IV.  POLITICAL ENVIRONMENT


-    Nature of Bilateral Relationship with the United States

Brazil and the United States have historically had close and cordial
relations.  This relationship encompasses a broad political and
economic agenda on both a bilateral and multilateral basis.
Commercial and trade issues occupy a significant position on this
agenda.  Two-way trade exceeds USD 10 billion and Brazil has
consistently run a trade surplus with the United States.


-    Major Political Issues Affecting Business Climate

Economic stabilization is the major political issue affecting the
business climate.  Brazil has been suffering from chronic inflation
throughout much of its recent history.  In the past decade, several
administrations have tried, but failed, to stabilize the economy.

Recognizing the importance of stabilization, then Finance Minister
Fernando Henrique Cardoso presented a plan to Congress in
December 1993.  After considerable negotiation, Congress amended
and then approved the economic stabilization plan introduced by the
Minister.  However, during the Constitutional review process that
ended in May 1994, Congress failed to amend the Constitution to
allow enactment of the structural economic reforms necessary to
support Cardoso's plan in the long run.  As a result, it is up to the
next administration, taking office in January 1995, to undertake the
fundamental economic restructuring required for long term
stabilization.


-    Brief Synopsis of Political System, Schedule for Elections,
and Orientation on Major Political Parties

Brazil is a representative democracy organized as a federation of  26
states and the Federal District with three branches of federal
government, the Executive, Legislative, and Judicial Branches.  The
system is governed by the 1988 Constitution.  The President holds
office for four years and appoints his own cabinet.  There are 81
Senators and 503 Deputies.  Senators have an 8 year term, and
Deputies have a 4 year term.

States are organized similarly, with three branches of government.
Brazilian governors and mayors exercise considerably more power in
Brazil than their counterparts do in the United States.

National, state and municipal elections will take place on October 3,
1994.  The two leading candidates for President are Fernando
Henrique Cardoso (PSDB) and Luiz Inacio Lula da Silva (PT).
There are several other presidential candidates in the race which
may require two rounds to determine the winner:  the first on
October 3, and the second on November 15, 1994.

The major parties competing in the federal, state, and municipal
elections are indicated below, with the number of Senators and
Congressman currently serving:

PMDB- Partido do Movimento Democratico Brasileiro (27 Senators,
      95 Deputies)
PFL - Partido da Frente Liberal (14 Senators, 88 Deputies)
PPR - Partido Progressista Reformador (11 Senators, 66 Deputies)
PSDB- Partido da Social Democracia Brasileira  (11 Senators, 48
      Deputies)
PP  - Partido Progressista (5 Senators, 45 Deputies
PT  - Partido dos Trabalhadores (1 Senator, 36 Deputies)
PDT - Partido Democrata Trabalhista (5 Senators, 35 Deputies)
PTB - Partido Trabalhista Brasileiro (4 Senators, 29 Deputies)
PL  - Partido Liberal (16 Deputies)
PSB - Partido Socialista Brasileiro (1 Senator, 10 Deputies)
PSD - Partido Social Democratico (10 Deputies)
PRN - Partido de Renovacao Nacional (3 Senators, 4 Deputies)
PCdoB-Partido Comunista do Brasil (6 Deputies)