<P> The new military president adopted a policy of almost total alignment with the United States . "What is good for the United States, is good for Brazil", asserted General Juracy Magalhães, the Minister of Foreign Relations of the Castelo Branco administration . In accordance with this thought, Castelo Branco took a series of pro-American policies in both the foreign and domestic agendas: in 1964 he cut ties with Cuba and China; in 1965 he sent troops to Santo Domingo in support for the United States occupation of the Dominican Republic; he opposed the creation, proposed by Chile, of a Latin American trade area that would exclude the U.S.; and defended the creation of an Inter-American Peace Force, a Pan-American military force that would be made up of military contingents of all countries in the Americas . The force would be headed by the Organization of American States, and its main function would be to intervene in any nation of the region where there was danger of a leftist revolution . </P> <P> In forming his economic team, Castelo Branco took to heart the advice that had been given to him by American officials . This, one sees in his indication for the Planning Ministry of Roberto Campos, a U.S. - educated monetarist economist . Together with the Minister of Finances Otávio Bulhões, Campos implemented reforms to both reduce inflation and make the Brazilian environment more open to foreign capital . Those included: public spending cuts, tax hikes on consumers and wage - freezing to lower inflation; massive privatizations; elimination of restriction on capital remittances to foreign banks; tax cuts to multinational profits; and the pulling out of subsidies and legislation that shielded national industries from foreign competition . </P> <P> From 82% in 1963, annual inflation fell to 22.5% in 1967 . In 1966, the budget deficit stood at 1.1% of GDP, from 3.2% in 1964 . Therefore, if one takes into account the aims of such economic policies, then they can be thought of as effective . But they were unpopular with both the broader society and the nationalistic sectors of the military . The latter accused the economic team of being sellouts (entreguistas) bent on destroying national industries and delivering the country to U.S Multinationals . Such accusations often appeared in the Brazilian press, which went mostly uncensored during the 1964--1967 period . The public attributed to the American government an immense political clout over the Brazilian regime, an impression encapsulated in a mock - campaign commenced by a humourist, Otto Lara Resende, whose motto was: "Enough with middlemen--Lincoln Gordon for president!" Gordon himself complained that American advisors were implicated in "almost every unpopular decision concerning taxes, salaries and prices ." </P> <P> The social consequences of such economic plan, the PAEG, were negative . Though inflation had been reduced, it was still high for international standards . And in combination with the wage - freezing policies, it caused Brazilians' real income to fall sharply--by about 25%--from 1963 to 1967 . As a consequence, malnutrition and infant mortality rose . The Brazilian industrial elite, too, began to turn on the government; not only it had been hurt by the sudden market opening, but also the monetary tightening applied under the PAEG had dried out credit and induced a recession in output . </P>

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