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Eight Years of Pragmatic Leadership in BrazilA Supplement to: Fernando Henrique Cardoso: Reinventing Democracy in Brazil
Last updated: January 1, 2003By Ted Goertzel, Ph.D.
Professor of Sociology, Rutgers University, Camden NJ 08102, USAhttp://crab.rutgers.edu/~goertzel/fhc.htm
Fernando Henrique Cardoso entered his eighth and final year as President of Brazil in remarkably
good shape. According to an interview with the Financial Times, life was serene in the Alvorada Palace.
Warm breezes wafted through the corridors and Cardoso emerged refreshed each morning from his swim in
the Olympic sized pool. Of course, there were political crises, but he took these with a grain of salt, telling
the interviewer that "since I've been in office there have been only two years when there wasn't a crisis."1
Certainly Brazil's crises paled into insignificance when compared to Argentina's disintegrating economy,
Venezuela's coups and counter-coups, and Colombia's escalating civil war.
As his presidential term approached its end, even the intellectual and journalistic communities
were coming to a new appreciation of his virtues. On March 9, 2002, one of Brazil's most respected
economic columnists, Luis Nassif, published a remarkable tribute to Cardoso's leadership in the Estado de
São Paulo: 2
In 1995, we still had a backward political society. The impeachment campaign had
placed new politicians on the scene. But even the fall of Fernando Collor, as his entire political
history, was much more the result of his incapacity to ally himself with the regional political
chiefs.
Almost eight years later, the political chiefs are disappearing one by one. There are
those who see behind each of these disappearances the direct involvement of Fernando Henrique
Cardoso. And there are those who believe that everything has happened despite him, as part of
the spontaneous maturing of the country's political institutions.
What happened in this period was something more subtle that can be traced back to the
beginning of the first FHC administration, as I stated in a column called "A Work of Political Art"
that I wrote on July 3, 1995. The strategy consisted in building an alliance with the old political
machines, conceding to their philosophy of government by distributing favors, so long as it could
be done without compromising the administration's project of definitive political reform.
1
At the same time, FHC the intellectual played his best role, that of professor. In these
almost eight years, he did away with the personalism that always transformed the President of the
Republic into a father figure for everyone. At times he even exaggerated his professorial role, not
even assuming responsibilities that really were his. But, day after day, this depersonalization of
power and social policy, and non-interference with state government and the other branches of the
federal government, enriched the institutional life of the country. Everything else was
consequence.
Cardoso had accomplished his life's major goal: the reestablishment of political democracy in
Brazil. There was no question that he would finish his term in office and be succeeded by the winner of
legitimate, democratic elections. Of course, this maturing of the country's political institutions was not his
personal achievement, but Brazil's. If it had depended on a single individual, it would not have been real or
lasting. The essence of democratic leadership is helping the system to act effectively instead of depending
on a charismatic leader or on ideological gimmicks. Cardoso had worked on that project all his
professional life, in a variety of roles and through many crises, and his work was bearing fruit.
The general public, also, had become more appreciative of his efforts, despite his limitations as a
communicator. His standing in the public opinion polls, which had dipped sharply after the 1999
devaluation, had recovered. In a March, 2001, Sensus poll his positives exceeded his negatives for the first
time since December, 1998, with 33.3% giving him a positive rating, and 26.5% a negative rating. The
percentages vary according to how the questions are phrased; other polls available to Cardoso's office at the
same time showed him at 30% "excellent or good," 50% "regular" and 19% "bad or awful."3
Of course, maintaining democratic continuity was not his only responsibility. Brazilians wanted
economic growth, a lessening of poverty and inequality, better health and education, safety from crime,
environmental protection, cultural development, and all of the good things that people everywhere want for
the taxes they pay. Cardoso stated that "liberty is fundamental, but democracy is not limited to party or
electoral institutions - it is extended to society. It requires a more agile and competent state. It is possible
within the limits of democracy, to carry out social policies that lessen the amount of poverty."4
As a sociologist, Fernando Henrique had always believed gathering the best objective, statistical
data to evaluate any social program. As a pragmatist, he asked to be judged by the results of his programs,
2
not by ideological principles. Brazilian government agencies have long gathered excellent statistics on
economic and social trends, and at the end of his term of office, Cardoso and his staff began to gather the
data for an assessment of their accomplishments and of the challenges that remained. Cardoso's annual
messages to Congress read like a social science report, full of statistical data and scholarly explanations of
the forces behind the social trends. His report to Congress on February 15, 2002, was titled "Eight Years of
Stability, Development, and Social Conquests."5 It was his report to the nation on his presidency.
He frankly acknowledged that there had been problems in the previous year, the most serious of
which was a sustained drought that forced electricity rationing because of the country's very heavy reliance
on hydroelectric power. Economic growth had been only 2% for the year, instead of the 4% to 5% that had
been anticipated. Nevertheless, Cardoso was convinced that Brazilians should "feel confident when they
think about the last seven years and remember how much Brazil has advanced…it is impossible to deny, in
light of the facts, that the reforms have been profound and that they made life better for Brazilians."6
But in a democracy there are always those who deny and disagree. Leftist critics James Petras
and Henry Veltmeyer argue that “from the point of view of national economic development, there is very
little doubt that FHC will be the worst Brazilian president of the twentieth century.”7 They accuse Cardoso
of leaving the country in a state of “regression and stagnation.”8 Their book, Brasil de Cardoso: A
desapropriaçao do pais, was published in 2001, and their criticisms reflect the mood caused by the
exchange rate crisis of 1999. Their arguments provide a useful counterbalance to Cardoso's optimistic
account. A more balanced appraisal can be found in the book Brazil in the 1990s: An Economy in
Transition, edited by Renato Baumann, the head of the United Nations/Economic Commission for Latin
America office in Brazil. We will make use of Cardoso's annual report and these two independent sources
in our evaluation of the social and economic record of Cardoso's presidency. Our argument is supported
with statistical data and graphs, many of which are from a presentation by Eduardo Graeff of President
Cardoso's office that is available for download from this author's WEB site.9 These statistics are from
standard sources available to anyone. The disagreements are not about the statistics, but about their
interpretation.
Economic Indicators. Cardoso was elected because of his success, as finance minister in the
previous administration, in ending Brazil’s hyperinflation. Eight years later, this remains his most
3
remarkable accomplishment. Even his severest critics, Petras and Veltmeyer, acknowledge that “one of the
greatest errors committed by Lula and by the PT [the Workers Party and its leader], in 1994…was to
grossly underestimate the social and political impact of hyperinflation and of Cardoso’s plan to stabilize the
value of the Real.”10 Maintaining a stable currency was absolutely central to Cardoso’s credibility, and he
kept this commitment to the Brazilian people, as Chart One11 shows.
The remarkable oscillations in this graph recall many dramatic events in Brazil's recent history:
the failure of the Cruzado plan in 1987, the Bresser plan in 1988, the summer plan in 1989, the Collor Plans
in 1991 and 1992, and finally the success of Cardoso’s Real plan in 1994. The graph's stability since 1994
disguises the drama of the near failure of the Real plan in 1999 when speculative pressures forced Cardoso
to allow the Real to float against the dollar. At that time, Brazilians were fearful that everything Cardoso
had accomplished was lost and that the country would return to hyperinflation and economic recession.
Petras and Veltmeyer were writing in the aftermath of that crisis when they accused Cardoso of leading the
country into regression and stagnation. But Cardoso and his team brought the country through the crisis of
1999 without reverting to hyperinflation.
This economic stabilization was not without cost. In the first three quarters of 1999, Brazil was in
a mild recession with declines in the Gross Domestic Product of –0.21%, -0.65% and –0.41%. In the fourth
4
Inflação 1983-2001 (IPCA mensal)
14%
20%
37%
82%
21%26%
47%
10%
jun/
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Fonte: IBGE
Chart One: Monthly Inflation Rates in Brazil: 1983-2001. Source: Instituto Brasileiro de Geografia e Estadistica.
quarter of 1999, however, there was a positive growth rate of 0.79% and growth resumed to over 4% by the
last two quarters of 2000 and the first quarter of 2001.12 The remainder of 2001 was disappointing because
of the electricity crisis, the crash of “dot.com” stocks in the United States, and contagion from the collapse
of the Argentine economy. Fortunately for Brazil, the United States recovered quickly and the relationship
with Argentina had already been minimized because of the incompatibility of Brazilian and Argentine
exchange rate policies. The Brazilian economy ended 2001 with a growth rate of about 2%, and was
expected to resume better than 4% growth in 2002.13
For the eight years of Cardoso’s presidency, Brazil’s per capita economic growth has been
moderate, with significant variations from year to year, as shown in Chart Two.14 There was a period of
rapid growth beginning in 1993, as the economic stabilization plan took hold. The first few years were
ones of great enthusiasm, sustained by an artificially high valuation for the Real. Imports were cheap,
wages were up, everyone seemed to be doing well with no bill to pay. But the country was living above its
means, depending on borrowing at high interest rates. Cardoso warned that there were problems, and kept
trying to get Congress to raise taxes and cut spending, but it was hard to create a sense of urgency when
everything seemed to be going so well. Economists advised that it was necessary to lower the value of the
Real, but Cardoso and his advisors were reluctant to do so for fear of re-igniting inflation and hurting
Cardoso’s chances for reelection in 1998. Economic pressures kept building until the Russian crash in
1998 forced a devaluation in 1999. After the devaluation, growth resumed.
5
Chart Two: Annual Change in Per Capita Gross Domestic ProductSource: Instituto Brasileiro de Geografia e Estadistica, author’s estimate for 2001
Cardoso’s economic policies have imposed significant hardships, most especially on state
employees and on relatively well paid workers in state industries. Privatization of state industries has
generally meant downsizing and the loss of jobs by workers who enjoyed job security under the statist
system. As Chart Three15 shows, unemployment in Brazil’s metropolitan regions increased sharply in 1998
and 1999, due in large part to the exchange rate crisis. This high unemployment, among relatively well
paid and politically vocal workers, contributed greatly to Cardoso’s low ratings in opinion polls during this
period. Unemployment has begun to come down with the revival of the economy after the 1999
devaluation, but it remains a source of significant distress.
This distress, however, has not been felt primarily by the poor, but by relatively advantaged
workers. As critics never cease to repeat, Brazil has a great deal of poverty and a higher index of inequality
than most nations. Cardoso is acutely aware of this, and just as committed as anyone to improving the lives
of the poor. The question is, what impact have his policies had? A comprehensive study released in 2002
by two of Brazil’s top specialists on measures of inequality – Marcelo Neri, Chief of the Centre for Social
Policies of the Fundação Getulio Vargas and José Márcio Camargo Professor of Economics at the Pontifíca
Universidade Católica in Rio de Janeiro- concluded that “1990-1997 is the most interesting period, owing
to the implementation of economic reforms. Our benchmark inequality measure falls from 0.748 to 0.699.
This downward movement is followed by almost all inequality measures.”16
6
Taxa de desemprego nas regiões metropolitanas
4,8%
5,7%5,3%
5,1%
4,6%
5,4%5,7%
7,6% 7,6%
7,1%
6,2%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
*
Fonte: IBGE, Pesquisa Mensal de Emprego
Chart Three: Unemployment Rate in Metropolitan RegionsSource: IBGE
By the best measures the United Nations Economic Commission for Latin America has, Cardoso’s
reforms have lessened inequality in Brazil. But inequality is not the most important measure of a society's
accomplishments. What is more important is the absolute level of poverty and misery, not how the poor
compare with others. There are a number of measures of this, including the poverty index shown in Chart
Four.17
As Chart Four shows, Brazil’s poverty index declined significantly in the immediate aftermath of
the Real Plan, although not as sharply as it did in 1985 and 1986 under the Cruzado plan. This is
understandable because inflation is most burdensome for the poor who have little ability to shelter their
incomes. Since 1995, poverty has remained stable at about 30% of the population, with a little less than
half of these severely poor or “indigent.” It has not returned to previous levels as it did after the failure of
the Cruzado plan. Another useful measure is the ratio between the minimum wage and the cost of a
standard market basket of commodities, as shown in Chart Five.18 This chart shows a sharp increase in the
purchasing power of the minimum wage in 1995, and a slow improvement since then.
7
População abaixo da linha de pobreza
0
10
20
30
40
50
60
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Fonte:IPEA, com base na PNAD. 1991, 1994 e 2000: estimativa DISOC/IPEA
Pobres (%) Indigentes (%)
Chart Four: Percent of the Population Below the Poverty Line (poor and indigent)Source: IPEA
Social Indicators. The United Nations Human Development Index19 was created because many
people thought that too much attention was being paid to economics and not enough to human factors such
as health, literacy and education. The methodology for computing the index is complex and has changed
slightly over the years, but it does provide a good balanced measure of how well a country is providing for
its people. As Chart Six20 shows, Brazil’s Human Development Index has improved steadily over the years
since 1980 with a slight increase in the rate of improvement during the Cardoso years.
8Razão salário mínimo/cesta básica
0,6
0,7
0,8
0,9
1,0
1,1
1,2
1,3
Jun/
94
Jun/
95
Jun/
96
Jun/
97
Jun/
98
Jun/
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Jun/
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Fonte: DIEESE
Chart Five: Ratio of the Minimum Salary to the Cost of a Standard Basket of FoodstuffsSource: Departamento Intersindical de Estatistica e Estudos Sócio-Ecônomicos
Índice de Desenvolvimento Humano - IDH
0,676
0,690
0,710
0,734
0,750
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Fonte: PNUD
Chart Six: The United Nations Human Development Index for Brazil: 1980-1999.
This chart may be surprising to many readers, since one hears a great deal more about Brazil’s
problems than about its progress. But Brazil is not exceptional in this respect. The United Nations Human
Development Report shows substantial progress in most regions of the world, with important exceptions in
sub-Saharan Africa and the countries of the former Soviet Union. Brazil’s record of steady progress is
more convincing when one looks at specific indicators. Infant mortality is usually considered to be the
single best measure of the welfare of a society’s most vulnerable members. As Chart Seven21 shows, infant
mortality in Brazil has declined steadily since the 1980s in each of Brazil’s regions. The decline has been
greatest in the Northeast, which is the poorest region.
These statistics reveal some facts which are not widely appreciated. First of all, Brazil has been
much more stable and consistent in its social development than in its economic development. The 1980s
are often referred to as a “lost decade” in Brazil because of the lack of economic growth. But it was not a
lost decade in terms of social welfare, the social indicators continued to improve steadily. Second, the
social indicators do not fluctuate in response to short-term changes in economic policies or inflation rates.
Social conditions change much more slowly than economic conditions. Of course, human welfare is not
what it should be, especially in the Northeast. But this cannot be blamed on Fernando Henrique Cardoso or
on “neoliberalism” or any other relatively short-term phenomenon. Nor can we credit Cardoso for any
9
Mortalidade infantil (por mil nascidos vivos)
41
60
52
33
24 20
0
20
40
60
80
100
120
140
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Fonte: IBGE
Brasil Nordeste Norte Sudeste C. Oeste Sul
Chart Seven: Infant Mortality per 1000 live births for Brazil, the Northeast, the North, The Southeast, the Center West and the South.
dramatic improvement in social indicators. Under his administration, Brazil continued to make slow but
steady progress, just as it did under the preceding governments.
Educational Policy. Despite the progress that has been made, Brazil continues to be one of the
most unequal societies on the planet. This fact is well established. The more difficult questions are: why
this is the case and what should be done about it? All market societies have considerable inequality, but
why is Brazil worse than many others? There most important variable that effects the amount of economic
inequality in a society is educational inequality. This is especially true as an economy modernizes because
more and more of the better paying jobs require literacy and other skills people learn in schools. In their
study of the causes of inequality in Brazil, Neri and Camargo found that “the marginal explanatory power
of schooling – by far the most important variable – rises from 25.7% in 1976 to 26% in 1990 and to 26.4%
in 1997.”22 The marginal explanatory power of the two next most important variables – the age distribution
and the proportion in the working class – were 5.9% and 8.7% in 1997. This means that by far the most
important step a government can take to lessen inequality is to raise educational levels.
And educational policy has improved significantly during the Cardoso years. Even Petris and
Veltmeyer concede that “basic education is widely recognized as one area where the federal government
has had success in the planning and implementation of social policy.”23 One of the most important reforms
has been to force local and state governments to spend at least $300 per student per year, which has
provided a guaranteed base salary for all school teachers. Petris and Veltmeyer acknowledge that “this
certainly was a conquest.”24
10
Atendimento escolar
65%
89%92%
97%95%
89%85%
69%78%
59%66%
48%
33%27%
22%20%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Fonte: INEP
7 a 10 11 a 14 15 a 17 18 a 24
Chart Eight: School Attendance by age group.Source: Instituto Nacional de Estudos e Pesquisas Educacionais
Brazil had been making slow but steady progress in school attendance rates throughout the 1970s
and 1980s, and the trend continued during the Cardoso years, as shown in Chart Eight.25 The rate of
improvement for primary school slowed slightly, but this is because Brazil was approaching full enrollment
for this group. The rate of increase accelerated most for the college age group, an area that has caused
much conflict because of the shift in emphasis from state to private institutions. Brazil’s state and federal
universities are free of tuition, and serve primarily students from affluent families who are able to afford
expensive private secondary schools. Cardoso would like to charge tuition from students who can afford to
pay and make the public universities more accessible to students from lower income groups. These reform
efforts have been bitterly resisted by students and faculty at the public universities who have often gone on
strike. The propensity for striking is encouraged by remarkable legal provisions that often allow faculty
receive their regular pay checks while on strike. The government has responded to this conflict by
channeling more and more resources to the private universities, which generally serve students from less
affluent families. As Chart Nine shows, enrollment has increased in both public and private sector higher
education, but much more rapidly in the private sector.
With primary school enrollments approaching 100%, the next step is to improve the quality of
education once students get there. The Cardoso government made improving primary education a top
priority because the need is so great. Under new federal legislation, which began to be implemented in
11
Matrícula no ensino superior
584 690 833
934971
1.5451.5191.661
2.378
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Fonte: INEP
Público Privado
Chart Nine: Enrollment in Higher Education: Public and PrivateSource: Instituto Nacional de Estudos e Pesquisas Educacionais
1998, states have been required to concentrate their spending, and their use of federal monies, on primary
education. Funds are pooled and distributed to schools in proportion to the number of primary
schoolchildren actually attending. At least sixty percent of the total resources of the fund must be spent on
improving the pay of primary school teachers, a critically important profession that has been woefully
underpaid in Brazil. Despite their obvious importance, these measures were strongly opposed by many
state and local governments, including some controlled by supposedly “leftist” parties, because they
penalized states that were not focusing enough of their efforts on elementary education. But this resistance
was overcome because of the strong public support for the issue. Sônia Draibe reports that within one year
the increase in per capita spending on schoolchildren was about 22.7% nationwide, and that it was higher in
the poorest regions – 47% in the North and 90% in the Northeast.26
Organizationally, the emphasis has been on decentralization, with each school given increased
autonomy. The rules encourage increased parental involvement in the schools, and some funds are sent
directly to parent-teacher associations in each school. A distance education program, with satellite
television reaching to remote areas, helps to cut regional inequities, a computerization program brings
schools into the digital age, and a school book and school library program helps schools to catch up on
traditional printed media. Substantial funding is made available for school meals. Studies have shown that
decentralization has led to improvements in efficiency and effectiveness, but improvements in the quality
of teaching are slower and more difficult to measure.27 The government is also devoting resources to
teacher training, improvement of curricula and materials, and national assessment schemes.
There has been a substantial lessening of social and racial inequities in education. In 1992, one of
every four children from a poor family was not in school. By 1999, this proportion to fell to 7%. The
percentage gap in school attendance between the richest children and the poorest children fell from 22% to
less than 6%. The gap between white and black children diminished from 19% to 6%. Few can disagree
with Cardoso’s statement that “this is social inclusion of the most unequivocal and lasting kind. It
signifies, in the last analysis, more citizenship and a more just society.”28
Health. Health is another area where Cardoso administration continued and developed reform
policies that were begun by previous governments. Prior to the 1980s, the Brazilian health care system was
fragmented and focused more on treatment than on prevention. Health care was especially poor in the rural
12
areas, and in urban slums. Lack of sewers and sanitary water supply was a major problem, and there were
powerful pressures for reform as democracy was restored. Many of these reforms were included in the
1988 Constitution which called for a Unified Health System, but implementation was slow. The Cardoso
administration’s greatest accomplishment has not been in changing the model of health care, but in making
it more of a reality. Implementing legislation was passed in 1995 and 1996 to diversify and expand the
sources of funding for health care, redistribute resources to basic services, and decentralize public health
management. Programs have been targeted on the poor, including family doctor programs, basic pharmacy
programs, vaccination programs, women’s health programs and programs combating infant mortality.29 The
effectiveness of these policies can be seen in the continuing decline in infant mortality rates, as shown in
Chart Seven, and the continuing improvement in life expectancy in all regions of Brazil, as shown in Chart
Ten.30 In these cases, Brazil under Cardoso has continued the steady progress achieved under the preceding
administrations. Progress on health and sanitation was maintained during the “lost decade” of the 1980s,
despite the economic crises.
One area in which improvement has been much more rapid under Cardoso is Brazil's response to
the global AIDS epidemic. Brazil was one of the first countries in the world to challenge the high prices
charged for AIDS drugs by American drug companies and to produce generic AIDS medications. Brazil
has provided free health care for people with AIDS.31 As Chart Eleven32 shows, there has been a sharp
13
Esperança de vida ao nascer (anos)
67,2
66,3
68,6
62,0
64,2
63,1
65,8
57,9
69,869,1
71,0
65,1
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Fonte: IBGE
Brasil N NE SE S CO
Chart Ten: Life Expectancy at Birth in Years for Brazil and regions.Source: Instituto Brasileiro de Geografia e Estadistica
decline in deaths since 1995, primarily due to the free distribution of AIDS medications through the public
health networks. Brazil has an AIDS problem similar to that in the United States instead of one similar to
that in South Africa, an outcome that was by no means certain.
Social Security Reform. Reforming Brazil’s social security system has been a priority for
Cardoso since he took office, because the system is fundamentally unjust and financially out of control.
There are really two systems. One, for government employees, is extremely generous. Civil servants can
retire at full salary as of their last date of employment. Federal civil servants even receive a 20% raise
when they retire. Their pensions are raised to keep up with the salaries of civil servants who are still
working. Furthermore, they can retire quite young, depending on their years of service and their age, often
at age 55 or younger. Women retire five years younger than men whose contributions are otherwise
equivalent. This system is a very important benefit for civil servants and helps to recruit highly qualified
people. But it is one that is paid for by general taxes imposed on people whose incomes are lower and who
receive much less.
The second social security system, for the common people, is a pay-as-you-go system dependent
on contributions, and benefits are very low. Before 1988, benefits for rural workers were much lower than
14
Mortalidade por AIDS (óbitos por 100 mil habitantes)
4,49
3,13
1,67
6,99
5,10
6,20
7,09
1994
1995
1996
1997
1998
1994
1995
Fonte: MS
Chart Eleven: AIDS deaths per 100,000 inhabitantsSource: Ministry of Health
for those in urban employment, but these have been equalized. Extending full social security coverage to
rural workers was perhaps the single most important measure taken to redistribute income and lessen
misery in Brazil. There is also coverage for destitute elderly people and others not having any retirement
coverage, but payments are low. The basic statistics are shown in Chart Twelve. As of 1988, 10.49% of
the Brazilian Gross Domestic Product was used for these Social Security expenditures, of which 43.3% was
spent on the 15.2% of the recipients who were in the system for government employees. Federal
government employees were especially generously provided for, with the 4.7% of the beneficiaries who
were federal employees receiving 22.1% of the revenue. 33
This imbalance in the social security system is one of the main reasons Cardoso characterized
Brazil not as a welfare state but as “an ill-fare state that takes from the poor to give to the rich and well-to-
do.” Unfortunately, it continued to be so at the end of his years in office, and he told Congress that “to
correct this situation will imply arduous and very persistent efforts to liberate the Brazilian state from the
yoke of privileged groups that surround it from the outside and colonize it from within.” He admitted that
“other battles must still be fought,” but claimed that “some important victories but some important victories
have been achieved in the long campaign to place the destitute majorities at the top of the priorities for
public spending. 34
Social security reform has met stronger resistance than most of his other reform efforts, and many
observers believe that he handled it badly. Sônia Draibe states that “the reform negotiated from 1995
15
Chart Twelve: Social Security Beneficiaries and ExpendituresThousands of beneficiaries as of 1996, thousands of U.S. dollars in expenditures as of 1998. Source: Draibe, op. cit, p. 114.
through to the end of 1998 was plodding, confused and incompetently managed by the government…the
government failed to drive home its proposal with sufficiently strong political will – at any rate it appeared
that way – and to back it up with an efficient scheme for informing and forming public opinion.”35
The failure to push social security reform through early in Cardoso’s administration may be in part
due to the fact that so many political resources were spent on the Constitutional amendment permitting
Cardoso’s reelection. Congressional staffers are especially well rewarded by the civil service system, and it
is difficult to gain their support for other reforms when their benefits are being threatened. But Cardoso did
not do a good job of explaining the reforms to the public and reassuring them that they were designed to
assure security in old age for everyone. Brazil’s successful demographic revolution, with low birth and
death rates, has led to a rapidly aging population, and providing for the aged will be difficult in the decades
to come just as it will in the United States and other countries.
The opposition to social security reform has been particularly tenacious because of Brazil’s strong
entitlement culture. People with government jobs simply believe that they are entitled to lifetime
employment with good pay and a good retirement, even if the society doesn’t really need their services, if
they retire very young, or, for that matter, even if they go out on strike. In some states there have been
cases of people who have been convicted of bribery and sentenced to prison being let out on payday to
collect their checks. Women simply assume that they are entitled to retire five years younger than men,
without having contributed anything extra to cover those years. When people’s life plans have been built
around these expectations, it is very difficult for them to accept that they must be changed.
Despite these problems, the Cardoso government did succeed in passing part of its social security
reform agenda in October of 1998. For the general public, this included minimum age and length of
contribution requirements, abolishing special pensions and the right to retire on a pension proportional to
length of service. For civil servants, early retirement was restricted, and a combination of age limits and
time of service requirements were imposed. Some exceptionally high pensions were capped. The reforms
are not sufficient, however, to balance the system’s books, to say nothing of fully correcting the inequities
between social classes. The hope is that the issue has been framed in such a way that reform can continue
in the next administration. Sônia Draibe is optimistic in this regard, stating that “from the standpoint of the
political forces opposing the reform, the outlook is very bleak. This is not so much because of the defeats
16
they sustained as of the dubious way they handled thorny issues, extending blanket opposition to items of
the reform that were morally and socially irrefutable or making last-ditch defense of backward stances that
were plainly unjust from a social standpoint. The consequent loss of political capital may prove disastrous
as the terms of the next round of welfare reform are announced.” 36
Land Reform and the Environment. As countries develop, all over the world, agriculture is
modernized and mechanized, using less labor. Brazil is quite far along in this process, having developed a
highly productive commercial agricultural industry. While critics accuse this industry of being oriented
primarily towards export rather than domestic needs, in fact it includes food crops such as grain and meat
as well as export crops such as coffee, sugar and soy beans that generate valuable foreign exchange. As
Charts Twelve and Thirteen37 illustrate, Brazil’s problem during the Cardoso years was not with the
production of food.
The problem is that a large number of small farmers and agricultural laborers were displaced in
the modernization process. The 1988 Brazilian Constitution strengthened provisions stating that unutilized
lands could be taken over by the government and distributed to landless people. But the real problem
wasn’t land so much as financing. Each family that was resettled required as about US$20,000 in financial
support. This money was hard to come by in a country with so many needs, and hard to justify unless the
farmers would actually become self-supporting and repay the loans. The government agency that was
charged with implementing this program, the National Institute for Colonization and Agrarian Reform or
17
Produção de grãos (milhões de toneladas)
59
69 69
77
82
74
7877
82 83
98101
1990
/91
1991
/92
1992
/93
1993
/94
1994
/95
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
Fonte: IBGE, CONAB. 2001/2002 estimativa
Chart Twelve: Brazilian Grain Production, 1990-2002. Source IGBE, CONAB
Produção de carnes (milhões de toneladas)
9,2
9,8
11,2
11,8 11,912,3
13,6
14,5
15,5
1993
1994
1995
1996
1997
1998
1999
2000
2001
Fonte: CONAB
Chart Thirteen: Brazilian Meat Production, 1990-2002. Source: IGBE, CONAB
INCRA, was bureaucratic and inefficient and spent much of its funds on salaries for staff. In the thirty
years up to 1995, INCRA succeeded in settling only 218,000 families on the land.38
Under heavy pressure from the Landless Farmer’s Movement, or MST, which sponsored land
invasions in many parts of the country, the Cardoso administration was able to accelerate the progress. In
the first seven years of Cardoso’s administration, 565,000 families were settled on 4,275 projects, more
than twice as many as in the preceding thirty years.39 This success was not at all appreciated by the MST,
1 Raymond Colitt and Richard Lapper, "Cardoso keeps a cool head," Financial Times, April 19, 2002. http://globalarchive.ft.com.2 Luís Nassif, "Uma obra de arte política," O Estado de São Paulo, 9 March 2002. "Em 1995 ainda se tinha um país politicamente anacrônico. A camapanha do impeachment havia colocado novos políticos em cena. Mas mesmo a queda de Fernando Collor, com todo seu histórico, foi muito mais fruto de sua incapacidade de se aliar aos coronéis políticos regionais.Quase oito anos depois, os coronéis estno desaparecendo um a um. Há quem veja por trás de cadaoperaçno dessas a interferLncia direta de Fernando Henrique Cardosos. E há quem considere que tudoocorreu apesar dele, pelo amadurecimento espontâneo das instituiçtes.O que aconteceu neste período foi algo muito mais sofisticado e que estava delineado desde o começo doprimeiro governo FHC, conforme se poderá conferir na coluna "Uma obra de arte política", que escreviem 3 de julho de 1995.A estratégia consistia em montar uma alinaça com as forças fisiológicas e se valer do imediatismo dafilosofia para distribuir favores em um nível que nno comprometesse a gestno, visando as reformas quemudassem definitivamente o modelo.
Paralelamente, o intelectual FHC cumpriu seu melhor papel, o de professor. Nestes quase oito anos, acabou com o personalismo que sempre transformava o presidente da República em espécie de pai detodos. As vezes exagerou no papel, exomindo-se até de responsabilidades que eram suas. Mas, dia apósdia, essa despersonalizaçno do poder, sociais e não-interferencia nos Estados e nos demais poderes,oxigenando a vida institucional. O resto foi consequëncia."3 Sílvia Faria, "Popularidade de FHC é a Maior Desde 98," O Estado de São Paulo, 28 March, 2001. http://www.estado.com.br. "ótima, boa, regular, ruim e péssima".4 Demétrio Weber e Lu Aiko Otta , "FHC prega Estado ágil e competente," Agência Estado, March 10, 2002. http://www.estado.com.br. A liberdade é fundamental, a democracia não se restringe à institucionalidade partidária e eleitoral – se estende à sociedade, requer um Estado mais ágil e mais competente. E é possível sim, dentro da democracia, levar políticas sociais que diminuam o nível de pobreza.” 5Fernando Henrique Cardoso, Mensagem ao Congresso Nacional, Brasília: Presidência da República, 2002. Downloaded from: http://www.planalto.gov.br/publica.htm. ‘Oito Anos de Estabilidade, Desenvolvimento e Conquistas Sociais”6 Ibid, p. vii. “Temis ainda mais razão para nos sentirmos confiantes quando passamos em revista os últimos sete anos e verificamos quanto o Brasil avançou…não é possível negar, diante dos fatos, que as reformas realizadas são profundas e que mudaram para melhor a vida dos brasileiros.7 James Petras e Henry Veltmeyer, Brasil de Cardoso: A Desapropriação do Pais. Petrópolis, RJ: Vozes, 2001, p. 14.8 Ibid. “retrocesso e estagnaçao”9 “Oito Anos” a Powerpoint presentation by Eduardo Graeff of the Office of the President in Brasília, is available, with interpretative notes, in both English and Portuguese versions at http://crab.rutgers.edu/~goertzel/fhc.htm.10 Petras and Veltmeyer, Brasil de Cardoso, pp 56-57. “Um dos maiores error cometidos por Lula e pelo PT, em 1994…foi subestimar gorsseiramente to impacto social e politico da hiperinflação e o plano de Cardoso para estabilizar o valor do Real.”11 This chart is from Graeff, op. cit.12 Fernando Henrique Cardoso, Sete Anos do Real: Estabilidade, Crescimento e Desenvolvimento Nacional. Brasilia: Prêsidencia da República, 2001, p. 19.13 Mensagem ao Congresso Nacional, p. vii14 This chart was prepared with data from http://www.ibge.net/home/estatistica/economia/contasnacionais/tabela5.shtm. The figure for 2001 was estimated based on data from the Mensagem ao Congresso Nacional.15 This Chart is from Graeff, op. cit.
18
who hoped to provoke a crisis that would cause Brazil to abandon the large-scale commercial agricultural
altogether. They sought to confiscate all farms over 1,000 hectares in size, including highly productive
ones, as part of a movement to redistribute society’s wealth to the masses.
Cardoso was not greatly concerned about the MST’s socialist rhetoric, because he felt that it was
historically out of place. The land reform the MST wanted was a 19th century demand in a 21st century
world. Today, making a decent living from farming requires a lot of land, technical and managerial skills,
and financial resources. Many of the people the MST organized to settle on the land lacked these resources
and failed. Cardoso wanted to put land reform on a more viable financial basis and, in 1999, succeeded in
passing a new agrarian reform program that shifted resources from the old program to a new Land Bank
Program that purchased land from large landowners and sold it to people who had the potential to obtain
sufficient credit to farm it.
16 Marcelo Neri and José Márcio Negri, “Distributive Effects of Brazilian Structural Reforms,” in Renato Baumann, ed., Brazil in the 1990s: An Economy in Transition, New York: Palgrave, 2002, p. 307.17 This chart is from Graeff, op. cit.18 This chart is from Graeff, op. cit.19 United Nations, Human Development Report 2001, at http://www.undp.org/hdr2001/.20 This chart is from Graeff, op. cit.21 This chart is from Graeff, op. cit.22 Neri and Camargo, op. cit., p. 308.23 Petras and Veltmeyer, op. cit., p. 100. “a educação básica é amplamente reconhecida como uma área onde o governo federal teve êxito no planejamento e implementação na política social.” 24 Petras and Veltmeyer, op cit., p. 100. “o que foi certamenta uma conquista."25 This chart is from Graeff, op. cit. 26 Draibe, op cit., p. 126.27 Núcleo de Estudos de Políticas Públicas, Avaliação da Descentralizaao de Recursos do FNDE e da Merenda Escolar. Unicamp, Campinas, 1998.28 Fernando Henrique Cardoso, Mensagem ao Congresso Nacional, op. cit., p. 57. "Isto é inclusão social da forma mais inequívoca e duradoura. Significa, em última análise, mais cidadania e um País mais justo."29 Sônia Draibe, op. cit, pp. 104-113.30 This chart is from Graeff, op. cit.31 Cardoso, Mensagem ao Congresso Nacional, op. cit, pp. 113-114.32 This chart is from Graeff, op. cit.33 Draibe, op. cit., p. 114.34 Cardoso, Mensagem ao Congresso Nacional, op. cit., p. 45. "O Brasil, por esse critério elemen-tar, era um exemplo acabado de Estado do mal-estar social, que tirava dos pobres para dar aos ricos e remediados. Reverter esse quadro implica esforços árduos e muito persistentes para livrar o Estado brasileiro do jugo de grupos favorecidos que o envolvem por fora e o colonizam por dentro. Outras batalhas ainda terão de ser travadas, mas algumas vitórias importantes já podem ser destacadas na longa campanha para colocar as maiorias destituídas no topo das prioridades do gasto público.35 Sônia Draibe, op. cit., p. 121.36 Sônia Draibe, op. cit., p. 121.37 These tables are from Graeff, op. cit. 38 Cardoso, Mensagem ao Congresso Nacional, op. cit., p. 192.39 Ibid.
19
Another initiative has been a campaign against “land grabbing” [grilagem], the practice of simply
moving into public lands and claiming title to them, often with the collusion of corrupt property registration
officials. As with much in Brazil, the biggest problem is not the law as it is written but the ineffectiveness
of enforcement. So the Cardoso administration began a process of computerizing and regularizing the land
registration procedures. In 1999 they had succeeded in reregistering 3,065 rural land holdings larger than
ten thousand hectares in size. This resulted in the canceling of 63,000,000 hectares of land that had been
irregularly registered, an area equivalent to approximately 7.5% of the national territory. As part of this
process, Brazil’s largest landowner was arrested in Manaus, the major city in the interior of the Brazilian
Amazon. He had claimed to have registered territory amounting to 1.5% of the national territory.40
Administrative Reform. Administrative reform does not have the emotional resonance of issues
such as fighting poverty or saving the Amazon. It may, however, be of more lasting importance since
Brazil's biggest problem is not passing good policies on paper but getting them effectively implemented. It
is not terribly important, for example, whether Brazil has a private or a state owned telephone network. It
is very important that it has one that works. Brazil has fine environmental and human rights legislation on
paper, but the enforcement is often inadequate.
This problem is not unique to Brazil. The crises in Argentina and Venezuela, for example, may be
due as much to the failure to administer policies honestly and effectively as to wrong policy choices. In his
state of the nation address on August 18, 2002, Russian president Vladimir Putin observed that Russia had
passed a wonderful list of reforms in only two years, but that they were not being implemented effectively.
The Economist observed that "most of the reforms bog down in the bureaucracy. Most Russians find it is
simpler to pay a quick bribe than spend time fighting misrule in court. Eventually the new ways may begin
to work but not any time soon. For all its potential, Russia is therefore still not an attractive place to do
business."41
In Brazil, getting reforms through the legislature has often been slower than in Putin's Russia,
because Brazil is a functioning democracy with a well established division of powers and active pressure
groups. Many inefficient policies were locked into the 1988 constitution, requiring a long list of
constitutional amendments. The constitution was amended thirty-one times since 1995. These
40 Land statistics from Cardoso, Mensagem ao Congresso Nacional, p. 195.41 Putin's speech as summarized in The Economist, April 20, 2001, p. 50.
20
amendments covered issues such as abolishing a number of state monopolies, allowing foreigners to teach
in Brazilian universities, creating a fund for the maintenance and development of primary education,
changing the rules of the social security system, abolishing the post of "class judge" in the Labor Court
system (judges who rule on labor/management disputes in particular categories of industry), allocating
certain federal revenues for health expenditures in states, creating a fund for the abolition of poverty, and
many other things that probably should never have been specified in the Constitution in the first place but
left to legislative action.42 Getting all these amendments through Congress took up a great deal of
Cardoso's time and energy throughout his administration.
Reforming the civil service rules required a constitutional amendment which was finally passed in
1998. Rules were changed to made it possible to actually dismiss civil servants if their services were not
needed. This, however, is difficult to do in practice and usually non-tenured or probationary employees
must be dismissed first. The most important and effective measures were those that placed limits on how
much of their revenue states and municipalities were allowed to spend on salaries. Some states had been
spending all of their revenues on salaries, with nothing left over for the programs the workers were
supposed to be administrating.
Privatization is often a short-cut to administrative reform. Instead of reforming the administration
of a government-owned corporation, it is simply sold to a private company. But the state retains key
regulatory functions, and agencies need to be set up to administer them efficiently. In his review of Brazil's
reform process, Rubens Penha Cysne observes that "Brazil has made a clear transition - perhaps a little
linear (given the country's relatively lack of experience in this sphere) - from an entrepreneurial to a
regulatory state.."43 Agencies have been set up to regulate the electricity, telecommunications and oil
industries. A successful reform of the banking system was implemented early in the Cardoso mandate,
which proved essential in helping the country to weather the financial storm of devaluation. This has not
been extreme "neoliberalism" as in Argentina, where the foreign banks were given almost complete control
of the banking system. The Brazilian Central Bank continues to play a central role, and has assumed
responsibility for state debts. The federal government shares revenue with the states, but also controls them
42 The amendments are listed in Cardoso, Mensagem ao Congresso Nacional, pp. 478-479.43 Rubens, Penha Cysne, "Macro- and Microeconomic Aspects of the Reforms," in Renato Baumann, op. cit., pp 39-40.
21
and their banks much more firmly than in Argentina. This mix of firmer state controls with a strong private
sector has enabled Brazil to weather the crises imposed by global shocks.
Administrative reform is incomplete, but significant progress has been made. The National
Debureaucratization Program has made more than six hundred small but significant changes in regulations
to make daily life quicker and more efficient.44 There is a single registration system for government social
programs, making it unnecessary to fill out forms over and over for different services. Civil service career
lines have been restructured in keeping with more up-to-date requirements, in-service training programs
have been intensified, and pay has been increased for civil servants. At the same time, the number of civil
servants is being reduced, with the size of the Executive Branch work force reduced by 15%, or 88,000
employees.45
Management has been decentralized, especially in the area of education, with much greater
involvement of parents and local communities. Greater emphasis has been placed on getting results,
instead of on implementing rules in the old bureaucratic manner. Nonprofit or "third-sector" organizations
are increasingly working in partnership with government agencies. This is part of a broad, cultural change
that Ruth Cardoso's Solidary Community organization has advocated. The Workers' Party has also played
an important role in implementing "participatory management" in places such as Pôrto Alegre where it
controls the city government.
These changes are incremental and often not dramatic, but they are lasting and important. As
Cardoso put is, they go beyond "obsolete polarities, such as statism vs. the free market, or the false
separation between public and private. The objective is not the minimum state or the maximum state but
the necessary state. A state that builds and strengthens the conditions necessary for the growth of the
economy, and that confronts the challenge of the universal access to public services, with priority to
meeting the needs of the poorest social strata."46
This may sound like hollow rhetoric, but at the end of Cardoso's term in office, he can point to a
great many tangible programs47 that give it reality. Here are some examples:
44 Fernando Henrique Cardoso, Mensagem ao Congresso Nacional, p. 509.45 Ibid., p. 510.46 Ibid., p. 503. "é uma empreitada que passa pela superação de dilemas obsoletos, como estatismo versus livre mercado, ou a falsa identificação entre o público e o estatal. O objetivo não é o Estado-mínimo nem máximo, mas o Estado necessário. Um Estado que construa e fortaleça as condições necessárias ao crescimento da economia e enfrente o desafio da universalização do acesso aos serviços públicos, com prioridade parao atendimento às demandas das camadas mais pobres."
22
A Secretariat for Human Rights was established within the Ministry of Justice, and
compensation was paid to the families of people who "disappeared" during the military
regime.
Gun control and money laundering legislation was enacted as part of a campaign against
organized crime and street violence.
Programs were established to protect the rights of blacks, other minorities, homosexuals, the
disabled, women, children and other groups, including a program to combat violence against
women.
A program was established to combat torture, and Brazil participated in an international
conference against torture.
Programs to protect indigenous Brazilians were expanded; the Cardoso governments declared
104 new protected areas for indigenous groups, with 32 million hectares, and ratified 144
additional areas that had been previously declared, with 41 million hectares. Brazil's
indigenous groups are growing at a rate of 3.5% a year, in comparison to 1.6% for Brazil as a
whole, largely due to improved health services.48
The staff of the Advocate General's Office was doubled, to provide increased public advocacy
within the judicial system.
Brazil became more active in international diplomacy, and Cardoso engaged in widespread
personal diplomacy, advocating for Brazil's interests. He advocated strongly for Brazil's
economic interests, especially with regard to exports to the United States and Europe.
A seminar was held on "affirmative action" policies, and a number of government agencies
began to implement quotas for Brazilians of African descent, women and disabled people, an
issue which had not been seriously addressed before in Brazil.
Brazil's electoral procedures were modernized and computerized, completely avoiding the
kinds of problems in counting ballots that were so embarrassing for the United States in the
2000 elections.
47 All of these, and many more, are described by Cardoso in the chapter on "Democratização do Estado in the Mensagem ao Congresso Nacional, available at: http://www.planalto.gov.br/publi_04/reformadoestado.pdf.48 Ibid., p. 499.
23
The tax reforms already detailed in the 1988 constitution were effectively implemented, with
tax collection largely centralized in the federal government and resources distributed
according to strict formulas. The federal government collects 67% of the taxes, but keeps
only 57%, of which 43% goes to social security programs. The states and municipalities
control 40% of total government revenue, and federal tax sharing provides a higher share of
revenue to the poorer regions of the country.
A Ministry of Defense was created to coordinate the three branches of the military service,
and the military was modernized and updated in both equipment and training, with special
attention to defending Brazil's frontier areas.
There are many other programs that could be described, and it is difficult to objectively assess the
impact and effectiveness of many of these programs. Many of them are continuations and improvements of
programs begun before Cardoso's administration, others are new programs that will be further developed by
his successors. Perhaps the most important thing about all of Cardoso's reforms is that they were done
through regular democratic processes. As Cardoso said in his report to congress, "I venture to affirm that
never in the history of Brazil, and very few times in the world, have such profound transformations been
conducted in the plenitude of democracy, with the participation of the whole society, and the consensus of
an ample majority."49
Brazil and the Argentine Collapse. In mid 2002, Brazil faced still another fiscal crisis, caused
by panic among investors who feared that the Argentine collapse would drag Brazil down as well. There
was much talk of "contagion" as if Argentina had some kind of Mad Economist's Disease that could spread
across its borders. In actual fact, trade relationships between Brazil and Argentina had declined for several
years, because of the inconsistencies in exchange rate policies. The risk was one of panic on the part of
investors who tend to lump all Latin American countries together. They were further concerned about the
probability of the election of a “leftist” candidate – either Lula da Silva or Ciro Gomes – as Brazil’s next
president.
49 Cardoso, Mensagem ao Congresso Nacional, Introducção, p. xx. Atrevo-me a afirmar que nunca na história do Brasil, e muito poucas vezes no mundo, transformações tão profundas foram conduzidas na plenitude da democracia, com a participação de toda a sociedade e o consenso de uma ampla maioria.
24
In objective economic fact, these fears were not justified. Brazil and Argentina are quite different,
and there was no reason for Brazil to follow Argentina into economic collapse. Historically, the economic
trends in the two countries have been quite different. Brazil’s economy has grown remarkably over the last
forty years. Argentina’s has not. Brazil experienced only brief periods of stagnation during the debt crisis
in the early 1980s and the inflation crisis in the early 1990s. It dealt with both crises responsibly, recovered
and went on to resume its growth. For Argentina over the same period, rapid growth has been the
exception, stagnation the rule. The only really striking growth Argentina experienced over the last four
decades was in the early 1990s, and that led up to the recent collapse. If we categorize countries according
to their economic track records, instead of their geography, Brazil belongs with the winners, Argentina with
the laggards. Argentina’s other important neighbor, Chile, has also done very well, at least since the mid
1980s.
Why has Argentina done so much worse than Brazil over the last four decades? The main
reason is probably national culture. Argentines thought of themselves as enlightened Europeans living on
the fringes of a primitive continent. Their ideal was to sit back and live off the riches of the pampas.
Brazilians are more diverse, racially and culturally, and their complexes are of inferiority, not superiority.
Brazil was known as "the land of the future – and it always will be." Now the positions are reversed;
Brazilian companies are buying up their Argentine counterparts at bargain prices, and Argentines are
25
learning Portuguese in the hope of finding jobs in São Paulo.
In 1991, the Argentines were fed up with hyperinflation and desperately wanted their money to be
as good as the American dollar. So they ammended their constitution to make it so. But this meant there
wasn’t enough money to pay for all the civil servants. Instead of laying people off, they let the states
print up their own quasi-money to pay them. They stuck adamantly to this system until the banks
collapsed. The Brazilians, under Cardoso, also ended hyperinflation with a monetary reform. But when the
economy couldn’t keep up with the new exchange rate, Cardoso made the hard decision to let the currency
float, not as soon as he should have, but soon enough to avoid a collapse.
Although Fernando Henrique Cardoso is not an economist, and has weak statistical skills, he
understands enough economics to know when the economists are out of touch with political realities.
Argentina’s politicians left the economy the hands of an economist, Domingo Cavallo, who is a technical
whiz but too optimistic about imposing his theories on a recalcitrant society. As a culture, Brazilians are
inclined to work problems out so that no one gets hurt too badly. Argentianians are more inclined to stand
on principle, even if the principle isn’t working.
Brazil’s parties are fluid, with politicians frequently jumping from one to another. Foreigners tend
to exaggerate the ideological differences between Brazilian political parties. They portray Luis Inácio
"Lula" da Silva, of the Worker’s Party, as a radical leftist, and Fernando Henrique Cardoso as a pro-
capitalist, orthofox free-marketeer. Actually Lula and Fernando Henrique are old friends, there’s very
little difference in their party platforms. They might easily end up in the same political coalition.
Fortunately, the leaders of the United States government and the International Monetary Fund,
after thinking it over, recognized the differences between the Brazilian and the Argentine situation. They
approved a $30 billion dollar loan to stabilize the Brazilian markets. The loan was carefully structured,
however, to be paid out in installments only if the country kept within the IMF.’s guidelines.
Fernando Henrique then called in the four leading candidates in the presidential election – Lula da
Silva, Ciro Gomes, José Serra and Anthony Garotinho – and got each of them to agree to stick to the IMF’s
conditions. This was a statesmanlike act on all of their parts. Fernando Henrique, as the outgoing president
not needing to face the voters again, took the blame for signing a necessary but painful agreement.
Whoever won the election could blame him if need be, but would stick within the same general guidelines.
26
Cardoso did not expect them to stick to his policies in all respects, he acknowledged that if he were to serve
another term, he would also change policies to reflect new conditions. Regardless of who wins the October
elections, Brazil will continue to be ruled by a center-left coalition that places the national interest ahead of
any partisan or ideological loyalties.
Argentina’ political parties are more polarized than Brazil’s, with strong traditional loyalties to the
two main centrist parties. They are in a state of flux today, and there is a possibility of a populist outsider
winning power. Mariano Grondona, Argentina’s best known political columnist, believes that what
Argentina needs most, in addition to a president like Cardoso, is a responsible opposition leader like Lula.
Of course, Brazil has sdrious problems, including a heavy debt burden, energy shortfalls and
environmental problems. It has difficulty raising taxes enough to pay for entitlements for its aging
population. There is far too much poverty, especially among the people of color. The stock and financial
markets are sometimes unstable, and the government occasionally has to step in to bail out a failed bank.
But these problems are not so different from those in the United States and other countries, and the
Brazilians can manage them with a little help from their friends.
Conclusions. Fernando Henrique Cardoso's term of office is not quite over as this chapter is
being written, so it may seem premature to evaluate his presidency. Historians will have more perspective
in a decade or two. But Brazilians cannot wait for historical objectivity. They have to make decisions now
about continuing or changing Cardoso’s policies, and about who should lead the country for the next four
years. These are really two separate questions, but they tend to get blurred in Brazilian political discourse,
in part because of a linguistic problem. In Portuguese, it is awkward to make the distinction that is made in
English between policy and politics. Both concepts are usually expressed by the same Portuguese word,
política.50
Often people who differ very much in their politics do not really differ much in the policies they
follow. At the World Social Forum meeting in Pôrto Alegre in February, 2002, for example, leaders of the
city’s leftist government strongly condemned the “neoliberal” Cardoso administration, the World Bank and
global capitalism. In terms of ideological rhetoric and party politics, Pôrto Alegre’s Workers Party leaders
are strongly opposed to Cardoso. But on the more concrete level of economic policy, when they actually
50 Perhaps the best way to express the difference in Portuguese is to distinguish between políticas governamentais or publicas and políticas partidarias or eletorais.
27
have to run a city, it is hard to see the difference. Pôrto Alegre is firmly enmeshed in the global capitalist
economy, producing cars by General Motors, computers by Dell, John Deere tractors, British American
tobacco, and wireless communication equipment by Telefónica of Spain. Pôrto Alegre’s own multinational
corporations also compete in the world markets, including the steel producer Gerdau with plants in the
United States, the Taurus handgun company, and Varig international airlines.51 The employment and
economic growth funded by this successful globalization allow the Workers Party government to fund
innovative social programs. This is all to the good, it is not different from the policies Fernando Henrique
Cardoso and his Social Democratic Party implement.
Evaluating any administration depends on three things: values, facts and counterfactuals. Our
values tell us what we wish had happened. The facts tell us what actually happened. The counterfactuals
are what we believe would have happened if different policies had been followed. Cardoso and his critics
do not usually differ on their values. They all want economic development, less inequality, better health
and education, less crime, inclusion of excluded social groups, and so on. But some critics doubt the
intensity of Cardoso’s commitment to these values. Others doubt his ability to mobilize the population on
the kind of moral crusade they believe the country needs. The first criticism is unfair, Cardoso has
consistently demonstrated his commitment to humane and democratic values for many years. But the latter
criticism does point to one of Cardoso’s weaknesses. He is not very good at communicating his empathy
for the suffering of others. He is very good at working with people face to face and getting government to
work. He is not so good at giving rousing speeches and inspiring the masses. This accounts for the
unenthusiastic rating he receives in opinion polls and in focus groups. People say “he is honest and
intelligent, but he is distant from the people.”
On the level of facts, Cardoso can be evaluated for the accomplishments and failures of his
administration. We have looked at much of the evidence, and Cardoso’s record certainly compares well
with those of his predecessors and with those of the leaders of neighboring countries. There are areas
where he has accomplished much less than he hoped, including fiscal and tax reform, political reform and
reform of the judiciary. Rubens Penha Cysne reports that “so far the proposed tax reform is no more than a
pipe dream,” while the political and judicial reforms are “difficult to approve.”52 The tax system is
51 Simon Romero, “A Leftist City Makes Money to its Own Drummer,” The New York Times, February 4, 2002. http://www.nytimes.com.
28
regressive and income taxes account for too small a share of government revenue. Brazil’s system of
proportional representation, in Cardoso’s judgment, “needs to be changed to strengthen both the political
parties and the link between the elector and his representatives.”53 But one hears few complaints about
these important issues from Cardoso’s critics, because opposition to change has come largely from
Congress and from powerful pressure groups that no one is eager to confront.
What one does hear repeatedly from Cardoso’s critics is the claim that he has not paid enough
attention or spent enough money on social programs. The facts really do not support this complaint, so one
suspects that the real concern may be cuts in salaries and benefits for people who work in the social
agencies. If we look at spending on programs other than salaries, we find that it actually increased
significantly during the Cardoso years. As Table One shows, about two thirds of this spending is on social
security benefits, which are mandated by law. But spending on health, education, housing and urban
development have also increased substantially.
Table One:54 Federal Expenditure on Social Programs, Excluding Salaries Annual Averages in $R billion for June, 2001
Social Health Education Labor Housing Total Social Total FederalSecurity Care Benefits and Urban Expenditure Expenditure
1990-1994 28.4 7.1 4.3 4.5 0.1 44.5 72.41995-1999 62.6 15.6 9.0 5.8 0.4 93.4 139.6
Percent Increase 120% 118% 112% 28% 208% 110% 93%
Source: Ministry of Finance.
Cardoso is annoyed by critics who cite statistics about how much money is spent as an indication
of the government’s priorities. The important thing, as he sees it, is not how much money you spend, but
the results you get. If you can get results while spending less money, so much the better. The purpose of
government programs is not to provide jobs for as many state employees as possible, but to get results.
Ruth Cardoso said that, when they took office, they could not find a single area where they believed simply
spending more money would get good results. They put a great deal of energy into improving the
administration of social programs, getting them to focus on producing results instead of simply following
bureaucratic rules. Many of these reforms have had measurable results, such as the increase of the number
of families settled on farms by the agrarian reform program. Social indicators have improved during the
52 Rubens, Penha Cysne, “Macro- and Microeconomic Aspects of the Reforms,” op cit., pp. 56, 84.53 Fernando Henrique Cardoso, Mensages ao Congresso Nacional, op cit, p. 476. “precisa de mucanças que fortaleçam ao mesmo tempo os partidos e o vínculo do eleitor com seus representantes.”54 Table One is from Graeff, op. cit.
29
Cardoso years. Of course, the needs are great and much remains to be done. But resources are limited and
there are many legal and political restraints on how they can be used. The complaint that Cardoso did not
give priority to social programs is not justified by the facts.
Many of Cardoso’s critics are socialists who have not reconciled themselves to the global
ascendancy of market economics and who oppose privatization and integration of Brazil into the global
economy. In this case, the dispute is not about the facts but about counterfactuals, about what might have
been. These differences cannot be resolved through rational debate because they are based on deep
ideological assumptions. At the World Social Forum meeting in Pôrto Alegre the organizers refused the
World Bank’s offer to send someone to debate the facts with them. They had already made up their minds
about the facts, their goal was to demonstrate that “another world is possible.” The vision of that other
world is still a bit cloudy; they know what they don't like but they aren't quite sure what to put in its place.
They say they aren’t “anti-globalisation,” they favor “de-globalisation,” which is a very subtle difference.
In general, they oppose privatization of state enterprises, favor redistribution of land, and want to break
with multilateral corporations and international agencies such as the International Monetary Fund and the
World Bank. Petras and Veltmeyer are more specific. They believe that Brazil should default on its
foreign debt and use the money to settle millions of Brazilians on small farms.55 They also want to abandon
the privatization process and renationalize Brazil’s major industries.
It is difficult to argue with someone like James Petras who believes that the Argentine crisis is
“the hope of a better future.”56 Cardoso, and most Brazilians, simply do not agree that the best alternative
for Brazil is a collapse of capitalism. Cardoso believes that Brazil’s best chance for a successful future is a
strong market economy combined with effective social programs. He was elected on that platform, and he
should be judged on how well he has carried it out. Judged by that criterion, he has done well. The old
joke, “Brazil is the country of the future and always will be,” doesn’t ring true any more. Brazil is a good
place to be right now if you want to make money. International investors, who could invest their money
anywhere, are sending quite a lot of it to Brazil (Chart Fourteen). 57 Argentina, not Brazil, is the subject of
55 Petras and Veltmeyer, op cit., p. 139.56 James Petras, “You have to take action from below,” The Labor Standard, http://www.laborstandard.org/New_Postings/petras_on_argentina.htm.
30
today's jokes. It is “the place where bad ideas go to die.” But even in the midst of their crisis the
Argentines do not seem likely to opt for James Petras’s vision.
This is not to say that Cardoso has always made the right decisions, or that he has not benefited
from a bit of luck here and there. With hindsight, it is clear that he should have floated the Real sooner
than he did. If two major crises had hit at once – say the banking crisis and the exchange rate crisis – the
economy might have been thrown into a tailspin.58 One can always speculate about counterfactuals. In my
own judgment, if Lula da Silva had won in 1994 instead of Cardoso, the country would very likely have
suffered a financial crisis similar to the one Argentina suffered in 2002. But judgments of this kind are
subjective, and reasonable people can differ. As Brazilians think back on Cardoso’s eight years in power,
many of them may agree with Luis Nassif, whose column was quoted at the beginning of this chapter.
Here are his conclusions59:
Many times [Cardoso] took heavy blows in order to avoid institutional crises. This
posture was sometimes confused with cowardliness. He explained that it was a matter of the
57 This chart is from Graeff, op. cit.
31
Entrada de investimentos diretos (US$ bilhões)
8,1
13,7
22,719,8
26,1
21,6
6,72,6
5,2 6,18,8
1,1
1,1 2,1 1,3 2,14,4
10,8
19,0
28,9 28,6
32,8
22,6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
*
Fonte: Banco Central do Brasil. (*) Jan./nov.
Privatização Demais
Chart Fourteen: Direct Foreign Investment in Brazil – as part of the privatization program and otherwise. Figures for 2001 are for January to November. Source: Brazilian Central Bank.
institutional responsibility of the President not to throw the country into a crisis. When the
interests of the country required that he take a strong position, he never vacillated. When it was
necessary, Antonio Carlos Magalhães was swept off the map of federal power without hesitation.
He made many mistakes, especially with regard to the exchange rate. He was a careless manager,
many times the victim of his own intellectual arrogance. He found it extraordinarily difficult to
demonstrate solidarity with the people, because of his preoccupation with not taking a populist
stance.
But, as his administration is reaching its end, intellectual circles have begun to revise
their appraisal of his administration. The power of the old political machines has been reduced in
some ministries. Most of the state enterprises have been privatized, the rest have professionalized
management. The Presidency is no longer a magical, Freudian institution, but a political one,
with the obligation to make an accounting of its acts. Fiscal responsibility has become an
indispensable requirement. And all of this has been done without dismantling the state, as the
savage liberals would have done.
If Fernando Henrique Cardoso had had more managerial determination, much more
could have been done. We would not have had the burden of four years of an erroneous foreign
exchange policy, and the public debt accumulated during that period. But the ideal is the enemy
of the good.
58 See William C. Smith and Nizar Messari, "Democracy and Reform in Cardoso's Brazil: Caught Between Clientelism and Global Markets?" for a discussion of alternative scenarios. Available in Jeffrey Stark, ed, The Challenge of Change in Latin America and the Caribbean, Boulder, Colorado: Lynne Rienner Publishers, 2001, or online at http://www.miami.edu/nsc.59 Luis Nassif, Estado de São Paulo, 9 March 2002, op. cit. "Muitas vezes suportou tiroteios pesados, a fim de evitar crises institucionais. Essa postura chegou a ser confundida com pusilanimidade. Ele próprio explicava que se tratava de responsabilidade institucional de presidente, de nno jogar o país em uma crise. Quando o interesse do país exigiu posiçtes formes, jamais vacilou. Quando precisou, ACM foi varrido do mapa federal sem que FHC nem sequer piscasse. Errou muito, especialmente na política cambial, que quase compromete sua obra política. Foi um gestor descuidado, muitas vezes vítima de sua própria arrogância intelectual e com uma dificuldade extraordinária em demonstrar solidariedade ao seu povo, devido B preocupaçno de nno parecer populista.Mas, á medida que seu governo vai chegando ao final, em muitos setores intelectuais tem início um processo inédito de reconhecimento de sua açno política. As armas da fisiologia forma reduzidas a alguns ministérios. A maior parte das estatais de mercado foi privatizada, as demais tiveram a gestno profissionalizada. A PresidLncia deixou de ser instituiçno mágica e freudiana para se transformarem um poder a mais, com obrigaçno de prestar contas de seus atos. A responsabilidade fiscal tornou-se valorirreversível. E tudo isso sem que houvesse o desmanche do Estado, como pretendiam os liberais selvagens. Houvesse mais determinaçno gerencial de parte de Fernado Henrique, muito mais poderia ter sido feito. Nno haveria o atraso decorrente de quatro anos de política cambial errada a dívida pública acumulada no período. Mas o ideal é inimigo do bem.A medida que seu governo vai chegando ao fim, as avaliaçtes perdem o passionalismo, a aobra política vai se completando, permitindo entender o fim do processo, nno restam dúvidas de que haverá saudades dos tempos em que FHC chamava os políticos no Palácio e, meia hora depois, uma conversa abortava crises políticas que, em outros tempos, paralisariam o país.Quem acompanhou o dia-a-dia desses oito anos sabe que o país poderia estar numa posiçno muito á frente, houvesse determinaçno administrativa de FHC. Mas quem olha para a Argentina se dá conta de que fazer transiçno do velho para o novo regime, preservando o país e as instituiçtes, talvez tenha sido o feito mais importante da moderna história política do país.
32
As his government reaches its end, the commentaries are becoming less passionate, as
the political work is being completed, we are able to see the results of the process. There is no
doubt that, in the future, we will look back with nostalgia on the times when FHC called the
politicians into the Palace and, half an hour later, a conversation had aborted political crises
that, in other times, would have paralyzed the country.
As this is being written (Sept 26, 2002), Brazil's attention is focused on the race to succeed
Cardoso. Luis Inacio Lula da Silva, the Workers' Party's perennial candidate, has pulled strongly ahead and
may even take the election by winning more than 50% of the vote in the first round of voting on October 6.
Much of Brazil's electioneering takes place on television, with each political party allotted its share of free
time on all the broadcast televison stations. Lula and the Workers Party used their time very effectively.
Lula was well dressed, with his beard neatly trimmed, and presented himself very well as a warm,
conciliatory person who really cared about the welfare of the Brazilian people. José Serra, candidate of
Cardoso's party, has a somewhat more abrasive personal style, and seemed more like a technocrat than a
father figure. He seemed reluctant to defend the record of the Cardoso government, portraying himself as
somewhat of a leftist opposition figure within the administration. The problem with this strategy was that
if voters wanted a change, they could be more certain of getting it from a real opposition candidate.
Early in the campaign, Ciro Gomes, a former governor from Ceara and Cardoso's first finance
minister, began to rise in the polls and threatened to pass Serra in the race for second place. Serra was
forced to use much of his television time to push back Gomes, which he succeeded in doing, but at the
expense of making himself and his party look hostile and negative. Then Serra's campaign had to turn its
negative campaigning against Lula in order to forestall a first round victory. They used their free television
time to play clips of Lula's leftist associations and statements in past years. This may have been necessary
to stop a first round victory by Lula, but it made Serra look negative and hostile. Lula and his campaign
advisors refrained from responding in kind to Serra's attacks, maintaining a much more positive, upbeat
image.
Fernando Henrique Cardoso played little role in the 2002 election campaign, largely because of
differences with Serra's campaign strategy. Cardoso recorded a number of segments for use in Serra's
electoral television broadcasts, but Serra used only one of them. Serra decided to position himself to the
33
"left" of Cardoso, and not to associate himself closely with the Cardoso administration's record. Cardoso
was reported to be irritated by Serra's slighting him, while Serra reportedly wanted Cardoso to loosen some
spending restraints as a boost to his candidacy.60 In any event, this allowed Cardoso to play a play a
statesmanlike, presidential role and to maintain excellent personal relationships with Lula. His primary
responsibility as president during this period was to manage the economic turbulence caused by the world
financial community's apprehensions about a possible Workers Party victory and to assure a responsible
transition. He took no part in Serra's negative campaign against Lula, and made it clear that he would work
closely with whichever candidate won the election. He set aside 53 paid positions in the government so
that appointees of the new administration could begin working during the period between the October 27,
2002, second round of the elections and the January 1, 2003, inauguration.
Cardoso's popularity remained low during this period, at least when judged by the usual survey
question. In a September 19 and 20 Datafolha poll, 40% of the respondents rated him "regular," 34% "bad
or very bad," and 23% "excellent or good."61 Surveys found him to be more popular with in the lower
socio-economic strata than with the better-educated, more affluent voters. Cardoso's ratings were negative
despite the fact that most voters considered him to be an exceptionally well qualified and effective leader.
In a September 2002, IBOPE poll, 71% of the respondents rated Cardoso high in political skill. This was
higher than their rankings of any of the 2002 presidential candiates, whose "high" rankings on political skill
were: Lula, 57%; Serra, 64%; Ciro, 57%; and Garotinho 50%. Cardoso also rated significantly higher
than any of the 2002 presidential candidates on "preparation for the position," "international respect," and
"intelligence." Although they recognized these traits, people nevertheless gave Cardoso a low overall
rating because of high unemployment, high crime, and the perception that he was distant and not
sufficiently sympathetic to the people's needs.
The 2002 Elections and the Transition. (added Oct 29, 2002) Lula's strategies proved
enormously effective in the 2002 elections. He won 46% of the vote in the first round of the election on
October 6, against 23% for Serra, 17% for Garotinho and 12% for Ciro Gomes, and about 1% for the far
left parties. He won the final vote with a landslide of 61%, versus 39% for José Serra. He rode a wave of
60 Cristiane Jungblut e Isabela Abdala, "Um pote de mágoas entre FH e Serra," Revista Época online, 27 September, 2002, http://revistaepoca.globo.com/Epoca/0,6993,EPT400311-2011,00.html.61 "Aprovação ao governo FHC cai para 23%," Folha de São Paulo, 22 September 2002.
34
dissatisfaction with the country's economic and social problems, and promised to change the "economic
model". At the same time, he promised to honor all existing contracts and commitments, including those
with the International Monetary Fund. As Revista Época summarized, "the President-elect spent the
campaign pronouncing declarations that were sympathetic in form and evasive in content. His true
program for governing has two points: `we will negotiate' and `we will talk'… he promised to modify the
`economic model' while he confirmed his support for the rules created by the International Monetary
Fund."62
José Serra did his best to point out the vagueness of Lula's campaigning and to provide more
specific plans of his own. But most of the voters were not looking for specific policy ideas, they were
looking for inspiration, for empathy, for someone with a positive vision of the future. They preferred to
suspend doubt, hoping that somehow Lula would find a way to deliver on all his promises, confident that at
least he would try his best. Fernando Henrique found this frustrating. He thought that the Workers Party
had changed its political line without going through the necessary self-criticism. He felt there was
something crafty or deceitful (astúcia) in their adopting the ideas the social democratic party had advocated
for years without admitting that they had done so. He complained that they were unwilling to pin
themselves down, never specifying exactly what they plan to do. He said:
They need to say what they are going to do with Brazil. They say they are against what is
happening now. But are they going to renationalize industry? Are they going to restructure the
debt? How are they gong to lower the interest rate? How are they going to reconcile the proposed
salary increases with the control of inflation? The agrarian reform is left up in the clouds. Lula
says he is going to negotiate everything, but he never explains exactly what. He is going to
negotiate to achieve what? What is his position? We are going into an election in which people
are voting for images, not for policies. We have no idea which way we are going."63
62 "O president eleito passou a campanha pronunciando delcaraões simpáticas na forma e evasivas pelo conteúdo. Seu verdadeiro program de governo tinha dois pontos: 'vamos negociar' e 'vamos discutir'. Prometeu modificar o 'modelo econômico' enquanto confirmava apoio às regras colocadas pelo FMI." Revista Época, Edição 232, October 2002, http://revistaepoca.globo.com.63 "Precisa falar o que vai fazer com o Brasil. Ele diz estar contra o que está aí. Mais vai reestatizar? Vai reestruturar a dívida? De que maneira vai baixar os juros? Como vai compatibilizar o aumento de salário proposo com o controle da inflação? A reforma agrária passou em brancas nuvens. Lula disse que vai negociar tudo, mas não explicou o quê. Lula van negociar a partir do quê? Qual é a sua posição? Nós estamos indo para uma eleicão em que as pessoas estão votando em imagens, mas não em políticas. Não podemos saber em que direão estamos indo." Revista Época, Edição 230. http://revistaepoca.globo.com.
35
It was certainly frustrating to see Lula triumph by attacking Cardoso's record without admitting that
he was espousing the same general policies. But that's the way the political game is played. Republicans in
the United States and Conservatives in England felt the same way when Bill Clinton and Tony Blair put a
warmer tone on their ideas. Indeed, Roberto Campos felt the same way when Fernando Henrique Cardoso
adopted ideas that he had espoused much earlier.
After Lula's victory, Cardoso put the best face on it. He said he felt "emotion" in passing the
Presidential Sash on to a labor leader, and stated repeatedly that Lula's government was one of "continuity"
with his policies, not change. He thought Lula was continuing his policies in combatting hunger and
misery and in honoring Brazil's international commitments. He praised Lula for "a path of continuity
which is necessary for Brazil."64 Lula made his commitment to continuity clear in his reassurances to the
financial community, especially in his promise to establish an autonomous Central Bank. He also praised
Fernando Henrique for making the transition as harmonious as possible, stating "Fernando Henrique's
disposition to make the transition process a demonstration of effective democratic participation is much
appreciated by my party."65
Of course, Cardoso would have done the same thing had any of the other candidates won. In fact,
none of the major candidates had proposed a dramatic shift from Cardoso's policies. All of them proposed
a modest shift towards more social democratic policies, with less strictness about fiscal stability and more
emphasis on economic growth. All placed great emphasis on providing jobs and fighting crime. Cardoso
did not disagree with these priorities, indeed he indicated that he also would have similar priorities if he
were continuing in office. Indeed, it was his success in ending inflation and stabilizing the economy that
made these priorities feasible. As sociologist Bernardo Sorj observed:
The Fernando Henrique Cardoso government created, paradoxically, the conditions of
governability for a future opposition government from the left, to the degree that he applied
stabilization policies and carried out reforms that would have been hotly contested by the labor
union base of the Workers Party… A government of the left in Brazil should be guided by the
64 "Um caminho de continuidade que é necessário no Brasil." Folha de São Paulo, October 29, 2002, http://www1.uol.com.br/folha/brasil/ult96u41771.shtml.65 " a disposição de Fernando Henrique Cardoso de fazer do processo de transição uma demonstração efetiva de participação democrática muito agradou ao partido". Estadode São Paulo, October 29, 2002, http://www.estadao.com.br/.
36
experience of the Chilean government in the sense of a coalition of the Christian Democrats and
Socialists, learning to live with liberal reforms, building a dialog with civil society and
strengthening social policies, respecting the limits of fisail discipline, and welcoming productive
foreign investment.66
I would disagree with Sorj only in his use of the term "paradoxically." Cardoso certainly
understood that he was taking sometimes unpopular measures that would enable his successors to move in
a more social democratic direction. All successful social democratic systems are based on a sound
capitalist economy, and Cardoso realized that Brazil had to straighten out its fiscal and economic affairs if
it were to be able to afford better social programs. He also helped to reform the civil service and build
much of the infrastructure needed to effectively carry out effective social programs. And he helped to
strengthen the democratic practices that assured a stable transition to the next stage in Brazil's development.
Fernando Henrique Cardoso ended his term in office in good spirits, with friendly relations with his
successor, Luis Inácio Lula da Silva. He accepted a position as a special advisor with the United Nations,
and planned to write two books: one on what he learned about leadership from his experiences as president,
the other on problems confronting developing nations in the present conjuncture. The press commentary at
the end of his term, was mixed, with commentators noting that much had been accomplished, but also that
much remained to be done.
Fernando Dantas, writing in the Estado de São Paulo on January 1, 2003 provided an excellent
overview.67 A translation of his essay is a fitting end to this book supplement:
66 Bernardo Sorj, A Construção Intellectual do Brasil Contemporâneo: Da Resistência à Ditadura ao Governo FHC, Rio de Janeiro: Jorge Zahar Editor, 2001, p. 124. "O governo Fernando Henrique Cardoso criou, paradoxalmente, as condições de governabilidade para um futuro governo de oposição de esquerda, na medida em que aplicou políticas de estabilizaçao e realizou reformas que seriam travadas pela base de sustenção sindical do PT… Um governo de esquerda no Brasil deverá orientar-se no sentido da experiência do governo chileno de coalizào cristã-democrática/socialista, de convivência com as reformas liberais, de dialágo com a sociedade civil e fortalecimento das políticas socias, respeitando os parâmetros de disciplina fiscal e de convivência com o investimento estrangeiro produtivo. 67 Fernando Dantas, Lula herda um país melhor, depois de oito anos, Estado de São Paulo, January 1, 2003, http://www.estadao.com.br/eleicoes/governolula/noticias/2003/jan/01/24.htm. Also available at http://crab.rutgers.edu/~goertzel/DantasOriginal.html.
37
After Eight Years, Lula Inherits a Better CountryBrazil Advanced During Fernando Henrique Cardoso's Two Terms as President
But it is Still Fragile and Unequal
by Fernando Dantas, Estado de São Paulo, 1 January 2003.http:/www.estadao.com.br/eleicoes/governolula/noticias/2003/jan/01/24.htm
São Paulo - It was a little more than nine and a half years, from May 1993 to December 2002. The history of Brazil during this period is intertwined with the biography of the sociologist Fernando Henrique Cardoso, who came to dominate the economic and political scene in the country since he was shifted from the Ministry of Foreign Relations to the Finance Ministry by President Itamar Franco. On 3 October 1994, with the Real Plan launched and hyperinflation conquered, Fernando Henrique was elected president in the first electoral round, with Itamar's support.
The FHC era profoundly changed Brazil, and probably many years will past before History makes a dispassionate judgment of his strengths and weaknesses. In 1993, the country was experiencing its sixth year of a strange form of hyperinflation with hyperindexation, which had defeated five heterodox stabilization plans: Cruzado, Bresser, Verão [summer], Collor 1 and Collor 2. With great difficulty, after three implicit or threatened moratoria in the decade of the 1980s, the future Finance Minister, Pedro Malan, had just succeeded in negotiating the external debt, within the framework of the so-called Brady Plan.
Frustrated Euphoria
In the political sphere, the Brazilians discovered that the civic euphoria of the Elections Now movement and of the election of Tancredo Neves, in 1984, was not translated into an automatic improvement of the socio-economic conditions of the majority of the population. Nor did it begin a period of political tranquility. In the period of 1985 to 1994, the economy grew on average 2.8% per year, and the indicators of poverty, education, health, inequality, sanitation, etc., continued to be very bad. Of the three presidents - José Sarney, Fernando Collor and Itamar - before Fernando Henrique, two had been vice presidents and one suffered impeachment.
Fernando Henrique introduced to the national scene a series of novelties to which Brazilians had long become unaccustomed. Perhaps the most important has been an extensive period of democratic normalcy under the same president, at whose side the institutional machinery - opposition, parties, judiciary, civil society, etc. - functioned without breaks or discontinuities.
In the economy, the great victory was the stability of prices. With the exception of 1995, when the inflation rate was 22.41%, the worst year will be 2002, precisely at the moment at which Fernando Henrique leaves power. The latest prediction of the inflation rate for 2002 is 12.53%.
This worsening of inflation at the end of his mandate may encourage the idea that the principal - and for many critics, practically the only - economic achievement of Fernando Henrique went down the drain with the electricity blackouts. This view is, quite simply, wrong and unfair. The average annual inflation rate for the period from 1985 to 1994 was 757%, which is equivalent to 19.5% per month - more, that is, than the total annual inflation of the last year of Fernando Henrique's government. The so called IFP-M [producer price index]increase of 25.30% in 2002 is not a measure of consumer prices, and it reflects the increase of 54% in the value of the dollar during the year, which has great influence in this indicator. In 1999, the other year of great devaluation of the real, the IGP-M reached 20.20%, falling back to 9.95% in 2000. If it is true that Fernando Henrique is passing on to president Luiz Inácio Lula da Silva an increased inflation rate, which will create work for him, it is also true to say that the ex-president broke definitively with the cycle of hyperinflation and hyperindexation of the 1980s and 1990s.
On the front of economic growth - one of the final objectives of any economic policy - Fernando Henrique skidded [derrapou]. The average annual growth rate during his two governments, 2.3%, is below the 2.8% of the period from 1985 to 1994 (if 1994 is included in the FHC era, the average increases to 2.7%).
38
Criticisms
Some critics of the government present these numbers as irrefutable proof of the fiasco of Fernando Henrique's economic policies. The economic performance of FHC, however, is far from indefensible. It is possible to argue that the ex-president administered the transition from a failed economic model, from protectionism, statism and interventionism, to a more open system, stable and dependent on the private sector. But errors of conception, failures in implementation and unfortunate chance events (such as the succession of international financial crises beginning in 1997 and the Argentine collapse in 2001) made it impossible for the fruits of economic growth to be realized during Fernando Henrique's government.
Whatever may be the judgment of history, the changes under Fernando Henrique were immense. The government privatized $91 billion dollars worth of government owned enterprises (including those owned by state governments, stimulated by him). It concluded the sale of industrial and mineral enterprises, such as the Vale do Rio Doce, privatized telecommunications, parts of the electric and railway sector, and sold most of the state government-owned banks.
In the telephone industry, residential landlines increased from 13.3 million to 49.4 million, while cellular phones increased from 800 thousand to 31.6 million. In the electrical sector, a poorly executed change of model led to rationing in 2001. In the area of relations with state and municipal governments, the Social Democratic Party government completed a megarefinancing of the debts of these governments, with a value of R$ 205 billion. More than that, breaking with the past historical norm, the operation included draconian measures - complemented and reinforced by the Fiscal Responsibility Law of 2000 - which forced states and municipalities to adjust their accounting procedures.
The Fernando Henrique government also repaired the private financial system with Proer - a program that became an international model for its efficiency, although in Brazil it was insistently sold as a present of the government to the bankers.
The critics of Fernando Henrique's economic policies say that he implanted a mistaken model, but the definition of what would have been the correct model has never been made very clear. There is one point that the critics agree on: he should have had a more robust industrial policy, with strong emphasis on exports and linked to a tax reform. But it has not been demonstrated in detail, by the critics, how to finance more stimulation of exports in the context of strong budgetary restrictions.
Overvalued Exchange Rate
The debate about the negative side of FHC's legacy is complex, and it is only beginning. The most common argument is that the great error was the overvaluation of the real during his first term. The international experience beginning with the decade of the 1990s, moreover, shows that almost two dozen countries in Europe, Latin America and Asia, abandoned fixed or semi-fixed exchange rate policies for floating exchange rates, and that this change almost always was accompanied by turbulence which weakened or overthrew established government.
In any event, although this could not have been as easily avoided as the critics assume, the face is that the overvalued exchange rate is one of the causes of the two large deficits that tormented Fernando Henrique's government: the external and the public deficit. The public deficit was stimulated by the extremely high interest rates that were needed to attract the financing for the external deficit.
Furthermore, the government had in hand a tool that could have counterbalanced these effects, and that was not used in the first term: fiscal rigor. The abundance of foreign capital in the middle 1990s, combined with Fernando Henrique's generosity to the political forces that he attracted, with success, for his re-election project, dictated the dynamic of the events. The government achieved a primary budget balance (excluding interest payments) that was even [i.e., neither positive nor negative; a positive primary budget balance is needed to properly service the country's debts: TG], and the president declared, in the middle of
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1997, that governing was easy. Soon afterwards, a sequence of foreign crises in the Asian countries and in Russia forced Brazil onto bent knees, by the end of 1988. Fernando Henrique managed to get reelected, but the real was devalued in January of 1999, and his popularity and command over Congress would never be the same (although the emergency measures needed to sign an accord with the International Monetary Fund in 1998 and 1999 were passed).
Fernando Henrique's second term of office had paradoxical aspects, with good accomplishments in the social area, competent results despite bad luck in the economic realm, but disastrous political results. The economic model was radically changed, with the introduction of floating exchange rates, large surpluses in the primary budget, and inflation targeting. Even with all the turbulence of 2001 and 2002, from the Argentine crisis to the electoral uncertainties, those three macro-economic policies, introduced with the appointment of Armínio Fraga to the presidency of the Central Bank, in 1999, continued in place and were adopted by the new Workers Party government.
In the social area, Fernando Henrique reinforced, consolidated and amplified a series of initiatives that had already been outlined in his first term. Programs that transferred resources directly to the most poor, some tied and some not tied to agreements that allowed them to keep their children in school, were established all around the country, on the municipal and state and federal level. Targeting and evaluating social programs became the order of the day.
Almost all the children of school age were enrolled in primary school. During FHC's eight years in office, infant mortality was reduced from 40 per 1000 births to 30, and illiteracy also fell. The system of public health agents reached 50 million Brazilians, compared with about 1 million in 1994. Poverty and indigence had moderate declines, but not insignificant ones, as a proportion of the population. The average income increased, although it had fallen during the second term, and inequality almost did not change. Unemployment had a large increase, beginning with the economic stagnation at the beginning of 1988.
Bloody Battles
In politics, bloody fights between its two principal parties, the Brazilian Social democratic Party (PSDB) and the Liberal Front Party (PFL) weakened the political coalition supporting Fernando Henrique. In the end, the PSDB imposed the complicated candidacy of José Serra, which was easily defeated by Lula.
An ironic aspect of Fernando Henrique's government is that, despite so many accusations of being neoliberal and seeking to establish a minimal state, he presided over a large increase in public revenue and spending. Considering only primary expenditures (excluding interest) by the federal government, there was an increase from 16.5% of GNP in 1994 to 21.8% of GNP in 2002. There was also an increase in the expenditures of the states and municipalities. On the side of revenue, tax collections jumped from 29.5% of GNP to 34%.
Part of the increase in government revenue and spending can be explained by the fact that Fernando Henrique had inherited an increasing trend in public expenditures required by the 1988 Constitution and by the Unified Civil Service Law, put in place in the 1990s. But, according to recent studies, the constitutional inheritance and the civil service law do not explain everything. Primary expenses, excluding interest, increased at an annual rate of 6% during the Fernando Henrique government, in real terms. Especially during the first term, loose controls contributed to this increase. On the other hand, it is this same expansion of spending which perhaps explains why, in the end, Fernando Henrique invested much more in the social area (including agrarian reform) than most Brazilians think.
In any event, since spending, including interest, ran ahead of revenue, Fernando Henrique delivers a government with a significant nominal public deficit (including financial expenditure), high internal debt (57.5% of GNP), and with high interest rates and the instability caused by those factors. The large external debt, the other vulnerability of the economy in the FHC era, was only definitively reduced at the end of his mandate, at the cost of a megadevaluation. This, for its part, threw fuel on the flames of inflation.
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Positive Balance
As a general and provisional evaluation - the definitive one is left to History - Fernando Henrique seems to be giving Lula a much better country than he received. But it is quite far from what could have been, if he had governed with more prudence in the first term, and had better luck in the second. If the present conjuncture is very difficult, and there still remain very grave structural problems - such as growing crime rates and a social security deficit of 5.2% of the GNP - institutional advances and the advances in thinking during the FHC government were impressive. Today, fiscal and monetary responsibility is no longer treated as the enemy of social commitment in Brazil. This is a good base for constructing a successful government, one that Fernando Henrique did not have at the beginning of his first term.
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