CHANGING CULTURES IN LATIN AMERICA

WELLINGTON, NEW ZEALANDSEPTEMBER 26, 2008

GOVERNING BRAZIL LESSONS AND CHALLENGES

•

JOÃO PAULO M. PEIXOTO•

PROFESSOR OF GOVERNMENT•

UNIVERSITY OF BRASILIA

BRAZIL IN THE WORLD

B R A Z I L

BRAZIL IN NUMBERS

an introduction

BRAZIL IN NUMBERS

• Population: 196.342 mil (+half of SA)• Size: 8.514.205 sq km (n/half of SA)• GDP (PPP): $1.836 trillion (+half of SA)• GDP (PPP): per capita $9,700• GDP Growth Rate: 5.4% (est.)• Exports: $160,6 billion (f.o.b.)• Imports: $120,6 billion (f.o.b.)• Budget: $244 billion

BRAZIL IN NUMBERS

• PUBLIC DEBT: 45.1% GDP• CURRENCY: BRL$1,8 to $1,00• INFLATION RATE: 3.6% (est.)• THREE MAIN EXPORT PARTNERS• U.S.: 14.4%• CHINA: 9.2%• ARGENTINA: 8.3%

BRAZIL IN NUMBERS

• Labor force: 99.47 million (2007 est.)

• Labor force - by occupation: agriculture: 20% industry: 14% services: 66% (2003 est.)

• Unemployment rate: 9.3% (2007 est.)

• Population below poverty line: 31% (2005)

BRAZIL IN NUMBERS

• IMPORT COMMODITIES

• MACHINERY, ELETRICAL AND TRANSPORT EQUIPMENTS, CHEMICAL PRODUCTS, OIL, AUTOMOTIVE PARTS AND ELETROCNICS

BRAZIL IN NUMBERS

• THREE MAIN IMPORT PARTNERS:• U.S.: 20%• CHINA: 8.9%• ARGENTINA:8.1%

• RESERVES OF EXCHANGE AND GOLD:

• $200 BILLIONS (2007)

BRAZIL IN NUMBERS

• EXPORT

• COMMODITIES, TRANSPORT EQUIPMENTS,IRON ORE, SOYBEANS,FOOTWEAR,COFFEE,AIRPLANES AND AUTOS

CULTURAL, ETHNIC, BACKGROUND

LANGUAGE PORTUGUESE

ETHNIC GROUPS

• WHITE: 53.7%• MULLATO (mixed white and black):

38.5%• BLACK: 6.2%• OTHERS (include Japanese, Arab,

Ameridian): 0.9%

• GOVERNMENT TYPE• FEDERAL REPUBLIC • PRESIDENTIAL

• ADMINISTRATIVE DIVISIONS• 26 STATES AND 1 FEDERAL DISTRICT

• CAPITAL BRASILIA

BRAZIL POLITICAL

LEGISLATIVE BRANCH• BICAMERAL NATIONAL CONGRESS

• FEDERAL SENATE• 81 Senators

• 3 members from each state and Federal District elected to serve eight-years term. One third and two thirds elected every for

years

LEGISLATIVE BRANCH

• CHAMBER OF DEPUTIES• 513 seats

• MEMBERS ELECTED TO SERVE FOUR YEARS

• 4 MAJOR POLITICAL PARTIES• PMDB,PT,PSDB,DEMOCRATS

JUDICIAL BRANCH

• SUPREME FEDERAL TRIBUNAL• 11 MINISTERS APPOINTED BY THE PRESIDENT OF THE

REPUBLIC

• HIGHER TRIBUNAL OF JUSTICE• REGIONAL, FEDERAL, TRIBUNALS

POLITICAL EVOLUTION

• 1500 DISCOVERED BY THE PORTUGUESE

• 1500 to 1822 PORTUGUESE COLONY

• 1822 INDEPENDENCE

• 1822 to 1889 EMPIRE (UNIQUE IN L.A.)

• 1889 REPUBLIC

• 1930 MODERN BRAZIL

MAIN PHASES OF THE BRAZILIAN STATE (since 1930)

The golden years: from the keynesianism of 30’s to the “quasi- liberalism” of the 90’s.

Vargas Era

Military Regime

Collor and the Washington Consensus

FHC Era

Lula’s Administration

PresidentialPresidentialLimited Parliamentary

Government System

Dictatorship

Provisory Government 1889 to 1891 and

Constitutional 1891 to 1930 Provisory Government 1930 to

1934 andConstitutional 1934 to 1937 Dictatorship 1937 to 1945

Pre-constitutional 1822 to 1824

andConstitutional1824 to 1889

Type of Constitution

DictatorshipLimited DemocracyLimited Democracy

Political Regime

Unitary in practice, Federal

in theoryFederalUnitaryState

Structure

RepublicRepublicMonarchyGovernment Strucure

From 1937 to 1945From 1889 to 1937From 1822 to

1889Brazilian

State

EVOLUTION OF THE BRAZILIAN STATE (from 1822 to 1945)

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EVOLUTION OF THE BRAZILIAN STATE (from 1946 to 2008)

PresidentialPresidential

Presidential1946 to 1961

Parliamentary1961 to 1963Presidentialsince 1963

Government System

ConstitutionalConstitutionalConstitutionalType of Constitution

DemocracyAuthoritarianLiberal DemocracyPolitical Regime

FederalFederalFederalState Structure

RepublicRepublicRepublicGovernment Strucure

From 1985 until today

From 1964 to 1985

From 1946 to 1964Brazilian State

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POLITICAL AND ECONOMIC FEATURES OF CONTEMPORARY BRAZIL: 1930 – 1985

Period Administration Features1930 - 1945 Getúlio Vargas Industrialization, Public Sector

Modernization, State Intervention in the Economy.

1946 - 1950 Gaspar Dutra Economic Liberalization, Redemocratization, Currency Crises

1950 - 1954 Getúlio Vargas Nationalism, Populism, Statism

1955 - 1960 Juscelino Kubitschek Development with Inflation, “Plano de Metas” , New Capital

1960 - 1964 Jânio Quadros João Goulart

Right and Left Wing Populism, “Structural Reforms”, Parliamentary System, Planning

1964 - 1985 Castelo Branco, Costa e Silva, Emílio Médici, Ernesto Geisel,João Batista Figueiredo

Nationalism, Structural Reforms, Economic and Administrative Modernization, Ideology of National Security and Development, External Debt

PeriodPeriod AdministrationAdministration FeaturesFeatures1985 - 1989 José Sarney New Republic, Constitution

of 1988, Economic Nationalism, High Inflation, “Plano Cruzado”

1990 - 1992 Fernando Collor Economic Reforms, Neoliberalism, Public Sector Reform, Impeachment, Privatizations

1992 - 1994 Itamar Franco “Plano Real”, Statism

1995 - 2002 Fernando Henrique Cardoso “Plano Real”, Economic Stabilization, Structural Reforms, State Modernization, Privatization, Re-election

2003 - 2007 Luiz Inácio Lula da Silva Economic Stability, Populism, Statism and Democratic Left

POLITICAL AND ECONOMICAL FEATURES OF CONTEMPORARY BRAZIL : 1985 - 2007

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SEVEN CONSTITUTIONS OF BRAZIL

Length Observations Lasted for

1824 to 1891 Empire, the one that lasted more

67 years

1891 to 1934 First Republican Constitution 43 years

1934 to 1937 The one that lasted less 3 years

1937 to 1945 “New State” 8 years

1946 to 1967 Liberal 21 years

1967 to 1988 The Constitution of the Military Regime

21 years

1988 onConstitution of the “New Republic”, emphasis at Economic Nationalism, “Pro - State” and Progressive on Social issuesS

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THE VARGAS ERA1930 – 1954Institution Building

Reforms

Public Sector Modernization, DASP, Careers,Merit System, Scientific Administration – Weber

Objectives

Administrative

Labor First Legislation – Labor Code and Courts

Trade Unions Pluralism and Autonomy

Fiscal/Tax Flexibility

Political Electoral Code and Court

Industrialization Economic Nationalism (CSN – BNDES –PETROBRAS)

JOÃO GOULART ADMINISTRATION‘REFORMAS DE BASE’

(1961 – 1964)

REFORMS OBJECTIVES

Agrarian Reform Redistribution of land, creating numerousclasses of small owners.

Urban Reform Planning and regulations for city development.

BankingReform Creation of a financial system dedicated to attendnational needs.

Electoral Reform Allow the iliterate to vote (about half the adultpopulation) as well as the military.

Foreign CapitalReform

Regulation and control of foreign investment andprofit/capital flow.

Educational andUniversity Reform

Teaching and research alligned with nationalinterests and social needs.

Tax Reform Emphasis on collecting direct taxes, such as theprogressive income tax.

Agrarian Reform Land Statute, rural settling andcolonization.

Education Reform Structural and educational reforms in the three levels of the system.

Tax/Fiscal Reform Modernizing the tax/fiscal systems, creation ofnew taxes, and redistribution of theincome tax.

Administrative Reform Public Sector modernization, deburocratization, administrativereorganization.

Economic Reform Economic stabilization, business liberalization, financial system reform.

Judiciary Reform Modernization of the Judiciary system.

Political Reform Two party system and indirect elections.

MILITARY REGIME (1964 – 1985)

REFORMS OBJECTIVES

Conservative Modernization

Economic modernization, privatization and business liberalization

Simplification and consolidation of indirect taxes, modernize and simplification of the collection and the auditing by the Revenue Service (RF), tax/fiscal system reform.

Review of the stability of public servants, careers structure, rationalize the public expenditures and salaries, de-regulation and administrative reorganization.

Review of Higher Education and regulation of the university’s autonomy.

End State tutelage, flex the labor laws.

Review of the ITR, encourage rural settling.

Pension reform, revenue system.

REFORMS IN THE COLLOR ADMINISTRATION (1990-1992)

REFORMS OBJECTIVES

Tax/Fiscal Reform

Public SectorReform

Higher EducationReform

Union and LabourReform

Agrarian Reform

Social SecurityReform

Economic Reforms

Globalization and Neoliberalism

FHC ADMINISTRATION(1995 – 2002)

Economic Reform End of State monopolies, economic stability, fiscal adjustment, privatization, publicservice concessions.

State Reform Regulatory agencies, administrative reformand reorganization, fiscal responsability law (New Zealand).

Agrarian Reform Rural settling.

Tax/Fiscal Reform Review of the tax system.

Social security Reform Review of the public sector’s pensionsystem.

Political Reform Electoral system, reelection, party system.

Judiciary Reform Modernization of the Judiciary.

REFORMS OBJECTIVES

Quase-Liberalism

FHC ADMINISTRATION LEGACY 1995 - 2002

• Structural Reforms• International Presence• Presidential Diplomacy• Economic Stability

LULA ADMINISTRATION CHALLENGES 2003 - 2008

- Govern Efficiently at the Federal Level

- Control the PT and its Ideology

- Maintain Economic Stability- Implement the Social Agenda- Promote Sustainable Development- Carry on the Reform Agenda

Lula Administration

An Administration of Programmes

NOT

An Administration of Reforms

ACTION OBJECTIVESocial Security Reform

Reduce social security deficit

Fiscal and Tax Reform

Reduce the costs on production and wages. Simplify the system by creating a IVA Tax charged from the final consumer, instead of the great amount of taxes that exists today.

Labor ReformFlexibility on the labor relations and reduction of labor costs for the companies.

Bureaucratic Simplification

Improve business environment and citizenship

Poltical Reform

Strengthen the parties trough party loyalty, public financing of the campaigns, discussions over the improvement of politicians’ links to their constituencies (districts) and party list system.

Unfinished Reforms

State

Mar

ket

State versus Market

1990 - 2008

TENDENCY FOR

MARKET SERVICES FOR THE RICH(MIDDLE CLASS)

PUBLIC SERVICES FOR THE POOR(LOWER CLASSES)

Some obstacles for Growth

Public Services Infrastructure

•Unefficient public services as health, education, public safety and justice.

•Precariousness of infrastructure in transportation, energy, ports and sanitation.

THE BACKWARDNESS EQUATION The reasons for small growth in Brazil - % of the GNP

The government raises taxes...

1995 28,2

1997 29

1999 31

2001 33,5

2003 34

2005 37

...spends more to sustain the administrative apparatus...

1995 14,8

1997 15,4

1999 16,1

2001 17,3

2003 16,9

2005 18,8

...and invests less and less. 1995 0,6

1997 0,6

1999 0,4

2001 1,2

2003 0,4

2005 0,5

Source: Ministério do Planejamento e Fazenda, IBGE, Banco Central. Elaboração Raul Velloso

Perceptions of Obstacles to Growth—Brazil

Source: World Bank, Investment Climate Survey, 2003

Source: World Bank, Investment Climate Survey

Labor Regulations as an Obstacle for Growth

Source: Doing Business 2004

International Comparison of Days Needed to Start a Business

Topics for the Future

Strengthen citizenship

Improve the quality of essential public services (education; health and public safety)Reduce bureaucracyImplement necessary reformsMore Society, less State

What must be done is common sense

The failure remains at the implementation level

B R A Z I L

THANK YOU

AKU MIHI NUI KI A KOE

JPMP@UNB.BR

BRAZIL: HISTORICAL DATES

154918081815182218241889

193019461964198519902002