Children spy through iron doors. Women are washing floors. Bird cages hold colorful canaries. Luiz opens the door with a smile and an invitation of coffee. A light-skinned man with dark hair and a medium build, he is wearing jeans and a T-shirt as he cooks on a stove that heats with bottled gas. The food smells melt with the overpowering favela odor of waste. Cheerful and polite with a typical Brazilian warmth, Luiz shows off his little house. Past the kitchenette is a bath room and another room that Luiz has just added. It is dark and dank. The concrete floor has yet to dry. Two bedrooms have windows so small that the natural light and fresh air press in only so far. The chill catches you in the back and lungs. Luiz watches his "half dozen children" when they are not in school and while his wife is taking her turn selling cigarettes on the street. When his wife comes home, Luiz takes her place on the streets and she watches the kids. The children, ages four to 11, wear light clothing although the weather is chilly. Their clothes are dirty, their hair is long and matted. Their skinny, tiny dog looks sick. Like many other residents of Sao Paulo's favelas, the 30-year-old Luiz was born in the impoverished north states of Brazil. He migrated to Sao Paulo 16 years ago to work in a restaurant. With a regular paycheck, he managed to rent a regular room. But eight years ago, with jobs scarce, he moved to the favela. Luiz started his house by building one room with cheap bricks and concrete. Over the years, he expanded room by room. He also added some basic services. He installed tubes to get water and hooked into some electrical cables. He designed a crude drainage system. But Luiz counts himself lucky. Many homes in Brazil's squalid favelas are much flimsier, built with pasteboard and lacking either a drainage system or running water. The pasteboard homes are at constant risk of flash floods that can wash the fragile structures down the hillside. Luiz has his own worries. He fears the government might tear down C.S.U.'s makeshift homes that have arisen illegally on occupied federal land. The government has bulldozed away other slums, and Luiz worries that his family could lose the only roof he can afford. - - - - - - - - Only 20 minutes from Luiz's favela is a neighborhood with the friendlier name of Jardin Marajoara. It is one of Sao Paulo's most expensive condominium communities and highlights Brazil's reputation as a nation of startling contrasts.Behind a wall that shields the homes from the eyesight of passersby are four luxury buildings with a fifth under construction. The condos face a tropical park with two tennis courts, one basketball court, two swimming pools, a sauna and a soccer field. For children, there's a playground. For more sedentary pleasures, there's a restaurant. For many Brazilians, Jardin Marajoara and similar neighborhoods mark the best of the uneven progress that has flowed from the country's experiment with neo-liberal economics. Amid the amenities of wealth, Yara, a 43-year-old housewife, is planning a tea party. Sitting on a comfortable sofa in her spacious apartment, she waits in elegant clothing, her brown hair short and shiny. Two of Yara’s three children study at a private university and the third at a private high school. The tuitions total about $1,500 a month. Condo expenses add another $500 a month, not to mention $200 for the club, $100 a week in groceries, the insurance on the four cars, and the salaries for her two maids. All that comes out of her husband's $100,000 salary as an executive at an American company. Though she recognizes the relative comfort of her life, Yara notes that her family is far from one of the richest in Sao Paulo. She has friends who have drivers and gardeners and "babas" -- 24-hour-a-day baby-sitters. Some friends hire faxineras -- women who do the hardest cleaning -- to help the regular maids who handle the lighter chores. Some friends have country homes with even more employees. Some belong to social clubs that cost more than $1,000 a month. Yara says Brazil's recent financial crisis has affected her only a little. The dollar is now more expensive, making it difficult for her family to travel abroad. But she has not cut her daily expenses. Yara's big worry is the stability of her husband's job. Some companies cut staff, including executives. "We've never been worried about stability before, because we were used to high job mobility," Yara said. "Now, the world is smaller, and so are the jobs." During the 1990s, Brazil deregulated much of its economy. Billions of dollars in foreign investment poured in, helping to make Brazil the economic behemoth of Latin America.By the late 1990s, Brazil boasted the world's eighth largest economy and an $800 billion gross national product. But when the international financial troubles rumbled from Asia to Russia in 1998, there were fears of a massive pullout of foreign investment in Brazil. The crisis hit Brazil in January, causing a devaluation of the real that lopped off about one-third of the country’s GNP. The crisis was nicknamed the "samba effect" after Brazil's shaky music. One of its immediate consequences was reversal of slow gains among Brazil's vast poor population. According to one study, "Panorama Social," the number of poor people in Brazil -- those living on $50 a month or less -- had declined by nearly one quarter from 1990 to 1996, dropping from 100.5 million to 76.3 million. While the findings encouraged some social scientists, poverty numbers still claimed about four out of 10 people in Brazil, a nation with a population of 172 million. The World Bank estimated that the new crisis drove about three million Brazilians back into poverty while those already on the bottom rungs saw their predicament made even more precarious. Clearly, the poor suffered the most, losing about 11 percent of their income. In the countryside, some peasants have organized themselves into what they call the "people that have no land" movement, or MST. Defiantly, the MST has begun occupying land, farms and mansions. The financial crisis also reopened Brazil's debate over where the country is headed. Many intellectuals argue that the economic "liberalization" ultimately will deepen Brazil's inequality of wealth and cause more social conflict. One critic, economist Simao Silber, argues that redistribution of wealth will come only through government spending on public education, investments in the national infrastructure and a progressive tax structure that requires the rich to pay a larger share of the costs. But other leading economists and political scientists argue that the poor remain ahead of where they were earlier in the decade and that Brazil's old state-driven economy was no longer viable. Since 1990, the government has removed many economic controls and encouraged competition both at home and as part of the global economy. The transformation was not easy for Brazil. "For years, the public sector fed a huge bureaucracy and corporate-type groups that depended on state benefits," said pro-liberalization political scientist Leoncio Martins Rodriguez. "Among them were the unions, national industries and even foreign investors who settled here under monopoly conditions." There also were problems with patronage and lack of competition. "The political parties gave public employment in exchange for political support," Martins Rodriguez said. "In Brazil, there was a car plant that produced the same van for 18 years. You would have only one type 'A' milk and lack a variety of milk products. The same with other merchandise." In 1990, President Fernando Collor de Mello initiated an economic liberalization that opened the markets to a wider variety of goods and competition. For the first time, Brazilians could buy skim milk, a variety of cheeses, better-quality disposable diapers and fancy cars. Yet, the changes were accompanied by hyperinflation soaring to 1,000 percent a year. In 1994, Economic Minister Fernando Henrique Cardoso devised a plan for stabilizing the real. Along with curbing inflation, the plan raised the minimum wage and granted the poor access to credit. For many of Brazil's poor, the quality of life improved, at least marginally. Brazil's economic stabilization also attracted foreign investors who were looking for new markets after an economic crisis had shaken confidence in Mexico. By 1997, Brazil had become the principal beneficiary of that shift, with foreign investment rising more than 600 percent. Then, the worldwide financial crisis stung Brazil. To avert panic, the International Monetary Fund rushed to shore up Brazil's economy with a $45 billion agreement. By late 1998, however, Brazil was experiencing internal problems. Its international cash reserves dropped from $75 billion to less than $30 billion. The legislature also refused to revamp the pension system, causing more uncertainty. In January, Itamar Franco, the governor of Brazil's second largest state and an opponent of economic neo-liberalism, declared his state in default. He urged other governors to follow suit. Six other states announced that they, too, were overwhelmed by debt. The value of the real dove and unemployment, especially in industrial Sao Paolo, rose. But many world economists remained bullish on Brazil. Philip Keefer, a senior economist at the World Bank, termed the sharp devaluation of the real "an overreaction" based on fears that there would be worse news ahead. When that bad news did not materialize, Brazil's economy steadied itself. The real recovered much of its value and fears of a new round of hyperinflation proved unfounded. Instead of an expected six percent decline in economic growth this year, economists adjusted their numbers to project only a slight decline or possibly none at all. U.S. Treasury Secretary Lawrence Summers called Brazil's rebound one of the best "surprises." But the challenges ahead for Brazil and other developing countries remain daunting. One is how to bridge the chasm between rich and poor -- and avert instability and injustice that these disparities create. With the bottom-line demands of the world economy, nations have even fewer options for addressing social needs. The core problem is that international investors look for a fast return and have little patience for the long-term value that can come from better education and social improvements. Investors can be fickle when they don’t get the return they expect or when there's political turmoil. But the uncertainty cuts both ways. Like the residents of the hillside favelas fearing flash floods, Brazilians have learned this year how quickly a rain burst from the world economy can wash away progress painfully pieced together over many years.
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