Forget meltdown, it's carnival time

The currency's dropped 40 per cent in a month. But they've still got an awful lot of samba in Brazil, finds Phil Davison

CRISIS? WHAT CRISIS? Nothing can stop the Rio carnival. Brazilians from all walks of life swept Latin America's wide-spread financial problems under the carpet yesterday at the start of the annual extravaganza.

They have seen Brazil's money lose 40 per cent of its value over the past month, but all that was forgotten as the five-day fiesta got under way in Rio and several other cities. Even the Rio stock exchange closes during the festivities and will not reopen until Thursday.

The financial uncertainty may have forced some people to cut corners on their exotic costumes. Television stations have been running programmes telling people how to use cheap materials for their dance dress and elaborate floats.

The famed 4,000-strong samba groups from the slums, who vie for the coveted annual singing, dancing and costumes prize, had to seek sponsorship from state governments after the costs of their imported costumes and float decorations skyrocketed.

But for a couple of nights, samba, singing and sex will replace talk of high interest rates, devaluation and IMF loans. Manufacturers gave away free condoms in the streets to make sure the fun was safe.

Despite the financial crunch, the 70,000 tickets to the Rio "sambadrome", a half-mile long grandstand where most of the action takes place, were snapped up at prices ranging from a paltry pounds 2 to pounds 10,000 for a luxury booth.

The good news was that the devalued Brazilian currency, the real, brought to the city many more tourists than usual, from as far away as Canada, filling hotels and spending dollars.

In an apparent attempt to clean up the carnival's image - long linked to mafia mobsters who financed the samba groups as part of their power base - police arrested a top carnival organiser on the eve of the party.

Luis Pacheco Drummond, head of the Samba Schools League, was charged with last year's murder of a gambling racketeer, but the timing of his arrest appeared aimed at sending a message to mob leaders involved in the carnival. Police said Drummond and his alleged victim had clashed in a territorial dispute over an illegal but popular private lottery system known as the jogo do bicho, or animal game.

The mobsters who run the lottery, known as bicheiros, are treated like godfathers at the carnival, surrounded by bodyguards and beautiful women. Many cariocas, as Rio's residents call themselves, predicted that the samba school run by the bicheros would win the prestigious dance, song and costume prize because of sympathy for Drummond. They were likely to sing newly written samba songs protesting his arrest, said residents.

One expected guest at the main parades today and tomorrow is likely to be Itamar Franco, former president of Brazil and now the controversial governor of Minas Gerais state. Mr Franco made headlines at the carnival a few years ago when he was president, being photographed on a podium with a knicklerless young woman.

A month ago Mr Franco triggered Brazil's latest financial crisis when he threatened to default on his state's debt to the central government. Several other governors followed his lead, panicking investors and raising fears that Brazil itself would default on its domestic and foreign debt.

Just before the carnival got under way, the central government agreed to cover half of the Minas Gerais foreign debt, and Mr Franco agreed to make payment on the other half.

The compromise eased the fears of international financiers concerned that Brazil's crisis will send shock waves through Latin America, into the United States and across the world.

The crisis has already caused tension within the so-called Mercosur common market, linking Brazil, Argentina, Paraguay and Uruguay. The devalued real has put Argentinian exporters at a distinct disadvantage and there is talk of imposing emergency tariffs, something that would destroy Mercosur's very raison d'etre.

The carnival will be a welcome diversion for Fernando Henrique Cardoso, the beleaguered President of Brazil, whose popularity has plunged over the past month as a result of the financial crisis. Polls show only one in five Brazilians approves of his current job performance.

His main concern now is to win back international confidence in Brazil, first by meeting IMF conditions for a pounds 25bn bail-out package aimed at preventing a Russia-style "meltdown". The President has come under increasing criticism not only from state governors but from opposition politicians, labour groups and even the country's influential Catholic bishops.

The latter view IMF support with suspicion and they have accused the President of "total submission" to the international financial institution. They warn against tax increases or other austerity measures which would widen the dramatic rich-poor divide.

Some political analysts warn that too much reliance on the IMF could turn more and more Brazilians against Mr Cardoso's free-market policies and possibly lead to what they call the "Venezuelan scenario". They are referring to the recent election in Venezuela of Hugo Chavez, a former army colonel and a populist whose revolutionary rhetoric has left international financiers jittery.

But for now, it's samba, samba, samba. Later today, to the pounding of 300-strong percussion bands, the elaborately garbed dancers will gyrate past the sambadrome the way only Brazilians can.

Come Ash Wednesday, the crisis will be back to haunt revellers suffering their annual hangovers.