Brazil's Turn To Hurt?(Brazilian economic conditions concern Argentina)(Brief Article)

South America's two giants, Brazil and Argentina, have long been intense competitors. They have sparred in every field, from football to finance, and spent much of the past century vying for the cash and attention of the rest of the world. In the early '90s Argentina was the darling of the moneymen, when the then President Carlos Menem shook the continent with his enthusiasm for market-friendly economics. But by mid-decade, it was Brazil's turn, as President Fernando Henrique Cardoso promised to marry capitalism and social justice.

Ever since, Brazil has been winning the race. The government has tamed inflation and unemployment and put the books in the black. And even as the world economy has slowed, Brazil's has looked fit and fortunate.

No longer. Just the other day, the cardinals of high finance were saying last rites for Argentina. Now everyone is praying for Brazil, too. The latest troubles began in December, when Buenos Aires's brush with default had much of the Third World bracing for a knock-on effect- -nowhere more than Brazil, where the real went into a tailspin and investors scrambled for the cashier. But that was just the beginning. By May a corruption scandal festering in Congress drove two key lawmakers from office (for allegedly stealing a look at secret Senate votes) and virtually paralyzed the legislature. Worse, Brasilia finally owned up to a colossal energy crisis, dashing the nascent recovery and threatening to leave 170 million people in the dark. Brazil boosters have become Brazil bashers. Says Walter Molano, a financial analyst with U.S.-based BCP Securities: "We are rewriting all our predictions."

Just how far Brazil will fall is a matter of intense speculation. In early 2001 the economy was on track to expand by at least 4 percent. Brazil led the developing world in foreign direct investment, pulling in $60 billion in 1999 and 2000. Now the brightest estimates are 2.5 percent growth, with foreign investment falling to $16 ...