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L E G A L W A T C H
Controlling the executive by law

By Nayana
Control by the political executive and the bureaucracy over the country's principal investigative agency is a violation of the right to equality and the right to due process of law.

This is the latest articulation in India of a principle that was first given judicial endorsement in the "Jain hawala" money case in which the Supreme Court virtually took over supervision of the investigation in 1994.

In that case, which seemed the high water mark of judicial activism in its day, the Supreme Court, activated by a public interest petition alleging failure by the Central Bureau of Investigation (CBI) to inquire expeditiously into allegations of corrupt pay-offs to a string of politicians and bureaucrats, issued a series of blunt directives which included an order that the head of the CBI take personal charge of the investigation and report periodically to Court.

It also directed that "in order to eliminate any impression of bias and avoid erosion of credibility" the CBI should not take instructions from "any authority interested in, or likely to be affected by, the outcome of the investigation" - which for all practical purposes meant the government of the day.

Recognizing perhaps that all this came perilously close to judicial assumption of executive powers, the Court as a long-term solution to such problems, ordered the establishment of an independent supervisory structure for the CBI and the "Enforcement Directorate", another anti-corruption body about which more will be said hereinafter.

The State has now established a "Central Vigilance Commission" to perform this supervisory role, but that too is presently under challenge by a public interest petitioner who objects to the fact that the Commission itself will be staffed by bureaucrats who can thereby block investigations against their colleagues. It is in this case that the principle referred to above was articulated by the petitioner who alleged that such an arrangement interfered with his fundamental rights to equality and due process of law.

Contemporaneous with these developments has been a personal cause celebre involving the transfer of M. K. Bezboruah, head of the Enforcement Directorate which investigates large-scale economic offences, and his subsequent re-instatement by order of the Supreme Court. This is seen as the first major judicial rebuke of the new BJP-led Government.

At the time of his transfer, Bezboruah's Directorate had been investigating a number of prominent businessmen and persons with political connections, as well as "Godman" Chandraswami against whom the Directorate had already filed a number of cases under the Foreign Exchange Regulation Act.

While the transfer of officers is generally a regarded as a function of the executive, the Court found Bezboruah's removal to the Union Territory's Transport Department to be an entirely arbitrary transfer of an honest and competent officer. Public interest lawyer Anil Diwan who appeared as amicus curiae was also able to show up certain errors of fact in the Government's affidavit which appeared to be an attempt to mislead Court.

As illustrated by the case of Bandara v Ratwatte and others, reviewed in this column earlier this year, our Supreme Court has also used Article 12 (right to equality before the law) to quash arbitrary transfers within the public service, in this instance a police officer.

What is of more novel interest in the Indian examples is the range of orders that the Court will make so as to ensure that broader principles such as non-interference of the Government in criminal investigations, is maintained.

Under Article 126 Sri Lanka's Constitution the Supreme Court has power to "grant such relief or make such directions as it may deem just and equitable in the circumstances". It is thus not limited to the grant of personal relief such as re-instatement or compensation, although this has so far been the norm.

A comparison between the fate of Mr Bezboruah and that of our Commission for the Prevention of Bribery and Corruption also raises an interesting question: namely, whether the independence of officials is more effectively maintained simply by letting them remain as officials with their transfer and disciplinary control open to review by the Supreme Court in the event of fundamental rights violations. This procedure is already available under our Constitution to all officers of public institutions and even state-run commercial institutions, and a study of the judgement in the Suranganie Marapone case (arbitrary refusal of an extension of service where the grant of such an extension had been the norm) indicates how far the Court will intervene where it detects arbitrary or unreasonable conduct on the part of the authorities.

By contrast, the institutionalized safeguards that were supposed to operate in the case of the Commission on Bribery and Corruption has resulted in the indefinite non-functioning of the institution and the fate of the Commissioners eventually depending not on the Supreme Court but on a politically partisan majority vote in Parliament.

By coincidence, the need for safeguarding the independence of bodies such as the Police, the Elections Commissioner and the Public Service Commission has recently been receiving prominence in this country, with the business community now adding its collective voice to those of opposition political parties.

The recent joint statement issued by this country's leading Chambers of Commerce and Industry, the Employers' Federation and trade organizations is historic in that it is the first time the wielders of such collective economic clout have delivered such a stinging indictment on the quality of governance in this country.

While some aspects of the statement may mirror long-standing employer demands, such as the call for the linking of productivity with remuneration and for the recognition of employees' obligations as well as rights, the inclusion of a plea for bipartisan consensus on a much wider range of policy matters indicates a growing frustration at the disruptive effect of party politics on the economic life of this country.

Of even greater significance is the fact that these groups are reported to have organized a meeting with representatives of political parties, foreign missions and aid agencies to promote their ideas. It is clear that as far as the business community is concerned, politics has become too serious a matter to be left to the politicians.

The week that was
Ranil - Cooray showdown gathers momentum

by Shan Wijetunga
Last Thursday, a large crowd braved the weather and assembled in their thousands near the Sri Jayawardenepura roundabout. They had come to pay their respects to Nalanda Ellawala who was killed by a gunshot two years ago. The occasion was the unveiling of his statue. It was a dignified simple ceremony . Although there were political invitees, there were no political speeches, no noise. There was a welcome speech followed by a short religious ceremony. The statue was due to be unveiled by the Prime Minister, because she was not well Nalanda Ellawala's mother undertook the task. Lighted candles carried by everyone brightened the place while the Ellawala song rendered in beautiful voice moved all. The whole event was organised and executed by the Nalanda Ellawala foundation headed by D. Alahapperuma and Dilan Perera ably supported by the Mulberry Group. It had been originally planned to unveil the statue on Ellawala's first death anniversary, but it had to be postponed due to unavoidable circumstances. All parliamentarians with the exception of Susantha Punchinilame, Mervyn de Silva and Vajira Abeywardane had been invited for the ceremony. Punchinilame was not invited because he is the suspect in the Nalanda Ellawala assassination case and the other two sponsored the resolution to grant the suspect leave from parliamentary fittings. This exclusion was at the request of the Ellawala family.

Cooray makes his debut
After his decision to re-enter politics, Sirisena Cooray participated in his first public function last Thursday. This was a meeting arranged by the Save the UNP Group with the twin objectives of continuing the Premadasa concepts and solving problems affecting Colombo Central. The venue was the Sucharita Hall. The organisers had also invited Mrs. Hema Premadasa. It is well known that Mrs. Premadasa is supporting Cooray and the two of them had participated in several religious functions together. The leader of the recently formed party of UNP breakaways H. R. Piyasiri stayed at the hall until Cooray and Mrs. Premadasa finished the religious rites and was not seen thereafter.

In spite of the bad weather there was a large gathering at the meeting. Among them were the former MPs Madurapala Ediriweera and P. L. S. Galappaththi and a large number of MMCs. Dayan Jayatillaka, of the Premadasa centre was also there. The crowd filled the hall and overflowed outside. The gathering was addressed first by Mrs. Premadasa and then by Cooray. Cooray did not criticise the UNP but openly and directly attacked Ranil. His speech reflected the friction between the two. Cooray said that he had done a foolish thing by giving Colombo Central to Ranil. Although no decision has yet been taken, if he comes forward as a presidential candidate it will be with the definite intention of winning, he further remarked.

Next, the gathering was requested to submit the common problems facing the people of Colombo Central. This took a long time and the meeting went on past 7.30 p.m. and had to be concluded due to the time factor.

It was quite clear that this was not Cooray's last meeting. The number of his supporters visiting his Lake Drive residence is now on the increase and all arrangements have been made by him and his supporters to set up a Premadasa Front. They intend to build the organisation on a district basis. In the meantime, it has been reported to Siri Kotha that Cooray had visited and had discussions with a senior member of the UNP on Monday. There is no truth in the story that Mrs. Premadasa was also a participant at this meeting.

Another UNP MP had an unexpected experience at a birthday party at the Pettah home of a party supporter. While he was there, Save the UNP group members had surrounded him and rained questions on him he had no escape and he had promised to arrange a meeting between Ranil and Cooray within a week and solve the problem.

On his return from his Katana estate, Cooray participated in a Bodhi Pooja at Bellanwila temple. It was the last day of the Bodhi Pooja held for him. Although the decision in his case was due the following day, it was postponed.

UNP MMC meets Mangala Samaraweera
A powerful UNP member of the Colombo Municipality came to meet Minister Mangala Samaraweera along with Anura Ratnayake last Wednesday. No details are available about their discussions. But it is rumoured that the member concerned is highly disappointed about certain incidents that had taken place at a meeting held last week.

Attorney General meets the Maha Sangha
The meeting between Attorney General Sarath Silva and members of the Maha Sangha Nalanadarama, Nugegoda attracted much attention among political circles. But he met them not as Attorney General but as a Buddhist. Among the clergy who participated in the meeting were members representing the Jathika Sangha Sabha. The meeting had taken place on the invitation of the Treasurer of the Jathika Sangha Sabha, Venerable Kiniyawala Palitha. Among the other Buddhist clergy who participated at the meeting were well known names such as Ven. Madoluwawe Sobhita, Ven. Professor Bellanwila Wimalaratana, Secretary of the Jathika Sangha Sabha Ven. Iththapane Dhammalankara, President of the Nurses Union, Ven. Muruththettuwe Ananda, Venerable Brahmanawatte Sivali, Kirama Wimalajothi Upatissa and Malewana Sobhita. The Attorney General was accompanied by a Junior Legal Officer and the Director of the BMICH.

In the course of the discussion he asked the Sangha whether the Buddhist clergy could chant pirith and bless the soldiers going to the front. Ven. Malewana and Wimalaratna replied that they could not bless a war.

"What I meant was whether the soldiers sacrificing their lives for the country could be blessed" the Attorney General corrected.

"We are always against terrorism in any form" Ven. Madoluwawe Sobhita replied." "We are demanding an end to terrorism. If the government acts towards that objective, it will automatically receive the support of the Sangha. But no support will be forthcoming for the so called package that will break up the country."

Ven. Iththapane Dhammalankara said that only the Maha Sangha spoke openly and directly about this problem. And the Sangha who express independent opinions are branded as racists.

This had to be treated as a national question and not as a political question, "If any one tries to get any political advantage out of it, it has to be prevented" he said.

Ven. Madoluwawe Sobhita complained that nothing had come out of the presentation they made to Minister G. L. Peiris regarding obscene publications. Still such programmes continue to be telecast.

The Buddhist dignitaries maintained that during the time of the Sinhala kings they listened to the advice of the Buddhist clergy and this is stipulated in the constitution as well. All leaders of the country acted accordingly. Even President Premadasa though described as a dictator showed his desire to protect Buddhism.

"There was a Supreme Council also at that time. But, after this president came to power, the Supreme Council has been dissolved and she has relinquished the Buddha Sasana Ministry handing it, over to the Minister for Cultural Affairs" Ven. Sobhita complained.

This system of elections is not conclusive to the emergence of national leaders. The President should change the system of elections as promised by her, several pointed out.

"After this government came to power, there are no teachers to teach Buddhism. Carpentry teachers are employed to teach Buddhism" Professor Wimalaratana complained. Supporting his opinions Ven. Madoluwawew Sobhita pointed out that although there are 18,000 Dhamma teachers in the island quite a large number of Dhamma schools are not functioning properly. Lack of books, lack of a payment system for teachers, are some of the causes for this state of affairs. "No one has looked into these things. That shows the present position of Buddhism. The President has not been able to correct these mistakes up to now."

The Attorney General said that he would report these opinions to the President. He did not speak more than a few words during the whole discussion. What he did was to listen very carefully to the opinions expressed by the Sangha.

"The Attorney General is an independent person. Therefore, we can present our ideas to you. We also have the right to present our views on any matter. The Maha Sangha does not act as a political party, but the government treats us in the wrong way" Ven. Ananda declared. "We opposed J. R's Provincial Councils. We are against it even today. We oppose the present package as well. What we have is a terrorist problem. Solutions must be applied to cure that". The Attorney General requested their support for the President to work successfully in that direction.

"We are the people who helped the president, but how does she refer to us? She calls us 'Sobhita, Ananda' as if we are plain laymen. When the Weera Vidana Organisation was purchasing paddy from farmers at Dimbulagala, Minister D. M. Jayaratne thanked us. He said that we saved him from a serious crisis. He said that he was ready to provide stores if we buy paddy" Ven. Sobhita remarked.

"But what did the president say? He continued. "She said that Sobhita is buying paddy. There is another priest leading a women's organisation and asked minister Suraweera to check whether there is provision in the Vinaya Pitaka for that activity. Under this situation, how can we have any trust in the President" he questioned.

If we express independent views on any matter, it will be looked at from a completely wrong angle Ven. Ananda said." A story was invented saying that we had broken coconuts. Then attempts were made to distribute coconuts through henchmen. What are these things?"

Ven. Professor Wimalaratane said that the government has distanced itself from the Sangha. The government thinks that the majority of Bhikkhus are racists.

Ven. Iththapane complained that the two major parties have become prisoners in the hands of minorities. The government supported Thondaman when he was creating new Grama Sevaka divisions. The Opposition did nothing about it.

The two major parties must join hands to solve national problems without thinking of political gains was the view of Professor Wimalaratane.

''That will never happen'' was the Attorney General's comment. However, the Sangha held the view that it should be attempted.

It was well into the night when the meeting was over. The Attorney General took leave of the Sangha promising to report these matters to the President and convey back her response.

Group 345
A group of MPs in the UNP had been toying with the idea of forming a group similar to the government's ''Mulberry Group'' representing backbenchers. Most of them were MPs elected in 1989. A preliminary discussion was held towards this objective of last Friday at the Orient Club. Although not an MP now, livewire behind the whole thing was Mahen Gunasekare. Fifteen of the nineteen members invited for the meeting were there and Tissa Attanayake explained the purpose of the meeting followed by Sarath Ranawake.

''Not enough exposure is given to corruption and rackets in the government. We have enough information, but the material is not being used due to the absence of a good organisation. Or else, they are limited to Parliamentary discussions with no exposure through the mass media.'' Ranawake said.

''We can fill the gap not only the government about, but even of those concerning ministers and government MPs. We can find out and take action,'' he continued.

Attanayake also mentioned about things happening within Parliament that are damaging to the respect of Parliament. ''We can set an example to others by having a disciplinary control committee among ourselves''

Both Ranawake and Attanayake were of the opinion that another duty of the group will be to protect the good name of the party leadership and pointed out the feasibility of acting for the protection of the party from external threats.

Appointment of office bearers followed. The post of President went to Sarath Ranawake and Messrs. Tissa Attanayake and Reginald Cooray were nominated uninamously as Secretary and Treasurer respectively. The question of a suitable name for the group came up and it was decided to call it 345 group.

The name was proposed by Mano Wijeyratne who quoted the example of the British Conservative Party.

He said that a group formed in 1931 with the number of the year as its name still functions. ''Even the children of the founding members are today its members,'' he said.

Lakshman Seneviratne commented that since they are there on trust and tradition no written constitutions are necessary for the group. Azwer said that they must work together so that no wrong interpretations can be given to their actions. It is necessary to criticise the government on an organised footing. That way, the group can be a source of strength to other members as well, he said.

Ranjith Madduma Bandara said that they must set an example in maintaining the honour and stature of Parliament.

Without being aware as to who started the ball rolling, the subject of Sirisena Cooray came up for discussion. "Since there are two factions involved, the group will be the target of opposition of one of the factions if a decision was taken on Cooray. Therefore, it is better to avoid that subject" was the acepted view of the group.

Then they talked about the adverse media publicity given to the party and the leadership, and Ranawake pointed out the need to counter such propaganda.

It was decided to allocate individual ministries to members of the group so that they could be on the lookout for any corruption. They will use a system of numbers for the protection of informants.

A membership fee was proposed and adopted and many other subjects came up for discussion. The meeting went on past 10 o'clock and was followed by a a dinner accompanied with a little music. The entertainment was provided by Lakshman Seneviratne and Reginald Cooray.

Workshop at Tangerine
While the ''Cooray Effect'' was becoming active in the city, the UNP high command had arranged a workshop for its members at Hotel Tangerine. The leader of the party in his opening speech remarked that good results have been achieved through similar workshops in the past and the intention of the workshop was to enlighten the people on the current state of the affairs in the country and the UNP stand on crucial matters.

The participants assembled again after the opening session and residential facilities had been provided for them.

Among the participants were Dr. Rajitha Senaratne, Amara Bhadra Dissanayake, Amara Piyaseeli Ratnayake, E. M. Ratnayake, S. Ranawake, Ariyaratne Walpitagama, Chandradasa Galappththi, Sunil Ranaweera, Upali Amarasiri, J. C. Alawathuwala, Upatissa Silva, Dr. Sarath Amunugama, Al Sahir Moulana, Gamini Lokuge, Ananda Kularatne and Imtiaz Bakeer Makar.

Ten topics for attention were decided upon. Ranawake pointed out that the biggest problem is the failure of the war effort. He said that the people should be enlightened on the fate that befell on the war effort due to use of war for political purposes and to amass commissions.

Gamini Lokuge presented the problem of unemployment and Dr. Amunugama and Renuka Herath presented ideas about the economic decline of the country and women's rights. Walpitagama, Galappaththi and Sunil Shantha expressed views about the problems of minorities while Rajitha Senaratne proposed that the adverse propaganda carried out by the state media about the party must be replied to.

The participants were divided into three groups and entrusted with the task of reporting on suggested courses of action. These reports were taken up later and discussions followed until around 10 pm. The suggestion by Ranawake regarding the establishment of a 'Council of War' attracted a great deal of attention.

Ranawake pointed out the need to exercise caution in criticising the war because excessive criticism can antagonise the soldiers and ordinary people. Since the people believe that there must be some understanding between the two major parties in solving national questions, the UNP must act in such a way so as to convince the people that it is ready to co-operate on that kind of matter.

It was decided to propose the appointment of a competent council of persons for the conduct of the war to end the censorship on war and to set up a body of persons acceptable to both sides to deal with import of arms.

They also planned to project the image of the UNP as a party with an experienced leadership. It was also planned to take effective measures to counter adverse propaganda against the party.

Mutual Cooperation on vital issues?
The speech made by G. L. Pieris at the second sessions of the Engineers Institute contains some inkling about the government's agreement to a request for co-operation with the opposition on vital matters made by business leaders and trade chambers. The ministers informed the audience that the President had expressed her desire to have discussions with the business sector. This will be a good beginning for their efforts.

Media Committee meets again
The Media Committee met again at the residence of Minister S. B. Dissanayake on Wednesday. There was some sort of uneasiness about the publicity given to the previous proceedings in the media. Hence, they also discussed ways and means of preventing such leakage of information.

The minister stated that the government is willing to help media men in solving their problems, but he did not ask what they were.

The proposed pension scheme came up for discussion, and minister informed them that it will be operational from the beginning of next year.

Why is not enough information on the government's development efforts published was one question raised. Some mediamen replied that there cannot be news about development when there is no development. But the minister was not prepared to accept that position.

The view was put forward that the system of providing information through media officials in ministries constituted a bottleneck. It was decided to summon them also for the future meetings of the committee.

The minister asked why Mr. Sirisena Cooray is getting so much of publicity. There was no explanation. The last item to be discussed was the way of winning over independent media co-operation for publicising the activities of the government. Minister Mangala Samaraweera joined them while it was being discussed.

Cardosa's re-election and the Brazilian economy

by Dr. Stanley Kalpage
On 4 October 1998, Brazil's 106 million voters were electing a president, 513 deputies in the Chamber of Deputies and 27 of the 81 members of the Federal Senate, as well as members of state legislatures Stage governors were being elected in a second round of voting where opposition candidates were expected to outperform candidates from president Car-dosa's Brazilian Social Democratic Party.

President Fernando Henrique Cadorsa's landslide victory, with over 50 percent of the vote, in the first round of the Brazilian presidential election, has been hailed as signalling a solution to Brazil's current economic problems. The severe economic difficulties affecting the largest country (area 3.29 million sq miles) in South America, with the world's ninth largest economy, dominated the election campaign

If Cardosa's nearest rival, left-wing candidate, Luiz Inacio 'Lula' da Silva, who got about 34 percent of the popular vote, had been successful the chances of Brazil emerging from its financial crisis would have been more difficult. Da Silva's Workers party has been demanding the imposition of tougher capital controls to prevent the crisis from deepening.

Cardosa's earlier performance
Cardosa, a sociology professor and later Brazil's finance minister, suffered exile under the 1974- 85 military dictatorship. Through his 1994 Real Plan (named after the country's currency, the real), Cardosa stabilised the economy, reduced Brazil's inflation rate from a peak of around 3000 percent to about 4 percent, brought the economy back on track, and introduced vital educational and social reforms.

One of Cardosa's major failures, however, was his inability to push through budget cuts, pension and tax reforms, through a fractious Congress. Consequently, Brazil's government has been spending far more than it can afford to. The budget deficit has increased to more than 7 percent of total output and the trade deficit was mounting as the Asian crisis affected Brazil's export sales. The government faced a huge debt burden that hit the country's economic prosperity.

The current crisis
The current crisis has been triggered by the economic melt-down in Asia and the breakdown in the Russian economy. But Brazil's economic fundamentals are said to be sound and, while it has a problem, it is not likely to be as disastrous as in Russia.

Brazil's foreign crunchy reserves have fallen by US$ 25 billion since August when Russia's currency was devalued. To stem the flight of capital, Cardosa was forced to raise interest rates to nearly 50 percent. Measures are now needed to reduce the budget deficit of nearly 7 percent and a current account deficit of just under 4 percent.

Analysts believe that Brazil would need US$ 30 billion to help overcome the financial crisis which, if unresolved, threatens to engulf other countries in Latin America. But unlike in Russia, the Brazilian economy only needs liquidity in the short term. With a GDP of $ 800 billion and a per capita income of $ 4,900, the Brazilian economy is many times the size of Russia's

Brazil and the US
The US is concerned about Brazil's economic health. Brazil has been the most attractive developing economy for direct investment after China. US investments in Brazil amount to tens of billions of dollars and US exports total around one billion dollars worth of goods to Brazil each month.

Brazil has approached the US, the G-7 group of industrialised countries (Britain, Canada, France, Germany, Italy, Japan and the US), and the IMF for immediate assistance. The US had been somewhat complacent about the economic maladies affecting South Korea and the Southeast Asian nations, but has become worried about the Brazilian crisis.

Brazil, the largest country in Latin America is the one whose fate most impinges on the others. Latin America buys 20 percent of US exports, and Brazil accounts for 43 percent of Latin America's gross domestic product. Consequently, the loan package for Brazil that the International Monetary Fund (IMF) has been considering is a prudent effort to stop the global contagion before it infects the US economy.

Brazil and Russia
The spreading global economic and financial crisis began in July 1997 with the economic melt-down in Thailand, and spread quickly to other ASEAN countries like Indonesia, Malaysia and Singapore as well as to South Korea. It was not long before Russia was affected. Brazil was seen as the next domino to fall.

It is generally thought that if the Brazilian economy collapses, the impact on the world's financial system will be far more devastating than the consequences of the Russian economic crisis. Brazil's economy accounts for almost half of Latin America's total economic output. Moreover, unlike in Russia, American banks have a heavy involvement in Latin America. If Brazil goes under, it could even signal the end of six years of uninterrupted growth in the US economy.

Brazil and the IMF
Both president Cardosa and finance minister, Pedro Malan, have told the IMF that Brazil was not going to devalue its currency, the real. They have said that Brazil would need more than 15 billion dollars to meet its financial requirements over the next 15 months. Thereafter a contingency fund would be required, an idea that President Clinton has backed.

Together with the IMF, US Treasury Department officials have been trying to work out a $30 billion or more emergency line of credit to support an austerity program by president Cardosa to convince nervous foreign investors to stop taking money out of the country.

But the difficulty is that the IMF is also having problems and is strapped for cash since it has already assembled more than $ 100 billion in bailouts for Thailand, Indonesia, South Korea and Russia. Japan's worst recession in fifty years has aggravated the problem. Bill Clinton has managed to squeeze out of a Republican-dominated Congress, the $ 18 billion that he sought to replenish the coffers of the IMF.

As a longer term measure, attempts are being made to strengthen the architecture of the international financial system. The aim would be to urge greater openness by all countries, tougher banking rules and the consideration of ways to make investors pay for their mistakes rather than reaping the benefit of IMF bailouts

IMF needs reform
However there is a growing feeling that the IMF is not the best salvation for preventing economic collapse. This institution, established after the end of the Second World War, needs reforms as badly as the countries which it purports to help. In both Asia and Russia, the IMF failed to recognise the signs of looming economic catastrophe and act in concert with the industrialised countries to prevent, or at least contain, the ensuing financial disasters.

Some even believe that adopting IMF remedies is a sure way to produce economic, political and social turmoil. In exchange for a bailout, nations are required to implement draconion measures that result in economic recession; the collapse of banking institutions, especially those that serve the lower and middle classes;; bankruptcies, particularly of small and medium-size enterprises; corporate and consumer loan defaults; massive unemployment; social unrest; and political instability.

The governing structure of the IMF needs reform so as to be more sensitive to developing country needs. Country-specific recovery plans and decisive actions must come from within the region itself rather than through standard IMF prescriptions.

Cardosa's austerity programme
After his election, Cardosa will have to move deftly between the competing and contradictory demands of international investors and critics within the government. He has reaffirmed his commitment to balancing Brazil's books but said that he would carry it out "without shocks and without surprises". He has ruled out a currency devaluation which would cut the value of foreign investment holdings. He would realise that currency devaluation proved to be disastrous in Asia and in Russia.

In the days ahead, president Cardosa will unveil his promised solution - a three-year fiscal austerity package to renew investor confidence and stave off currency collapse that could trigger a domino effect in Latin America and beyond. The package is also vital to ongoing negotiations with the International Monetary Fund for what is expected to be a $30 billion loan to pull Brazil from the brink of financial collapse.

Yet, although 'Cardosa's proposals are likely to be sweeping in nature - including major cuts in government spending, social security reform, a budget control amendment and possibly new taxes - there are few guarantees that the bulk of his reforms will go into effect, if at all. An unpredictable Brazilian Congress and even less predictable state governors will have to pass and implement his plan.

In the past Cardosa has shown little determination in pushing through legislation. Brazil has been losing $400 million a day in foreign capital and is slipping into recession as the government tries to protect the national currency. This time Cardosa will have to change his style in pushing his reforms legislation through a fractious Congress.

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