Brazil Bites the Fiscal Bullet

SAO PAULO: Phew. After three tries, Brazil's congress finally woke up and smelled the crisis, voting to approve large parts of President Fernando Henrique Cardoso's austerity plan late Wednesday. "We are on the right path," Cardoso said in a late-night speech after the session ended. "Foreigners... are beginning to understand that Brazil is advancing as it should." And not a moment too soon. "They really had no choice but to pass at least some of the plan," says TIME senior economics correspondent Bernard Baumohl. "Now, the worst is probably over."

The key success was a pension bill that will raise about $2.5 billion a year (4 billion reals at the latest exchange rate) by increasing pension contributions from civil servants and making retired public-sector workers pay for their pensions. The legislation should pay off almost immediately; encouraged that Brazil means business, the International Monetary Fund will quickly release another $9 billion in credit that Brazil needs to meet a host of short-term debt payments. And those payments will be a whole lot cheaper now that foreign markets have a reason to believe. "With the increased confidence that will come from this, we may have seen an end to the depreciation of the real," says Baumohl. "For now at least, Pandora's box has been shut."