The Cardoso government's reform agenda: A view from the National Congress, 1995-1998

The experience of the Cardoso government's first three years has shown that reforms to the economic order were much easier to move through Congress early in 1995. The politics of the other reforms (administrative, social security, political, judicial, and tax-fiscal) have proved much more difficult to articulate in Congress-especially as the 1996 municipal and 1998 general elections drew near-and have been conditioned by other political issues, such as the reelection amendment, the political ambitions of the state governors, and the public reaction to austerity and deficit reduction attempts (Weyland 1996a). Tax and fiscal reform again became a very high priority when the international financial crisis invaded Brazil in early September 1998. International investors lost confidence in Brazil's ability to reduce its fiscal deficits after the June 1998 data revealed that the deficit in current account had reached 7.2 percent of GDP (accumulated over a 12-month period). Brazil lost some US$15 billion in reserves in a little over two weeks. Although on September 8, Cardoso decreed reductions of expenditures in the 1998 and 1999 budgets, this was seen as too little, too late. Thus, some sort of tax package will be passed in the lame duck congressional session so that it can take effect in 1999; but the more urgently needed fiscal reform will await the approval of constitutional amendments in 1999.