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Itamar Franco

3 July 2011

When Latin American presidents leave office, most people are relieved… even when they aren’t chased out, or —like Mexico’s Carlos Salinas  —wise to take up residence abroad  in a country with no extradition treaty… an ex-president in the Americas has to consider his career a success if he leaves office with more than a 30 percent approval rating.  Itamar Franco, when he stepped down as Brazil’s president on New Years’ Day, 1995, had an approval rating of 90 percent.

Franco was an accidental president, having been elevated from the Vice-Presidency when Fernando Collor de Melo resigned rather than face impeachment (shades of Gerald Ford).  As a Senator from Minas Gerais, Franco had made a name for himself  in demanding honesty from public officials.  He opposed constitutional changes that would have allowed President Sarney to extend his term in office during Brazil’s transition from a military dictatorship.

Collor and Franco — initially considered minor candidates, in a wide open presidential campaign —  won a narrow victory with the support from the elites and conservatives as the best alternative to the expected winner, Luiz Ignacio Lula da Silva.

While Collor (and Franco) had campaigned on their reputations for fighting corruption, Collor was accused of influence peddling, by his own brother.  In addition, the administration’s plans to bring the horrendous 29 percent per MONTH inflation under control which, with several changes in direction and procedure, managed to bring the inflation rate to 50 percent per month.  Collor chose to resign, rather than face Congress, and Franco inherited… a mess.

As president, Franco turned to his eventual successor, Finance Minister Fernando Henrique Cardoso,  in restoring Brazil’s currency though the creation of what was basically Monopoly Money A non-existent stable unit was used as the quoted price for goods and services, but you paid for those goods in services in real money, which at the time was the Cruzado Novo, which had replaced the Cruzeiro under Collor’s failed plan(s)… and then replacing the monopoly money value *and the Cruzado Novo) with a currency based on the monopoly money value with real money… the the Real:  which, to the chagrin of the world’s economists worked… for real.

Also to the horror of the conventional economists, the over-valued (by design) Real allowed Franco and Cardoso turned neo-liberal “free market” solutions on their head.  The point of the whole exercise in opening markets was less to sell off state businesses and increase exports as to keep Brazilian businesses in Brazilian hands, and to force Brazilians to develop new export opportunities.    The new currency made foreign products cheaper (and brought down the price of Brazilian made goods).  But, in opening the doors to foreign capital, the plan was to keep Brazilian industries in Brazilian hands, and plowed into Brazilian investments.  Iron ore brings in cash, but it doesn’t create the kind of society a country that exports steel and Chevrolets and jet aircraft does.

While mourned on his passing this weekend by the financial press, Franco should also be remembered for his commitment to a Brazil for all Brazilians.  Of German and Italian descent himself, he championed a more inclusive Brazil, both nationally (his chosen successor, Henrique Cardoso, was descended from slaves, and proud of it) and internationally (as a Senator, he pushed Brazil to break relations with racially segregated countries like, at that time, South Africa) and democratic stability.


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