Olinda, host of Brazil's most traditional Carnival, is involved in a controversial campaign to get private businesses to pick up the tab for a traditional money-loser.

While some residents fear the yearly pre-Lenten celebration could get too commercial, city officials say they're simply following a trend: Brazil has sold state-owned steel, mining and telephone companies to weather a financial crisis, so why not privatize Carnival?

''We've never made money on Carnival,'' says Olinda's finance secretary, Mauricio Chaves. ''At best we get back about 20% of what we put in.''

Brazil comes to a standstill for the annual four-day bash that precedes the Christian observance of Lent. Best known is the glittering samba parade in Rio de Janeiro, but many cities, such as Olinda, have their own traditions.

The event's growth has been overwhelming in this 450-year-old city perched on a hillside overlooking the sea, 1,160 miles northeast of Rio de Janeiro.

During the festivities - which officially begin Saturday but are already in full swing - some 600,000 people a day crowd into this city of 30,000.

Chaves' idea was to turn over certain streets to companies, which would pay for entertainment and decoration in return for advertising rights. He had hoped that privatization would cut the $660,000 cost of the festival in half.

But Brazil's currency devaluation last month wreaked havoc with corporate finances, and many would-be sponsors backed out at the last minute. Chaves had expected to get contracts for 11 areas but managed to sign only four - the alcoholic beverage companies Brahma, Antarctica and Pitu and the cellular phone marketer Atelpe.

Still, he expects to fill all the slots next year.

Not everyone supports the city's changes.

''If they privatize Carnival, they will kill it,'' said Mario Sotomaior, a specialist in Brazilian folklore. ''Traditional Carnival can only survive if it remains spontaneous.''

Others said the event will resist efforts to commercialize it.

''They'll never kill Carnival. The people of this city are too irreverent,'' says Eraldo Jose Gomes, a founder of the group ''John Travolta Block'' - named after the actor who starred in the 1977 film ''Saturday Night Fever.''

The group plays frevo, a speedy rhythm derived from polka and military marches. Parasol-carrying dancers parade through the streets, accompanied by revelers waving banners and others dressed in enormous doll costumes.

Gomes and his two partners spent $2,600 to make the giant papier-mache dolls and costumes and to pay the band.

The sum is well beyond what the three manual laborers earn. But in true festival spirit, they borrowed money from friends and family to pull it together.

''I don't make a living from Carnival,'' said Gomes' partner Marcio Botelho. ''I live for Carnival.''