilization program that Brazil has worked out with the International Monetary Fund, and perhaps the Brazilian congressmen thought of killing it as a costless gesture. But it seems to indicate rising resistance to the more stringent wage restraint on which the IMF agreement depends. The vote on that legislation will probably come in October.
Like the United States Congress, the Brazilian Congress prefers to deal with the international debt crisis as though it were purely a domestic issue. Here in Washington, congressmen vote against strengthening the IMF in order--they happily think--to punish American banks. In Brazil, congressmen vote against wage restraint because it will mean, at least temporarily, a drop in standards of living.
There's a lot of nationalistic talk in Brazil about a moratorium on repayment. Since Brazil is perhaps a couple of billion dollars in arrears on its payments, it has already fallen into an undeclared moratorium. Relations between lenders and borrowers are increasingly taut. Reports from Brazil suggest a rising inclination there to joust with the IMF in a test of nerve and will. That temptation needs to be resisted. It would raise the chances that one of the American creditors might break ranks and rush into an American court to try to seize Brazilian assets in this country. If that happened, all the other creditors would feel compelled to do the same thing, if only to protect their positions in the eventual settlement.
Brazilian politicians, other than the financial specialists, evidently do not fully understand that the Reagan administration would have no control over that process. It would go forward in the courts-- and not only the courts of this country. It would rapidly escalate into a worldwide competition to attach Brazilian cargoes, ships, planes and bank accounts. People in other countries would suddenly find themselves risking litigation simply by doing business with Brazilian companies.
A primitive and isolated country might hope to ride out that kind of legal attack. But Brazil ranks eighth worldwide in manufacturing output, and 14th in exports. Cut off from international credit and trade, its economy would go into paralysis, with truly dire consequences for standards of living. The effects on the American economy would also be severe, as a major foreign customer disappeared and ripples of panic ran through the credit markets.
Brazil was living for a time on foreign loans and, as foreign lending drops, there will be an impact on Brazilian life and incomes. That is inevitable. The crucial thing is to keep lines of trade and credit open, and get the buoyant Brazilian economy expanding again as rapidly as possible. The creditors and the IMF have a responsibility to keep working with Brazil. Conversely, Brazil has a responsibility to keep working with the IMF.