Mr Franco's previous great claim to fame was at the Rio carnival five years ago. While still president, he was photographed on a podium with his arm tightly round a local beauty. As his arm pulled up the T-shirt that young Lillian Ramos was wearing, front-row onlookers could hardly help but notice that she was wearing no underwear. At least one tabloid paper published a full-length picture.
But last week Mr Franco created waves of a different kind. Now governor of Minas Gerais state, one of Brazil's most important, he announced a 90-day moratorium on his region's $15bn (pounds 9.3bn) debt to the federal government. That gave rise to fears that Brazil itself might postpone or even default on its debts, in turn triggering a stock-market slump around the world.
Investors and middle-class Brazilians sold local currency and poured several billion dollars out of the country during the latter half of last week, fearing a currency collapse parallel to that of Russia last year. Warnings against panic came too late to prevent a devaluation of the Brazilian currency, the real.
So, why did 68-year-old Mr Franco do it? Some called him "crazy", citing the no-knickers incident, during which his inebriated justice minister also fell down some stairs. Some said it was spite: he has long been at odds with his successor, Fernando Henrique Cardoso. When in power, Mr Franco appointed Mr Cardoso finance minister, and saw him take the credit for a financial plan that tamed Brazil's 5,000 per cent annual inflation. He called Mr Cardoso an "ungrateful Jekyll and Hyde".
Others believe it is part of a political power-play in the run-up to presidential elections in 2002, in which Mr Franco is expected to run. But many believe the governor of Minas Gerais, which is almost broke, had little or no choice if he is to pay state workers their salaries and avoid what he warned could become "civil disorder". At least two of Brazil's other 26 state governors are now considering following the moratorium example.
While the world's focus at the end of the week was on the Sao Paulo stock exchange - the biggest in South America - Mr Cardoso's problem was not just to restore world confidence but to prevent unrest at home. He has faced food looting and land invasions in the past year, mostly organised by the Landless Rural Workers' Movement. Last year they were backed by the Catholic church, which said the looters were starving and had no choice.
Almost half Brazil's workers live on less than $2 a day, while a 10th of the 160 million population takes home half the country's income. Yesterday, it was off to the beach as usual for wealthy and middle-class Brazilians, including girls in fio dental (dental floss) monokinis. "I'll just have to buy smaller bikinis," laughed Laura de Oliveira, a 24-year-old office worker who was headed for Rio's Copacabana beach. "Actually, it'll have to be bigger ones. They're cheaper."
"In a way, there's a sense of relief," said Ricardo de Goes, a 42-year- old newspaper vendor in Sao Paulo. "People knew the real was overvalued. It'll soon be carnival [in February]. If we can get by until then, we'll survive. With the recession, people weren't buying much anyway. I guess we'll have to cut down on carnival costumes and the floats, but the show will go on."
But people like Mr de Goes had little to start with. Wealthier middle- class residents of Sao Paulo and Rio complain that they have lost world respect, and will no longer be seen as better off than most South Americans. "Now, people are treating us like Russians," said Jose de Souza, a restaurant owner in Sao Paulo. "I hope we're not going back to the days of hyper- inflation, when you walked out of your bank carrying bags full of money that became more worthless every day."
To fight the crisis, Mr Cardoso will have to reduce the crippling budget deficit, mainly by attacking social security. Brazilians have seen the value of their assets and savings shrink by 15 per cent in three days, and some US economists predict a loss of business of up to $40bn by American companies, enough to revise US growth predictions downwards by up to half a percentage point for this year.
And it all started with the man who was with the girl who forgot to bring her panties.
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