With a population of almost half the total for South America, abundant natural resources, and Latin America's most sophisticated and diversified economy, Brazil should be poised for growth.

"In terms of sheer economics, Brazil has the best long-term potential in Latin America," observed Geoffrey Dennis, senior vice president and head of Latin America research for James Capel in New York.

Yet even after more than two decades of political chaos, Brazil is again confronted with a major government crisis amid rising possibilities that the country's president, Fernando Collor de Mello, may be forced to resign. He has been accused of running a multimillion-dollar bribery ring.

Ruining Economic Plans

The crisis threatens to torpedo the best-laid plans for economic reform and to destroy programs agreed on with the International Monetary Fund as a condition for regaining critical access to international capital markets.

But Brazilian bankers and analysts are taking developments in stride.

They argued that, even if the political crisis creates short-term uncertainties, Brazil would continue to adopt reforms needed to brake inflation, eliminate deficit spending, and increase competition by reducing protectionist trade tariffs.

"The political battle with postpone everything," said Enrique Mireilles, country manager for Bank of Boston in Sao Paolo. "But whether he [Mr. Collor] stays or leaves, there is general consensus about a way to go, and this is a positive."

Betting on Brazil's Potential

On the plus side, the country has foreign exchange reserves of more than $20 billion - far greater than in the past - and appears likely to post a $14 billion to $15 billion trade surplus this year.

Grain harvest, mainly of soybeans and corn, are at record levels, and private capital continues to flow in, albeit at a reduced pace.

Salomon Brothers projected capital inflows will reach $15 billion to $20 billion by yearend, compared with $11.6 billion in 1991 and $5.7 billion in 1990.

A privatization program has also been launched, raising more than $3 billion in the 12 months through July 31, and a major tax reform package is now before the Brazilian Congress.

Numbers Are Improving

Gross domestic product is rising slowly and is expected to grow 1% to 2% this year, compared to a 4.6% decline in 1991.

Import tariffs have been reduced, and inflation, although still running at more than 20% a month, is expected to fall to around 15% toward yearend.

Still, Brazil faces a host of problems.

Until the government's deficit spending is curbed and inflation brought under control, Brazil is unlikely to obtain International Monetary Fund support for a $44 billion debt-reduction agreement with creditor banks.

Without such an agreement, Brazil would be unable to regain the credibility it needs to fund economic development through international financial markets.

Tacit IMF Support

A recent by Salomon Brothers said the IMF is likely to postpone approving financial support for the debt-reduction agreement rather than risk worsening the situation by an outright rejection.

"We do not believe that the IMF agreement will be suspended even if Brazil is not making targets or that the Brady Plan would be in danger of being canceled," Salomon wrote. "The IMF does not want to be perceived as the deal breaker for the Brady agreement."

But predicting Brazil's future can be very much a guessing game, so most analysts offer not one but several possible scenarios based on just how fast the constitutional crisis is resolved.

"The situation remains depressed," admitted Mr. Mireilles of Bank of Boston. "Everybody is holding back on decisions."

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