41
Eight Years of Pragmatic Leadership in Brazil
A Supplement to: Fernando Henrique Cardoso: Reinventing Democracy in Brazil
Last updated: January 1, 2003
By Ted Goertzel, Ph.D.
Professor of Sociology, Rutgers University, Camden NJ 08102, USA
gers.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 S?o 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.
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, 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 desapropria?ao 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 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 One[11] 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 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.
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 Three[15] 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 Funda??o 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]
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.
Social Indicators. The United Nations Human Development Index[19] 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 Six[20] 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.