The Political Economy of Brazil: Public Policies in an Era of Transition 9780292773028

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The Political Economy of Brazil: Public Policies in an Era of Transition

Symposia on Latin America Series Institute of Latin American Studies University of Texas at Austin

The Political Economy of Brazil: Public Policies in an Era of Transition Edited by Lawrence S. Graham and Robert H. Wilson

University of Texas Press, Austin

Copyright © 1990 by the University of Texas Press All rights reserved Printed in the United States of America First Edition, 1990 Requests for permission to reproduce material from this work should be sent to: Permissions University of Texas Press P.O. Box 7819 Austin, Texas 78713-7819 © The paper used in this publication meets the m i n i m u m requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1984. Library of Congress Cataloging-in-Publication Data The political economy of Brazil : public policies in an era of transition / edited by Lawrence S. Graham and Robert H. Wilson. p. cm. — (Symposia on Latin America series) Includes index. ISBN 0-292-76520-7 1. Brazil—Economic policy. 2. Brazil—Politics and government—19853. Brazil—Social policy. I. Graham, Lawrence S. Π. Wilson, Robert Hines. ΠΙ. Series. HC187.P675 1990 338.981—dc20 90-43876 CIP

Contents

xi

Preface 1. Introduction Lawrence S. Graham

1

Section 1: The Institutional and Historical Setting 2. Dilemmas for Democracy in Brazil Richard Graham 3. Local and State Government in the Nova República: Intergovernmental Relations in Light of the Brazilian Political Transition Enrique Ricardo Lewandowski

7

26

Section 2: Economic Policy and Development Issues 4. Brazil's Rocky Economic Road to Democracy Werner Baer

41

5. The Political Economy of Export Promotion in Brazil Benedict J. Clements and J. Scott McClain

62

6. Colonization and Conflict: Frontier Expansion in the Brazilian Amazon NeilE. Schlecht

94

Section 3: Social Policy and Social Issues 7. Social Policy and Democratic Consolidation in Brazil Vilmar Faria and Maria Helena Guimarães Castro

122

Contents

vi

8. Health Policy in Brazil: The State's Response to Crisis Angela Atwood

141

9. National Housing Policy and the Favela in Brazil Lea Ramsdell

164

10. The Growth of Cities and National Urban Policy in Brazil Anne Hall

186

Section 4: The Role of the Parties and the Labor Movement in the Polity and the Economy 11. The Constituent Assembly and the Transformation Strategy: Attempts to Shift Political Power in Brazil from the Presidency to Congress David Fleischer

210

12. Organized Labor in Brazil Peter Swavely

259

13. Conclusion. Public Policy and Political Transition: A New Direction for Brazil? Robert H. Wilson

281

Index

287

Tables Table 2.1.

Index of Brazilian Manufacturing Production, 1939-1961

12

Table 4.1.

Brazil's Balance of Payments, 1971-1987

42

Table 4.2.

Real Growth Rates and Inflation Rates in Brazil, 1968-1987

45

Table 4.3.

Indicators of Size Distribution of Income in Brazil, 1981-1983

46

Table 4.4.

Functional Income Distribution in Brazil, 1980-1984

51

Contents Table 4.5.

vii

Production, Employment, Productivity, and the Wage Bill in Brazilian Manufacturing Industry

52

Yearly Growth Rates of Exports by Category, 1964-1988

67

Export Incentives for Manufactured Products, 1969-1985

68

Table 5.3.

Real Exchange Rates and Subsidies, 1970-1988

70

Table 5.4.

Nominal Export Incentives and Antiexport Biases, 1981

72

Table 5.5.

25 Principal Exporters in Brazil, 1985

80

Table 5.6.

Export Share of Top 250 Exporters, 1981-1985

81

Table 5.7.

Appropriation of Fiscal Subsidies for Manufactured Goods Exports, 1978

82

Table 5.8.

Percentage of Firms That Export, 1978

83

Table 5.9.

Domestic, MNC, and State Firm Share in Exports among Top 250 Exporters, 1981-1985

85

Table 5.10.

Participation of Foreign-Owned Firms in Domestic Sales, Exports, and Export Credit Subsidies for Manufactured Goods, 1978

87

Table 5.11.

MNC Participation in Manufactured Exports, 1969 and 1978

88

Table 6.1.

Landholdings by Category and Region, 1972

102

Table 6.2.

Projected Land-Use Patterns in the Amazon

104

Table 6.3.

Allocation of New Land during Intercensal Periods, 1950-1975 105

Table 6.4.

Indicators of Government Activity in Colonization Compared with Indicators of Activity Related to Large-scale Enterprise, 1970-1977 113

Table 5.1. Table 5.2.

Contents

viii

Table 7.1.

Federal Social Expenditures, 1980-1986

226

Table 7.2.

Distribution of Social Expenditure by Program Type, 1980-1986

127

Table 7.3

Social Indicators for Brazil, 1980

132

Table 8.1.

Estimated Life Expectancy at Birth According to Monthly Family Income Groups, 1976

142

Table 8.2.

Percentage Distribution of Preventive and Curative Shares of Brazilian Health Expenditures, Selected Years, 1949-1982 155

Table 9.1.

Favela Population in São Paulo

Table 9.2.

Physical Characteristics of Bras de Pina Dwellings, 1967 and 1975 177

Table 10.1.

National Council of Urban Development, Investment in Metropolitan Regions and Middle-Sized Cities, 1976-1984

199

Table 11.1.

Majority and Proportional Elections in Brazil by Party, 1966-1982

212

Table 11.2.

Distribution of ARENA Chamber of Deputies Vote by Municipal Population and Region, 1978 213

Table 11.3.

Distribution of ARENA vs. PDS Chamber of Deputies Vote by Municipal Population in Selected States, 1978 and 1982

214

Election Results, November 1982, and Electoral College Composition, January 1985, by Political Party

217

Regional Political Representation in Brazil: 1982 Elections, 1984 Congress, and 1985 Electoral College

218

Table 11.4.

Table 11.5.

172

Contents

ix

Table 11.6.

Regional Political Representation of the PDS: 1982 Elections, 1984 Congress and PDS Convention, and 1985 Electoral College 219

Table 11.7.

Party Delegations in Congress, 1983-1987

223

Table 11.8.

Index of Congressional Support for Government by Party, 1985-1986

226

Table 11.9.

Past Party Affiliations ( 1979 and 1983) of Members of the Brazilian Constituent Assembly by Party, 1987 232

Table 11.10. Occupations of Constituent Assembly Members by Order of Importance, 1987

233

Table 11.11. Occupations, Socioeconomic Status, Age, and Seniority of Constituent Assembly Members by Party, 1987

234

Table 11.12. The Capitalist Class in the Constituent Assembly: Sectors of Economic Activity by Party, 1987 235 Table 11.13. University Degrees of Constituent Assembly Members by Party, 1987

236

Table 11.14. Political Careers of Constituent Assembly Members by Party, 1987

237

Table 11.15. Profile of the "Various" PMDBs in the Constituent Assembly by Past Party Affiliation

238

Figures Figure 11.1. Popularity Index for President José Sarney, April 1985 to September 1986

227

Figure 11.2. Organization of Constituent Assembly Committees and Subcommittees

246

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Preface

This book is the consequence of a year-long policy research project in the LBJ School of Public Affairs and the Institute of Latin American Studies (ILAS) at the University of Texas at Austin. Structured in the form of a sustained dialogue, discussion was focused around formal presentations by Brazilian specialists followed by informal meetings between them and advanced students engaged in policy research. The specialists also reviewed and commented on the work under way. The papers selected for publication here represent a continuation of that dialogue,· they constitute a cross section of the work presented by seminar participants and papers finalized afterward in the United States and Brazil. The project received fundingfrom ILAS, including grants from the U.S. Department of Education through its Latin American Language and Area Center Program, and the Lyndon Baines Johnson Foundation. This project benefited from the support and participation of many people. William Glade, the former director of ILAS, Richard Adams, the current director, and Max Sherman, dean of the LBJ School, provided support and encouragement in all phases of the project. The participation of a number of colleagues at the University of Texas at Austin, including Michael Conroy, Fred Ellison, Richard Graham, and David Jackson, and scholars from other institutions, including Werner Baer, Vilmar Faria, Henrique Lewandowski, and Wayne Selcher, greatly enriched our efforts. Christine Payne provided excellent editorial assistance.

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The Political Economy of Brazil: Public Policies in an Era of Transition

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1. Introduction

Lawrence S. Graham The nature of the transition from authoritarian to democratic governance in Brazil has evoked great interest as well as considerable debate. Depending on one's vantage point, it is possible to dramatize the risks in Brazil's political economy—thereby emphasizing the constraints on politics and economics and downplaying the likelihood of reconciling new economic growth with the consolidation of a democratic regime. Or, one can advance an equally plausible argument stressing the opportunities for building a new political and economic order. Yet another possibility, and one that is becoming more and more likely, is that the current regime will continue to muddle through difficult economic and political decisions and will produce outcomes in the years ahead not noticeably different from the immediate past. However one views Brazil, one thing is certain: This is a country in the midst of a profound transition that cannot be captured by myopic perspectives. The challenge in this case is to open up political and economic analysis to new vistas, to transcend the boundaries imposed by concepts and methods derived from more limited models of politics and economics that lead us away from a holistic vision of what is occurring. The very size, the diversity, the complexity of modern Brazil, the rapidity of its change without rupturing its cultural cohesiveness, all argue for the design of schema capable of capturing the larger picture, which can communicate to others the dynamics of the current situation. One way of capturing Brazil's political economy at this particular moment in transition is to use a policy perspective. While every political and economic system has a history and an institutional context that impose certain limitations on the extent of change, a policy perspective can be especially helpful in directing attention to the changes under way or the stalemates that have ensued by examining the nexus between intent and practice, design and outcome. The decision to use a policy perspective and to direct attention to Brazil's political economy was a conscious choice, as was the decision to

1. Introduction

Lawrence S. Graham The nature of the transition from authoritarian to democratic governance in Brazil has evoked great interest as well as considerable debate. Depending on one's vantage point, it is possible to dramatize the risks in Brazil's political economy—thereby emphasizing the constraints on politics and economics and downplaying the likelihood of reconciling new economic growth with the consolidation of a democratic regime. Or, one can advance an equally plausible argument stressing the opportunities for building a new political and economic order. Yet another possibility, and one that is becoming more and more likely, is that the current regime will continue to muddle through difficult economic and political decisions and will produce outcomes in the years ahead not noticeably different from the immediate past. However one views Brazil, one thing is certain: This is a country in the midst of a profound transition that cannot be captured by myopic perspectives. The challenge in this case is to open up political and economic analysis to new vistas, to transcend the boundaries imposed by concepts and methods derived from more limited models of politics and economics that lead us away from a holistic vision of what is occurring. The very size, the diversity, the complexity of modern Brazil, the rapidity of its change without rupturing its cultural cohesiveness, all argue for the design of schema capable of capturing the larger picture, which can communicate to others the dynamics of the current situation. One way of capturing Brazil's political economy at this particular moment in transition is to use a policy perspective. While every political and economic system has a history and an institutional context that impose certain limitations on the extent of change, a policy perspective can be especially helpful in directing attention to the changes under way or the stalemates that have ensued by examining the nexus between intent and practice, design and outcome. The decision to use a policy perspective and to direct attention to Brazil's political economy was a conscious choice, as was the decision to

2

The Political Economy of Brazil

bring together this particular set of articles. Each of the chapters that follows focuses on a specific issue central to understanding the political and the economic choices currently under debate in Brazil, at a point in time when everything is in transition. Second, as papers centered around common themes, they are concerned with a particular range of topics: those developments that serve as bellwethers of the new polity emerging in Brazil. Since the terms "polity" and "political economy" are used here in a delimited way, operational definitions are in order. By "polity" we mean the state apparatus that has taken form in Brazil (with its multitude of public organizations at the federal, state, and local level) and the political and social forces within the state and outside (made up of groups and individuals) that are giving shape to a new regime (consisting of a constellation of actors quite different from the Brazil of a decade ago). "Political economy" refers to the interaction among these institutions, actors, and groups inside and outside the state, with the economic conditions that have given rise to new patterns of action (juxtaposing economic productivity, skewed income, and inflation with socioeconomic tensions and social movements generating conflict, without leading to breakdown). The papers in this volume provide an integrated view of the dynamics characteristic of the Brazilian polity at the end of the 1980s. Like the United States of the late 1960s, Brazilian governance has become so complex and diffuse that by working alone one cannot easily capture the unity and diversity characteristic of the interactions among the state, the economy, and society. The Brazilian policy arena today is as pluralistic and fragmented as that first identified by Dan K. Price in his 1965 analysis of The Scientific Estate in the United States.1 Yet, there are few parallels between the two countries in the constellation of actors and policy arenas particular to each. The Brazilian polity differs from that of the United States in essentially two ways—first, in the extent to which Brazil's state apparatus, directly in its ministries and commissions and indirectly through state-owned banks and public enterprises, has structured the economy and society,· and, second, in the extremes of wealth and poverty to be found in an industrializing country with a rural society in the northeast and to the interior far removed from the modernity of its urban centers. Each chapter that follows stands alone in its representation of a particular component of the Brazilian policy process. Yet, these chapters are not simply isolated representations of different facets of Brazilian politics and economics. Each deals with a dimension of contemporary Brazil that is essential to comprehend the larger polity—the structures and organizations of government, the policies that have emerged, and the major actors.

Introduction

3

Accordingly, there is a specific rationale behind these chapters and their ordering. Beginning with a discussion of the dilemmas and constraints facing Brazil, they seek to enhance progressively the reader's understanding of public affairs and policy at a crucial juncture in the evolution of modern Brazil. As such, this volume is designed to be much more than just another book about Brazil: It seeks to demonstrate how policy-oriented research can be integrated with the concerns of economic and political science to open up new insights and understanding of political, social, and economic change in an important country in transition from authoritarian to democratic rule. The volume is divided into four parts, each of which is designed to answer basic questions about Brazilian public policy. What are the institutional and historical conditions that led to the policies formulated and implemented during the 1980s? What is the character of the economic policies chosen by the authoritarian regime that ruled Brazil for twenty years, and what impact are they having on the transition? What have been the outcomes of the social policy decisions made by the military governments during the 1970s? What are the conditions facing the poor and shaping public health, housing, and urban life in the Brazil of the late 1980s? What factors are involved in the changing role of the state as government leaders leave behind the authoritarianism of the past and move toward more open styles of governance that are still a long way from the democratic expectations of most Brazilians? Three unifying themes cut across this book and are addressed within these chapters. All reflect a common concern with the ramifications of increased complexity in the policy environment and with the limitations placed on democratization by the kind of government institutionalized during the authoritarian era. First, there is a proliferation of actors, the causes of which are to be found as much in Brazil's socioeconomic development over the past two decades as in the consequences of previous policy initiatives. Second, there are constraints imposed on present choices by previous policy decisions. Earlier options pursued under a military-dominated regime regarding the allocation of financial resources, export policy, and social policy continue to have real impact on present policy choices. Third, there is the issue of the responsiveness of institutions and the political process to the new social forces that have emerged in Brazil. The kind of governance institutionalized during the authoritarian era and the policies developed by military officials and technocrats have much to do with the scarcity of resources available to states and municipalities today. It is here in these public institutions, closest to the people, where awareness of the constraints on public policy is the greatest. The frustrations generated by such conditions are especially painful for the new generation of political leaders and officials

4

The Political Economy of Brazil

who have come to the fore and who wish to change the priorities and the beneficiaries. This, then, is a book about Brazil in transition. The policy perspective provided seeks to draw out the complexities of a state apparatus whose institutionalization is largely a function of patterns of interaction established between state and society during the 1960s and 1970s. In drawing attention to the boundaries imposed by the institutional setting and the dynamics that are shaping Brazil's political economy at the end of the 1980s, we seek to provide greater insight into Brazil as it stands on the threshold of the 1990s in such a way that the distinctiveness of Brazilian politics and economics can be comprehended more fully. Note 1. Dan K. Price, The Scientific Estate (Cambridge, Mass.: Harvard University Press, 1965).

2. Dilemmas for Democracy in Brazil

Richard Graham In December 1989 Brazilians elected a president by direct popular vote for the first time since 1960. They had already been ruled by a civilian president since March 1985, after a twenty-one-year military dictatorship. By these steps they signaled their determination to return to constitutional government, the rule of law, and government by duly elected officials. The handing over of the sash of office to any civilian had already marked a significant shift in the orientation of recent Brazilian politics. But the historian is necessarily wary of believing great change can be secured without struggle. Not that it is my purpose to diminish the importance of installing a civilian government in Brazil, particularly for what it signifies as a symbolic event, suggesting what many Brazilians, even military officers, consider the proper direction of political change. Yet if we ask, What does civilian rule really mean for most Brazilians, we must conclude that it is unlikely by itself to impel great modifications in the relationships of power. The point emerges with particular clarity if we consider the nature of past regimes during this century. The first third of the century was characterized by the techniques of government associated with coronelismo, or rule by local landed bosses,· the second third by populismo, through which urban masses were carefully controlled while receiving certain social benefits,· and the last third began with autoritarismo, or rule by ideologically motivated military officers. Any attempt to consider the prospects for civilian government in Brazil today must begin by examining the characteristics of each of these three types of political order. Especially important is an understanding of why coronelismo yielded to populismo and the latter to autoritarismo. Each system has left a weighty heritage to be confronted by present-day governments. The system of coronelismo ensured landed control of the Old Republic (1889-1930), despite the outward trappings of democratic elections and constitutional government. Three systems of oligarchic alliances operating respectively in the states of São Paulo, Minas Gerais, and Rio

8

The Political Economy of Brazil

Grande do Sul determined not only their own governors and state political bosses, but who would be federal president as well. He, in turn, using his patronage power to produce electoral results favorable to him, virtually appointed the governors of all the other states. They had free reign to do locally as they would, as longas they returned representatives to Congress favorable to the president. These governors struck more or less the same bargain with the local political bosses, or coronéis. When a coronel proved uncooperative, a rival could easily be found to challenge him. If need be, the challenger could count on support from a contingent of the federal army sent in "to keep the peace." Getúlio Vargas is sometimes alleged to have ended the power of the coronéis after taking power in 1930; I would say he merely balanced them off against other groups. As late as the presidency of Juscelino Kubitschek (1956-1961), the landed boss still formed an important element in building electoral victories. Indeed, the personal tie between landlord and peasant made it possible to interject a controlled rural vote in an increasingly complex political formula.1 Ultimately, patronage linked village and national capital through a chain of personal, face-to-face relations that connected even the landless peasants to a national system of obligations. Through politics, local potentates defended a clientelistic structure and projected it into the next generation. They obtained bureaucratic appointments, sinecures, livings, and commissions for their family and for the vast network of dependents and clients all family members carried with them. Those who rose in the political hierarchy granted benefits—chiefly authority over others—to those who loyally supported them. And, if granted, such favors could be withdrawn. Authority did not spring from below, but could only be bestowed from above. No one held a position by right, but only by connection.2 All politicians sought most of all to gain the power to appoint to public office—whether to petty bureaucratic posts or to positions of major authority. Yet, ultimately the landed class controlled the government, for any individual's access to the ladder of political success depended on the support and encouragement of that class. Social and economic changes gradually undermined the once unquestioned dominance of the coronéis. Beginning even in the nineteenth century, several other groups slowly came to share power with the landowners, complicate political relationships, and eventually displace them from sole occupancy of the seat of power. For lack of better rubric with which to cover all such new arrivals, John J. Johnson once referred to "middle groups";3 it would still be vague to speak of an urban-military coalition, yet such a term captures, perhaps more accurately, their varied base and inchoate class loyalty. Industrialists formed one sector within this new conglomerate. Even

Dilemmas for Democracy in Brazil

9

as early as the Paraguayan War (1864-1870), demand had stimulated industrial production. When the war ended, an industrial lobby coalesced in Rio de Janeiro. Weak at first, it strove to secure a protective tariff and favorable monetary policies. Factory owners finally persuaded the government to take initial steps toward fostering industrialization, and the first Republican government in the 1890s promoted hasty investment in factories; despite widespread failures, a substantial number remained in production. Surviving the First World War and profiting from its opportunities, industry grew in importance during the 1920s and 1930s. The prosperity of the coffee export economy led to the formation of capital that sought opportunities in industrial investment, and many coffee planters themselves became captains of industry.4 Industrialists found allies. Some bankers, wholesalers, stock brokers, and promoters, as well as the doctors, lawyers, accountants, and managers who augmented the number of urban well-to-do, joined industrialists in desiring and sometimes securing a voice in politics along with that of the landed classes. Those who were less well-off but still owned or hoped to own some property—shopkeepers, artisans, and skilled workers, proprietors of service establishments, hoteliers, restaurateurs, bureaucrats, and white-collar workers—frequently saw industrializing goals as also benefiting them by swelling urban employment and opening up opportunities for themselves. Military officers, meanwhile, also came to prominence. Their first opportunity occurred during the Paraguayan War. That war strengthened the position of army officers as against the landowner-dominated National Guard. Yet, they remained dissatisfied with the pace of their promotions, the rate of their pay, and the supply of materiel.5 Whenever the landowning class divided, the urban-military coalition moved into the breach. This had happened even in 1889 when the landowners of São Paulo split off from their peers in other provinces to support the military action that overthrew the monarchy. Five years of military rule resulted, as did the industrial boom of the 1890s. Cattlemen in Rio Grande do Sul then mobilized their workers to ride under their orders in revolt against Marshal Floriano Peixoto. Meanwhile, coffee planters in São Paulo had purchased the latest military equipment for their state militia, also commanded by landowners. Faced with this show of force, and themselves divided, the military officers gave way and the landed classes once again came to power in 1894. A similar falling out among the landed oligarchs in 1910 led to the election of a military officer as president. He undertook a series of measures, soon proven inadequate, to strengthen the hand of urban political groups against the power of rural bosses. When the rift between oligarchs closed, a spokesman for coffee planters succeeded as president and coronelismo continued unabated.6

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The Political Economy of Brazil

Landed power found itself once again under attack when in 1922 a group of young tenentes (lieutenants) launched a movement of protest. Although divided about almost everything else, they agreed that the political system must be reformed. One of them, Luís Carlos Prestes, in 1924 initiated a "long march" to rally peasants against landed potentates in the interior. The movement failed miserably, however, as the peasants fought alongside the landlords against the young officers. Only when landed groups again divided in 1930 did the tenentes emerge to transitory prominence in the first days of the new government led by Getúlio Vargas.7 Organized labor began gradually to increase its importance during the first third of the twentieth century. Industrialization brought with it the seeds of conflict between workers and owners. The first strikes in Brazil occurred in the 1890s, against the railroad companies. Through the 1920s the position of government remained overtly hostile, and one president referred to the labor issue as a matter for the police. Getúlio Vargas, despite his origins in the landed oligarchy and his rise to power through the steady use of patronage and clientage, nevertheless envisioned the mobilization of labor to enlarge his freedom of action between the urban-military coalition and the landowners. He seemed to see that the breakdown of those face-to-face relationships between workers and the propertied, implicit in factory employment, created a void that could be filled by government institutions. Aspects of the old paternalism could be perpetuated impersonally if government were to become the new patrão. The techniques of Vargas can be properly labeled populismo, although he came fully to adopt its qualities only over years. By populismo I mean a style of politics that granted benefits to the lower middle and, especially, working class, without passing on real power. On the contrary, from 1930 Vargas and his successors successfully practiced it as a means of exerting social control. The urban-military coalition at first accepted the mobilization of labor as a kind of battering ram through which it could broaden its power vis-à-vis the landed oligarchy. Eventually, however, labor proved to be a threat to the political position of the coalition itself by demanding entrance to the circle of power. When that happened, the coalition turned against the workers. Vargas had begun granting various concessions to organized labor in exchange for control soon after his successful coup of 1930, and these benefits were enlarged through successive measures down to 1964. A good example is the creation of govern mentally supervised labor unions in sharp contrast to the militantly independent unions of the 1920s and earlier. Unions received the legal right to strike under certain circumscribed circumstances, but their members were not fully free to choose

Dilemmas for Democracy in Brazil

11

their own leaders or even to hold their own strike funds. Social security, medical care, shorter hours, minimum wages, and the prohibition of child labor were some benefits bestowed upon workers. The lower middle class also gained old-age pensions, medical assistance, and job security.8 Many of the poor, however, gained nothing at all. The underclass of servants, underemployed, and unemployed did not participate in the benefits oí populismo. One aspiring political leader, Pedro Ernesto, who in the early 1930s hoped to use the electoral support of slum dwellers in Rio de Janeiro, found that Vargas would have none of it. Illiterates—the bulk of the population—were by law excluded from the electoral process. Women of whatever class gained very little by way of corporate power under populismo. The feminist Berta Luz encountered only frustration as she struggled to secure equality for women, although a limited right to vote came in 1932.9 Populista politicians, not surprisingly, did absolutely nothing to threaten the property of the landowners. Land reform held no place among the reforms they urged. Import-substituting industrialization provided jobs in the cities and profits for industrialists, but did not menace the control of the land by the few. Indeed, the poverty of agricultural workers kept urban food prices and urban wages low. As late as 1960,3 percent of the farm units accounted for 53 percent of the land, while 81 percent of the agricultural workers either owned no land at all or owned so small a patch that they had to supplement their income by working for the large landowners.10 Thus, populismo provided a technique through which certain politicians could derive support simultaneously from the traditional landed class (or the votes they controlled), from the urban-military coalition, and from newly emergent organized labor. Vargas was in some sense a juggler, keeping several interests in the air at the same moment. By the time Juscelino Kubitschek became president in 1956, the number of these interests had multiplied and many had subdivided. João Goulart ( 1961-1964) could not continue the performance and, as he dropped one after the other, opposition spread. Nationalism could be used for a while to paper over the widening cleavages between diverging interests. Official nationalism was not directed against foreign investors (except for a few who had prospected for petroleum), but against the importation of foreign-made goods. Under populismo the growth of industry, even if foreign owned, could be hailed as a nationalist achievement. The Vargas regime that began in 1930 and subsequent administrations down through that of Kubitschek pushed the substitution of imports by Brazilian-based manufacturers (table 2.1). Major industries sprang up, funded by foreign capital.

The Political Economy of Brazil

12

Table 2.1. Index of Brazilian Manufacturing Production, 1939-1961 (1949=100) Year

Index

Year

Index

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950

49.9 51.9 58.4 55.9 61.8 64.8 67.8 77.3 80.3 90.1 100.0 112.7

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961

119.0 125.4 137.1 150.0 166.4 176.7 186.5 217.7 245.7 271.8 301.9

Source: Werner Baer, Industrialization and Economic Development in Brazil (Homewood, Ill.: Irwin, 1965), p. 263.

Meanwhile, politicians increasingly applied government resources to build roads, construct power plants, create mills, and launch mining ventures.11 Even the strident call heard in the early 1960s for the nationalization of public utilities in Rio Grande do Sul and Rio de Janeiro proved much ado about nothing: ample compensation assuaged the affront to private property.12 Populismo had its limits, however, and even nationalism could not conceal the increasing tensions development provoked. The hastening pace of industrialization exacerbated the friction between conflicting interest groups. So-called developmental inflation drove a wedge between captains of industry and their erstwhile allies among the petite bourgeoisie and white-collar workers. Some industrialists began to advocate enlarging the consuming market for their manufactures by bettering the condition of rural peasants, if necessary by granting them land; thus they found themselves in conflict with landowners. Skilled workers who had once joined their employers to secure policies designed to foster industry now more frequently clashed with them over wages and benefits.13 Like the earlier paternalism, populismo faced the fundamental problem that the workers were not children, and could demand a prerogative of adulthood: power. Two further developments complicated the effort of populista leaders: the army began to oppose urban labor and so did the increasingly

Dilemmas for Democracy in Brazil

13

influential U.S. government. Whereas in the 1920s the tenentes had often identified with workers in their search for a more equitable social order, twenty years later the two groups already saw each other as enemies. The cultural hegemony of capitalists, both within Brazil and internationally, had successfully identified workers as a threat even for the officers. Vargas worked to strengthen the army without imagining the result. In the 1930s he initiated a program to build up the federally controlled armed forces as a counter to the state-run militias of the landed oligarchies. He particularly displayed his commitment to the army by dispatching the Brazilian Expeditionary Force (FEB) to fight in North Africa and Italy during World War II and thus devoted substantial Brazilian resources to an effort aimed at giving officers the experience, which they craved, of fighting alongside a major military force. Meanwhile, however, Vargas had also relied on the urban working class as another counterpoise to the landed bosses and eventually played it against the army as well. The army, however, had the guns. In 1945 Vargas released Luís Carlos Prestes from jail. The former tenente had become a leader of the Brazilian Communist party and had led an abortive popular front revolt in 1935. In 1945 Vargas also legalized the Communist party and encouraged labor in preparation for the elections to be held at the end of that year. The army then overthrew Vargas. It did so not so much because, as some have argued, Brazilian officers had been imbued with democratic principles while fighting alongside North Americans against Mussolini, but because they saw Vargas escaping his dependence upon them and dangerously encouraging a disruptive labor element. Once he was overthrown, two military men contended for the presidency; not long after General Eurico Gaspar Dutra won the election, he outlawed the Communist party, which had secured 10 percent of the electoral vote. Not democracy, but an antilabor bias had been the lesson apparently learned from the Americans.14 Vargas now set himself the task of coming back to power. To do so he needed the support both of labor and the army. General Góes Monteiro, who had earlier announced that no "unsuitable" candidate would be allowed to run in the 1950 election, struck a deal with Vargas in late 1949: the army would not oppose his candidacy. Although Vargas won the election thanks especially to the Brazilian Labor Party (PTB) that he created to mobilize labor support, upon inauguration, in clear disregard for the usual practices of clientelistic politics, he gave practically no offices to its leaders. Instead, he named Góes Monteiro his military chief of staff and soon pushed through a military aid pact with the United States. Vargas would still not be tied only to one group, however, and soon

14

The Political Economy of Brazil

began searching once again for support among workers. In June 1953 he appointed his protégé João Goulart as his Minister of Labor. Goulart, like Vargas drawn from the landed class of Rio Grande do Sul, and anxious to establish a political base of his own among working men and women, immediately pushed through a substantial increase in the minimum wage. In reaction, military officers in February 1954 demanded and got his resignation,· by August they were prepared to ask Vargas to step down. Instead, Vargas shot himself. When, seven years later, Goulart inherited the presidency, the stage was set for further hostility between military officers and workers. However much populista leaders played against the army, those politicians never chose to side wholeheartedly with labor. Rather, populistas relied heavily on force and the threat of force to crush unsanctioned strikes. In addition to firmly dominated labor unions, Vargas created a special police department to maintain "political and social order." Kubitschek sought to divert attention from the dire plight of workers by grand building schemes, but when this did not work, he did not hesitate to use force, for instance, entirely to close down a union in Santos. Not even Goulart countenanced granting genuine power to workers—much less arming them. He even called upon the army to keep watch on Miguel Arraes, the reformist governor of Pernambuco who sought to push populismo too far. Behind all the occasional efforts on behalf of the working class lay two premises: labor should receive benefits as favors bestowed, not as rights won through struggle,· and, if workers went beyond certain limits, it would be legitimate to oppose them by force.15 By the late 1950s a new component had come to take a major role in Brazilian politics: U.S. policy. The U.S. government's position placed it steadfastly in opposition to the Brazilian worker, not so much by conscious intent but as a result of a larger struggle between the capitalist system, which the United States now led, and the socialist camp. Its instruments in this struggle within Brazil proved to be Brazilian military officers. In 1949 General Dutra ordered the creation of the Escola Superior de Guerra (ESG) modeled on the U.S. Superior War College. Its academic divisions included, besides military subjects, sections on politics, economics, psychology, and social affairs. Of the many officers connected to it, the names of Humberto Castelo Branco, onetime director,· Ernesto Geisel, an instructor,· and Golbery do Couto e Silva, its chief ideologue, stand out. Impelled by a cold war view of the world, Golbery believed that Brazil would seriously jeopardize its national security if it moved away from the U.S. orbit or allowed "internal subversion" to lead Brazil in that direction.16 Internal subversion, of course, suggests class division,· for where would supposed subversives

Dilemmas for Democracy in Brazil

15

find purpose or support except amid the disadvantaged? Among the principles taught at the ESG, the Doctrine of National Security loomed largest. According to that doctrine all interests, all values, all principles must be sacrificed to national security. Raison d'état justified any action, no matter how inhumane, no matter how morally despicable. The doctrine also argued that, chronologically, security came first. If a government firmed up its national security, whether from external attack or especially internal subversion, then it could lead the nation to political stability, which in turn could provide for economic development and thus lay the groundwork for democracy, that is, for representative government as practiced in the capitalist societies. The doctrine had been forged in the United States. At Punta del Este in 1962 Dean Rusk called for a "shield behind which constructive measures can take effect in steady and secure progression." From such U.S. premises it was not a far step to training Brazilian military and police officers in techniques for use against their own people.17 Among Brazilian army officers, meanwhile, nationalists steadily found themselves weakened by the cold war. If, indeed, there were only two possible positions, then they too would side with the United States against Soviet domination. The weight of the North American definition of the world bore down upon them and broke their unity. As domestic unrest in Brazil was increasingly seen to back up the arguments of those who claimed that a foreign ideology threatened Brazilian security, more and more former nationalists joined the pro-U.S. camp. Only a few of them remained to be read out of the army in 1964. The steady weakening of the landlords in Brazil increased the selfconfidence of military officers. The inclusion of new groups within an enlarged circle of power holders, especially after 1930, robbed civilian governments of their former stability: civilian political leaders spoke with too many voices. And each of several groups now held enough power to veto the programs of the others, but not enough to push through their own. No longer drawn exclusively from a self-confident landed oligarchy that could afford to ignore sharp social inequalities, politicians were vulnerable to moral pressure. Social inequity, though perhaps no greater than it had always been, now promoted doubts and questions even among the political elite.18 As inner confidence waned, workers appeared more menacing than perhaps they really were. As the rich could no longer count on the widespread acceptance of their right to property, they began to look to the military to secure their wealth and position by force. (Their belief that officers would do their bidding and retire to the barracks was to prove unfounded.) Officers, meanwhile, grew contemptuous of civilian leaders who did not seem to know how to maintain the status quo or even whether they

16

The Political Economy of Brazil

really wished to. The unified command of a military structure, the officers' conviction that they alone were untarnished by greed or personal ambition, their belief that the nation risked destruction before the onslaught of a foreign ideology introduced among the workers, their experience in relating to army officers from the United States—all these factors encouraged the conviction among some officers that they, rather than civilians, should openly rule. The result was the coup of April 1, 1964, which installed a military officer in the presidential palace and led to rule by officers for the next twenty years. The putsch definitely removed from their central position as a major political force those traditional landlords who had relied on face-to-face relationships with dependents, although, as we shall see, it did not completely end their presence within political circles. Unlike old-fashioned Latin American caudillos, the new dictators were driven by an ideology cast in cold war terms and directed especially against the lowest class. True, other groups also felt the heel of the military boot, for in military eyes property owners had shown a lack of will in controlling labor, and all elements of society must now be firmly disciplined. But mostly the officers feared political power might be exercised by workers. Populismo having failed, in the end, to perform its necessary function of controlling labor, autoritarismo must take its place. To summarize so far: workers had once been controlled by a combination of violence and paternal benefits dispensed by landlords. Through such power the landed oligarchy wielded political power nationwide. The person-to-person connections between landlord and dependent ensured that a rural vote could be "delivered." As the urban-military coalition arose, rural bosses continued to play a major role: populista politicians relied on them as a counter to industrialists on the one hand and urban workers on the other. Although the populista regimes seemed to rely especially on the support of urban voters, in fact they could toy with that source of support only because there was a rural controlled vote to brake a proletarian impulse toward any alteration in property relations. Nevertheless, military officers who had become increasingly opposed to urban labor also lost their confidence in the efficacy of civilian rule in guiding or restraining the process of social change. After 1964 there were two alternative policy emphases among authoritarian governments in Brazil: linha dura (hard-line) and abertura (opening). Rather than being understood as opposites, however, the two tendencies must be thought of as forming the sides of one coin. Just as surely as the paternalism of the early twentieth century would have been meaningless without the punishments coronéis could mete out, so now liberalization derived its definition from the otherwise ruthless exercise of violence. The two currents of military opinion shared a common vision

Dilemmas for Democracy in Brazil

17

of the world. Both urged close alliance with the United States. Both pushed for rapid capitalistic development regardless of the cost to the workers.19 Both saw the working class as a threat to Brazil's security and, therefore, as a group to be watched rather than mobilized. Their differences centered around means, not around ends. One group came to be called "liberal, " although this rubric is appropriate only in contrast to the hard-line policies of the others. The so-called liberals believed that eventually the military should retreat to their quarters. Their underlying premise was that the removal of a certain number (albeit always growing) of demagogic and disloyal politicians would eradicate the danger to the republic and enable representative democracy to flourish. They failed to see the roots of Brazil's crisis lay in the social order itself. They continued to believe that security would bring stability, and that the resulting economic development would produce benefits for all; or at least enough benefits to buy off those who would otherwise desire a radical alteration in society. Among this group was the ESG generation held together by Golbery do Couto e Silva. Presidents Humberto Castelo Branco ( 1964-1967), Ernesto Geisel ( 19741979), and João Figueiredo (1979-1985) belonged to this camp. The credibility of their action depended, however, on the presence of the totally oppressive hard-liners. These more doctrinaire advocates of army rule apparently believed that only brute force could keep the society from exploding. When, in 1965, gubernatorial elections returned candidates hostile to the programs of the military, Castelo Branco remained in power only by making concessions to the hard-liners, agreeing, for instance, to restructure the party system, pack the Supreme Court, and carry out a renewed purge of Congress.20 Even these measures failed to satisfy the more extreme officers. Especially as it became clear that many civilian leaders who had backed the 1964 coup now questioned the legitimacy of continued military rule, the more authoritarian officers demanded sterner measures. In December 1968 these ultra-authoritarians forced General Costa e Silva to issue Institutional Act no. 5. Along with the National Security Law (March 1969), it abolished almost every one of the traditional liberal freedoms of the individual. Draconian paper measures merely cloaked the unofficial but government-sponsored terror of torture chambers and death squads. As president from 1969 to 1974, Emílio Garrastazú Médici presided over the worst years. The arbitrary measures taken by Castelo Branco paled in retrospect.21 Similarly, the military governments that succeeded Medici managed to pass off a succession of otherwise shockingly arbitrary and dictatorial enactments as acceptable lesser evils, even sometimes as big steps toward the rule of law.22 Brazilians who would once have spoken out

18

The Political Economy of Brazil

courageously against any encroachment on human liberty—and would do so again—perforce remained silent or even ready to support the government in the later 1970s for fear of a return to the even worse conditions that had characterized the Medici years. Just as abertura derived its literal meaning from the previous "closing," it worked to maintain order and establish legitimacy because the threat of a renewed closing was constantly present. Hesitant progress was its very nature: everyone must be reminded that a renewed reign of terror could be imposed at any moment. The alternating directions of abertura—two steps forward and one step back—were part and parcel of the system. Careful political engineering under Geisel and Figueiredo finally allowed indirectly elected members of the electoral college to choose a civilian president in 1985. Tancredo Neves, a skilled politician who had emerged from the coronel networks of Minas Gerais, discreetly persuaded one group after another—including significant portions of the officer corps—to back him for president. One part of his bargain was to name as his running mate José Sarney, a man even more tied to the landed bosses of, in his case, the northeast. But Neves died before taking office and Sarney was inaugurated instead. Sarney took power without a popular mandate and spent most of his years in office trying to solidify his position by the blatant use of patronage. In this effort he was hampered by deepening economic crises, brought on in part by the giant foreign debt contracted by his military predecessors and in part by the government deficits his burgeoning appointments required. When a Constituent Congress met, it soon divided into a number of factions, although a center-right coalition eventually asserted control. Thanks to its careful balancing of conservative provisions with nationalistic language, a constitution resulted that both military officers and the landed class could accept. It is within the terms of this constitution that Brazil's direct election for president took place in late 1989 leading to the narrow victory of Fernando Collor de Mello.23 As Brazilian leaders today consider the alternatives that lie before them, they must confront the fact that the twentieth century has so far offered three models for government action in Brazil: coronelismo, populismo, and autoritarismo. Each of them has left a heritage that in some ways limits present options. Each of them has offered examples of what should now be avoided. None of them can or will be repeated. Take coronelismo, for instance. The power of landholders is still such that land reform has been completely blocked. When a populista leader—Goulart—went so far as to propose a modest program, he was overthrown within two weeks. Sarney at first declared his commitment to land reform only to forget the issue once the going got tough. Yet the foundations of the political system on the land have been permanently

Dilemmas for Democracy in Brazil

19

altered, not by land reform, but by agricultural business. In large areas of Brazil, highly capitalized modern ventures often backed by foreign capital have displaced the coronel who had been content to hold land for the political force it bestowed or the status it conferred. For that very reason, however, the dependent retainers—no longer useful for their physical force against encroaching neighbors or their political weight at the polls—have been driven off the land they once tilled in subsistence plots. They now gather in the early morning at the local village to be picked up by labor contractors and driven here and there for a day's work: work paid for in cash and only a little cash at that, but certainly not in protection of the right to plant a few beans and some corn.24 Squatters on frontier lands, who would once have been allowed to remain indefinitely, have instead been gunned down by men (grilheiros) armed and paid for by agribusinesses. Tensions in rural areas are likely to increase, even though land reform itself will probably lessen as a major issue since wage workers are replacing peasants in the bulk of the rural population. The personal link between workers and a particular landowner, so important under coronelismo and as a rural counter to populismo, have gradually declined in importance. As this process continues, it will be more and more difficult to imagine a return to the controlled elections of an earlier age; but genuinely open political processes could likely lead to results hostile to the new landed businessmen. Populismo encounters another great problem today as compared to the years before 1964. The labor force of Brazil engaged in manufacturing and construction grew from 2.7 million in 1960 to 10.1 million in 1980. The official labor unions, in place since the 1930s, have not satisfied all members. Luís Ignacio da Silva ("Lula"), working outside the structure, led metalworkers in two illegal strikes in 1978 and 1979, one successful, one not. He subsequently organized a federation of unions demanding freedom from the corporatist controls in place since the days of Vargas. Recognizing that genuine labor rights would only come from changing political structures, he founded the Partido dos Trabalhadores (PT) in 1979. Not so much aimed initially at winning elections as at putting an alternative forcefully before the people, his party met with such success as to be considered a real threat to established interests. Overt violence may be necessary to remind workers that their freedom to strike is only a gift, and must not be "abused." Lula has evidently decided that either freedom is to be used or it is not worth having. Whether his colleagues and followers share his conviction remains to be seen, but certainly his action challenges any assumption that the protection of employers from worker demands can escape its ultimate reliance on force.25 On the other hand, the swelling population of Brazil and the inability of capitalintensive industrialization to absorb these numbers mean that a growing

20

The Political Economy of Brazil

"army of the unemployed" is ready at all times to dampen labor militancy. Also, the church now sides, as often as not, with workers. Whether because it too fears the spread of communism or because of its prophetic mission, it has become the champion of the working man. Not only radical priests but a slim majority of bishops now advocate social justice, the distribution of wealth, land reform, better wages and working conditions, and protection of defenseless groups such as women, children, and Indians. To cope with the lack of clergy and its own lack of resources, the church has turned to what are called Base Communities. Working from Biblical interpretations, these groups emphasize solidarity, especially among the poor, a critical assessment of the present reality, and thinking through local problems rather than blindly following orders. If successful, such organizations will pose a serious challenge to the status quo and threaten to push any populista government toward programs that lie beyond limits acceptable to the propertied.26 Another change is the increasing skepticism as to state-run enterprises. Following on the model established under Vargas, much of the economic growth experienced under military rule was engendered by state-owned companies. Ironically, the militantly procapitalistic military governments bequeathed to their successors a heavily state-controlled economy. Given the continuing propensity to use the techniques of patronage to win political support, these companies have often become bloated and inefficient (though with significant exceptions, e.g., the Vale do Rio Doce mining company). This became truer as elections became more common. Meanwhile, as the Brazilian economy rapidly expanded, new groups of businessmen found rich opportunities for growth and enrichment entirely divorced from the old wealth, rooted in the land. These people have increasingly demanded a freer economy, arguing that Brazil is now strong enough to participate in the world economy without governmental buttressing. Any populist leader has to weigh the advantage in votes of continuing state support for economic enterprises against the possibility that greater growth will derive from breaking the umbilical cord between government and business. President Collor chose to privatize many state companies, but it cost him a significant portion of his popularity. Finally, it would be a mistake to underestimate the support autoritarismo enjoyed and the forces that may desire its return. One major beneficiary of the military regime was that conglomerate of businesses with international links. As many Brazilian men of wealth came themselves to participate in multinational enterprises, they shared with those companies a desire to keep wages low. The military helped them do that by controlling labor.27 Whether the government used terror

Dilemmas for Democracy in Brazil

21

or parliamentary tactics hardly mattered to those in the board room—as long as they secured labor peace. Although multinationals have not opposed the return of civilian government, one may be sure it will continue to receive their quiet support only as long as industrial order is assured. In addition, the U.S. government plays an important role in today's Brazil. True, U.S. officials have sometimes found the Brazilian government—even when led by the military—pursuing its own goals independent of those set for it by the United States, for instance, regarding Brazil's policy toward Africa or Central America. Brazil under military rule built nuclear reactors in defiance of U.S.-backed nonproliferation efforts,· Brazil claimed two hundred miles of territorial waters despite U.S. opposition.28 The overall goal, however, of preventing basic alterations in the relations between workers and owners was shared by North American and Brazilian leaders and must continue to be an important consideration for civilian politicians.29 Whether or not the U.S. government itself responded to the desires of multinational corporations, its policies toward Brazil strengthened the hand of Brazil's military against Brazilian workers. Moreover, U.S. past support for the Brazilian military, even when it used torture and terror, sends a clear message to those who would challenge the present civilian regime: behave or else. One point may be made in summary. Despite democratic forms, political practices in Brazil have always systematically denied the workers a real share in political power; if they are now given a genuine voice in politics, they will threaten powerful interests that benefited from military rule. When Lula threatened to win the presidential election of 1989, many were the voices calling for renewed repression. The steadily closer connections between the Brazilian industrial economy and the world capitalist order means that anything that menaces existing social relations in Brazil will be seen to endanger capitalism itself. In the short term, therefore, only a false democracy will prevent reversion to authoritarianism in order to counter that threat. The earlier techniques through which, behind a facade of democracy, the propertied enforced the loyalty of workers by the skillful combination of violence and benefits have now become more difficult to practice. One major obstacle to the use of the older method is the decline of those face-to-face relationships that once characterized the rural order. As modern businessmen have replaced traditional landlords, cash has taken the place of paternalism. Social control has thus become more difficult. Simultaneously, the lessening importance of the coronel within the arena of political action has narrowed the room for bargaining and maneuvering between industrialists and factory workers. And in that very

22

The Political Economy of Brazil

narrowing of its political base, the ruling elite diminishes its opportunities to maintain the appearance of democracy. Sharp improvement in Brazil's economic performance and distributive mechanism—combined with the effective use of the media to keep attention away from disparities of power—could postpone the day of reckoning, perhaps allay hostilities indefinitely. But right now, as ever more clearly the workers are seen as a threat to social order, violence or the threat of violence remains essential to the maintenance of the present economic and social system. The dilemma for leaders in Brazil will be whether they can reconcile free elections with the need to maintain the present social and economic system. Notes 1. Victor Nunes Leal, Coronelismo: The Municipality and Representative Government in Brazil, translated by June Henfrey, Cambridge Latin American Studies, no. 28 (Cambridge, Eng.: Cambridge University Press, 1977); Edgard Carone, "Coronelismo: definição, história, e bibliografia," Revista de Administração de Empresas, 11:3 (July-September 1971 ): 85-92; Charles Morazé, Les trois ages du Brèsil, Cahiers de la Fondation Nationale de Sciences Politiques, no. 51 (Paris: Colin, 1954); Joseph L. Love, Rio Grande do Sul and Brazilian Regionalism, 1882-1930 (Stanford: Stanford University Press, 1971); Joseph L. Love, São Paulo in the Brazilian Federation. 1889-1937 (Stanford: Stanford University Press, 1977); Eul-Soo Pang, Bahia in the First Brazilian Republic: Coronelismo and Oligarchies, 1889-1934 (Gainesville: University Presses of Florida, 1979); Phyllis J. Peterson, "Brazilian Political Parties: Formation, Organization, and Leadership, 1945-1959" (PhD diss., University of Michigan). 2. Francisco José de Oliveira Vianna, Instituições políticas brasileiras, 2d ed., 2 vols. (Rio de Janeiro: J. Olympio, 1955); Linda Lewin, Politics and Parentela in Paraíba: A Case Study of Family-Based Oligarchyin Brazil [Princeton: Princeton University Press, 1987). 3. J. J. Johnson, Political Change in Latin America: The Emergence of the Middle Sector (Stanford: Stanford University Press, 1958). 4. Stanley Stein, The Brazilian Cotton Manufacture: Textile Enterprise in an Underdeveloped Area, 1850-1950 (Cambridge, Mass.: Harvard University Press, 1957); Nícia Vilela Luz, A luta pela industrialização do Brasil, 1808-1930, Corpo e Alma do Brasil, no. 5 (São Paulo, Difusão Européia do Livro, 1961); Warren Dean, The Industrialization of São Paulo, 1880-1954, Latin American Monographs, no. 17 (Austin: University of Texas Press for the Institute of Latin American Studies, 1969); Steven C. Topik, The Political Economy of the Brazilian State, 1889-1930, Latin American Monographs, no. 71 (Austin: University of Texas Press, 1987); Annibal Villanova Villela and Wilson Suzigan, Política do governo e crescimento da economia brasileira, 1889-1945, IPEA Monografia, no. 10 (Rio de Janeiro, IPEA/Inpes, 1973). 5. Sérgio Buarque de Holanda, ed., História geral da civilização brasileira (São Paulo: Difusão Européia do Livro, 1971), bk. 2, vol. 4, pp. 235-254 and 291-

Dilemmas for Democracy in Brazil

23

298; William S. Dudley, "Institutional Sources of Officer Discontent in the Brazilian Army, 1870-1889," Hispanic American Historical Review 55:1 (February 1975): 44-65. 6. Heloisa Rodrigues Fernandes, Política e segurança: força pública do estado de São Paulo: fundamentos históricos-sociais (São Paulo: Alfa-Omega, 1974); June Ε. Hahner, "The Paulistas' Rise to Power: A Civilian Group Ends Military Rule," Hispanic American Historical Review 47:2 (May 1967): 149-165. 7. Edgard Carone, O tenetismo: acontecimentos, personagens, programas, Corpo e Alma do Brasil, no. 43 (São Paulo: DIFEL, 1975); Neil Macaulay, The Prestes Column: Revolution in Brazil (New York: Franklin Watts, 1974); Boris Fausto, A Revolução de 1930 (São Paulo: Brasiliense, 1970). 8. Fransisco Correa Weffort, O popuhsmo na política brasileira, Estudos Brasileiros, no. 25 (Rio de Janeiro: Paz e Terra, 1978); Boris Fauto, Trabalho urbano e conflito social (1890-1920), Corpo e Alma do Brasil, no. 46 (São Paulo: DIFEL, 1977); Carlos E. Cortés, Gaúcho Politics in Brazil: The Politics of Rio Grande do Sul, 1930-1964 (Albuquerque: University of New Mexico Press, 1974); Kenneth Paul Erikson, The Brazihan Corporative State and Working Class Politics (Berkeley: University of California Press, 1977). 9. Michael L. Conniff, Urban Politics in Brazil: The Rise of Popuhsm, 19251945 (Pittsburgh: University of Pittsburgh Press, 1981); Rachel Soihet, "Berta Lutz e a Ascensão Social da Mulher, 1919-1937" (MA thesis, Universidade Federal Fluminense, 1974). 10. Juarez Rubens Brandão Lopes, Crise do Brasil arcaico, Corpo e Alma do Brasil, no. 19 (São Paulo: DIFEL, 1967); In ter-American Committee for Agricultural Development, Land Tenure Conditions and Socio-Economic Development of the Agricultural Sector: Brazil (Washington, D.C.: Pan American Union, 1966); Orlando Valverde and Antonio Coutinho, "Reforma Agrária," Correio da Manhã, August 14 and 29, 1964, p. 3. 11. Werner Baer, Industrialization and Economic Development in Brazil (Homewood, Ill.: Irwin, 1965); Maria da Conceição Tavaras, "The Growth and Decline of Import Substitution in Brazil," Economic Bulletin for Latin America 9 (March 1964): 1-59. 12. Hélio Jaguaribe, "The Dynamics of Brazilian Nationalism," in Claudio Veliz, ed., Obstacles to Change in Latin America (New York: Oxford University Press, 1965), pp. 162-187; Ruth Leacock, Requiem for Revolution: The United States and Brazil, 1961-1969 (Kent, Ohio: Kent University Press, 1990), pp. 129148; James V. Rowe, "Revolution or Counter-Revolution in Brazil?" American Universities Field Staff Reports, East Coast of South America Series 11, pp. 45; also see James V. Rowe "The 'Revolution' and the 'System': Notes on Brazilian Politics," American Universities Field Staff Reports, East Coast of South America Series 12, pp. 3-5, 1965; and James V. Rowe, "Brazil Stops the Clock," American Universities Field Staff Reports, East Coast of South America Series 13, pp. 1-2, 1966. 13. Philippe C. Schmitter, Interest Conflict and Pohtical Change in Brazil (Stanford: Stanford University Press, 1969); Octavio Ianni, Crisis in Brazil (New York: Columbia University Press, 1970). 14. José Murilo de Carvalho, "Armed Forces and Politics in Brazil, 19301945," Hispanic American Historical Review, 62:2 (May 1982): 192-223; Alfred

24

The Political Economy of Brazil

Stepan, The Military in Politics: Changing Patterns in Brazil (Princeton: Princeton University Press, 1971); Robert M. Levine, The Vargas Regime: The Critical Years, 1934-1938 (New York: Columbia University Press, 1970); Thomas E. Skidmore, Pohtics in Brazil 1930-1964 (Oxford: Oxford University Press, 1967), pp. 48-50, 76; Thomas E. Skidmore, "Workers and Soldiers: Urban Labor Movement and Elite Responses in Twentieth-Century Latin America," in Virginia Bernhard, ed., Elites, Masses, and Modernization in Latin America, 1850-1930 (Austin: University of Texas Press, 1979), pp. 79-126; Peter Flynn, Brazil, a Political Analysis (London: Benn; and Boulder, Colo.: Westview Press, 1978). 15. John W. F. Dulles, Vargas of Brazil: A Political Biography (Austin: University of Texas Press, 1967); John W. F. Dulles, Unrest in Brazil: PoliticalMilitary Crises, 1955-1964 (Austin: University of Texas Press, 1970). 16. Golbery do Couto e Silva, Planejamento estratégico, Biblioteca do Exército, no. 213 (Rio de Janeiro: Americana, 1955); Golbery do Couto e Silva, Geopolítica do Brasil, Documentos Brasileiros, no. 126 (Rio de Janeiro: J. Olympio, 1967). 17. Dean Rusk, The Wind of Freedom. Selections from the Speeches and Statements, January 1961-August 1962, edited by Ernest K. Lindley (Boston: Beacon Press, 1963), p. 138 [italics mine]; Matthew Harvey to James Abouresk, Washington, D.C., September 26, 1979, as quoted in Michael Klare and Nancy Stein, "Police Terrorism in Latin America," NACLA Report 8:1 (January 1974): 20; Jan Knippers Black, United States Penetration of Brazil (Philadelphia: University of Pennsylvania Press, 1977). 18. Irving Louis Horowitz, Revolution in Brazil (New York: Dutton, 1964). 19. For some indication of the cost, see Charles H. Wood and José Alberto Magno de Carvalho, The Demography of Inequahty in Brazil (Cambridge, Eng.: Cambridge University Press, 1988, 86-103; Marcos G. da Fonseca, "An X-Ray of Brazilian Income Distribution: Decomposing the Gini Coefficients," Luso-Brazilian Review 18:1 (Summer 1981): 41-58. 20. Visão, November 5, 1965, pp. 9-23. 21. Ronald M. Schneider, The Pohtical System of Brazil: Emergence of a "Modernizing" Authoritarian Regime, 1964-1970 (New York: Columbia University Press, 1971); Maria Helena Moreira Alves, State and Opposition in Mihtary Brazil, Latin American Monographs, no. 63 (Austin: University of Texas Press, 1985); Thomas E. Skidmore, The Politics of Military Rule in Brazil, 1964-85 (New York: Oxford University Press, 1988); Paul E. Sigmund, ed., Models of Pohtical Change in Latin America (New York: Praeger, 1970), pp. 121156; Ralph della Cava, "Torture in Brazil," Commonweal 92:6 (April 24,1970): 135-141; American Committee for Information on Brazil, Terror in Brazil: A Dossier (New York: American Committee for Information on Brazil, 1970); Veja, February 21,1979, pp. 60-68; Joan Dassin, ed., Torture in Brazil: A Report by the Archdiocese of São Paulo, translated by Jaime Wright (New York: Random House, 1986). 22. For instance, inclusion of the main features of Institutional Act no. 5 in an amendment to the Constitution in 1979 found justification in that "exceptional acts" would thus no longer be needed; the so-called April Package of 1977, which suspended Congress and decreed new rules for elections, was widely interpreted as the price paid for the president's effort to lessen torture after the murder of Vladimir Herzog in late 1976.

Dilemmas for Democracy in Brazil

25

23. A number of useful studies are included in Alfred Stepan, Democratizing Brazil: Problems of Transition and Consolidation (New York: Oxford University Press, 1989). 24. Maria Conceição d'Incão e Mello, O "bóia fria": acumulação e miséria. 2d ed. (Petrópolis: Vozes, 1975). 25. Brazil, Fundação Instituto Brasileiro de Geografia e Estatística, Anuário estatístico do Brasil—1987-88 (Rio de Janeiro: IBGE, 1988), p. 139; Latín American Regional Reports: Brazil January 1, 1982, pp. 6-7·, Brazil Labor Information and Resource Center, Brazil: Labor Unions on Trial (New York: BLIRC, 1981). 26. Emanuel de Kadt, Catholic Radicals in Brazil (London: Oxford University Press, 1970); Penny Lernoux, Cry of the People: The Struggle for Human Rights in Latin America—The Catholic Church in Conflict with US Policy (New York: Praeger, 1982); Thomas C. Bruneau, The Church in Brazil: The Pohtics of Rehgion, Latin American Monographs, no. 56 (Austin: University of Texas Press, 1982); José Cesar Junqueira, The Church in Brazil: A Stronghold of Opposition (Toronto: Brazilian Studies, 1974, Brazilian Studies, no. 2); Thomas G. Sanders, "The Catholic Church in Brazil's Political Transition," American Universities Field Staff Reports: South America, no. 48, 1980: 1-17. But see also Thomas Niehaus and Brady Tyson, "The Catholic Right in Contemporary Brazil: The Case of the Society for the Defense of Tradition, Family and Property (TFP)," in Lyle C. Brown and William F. Cooper, eds., Religion in Latin American Life and Literature (Waco, Tex.: Baylor University Press, 1980), pp. 394-409. 27. Peter Evans, Dependent Development: The Alliance of Multinational State and Local Capital in Brazil (Princeton: Princeton University Press, 1979); Marcos Arruda, Hebert de Souza, and Carlos Afonso, The Multinational Corporations and Brazil: The Impact of Multinational Corporations in the Contemporary Brazilian Economy (Toronto: Brazilian Studies, Latin America Research Unit, 1975). Whereas international bankers seem to have supported unquestionably the repressive measures of the Brazilian military governments, the multinationals, in seeking greater freedom for themselves, were more willing to bargain with workers. Also see Werner Baer and Adolfo Figueroa, "State Enterprise and the Distribution of Income: Brazil and Peru," in Thomas C. Bruneau and Philippe Faucher, eds., Authoritarian Capitalism: Brazil's Contemporary Economic and Pohtical Development (Boulder, Colo.: Westview Press, 1981), pp. 59-83. 28. "Brasil não é juiz de Angola, afirma Saraiva Guerreiro, " Folha de São Paulo, February 11, 1982; "Figueiredo prega solução política para o continente," Folha de São Paulo, February 9, 1982; Norman Gall, "Atoms for Brazil, Dangers for All," Foreign Pohcy 23 (Summer 1976): 155-201; Norman Gall, "The Twilight of Nuclear Exports: Brazil and Iran," American Universities Field Staff Reports, South America 12, 1979, pp. 1-6; Stanley E. Hilton, "The United States, Brazil and the Cold War, 1945-1960: End of the Special Relationship, " Journal of American History 68:3 (December 1981): 599-624, argues that the military's pro-U.S. stance is now a coolly calculated maneuver informed by a deep distrust of American steadfastness. Also see Robert Wesson, The United States and Brazil: Limits of Influences (New York: Praeger, 1981). 29. A point made with chilling candor by Roger Fontaine, Brazil and the United States: Toward a Maturing Relationship, ΑΕΙ-Hoover Policy Studies, no. 13 (Washington, D.C.: American Enterprise Institute, 1974).

3· Local and State Government in the Nova República: Intergovernmental Relations in Light of the Brazilian Political Transition Enrique Ricardo

Lewandowski

Brazil as a Federative Republic Brazil is politically and administratively structured as a federative republic. This organizational form dates back to the Proclamation of the Republic in 1889 and was institutionalized by the first Republican Constitution in 1891. Earlier—that is, from 1822, the year of independence, up to 1889—Brazil was a unitary empire, subdivided into provinces with a very restricted autonomy. During the second half of the nineteenth century, federalist ideas became intertwined with republican ideals in growing opposition to a centralizing and autocratic monarchy, which the emperor D. Pedro IPs bonhomie did little to mitigate. Brazil's continental dimensions, together with the sociocultural diversity of its several regions and the autonomist tendencies of municipal leadership, cultivated since colonial times, indicated the federative form as the more adequate for the country's political organization. It should be stressed, however, that the Brazilian federation never fully recovered from the artificialness of its institution. Contrary to what took place in the United States, where the federation was based on the establishment of bonds among sovereign states, or in Switzerland, where cantons with different cultural and linguistic backgrounds joined to defend common interests, the Brazilian federation was the result of the transformation, by virtue of enactment of the 1891 constitution, of provinces of a centralized state, without any tradition of autonomous government, into states. A common trend in Brazil's history, deriving from Iberic tradition, is the constant attempt to solve political, social, and economic problems by means of statutory reform (as illustrated by the recent Cruzado Plan, which was intended to remedy the inflationary process by decree, and by the six constitutions that at different times have been in force in the country). On the other hand, given the enormous distances from the seat of central power, the local municipalities enjoyed even in colonial times a significant degree of autonomy. Since they could not depend for survival

Local and State Government in the Nova República

27

upon the assistance of a central government hundreds or thousands of miles away, local governments had to undertake great responsibilities. They had to take a hand in everything that concerned their specific interests. For several centuries, this encompassed legal functions, including penal law. In this sense, the Brazilian federation, as will be shown throughout this chapter, is unique in that it mentions municipalities in the constitution along with states and the union, and ascribes to them specific spheres of competence and revenues. Characteristics of the Federal State Given the number of federal states currently in existence and the vast theoretical literature on the subject, it is difficult to summarize the much-disputed essential characteristics of a federal state. Nevertheless, four basic features may be assumed: ( 1 ) a division of powers; (2) political autonomy of the federated units,· (3) participation of the states in the decisions taken at union level; and (4) specific sources of revenue within their sphere of powers. The division of powers seems to be one of the most important features of a federation. It is in fact linked to the very history of this form of government. When the former British colonies in North America, which were states in their own right, joined around a central government, they accepted a limited loss of competence, but retained all such competences as concerned local problems. Only the competences that related to the common interests of the states were transferred to the central government. As a rule, all constitutions of federal states, including the Brazilian constitutions, adopt the principle that everything that is not ascribed to the union is included in the sphere of powers of the states. This is to say that the federal government exercises only the powers expressly delegated by the states, all residual powers falling to the latter. But in the Brazilian case, in which the federation grew out from a unitary government, it is difficult to speak of "residual powers" of the member-states. In actual fact, it was the central government that abdicated certain powers in favor of the federated units. In the Brazilian case, the picture is further confused by the institution of a third sphere of attributions, the municipality, for which reason the Brazilian federation is, in reality, a three-dimensional organization. With respect to the political autonomy of the federated units, it should be noted that they traditionally enjoy powers of self-government and self-organization,· the preservation of a specific sphere of attributions is a consequence of this fact. The question of whether local or state sovereignty can be said to exist has been answered by political doctrine,

28

The Political Economy of Brazil

which currently acknowledges only the autonomy of the federated units, that is, their capacity to determine their own destiny by means of their own statutes. Sovereignty as such is held only by the federal state, a new political entity resulting from the indissoluble union of the members of the federation. With respect to the participation of the states in the decisions of the union, one observes that the former British colonies, upon becoming states in their own right, did not wish to become totally subject to the central government, and for this purpose organized a senate in which the members of the federation were represented, thereby taking part in the actions of the federal state and ensuring a certain control over the decisions affecting the states. In Brazil, it must be noted, the senators have not always been an authentic representation of the interests of their states. Especially after 1968, when the so-called "bionic senators" were created, nominated by an electoral college, and dominated by the government party, the senate became little more than a ratification chamber for the decisions of the central government. Along with the distribution of powers, probably the most important feature of a federal state is the attribution of specific revenues to the federated units. It is essential that a member-state holding a given sphere of competence and autonomy should also possess a financial base that can meet any obligations resulting from the exercise of such attributions. In recent times, the concept of financial autonomy has become essential to the discussion. As Prof. Dalmo de Abreu Dallari insists, whoever attributes competences is, in fact, transferring charges. In order to fulfill such charges, the attribution of adequate revenues is crucial; otherwise, since the federated unit cannot act independently without disposing of its own resources, political autonomy will remain only nominal.1 This is precisely what happened in Brazil. The Brazilian provinces, upon receiving political autonomy, became states, and thereby were ascribed a set of exclusive powers. But they never received the revenue required to exercise such competences. This has led to chronic financial dependence on the federal government, which has resulted in the loss of political independence. The Evolution of Federalism in the United States American federalism engendered a type of federal state that, at its outset, was marked by a rigid separation of spheres of competence, mutually exclusive and limiting. Within such a system, the federal authority on one hand and the authority of the member states on the other fell within clearly drawn boundaries. The state powers were jealously upheld. This

Local and State Government in the Nova República

29

form of federalism has been called a dual federalism and, as Prof. Bernard Schwartz has noted, is a necessary complement to the laissez faire policy in the economic and social fields, corresponding to a maximum of political decentralization and a minimum of state intervention.2 Until Roosevelt's New Deal in the 1930s, the balance of powers was markedly tipped in favor of the state. From a "gendarme" state, negative and regulating, the U.S. government after the 1929 debacle began to take a more positive role, becoming an active renderer of services. Since the New Deal goal, as is well known, was to overcome the economic crisis that affected the country as a whole, the intervention of the state in economic and social affairs was carried out on a national scale— intervention restricted to the local level would hardly have been efficient. The Supreme Court, after some hesitation, followed the new approach of the federal government, confirming extensive legislation in the field of labor relations and in the plane of state intervention in the economy, particularly in the production and consumption sectors. This expansion of the state, also corresponded to an expansion in its fiscal capacity, founded on Article 1, Section 8 of the U. S. Constitution, and confirmed by the Supreme Court, which pointed out that taxation also has a regulatory function, essential to government action. Another type of interference by the federal government in the member-states took place in the form of subsidies. States and local governments began to receive subsidies of every kind, especially from the final years of the nineteenth century, which were granted upon the establishment of certain conditions. After the New Deal, federal resources granted for the purpose of stimulating economic revival were accompanied by detailed regulations concerning their destination and form of investment. Furthermore, the union granted, as indeed it still grants, the means for financing public health activities, unemployment benefits, mother and child care, and other investments in the social sphere, subordinating the states. This development led to the replacement of dual federalism, based on the equality of the union and the member-states, by the so-called cooperative federalism, in which one observes an intertwining of competences and attributions, notwithstanding certain decisions of the Supreme Court aimed at mitigating the supremacy of the union (as in the case of the National Cities League v. Usery, which established minimum and maximum wage scales for state civil servants). Although new federalism has become an everyday term in the United States that connotes the concept of reviving of state autonomy and, particularly as proposed by President Reagan, of abolishing a great number of controls on the use of federal resources, the fact is that the

30

The Political Economy of Brazil

predominance of the union is an inescapable and definite reality. As Professor Schwartz has pointed out, to attempt a return to the classical federalism of the late nineteenth century is to seek a chimera.3 A federal government that overcame a violent economic depression and led the country through two world wars, conducting it to its dominant position in the world, would hardly accept the limitations imposed by the 1787 constitution. As far as one can foresee, the union and its sphere of competence will grow—without, however, resulting in the disappearance of the states—not only for sentimental reasons nourished by their citizens, but also because of the evident need for continuing availability of basic community services, which by their very nature will remain the responsibility of local government. The Evolution of Brazilian Federalism Brazilian federalism, initially conceived one century after its implementation in the United States in the Republican Manifesto of 1880 and finally institutionalized in 1891 with the first Republican Constitution, was born under the influence of its original sin: instead of evolving through the joining of sovereign states, it was structured by means of the decentralization of a unitary state. It is true that such original sin was in part attenuated by geographical and demographical impositions, which pointed toward a federative solution. Ruy Barbosa, lecturing in Argentina at the end of the last century, defended the adoption of a federal system for Brazil by pointing out that the implementation of this state form was an imposition of the country's 8,400,000 sq. km. and 24 million inhabitants. It is interesting to note, as has been stressed by Professor Dallari in several works, that with respect to centralization and decentralization tendencies, the Brazilian federation seems to conform to a pendular pattern. Historically, it has evolved from extreme decentralization, when it was first implemented, to stages of enormous centralization, as in the period from 1964 up to the present. In fact, from 1891 to the 1930 revolution, the federation was marked by the distinct autonomy of its members—so much so that many politicians even came to fear for the territorial integrity of the country. Indeed, decentralization was carried to extremes, granting, as in the case of the Municipal Organization Statute of Minas Gerais (1891), a degree of autonomy not only to the municipalities as such, but even to the districts. The framers of the state constitutions enacted after the Republican Constitution of 1891 went into effect committed a number of exaggerations in their desire for a field of action not subordinate to the federal

Local and State Government in the Nova República

31

government. Thus, for instance: 1. All new members of the federation adopted the term states, which they considered to be more expressive than provinces, and five proclaimed themselves "sovereign," although they also acknowledged the sovereignty of the union. 2. In ten states, the head of the executive power was called the president instead of the governor, as was the case in the other ten states. 3. Two constitutions authorized the state government to declare a "state of siege," and eight authorized the drafting of military forces to face emergency situations. 4. The constitution of Rio Grande do Sul placed no restriction on the continuous reelection of the state president, and required that any candidate should be a native of the state. 5. Seventeen state constitutions allowed the state government to sign international agreements and treaties without requiring approval by the national Congress, although such procedure was mandatory according to the federal constitution. The modernizing 1930 revolution, which marked the onset of Brazil's industrialization, led Brazilian federalism back to extreme centralization, even when compared to the empire. From 1930 to 1934, when the new constitution was promulgated, the states were governed by administrators directly appointed by the president of the republic. The 1934 constitution, especially as a result of the pressure of constitutionalist movements (typically, the 1932 revolution in São Paulo), revived the federative principle. In 1937, with the Estado Novo and the Vargas dictatorship, a centralistic trend again became evident, and even the form of the state was altered in favor of "unitarism." Thus, the 1937 constitution abolished the expression "United States of Brazil" and, in its first article, simply stated that "Brazil is a Republic." This situation lasted up to 1945, during which period federalism was fully eclipsed. Only with the downfall of the Es tado Novo and the enactment of the 1946 constitution, after World War II, was federalism reborn in Brazil. Indeed, the 1946 constitution not only consecrated the respect for state and local autonomy, but also established a reasonable balance between the different powers, activated political parties, and granted direct elections for all offices of the republic. This democratic phase of Brazilian history was interrupted by the political-military movement of March 31, 1964, which was soon to make explicit its legal concepts in Institutional Act No. 1, of April 9 of the same year, repealing a significant part of the constitution in force. The centralization of the Brazilian federal system reached its peak

32

The Political Economy of Brazil

after 1964. Despite the liberal rhetoric of the revolutionary governments, the period is marked by the outright interventionism of the federal government, which ended by concentrating in its hands a number of the attributions that had formerly belonged to the states. The latter had their residual spheres of competence drastically reduced. This phenomenon is easily observed in the wording of Article 8 of the 1967 constitution, which specified the field of powers of the union. With the modification introduced in the constitutional text in 1969, Item 17 of Art. 8 expanded even further the legislative attributions of the federal government, particularly in Sec. C in which the national Congress is attributed the powers to determine "general rules relating to budgets, expenditure and the management of public finances and assets,· to financial law,· to insurance and social security,· to defense and protection of health; to retirement systems." On the other hand, the need for global planning for the country, in view of the goal of promoting its economic and social development, also became imperative, especially from Kubitschek's administration on. The 1969 constitution, in Art. 8, Item 5, attributes to the union the powers and authority to "plan and promote development and national safety." Furthermore, as a guarantee for compliance to federal rulings relating to planning, the union is entitled, by the provisions of Art. 10, Item 5, Sec. C, of the constitution in force, to intervene in any state that "adopts policies or implements economic or financial plans which oppose the guidelines set by federal legislation." As a result of the enormous concentration of resources, through heavy taxation, in the hands of the federal government, the financial situation of the states and municipalities is precarious. Indeed, and especially in the case of the northeastern states, they are harnessed to federal agencies even for obtaining funds to pay their own civil servants. In fact, the "lion's share" of fiscal revenues remains with the union, which collects, among others, income tax, manufacturing tax, and customs duties. The states derive their revenue basically from sales tax, and the municipalities from real estate tax and service occupation tax. The constitution provides for the distribution of part of the federal and state taxes to the members of the federation, but in amounts that are insufficient for them to meet their needs and obligations. Over and above these constitutional limitations, the states were also placed under political dependency to the federal government. After the 1964 revolution, state governors were no longer elected directly, but by state assemblies controlled by the government party, and dozens of municipalities, including all state capitals, had mayors appointed by the state governor, since they were classified as "of special interest for national safety."

Local and State Government in the Nova República

33

The 1988 Constitution We have seen that in the evolution of the federal system of the United States, as well as in the alterations that the Brazilian system has undergone, two clearly distinct stages may be identified. Both systems evolved from dual federalism to so-called cooperative federalism. From the end of the eighteenth century up to the end of World War II, dual federalism, characterized by two watertight spheres of competence, a vertical distribution of competences and exclusive assessment rights, gradually gave way to cooperative federalism. In the latter, two spheres of power are intertwined under the hegemony of the union, and vertical distribution of competences is maintained, but with a noteworthy redistribution of the national fiscal revenue that, with the adoption of the shared revenues system, favors the central government. In the case of Brazilian federalism, as well as that of the United States, it seems tenable to affirm that both are entering a new stage that the literature has termed "integrative federalism." The main feature of integrative federalism is an accentuation of cooperative federalism, especially in terms of the extension of the competence of the union, and the greater concentration of revenue under the latter's control. As Prof. Manoel Gonçalves Ferreira Filho notes, this new federalism is closer to a decentralized unitary state than to a true federal state. Paradoxically, it is "a federation which leads to a denial of the federation."4 The 1988 constitution, however, consistent with the pendular movement that historically typifies Brazilian federalism, once again advances in the direction of decentralization. In fact, governors and state assembly members, as well as mayors and city councillors, freely elected by the population shortly before the Constituent Assembly, exerted strong pressure to ensure that the new constitution would grant greater powers and funds to the states and the cities. Neverthelesss, despite this decentralization trend, the union retains a major portion of the competence and of the income attributed to it by the preceding constitution. Nor could it be different, since the enormous domestic debt contracted by the federal government over these last years, as well as the growing public intervention basically sponsored by federal authorities did not allow sufficient scope for a more radical decentralization, as was the hope of many constituents. In fact, the powers conferred on the union by the 1969 constitution remained practically unchanged. Thus, for example, Sec. 21, Item 14, of the new constitution confers on the union the competence to develop and carry out national and regional plans for the ordering of the territory and for economic and social development. In other words, the new constitution retains the notion prevailing under the entire military

34

The Political Economy of Brazil

regime, and which found expression in the 1967 and 1969 constitutions, that it was incumbent on the central government to develop plans for the country as a whole. This planning involves a level of detail that, strictly speaking, would be more appropriate for state and city governments. Thus, Item 20 of the said section confers on the federal government the competence to set guidelines for urban development, including habitation, basic sanitation, and city transports. With respect to legislative competence as such, the union retains the authority and responsibility conquered in the preceding constitutions. Section 22, Item 1, states that the union has specific competence to legislate civil, commercial, criminal, procedural, electoral, agrarian, maritime, aeronautical, space and labor law, besides many other subject matters listed in twenty-nine items. The 1988 constitution introduces the so-called common or shared competence of the union, states, federal district and cities, composed of a set of activities that shall be conducted in cooperation among the three political-administrative levels of the federation, the form of which is to be defined by complementary federal legislation. The cooperation defined in Sec. 23 of the constitution comprises, among other fields, health and public assistance, environmental protection, protection of the historical, cultural and landscape heritage, agricultural production, food supplies, housing and basic sanitation. The new constitution furthermore defines the so-called concurrent competence, according to which it is incumbent on the union, the states, and the federal district, but excluding the cities, to legislate on certain specific matters. Among such matters are: assessment law, financial law, penitentiary law, economic and urban planning law; production and consumption,· forests, hunting, fishing, fauna, protection of nature, of the soil and natural resources,· protection of the consumer, education, culture, schooling, sports; and organization, guarantees, rights, and duties of the civil police. Nevertheless, and despite the retention of these competencies by the federal government, it should be pointed out that the states, the federal district and the cities have been markedly strengthened as compared to the preceding constitutional situation. The states are now expressly ensured all powers not prohibited by the federal constitution. This rule, which is defined in Sec. 25 (1), refers to the so-called residual powers. Within the scope of such powers, the states may, in fact, enact all and any legislation. And since this same section, in its caption, ensures that the states are organized and ruled by the constitutions and laws they enact, one finds that the members of the federation are indeed making wide use of the scope reserved for them by the new federal constitution in

Local and State Government in the Nova República

35

developing their local constitutions, within the spirit of decentralization and democratization that now prevails in this country. Great progress is being made by the states in terms of planning for their respective territories. This progress refers specifically to the metropolitan regions. As is well known, over these last three decades, a great migration has taken place from the rural to the urban districts, resulting in a "swelling" of the cities, particularly in the coastal districts and in the suburbs of the state capitals, which have become large metropolitan areas, comprising several cities and boroughs. This has generated a number of problems concerning public services that are provided jointly by the several cities. These problems directly affect the standard of living of the inhabitants of these metropolitan areas. In the preceding constitutions, the metropolitan regions were defined by a complementary federal law, which not only created them but listed the cities involved, and imposed, for all such regions, a single model of management, excluding any real participation of the cities, which were granted merely a consulting role. In fact, such regions were controlled by the state governments, which actually meant the control by the federal authorities since the governors were appointed by the federal government. The governors effectively had control over these politically explosive areas. With the new constitution, the states now hold the power to establish metropolitan regions within their territories, and also the special "microregions" and "urban agglomerations," smaller groupings of cities, which require a common treatment of problems affecting a regional area. Thus, the states, whenever they find it necessary to ensure a common treatment of public services in a given area—such as for public transportation, garbage treatment, basic sanitation or habitation—may create, by law, a metropolitan region or other regional entity, with its own unique management structure. But perhaps the most significant progress under the new constitution is found in the treatment of Brazilian municipalities. Although they have historically wielded a great range of powers including some not formally addressed in the constitution—they could not resort to the assistance of the central government, due to the great distances, under emergency situations—such powers and effective autonomy have never before been fully and formally acknowledged in the several constitutions of the country. Within the framework of the pendular movement that typifies Brazilian federalism, there have been moments of progress in the constitutions. But, even when municipalities became responsible for a great number of the problems affecting the everyday Ufe of their citizens, they never held the powers and means required to cope with them in a satisfactory manner.

36

The Political Economy of Brazil

Furthermore, from a legal and formal point of view, cities have at all times been a mere expression of the territorial organization of the states, although ensured a certain degree of constitutional autonomy. Now, however, with the new constitution, cities, as defined in the first section of the federal constitution, have become full members of the federation, to the same degree as state governments. In this sense, the Brazilian federation is three-dimensional, since the union, the states, and the cities are all integral partners of the federative pact, each controlling its own sphere of competence, besides sharing a field of common action, as mentioned earlier. But the major progress that should be stressed is the fact that the cities, on the strength of Sec. 29 of the federal constitution, may now set up their own organic laws, which correspond to city constitutions, provided only they conform to the principles of the federal and state constitutions, neither of which contains very specific rules that could restrict the autonomy of the local communities. Another important innovation is that the cities may develop a larger role in two major fields in which their presence was formerly rather limited: health and education. Section 30 (6) and (7) states that it is incumbent on the cities, with the technical and financial cooperation of the federal and state governments, to provide health services to their respective populations and to maintain preschool and elementary school programs. Contrary to the former situation, the cities may now also freely set the number of city councillors, proportional to their populations, provided that certain general rules, defined in the federal constitution, are satisfied. Furthermore, they are free to define the compensation of the mayors and council members, a subject that was formerly defined by federal and state legislation. With respect to the division of the national tax revenue, the new constitution has introduced certain important changes favoring the states and cities. It is true that the competence of the union to institute taxes has been left practically untouched; taxes on importation, exportation, industrialized products, income, credit operations, foreign exchange, insurance, and rural property remain in the hands of the federal government. On the other hand, the union has abdicated certain taxes, such as the tax on transportation and communications services, in favor of the states, and the fuel tax, which, in a modified version, has been granted to the cities. Furthermore, the constitution has expanded the participation of the lesser federative entities in the revenue arising from certain federal taxes. In compensation, the union has acquired the competence to institute a tax on great fortunes, a novelty in Brazil, but which already exists in some countries, such as France.5

Local and State Government in the Nova República

37

The states, in turn, had to renounce the real estate sales tax, inter vivos, but retained the same tax for causa mortis, which is now more widely applied on assets and rights. The inter vivos real estate sales tax is hereafter to be levied by the cities. The states also collect the tax on donation of any assets or rights, and on interstate and intercity transports and communication. For the first time in the assessement history of the country, states have acquired a share in income tax, being permitted to collect a supplement of up to 5 percent of the tax paid to the union, by natural persons or legal entities domiciled in their respective territories, in the form of income tax incident on profits and on capital gains. The tax that generates the greatest revenue after income tax, the sales tax, remains in the hands of the states. The cities have also increased their tax assessment powers. Not only have they retained the right to levy tax on urban properties and buildings and on services of any kind, but they can now tax any form of inter vivos transfer of real estate, as well as retail sales of liquid and gaseous fuels. States and cities also participate in taxes levied by the union. In particular, they have a 21 percent share in the product of income tax and of the tax on industrialized products. The cities also received 50 percent of the tax on rural property collected in their respective territories by the union, and 25 percent of the sales tax collected by the states. Final Remarks The 1988 constitution, consistent with the pendular movement that typifies Brazilian federalism, alternating between centralization and decentralization, has once again enhanced the role of the states and of the cities, not only in terms of legislative and administrative powers, but also in terms of fiscal autonomy. Oddly enough, the periods of redemocratization and political freedom in Brazil have always occurred at times of the strengthening of the federative entities and regional leaderships. This was the case in 1891, two years after the republic was proclaimed, and again in 1946, when a new constitution was written after the Getulio Vargas dictatorship was overturned. And this was also the case in 1989, when the people institutionalized a new legal and political order, after almost twenty-five years of a military regime. The federal constitution has opened up a number of new paths for the final emancipation of the Brazilian states and cities, a task to be completed by the state constitutions and the Organic Laws of the Cities. Brazilians are hoping that this will in fact come to be, since, in Brazil, federalism and democracy are concepts that historically have always gone together.

38

The Political Economy of Brazil

Notes 1. Dalmo de Abreu Dallari, O estado federal (São Paulo: Atica, 1986), p. 20. 2. Bernard Schwartz, Federalismo norte-americano atual (Rio de Janeiro: Forense, 1984), p. 29. 3. Ibid., p. 64. 4. Manoel Gonçalves Ferreira Filho, Curso de direito constitucional (São Paulo: Saraiva, 1983), p. 52. 5. The success of wealth tax in France was rather poor, since it inhibits the accumulation of capital, and, consequently, the productive process.

4. Brazil's Rocky Economic Road to Democracy

Werner Baer The glorious years of Brazil's "economic miracle" ( 1968-1973) were also the time of the greatest political repression. It was thus ironic that the governments that presided over the gradual political opening of the country were faced with increasing obstacles to the continued expansion of the economy. It is the purpose of this chapter to describe and explain the economic policy reactions to external and internal shocks in the years 1974-1988 and their impact on the economy. The First Oil Shock and the Geisel Years (1974-1979) General Geisel assumed Brazil's presidency in March 1974, a few months after the first oil shock in November 1973, which had quadrupled the price of petroleum. Since at the time Brazil was relying on imports for over 80 percent of its oil consumption, the country's total import bill rose from $6.2 billion in 1973 to $12 billion in 1974, and the trade balance changed from a slight surplus in 1973 to a deficit of $4.7 billion in 1974 (table 4.1). At the time Brazil had two options in reacting to the oil shock. It could either substantially reduce growth in order to diminish its non oil import bill, or it could opt for continued high growth rates. The latter implied either a substantial decline in the country's foreign exchange reserves or a substantial increase in its foreign debt. The Geisel administration opted for the second alternative for a number of political and economic reasons. The previous administration of President Médici had presided over years of extremely high growth, when yearly real GDP growth rates averaged 11 percent and when inflation was brought down to the lowest levels since the 1950s. The other side of this favorable picture was the revelation in the early 1970s that the distribution of income had substantially worsened between 1960 and 1970. This fact received a substantial amount of international publicity when World Bank Presi-

Table 4.1. Brazil's Balance of Payments, 1971-1987 (millions of U.S. $) 1971

2972

1973

1974

1975

1976

1977

1978

1979

Exports Imports Trade Balance

2,904 -3,245 -341

3,991 -4,245 -244

6,199 -6,192 7

7,951 -12,641 -4,690

8,670 -12,210 -3,540

10,128 -12,383 -2,255

12,120 -12,023 97

12,659 -13,683 -1,024

15,244 -17,961 -2,717

Services Net Interest Profits, Div. Transportation

-980 -302 -118 -277

-1,250 -489 -161 -338

-1,772 -839 -198 -618

-2,433 -1,370 -248 -1,066

-3,213 -1,804 -235 -903

-3,763 -2,039 -380 -969

-4,134 -2,462 -455 -972

-4,975 -3,342 -561 -1,025

-7,920 -5,347 -636 -1,418

-1,489

-1,688

-7,122

-6,751

-6,133

-4,037

-5,927

-10,742

189

337

977

945

1,006

962

810

906

2,523 -850

4,300 -1,202

4,495 -1,673

6,891 -1,920

6,759 -2,149

7,921 -2,888

8,424 -4,060

13,632 -5,170 72

1,491 721 11,228 -6,385 601

1,746

9,521 4,183

12,572 6,416

17,166 5,269

21,171 4,041

25,985 6,544

32,037 7,526

43,511 11,895

49,904 9,689

Current

Acct.

Capital Acct. N e t Dir. Inv. Reinvestments Loans Amortization Short-Term Cap. Gross Debt Intl. Reserves

1980

1981

1982

2983

Exports Imports Trade Balance

20,132 -22,955 -2,823

23,680 -22,086 1,594

20,213 -19,396 817

21,900 -15,428 6,472

Services Net Interest Profits, Div. Transportation

-10,152 -7,457 -310 -1,936

-13,135 -10,305 -370 -1,692

-17,082 -12,551 -585 -1,456

Current

-12,807

-11,734

Capital Acct. Net Dir. Inv. Reinvestments Loans Amortization Short-Term Cap.

1,120 411 10,596 -2,297 2,562

Gross Debt Intl. Reserves

53,848 6,913

Acct

Source: Banco Central do Brasil.

1985

1986

1987

27,005 -13,937 13,068

25,639 -13,189 12,450

22,349 -14,044 8,305

26,225 -15,061 11,164

-13,415 -10,263 -758 -912

-13,215 -11,449 -796 -731

-12,893 -11,092 -1,055 -308

-12,877 -10,055

-12,911

-16,310

-6,837

45

-242

-4,476

1,585 741 15,632 -6,436 1,136

991 1,556 12,515 -6,952 -64

664 695 6,708 -9,120 1,069

1,047 489 10,401 -6,468 -1,633

720 543 -7,078 -8,491 -1,404

-108 449 3,095 -11,590 540

61,411 7,507

69,653 3,994

81,319 4,563

91,091 11,558

95,857 10,724

101,759 5,907

•1984

-432

44

The Political Economy of Brazil

dent Robert MacNamara singled out Brazil as one of the developing countries where there was little effort to make the fruits of growth more widely available to the population at large. The other dark side was political repression, which had reached its height during the Medici years.1 Given this background, one finds General Geisel's opting for growth quite understandable. This was due not only to his possible distaste for invidious comparisons with the previous government, but also to his goal of a gradual political opening and an easing of wage repression, which would be easier to achieve in a climate of growth.2 In 1975 the Geisel government introduced the Second National Development Plan (PND II, 1975-1979). It consisted of a huge investment program, whose goals were: (1) import substitution of basic industrial inputs (such as steel, aluminum, copper, fertilizers, petrochemicals) and capital goods,· and (2) the rapid expansion of the economic infrastructure (hydro and nuclear power, alcohol production, transportation, and communications). Many of these investments were undertaken by state enterprises (in such fields as energy, steel, and economic infrastructure), while others (especially capital goods) were carried out by the private sector, with massive financial support from the National Economic and Social Development Bank (BNDES).3 The purposes of these programs were: ( 1) to act as a strong countercyclical policy vis-àvis the impact of the oil crisis and to maintain a reasonable rate of growth, level of employment, and consumption,· (2) to change the structure of the economy through import-substitution and export diversification and expansion,· and (3) to encourage international lenders to finance the huge balance-of-payments deficit. The impact of the growth option can be observed in tables 4.2 and 4.3. Although the real GDP growth rate was not maintained at the level of the "miracle years, " it remained at a yearly average of about 7 percent for the rest of the decade, while industry expanded at a yearly rate of about 7.5 percent. The sectors that experienced years of exceptionally high growth rates in the 1970s were metal products, machinery, electrical machinery, paper products, and chemicals. The choice of the growth option implied a dramatic increase in the country's foreign debt. Without borrowing abroad, it would not have been possible for Brazil both to pay for the higher oil bill and to continue to import the inputs necessary for the production of industrial goods, and especially to accompany the PND II's largest investment programs. Growth via debt was justified on the grounds that future savings of foreign exchange resulting from the investment programs—due to import substitution and to the development of a new export capacity— would ultimately bring about a situation in which Brazil could produce

Brazil's Rocky Economic Road to Democracy

45

Table 4.2. Real Growth Rates and Inflation Rates in Brazil, 1968-1987

1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

GDP

Industry

Agriculture

11.2 10.0 8.8 12.0 11.1 13.6 9.7 5.4 9.7 5.7 5.0 6.4 7.2 -1.6 0.9 -3.2 4.5 8.3 8.2 3.5

13.3 12.2 10.4 12.0 13.0 16.3 9.2 5.9 12.4 3.9 7.2 6.4 7.9 -5.5 0.6 -6.8 6.0 9.0 12.1 0.7

4.5 3.8 1.0 11.3 4.1 3.6 8.2 4.8 2.9 11.8 -2.6 5.0 6.3 6.4 -2.5 2.2 3.2 8.8 -7.3 13.9

Gen. Price

Index

25.5 21.4 19.8 18.7 16.8 16.2 33.8 30.1 48.2 38.6 40.5 76.8 110.2 95.2 99.7 211.0 223.8 235.1 65.0 415.8

Source: Fundação Getúlio Vargas, Conjuntura econômica. trade surpluses large enough to service and repay its international debt. The huge increase in the current account deficit after 1973, resulting from the large trade deficit, led to a dramatic increase in the country's external debt. The net debt rose from $6.2 billion in 1973 to $31.6 billion in 1978, while the gross debt rose from $12.6 billion to $43.5 billion.4 Much of the foreign borrowing was done by the public sector—public enterprises, state governments, and various types of public agencies. This resulted in a notable increase in the share of public and publicly guaranteed debt of total medium and long-term debt—it rose from 51.7 percent in 1973 to 63.3 percent in 1978. Brazil's external financial requirements to maintain its growth option occurred at a propitious moment. Right after the first oil shock, the international financial markets were extremely liquid. International banks were flush with petrodollars and were eager to make loans, and

46

The Political Economy of Brazil

Table 4.3. Indicators of Size Distribution of Income in Brazil, 1981-19832

Gini Coefficient Share of Total Income of Poorest 40% Share of Total Income of Richest 10%

1981

1983

0.579 9.3% 45.3%

0.597 8.1 % 46.2%

Source: Maurício Romão, " Adjustamento interno em uma economia heterogênea e seus efeitos sobre a distribuição de renda: o caso brasileiro," Recife: Texto para Discussão, No. 160. 1985. Original data from: FIBGE, Pesquisa nacional por amostragem de domicílios, 1981 and 1983. a Deflated by the wholesale price index for industrial goods.

since international interest rates were relatively low at the time, Brazil's increased international borrowing at the time could easily be justified.5 The political circumstances that led to the decision to opt for a growthwith-debt strategy also led to a resurgence of inflation. The sectors affected by the oil price shock were anxious to pass on their increased costs of production in the form of higher prices, and the government, in spite of elaborate price control mechanisms, found it politically wiser to put up relatively little resistance to this process. In other words, given the above-mentioned political developments, the government was willing to tolerate a fight-for-shares through the inflationary process rather than to impose explicitly a distributional solution to external shocks. These shocks were translated into an inflationary process through the rapid implantation of formal and informal indexation in the economy. This came to be known as the process of "inertial inflation."6 From 1964 to 1973 there had been a steady downward trend of inflation (reaching 22.6 percent). After that, the inflation rate rose to the mid-30s in 1974 and 1975, to the mid-40s in the two following years, and by the beginning of the 1980s, it had passed the 100 percent mark. In sum, Geisel's political program to begin the opening process and to take remedial actions concerning the country's distributional problems was instrumental in opting for continued growth and for avoiding sectoral clashes. The net result was continued growth, which occurred at the cost of the fast-expanding foreign debt and a resurgence of inflation. The Figueiredo Years: Initial Policies In March 1979, General Figueiredo, who was to be the last of the military

Brazil's Rocky Economic Road to Democracy

47

presidents, took office. His political program was to restore Brazil to a completely democratic regime and to hand over the administration to a civilian. These political aims were severely tested by continued and worsening economic crisis situations. Figueiredo's government was immediately confronted with the dilemma of how to cope with the conflicting goals of controlling the rising rate of inflation, of dealing with a foreign debt whose servicing (interest plus amortization) was already taking up two-thirds of export earnings, and of keeping the GDP growth rate from stagnating. To complicate matters, 1979 witnessed the second oil shock, which contributed to a drastic decline of the terms of trade. They had already been falling since 1978 due to the weakness in the prices of various exported primary goods. In addition, there was a dramatic rise in world interest rates in reaction to tight monetary policies of the United States. As most of Brazil's debt had by then been contracted on a flexible interest rate basis, a rise of world interest rates automatically increased not only the cost of new borrowing, but also of servicing the already outstanding debt. Table 4.1 shows the pronounced increase of imports between 1978 and 1979, and the large rise of interest payments. Another problem confronting the Brazilian government was that international pressures had forced it gradually to remove fiscal and credit subsidies to exports. Given the need to continue the rapid expansion of exports, however, this made it necessary for the government to increase the rate and/or the frequency of the mini-devaluations of the cruzeiro. The latter had been allowed to become overvalued, that is, the rate of devaluation lagged behind the rate of inflation (the difference between the rate of inflation in Brazil and that of its main trading partners). Because of the export incentive program, the overvaluation had not hurt exports in the past. The removal of tax incentives and subsidized credit for exporters, however, called for a stepped up devaluation as a compensating measure. The problem, of course, was that the greater devaluation would increase inflationary pressures and would substantially increase financial burdens on firms with foreign debts. Finally, an additional unfortunate event was the impact of climatic factors—a combination of droughts and frosts—on agricultural output in 1978 and 1979, which forced Brazil to import some staple products like beans and rice. An increase in agricultural output, which would dampen the rise of food prices and reduce imports of food, called for short-run increases in relative food prices to stimulate production and also for an increase in agricultural credits. These measures, however, implied substantial short-run additional inflationary pressures. The economic policies attempted in the first months of the Figueiredo government (March to August 1979) called for a stepped-up devaluation

48

The Political Economy of Brazil

of the cruzeiro, with a gradual elimination of the export incentive program, and for a slowdown of economic growth to cope with both the balance-of-payments and inflation problems. Planning Minister Simonsen wanted to reduce general credit subsidies, which had arisen as the accelerating inflation increased the difference between fixed interest rates and the real cost of resources. He also wanted to make fiscal transfers explicit rather than having them being implicit in the monetary budget of the government (this would result in a tightening of credit), to increase control over the expenditures of state enterprise, and to liberalize imports. As the Simonsen policies implied a substantial decline in growth, they were opposed by the private sector, labor, the heads of various economic ministries, and state enterprises. And since the resulting slowing of growth was perceived as making the political opening more difficult, Simonsen recognized that his policies had no support. He resigned and his place was taken by Delfim Netto, who had run the economy during the "miracle years" of 1963-1973. He immediately claimed that high growth rates could lead to stabilization from the supply side. By December 1979, however, the government recognized the need for hard measures to deal with the pressures described above, and an "economic package" was introduced whose cornerstone consisted of : ( 1 ) a maxi-devaluation of the cruzeiro by 30 percent; (2) elimination of export subsidies,· (3) elimination of many other tax incentives; (4) substantial increases in the prices of public services,· and (5) various other measures designed to reduce import protection, stimulate capital inflows, and cushion the impact of the devaluation on firms having foreign debts. These measures were meant to solve in one move the overvaluation of the cruzeiro and to ease foreign political pressures to eliminate export subsidies. Although the devaluation and the increase of public-service prices had an immediate "corrective" inflationary impact, it was hoped that this would only be a short-run phenomenon, and that the elimination of many tax incentives would increase government revenues and thus act as a brake to monetary expansion. In the following months, several complementary measures were adopted. Among the most important was the declaration in early 1980 that the devaluation of the cruzeiro would be limited to 40 percent for the year and that in the same period indexation would be limited to 45 percent. The latter measure was supposed to reduce inflationary expectations. The reasoning behind the former was that to the extent that inflation was higher than devaluation, the relatively cheaper imports resulting from a gradually overvalued currency would place a damper on inflation and thus force domestic industry to rationalize in the face of foreign competition. As the months went by in 1980, it became obvious

Brazil's Rocky Economic Road to Democracy

49

that inflation would be higher than 100 percent, and that the planned devaluation of 40 percent would lead to such a rapid overvaluation of the cruzeiro as to hurt the competitiveness of the country's exports. During the first half of 1980, the government had decided to keep credit expansion at 45 percent for the entire year. Since full funding was to be available for the agricultural sector, the impact of this credit restraint was to fall on the industrial and commercial sectors. In the second quarter of 1980, the government drastically slashed public expenditures and reduced investment of state enterprises across the board. The cuts were accompanied by a rise in the lateness of payments by the government and its state enterprises to suppliers and contractors in the private sector. The basic idea was to reduce aggregate demand and thus inflationary pressures, and to reduce imports of state firms. This represented an explicit choice of a sector that would have to undergo the "sacrifice" necessary in a stabilization attempt. The problem, however, was that due to the close interrelationship between ownership sectors in Brazil's economy (i.e., the private, state, and multinational sectors), such a sacrifice could not be isolated. Throughout 1980-1982, wage policies followed a scheme instituted in October 1979 that called for a semiyearly adjustment of wages, favoring especially the workers in the lower wage scales.7 This new policy was supposed to have a redistributional impact. Since, however, the price control agency was lenient in allowing energy and labor cost increases to be passed on to product prices, the resulting inflationary conditions substantially diluted the real wage increases of the lower-income groups. By the end of 1980, most of the policy measures instituted in the latter part of 1979 and early months of 1980 had been reversed. Full indexation was reintroduced and the prefixed devaluation was abolished. The rate of growth of the Brazilian economy in 1980 was surprisingly high, as the real GDP expanded at 7.2 percent, with industry growing at 7.9 percent and agriculture at 6.3 percent. The rate of inflation, however, reached a yearly rate of 110 percent. The Figueiredo Years: Debt and Adjustment Crisis As it became increasingly more difficult to finance the external deficit and as three-digit inflation continued to prevail, the Brazilian government found itself forced to radically change its macroeconomic policies. It instituted orthodox austerity measures that led to an economic downturn. The austerity program consisted of: decreasing the capital expenditures of state enterprises; placing a ceiling of 50 percent over the nominal values of December 1980 for loans to the private sector,· decontrolling interest rates, except for loans to agriculture, energy

50

The Political Economy of Brazil

projects, and exports; and limiting the growth of the money supply and the monetary base to 50 percent. The basic goal was to reduce foreign exchange needs by reducing domestic absorption. In sum, the Figueiredo administration, hoping to avoid the imposition of an IMF austerity program, tried to carry one out by itself. The policies had a contractionary impact as GDP in 1981 declined by 1.6 percent and industry by 5.5 percent. But the effect of these measures on inflation was almost nil. Although the trade balance improved (despite a further decline in the terms of trade), the rise of international lending rates by about 4 points caused interest payments to absorb an increasing proportion of export earnings. In 1982, debt service interest payments alone took up 52 percent of export earnings. Brazil's voluntary adjustment program did not solve the country's problem in coping with its external debt, and in 1982 Brazil experienced another external shock: the Mexican debt moratorium of August 1982, which resulted in the virtual closing of international markets to finance the Latin American debt. Brazil was thus facing a totally inelastic supply of international bank loans. The government tried for a while to avoid going to the IMF, mainly for political reasons (the November 1982 elections were approaching). But as its voluntary austerity program failed to impress the international financial community, and as it ran out of reserves and access to the shortterm market, it finally turned to the IMF in December 1982. For the following two years, the government submitted to the dictates of that institution, as the international banks' willingness to roll over the debt and make new loans to meet the interest payments was contingent on IMF approval of Brazil's adjustment program. The austerity program was continued throughout 1983 and 1984.8 The main features of the IMF-supervised program consisted of: raising the real exchange rate,· reducing domestic demand by finding ways of cutting private consumption, investment, and public expenditures,· and increasing tax rates. Even following a recessionary program, however, the Brazil government did not find its relations with the IMF easy. This is shown by the fact that over the two years it sent seven "letters of intent" to the IMF. One Brazilian economist remarked that "these painful negotiations (leading to letters of intent) between the Brazilian government and the IMF illustrate the difficulties involved in adapting the orthodox recipes of the fund to a developing economy which was highly indexed, where the government was responsible for one-third to one-half of total investment, and for the intermediation of a large proportion of private investments through the administration of forced savings."9 Despite the continuous bickering with the IMF over the way the

Brazil's Rocky Economic Road to Democracy

51

austerity program was being administered, Brazil underwent a severe adjustment: the real exchange rate declined by 40 percent between 1980 and 1983, the money supply expanded at rates substantially smaller than inflation, the public deficit was decreased as tax collection increased and expenditures were cut, and real wages declined. The net result was a decline of real GDP (table 4.2), especially industrial production and the emergence of large trade balance surpluses from 1983 on, mainly due to drastic declines of imports resulting at first in large part from the decline in GDP, though later also as a result of the delayed impact of importsubstitution programs of the 1970s. The economy recovered in 1984, when the GDP grew 4.5 percent. This recovery was linked to a strong increase of exports, from $21.9 billion in 1983 to $27 billion in 1984. Recent programs have shown that the burden of the adjustment programs of the early 1980s fell more heavily on the lower-income groups than on other sectors of Brazil's society. The estimates in table 4.3 reveal that personal income distribution became more concentrated between 1981 and 1983. And note in table 4.4 that the share of labor income declined in the same period. Finally, in table 4.5, one notes that production fell less than employment, and the wage bill in 1984 was about 66.2 percent of what it had been in 1980. When analyzing the impact of the adjustment program on ownership sectors, one finds that the greatest burden was born by the public sector. Werneck has shown that due to declining revenues and rising interest rates on the public debt, government disposable income as a percentage of GDP fell from 10.1 percent in 1980 to 5.4 percent in 1985. Much of the cutback of government expenditures in the 1981-1983 recession was in public-sector investments, and this explains the depth of the recession itself, as about one-third of fixed capital formation consists of government investments. 10 Table 4.4. Functional Income Distribution in Brazil, 1980-1984a

National Income Labor Share Nonlabor Share

1980

1981

1982

1983

1984

100.0 50.0 50.0

100.0 51.8 48.2

100.0 51.2 48.8

100.0 48.7 51.3

100.0 46.7 53.3

Source: Ministry of Labor. MTb/SES - Projeto PNUD-OIT, Bra/82/026, "Política salarial e emprego: situação recente e perspectivas," November 1984. a Deflated by the National Consumer Price Index.

The Political Economy of Brazil

52

Table 4.5. Production, Employment, Productivity, and the Wage Bill in Brazilian Manufacturing Industry (1980=100) Production

1981 1982 1983 1984

88.7 88.4 83.2 88.1 a

Employment

92.7 86.2 79.8 77. l b

Labor Productivity

95.7 102.5 104.3 113.5 b

Wage Bill A.

B.

95.5 95.1 79.2 66.2 e

97.8 99.9 85.5 79.9 e

Source: Estimated by Maia Gomes from data of FIBGE and FGV. January-November 1984 compared to January-November 1983. b January-September 1984 compared to January-September 1983. c January-September. a

It is remarkable that the austerity measures of the early 1980s did not affect the continued rapid political decompression. There were no threats of severe general strikes and other types of resistance by economic groups, which might have led the military to reverse the democratization process. What are the possible explanations? At this time one can only offer some hypotheses that will have to be tested as more information becomes available.11 First, after twenty-one years of military rule and a decade of gradual, but continuous, political decompression, and with the repeatedly stated promise of President Figueiredo to return the country to civilian rule at the end of his term of office, the expectations of most groups for a new regime were so high that none wanted to jeopardize its advent through provocative actions. Second, the economic crisis was seen by many as having been imposed by the outside world, thus reducing the responsibility of the government for the economic decline. That is, the basic cause of the latter was the second oil shock, the rise of international interest rates, and the recession in the industrial countries, which gave Brazilian policymakers no alternative but to plunge the economy into a recession. Third, the Brazilian capitulation to the IMF was not a unique event on the world scene, but also occurred with many other Latin American countries as a result of the general debt crisis. This, again, made it difficult to find convenient internal scapegoats. Fourth, Brazil's compliance with IMF conditions was slow and incomplete, thus saving to a certain extent the image of the Brazilian government. It was seen as very reluctant in imposing austerity on the country. Finally, even if the government had found it necessary to use political repression significantly, it would

Brazil's Rocky Economic Road to Democracy

53

probably have been unable to do so as the political opening process had already gone too far to be reversed. Sarney and the Rise and Fall of the Cruzado Plan As José Sarney became Brazil's first civilian president in twenty-one years in March 1985, the economy was already recovering from the 1981-1983 recession. The recovery was initially linked to the rapid growth of exports in 1984. In 1985 this source ofgrowth was supplemented by a consumer buying boom that was the result of the new government's policy of promoting real wage increases. The latter rose by 15 percent in 1985 and, due to rises in employment, the income of the entire wage sector increased by 30 percent. In both 1984 and 1985 the country managed to produce extremely favorable trade surpluses of $13 billion and $12.5 billion, respectively. The only negative factor was the continued high rates of inflation of 224 percent in 1984 and 235 percent in 1985. The resumption of growth in an economy with widespread financial indexation, a crawling-peg exchange rate, and wage indexation reinforced by resurgent labor militancy reinforced the intractability of inflation. In late 1985 a drought caused a sharp rise in agricultural prices. By early 1986, as the shock fed through the indexation system, the inflation rate seemed set to rise to unprecedented levels, passing the 300percent-a-year mark. President Sarney's advisers, arguing that such an inflation could not be treated with traditional orthodox stabilization programs, persuaded him to attempt a "heterodox shock."12 On February 28,1986, President Sarney announced Decree Law 2283, intended to break the back of Brazil's inflation. It (and its slightly revised version, DL 2284) imposed the following measures: (1) a general price freeze,· (2) a wage freeze after a readjustment that set the new real wages at the previous six months' average plus 8 percent, and a 15 percent rise of the minimum wage; (3) a freeze of rents and mortgage payments after a readjustment that set their new rates at the previous six months' average (no increase); (4) the introduction of a wage escalation system, which guaranteed an automatic wage increase each time the consumer price index accumulated 20 percent from the previous adjustment; (5) the prohibition of contracts of less than one year with indexation clauses,· (6) the creation of a new currency, the cruzado, which replaced the old cruzeiro (1 cruzado being equal to 1,000 cruzeiros); (7) although not specifically referred to in the decree laws, the government's clear intention to keep the exchange rate fixed at 13.84 cruzados to the U.S. dollar.13 The Cruzado Plan clearly reflected the enhanced influence of econo-

54

The Political Economy of Brazil

mists who diagnosed Brazil's inflation as being mainly of the "inertial" type. They had gradually gained the upper hand in Sarney's government against economists who viewed inflation in an orthodox fashion and who had advocated more traditional remedies.14 As the transition proceeded and directly elected officials gained influence relative to those of the previous regime, recessionary policies became increasingly difficult to institute for political reasons. The immediate results of the Cruzado Plan were spectacular from both an economic and a political point of view. The monthly general price index declined from a 22 percent increase in February 1986 to a 1 percent decrease in March, and a further decline of 0.6 percent in April, a rise of 0.3 percent in May, and a rise of 0.5 percent in June. Meanwhile, economic growth accelerated. Industrial production was 8.6 percent higher in the first quarter of 1986 than it had been in the corresponding 1985 period, reaching 10.6 and 11.7 percent in the second and third quarters, respectively. Consumer durable production grew at almost explosive rates: annualized growth rates surpassed 30 percent in the months of May to August. At least during the first few months following the Cruzado Plan, the external accounts remained strong, with merchandise trade surpluses running at $ 1 billion a month. Superficially, it seemed that Brazil had accomplished the trick of running solid external accounts and maintaining spectacular growth with rising real wages, diminishing unemployment, and insignificant inflation. The point of the Cruzado Plan's price and wage freeze was to halt inertial inflation. The wage increase and price freeze amounted to an income policy favoring labor (although, curiously, Brazilian public opinion failed to perceive this at first, perhaps because of the confusing multiplicity of policy actions). The Cruzado Plan's drastic nature, coming after an inflation that seemed increasingly out of control, rallied the population behind the president, with millions of citizens volunteering to serve as "Sarney's price inspectors" to report on freeze violations. This popular enthusiasm made an incomes policy quite feasible for a short period of time. Within weeks, however, problems emerged and rapidly intensified. One negative side effect of the Cruzado Plan was to temporarily eliminate the functioning of the price mechanism as an allocator of resources. Maintaining the freeze too long would thus result in serious distortions. The most worrisome aspect was the reaction of those sectors who were caught behind in their price readjustments at the time of the freeze and who would be less and less inclined to continue at a disadvantage as time went on. While all government economists agreed that the price freeze had to be temporary, there was considerable

Brazil's Rocky Economic Road to Democracy

55

uncertainty over how and when the freeze would be lifted. The major fear was that a premature unfreezing would once again reintroduce inflationary expectations and bring about a renewed situation of inertial inflation. By mid-1986 it became increasingly clear that the continued price freeze, without readjustments, would bring along shortages, as was the case with meat and milk. Rather than change the relative price of such products, the government decided to import them. This meant that the policymakers were willing to spend foreign exchange reserves on food imports in order to preserve the price freeze rather than spend them on imported capital goods. Public utility prices (especially electricity) were also caught behind in the freeze. This created a situation of increasing deficits of the state public utility companies, placing pressure on the government to subsidize both their current and capital projects. The latter could not be postponed if bottlenecks were to be avoided as rapid growth continued. Finally, the government became increasingly preoccupied with various attempts to bypass the freeze—for example, raising prices by offering "new products," cheating on the contents of packages, and requiring "side payments" [ágios] to furnish various types of consumer durables or to supply components to manufacturing firms. As the year went on, the inevitable problems of frozen prices deepened, and the government's and populace's efforts to enforce the freeze administratively became more half-hearted and enfeebled. The continued high growth was mainly based on consumer spending, which was stimulated by the substantial real wage increases; the elimination of indexation from savings deposits, which caused an exodus from savings accounts and largely into consumer goods,· and the price attractiveness of many goods whose relative prices were lagging at the time of the freeze. As the boom continued, many sectors were approaching capacity, with limited short-run hopes of increasing it. The freeze of the exchange rate that accompanied the general price freeze gradually placed Brazil in an increasingly precarious position in its external accounts. The combination of an internal boom and repressed inflation made the domestic market more attractive than the foreign one,· thus, exports declined, while imports rose as shortages increased. By the end of the year, the monthly trade surpluses had disappeared and foreign-exchange reserves had fallen by over $4 billion. Also, the situation of the capital account of the balance of payments worsened dramatically. Net direct foreign investment, which had totaled $800 million in what was regarded a disappointing performance in 1985, totaled only $15 million in the first six months of 1986. Profit remittances

56

The Political Economy of Brazil

and capital flight were rising, one apparent sign of which was the rising "parallel" exchange market premium. In July 1986, there was a half-hearted attempt to cope with the accumulated problems. Monetary policy was tightened. To increase investment and decrease consumption, the government imposed a 25 percent tax on international travel and instituted a compulsory savings scheme that included a 30 percent "forced loan" on new cars and a 28 percent "forced loan" on gasoline. These were considered by the government to be loans (forced savings), since they were to be returned to consumers of these products in the form of equity shares in a new National Development Fund. The government's refusal to consider any price realignment was probably motivated by two considerations. First, since the freeze came to symbolize the political success of the plan, President Sarney was reluctant to tamper with it, at least until after the crucial November elections to the new Constituent Assembly. Second, because the Cruzado Plan allowed wages to automatically rise every time the accumulated inflation from each labor category's annual "base data" reached 20 percent, policymakers were afraid to permit price increases that might activate the "trigger." Shortly after the November 15 elections, the government announced a dramatic adjustment program (Cruzado II), which realigned prices of "middle class" consumer products and increased taxes on them. Automobile prices were raised by 80 percent, public utility prices by 35 percent, fuels by 60 percent, cigarettes and alcoholic beverages by 100 percent, sugar by 60 percent, and milk and dairy products by 100 percent. A crawling-peg exchange rate devaluation was reinstituted, and new tax incentives for savers were introduced. These measures were intended to cool consumption expenditures. Unfortunately, they served only to divert consumption expenditures rather than stimulate savings. The net result of these measures, combined in early 1987 with wage increases as the automatic trigger mechanism began to function, caused a resurgence of inflation. In December 1986, consumer prices rose 7.7 percent, and in January 1987, they rose 17.8 percent. These record price increases did not reflect the widespread use of price premia [ágios), which made many prices much higher than the officially quoted ones. In the following months, the general monthly price index rose steadily from 12 percent in January to 26 percent in June, as wages under the trigger mechanism were being readjusted on a monthly basis and as prices all over the economy were raised above the inflation rate, in expectation of a new freeze. In the meantime, the Central Bank's reserve position had fallen so far that the government found it necessary to declare a unilateral moratorium on February 20, 1987.

Brazil's Rocky Economic Road to Democracy

57

The Aftermath of the Cruzado Experience (1987-1988) In the first half of 1987, the government adopted a number of orthodox policy steps to counter the inflation explosion—indirect taxes were raised, the rate of increase of the money supply was slowed, and interest rates were raised above the inflation rate. Instead of stopping inflation, however, these measures served only to raise inflationary expectations. The total uncertainty resulting from the inflationary outburst and from the moratorium declaration, and the reduced real wages (which could not keep up with the price explosion, despite the trigger mechanism),15 caused the growth of industrial output to decline from a monthly growth rate of 8.1 percent in the first half of 1987 to a monthly negative rate of 5.6 percent in the second half. In May 1987, a new economic polity team was appointed. It was led by Finance Minister Luiz Carlos Bresser Pereira. A series of policy measures, called the "Bresser Plan," were developed to deal with the economic crisis in a more flexible manner than before. Prices and wages were frozen only temporarily (for three months), after public utility rates had been readjusted and the exchange devalued by more than the rate of inflation. The aim was not to attain zero inflation, but to counter inflationary expectations while avoiding gross distortions of relative prices. In addition, the wage trigger mechanism was eliminated and replaced by monthly wage readjustments based on the average monthly increase of prices in the previous three months, as measured by a price index called the Price Reference Unit (URP). The Bresser Plan also called for a reduction of the government budget deficit to 2 percent of GDP by the end of 1987. To attain this goal, various expenditure cuts were called for, such as a reduction of wheat subsidies, of subsidized credits to agriculture. Interest rates were maintained positive to avoid the consumer buying spree that had contributed to undermining the Cruzado Plan. The Bresser Plan broke the inflationary outburst, as the inflation rate was brought down from a monthly average of 24.6 percent in the second quarter to 7.3 percent in the third quarter of 1987. It also resulted in an improvement of the trade balance and stopped the decline of real wages. Industrial production, however, continued to fall. By the last quarter of 1987, the Bresser Plan began to unravel as inflation rates rose again (to a monthly average of 13.8 percent in the fourth quarter), while economic stagnation continued. Prices increased not only because the freeze had come to an end, but because they were fed by a growing budget deficit, which reached 5.4 percent of GDP by the end of the year. Bresser Pereira's efforts were undermined by the political necessity to increase public spending. President Sarney was anxious to

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influence Congress, which also acted as a constitutional convention, not to reduce his mandate from 5 to 4 years. This resulted in the government financing large increases in state government deficits, increasing federal employment, and raising the salaries of public servants.16 Political priorities gradually undermined the authority of Bresser Pereira, who resigned in December 1987. Bresser Pereira was succeeded by Mailson da Nobrega, who attempted to follow a fairly conventional policy in trying to cope with the inflationary situation. Efforts were made to reduce the budget deficit: a decree was passed in January 1988 to freeze new government hiring; the real values of loans by the financial system were frozen in February; in April wage readjustments of public employees were frozen for two months; and various subsidies were eliminated. The aim of these measures was to reduce the public deficit from 5.7 to 4 percent of GDP by the end of 1988. The results of these efforts were disappointing. There was increasing pressure by various ministers and public servants, who went on a number of strikes to restore the real wage loss resulting from the freeze, and by July/August many government sectors had succeeded in restoring the real wages of their employees. For political reasons, the president refused to cut certain projects, such as the North-South railway, which will connect Brasilia to his home state of Maranhão. Also, the recession, which continued in the first eight months of 1988, resulted in a 14 percent real decline of tax revenues. The domestic economic performance deteriorated throughout the first eight months of 1988. The monthly inflation rate continued to grow, reaching 24 percent in July, and industrial production continued to decline (in the first four months, it was falling at a monthly rate of 6.8 percent). The only bright spot in 1988 was the external sector. The trade surplus continued to increase, as exports expanded rapidly. This was due to both the competitiveness of Brazilian products resulting from the more realistic exchange rates that had been established after the collapse of the Cruzado Plan, and to the domestic recession that gave producers an incentive to export. Also, Brazil suspended its debt moratorium and began to successfully renegotiate its debt with its foreign creditors, reaching an accord in late June. The latter included the rescheduling of U.S. $63.6 billion of the debt, new resources amounting to U.S. $5.8 billion, and a lowering of interest spreads to 0.8125 over LIBOR, and various plans for debt conversion. As Brazil was entering the last quarter of 1988, the prospects for successfully conquering inflation and returning to a higher rate of growth were not encouraging in the short run. The major reason was the general uncertainty about the future. President Sarney's term was to

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come to an end in early 1990, and there was no clear indication as to who, or which group, would be in charge in the new decade. As electioneering was heating up, there was little prospect in the short run for a social accord that would make it possible to lower inflation rates by stopping the fight-for-shares situation. Also, in September 1988 a new constitution was voted into being, and its impact on the economy was uncertain. The document has many provisions that increase the welfare of the workers: for example, a reduction of the work week from forty-eight to forty-four hours and 50 percent increment for overtime work; paid vacations with supplements,· and various other benefits. These may have a positive effect by redistributing income and raising aggregate demand in the economy,· they may also have negative effects if they lead firms increasingly to adopt labor-saving technology and/or diminish their investments as rates of return decrease. The new constitution also includes an article setting a maximum ceiling of 12 percent on real interest rates. This can easily distort capital markets and negatively affect economic growth. The nationalist tone in provisions that keep foreign capital out of the petroleum and mining sectors and that give restrictive definitions as to what is a domestic firm could have some negative impact on the attraction of foreign investments. The redistribution of resources from the federal to state and local governments will also force a redistribution of powers from the center to the periphery. Whether this will positively or negatively affect economic policy making remains to be seen. Thus, the new rules of the game that have been introduced by the new constitution are not yet clear, and therefore result in uncertainties that might last a long time. This will make both domestic and foreign investors very cautious in their behavior, and thus contribute to a prolonging of Brazil's low investment ratio and rate of growth. Concluding Comments This survey summarized some of the principal events in Brazil from 1974 to 1988. This was a period of the country's gradual political reopening, culminating in the first civilian government in twenty-one years in 1985 and the election of a constitutional assembly in 1986. It was shown that the political opening process explains, in part, the growth-cum-debt policies of the Geisel administration, and that it explains the reluctance of the early Figueiredo government to apply austerity measures in the light of the growing debt crisis. We also saw, however, that the debt crisis's induced austerity program of 1981-1983 was feasible because of the general public's expectations of a full return

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The Political Economy of Brazil

to democracy and because it was seen as being part of a world rather than just a domestic problem. We also saw that the heterodox approach to deal with inflation by the newly installed civilian government of President Sarney was doomed because of its rigid application. The latter can be explained by the peculiar political circumstances of the time—the election of the Constituent Assembly. And, finally, we showed how the political priorities of the president in influencing that assembly made it impossible for economic policy makers to effectively deal with the domestic economic turmoil. Notes 1. For details, see Riordan Roett, Brazil: Politics in a Patrimonial Society (New York: Praeger, 1984), chap. 6. 2. Bolivar Lamounier and Alkimar R. Moura, "Economic Policy and Political Opening in Brazil," in Jonathan Hartlyn and Samuel A. Morley, eds., Latin American Political Economy: Financial Crisis and Political Change (Boulder, Colo.: Westview Press, 1986), pp. 180-183. 3. Annibal Billela and Werner Baer, O setor privado nacional: problemas e políticas para seu fortalecimento (Rio de Janeiro: IPEA/INPES, Coleção Relatório de Pesquisa 46, 1980). 4. Paulo Nogueira Batista, Jr., International Financial Flows to Brazil since the Late 1960s (Washington, D.C.: World Bank, World Bank Discussion Paper 7, March 1987), p. 18. 5. Many of the projects had beneficial effects on expanding the country's export capacity and substituting imports in new sectors. However, there also occurred a considerable amount of waste. For instance, given the large reserves of hydroelectric power, one might wonder whether the huge investments in nuclear power, which were begun in the Geisel years, made sense. 6. For a more detailed discussion, see Werner Baer, "The Resurgence of Inflation in Brazil, 1974-86," World Development August 1987), pp. 1007-1034. 7. Throughout 1980-1982, wage policies followed a scheme instituted in October 1970. Wages were readjusted twice a year, with the lowest wages (up to three minimum salaries) being readjusted on the basis of 110 percent of the cost of living increase; middle salaries (three to ten minimum salaries) on the basis of 100 percent; higher salaries (ten to twenty minimum salaries) on the basis of 80 percent; and the salaries above twenty minimum salaries on the basis of 50 percent. 8. Lamounier and Moura point out that "the program of the IMF meant little in terms of loans, but it offered to the international financial community a certain guarantee against 'moral hazard' and other risks typical of debtors in difficulty. The IMF's guarantees of the Brazilian adjustment program meant that private banks would also support the program financially . . . " ("Economic Policy" in Hartlyn and Morley, eds., Latin American Political Economy, pp. 176177). 9. Dionisio Dias Carneiro, "Diagnóstico macroeconômico da economia

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61

brasileira," in Debate Econômico (Fundação João Pinheiro), Year 1, no. 1, December 1986, pp. 101-102. 10. Rogerio L. Furquim Werneck, "Public Sector Adjustment to External Shocks and Domestic Pressures in Brazil, 1970-1985," mimeograph. Rio de Janeiro, PUC/RJ, Texto Para Discussão, no. 163, July 1987. 11. These remarks are taken from a more elaborate discussion that can be found in Werner Baer, Dan Biller, and Curtis T. McDonald, "Austerity under Different Political Regimes: The Case of Brazil," Prepared for LASA Panel on Austerity Programs and Political Regimes: LASA ΧΙΠ International Congress, Boston, October 1986. 12. For a more detailed discussion of the theories behind the heterodox shock, see Werner Baer, "The Resurgence of Inflation in Brazil," World Development, August 1987; and Werner Baer and Paul Beckerman, "The Decline and Fall of Brazil's Cruzado," Latin American Research Review, vol. 24, no. 1, 1989. 13. A full description of the Cruzado decree laws can be found in Conjuntura Econômica, March 1986; the subsequent issue of this journal (April 1986) contained a lengthy panel by many of Brazil's leading economists on various aspects of the Cruzado Plan. 14. Represented by Finance Minister Dornelles and Central Bank President Lemgruber, who resigned in late August 1985. 15. Real wages began to decline in April 1987 and continued to do so for the rest of the year. See Conjuntura Económico, Fevereiro 1988, p. 13. 16. Ibid., pp. 15-16.

5· The Political Economy of Export Promotion in Brazil

Benedict f. Clements and J. Scott McClain Introduction It is widely accepted that the health of the Brazilian economy is inexorably linked to the performance of the export sector. This is as true today as ever, as crushing debt service payments necessitate the generation of large trade surpluses. Policymakers have little choice but to promote exports, as even in the best of years there is some difficulty in achieving the required trade surpluses. Against the background of this need to export is the stunning historical success of Brazil's export promotion (EP) program. Total export sales increased at a robust average of 22 percent per year in the 1970s, while manufactured good exports expanded at an impressive average 38 percent per annum during the decade. Although export growth has diminished somewhat in the 1980s, the overall growth of Brazil's exports to this date can only but please the original advocates of Brazil's EP strategy. The purpose of this chapter is to explore the origins of Brazil's EP policy, as well as the specific tools used by the Brazilian state to achieve greater export growth. The important changes in trade policy in the 1980s, as well as the forces that have led to these changes, are also addressed. A further goal of the chapter is to explore a question that has received only scant treatment in the literature: Which firms have most benefited from the export boom in Brazil—small firms or large firms, domestically owned enterprises or multinational corporations? Utilizing recent data on export sales by firm, an evaluation of the share of multinational corporations (MNCs), domestically controlled firms, and state enterprises in the exports of the top 250 exporters is presented. This chapter is structured in the following manner. The first section explores the origins and intellectual foundations of Brazil's export promotion strategy. As will be argued, Brazil's shift to EP must be put in the context of the new economic strategy adopted by the nascent military regime in 1964; hence, this section delineates the role of exports

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63

and the foreign sector in the economic ideology and strategy of Brazil's military technocrats. The tools introduced by the state to promote export growth, and the performance of exports in the heyday of export promotion (1964-1974) are also discussed. The second section addresses the shift in policy priorities in the 1975-1979 era, as well as the performance of exports during this period. In the third section, the vicissitudes of trade policy and export performance in the 1980s are addressed. As we explain, these changes in policy in the 1980s must be understood not only in the context of a change in the priorities of domestic policymakers, but also the international pressures on Brazil to change its export promotion policy. The fourth section discusses some of the new directions in Brazilian trade policy. The fifth evaluates the role of large firms and multinational corporations in Brazilian exporting. Finally, the chapter concludes with an assessment of the future direction of trade policy in Brazil, as well as the dangers inherent in the current strategy. The Foreign Sector and the Economic Strategy of the Military Dictatorship, 1964-1974 When the military seized power in 1964, it inherited an economy beset with problems and bottlenecks. Real economic growth declined sharply in the early 1960s, falling from its zenith of 10.3 percent in 1961 to 5.3, 1.5, and 2.4 percent in 1962, 1963, and 1964, respectively. Inflation was no less of a problem, reaching 90 percent in 1964. The economy was also plagued by serious balance-of-payments problems, linked to both exchange rate overvaluation in 1962-1964 (cutting export earnings) and the virtual cessation of capital inflows. The leftward leanings of the Goulart administration had prompted foreign capital to drastically diminish new investment; the cutoff of U.S. aid in 1963 had also dealt a blow to Brazil's capital account. Much of Brazil's problem in the early 1960s can be explained in terms not so much of economic mismanagement, but of the exhaustion of the import substitution (IS) model of economic development in Brazil. The IS model involved substantial protection for domestic industry, with relatively little concern for exports. As a consequence, exports languished during the heyday of IS in the 1950s and early 1960s,· from 1947 to 1963, export sales expanded at a paltry 1.2 percent per annum. 1 Despite this poor performance on the export front, the Brazilian economy expanded briskly in the 1950s, as import substitution helped reduce the import bill and any potential foreign-exchange bottlenecks,· capital inflows also eased the foreignexchange constraint. Ironically, the very success of this model in the 1950s augured the demise of IS in the 1960s, simply because IS had

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practically exhausted the entire import bill for consumer durables by 1964. IS would henceforth have to concentrate on intermediate and capital goods, relatively immature industries in Brazil at the time. Thus, relief from the foreign exchange constraint would now have to come from increased exports, which had been so severely neglected in the IS era. The economic advisers of the new military regime wholeheartedly embraced the view that export expansion was the key to renewed growth in Brazil.2 The "industrialization at any cost" mentality of the 1950s had not served Brazil well, they argued, as it left a legacy of inefficient industries that could well benefit from the rigors of international competition. By dismantling some of the protective tariffs enjoyed by industry, greater efficiency could be achieved; and for those industries unable to withstand import competition, their demise would release resources for those sectors in which Brazil was internationally more competitive. Devaluation of the badly overvalued exchange rate was also necessary, so as to put Brazilian exporters on an equal footing with other competitors in international markets. Increasing exports would have benefits beyond the immediate increase in the ability to importgreater emphasis on exporting would improve Brazil's standing with international creditors and the International Monetary Fund (IMF), sending a signal that Brazil was intent on generating sufficient foreign exchange to honor any new debt commitments it might incur. Despite the professed proclivity of the regime's economic architects (such as Roberto Campos) for this free-market approach to economic development and the foreign sector, the pace of economic reform was actually quite modest. Most important, tariff and non tariff barriers were not totally abandoned. The tariff reform of 1967 reduced average rates of protection by just 30 percent.3 This had fairly little effect on domestic industry, as pre-1967 tariff rates were so high that they were in effect "redundant," that is, higher than what was needed to protect domestic industry from any import competition. Imports did increase, however, as greater leniency in the granting of exemptions from import duties (especially for imported capital goods) helped raise the import share of GDP from 5.0 percent in 1964 to 7.8 percent in 1973. The greater emphasis on exporting also had but a minor impact on the share of exports in GDP; exports grew from 6.6 percent of GDP in 1964 to 7.8 percent in 1973. Thus, while both import liberalization and greater export growth were part and parcel of the new strategy adopted by the military government, the internal market remained the engine of economic growth in Brazil, not the export sector. Given the ideological commitment of the military regime's economic advisers to a free-market approach to economic development, why did

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65

the role of exports and imports in the Brazilian economy change so little from the pre-1964 era? One explanation has to do with the pragmatism of the new government, as exemplified by its willingness to stick with policies that were "working" (in the sense that they were associated with high economic growth) and to abandon formulas that were not working. For example, the conservative macroeconomic austerity of the 1964-1974 period was jettisoned in 1968, simply because it was found that the economy was languishing under the weight of orthodox stabilization policy. The more expansionary macropolicies adopted after 1967 were continued because it was found that, contrary to orthodox beliefs, expansionary policy was not resulting in accelerating inflation. In the same way, there was very little pressure on policymakers in the late 1960s and early 1970s to change an economic strategy that primarily relied on expansion of the internal market. Given that the modest export and import reforms that had been made were associated with this robust economic growth, there was little reason to presume that even greater reforms had to be made. Beyond simple pragmatism, a further reason for the stability in the export and import share of GDP is that liberal economics (involving free trade and a minimum of state interference in economic activity) was incompatible with the desire of the military to control political and economic activity. As Evans has argued, one of the primary motivations of the military in seizing power in 1964 was to prevent a "revolution from below" that would entail significant socioeconomic change on behalf of the working class.4 Given the importance of control to the military, a laissez-faire approach to economic activity would have diminished the role of the state, and with it the controlling powers of the military and its ability to shape the economic development of Brazil. Widespread trade liberalization would have involved significant reallocation of resources, as resources tied to industries in import-competing industrial sectors would have been required to shift to export sectors most likely tied to agriculture and light industry. The significant economic dislocation associated with this resource reallocation would have hampered the ability of the state to map out and plan the course of future economic expansion in Brazil. Furthermore, the dismantling of part of Brazil's industrial park would have seriously compromised the country's ability to produce goods considered essential for "national security."5 Thus, the moderate pace of trade liberalization can be linked to the need of the military and the state to play a central and controlling role in Brazil's economic development. Whatever the efficiency gains of free trade, the chaos and dislocation of economic activity associated with such open competition were not compatible with the military's vision of economic development. Hence, economic development based

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on expansion of the domestic market continued to be the sine qua non of the Brazilian economy in the early years of the military's tenure, as it had been in the 1950s. While Brazil's EP strategy implemented between 1964 and 1974 fundamentally involved a continuation of the previous era's pattern of accumulation, the significant increase in Brazil's exports from 1968 to 1974 should not be downplayed. As table 5.1 indicates, yearly growth rates of Brazil's exports from 1968 to 1974 averaged a healthy 26 percent. Especially noteworthy was the performance of manufactured exports, increasing at an average rate of 52 percent per annum between 1970 and 1974. Favorable commodity price movements also contributed to the boom in basic and semimanufactured exports in 1972 and 1973. What tools did the Brazilian state introduce in the 1964-1974 era to foment the growth of exports? One of the major policy reforms meant to enhance export performance was the implementation of a crawlingpeg exchange rate that was pegged at a "realistic" level. The periodic devaluations associated with the crawling-peg regime kept the real exchange rate at a fairly constant value, greatly reducing the uncertainty associated with exporting. Beyond the maintenance of a realistic exchange rate through the crawling peg, the profitability and costcompetitiveness of Brazilian exporters were enhanced by the introduction and strengthening of fiscal incentives. One genre of incentives involved exemptions from certain taxes that firms selling in the domestic market were required to pay. Most of these incentives were legislated or strengthened between 1964 and 1968; principal among these tax breaks enjoyed by exporters were ( 1 ) exemption from taxes on imported inputs used to produce exports—the so-called "drawback" program,· (2) exemption from the industrial products tax (IPI); (3) exemption from the state sales tax (ICM); and (4) exemption from income taxes on profits earned through exporting. An additional incentive offered to exporters of manufactured exports in 1969 was the crédito prêmio, the tax credit premium. Unlike the other incentives, the crédito premio involved an outright subsidy to exporters,· its purpose was, ostensibly, to compensate the exporter for the burden of labor taxes such as the Fundo Garantia por Tempo de Serviço (FGTS) and the Programa de Integração Social (PIS).6 The crédito premio would often exceed the value of these taxes (as a percentage of export sales), however, and exporters were allowed to use their crédito prêmio credits to pay their tax liabilities owed from nonexporting operations.7 Besides these fiscal incentives, both shortterm and long-term credit subsidies for exporters were implemented. The impact of these export incentives on the cost and profitability of exporting manufactured goods is underscored in table 5.2, which shows the evolution of export incentives in Brazil from 1969 to 1985. In 1969,

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67

Table 5.1. Yearly Growth Rates of Exports by Category, 1964-1988

(Percentage Yearly Growth in U.S. Dollars) Year

Total

1964 1.7 1965 11.6 9.2 1966 1967 -5.0 1968 13.7 22.9 1969 1970 18.5 1971 6.0 1972 37.4 1973 55.3 1974 28.3 9.0 1975 1976 16.8 1977 19.7 4.4 1978 20.4 1979 1980 32.1 15.7 1981 1982 -13.4 8.6 1983 1984 23.3 1985 -5.1 1986 -12.8 17.4 1987 1988c 50.2

Basica

Industrializedb

-2.1

6.6

27.6 38.7

11.0 -9.8 14.5 20.4 14.1 -2.9 33.1 52.1 13.6

17.1 11.0 30.1 34.3 23.6 48.7 58.9 63.8

9.8 21.9 13.9 -14.1

9.6 29.5

5.1 7.6 3.6 2.6 -1.9 -14.7 10.2 31.3

3.2

8.0 5.4 35.0 33.2 31.2 33.3 23.7 -16.6 11.8 37.3 -6.6 -11.5 21.0 59.3

Semimanufactured — — — — — — 18.1

Manufactured

61.7 43.7 59.7 -7.3

— — — — — — 46.4 39.7 54.5 59.7 57.8 14.2

-.9

7.4

24.0 36.1 32.8 24.5 -9.9 -32.3 24.3 56.7 -4.0 -9.7 27.4 78.5

38.3 32.4 30.7 35.9 31.6 -13.7 10.0 34.2 -7.1 -11.8 19.7 55.4

-.8

Source: Benedict J. Clements, Foreign Trade Strategies, Employment, and Income Distribution in Brazil (New York: Praeger, 1988), pp. 15-17. Note: "Other"category includes reexportation and special transactions. a Basic exports include agricultural and mining exports, b Industrialized exports include both semimanufactured and manufactured exports. c July 1987-July 1988.

Table 5.2. Export Incentives for Manufactured Products, 1969-1985 (in % of FOB value of manufactured exports)

Year 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

"Drawback" 4.00 4.00 4.00 4.90 7.20 12.60 8.30 11.80 12.60 9.10 10.50 9.00 9.40 10.30 8.60 9.10 9.10

"Crédito Premio" 6.69 13.50 13.15 16.26 16.16 11.95 12.06 11.72 12.41 12.79 12.78 0.00 6.51 9.11 7.79 7.84 1.36

Income Tax Exemption — — 1.30 1.30 1.30 1.80 1.70 1.30 1.50 1.80 2.10 1.90 1.80 1.60 1.60 1.60 1.60

ICM Exemptiona

IPI Exemptionb

20.50 20.50 19.80 19.10 18.30 17.70 17.00 16.30 16.30 16.30 16.30 17.70 18.30 19.10 19.10 20.50 20.50

7.41 7.18 7.09 9.04 8.86 4.97 5.43 5.17 5.43 6.13 6.52 6.34 6.83 7.16 7.17 6.99 7.19

Credit Subsidiesc 4.07 7.51 7.80 8.22 6.45 6.14 11.51 15.88 19.63 17.00 13.88 2.04 18.73 21.69 9.31 2.67 3.63

Total Incentives 42.67 52.69 53.14 58.82 58.27 55.16 56.00 62.17 67.87 63.12 62.08 36.98 61.57 68.96 53.57 48.70 43.38

Source: Benedict J. Clements, Foreign Trade Strategies, Employment, and Income Distribution in Brazil (New York: Praeger, 1988), pp. 15-17. a Refers to exemption from the state sales tax. b Refes to exemption from the industrial value-added tax. c Includes both preexport and postexport financing subsidies.

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export subsidies equaled 42.67 percent of manufactured exports. Hence, selling a product on the international market effectively cost the exporting firm 42.67 percent less than selling it to the internal market. As table 5.2 indicates, by far the most important export incentive in the early days of EP was the ICM (state sales tax) exemption. The rise in total incentives from 1969 to 1972, however (from 42.67 to 58.82 percent) is explained by the doubling of the crédito premio in 1970 and the concomitant rise in credit subsidies. With a fairly stable real exchange rate from 1970 to 1974 and an increase in export incentives, the profitability of exporting increased by 15.7 percent from 1970 to 1974 (table 5.3). This export share of GDP, while high by the standards of the Brazilian economy of the 1960s and 1970s, is nowhere near the share characterizing the superexporters of Asia.8 Hence, even in the halcyon days of export promotion, the internal market served as the engine of economic growth. Undoubtedly the surge in exports played a large role in the economic boom of the early 1970s,· nevertheless, it appears that exports were important not so much as a source of demand, but rather as a source of foreign exchange that improved the capacity to import. Import Substitution Revisited: 1975-1979 The rather sanguine view of the Brazilian state regarding the rising share of imports in GDP could no longer be maintained after the first OPEC oil shock, as soaring oil prices helped raise the import bill to 11.9 percent of GDP in 1974. While conservative economics would have counseled a slowdown in economic activity to help reduce imports, such a recessionary course of action would have been politically infeasible for the new Geisel administration. Sensitive to international criticism regarding the meager benefits the poor had received from the economic boom in Brazil in the 1960s, the government committed itself to improving the standard of living of the average Brazilian.9 Unwilling to pursue immediate redistribution of income as a means to improve the lot of the poor, the Geisel administration saw continued economic growth, combined with less repressive wage policy, as a means to improve standards of living for the masses. Therefore, the government was unwilling to slow down economic activity as a means to reduce the import bill.10 Instead, import capacity and economic growth would be maintained by ( 1 ) adding on to the foreign debt and (2) an ambitious program of import substitution that would reduce the import bill. The government's new IS strategy, as articulated in the Second National Development Plan, called for substantial investments in pulp and paper, petrochemicals, fertilizer, steel, and nonferrous metals.11 In order to further reduce imports, tariffs were

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Table 5.3. Real Exchange Rates and Subsidies, 1970-1988

Year 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988a

Real Exchange Rate Indices RER (USA) REER 100.0 98.8 97.8 95.1 97.0 100.9 96.5 96.2 96.0 103.3 111.3 103.1 105.5 128.0 124.8 127.0 113.2 106.0 95.7

100.0 100.7 104.1 107.1 109.5 110.0 106.2 106.7 112.7 124.3 134.1 111.7 106.1 127.0 119.5 120.3 124.3 126.3 117.1

IP

Subsidies Index

Export Coefficient

100.0 101.6 108.2 111.7 115.7 117.0 119.3 122.8 124.2 137.2 125.8 118.4 118.3 129.4 115.7 110.6 n.a. n.a. n.a.

100.0 100.9 103.9 104.3 105.7 106.4 112.3 115.1 110.2 110.4 93.8 106.0 111.5 101.9 96.8 91.9 n.a. n.a. n.a.

5.5 5.9 6.8 7.8 7.6 6.8 6.6 6.7 5.9 6.2 7.9 8.0 6.6 9.7 12.8 11.6 9.0 n.a. n.a.

Source: Benedict J. Clements, Foreign Trade Strategies, Employment, and Income Distribution in Brazil (New York: Praeger, 1988), pp. 15-17. RER (USA) = Real exchange rate (Cr $/U.S. $). REER = Real effective exchange rate (using average trade weights). IP = Index of profitability of exports (REER corrected by subsidies impact). Export coefficient = Exports as a percentage of GDP. a July 1988.

increased, nearly doubling for both intermediate and consumption goods.12 The liberal attitude of the state regarding exemptions from import duties was reversed; the granting of exemptions became far more selective, and import quotas were established for programs that extended relief from import quotas.13 The import share of GDP dropped sharply in response to these policy moves, falling from 11.9 percent of GDP in 1974 to 6.4 percent in 1978. Unlike the IS of the 1950s, exports and export growth were not neglected. Export subsidies were actually increased (table 5.2), as well as the profitability associated with exporting. Exports grew at an average

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annual rate of 14.1 percentfrom 1975 to 1979 (table5.1). Nevertheless, the importance of exports in the economy diminished in this period, as the export to GDP ratio declined from its 1973 peak of 7.8 percent to 6.2 percent in 1979. Why would the export share of GDP fall, even as export incentives were being increased? The export incentives given to producers must be put in the context of the incentives producers also received for producing for the internal market. The principal enticement for production for the domestic market is the protection producers enjoy from competing imports. The high prices firms could charge on domestic sales (due to an effective lack of competition from imports) provided an incentive to sell in the home market, as opposed to an export market; in the international arena, internationally competitive prices must be charged to make a sale. Evidence on this incentive to produce for the domestic market and the "antiexport bias" in the Brazilian economy in the late 1970s and early 1980s is provided in table 5.4. Although the data pertain to 1981, they still give a fairly representative picture of the incentives facing producers with respect to the decision to produce for the home or export market in the late 1970s. As the table evinces, significant "antiexport" bias existed in Brazil, as incentives to produce in the internal market outweighed export incentives. It is not surprising, then, that import substitution was a more important source of industrial growth than export expansion from 1974 to 1979, despite the generous export incentives of this period.14 In sum, the export incentives detailed in table 5.2 must be put in the context of industrial policies that, in the aggregate, favored production for internal consumption. The estimates of antiexport bias by sector calculated by Tyler for 1981 must be interpreted with caution, as his nominal export subsidy rate for manufactured products (19.3 percent) is significantly below the rate calculated by Baumann and Moreira for 1981 (61.57 percent). On the other hand, Tyler's estimates of protection are lower than those found in recent research on the structure of protection in Brazil.15 Whatever the disparities are between these estimates, the point remains that domestic producers enjoyed incentives for producing for the national market, undoubtedly diluting the potency of export incentives. Export Policy and Export Growth in the 1980s The changes in export policy in Brazil in the 1980s are best explained in the context of the pressures placed upon Brazil by the international economic community. Throughout the late 1970s, the developed countries (DCs) became increasingly concerned with the rising share of imports in certain sectors of their economies. In the view of the DCs

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Table 5.4. Nominal Export Incentives and Antiexport Biases, 1981 Nominal Export Subsidy (%)

Antiexport Biasa (%)

Mining Nonmetallic minerals Metallurgy Machinery Electrical equipment Transportation equipment Lumber and wood Furniture Paper Rubber Leather Chemicals Pharmaceuticals Perfumery Plastics Textiles Apparel Food products Beverages Tobacco Printing and publishing Miscellaneous

1.3 22.5 20.1 25.6 25.4 23.7 14.4 26.2 23.2 22.4 22.8 10.2 22.6 20.0 25.6 25.2 26.3 4.9 15.4 9.1 23.9 25.0

-5.4 -48.9 -20.0 56.9 100.9 -45.6 -35.9 -.3 -58.4 -49.9 -8.8 70.9 93.8 34.5 4.4 0.0 9.0 -2.8 -30.7 -10.3 0.3 125.6

Averages Primary Agricultureb Manufacturing Capital goods Intermediate goods Consumer goods

-2.7 19.3 24.9 17.9 17.5

-4.8 11.5 37.0 7.2 .7

Industry

Source: William G. Tyler, "Effective Incentives for Domestic Market Sales and Exports," Journal of Development Economics 18 (1985): 234. a Defined as net effective protection minus net effective export promotion, b Includes forestry, hunting, and fishing.

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participating in the General Agreement on Trade and Tariffs (GATT), at least some of this import penetration was due to the unfair subsidization received by exporters in these countries. With such an undisguised subsidy as the crédito prêmio, Brazil was especially vulnerable to such a charge. The United States was an especially sharp critic of Brazilian trade subsidies in the late 1970s, going so far as to impose restrictions on imports of Brazilian manufactured goods in 1978.16 Feeling the pressure from both the United States and others involved in the GATT, it was clear to Brazilian policymakers that their good standing in the international economic community required them to remove the subsidy element of export incentives. In order to allow the government time to find other methods to promote exports, these subsidies were to be phased out gradually,· under the plan initiated by Brazil in early 1979, the crédito prêmio was to be reduced by 10 percent per quarter for the first two quarters of 1979 and by 5 percent per quarter until mid-1983.17 Brazilian trade and macroeconomic policy took a short-lived detour in late 1979 and 1980, as the government briefly flirted with the idea of using the exchange rate as a means to hold down inflation. As part of the December 1979 package, the rate of depreciation of the cruzeiro was preannounced at just 40 percent for 1980, in the hopes of controlling inflation by limiting the rate of devaluation (and the associated increase in the price of imported inputs). As part of the December 1979 package the crédito prêmio was completely eliminated, and credit subsidies were sharply curtailed. The net result of these policy moves was a precipitous fall in net export incentives for manufactured exports, as these incentives fell from 62.08 percent in 1979 to 36.98 percent in 1980 (table 5.2). A maxidevaluation of 30 percent in December 1979 was meant to compensate exporters for this loss of subsidies. Although the net result of these policy moves was a drop in the profitability of exporting from 1979 to 1980 (table 5.3), export growth was still quite robust in 1980, as export receipts climbed by 32.1 percent. The boom in exports for 1980 as a whole is rather deceptive, in that it masks the serious problem of exchange rate overvaluation facing the Brazilian economy in the second half of 1980. Inflation had raced ahead of the preannounced rate of devaluation, so that by late 1980 the exchange rate was badly overvalued. In order to maintain the export boom and compensate for this overvaluation, the créai to prémio for manufactured exports was reintroduced in April 1981. The reintroduction of the crédito prémio came with the blessings of GATT, as Brazil promised to quickly phase out the subsidy. Accordingly, Brazil agreed to a timetable for the orderly decline in the value of the crédito prêmio-, according to the plan, a subsidy of 15 percent of the freight on board (FOB) value of exports was to be allowed until December 31, 1981; 9 percent

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until the end of 1982, and 3 percent until June 30, 1983.18 Subsequent renegotiations with the United States modified and extended this timetable, but the gist of the matter is that the crédito premio has been gradually phased out in the 1980s, except for automobile exports. In sum, the elimination of the crédito premio in Brazil's EP scheme can largely be explained by the pressures received from the United States and other GATT nations adversely affected by the growth of Brazilian manufactured exports. Another important actor shaping the changes in Brazil's trade policies in the 1980s is the International Monetary Fund. The IMF enters the scene in 1982, when Brazil's severe difficulties in the balance of payments forced the country to ask the IMF for financial help. Brazil BOP problems of the 1980s can be traced to ( 1 ) the steep drop in exports as the world economy slid into recession in 1981-1982 and (2) the large debt servicing required to pay interest and principal on the $100-billion-plus foreign debt. The mounting foreign debt of the late 1970s had substantially increased the percentage of export earnings that had to be spent on interest and principal payments owed to foreigners each year, reducing the share that could be used to purchase critical imports such as petroleum. By 1980, debt servicing claimed over half of Brazil's exports,· in order to meet its debt servicing requirements and purchase imports, Brazil contracted a further $16 billion in foreign debt and spent $2.7 billion of its accumulated reserves.19 By 1981, the problems of balanceof-payment deficits and inflation were considered severe enough by Brazilian policymakers to warrant corrective action, even at the cost of recession.20 Ironically, the policies used to slow down economic activity and reduce imports actually contributed to the coming crisis in the balance of payments in 1982. By raising real interest rates, economic growth and imports slowed down,· however, these high domestic interest rates encouraged firms to incur even more foreign debt.21 While this was precisely what policymakers had hoped would happen, the wisdom of piling on more foreign debt in a recessionary world economy proved questionable. The end to the heyday of easy foreign credit came abruptly in 1982, as foreign credit dried up after the Mexican suspension of payments to international creditors in August of that year. Brazilian exports actually declined in value in 1982, drastically reducing Brazil's ability to service the debt. Having depleted its international reserves, and without the ability to service the foreign debt, Brazil turned to the IMF in September 1982 for help. IMF help does not come without a cost, as countries must enact certain "reforms" the IMF deems advisable in order to receive their concessionary financing. It is precisely these reforms that have shaped Brazilian

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trade policy in the 1980s. Before looking at the specific reforms that the IMF required of Brazil, it would be useful to review the general approach of the IMF to balance-of-payments problems in less-developed countries, and the kind of reforms it usually desires or requires before concessionary financing is granted. In the IMF's view, the policy reforms it wants are those that will enable the country to avoid balance-of-payments problems in the future. In the context of a country with significant foreign debt, this requires that the economy be adjusted so that it can provide a trade surplus that is large enough to meet debt-servicing requirements. This entails both an increase in exports and a reduction in imports. Imports are not to be reduced by restrictive controls or increased tariffs, however. Given that the origin of the balance-ofpayments problem stems from an overheated domestic economy, the best way to reduce imports is to reduce the level of economic activity. This is achieved by restrictive macroeconomic policies that reduce the money supply and cut government budget deficits. Subsidies and other distortions to the market system are to be reduced as much as possible, as they retard economic efficiency and growth. Subsidies are also to be eliminated for their detrimental impact on the budget deficit, being seen as a major cause of the overexpanded economy. IMF policies are often associated with greater openness to direct foreign investment, not only because of the perceived efficiency of foreign capital, but because this capital inflow is also a source of foreign exchange. While these policies reduce standards of living and lead to recession, the IMF sees these adjustments as necessary for restoring the conditions for future economic growth.22 Why would Brazil agree to these policy reforms, given that they entail a decrease in the standard of living in Brazil? It is often claimed that the IMF is responsible for the falling incomes in Latin America in the 1980s, due to the falling wages and incomes that seem to be mandated by IMF stabilization policies. It may be possible that alternative adjustment policies can help generate increased trade surpluses without squeezing domestic well-being; nevertheless, it is the desire of policymakers to pay the foreign debt (and to generate the greater trade surpluses) that is most proximately responsible for falling standards of living. Given this desire to fully honor the debt and to generate the required trade surpluses, Brazil's decision to submit to an IMF stabilization program was quite logical. The IMF is important to Brazil not so much as a source of concessionary financing, but as a guarantor of its soundness as a credit risk for the international financial community; hence, agreeing to an IMF stabilization program improves the chances of receiving further capital inflows. Commenting on the IMF's role in the stabilization program of early 1983 in Brazil, Lamounier and Moura state that "the

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program of the IMF meant little in terms of loans, but it offered to the international financial community a certain guarantee against 'moral hazard' and other risks typical of debtors in difficulty. The IMF's guarantee of the Brazilian adjustment program meant that private banks would also support the program financially."23 Thus, despite the recessionary wounds that IMF stabilization policies would inflict, further access to international credit was greatly enhanced by submitting to an IMF-approved stabilization policy. In return for IMF help in 1982 and 1983, Brazil agreed to implement certain policy reforms. The specific targets that the IMF set for Brazil were the end of all subsidies, exchange rate devaluation, and the generation of positive trade balances.24 Brazil's performance on these three fronts in 1983 failed to satisfy the IMF, resulting in a cutoff of further IMF concessionary aid. At the end of 1983 Brazil once again returned to the negotiating table with the IMF, agreeing this time to quarterly monitoring of its macroeconomic performance.25 And while Brazil did not fully comply with all of the IMF's demands, the nature of trade policy since 1982 has certainly changed in a direction more to the liking of the IMF. For example, credit subsidies to exporters have been gradually phased out, leaving the exchange rate as the primary tool of export promotion policy. Export growth rose sharply in 1983 and 1984, while domestic economic activity and imports dropped sharply. The export share of GDP reached new heights, equaling 12.8 percent of GDP in 1984. And as called for in the IMF model, standards of living fell in 1983 and 1984 in order to generate the greater trade surpluses. Brazilian trade policy in the years 1985-1986 briefly diverted from the IMF-approved course, with negative consequences for the trade balance and Brazil's ability to service its debt. The chief culprits in Brazil's deteriorating exports in these years are ( 1 ) the deteriorating prices for Brazilian exports in the international market in 1985 and 1986, and (2) the rapidly expanding domestic economy, especially under the aegis of the Cruzado Plan in 1986. The overvaluation of the cruzado during the later half of 1986 further diminished the competitiveness of Brazil's exports. The net result of these policies led to the Brazilian moratorium on interest payments on the foreign debt in February 1987. Since 1987, economic policy has returned to a posture that promotes the generation of large trade surpluses. The rate of domestic economic growth declined markedly in 1987; this allowed more resources to be allocated to export activity, contributing to the large trade surplus of $11.2 billion. Export growth has been especially strong since the middle of 1987, with exports surging an astonishing 50 percent from mid-1987 to mid-1988 (table 5.1 ). Estimates for the 1988 trade surplus are projected in the $15-$ 18 billion range.26

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Devaluation of the cruzado has also helped exporters regain some of the competitiveness lost during the Cruzado Plan in 1986; since 1986, however, Brazil's rapid inflation has contributed to an overvaluation of the cruzado estimated at 11.3 percent.27 Real wage decreases since 1986 have more than compensated for this overvaluation, however, improving the competitiveness of Brazilian exports.28 Favorable price movements in 1987and 1988, especially for industrialized products, havealso contributed to the export boom. It is important to note that this resurgence of exports has occurred without the revival of export subsidies. Thus, it appears that the critical variable in explaining Brazilian export growth in the 1980s is the rate of domestic economic activity. The poor performance of the export sector in 1985 and 1986 during a period of domestic economic expansion underscores the dilemma facing policymakers as they attempt to achieve domestic economic growth, increased export earnings, and stable inflation rates. Previous research confirms the conflict between domestic growth and export expansion, as export supply functions in Brazil indicate a positive relationship between excess industrial capacity and export performance,·29 hence, other things being equal, more robust domestic economic growth will decrease export performance. With an expanding domestic economy, and without the option of increasing fiscal and credit incentives, real exchange rate devaluation must be implemented to boost exports. Unfortunately, this devaluation increases the cost of imported inputs, accelerating the "cost push" component of inflation. Unhappily, the Brazilian experience of the 1980s confirms this grim scenario, where external balance (continued export growth to service the foreign debt) is not consistent with internal balance (full employment and stable inflation rates). This story is common to much of Latin America this decade, as exchange rate devaluation (to boost exports) has often been associated with accelerating inflation.30 Hence, there is some question whether Brazil can, under the aegis of IMF-style stabilization policy, achieve both reduced inflation and larger trade balances. One option for avoiding such inflation, of course, is further compression of the domestic economy, resulting in even greater unemployment and recession. This simply underscores the message behind the IMF solution to the debt crisis: In order to pay the foreign debt and make up for the overextension of the Brazilian economy in the late 1970s and early 1980s, the domestic economy must contract. To those in opposition to the IMF's recessionary prescriptions, the challenge is to provide alternative macroeconomic and trade policies that can simultaneously achieve export growth, low inflation, and domestic economic growth. The experience with heterodox stabilization policies (such as the ill-fated Cruzado Plan of 1986) are not encouraging in this regard, although it is probably too soon to abandon hope.

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New Directions in Brazilian Trade Policy The economic team in Brazil headed by Finance Minister Mailson da Nobrega is plainly committed to generating a trade surplus sufficient to service the debt. Beyond domestic recession, what are the options that Brazilian policymakers have to increase exports? It is clear that a renewal of export subsidies is out of the question. Previously, it was indicated that the IMF and the international community have been the driving forces in causing Brazil to change its export promotion scheme. Because of the gargantuan federal budget deficit in Brazil, and the role attributed to it in generating inflation, there does not appear to be any support for a revival of export incentives. Hence, the remaining tools of export promotion are (1) exchange rate devaluation and (2) import liberalization. Real exchange rate devaluation did somewhat compensate exporters for the drop in export subsidies in the early 1980s, but not completely,· as table 5.3 demonstrates, there has been a large drop in export profitability since the early 1980s. The inflationary ramifications of devaluation make it an unattractive policy option, as the negative consequences of increasing exports (so as to pay international creditors) cannot be easily hidden from the popular masses opposed to paying the foreign debt. In light of the role of the state and state regulation in the economy, the idea of trade liberalization as a means to increase exports has received increased attention.31 By liberalizing imports, especially those of capital goods, it is argued, Brazil can become more competitive in international markets. Recent research on firm export performance indicates that greater import competition, by lowering domestic prices, has a significant impact on export performance. The results of a CEPAL study, for example, indicate that for every 10 percent decrease in the ratio of domestic to foreign prices, the volume of exports increases by 7.5 percent.32 Import liberalization in Brazil would not only involve changes in the tariff code, but the lifting of nontariff barriers as well. Nontariff barriers to import have increased since the 1970s, making importing an onerous and difficult process. Since 1975, for example, the number of import goods subject to nontariff barriers has increased from 4 percent to 56 percent.33 The difficulty with increasing import competition, of course, is its impact on the import bill and the country's ability to meet foreign debt servicing. It is not clear whether the increased exports provoked by import liberalization would, on balance, outweigh the increase in imports. The champions of import liberalization assert, nevertheless, that there is no reason why this liberalization should necessarily be

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linked with a deterioration in the trade balance or current account.34 A natural complement to import liberalization would be the elimination of various export restrictions on assorted natural-resource-based (NRB) goods. Such a change in policy may well reverse the dwindling share of NRB goods in total exports. The moves announced by the government in May 1988 indicate a significant shift in the direction of trade liberalization. As part of the package, export controls were removed on over three thousand items,· the ceiling on import tariffs was also reduced from 105 percent to 85 percent. Domestic content requirements were also reduced.35 The net effect of these actions on import competition is difficult to gauge, as the great tariff redundancy existing in Brazil implies that the tariff reduction will, by itself, have but a modest effect on imports. As previously mentioned, one of the major impediments to importing is Brazil's onerous system of import controls,· the extent to which these controls are relaxed will be a critical determinant of how great the degree of import liberalization will be in Brazil. Exports, Firm Size, and Nationality Given the crucial role of exports in Brazil's economic future, the question of just who controls this destiny is most pertinent. In this section, we examine the role of large firms in Brazil's EP strategy, as well as the participation of multinational corporations. Large Firms and Exports A relatively small number of firms have come to dominate export trade in Brazil. Approximately 33.9 percent of exports were accounted for by the top 25 exporters in 1985 (table 5.5); 45.6 percent of exports were delivered by the 50 biggest exporters for the same year. The number of firms with export sales larger than $15 million per year has, however, increased markedly since the 1970s. In 1975, 81 firms had export sales greater than $15 million; by 1984, 289 firms had reached this benchmark. Export trade has become increasingly concentrated over time within the $15-million-and-over club; by 1984, these firms accounted for 76 percent of exports, while firms in this category were responsible for just 61 percent of export sales in 1975. The figures in table 5.5 tend to overstate export concentration in terms of the production of exports, since many large trading companies (such as Intercontinental de Café and Tristão Companhia de Comércio Exterior) are among the most prominent exporting firms. For example, for the top 250 exporters for 1985,22 percent of exports sales were accounted for

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Table 5.5. 25 Principal Exporters in Brazil, 1985

Company

Value of Exports U.S. $1,000

Petrobrás $1,833,223 908,833 Companhia Vale do Rio Doce Petrobrás Comércio Internacional 667,838 Interbrás) 389,542 Fiat Automóveis Volkswagon do Brasil 372,393 Instituto do Acucar e do Álcool 367,916 Companhia Siderúrgica Tubarão 353,812 Sucocítrico Cutrale 269,076 Ford Brasil 264,759 Citrusuco Paulista 263,986 Cevai Agro Indústria 252,787 Ford Indústria e Comércio 248,606 Tristão Companhia de Comércio Exterior 237,650 Unicafé Companhia de Comércio Exterior 225,846 225,807 Inter Continental de Café General Motors do Brasil 214,446 Sanbra Sociedade Algodoeira 213,416 do Nordeste Brasileiro Minerações Brasileiras Reunidas 207,376 Cotia Comércio Exportação e Importação 198,647 Companhia Siderúrgica Nacional 180,321 IBM Brasil 175,549 Avibras Indústria e Construção 170,932 Paranapanema S A Mineração Indústria e Construção 167,557 Engexco Exportadora 153,991 Embraer Empresa Brasileira 149,504 de Aeronautica Total

$8,713,813

Source: Brasil: comércio exterior, estatísticas, 1985.

Percentage Share of Total Exports 7.15 3.54 2.60 1.51 1.45 1.43 1.37 1.04 1.03 1.02 .98 .96 .92 .88 .88 .83 .83 .80 .77 .70 .68 .66 .65 .60 .58 33.86%

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Table 5.6. Export Share of Top 250 Exporters, 1981-1985

Year

Total Exports, All Firms ($1 billion)

1981 1982 1983 1984 1985

24.29 20.18 21.90 27.01 25.64

Share of Top 250 Exporters (%) 72.73% 74.98% 74.62% 77.54% 73.50%

Source: CACEX and authors' calculations.

by trading companies. Since these trading companies often purchase their wares from a number of producers, export production is less concentrated than indicated in table 5.5. The complicating role of trading companies makes it difficult to make any definitive statements regarding export concentration in Brazil among the top firms. Keeping in mind this caveat about trading companies, one can see that the years 1981-1984 witnessed a slight trend toward greater concentration of export sales among the top 250 exporters (table 5.6). The share of the top 250 exporters in total exports climbed from 72.73 percent in 1981 to 77.54 percent in 1984, while 1985 saw the top 250 share dropping to 73.50 percent. Thus, while the top 250 account for approximately three-fourths of exports in Brazil, no clear trend toward greater concentration emerges from the entire 1981-1985 period. Brazil's exports are produced by firms that are large, at least by Brazilian standards. Sample data for 1978 reveal that firms in the largest size category produced 89.5 percent of all manufactured exports (table 5.7). It should also be noted that large firms garner the lion's share of export subsidies. Further, the rate of subsidy on exports by large firms is greater than that enjoyed by smaller enterprises. Table 5.7 shows that large firms (with 1978 domestic and export sales exceeding 100 million cruzeiros) accounted for 89.5 percent of all exports and 91.0 percent of subsidies. Is the greater export subsidization rate enjoyed by larger firms the sole reason for their dominance in exporting? Or do other reasons explain the concentration of exports in big firms? Previous research on export performance at the firm level sheds light on these issues. The recent econometric work completed at CEPAL deserves special attention in this regard, as this research attempted to isolate the separate independent effects of firm size, industrial concentration, and other structural

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Table 5.7. Appropriation of Fiscal Subsidies for Manufactured Goods Exports, 1978 (sample data) Firm Sales (million cruz.) less than 1 1-2 2-3.5 3.5-7.5 7.5-15 15-25 20-35 35-50 50-75 75-100 100 or more

Number of Firms

Export Sales

Share of

7 6 11 44 142 96 332 359 445 302 1496

0.0% 0.0% 0.0% .1% .5% .4% 1.4% 2.0% 3.0% 3.1% 89.5%

0.0 0.0 0.0 0.0 .3 .3 1.2 1.7 3.1 2.4 91.0

(% of Total) Subsidies

Subsidy Rate 5.0% 5.7% 7.6% 13.4% 11.1% 14.8% 15.7% 15.8% 17.5% 14.9% 18.6%

Source: Helson C. Braga, "Aspectos distributivos do esquema de subsídios fiscais à exportação de manufaturados," Pesquisa e Planejamento Econômico 11 (Dezembro 1981): 799.

factors on firm export performance.36 As the CEPAL study notes, there are theoretical reasons to expect that firm size is positively associated with exporting. Large firms should have an "economies of scale" type of advantage over small firms in exporting, since the high initial fixed costs of exporting represent a smaller portion of the large firm's total sales. These high fixed costs include the cost of setting up marketing networks and contacts in the importing company, as well as the time and expense of dealing with government bureaucracies in both the importing and exporting companies. Small firms may also have difficulty in breaking into the export market because importers are not interested in irregular or small shipments.37 The CEPAL research, utilizing 1978 sample data, affirms that large firms are more likely than their smaller counterparts to export. Table 5.8 shows that as firm size increases, the percentage of firms that export a portion of their output increases. The value of firm export sales and domestic sales is also positively correlated. Logit analysis reveals firm size to be the most important factor in determining whether or not a firm will export. Other things being equal (capital intensity, advertising, foreign ownership, industrial concentration, and domestic protection), a 10 percent increase in domestic sales (firm size) increases the probabil-

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Table 5.8. Percentage of Firms That Export, 1978 (sample data) Domestic Sales (million cruzeiros)

Percentage That Export

less than 2 2-4 4-8 8-12 12-25 25-50 50-100 100 or more

.6% 2.1% 4.2% 7.4% 14.9% 25.9% 39.8% 61.9%

Source: CEPAL, Market Structure, Firm Size and Brazilian Exports (Brasilia: CEPAL, 1985): 23.

ity of exporting by between 8 and 9 percent.38 Does the beneficial impact of firm size on exporting imply that Brazil would export even more if industry was concentrated into a smaller number of firms? Ironically, the conclusion of the CEPAL study is just the opposite—industrial concentration has a negative impact on export performance in Brazil. While it is more probable that large firms will export, their export performance (defined as exports divided by domestic sales) is actually lower.39 Even when other factors are held constant, firm size still adversely affects export performance.40 Previous research by Fajnzylber and Silber on Brazilian exporting firms reaches a similar conclusion.41 The superior export performance of smaller firms is perfectly consistent with the "economies of scale" argument cited earlier. Once a firm decides to enter the export market, it makes sense that smaller firms have more to gain by exporting—since the export market provides them with a chance to achieve the scale economies that their larger rivals may already have realized in domestic markets.42 As noted by Auquier, an additional reason for the higher export/domestic sales ratio of smaller firms stems from product differentiation and differences in demand facing the small and large firm. Given that small firms may sell specialty items that find limited demand in the internal market, or face more elastic domestic demand than their larger competitors in the domestic market, it follows that those small exporting firms will export a larger portion of their output than their larger counterparts.43 According to the CEPAL study, greater concentration in most industries would limit the number of large firms, simply because the existing

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large firms would be merged. Hence, because the probability of exporting is positively associated with size, greater concentration entails fewer exporting firms. Concentration does have a positive effect, however, on very small exporters and very large exporters in very heavily concentrated industries,· other things being equal, concentration has a positive impact on exporting in these industries. Nevertheless, the CEPAL study shows that for 70 percent of the firms in their 1978 sample, concentration has a negative impact on export performance, as it increases firm size and reduces the number of "large" firms in the industry; with fewer large firms, fewer enterprises are likely to export. For these industries— the majority in the CEPAL study—concentration decreases export performance.44 In summary, econometric research in Brazil provides substantial evidence that large firms are more likely to export than their smaller counterparts. In light of this, the concentration of Brazil's exports into the hands of a relatively few firms is not surprising. This export concentration should not be viewed positively, as it is indicative of the difficulty small firms have in penetrating the bureaucratic mire faced by new exporters. A World Bank study of trade policy in Brazil aptly describes the difficulties facing small firms interested in exporting: The general attitude of the administration [particularly of CACEX, the foreign trade department of the Bank of Brazil] toward exporting enterprises seems to have been one of suspicion, instead of assistance and promotion. The volume of export documentation required is enormous, and CACEX operates a detailed export control system. This requires for both the exporting enterprises and CACEX large and costly bureaucracies, which may be an important reason for the concentration of exports in a comparatively limited number of large enterprises with experienced export administrations. 45 Multinational Firms and Brazilian Exports Given the dominance of larger firms among Brazilian exporters, one would also expect multinational enterprises (which tend to be much larger than domestically owned firms) to play a prominent role in Brazilian exporting. The marketing advantages of MNCs should also give them an edge over domestic firms in exporting, as their international connections provide access to a number of markets. In this section, we explore the role of MNCs in Brazilian exporting, as well as recent trends in the MNC shares of exports. Information on the percentage of exports accounted for by MNCs is not readily available in Brazil. In order to calculate the share of exports

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accounted for by MNCs, firm-level data for the top 250 exporters in Brazil are used. As previously mentioned, the top 250 exporters account for the vast majority of Brazil's exports,· in 1985, for example, 73.5 percent of exports were produced by these firms. Because MNCs are larger than domestic firms, one might think that this simply overstates the importance of MNCs in Brazilian exports, since many smaller firms are excluded from this top 250 sample. Offsetting this possible bias, however, is the fact that MNCs are more likely to export than domestic enterprises.46 Another complicating factor is the existence of trading companies among the top exporters; since these companies buy from smaller enterprises, this list of the top 250 exporters cannot be taken as synonymous with the top 250 export-producing firms. Needless to say, these caveats regarding our top 250 data set should be kept in mind while interpreting the data. The shares of MNC, domestic, and state enterprises in Brazilian exports from 1981-1985 are presented in table 5.9. Firms were classified into each ownership category with the personal help of Mr. Jean Bernet, author of Guia Intervest, the authoritative guide to ownership control of firms and conglomerates in Brazil. Firms were classified into ownership categories in terms of majority control. Hence, firms are categorized as MNC if foreign capital accounts for more than 50 percent of equity. Table 5.9 shows that the shares of each ownership group in exports has been fairly steady in the 1980s. Far from wilting away over time, the share of large domestic exporters has held steady,· from 1981 to 1985, the percentage of top 250 firm exports accounted for by domestic firms actually increased, climbing from 40.90 percent in 1981 to 42.48 percent in 1985. It should be noted that table 5.9's figures are not strictly based on the share of the top 250 firms in each of the years from 1981 to 1985. Instead, the shares are computed on the basis of those firms from 1985's Table 5.9. Domestic, MNC, and State Firm Share in Exports among Top 250 Exporters, 1981-1985' Ownership Group Domestic Multinational State Total a

1981

1982

1983

1984

1985

40.90% 33.09% 26.01%

41.76% 28.48% 29.76%

47.83% 25.67% 26.50%

45.55% 28.67% 25.78%

42.48% 32.13% 25.39%

100%

100%

100%

100%

100%

See text for further discussion on definition of the top 250 firms.

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top 250 list. Hence, inasmuch as new firms joined or dropped out of the top 250 in the years before 1985, they are not guaranteed to be included in the sample for each year. In effect, the sample used to compute the figures in table 5.9 is smaller than that reflecting the true top 250; for example, the sample accounted for 68.54 percent of all exports in 1983, whereas the true top 250 sold 74.98 percent of all exports in that year. While the sample used to compute table 5.9 is smaller than the true top 250 sample, there is no reason to believe it presents a biased view of any trends in the share of each ownership group during the 1980s. Keeping these caveats in mind, table 5.9 indicates that from 1981 to 1983 the export share of domestic firms rose by 7 percent, with the share of MNCs falling by roughly the same amount. Since 1983 MNCs have largely recouped their loss in export share, with both the domestic and state enterprise share falling. In sum, no clear trend in ownership shares emerges from the entire 1981-1985 period, although the years 19831985 have seen a rebound in the MNC share. One interesting aspect of table 5.9 is the important role of state enterprises in Brazil's exports. Of the top 250 exporters, 16 are state enterprises. The most important is Petrobrás, which along with Interbrás accounted for 52.34 percent of state enterprise exports in 1985. The mining giant Vale do Rio Doce also plays a prominent role in state enterprise sales abroad, being responsible for 18.99 percent of 1985 state firm exports. The role of MNCs in Brazil's exports may be understated in table 5.9, as our definition of "multinational"—a firm that is majority-controlled by nonresidents—misses the participation of foreign capital in firms where they have a minority share in equity. For example, defining a foreign firm as one in which nonresidents control more than 10 percent of equity, the 1978 CEPAL sample data show that foreign-owned firms account for 38.8 percent of manufactured exports. These data should not be taken as representative of exports as a whole, however, as only manufactured goods, and not all products, are figured into the calculations. In addition, firms in very concentrated industries (where fewer than six firms are present in the four-digit industry) are deleted from the sample. Nevertheless, the CEPAL figures in table 5.10 underscore the role of MNCs in Brazil's manufactured good exports, as well as the greater participation of MNCs in exports (38.8 percent) than domestic sales (33 percent). Table 5.10 shows that the foreign-firm share in exports exceeds its domestic sales share in all but seven of the twentyone sectors. MNCs also usurp a disproportionate share of credit subsidies; this may be attributable to their larger size, rather than foreign ownership per se.47 How do the figures regarding export share in table 5.9 compare with

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Table 5.10. Participation of Foreign-Owned Firms in Domestic Sales, Exports, and Export Credit Subsidies for Manufactured Goods, 1978 (sample data) Domestic Sales

Export Sales

Export Credit Subsidies

%

%

%

Total Manufacturing

33.0

38.8

47.5

Nonmetallic minerals Basic iron and steel Nonferrous products Metal products Machinery Electrical equipment Transport equipment Wood Furniture Pulp and paper Rubber products Leather and goods Chemicals Pharm., cosmetics Plastics Textiles Clothing Footwear Food and tobacco Printing Other manufactures

28.4 34.9 22.4 25.4 43.5 62.4 69.0 3.3 5.3 19.1 70.7 11.9 20.3 54.3 17.9 27.4 5.1 4.0 20.4 4.9 34.0

32.3 18.7 38.2 43.7 59.5 80.0 67.2 14.8 3.1 22.7 83.0 21.1 9.2 57.9 20.0 36.6 6.9 .9 30.1 .1 24.7

41.1 21.3 51.1 34.8 52.1 81.4 75.2 18.1 3.4 23.2 84.4 17.2 24.3 48.9 25.9 36.2 10.2 1.7 32.5 .9 36.5

Source: CEPAL, Market Structure, Firm Size and Brazilian Exports (Brasilia: United Nations, 1985): 21. Note: Foreign-owned firms are defined as those in which nonresidents control more than 10 percent of equity.

previous estimates of the role of MNCs in exports? Comparisons are difficult to make, as previous studies have concentrated on the role of transnationals in manufactured-good exports alone. The results of a 1983 CEPAL study on MNC participation in exports, summarizing the data of separate works by Fajnzylber and Braga, are reported in table 5.11.48 The Fajnzylber sample for 286 transnationals in 1969 shows

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Table 5.11. MNC Participation in Manufactured Exports, 1969 and 1978 Industry

1969(%)

1978(%)

Non metallic minerals Metallurgy Machinery Electrical equipment Transport equipment Wood Furniture Paper and cardboard Rubber Leather goods Chemicals Pharmaceuticals Cosmetics Plastics Textiles Clothing Food products Beverages Tobacco Printing and publishing Other manufacturing

77.8 29.0 78.0 64.6 72.7 3.5 17.7 6.1 78.2 18.4 18.6 78.9 n/a 89.0 11.8 6.5 n/a n/a n/a n/a 23.3

30.5 16.9 55.8 76.7 67.9 12.2 0.0 22.6 80.6 21.5 18.4 65.9 11.9 17.3 24.6 1.8 23.3 28.1 0.0 1.5 26.5

Total

43.4

37.2 (42.0)'

Source: CEPAL, Dos estudios sobre empresas transnacionales en Brasil (Santiago: CEPAL, 1983): 30. 1969 data are taken from F. Fajnzylber, Sistema industrial e exportação de manuf aturados: análise da experiencia brasileira (Rio de Janeiro: IPEA/INPES, 1971); 1978 data are from Helson C. Braga, "Aspectos distributivos do esquema de subsídios fiscais a exportação de manuf aturados," Pesquisa e Planejamento Econômico 11 (Dezembro 1981): 783802. a Participation of MNCs if food products, tobacco, and beverages are excluded.

MNCs accounting for 43.4 percent of manufactured sales abroad in that year. This undoubtedly overstates the MNC share, as food product sectors, dominated by national firms, are deleted from the sample. The Braga sample for 1978 draws on income tax data from 1978 for over 3,243

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exporting firms, accounting for 82 percent of manufactured exports that year. MNCs were defined as firms where nonresidents control more than 25 percent of equity. The 1969 and 1978 data are not strictly comparable, and hence cannot be used to analyze the change in export share between these two years. Nevertheless, one can hazard a guess that the share of MNCs in total exports increased during the 1970s. MNCs participate more heavily in manufactured exports than they do in mining and agricultural exports,· and since the share of exports accounted for by manufactured goods rose dramatically in the 1970s (climbing from 15.3 percent in 1970 to 44.8 percent in 1980), it is probable that the MNC share in exports rose as well. The 1980s have not, however, witnessed an increase in the MNC share (table 5.9); one reason may be due to the relative stability in the share of manufactured goods in Brazilian exports, as they increased from 51 percent of the export basket in 1981 to only 54.9 percent in 1985. Further research is needed to pinpoint more precisely the determinants of the share of ownership groups in exports. Conclusions and Policy Implications Brazil's EP program has by and large been successful. Firms have responded positively to the panoply of export incentives offered them, and export growth has responded accordingly. Pressure from both the developed countries in GATT and the IMF, however, have forced Brazil to eliminate export subsidies as a means to promote exports; hence, the exchange rate must now be seen as the primary tool of EP policy. While increasing export subsidies provided a relatively painless way to promote exports in the 1970s, the painful macroeconomic consequences of exchange rate devaluation must now be faced if exports are to be promoted further. An advantage of exchange rate devaluation as a means to promote exports is that it is likely to be less discriminatory toward small firms than a complex array of subsidies and tax exemptions. Greater reliance on devaluation as a promotional tool (instead of tax exemptions and subsidies) has the added benefit of isolating the export sector from the health of the public sector and the federal budget in particular,· given the growing concern (of both the IMF and Brazilian officials) about the federal budget deficit, it is not clear how much Brazil can afford in the way of tax exemptions or subsidies, however disguised. An alternative to real exchange rate devaluation for promoting exports would be to decrease domestic protection, reducing the incentive firms have for producing for the Brazilian market. Greater import competition, resulting in relatively lower domestic prices, would have a significant impact on export performance. The difficulty with increasing

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import competition, of course, is its impact on the import bill and the country's ability to meet foreign debt servicing; it is not clear whether the increased exports provoked by import liberalization would, on balance, outweigh the increase in imports. Calls for trade liberalization in Brazil by multilateral organizations such as the World Bank would surely carry more weight if promises of concessionary financing for such liberalization were forthcoming. In any case, those advocates of import liberalization as a method of promoting exports must seriously question whether the world economy is really willing to absorb a significantly greater amount of Brazilian exports. Without even higher export growth, import liberalization could spell disaster for the balance of payments. The protectionist sentiment arising in the developed countries, as evidenced by the assault against Brazilian export subsidies, poses a serious threat to continued export expansion. Optimistic projections about the possibilities of export growth must be tempered by the very real desire of DCs to limit import penetration. Export sales are concentrated among relatively few firms in Brazil. This is indicative of the difficulty small firms have in breaking into export markets and dealing with the associated government bureaucracies. The concentration of export sales into a few hands is obviously considered disadvantageous to those concerned about the concentration of economic power in Brazil. Especially troubling is the large role of MNCs in Brazil's exports,· as one prominent scholar of multinational corporations has asserted, "the long history of interdependent coordination illustrates the veto power TNCs (transnational corporations) collectively could exert on Brazil's export sector in times of political upheaval or when public policy is perceived to affect adversely the community of TNC interests."49 The high price of dependence on MNCs was well illustrated in late 1986, as capital repatriation by MNCs did damage to an already precarious balance-of-pay ments situation. Could changes in the economic strategy of MNCs do similar harm to Brazilian export performance? While this is yet to be seen, it would be naive to assume there will not be conflicts between the worldwide profit-maximizing goals of MNCs and Brazilian efforts to increase exports. Thus, excessive reliance on MNCs for export growth may set a risky course for the external sector. A judicious trade strategy must be vigilant of the possibly separate agendas of MNCs, and plan accordingly. Notes The authors would like to acknowledge the helpful comments of Augusto de la Torre and Renato Baumann on an earlier version of this paper. 1. Carlos Von Doellinger, "Foreign Trade Policy and Its Effects," Brazilian

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Economic Studies 1 (1975), p. 41. 2. According to Von Doellinger, ibid., p. 39, many economists in the early 1960s shared this view. 3. See Albert Fishlow, "Foreign Trade Regimes and Economic Development: Brazil," 1975, p. 56. Mimeograph. 4. Peter Evans, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil (Princeton: Princeton University Press, 1979), p. 219. 5. For an elaboration on why the state expanded the scope of its operations in Brazil after the 1964 coup, see Evans, ibid. 6. José Augusto do Castro, Incentivos fiscais e a formação de preços para exportação (Rio de Janeiro: Fundação Centro de Estudos Do Comércio Exterior, 1983), p. 25. 7. José L. Carvalho and Claudio L. S. Haddad, "Foreign Trade Strategies and Employment in Brazil," in Anne Krueger, ed., Trade and Employment in Developing Countries (Chicago: University of Chicago Press, 1980), p. 43. 8. Care must be taken in comparing the export/GDP ratio of Brazil with the successful exporters of Asia (such as Taiwan), due to the fact that Brazil's great geographical extension precludes it from having an extremely high export/GDP ratio. In light of Brazil's great size, then, it is not surprising that the primary engine of growth is the internal market. 9. Werner Baer, "Political Determinants of Development," in Robert Wesson, ed., Politics, Policies, and Economic Development in Latin America (Stanford: Hoover Institution Press, 1985), p. 62. 10. Ibid. 11. Bela Belassa, "Policy Responses to External Shocks in Selected Latin American Countries," in Werner Baer and Malcolm Gilles, eds., Export Diversification and the New Protectionism (Champaign: University of Illinois Press, 1981 ), p. 148; also see República Federativa do Brasil, Pro jeto do II Plano Nacional de Desenvolvimento, PND (197S-1979) (Brasília, 1974). 12. Helson C. Braga and Edson P. Guimarães, " A proteção efetiva proporcionada a indústria brasileira pelos custos de transporte e pelas tarifas," Estudos Econômicos 12 (1983), p. 119. 13. Wilson Suzigan, "Barreiras não tarifárias as importações" (IPEA Texto Para Discussão Interna no. 29, 1980): 7-9. 14. William G. Tyler, "Substituição de importações e expansão de exportações como fontes de crescimento industrial no Brasil, " Estudos Econômicos 12(1982): 125-134. 15. Helson C. Braga et al., "Incentivos efetivos as exportações e as vendas no mercado doméstico," IPEA/INPES, Rio de Janeiro, Brazil, 1987. Mimeograph. 16. José L. Carvalho, "Liberalisation of Trade Restrictions in Brazil, " 1985, p. 20. Mimeograph. 17. Ibid. 18. Ibid., p. 22. 19. Baer, "Political Determinants of Development," p. 130. 20. Ibid., p. 131. 21. Ibid. 22. For a critical review of the effectiveness of IMF policies on growth, the

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balance of payments, and income distribution in Latin America, see Manuel Pastor Jr., "The Effects of IMF Programs in the Third World: Debate and Evidence from Latin America," World Development 15 (1987): 249-262. 23. Bolivar Lamounier and Alkimar R. Moura, "Economic Policy and Political Opening in Brazil," in Jonathan Hartlyn and Samuel A. Morley, eds., Latin American Political Economy (Boulder, Colo.: Westview Press, 1986), p. 176. 24. Carvalho, "Trade Liberalisation," p. 49. 25. Lamounier and Moura, "Economic Policy," p. 177. 26. Balança Comercial (publication of the Fundação Centro de Estudos do Comércio Exterior), August 1988, p. 17. 27. Ibid., p. 26. 28. Ibid., p. 18. 29. José L. Carvalho and Claudio L. S. Haddad, Estratégias comerciais e absorção de mão de obra no Brasil (Rio de Janeiro: Fundação Getùlio Vargas, 1980), p. 76. 30. Benedict J. Clements, "The Debt Crisis and Stabilization Policy in Latin America: New Insights from Recent Research, " Kellogg Institute Working Paper #62, February 1986. 31. Carlos Alberto Primo Braga, "A política comercial brasileira em uma encruzilhada," Habitação & Poupança (1988): 3-4. 32. Centro de Estudios Para America Latina (CEPAL), Market Structure, Firm Size and Brazilian Exports (Brasilia: CEPAL, 1985). The study was prepared by Larry Willmore of CEPAL in Brasilia. 33. Braga, "A Política Comercial." 34. For an elaboration of this argument, see Braga, "A política comercial." 35. "Industrial Policy Measures Are Announced in Brazil," Wall Street Journal, May 20, 1988. Other trade liberalization measures taken since 1987 include ( 1) a reduction in the number of products for which an "import license" is suspended; and (2) greater flexibility in the external financing requirements imposed on importers. 36. CEPAL, Market Structure. 37. Ibid., p. 11. See also William G. Tyler, Manufactured Export Expansion and Industrialization in Brazil (Tubingen, W. Ger.: Mohr, 1976); William V. Rapp, "Firm Size and Japan's Changing Export Competitiveness since Meiji" in H. Patrick, ed., Japanese Industrialization and Its Social Consequences (Berkeley: University of California Press, 1979): 201-248. 38. CEPAL, Market Structure, p. 5. 39. Ibid., p. 25. 40. Ibid., p. 44. 41. Fernando Fajnzylber, Sistema industrial e exportação de manufaturados (Rio de Janeiro: IPEA/INPES, 1971); David Simão Silber, "Intensidade de exportação ao nível da empresa," Fundação Instituto de Pesquisas Econômicos, São Paulo, 1978. Mimeograph. 42. CEPAL, Market Structure, p. 11. 43. Antoine A. Auquier, "Sizes of Firms, Exporting Behavior, and the Structure of French Industry, " Quarterly Journal of Industrial Economics 29 (December 1980): 203-218; cited in CEPAL, Market Structure, p. 12. 44. CEPAL, Market Structure, p. 6.

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45. The World Bank, Brazil, Industrial Policies and Manufactured Exports (Washington, D.C.: World Bank, 1983), p. 31. Also cited in CEPAL, Market Structure, p. 8. 46. CEPAL, Market Structure, p. 11. 47. Ibid., p. 20. 48. CEPAL, Dos estudios sobre empresas transnacionales en Brasil (Santiago: CEPAL, 1983), p. 30. 49. Richard Newfarmer, Transnational Conglomerates and the Economics of Dependent Development: A Case Study of the International Electrical Oligopoly and Brazil's Electrical Industry (Greenwich, Conn.: JAI Press, 1979), p. 352.

6. Colonization and Conflict: Frontier Expansion in the Brazilian Amazon Neil E. Schlecht Twenty years ago, it was the once and future El Dorado, one of the few frontiers left in the world. Today the Amazon still evokes an image of immense, impenetrable rain forests and expanses of unexploited, inaccessible riches. The Brazilian government, however, has made attempts to penetrate, colonize, and develop this vast region. In the continued efforts to develop and integrate the Amazon into the national social and economic picture since the mid-1960s, the land and its inhabitants in the Amazon have undergone the most massive, lasting, and violent changes in its history. Colonization of the Amazon, a Brazilian policy issue of considerable thrust and high expectations in the 1960s and 1970s, remains an important issue today because of the modest successes and the questionable impact of the policy initiatives implemented to achieve them. Colonization has been costly in economic terms and disruptive to the natural and human environments of the region. Planned redistribution and occupation of the land has created conflict, social tension, and in many cases, violence, as peasant farmers, invading colonists, and native Amazonian Indian populations battle large Brazilian and multinational enterprises as well as each other. Although the land itself is the object of exploitation, not the Indians or settlers, when their presence is an obstacle to capitalistic "development," they enter into conflict with government policy. Of the many elements that are transformed in frontier development projects, the land is both the central focus and key indicator of change. In the 1960s and 1970s, Brazil hoped to use the Amazonian region to reap the natural resources necessary to feed its population, increase exports, and decrease the balance of payments deficit; to realize national greatness through occupation and integration; and to redistribute the population and alleviate demographic pressures in other regions. Land is also the subject of fundamental policy questions about Amazonian development: What can the land produce in quantities sufficient

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to achieve economic growth? Can the land sustain the large numbers of migrating peasants and opportunists the government deems necessary in order to integrate the region and substantially relieve others of population pressures? Colonization, with its twofold focus on land occupation and utilization, was the cornerstone of Brazilian development strategy for the Amazon region for much of the past two decades. In the early 1970s Brazilian students wore T-shirts patriotically proclaiming colonization of the Amazon to be a program of "Land without People for People without Land." Indeed, some peasant families have settled on plots they can call their own. Production in the region has expanded. Land in the Amazon has proved, however, to be a source of unresolved social tension and conflict. Was a coherent, consistent state policy of Amazon development and colonization ever developed and implemented?1 It would appear not: state policies in the region have been a series of reactions, improvised according to political pressure or threats to the status quo. Government policy throughout the 1960s, 1970s, and 1980s appears to have created or exacerbated existing conflicts and tensions in the region. As will be demonstrated in this chapter, government policy has resulted not in the greater dispersal of land ownership and occupation, but in a greater concentration of land holdings, the dispossession of small farmers, and the reproduction of dominant-class relations. The influx of private capital, combined with the policy and practice of expelling rural workers and expropriating of property, has resulted in a gradual closing of the frontier to settlers. The experiences of the past twenty years have shown that rapid economic growth, in the manner in which it has been pursued in the Amazon, is incompatible with the maintenance of social order. Growth has been achieved through disrupting the environment and dislocating human populations. A paradox of state action, of destroying the environment on which development depends, of promoting conflict and at the same time attempting to abate it, has seriously imperiled colonization and development programs in the Amazon. This chapter examines the human conflict resulting from government colonization initiatives in the Amazon frontier during the period of military rule from 1964 to 1980, and the continuing attempts to colonize the Amazon under democratic rule. In addition, the chapter surveys continuing efforts and attempts to analyze motives behind and constraints on policy decisions. A central question to be asked of Brazilian colonization programs is did they create, exacerbate, mitigate, or dispel land conflict among large enterprises, official settlers, and posseiros (occupants without title)? It is the position of this chapter that frontier expansion policy focusing on

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colonization both created and exacerbated such conflict. This evaluation is based on conflicting state policies and contradictory motives for developing the region: to preserve favorable conditions for capitalist expansion, and to prevent social conflict from escalating and thus weakening government control in the region. Motivations for Occupation and Development Brazilian initiatives to "develop" and occupy the Amazon did not originate with the military government after 1964. However, during the period from 1964 to 1973, the planned "conquest" was supported by rhetoric and propaganda of first-attempt intensity. Why did the state treat the region's development as an objective of such national import? No single governing objective or motive emerges,· rather, there were several political, economic, and social reasons. Political considerations were certainly among the most important. Conquest of the Amazon would be a grande vitória (the great victory), a source of immense nationalist pride and mobilization. It would bring prestige and legitimacy to the military government, which would be seen as a great builder of development with the national interest in mind. Territorial occupation of the region was considered an issue of national security by the military,· Brazil's sovereignty over a great portion of its land mass, perceived as coveted by other nations, was at stake. "Integrarpara não entregar" was the rallying cry.2 Further, integration would allow greater control over a region far removed from the capital. Integration of the region was a notion equally important, if not primarily so, in its ramifications for the Brazilian economy. Economic growth was unquestionably a principal goal of the military government in the 1960s. Amazônia was envisioned as Brazil's new source of national wealth. Agriculture, together with the extraction and exploitation of the natural resources, would allow Brazil to solve a myriad of social and economic problems, including uneven regional development. Development projects in the Amazon were based on extensive roadbuilding, colonization schemes, fiscal incentives to capitalist enterprises, and mineral extraction. Agricultural expansion would be facilitated by the creation of a middle class of small, independent farmers and a number of large projects such as cattle ranching. The Amazon was perceived as a demographic vacuum,· accordingly, it would serve as a "safety valve" for alleviating population pressures and other social problems, principally in the northeast region of the country. Colonization schemes were a focus of development efforts. Planned occupation and development would trigger massive migration, attracting an untapped labor force by giving land to peasant farmers and their

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families willing to resettle. Colonization, along with road-building and agricultural expansion, would theoretically integrate Brazil's regions by connecting Amazonia and the northeast to the rest of Brazilian society and ameliorating socioeconomic problems in the regions themselves. Such objectives appear worthy of determined pursuit. Evaluation of the adoption, implementation, and impact of the programs, however, reveals crucial problems. Colonization Programs, 1964-1973 Occupation of the Amazon represented an important psychological stage for Brazil as a developing nation: for those advocating rapid development, at least, it was a test of Brazil's maturity. For many, it represented the long-awaited realization of the nation's potential.3 Not only was there public pressure to embark upon a vigorous drive into the Amazon, there was considerable political pressure as well: the military government wanted to defuse social conflict, and large industry wanted to pursue economic expansion.4 These factors thrust economic occupation and colonization programs from conception to inception very rapidly, with a flurry of propaganda and virtual absence of advance feasibility studies. The military government considered planned colonization a necessary precursor to spontaneous colonization. Programs were designed so that the government, through its appropriate agencies, could play a prominent role in the various administrative aspects of the colonizing process. As will later be examined, most colonization in the Amazon continued to be spontaneous. The first colonization scheme of major importance was designed to accompany construction of the Belém-Brasília highway. Plans were first conceived in 1958 under the Kubitschek administration, though construction of the first sections of the highway was not begun until 1946. Belém-Brasília was one leg of the grand highway network that would penetrate and interconnect the country's previously peripheral regions. It was the first major road to traverse the Amazon forest, connecting the new Brazilian capital, Brasilia, with Belém, at the mouth of the Amazon. Operation Amazon In 1964, President Humberto Castelo Branco announced that "Amazonian occupation would proceed as though it were a strategically-conducted war."5 Thus, Operação Amazônica was launched, in the assault terms characteristic of the military government. Many critics and settlers would also come to see it and subsequent large-scale colonization

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initiatives, albeit ironically, as part of an all-out war on the Amazon. In critics' views, the forest and native Indian populations were under fire as settlers, squatters, and large companies battled one another for land possession. Operation Amazon began a new era in official development planning for the region. It sought to establish stable population groups in the frontier, encourage migration, develop infrastructure, and encourage the expansion of private enterprise through tax incentives to private capital investors.6 Fiscal incentives included a 50 percent corporate tax liability for investment in Amazonian development projects, allowance of dutyfree importation of equipment and machinery, and an exemption from export duties on regional exports.7 In an effort to stimulate greater efficiency in regional development planning, the Superintendência do Desenvolvimento da Amazônia (SUDAM) was created in 1966 as the official Amazon Development Agency. Human occupation, idealized as the formation of permanent and self-sustaining frontier settlements, was to originate with interregional and foreign immigration. Operation Amazon led to a significant increase in the numbers of Brazilian national companies investing in the Amazon and peasants migrating there in quest of land.8 In accord with the first National Development Plan (Plano Nacional de Desenvolvimento, or PND I) in 1967-1968, SUDAM sought to encourage further private-sector investment, building an agricultural frontier in pursuit of stated government goals of integration and economic growth. The emphasis on entrepreneurial development represents the genesis of conflict in government Amazon expansion policy, pitting larger investment concerns against small-scale farmer occupation. The National Integration Plan The National Integration Program (Programa da Integração Nacional, or PIN) was conceived after President General Emílio Médici visited the drought-plagued northeast in 1970. Médici pledged to implement a program to aid landless peasants and redistribute land; scarcely three months later, PIN was under way. PIN would bring military plans for conquest of the Amazon to fruition: its objectives were construction of a highway network to crisscross the Amazon and a concomitant colonization program for small farmers to take place along the highways. Two highways, the Transamazônica and Cuibá-Santarém, would join the Belém-Brasília to form a network of 13,500 kilometers of roads, opening a significant portion of the Amazon region. The Transamazônica would connect the northeast to Amazonia, and the Cuibá-Santarém, the south and southeast to Amazonia. Completion of the entire highway

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network was, most optimistically, scheduled for 1975. To facilitate migration and occupation of Amazonian lands, the National Institute of Colonization and Agrarian Reform (Instituto Nacional de Colonização e Reforma Agrária, or INCRA) was created. Its functions were to administer land colonization by recruiting settlers, distributing lands, and overseeing settlement of the colonists. In its effort to encourage migration and "fix the man to the land," the government appropriated and earmarked 2.2 million square kilometers of land (in a 100-km.-wide zone along the sides of the highway system) as public domain, to be officially colonized and developed.9 In 1970 the federal government assumed control over all unoccupied land in the Amazon. On this land, the government envisioned settlement of 100,000 peasant families between 1971 and 1974; INCRA was to administer the program. During the initial period (1971-1972) of the PIN, colonization was accorded highest priority for the Amazon. Social concerns were touted as paramount, and colonization was proffered as a credible solution to underemployment and the terrible drought in the northeast. O homen e a meta (Man is the goal) was the stated government objective.10 PIN envisioned the creation of a class of prosperous farmers. Though social motives were claimed as the rationale behind PIN, certainly its concordant economic benefits were not overlooked. The Amazon's economic potential, its natural resources, would be integrated into the national economic development strategy. In fact, many observers believe roadbuilding was undertaken explicitly to further Amazonian integration into the national economy. The Trans-Amazon Highway The most widely publicized Amazonian element of PIN was the TransAmazon (Transamazônica) Highway program, initiated in July 1970. Like all colonization in the Amazon, it was designed ostensibly to combine social and economic objectives. At a proposed length of 3,300 kilometers, the Trans-Amazon was envisaged as the east-west axis and centerpiece of the new road network. Of all colonization projects, it received the greatest fanfare, with its massive clearing of forests for a vast highway network and its extensive homesteading plans designed for hundreds of thousands of colonists. One of its primary functions was to access impenetrable lands and stimulate migration. Ironically, it became known popularly as the "Transmiseriana," linking the poverty of the northeast and the misery of the Amazon.11 The Trans-Amazon was "an attempt to transfer rural populations to an environment and conditions propitious for their development into an

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economically productive center."12 On 100-hectare plots, 10 kilometers on either side of the highway, the Trans-Amazon was to be the basis for much of the planned 100,000-family colonization (75 percent of whom were expected to be drawn from the northeast).13 However, at the end of 1974, only 5,724 families had officially occupied the region along the highway. By the end of 1978, that number had increased to only 7,674 families, less than 8 percent of the projected 100,000 to be officially settled. By penetrating the Amazon and connecting others to it, the highway system was expected to mobilize the mass movement of peoples to the Amazon. As the numbers above illustrate, the Trans-Amazon colonization project achieved but modest results, and its successor programs would be designed as responses to both its failures and rising agitations in Brazil. Though the existence of the highways did facilitate migration, the true motivating factors were poor economic conditions in some regions and perceived opportunities in the Amazon. Procedure: Colonization INCRA was the government agency established in 1970 to legalize spontaneous migration flows by overseeing official colonization projects. In addition, it was conceived of as a guarantor of land rights. INCRA replaced the Brazilian Institute of Agrarian Reform (Instituto Brasileiro de Reforma Agrária, or IBRA), which had since 1964 acted as arbiter of conflicts between landowners and posseiros. The creation of INCRA was significant because it reflected a renewed emphasis on frontier land settlement in Brazil. INCRA's duty was to impose order and to control conflicts as part of the government-supervised colonization effort. However, as will be demonstrated, INCRA's authority would become subject to the government's alliance with the private sector. Bureaucratic delays and confusion caused many potential settlers to circumvent the entire legal process and migrate unofficially to the frontier. INCRA, after all, was created in the midst of a land rush to the Amazon, making its task from the start exceedingly difficult. INCRA was responsible for reserving land, building side roads, dividing lands, and selecting colonists in PIN colonization projects. Officially, peasant settlers were entitled to: (1) 100 hectare land plots along the highway (titles dispensed and boundaries determined by INCRA); (2) household subsidies, including a six-month salary to be repaid after three years,· (3) government-built facilities (housing, schools, medical centers); and (4) technical assistance and training.14 Each Integrated Colonization Project (Programa Integrado de Colonização, or PIC) site was constructed and supervised by INCRA and

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organized according to a hierarchical Rural-Urban Settlement Plan. It included an agrovila (settler houses and limited facilities), an agrópolis (intermediate administrative center), and a rurópolis (small town with all facilities). Perhaps the foremost problem encountered on the few settlement sites completed was that the agrovilas were not on or near the land plots, and most peasant farmers preferred to Uve directly on the land. Altamira, located along the Xingu River in the state of Pará, became the top priority and showpiece of the PIC. It brought economic prosperity to the area and became the focus of Trans-Amazon colonization activity, settling the largest number of families and landing the most government services. Shifts in Policy, 1973-1974 A radical shift in approach altered the official policy of frontier colonization in Brazil in 1973-1974. Under PIN, the government had encouraged peasant migration to the Amazon, albeit while simultaneously promoting large private initiatives and economic growth. A government decree in 1972 issued a dramatic reversal of the PIN objective to colonize small farmers. The new plan was implemented under General Medici, who just three years previously had spoken of the government's dedication to small farmers and the landless of the northeast, and was consolidated under President Geisel. The plan called for "the colonization and concession of unoccupied lands through colonization projects, rural enterprises and agroindustrial and cattle raising ventures initiated by public institutions or private or corporate groups."15 The shift was toward the development of large capitalist enterprises and the resettlement of peasant farmers, opening for occupation by large concerns the same lands that had previously been set aside for small farms.16 Essentially, the government was announcing the failure of its much-publicized homesteading programs, citing that they were too expensive and produced too little. Critics, however, pointed to the displacement of peasant concerns by larger capitalist ones.17 The radical shift in policy emphasis was facilitated by two factors: INCRA's precipitous decline in influence relative to SUDAM and the Ministry of the Interior, and the increasing persuasiveness of large private interests. From 1970 to 1974, the majority of INCRA funds were allocated to PICs. However, in 1972 the agency became responsible for the sale of public lands to private enterprise. Increasingly, interagency conflict between SUDAM and INCRA slanted the expressed government goal of occupation by small farmers. Budgets for colonization schemes shrank. Fiscal incentives passed on to large enterprises by SUDAM in 1975-1976 would surpass their previous high levels of 1970.

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Table 6.1. Landholdings by Category and Region, 1972 (percentage of total) Minifúndio North Number Area Northeast Number Area Center-South Number Area Brazil Number Area

Rural Latifúndio Enterprises (A)

Latifúndio Total (Β)

69.8 5.3

1.8 5.2

28.4 78.2

0.0 11.3

100 100

79.5 20.0

1.4 5.2

19.1 71.0

0.0 3.8

100 100

68.8 11.0

6.3 12.0

24.9 72.8

0.0 4.2

100 100

71.9 12.5

4.8 9.7

23.3 72.9

0.0 4.9

100 100

Source: Instituto de Colonização e Reforma Agrária, Estatísticas Cadastrais 1 (Brasília, 1974). Cited in Dennis J. Mahar, Frontier Development: A Study of Amazonia (New York: Praeger, 1979), p. 76.

SUDAM's principal ally, private business, had succeeded in influencing and directing policy toward its interests. The Association of Amazonian Entrepreneurs (Associação dos Empresários da Amazonia, or AEA), through SUDAM and the Ministry of the Interior, pressured for private colonization and land acquisition by private investors. It also lobbied against regulations that would preclude INCRA from the selling of public lands greater than 300 hectares. Stephen Bunker believes that the policy shift signaled that the state was no longer able or willing to resist private-sector demands for expansion in the Amazon.18 With the rejection of the original plan for small homestead development in favor of renewed incentives for capital accumulation, the state development initiative in the Amazon entered into direct conflict with previous patterns of human occupation. The government's role changed from patron of small colonists to broker for cattle ranchers and other large development projects.19 In the process, it intensified conflicts over land and encouraged unbalanced economic growth. Emilio Moran believes that state policy encouraged migration with the intention of supplying workers to the large enterprises. As land became increasingly controlled by large estates, peasants in the Amazon became increasingly marginalized. Those who were unable to appropriate land of their own

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and become self-sufficient farmers were reduced to landless, salaried agricultural workers for monopolistic landowners. Rather than create a middle class of farmers, colonization of migrant peasants helped establish a supply of inexpensive labor. Thus, the state can be viewed as having had a direct role in reproducing in the frontier the dominant land tenure relations found elsewhere in Brazil. INCRA President Lourenço Vieira de Silva, however, did not discern either improprieties or alarming implications in the policy change (an attitude itself indicative of an increasingly centralized approach toward colonization and development in the region): "There has not been a change, rather a natural evolution, already foreseen in the dynamic colonization plan for Amazonia. At first, we were concerned with the settling of farmers on their land. Today, the situation is different, and we feel that large companies, exploiting extensive areas, are called for."20 Even if "natural," the change was significant. It again raised important questions about who was to benefit from frontier expansion and development—the nation as a whole, or particular elite interests. And if this "evolution" was indeed foreseen, was it ever the intent in the 1960s or 1970s to open the Amazon to address the social problems and inequities of Brazil's peripheral regions? Policy: 1975-1980 Spontaneous migration throughout the 1970s surpassed what was officially sanctioned, organized, and overseen by government agencies. Colonization programs had required a greater commitment from the government than expected in terms of resources for education, housing, and training. The goal of the second Plan for the Development of the Amazon (Programa de Desenvolvimento do Amazônia, or PDA II) in 1975 was to address some of the massive problems encountered in the implementation and administration of previous colonization plans by slowing colonization and improving conditions of existing highway colonies.21 Private colonization by land-selling companies was allowed, and INCRA was authorized to sell up to 500,000 hectares to these companies. Most important, the new plan made explicit the abandonment of small-farmer settlement, the focus on large-scale enterprise, and consequently the economic occupation of the region. For example, the plan's budget for cattle-breeding projects was more than five times greater than for official colonization.22 INCRA, by virtue of two presidential directives, was authorized to sell land titles of up to 60,000 hectares for large enterprises and 3,000 hectares for medium-sized enterprises.23 The land sales were effected, it was said, because to paralyze private business might hinder the eco-

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Table 6.2. Projected Land-Use Patterns in the Amazon (in millions of hectares and as a percentage of total area) Type of Land Use

Estimated Area

Cleared for nonforestry purposes Cleared for agricultural purposes Natural pasturage Floodplains, swamps, mangroves Indian reserves National parks and biological reserves "Sustained-yield" forest reserves Total

Percentage

of Total

78.8 40.0 15.0 9.5 20.0 43.0 53.7

30.3 15.4 5.8 3.7 7.7 16.5 20.7

260.0

100.0

Source: Serete S.A., 1974. Cited in Shelton H. Davis, Victims of the Miracle: Development and the Indians of Brazil (Cambridge: Cambridge University Press, 1977), p. 152.

nomic development of the region.24 The government also sought to blame the failure of its small-producer colonization programs on the colonists themselves, citing their destructive "slash and burn" farming techniques and unproductive use of the land. As Stephen Bunker recognizes, such an explanation for favoring large-scale agricultural enterprise over peasant colonization schemes is especially implausible given the "consistent evidence that small producers in Brazil consistently market more produce and support more workers than larger enterprises. "25 The abandonment of small-producer colonization seems to illustrate an official perception of peasant families not as potential producers but as threats to development plans in the region.26 Polamazonia The Polamazonia Program (1975-1979), which replaced PIN, reflected the new shift of emphasis and concessions to large enterprise made explicit in PDA II. "The object of the program . . . is to provide the necessary infrastructure and support for the development of the large projects which are being carried out by private initiative," emphasized the government report detailing the project.27 Polamazonia established sixteen investment poles (targets of development) in the areas of cattle ranching, mining, and timber. To effect the movement of large enterprises to the area, INCRA sold 52 million hectares of public land to large

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Table 6.3. Allocation of New Land during Intercensal Periods, 1950-1975 (percentage of national total) Establishment

Size

Under 100 hectares Over 100 hectares

1950-1960

1960-1970

1970-1975

84.6 15.4

35.3 64.7

0.2 99.8

Sources: IBGE 1950, 1960; FIBGE 1970, 1975. Cited in José de Souza Martins, "The State and the Militarization of the Agrarian Question in Brazil" in Marianne Schmink and Charles H. Wood, eds., Frontier Expansion in Amazonia (Gainesville: University of Florida Press, 1984), p. 471.

conglomerates. Almost all investment was to be in large projects: only 1 percent of the budgets would go toward development of subsistence crops, the mainstay of peasant farmers. Government efforts in the Amazon in the late 1970s and early 1980s did little to supervise migratory flows or mitigate land battles. Indeed, the government's interest in colonization programs was waning if not completely disappearing. INCRA's original mandate of controlling migration from the northeast was gradually transformed into distributing land titles to peasant families involved in sometimes violent disputes. It had little success in resolving these disputes. The Executive Group for the Araguaia-Tocantins Region (Grupo Executivo das Terras do AraguaiaTocantins, or GETAT) was created in 1980 by the National Security Council (Conselho de Segurança Nacional, or CSN) to take over certain administrative and supervisory duties of INCRA. Essentially, GETAT was a special task force charged with imposing law and order in the region, solving land problems by distributing land titles to peasant farmers. Its plan was to distribute 30,000 titles (1.3 million hectares) to families by the end of 1981. However, GETAT was obviously not designed exclusively to protect settlers and small farmers. Perhaps most indicative of the organization's opposition to peasant interests was its exclusion of a single representative of either rural workers or peasants among its members.28 According to its critics, GETAT's intentions as well as impact were dubious. Both the Catholic church and the Agricultural Workers' Federation (Confederação Nacional dos Trabalhadores na Agricultura, or CONTAG) claimed that violence and conflict did not in fact diminish. "In its three years of existence, GETAT has distinguished itself by its collaboration with police in repressing the squatters' movement," said CONTAG.29 Its "blatant bias in favour of the large landowners" provoked a group of settlers to attack a GETAT group in 1982; one official was killed in the incident.30 CONTAG objected that

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though GETAT's jurisdiction covered most of the 350 farming and cattle-rearing projects set up through SUDAM, many high-tension areas were outside this province.31 For example, in Maranhão, CONTAG counted 12,000 cases of squatters who were expelled from their land holdings.32 Continuing Land Conflict Land conflict in the region, already intense, radicalized. CONTAG estimated 11.5 million landless families in 1980—1981.33 The same organization recorded 96 land conflicts, involving 21,000 families in 1980 and 277 conflicts involving 44,000 families in 1981.34 In 1981, the Catholic church's Land Commission (Comissão Pastoral da Terra, or CPT) cited 915 cases of conflict involving 261,000 families, or 1.5 million persons, and 37.2 million hectares of land.35 Further, claimed the church commission, not a single satisfactory solution for any of the conflicts was found. These groups believed that the essence of the problem, that the peasants' demands for access to land were not being satisfied, reflected the dominant pattern of land concentration found elsewhere in Brazil. Countrywide, according to 1975 statistics, 0.8 percent of the landowners possess 42.8 percent of the land.36 With 95 percent of the new farms in the Amazon covering 10,000 or more hectares and employing few peasant laborers, government expansion programs were not addressing the opportunity—indeed, the necessity—to settle thousands of landless peasant families.37 In 1981, the government promulgated a prescriptive law designed to ease the restrictions barring peasants from acquiring legal title to the land. It proposed to reduce the required occupation period before issuing legal title from ten years to five years. However, as was the case with most government legislation ostensibly designed to benefit peasant colonists, the law was flawed: occupation of the land had to be deemed "pacific." Uncontested acquisition and occupation of a land plot in the violent environment of the Amazon was unlikely, if not impossible. Additional bureaucratic reorganization sought further to reduce land conflict. In 1982, the Extraordinary Ministry for Land Affairs was created, further maligning the authority of INCRA and its ability to resolve land conflicts independently. The new ministry assumed key INCRA tasks central to land policy and distribution. Because the new agency was allied with the National Security Council (Conselho da Segurança Nacional, CSN), its creation was viewed as a significant victory for the military's position on the land question. The ministry's ties to the National Security Council began at the top: the land minister,

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General Danilo Venturing was also general secretary of the CSN. One of the minister's first actions was to reject the idea of creating special courts to decide land disputes. The Security Council's role in land matters, now treated as matters of national security, was by this point well established. It began to assert itself in the workings of INCRA as well as the National Indian Foundation (Fundação Nacional do Indio, or FUNAI), directly intervening in its jurisdiction over Indian land disputes and even appointing FUNAI officials. As colonization projects became increasingly difficult to administer and control, the federal government withdrew both from the programs themselves and the boastful ambition of the previous decade. In 1983, the state of Rondônia, rather than the entire Amazon region, was proclaimed "the land of the future" and selected as the principal target area for state-directed colonization initiatives. INCRA announced the most recent government project in July 1984, the incorporation of 204,000 hectares of land, to be distributed to more than 3,800 new families. In Rondônia, INCRA claimed to have distributed land to more than 10,500 families, or more than 50,000 persons. The more limited scope of the Rondônia project did not produce smoother administration and distribution of land titles, however. As Maria Henriques has observed, the original concept of colonization had changed radically, and the new emphasis was solely on the most rapid occupation of land possible.38 Like previous and since-abandoned government projects, the project in Rondônia reproduced once again the social conflict and inequalities plaguing other areas of occupation in the Amazon.39 Current Initiatives The matter of state-directed versus private initiative colonization programs still has not been resolved. Other than the official program in Rondônia, after 1982 occupation of the region was dependent instead upon the directive of private initiatives and spontaneous migration. Today human flow to the region continues, both from the Northeast and the southern states, as do the land conflicts settlers encounter there. Brazil's return to democracy in 1985 appears to have changed little the administration of programs, the impact of migratory flows to the region, or the terms of the continuing debate over the region's occupation. Somewhat perversely, the questions surrounding government attempts to occupy and develop the Amazon region are essentially the same ones asked twenty-five years ago. More than two decades of failed colonization attempts, empty rhetoric, bureaucratic blunders, land violence, and ecological destruction do not appear to have refined either public debate or government planning. The fundamental questions of development

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and integration—including the most basic, "Why occupy the Amazon ? "— linger unanswered. Today the region is no longer perceived as a panacea for the social ills of the overcrowded Northeast or as the resource frontier that alone will resolve the Brazilian foreign debt. Yet the official and popular desire to occupy the Amazon—by human as well as economic expansion—has not been abandoned. The Sarney administration is allegedly preparing its own strategy for developing and occupying the Amazon, and the current constitutional convention ("Constituinte") is expected to consider the entire region, including its human occupation and preservation, and include in the text of the new constitution language on both aspects. Yet great changes in the region in the near future seem unlikely. The democratic government's inheritance of a disastrous past, combined with current fiscal and political obstacles, render dim the prospects. Steadily since 1980, it appears, the migrant peasant farmer, once touted as the foundation of Amazonian colonization, has been evicted not only from his land but from government planning as well: "Given the impossibility of finding in the Amazon region the solution to the settlement of this large migrant population, they are rapidly becoming invisible in planning for the region. They are highly visible in numbers, however, and in the potential social problem they represent."40 The major government actors for the administration of colonization programs, including INCRA, FUNAI, and GETAT, remain in place. Colonization is as chaotic and uncoordinated as ever. Amid the confusion, land violence continues. Expulsions of colonists andposseiros and landrelated attacks and deaths in the frontier appear in periodic but littlenoticed, it seems, reports from the region. In 1984, 116 peasant farmers were killed in battles for land in Brazil, and 500 land conflicts involving more than 70,000 families raged in the frontier.41 In 1986 in the southern region of the state of Pará, site of the Tucuma colonization project, more than 100 persons were murdered fighting for land, according to the Pastoral Land Commission (CPT).42 The number of land invasions in that rural area was estimated at 6,000 families. Tucuma was a colonization project created by the private construction firm Andrade Gutierrez, but its representatives now wish the federal government to assume control of the project. The firm complains that the democratic government of the Nova República has refused to intervene in the land conflicts with the necessary police force. Researcher Jean Hebette reports that in some areas, peasant settlers have become militant in defense of their lands. "The posseiros have become increasingly conscious of themselves as part of an exploited social class and have realized their potential for mobilization," he writes.43 "On the national scene, struggles [have] merged together and

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succeeded to impress public opinion and exert pressure on the government."44 In 1986, the First National Congress of the Landless rallied 1,500 landless workers together in calling for agrarian reform with full worker participation. In 1985-1986, President Sarney visited the region seven times. Recognizing the continuing land violence in the region, his administration proposed a National Plan for Agrarian Reform in late 1985. The plan would place 1.4 million peasant farmers on lands in the Amazon over a period of four years. Distinct from previous proposals, however, the reform act did not define priority areas for reform. It also did not attempt to appropriate lands that, in INCRA's terms, "produce." Critics found the proposal, timid, however. Said the President of CONTAG, "Este plano não corresponde de forma aos anseios dos trabalhadores rurais." Agrarian Reform and Development Minister Nelson Ribeiro claims that "todo o Brasil e prioritário para a Reforma Agrária. Menos a Amazônia."45 Responding to Sarney's reform plan, Ribeiro claimed that Amazonia will certainly not be a part of the plan, at least for several years. "In Amazonia, there is no infrastructure, and this multiplies the cost of agrarian reform three or four times. Grave social problems in the region are owed to the precarious land title distribution, lack of support and necessary infrastructure." In 1986, the first phase of a plan seeking to reinforce the existing infrastructure in areas north of the Amazon river was initiated, at a cost of some $7 million. In August 1987, the government created, through INCRA, the project for Extractive Settlement (Projeto de Assentimento Extrativo). The Project intends to ensure the projection of areas and their populations from extractive occupation in the entire Amazon region. The principal objectives of the Project for Extractive Settlement were the following:46 1. To guarantee the permanence of extractive populations in areas where they have always lived, lands they have the right to possess. 2. To make possible the incorporation of new populations for the development of similar activities. 3. To guarantee the substantive use of natural resources of flora and to impede the progress of deforestation. 4. To create bases for the definition of alternative activities promoting the occupation of the region from the north, taking into account the necessities of local populations and the peculiarities of the ecosystem. It is unfair to claim that the federal government has retreated entirely from the Amazon and is ignoring problems that projects of earlier administrations created there. Yet no new proposal has received the necessary support and commitment to effect change in the region's hazardous occupation. Alternatively, many Brazilian and international

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observers have hoped that the current (1987-1988) constitutional convention would provide the impetus for real progress in the region. Evaluation of Policy Initiatives Brazilian colonization policy in the Amazon was crippled by exceedingly high expectations that did not conform to reality. "The mixture of national euphoria and administrative haste augured badly," observes Richard Bourne.47 Clearly, not all Brazilians were enthusiastic about the thrust to occupy the Amazon. The military government, as initiators of the projects, most vigorously pursued its opening. Brazilian and international capitalist enterprises, which profited from government incentives to expand into the Amazon, also lauded its opening. And certainly peasant families, in their quest for land ownership, were initially enthusiastic about opportunities in the Amazon. Other elements of Brazilian society, however, doubted the viability of such schemes. The military government sought rapid and spectacular results from the colonization process. However, it embarked on settlement and development plans with insufficient knowledge of the likely effects of such programs. As many critics have illustrated, government colonization schemes suffered from the same central problem as all desenvolvimento planejado (planned development): they were an attempt to solve all problems at once.48 Colonization did not prove a realistic solution to the problems of income inequality, scarcity of land, and overpopulation in the northeast. Penetration of the region through massive road construction, with land-hungry peasants to follow, was to have stimulated "development" and alleviate social pressures in the northeast. Noted Amazon anthropologist Charles Wagley finds the "escape valve" notion improbable: "It is hard to see how the transfer of several hundred thousand, even two to three million, people from the Northeast to the Amazon can possibly make any more than a dent into the problem of poverty."49 The statistics show that the number of persons absorbed by the frontier was nominal compared to population growth and the rate of rural to urban migration.50 The capacity of the region to absorb migrant families and of the government to minister to them was limited, as demonstrated by the low figures. Perhaps foremost among erroneous expectations was the belief that official sanctioning of the colonization procedure could bring order to the process. Certainly, government efforts did not ensure that its intervention would mitigate conflict over land acquisition. In addition, the government seemed to believe that land in the Amazon was inexhaustible. This was quickly proved false, as tensions and battles over land titles erupted. Social conflict was effectively, whether by design or

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not, displaced to the Amazon from the northeast. Some critics have suggested that colonization did serve some function as a "safety valve," reasoning that the situation in the northeast could only have deteriorated had there been no Amazonian outlet.51 However, such a claim makes no allowance for the fact that the government programs then did not fundamentally address the need for greater equality of land distribution. Had there been no movement toward the Amazon, social unrest in the northeast would have been even greater. If the results were not what Brazilian policymakers expected, neither was the situation in the Amazon what colonists were led to believe they would find. They believed that their concerns for land were indeed the focus of the colonization initiatives after 1970. In accordance with PIN plans, they had been promised a good plot of land, agricultural supplies, housing, facilities, and protection. They often received none of those things. Instead, they found a serious gap between intent and execution. Government provisions and supervision were severely lacking, administration was confused, and, most important, the colonists often found that the land, even that to which they may have held title, was already settled or "squatted." If they did manage to claim and settle a plot, their holding was never secure: colonists were routinely evicted from their lands. For these colonists, the famed "Land without People" was elsewhere. Evaluation of the Brazilian military's frontier expansion policy in the Amazon region yields three conclusions: 1. Economic growth and output were fundamental concerns, perhaps the primary objectives of frontier occupation policy concerning the region. 2. No coherent policy or strategy to achieve these objectives via colonization is discernible. 3. Frontier expansion, and in particular colonization schemes, played a key role in the creation and exacerbation of land conflict in the Amazon involving peasants, posseiros, and Amerindians. It must be asked, as Stephen Bunker does, "How and why did none of the government programs for development of the Amazon appear to succeed, despite the massive financial and political commitment of the government?"52 Various responses may be offered. One is that achievement was inhibited by contradictory policy objectives and ultimately that policymaking was skewed toward specific, large private interests. Bunker indicates that programs were inadequately funded and overseen, that agencies existed to serve the dominant classes, and that programs were oriented convincingly toward nonpeasant (predominantly agricultural) economies, allowing further exploitation of the peasantry.53 "Modernization of Brazilian agriculture was pursued with little regard to issues

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of equity, poverty, distribution or employment, " writes Merilee Grindle.54 Though government efforts at integration and occupation for the most part met with failure, certain positive results were achieved. Transportation and communications were significantly improved, at least lessening the historical isolation and dependence of the region. Naturalresource potential was tapped. Finally, migration and settlement did lead to occupation of much of the area's lands.55 Were the actual motives for development or colonization policy different from those officially claimed by the military governments? How important were social motives as compared to economic and geopolitical considerations? Or, more simply, was the Amazon intended to be populated by landless peasants or large, growth-oriented enterprises? It would appear, from the policy decisions of the various administrations, that political and economic objectives overrode social concerns. Writes J. M. G. Kleinpenning, "the lessening of social problems of the Northeast was not the primary motive; rather, the primary aim was to stimulate economic growth, increase prestige and popularity of the government, secure occupation of the region and realize imperialistic ambitions."56 By maintaining that Amazon programs were guided by the impetus of grand-scale social benefits, the government's political purposes were served. Ostensibly, the problem of rural development could be undertaken without the social and political risks of land reform, which was anathema to the military government and its supporting interests. Through colonization, the government could effectively relocate and thereby defuse political pressures and tensions in "problem regions." The military regime could thus safely address its aspirations for legitimacy, national security, and economic growth. National integration would serve another military purpose: establishment and maintenance of order. The military government, after the coup in 1964, made its commitment to future and growth-oriented economic development explicit. Amazon colonization land policy was subservient to economic development and national security objectives. By the government's own admission, its planned efforts to colonize the Amazon were not successful insofar as peasant quagmires were addressed (or Indian rights protected). To whom did the benefits of frontier expansion, then, accrue? Policy priorities dictated a reproduction of the highly polarized class organization found throughout Brazil.57 According to J. M. Pompermayer, the dynamics of class conflict to a great extent determined policy implementation in the Amazon.58 As profitable activities promoted were predominantly capital-intensive, few employment benefits were created for colonists, and the material benefits flowed to the Center-South and Southeast. Economic penetration and increased production of raw materials expanded markets in other parts

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Table 6.4. Indicators of Government Activity in Colonization Compared with Indicators of Activity Related to Large-scale Enterprise, 1970-1977 (millions of cruzeiros, number, and hectares) Colonization-PIC Altamira and Itaituba INCRA Budget 1970 1971 1972 1973 1974 1975 1976 1977

— — 128.27 159.33 119.72 112.07 95.19 39.70

Large Enterprise

INCRA Land Tenure INCRA Classificaüon SUDAM Fiscal Personnel PR Altamira (area) Incentive Disbursements — — 1,228 1,651

833 700 517 248

— — — 324,000 510,000 600,000 1,486,200 559,700

632.76 561.53 424.30 477.62 487.39 923.67 652.92 504.93

Source: INCRA, CR-01, FF/FFP; SUDAM, DAI/DPOI. Cited in Stephen G. Bunker, Underdeveloping the Amazon: Extraction, Unequal Exchange, and the Failure of the Modem State (Urbana: University of Illinois Press, 1985), p. 85.

of Brazil. Perhaps the greatest danger incurred was a possibly greater dispersal of Brazil's already acute poverty, rather than socioeconomic advancement for marginal populations. "It is by no means certain that the policy of the Brazilian government will result in a development that will benefit a large proportion of the Brazilian population," was Kleinpenning's prophetic observation in 1972.59 His prediction was emphatically substantiated within the next two years, as policy emphasis explicitly gave advantages to a small economic group and thus reinforced underdevelopment and continued social inequities. Sue Branford and Oriel Glock suggest that not only did large enterprise benefit at the expense of colonists and posseiros, the government itself reaped benefits by suppressing potentially disrupting forces of peasant mobilization. Thus, the government's relative lack of supervision of its colonization schemes may well have been a deliberate tactic. Development policy, rather than being coherently orchestrated and articulated, seems rather to have been a series of reactions to conditions that, for political or economic reasons, demanded government attention. Perhaps as a direct result, "policy" was based on contradictory aims. The government reacted by defusing or displacing the conflict and undermining opposition, but did not move to correct the situation's causal

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factors. It has been argued that colonization of the Amazon in the mid1960s was merely a government response to the threat of unofficial, de facto occupation of those lands by peasant families. The programs were an attempt to preempt massive spontaneous migration and illegal usurpation of land plots. Pursuit of conflicting and mutually exclusive policy goals creates conflict. Amazon colonization programs were plagued by their dual character: simultaneous settlement and expansion of capitalist enterprise and peasant farmers. As Emilio Moran, among others, has observed, conflict of interest between capitalist and noncapitalist (i.e., small-scale subsistence farming) economies, results in direct and unequal competition. Yet this is what the government, in effect, promoted. Conclusions If the Amazon was the new frontier for expansion and development in Brazil, it was also the new frontier for conflict, sometimes violent and unabated. The peasantry was in search of its own frontier, one on which it could gain access to the land and stake out its own subsistence. Nigel Smith proposes judgment of colonization programs by questioning provision for colonists: did the programs provide opportunities for a "prosperous, reasonably secure existence?"60 As this chapter has endeavored to show, the answer to both questions is "no." Policy of the military governments was often confused and contradictory, and true objectives for expansion substantially different from those sometimes articulated. Policy was marred by two total reversals in emphasis in one decade, from all-out economic growth to small-farmer colonization and back again. A governing objective of Brazilian frontier expansion in the future must be improvement in the general social welfare of the marginal rural populations. Policy, especially in the tenuous stages of redemocratization in Brazil, must strive to involve and provide for those who were restricted from the system during the military years. In 1981, a leading government official proclaimed, "In the open society we wish to build, we cannot guarantee success to anyone. In the competitive struggle for survival, those peasant farmers who do not prove equal to the challenge will go under."61 The challenge, for both peasants and native populations, however, was to defend their lands by defeating larger and preferred interests. Clearly, government policy cannot continue to promote economic expansion at the expense of small farmers and Amerindians, a process that has been, in essence, promotion of conflict. The government is correct in assuming a dominant role in occupation of the Amazon, but it must promote its equitable occupation. Given the framework of land colonization and the ensuing struggle for

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it, conflict and social tension erupting from its occupation and division should have been a focus of policy initiatives in state-directed Amazonian colonization plans. Perhaps Amazonian development focusing on planned colonization is impracticable, given the potential pernicious effects of such expansion and the current demands in Brazil for increased social expenditures and debt servicing. Brazil has had to accept that, while the Amazon remains the great unexplored frontier, it is certainly not the panacea it was perceived to be. It would seem that the hopes for it to provide solutions to a great many Brazilian social and economic problems were, and continue to be, illusory. The once-perceptible conquest of the Amazon has again been delayed. Today, less is expected of the region. In pursuit of Ordem e Progresso (Order and progress), the Brazilian national motto, frontier expansion in the Amazon has to date achieved neither. Disputable "progress" has merely created disorder and conflict. Notes 1. "State policy" here is used to connote policy of the national government rather than specific policy followed by one or more of the individual state governments. 2. Susanna Hecht, "Cattle Ranching in Amazonia: Political and Ecological Considerations," in Frontier Expansion in Amazonia (Gainesville: University Presses of Florida, 1984), p. 370. 3. Richard Bourne, Assault on the Amazon (London: Victor Gollanez, 1978), p. 19. 4. For further discussion of these issues, refer to the following sections of this chapter: p. 112, where military concern for order, stability, and legitimacy is addressed; p. 97, for discussion of large industry pressure on Amazon expansion policy. 5. Hecht, "Cattle Ranching in Amazonia," p. 370. 6. Dennis J. Mahar, Frontier Development Policy: A Study of Amazonia (New York: Praeger, 1979), pp. 10-11. 7. Hecht, "Cattle Ranching in Amazonia," p. 370. 8. Please refer to tables 5.2, 5.3, 5.4, 5.11, and 5.12 for more information. 9. Bourne, Assault on the Amazon, p. 18. 10. Hecht, "Cattle Ranching in Amazonia," p. 378. 11. Bourne, Assault on the Amazon, p. 73. 12. Charles Wagley, ed., Man in the Amazon (Gainesville: University Presses of Florida, 1974), p. 291. 13. Sue Branford and Oriel Glock, The Last Frontier: Fighting over Land in the Amazon (London: Zed Books Ltd., 1985), p. 124. 14. J. M. G. Kleinpenning, The Integration and Colonisation of the Brazihan Portion of the Amazon Basin (Nijmegen, The Netherlands: Catholic University of Nijmegen, 1975), p. 21. 15. Roberto Santos, "Law and Social Change: The Problem of Land in the

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Brazilian Amazon, " in Schmink and Wood, eds., Frontier Expansion in Amazonia, p. 455. 16. Ibid., p. 468. 17. Emilio F. Moran, Developing the Amazon (Bloomington: Indiana University Press, 1981), p. xiii. 18. Stephen G. Bunker, Underdeveloping the Amazon: Extraction, Unequal Exchange, and the Failure of the Modern State (Urbana: University of Illinois Press, 1985), p. 11. This work is excellent on the dynamics regarding the shift in policy. 19. Bourne, Assault on the Amazon, p. 260. 20. Nigel J. H. Smith, Rainforest Corridors: The Transamazon Colonization Scheme (Berkeley: University of California Press, 1982), p. 23. 21. Mahar, Frontier Development Policy, p. 27. 22. José Malori Pompermayer, "The State and the Frontier in Brazil: A Case Study of the Amazon," PhD diss., Stanford University, 1979, p. 257. 23. Stephen G. Bunker, "Policy Implementation in an Authoritarian State: Colonization along Brazil's Transamazon Highway," in Latin American Research Review 18:1(1983), p. 43. The presidential directives referred to are exposição de motivos 005 and 006. 24. Ibid. 25. Ibid. 26. Branford and Glock, The Last Frontier, p. 318. 27. Ibid., p. 73. 28. Latin American Regional Report, RB-83-02 (February 11, 1983), p. 7. 29. Ibid. 30. Ibid. 31. Ibid., WR-80-12 (March 12, 1980), pp. 5-6. 32. Ibid. 33. Latin American Regional Report, RB-91-05 (May 29, 1981), p. 5. 34. Ibid, RB-83-02 (February 11, 1983), p. 7. 35. Ibid, RB-82-04 (April 23, 1982), p. 6 36. Ibid. 37. Ibid. 38. Maria H. Henriques, "A segunda Rondônia: fronteira sem rédeas" (Rio de Janeiro: Centro de Estudos e Políticas de População e Desenvolvimento, 1986), p.3. 39. Ibid p. 26. 40. Marianne Schmink, "A Case Study of the Closing Frontier in Brazil," Amazon Research Papers Series, no. 1 (Gainesville: University of Florida, 1981 ), p. 31. 41. Veja, October 16, 1985, p. 45. 42. Jornal do Brasil, May 31, 1987. 43. Jean Hebette, "The Posseiro's Resistance in the Region of the Greater Carafas Program," in J. M. G. Kleinpenning, ed., Competition for Rural and Urban Space in Latin America: Its Consequences for Low Income Groups (Amsterdam: Koninklijk Nederlands Aardrijkskundig Genootschap, 1986), p. 40. 44. Ibid. 45. Jornal da Tarde, March 12, 1985.

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46. Ibid., August 7, 1987. 47. Bourne, Assault on the Amazon, p. 84. 48. Moran, The Dilemma of Amazonian Development, p. 308. Also inDonald R. Sawyer, "Frontier Expansion and Retraction in Brazil," in Schmink and Wood, eds., Frontier Expansion in Amazonia, p. 299. 49. Wagley, Man in the Amazon, p. 6. 50. Charles H. Wood and John Wilson, "The Magnitude of Migration to the Brazilian Frontier, " in Schmink and Wood, eds., Frontier Expansion in Amazonia, p. 151. 51. Bourne, Assault on the Amazon, p. 288. 52. Bunker, Όnderdeveloping the Amazon, p. 11. 53. Ibid., p. 142. 54. Merilee Grindle, State and Countryside: Development Policy and Agrarian Politics in Latin America (Baltimore: Johns Hopkins University Press, 1986), p. 72. 55. Mahar, Frontier Development Policy, p. 164. 56. Kleinpenning, Integration and Colonisation, p. 143. 57. Mahar, Frontier Development Policy, p. 165. 58. José Malori Pompermayer, "The State and the Frontier in Brazil: A Case Study of the Amazon," PhD diss., Stanford University, 1979, p. 374. 59. Kleinpenning, Integration and Colonisation, p. 5. 60. Nigel J. Smith, "Trans-Amazon Highway: A Cultural-Ecological Analysis of Settlement in the Humid Tropics," PhD diss., University of California at Berkeley, 1977, p. 316. 61. Latin American Regional Report, RB-81-03 (March 13, 1981), p. 3.

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7. Social Policy and Democratic Consolidation in Brazil

Vilmar Faria and Maria Helena Guimarães Castro Observers of democratic transition during recent decades in countries such as Greece, Spain, Portugal, Argentina, and Uruguay have watched closely the role of the government in the Nova República in Brazil. The result of a relatively long process, the transition has occurred without any significant political or institutional rupture with the past and has continued during internal and external economic crises unresponsive to the economic measures adopted by the government. The transition process has persisted despite these potentially disruptive pressures.1 The severity of the economic crises and the uncertainties related to the new constitution have caused debate to focus on questions of policies and measures for economic adjustment, management of the external debt and constitutional issues. Serious reflection about other strategic dimensions of the transition process, such as the political and operational role of the government during the transition in certain social policy areas, has not occurred. The role and performance of the Nova República in areas such as health, social security, housing and infrastructure, education, public safety and justice, and nutrition, constitute a critical dimension of democratic consolidation for at least three reasons: 1. Structurally, as a result of the enormous social deficits that the country has incurred throughout its history but that have deteriorated during the prolonged period of exclusionary economic development policy adopted by the military regime. 2. Strategically, by the importance that public social programs have acquired in the reproduction of the daily life for vast segments of the population as well as in the specific interests of important professional groups, such as public sector workers, professors, doctors, and medical workers, and of economic groups that developed around these social policies, such as civil construction and the pharmaceutical-hospital complex. 3. Politically, because a considerable segment of the political forces

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opposed to the military regime grew and coalesced around the critique of the military government's social policy and a corresponding promise of its reform and expansion. In this way, even as the political regime and economic policy were transformed during the transition, the critique of the federal housing programs, health and social security policy, the education policy, and the public safety and justice systems served as points of mobilization and consolidation of the various forces in opposition to the regime. From these critiques and a set of proposals for profound changes, the basic platform for election campaigns and policies emerged and gave substance to the redemocratization movement. 2 On the other hand, the control of social agencies and programs represents a strategic political resource, from the point of view of the legitimacy of the regime and government or from the point of view of the political parties and their constituencies. For these reasons, the assessment of the potential for the consolidation of democracy in Brazil at this critical moment in the country's history requires an analysis of the commitments of the government of the Nova República in social policy and of the success and failures of this policy, and an evaluation of the political consequences of these results for the future of the country. In this chapter we examine these points in four sections. In the first, we attempt to identify the context for the social agenda of the Nova República and the choices the government made. In the second section, we examine recent operational results. In the third section, we study the causes and constraints that can explain this performance and, to conclude, we offer some thoughts on the possible impact of this performance on the consolidation and stability of democracy in the country. The Agenda of the Nova República: Promises and Choices The economic and political legacy of the authoritarian regime—including an economic crisis, characterized by high inflation, enormous internal and external debt, the lack of governmental fiscal control, and authoritarian legislature and institutions—has contributed substantially to the dramatic social problems of the country. In addition, the opposition alliance, which effectively pressured for political change, consisted of heterogeneous and conflicting political forces. As a result, the political agenda of the post-authoritarian government included a great number of complex tasks that need to be executed in a short time: to elaborate a new constitution,· to implement economic policies for land reform and to change the income distribution,· to resolve problems of the external debt; to eliminate the legislative

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instruments of authoritarianism,· to create new rules of the electoral process and reform of political parties and to organize the constitutional deliberations.3 In addition, the government of the Nova República promised to pursue reasonable rates of economic growth, to respond to the extremely urgent needs of the poor resulting from the crisis of the early 1980s, and to transform the social policy inherited from the military regime. With regard to this last promise, the agenda of the Nova República included: ( 1 ) the restructuring of the funding system for social expenditures, especially with respect to a larger use of special funds rather than normal fiscal budgeting and diversification of funding sources in order to reduce the sensitivity of funding to economic cycles; (2) a reorganization of the administrative apparatus for social services, which had become institutionally fragmented into diverse, competing agencies, with poorly paid, poorly trained, and disinterested workers and, consequently, ineffective and inefficient, under the preceding centralization of decision making and operations, in spite of the range and comprehensiveness of existing social programs,·4 (3) the promotion of a major debate, including various groups of civil society, to identify a model of social policy that is compatible with effective, efficient, equitable, and just governmental intervention and that corresponds, simultaneously, with the demands for democratization of governmental action itself. Such a model calls explicitly for substantial decentralization of decision making and execution and for greater community participation in the definition, gestation, and control of the programs. An agenda of this magnitude and complexity demands that the government advances, simultaneously, in the formal and the substantive dimensions of the democratization process.5 Because of the heterogeneous forces and contradictory agreements found in the opposition alliance, a clear hierarchy of priorities, in terms of formal policies and specific measures, in the social policy arena has never been established. Various government documents of the period 1985-1986, such as those of the Commission for the Government Action Plan created by President Tancredo Neves, the Social Priorities of 1985 (PPS-85), the Social Priorities of 1986 (PPS-86), and the National Development Plan of the Nova República (I PND-NR), attempted to further this agenda. These documents reaffirmed and refined the assessment of the social conditions of the country produced by the opposition during the period of mobilization and attempted to lay out a strategy for federal government intervention in the social arena. The government initiative was organized along two basic concerns: ( 1 ) the funding structure (its regressive character, dependency on specific

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funding sources rather than general revenues, the budget process) and (2) organizational and political issues (such as institutional fragmentation, dispersion of resources, and clientelismo).6 To implement this strategy of social intervention, the government of the Nova República defined priorities for the short and middle term, distinguishing two levels of action: (1) the Emergency Plan which responds to immediate needs of hunger, misery, and unemployment, and gives priority to food and nutrition programs destined to serve the most vulnerable segments of the population, pregnant and nursing women, families with children that receive no more than two minimum family salaries per month. In addition, some specific and limited measures in the areas of health, infrastructure, education, construction, and rural problems, that could, in the short term, improve the demand for labor and food production, were adopted; and (2) structural reforms that would require a complete reformulation of the Brazilian system of social welfare. In addition to presenting a number of matters for consideration by constitutional convention, the government created commissions to consider reform in several areas: adminstration, financial, social security, infrastructure, and education, among others. Besides these efforts, a number of sectoral working groups were formed. The commissions and working groups provided the opportunity for the participation of various groups of the civil society interested directly or indirectly in the discussions.7 Among the various social policy concerns, the government of the Nova República chose to focus on the short term on actions involving emergency assistance. Issues of structural change were placed on the agenda of the various commissions and working groups and were presented to the constitutional convention. Performance of the Nova República in the Area of Social Policy As reported in a recent document of the World Bank, in spite of the persistent and deteriorating economic crisis, the Nova República was able to increase federal expenditures in social programs by 14.6 and 9.0 percent per year during the first and second years of the government, without returning, however, to the levels of expenditures per capita reached in 1982 (table 7.1).8 A decline in social expenditures of more than 30 percent occurred between 1982 and 1984, at the end of the authoritarian regime. The decline was especially severe in health and social security programs in 1983, and in the areas of housing, urbanization, and infrastructure in 1983 and 1984, though the first two recuperated their previous levels by 1984. Taking 1984 as a base, we can observe how the government of the

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Table 7.1. Federal Social Expenditures, 1980-1986 (in billions of 1986 cruzados and percentage) Year

Total Expenditures

Per Capita Expenditures

Percent Change

Percent of Gross Internal Product

1980 1981 1982 1983 1984 1985 1986

329 335 356 327 259 304 338

2.527 2.511 2.606 2.341 1.817 2.082 2.270

-0.6 +3.8 -10.2 -22.4 +14.6 +9.0

9.1 10.0 10.7 10.2 7.9 8.6 9.3

Source: NEPP/UNICAMP, Brasil 1986: relatório da situação social do país (São Paulo: Ed. SEADE, 1988).

Nova República concentrated the increase in expenditures in food and nutrition, education, and culture and labor programs. The relative expenditure levels of 1982 for the health and social security were recuperated during the Nova República, to the detriment of expenditures in housing, urbanization, and infrastructure, whose relative share continued to fall. This shifting pattern of social expenditures reflects (1) changes in legislation passed prior to the transition government, such as the Calmon Amendment, 9 (2) fluctuations in revenue sources of some programs whose funding depends on total salaries and that vary with business cycles, and (3) the profound crisis and disorganization of the federal housing financial system. The funding pattern also expresses the priorities given by the transition government to emergency programs. Taking into account these determinants of the changing pattern of social expenditures and the strategy of the Nova República to distinguish between structural reforms and emergency programs, we can now examine the government's performance in various social policy areas. Health Care In the area of health policy, the transition period has been devoted principally to the discussion of Public Health Reform, the basic premise of which is the necessity to organize a single, decentralized health system. However, this reorganization encountered strong opposition from private health care providers who feared an increase in the public sector share of health care provision.

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Table 7.2. Distribution of Social Expenditure by Program Type, 1980-1986 (in percentage) 1980

1981

1982

1983

1984

1985

1986

Food and Nutrition 0.6 18.8 Health Infrastructure 3.5 Education and 11.0 Culture Housing 12.1 Labor 0.4 Social Security 53.6 Total 100.0

0.6 17.3 4.3 11.3

0.8 17.0 3.8 11.8

0.9 14.7 2.9 18.4

1.3 19.5 2.3 11.7

2.0 18.9 3.7 13.9

2.5 17.6 2.8 16.1

9.4 0.3 56.7 100.0

9.3 0.4 57.0 100.0

7.8 0.3 54.9 100.0

5.8 0.4 59.1 100.0

4.9 0.5 56.1 100.0

3.8 1.0 56.5 100.0

Program

Source: NEPP/UNICAMP, Brasil, 1986. In terms of the effectiveness of the health programs, it is useful to examine those programs considered priorities: the Program for SelfSufficiency in Vaccines for Immune Diseases (Programa de AutoSuficiênca im Imunobiolôgicos) and the Program for the Control of the Major Regional Endemic Diseases (Programa de Controle das Grandes Endemias). Due in part to resources received through the Programs of Social Priorities, the Program for Self-Sufficiency has surpassed production goals in two areas: growth in the production of snake antivenom and the nationalization of production of vaccines for meningitis, yellow fever, typhus, and rabies. With respect to the control of the great endemic diseases, the results are less satisfactory: the incidence of such maladies as Chagas' disease and schistosomiasis changed very little, and others, such as dengue, yellow fever, and malaria appeared to have increased during the period. Independent of the objectives of the Public Health Reform, the strategy of the integration of various health services, such as federal, state and local INAMPS, was a major theme of the Integrated Health Actions (AIS) program. The implementation of this program began in 1984, under the general title of Unified Health Services (SUDS). Today this attempt includes more than 60 percent of the Brazilian municipalities (2,418). This strategy, however, is not able to correct some of the most important distortions of the health care model, which is a private sector model with governmental subsidies and emphasis on individual curative care, inherited from the military regime. In addition, these attempts at integration have been inconsistent with the completion of previously introduced measures for basic collective sanitation. Evidence of this can be seen in the vary modest increase in federal expenditures per capita for public

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health, even though the budgets for the Minster of Health have recently increased.10 Finally, the absence of a clear, normative ordering and lack of definition of care levels to be met by the different levels of health care system have caused, in the last three years, distortions in the process of decentralization of services. The risk is that decentralization will create local systems that are highly heterogeneous and that may well reinforce the model of private curative individual health care. Social Security and Public Assistance In 1985 and 1986, wide-ranging debates about the transformation of the social security and public assistance systems were conducted. Particularly relevant was the creation of a working group for the restructuring of social security. This group elaborated a detailed diagnostic and identified solutions that would substantially transform the system. Some recommendations of this group served as a base for the steps taken by the Ministry of Social Security and Public Assistance and were used in the formulation of a preliminary proposal for a new social security law. This new law, if approved by the Congress, will produce major change in the social security system of Brazil, which has been one of the pillars of social policy in the country. It is important to note that in 1986 the social security system had a positive budget balance, in contrast to the previous years. This reflected not only effective management but, more important, favorable labor market conditions and increases in the number of employed workers, both in the formal and informal sectors, and in income as a result of the Cruzado Plan. In 1986, there was an increase of 9 percent in the number of covered contributors to the system, which affected about 27.5 million households.11 Two specific changes in the social security area need to be mentioned: the creation of an unemployment insurance program and the formation of the Superior Council of Social Security, and the recognition of community councils. The initiative of the councils represents an important opening of channels for social participation in the decision making and operation of the social security system. Finally, in the area of public assistance, implemented through the Brazilian Legion of Assistance (LBA), recent data indicate a real increase in the resources of LBA and in the number of people and families served by these programs. However, these data also indicate that the number of beneficiaries increased at a greater rate than the resources (the various assistance programs served more than 50 million people in 1987, according to government reports) producing a decline in the real expenditures

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per client in these governmental programs. In the area of food and nutrition, where several programs were defined as emergency programs and given high priority in various documents of the Nova República mentioned above, the operational performance was very disappointing. The same problems and distortions persist and perhaps become more serious: dispersion of resources, duplication among programs, overlapping clienteles, broadening of the eligible population but with a decline in food per client actually distributed, and, above all, intense and pervasive patronage throughout the programs. In this context, the National Program of Milk for Needy Children (PNLCC) and the Program of First the Child, which attempts to improve the nutrition provided in preschool programs, were implemented in 1986. Although the eligible population expanded substantially, the programs fell far short of providing the necessary calorie and protein requirements of the children.12 Education A number of factors made 1985 a very exciting and active year for education policy. There were significant debates and proposals about education reform, and the approval of the Calmon Amendment suggested these proposals might be adopted. In 1986, however, the great distance between the hopes of the previous year's discussions and the definition of a coherent and effective policy actually contributed became evident. The promising ideas of the 1985 debates have not yet been incorporated in a global, systematic education policy. Advances have occurred in some secondary programs, such as the school snack program and the program for the distribution of school supplies and textbooks. But there continue to be significant delays between the adoption of goals for these programs and actual distribution of physical and financial resources. This obviously creates administrative difficulties for those responsible for implementing the programs. The Minister of Education attempted to decentralize, to the municipal level, several programs, including the school snack program, and claimed that priority would be given to primary education and to adult literacy. In terms of expenditures in 1986, however, there was a substantial fall in the absolute and relative level of resources for primary education. Housing and Urban Development The performance of the government of the Nova República in the area of urban development, which includes programs for housing, water and wastewater treatment, and urban transportation, has been chaotic and

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disappointing. Former levels of funding for these socially and economically critical areas have not yet been recuperated.13 In the housing policy area, a working group for the reform of the housing financial system conducted discussions in 1985. The measures that the government have since adopted directly contradict in form and substance the goals and proposals elaborated and sent to the Minister of Urban Development and the Environment by that working group. For example, the National Housing Bank was abolished and its functions were transferred to another national bank (Caixa Econômica Federal) without any significant change in the basic housing policy. The same perverse financial system remains intact as does the centralization of decision making at the federal level. Government agencies remain vulnerable to the interests of private groups linked to the construction and real estate industries. The same system, corrupted by patronage and clientelismo, remains in place. The analysis of government performance in housing during recent years is difficult, however, because the disorganization and mismanagement within the National Housing Bank has resulted in poor record keeping and inadequate data availability. We know only that the number of funded projects in 1986 was about 60 percent less than the number in 1985 and about 90 percent less than the number in 1980. And although the relative participation of families of low income (between one and three minimum salaries) in the home finance program increased in relation to the previous year, the level was far below that reached in 1980. The record of programs for basic water and sewer systems, which are linked administratively to the National Housing Bank, is much the same. Besides the implementation of the Infrastructure Program for the Low Income Population (PROSANEAR), which was to allocate grants for projects, and the introduction of better controls on investments funded through the Infrastructure Financial System (SFS) of the National Housing Bank, little has been accomplished by the transition government. The crisis in infrastructure continues, and investments in water and sewers decline. This brief accounting, although based on scarce information, suggests that the Nova República has not significantly altered the social policy it inherited from the military regime. The major structural changes recommended in the reports of commissions and working groups have not been implemented, and the future of social policy appears uncertain. In spite of changes that have occurred in health and social security, for the most part past policies and trends in social policy prevail. Even in the constitutional convention, the chances for change are small, especially with respect to the basic funding structure of social programs.

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If increases in funding have occurred at all, they have occurred in public assistance programs. These programs may now cover a significantly greater number of individuals, but in these programs there exits a greater possibility for patronage and clientelismo in the implementation of policy. How can this lack of progress be explained and what are the consequences for the democratic regime of the paralysis of the government of the Nova República in social policy? We now turn our attention to these questions. Social Policy Performance: Causes and Constraints The array of factors explaining the governmental performance cluster around two interdependent dimensions: underdevelopment and structural inequalities, and political structure and democratic transition. We examine each below. Underdevelopment, Structural Inequalities, Existing Social Policy First and foremost, there are factors related to the size, complexity, and intensity of the social problems inherited by the Nova República that must be addressed through social policy; it is important to remember that despite the high rates of economic growth prevailing in the past decades and the substantial public expenditures in social programs, the social situation of the country has not improved accordingly. Social injustices are cruel, inequalities—both social and regional—are widening, and poverty and destitution are still rampant (table 7.3). Second, there is a perennial dilemma concerning short-term allocation priorities for economic development investments to increase per capita income, to raise food production and exports, to expand employment (since the labor force is still growing at about 3 percent annually), and to support research, science, and technology on one hand and social programs on the other. This profound dilemma for a still-poor country becomes particularly sensitive when inflation, public deficit, and stagnation persist for long periods of time. Third, there are factors related to the existing social policy programs that restrict the improvement of social assistance for the poor, particularly in programs expanded during the military regime. The expansion of programs such as housing, social security, health care, urban transportation, education, and food supply under the military regime occurred: ( 1) by creating financing mechanisms that either obstructed the access by the poor to the services provided (as in the case of the housing programs) or implied a contraction of resources precisely when social crisis occurs and demands for services increase (as in the case of social

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Table 7.3. Social Indicators for Brazil, 1980 Indicators

Brazil

Infant mortality rate (deaths per thousand births)

87.9

124.5

71.6

Life expectancy (years)

60.1

51.0

64.4

Adult illiteracy rate (percent)

20.7

39.7

13.1

Primary education enrollment (percent)

83.2

70.1

86.2

Households with supply (percent)

68.0

44.4

83.3

Families below poverty line (percent)

35.4

59.0

26.0

Northeast

Southeast

Source: Brazilian Demographic Census, 1980.

security and health care), or both; (2) by expanding the coverage without providing adequate financing through the fiscal budget, an adequate wage policy for the social services personnel, and suitable training programs for the "street level" bureaucracy involved, especially in the areas of education, health care, justice, and security; and (3) by promoting distinctive forms of interrelationship between the public and the private sectors for the provision of services that led to distortions in terms of service costs and to other perverse effects, notably in the areas of health care and housing.14 One aspect of this existing structure of social benefits inherited by the Nova República deserves to be singled out for closer attention: the problems of inefficiency, internal inequality, and mistargeting, to use Macedo's expression.15 Having developed in social and political contexts where clientelistic, patronage, and authoritarian relationships prevail, the Brazilian system of social benefits is marked by internal inequalities and by almost systematic mistargeting. The benefits provided by the public sector pension funds vary enormously, favoring segments of the public bureaucracy and the formally employed urban groups and discriminating against those working in the rural areas and in the informal urban sector; the housing program

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undoubtedly favored the urban upper and middle classes; the financing of the educational system discriminated against high school education, discriminating against the lower middle and lower class children and adolescents; public, preventive, and less expensive health care receives much less attention than private, curative, hospital-based, high-tech medicine. To put it succinctly, there are three forms of mistargeting of social services resources: i) mistargeting within sectors such as education and health, resulting in relatively high public subsidies for the types of programs that are not likely to reach the poor; ii) mistargeting across sectors, with relatively high public subsidies for those programs, such as social security and housing, that currently serve primarily the middle class and the rich, compared with sectors such as nutrition that primarily serve the poor,· and, iii) failure within programs to reach the poorest and neediest groups as the rural northeastern poor.16 All this results in a structure of unequal "acquired rights" extremely difficult to change and crystallizes a pattern of struggle for social rights that can be morally desirable but that, in the end, given resource scarcity, favors the groups with easier access to the political and administrative systems, and thus discriminates against others. The final result of this existing structure of inherited social policy mechanisms is an array of social policy programs in deep financial crisis, conducted by an ill-paid, huge, centralized, and inefficient bureaucracy, providing a variety of unequal and discriminatory benefits. All this, of course, is a powerful source of inertia and internal tension. Political Structure and Democratic Transition There are constraints associated with the Brazilian political system and its past performance that limit the possibilities of developing, in the short run, an adequate welfare system for the Brazilian poor. The principal points of change in the development of the Brazilian welfare system took place either during periods of strong presidential regimes, marked by populist and corporatist overtones, or during periods of authoritarian rule, such as the Vargas presidencies and the recent military governments.17 This contributed to creation of a distorted perception, by the different social groups, about the way social rights are institutionalized and about the role played by the state in this process. Social rights, rather than resulting from political conflict and negotiation among political parties, pressure groups, and social movements, are

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perceived as paternalistic concessions granted by the governing elite and the state as a patrimonialistic grantor of benefits. The lack of a long and stable party system tradition that could create and sustain the evolution of clear-cut programmatic party identities limited the crystallization of different political parties with explicitly distinct approaches to the welfare problems and supported by distinctive constituencies. On the contrary, the evolution of the Brazilian polity has been marked by short periods of party-system development interrupted by long periods of authoritarian rule, which curtailed the stability of the evolving party system where alternative political parties could capture the social welfare issues posed by distinct constituencies. As a result, these issues are clustered together by generic opposition parties and welfare demand, and periodically "explode" in plebiscitarían elections where these demands have little importance. Furthermore, the interrelated precariousness of both the party system and the democratic political process implies the lack of party or party alliances alternation in the exercise of governmental power. Consequently, on one hand, the compromise of these several parties with the welfare rhetoric cannot be tested and, on the other hand, the experience of dealing with the administrative responsibilities involved in running a welfare apparatus in a still-poor country does not feed back upon the party rhetoric. The governing elites, by their turn, may remain elliptical in their welfare political platform and manipulate welfare development according to their pace and convenience. Finally, the growth of a highly centralized state, controlling a huge amount of resources, and intervening in a large range of activities, has implied growing pressures for finding privileged connections with the state apparatus. Therefore, successful participation in the political game became exaggeratedly dependent upon the access to state resources: as it is usual to say, there is no salvation outside the state. The access to the growing welfare machine, as a strategic source of political resources, became indispensable and its control an important basis for political clientelism. The net result of these structural political constraints for the social policy system—in a society still strongly influenced by a patrimonial and patriarchical ethos—has been the prevalence of populism and demagoguery in the political practice and the widespread clientelistic utilization of the social policy state apparatus. These structural constraints have also led to the lack of alternative forms of issue organization, agenda building, and policy choices to face the social problems from the social policy standpoint, consistently supported by different political forces that would have to deliver results once in power. The "catch all" rhetoric of promising to solve all social problems through state-sup-

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ported programs and benefits became a generic "opposition platform" for all political forces outside the governing coalition. The absence of a long and sustained experience of democratic governments has biased the perception of the social issues and the public policies required to deal with them for all the players: the citizens; the politicians, their parties, and their constituencies,· the government and its bureaucrats. This nonzero sum game could be sustained more easily in situations of rapid economic expansion. Now that expansion halted, it is increasingly difficult to operate under these nonzero sum assumptions. The political movement behind the recent democratic transition raised the hopes that the structural constraints we just reviewed would be removed. However, given the depth and the complexity of the issues involved, it is clear, from an analytical point of view, that global structural changes could not be reached in the short run. But the particular form that the process of transition toward democracy has been taking in Brazil enhanced the political difficulties of this enormous and complex task, turning progressively into frustration. Relying upon the analyses of democratic transitions by O'Donnell, Lamounier, and Campello de Souza,18 among others, four aspects of the Brazilian transition toward democracy are relevant for exploring the restructuring of the social policy promised by the political mobilization. First, the military regime in Brazil—when compared to the Argentinean dictatorship, for example—was able to sustain high rates of economic growth and to modernize several segments of the state apparatus, although at the cost of deepening social exclusion. It was also able to expand social policy coverage although using rather perverse financial mechanisms and systematic mistargeting. As a result, a large proportion of the upper level administrative and technical "cadres" in the state apparatus emerged during this period of authoritarian rule. Second, the transition has been a rather long one, developing at a different pace since the "slow and smooth opening of the political system" proposed by General Geisel in 1974. This long transition, with its ups and downs, gave time to different political segments to progressively disengage from the military regime and facilitated the inclusion within the opposition coalition, of an array of divergent interest, loosely articulated and with conflicting priorities. Third, the ending of the authoritarian political rule, at least at the presidential level, occurred not only as a result of popular mobilization but also from a political pact that encompassed a rather broad spectrum of political forces including an important part of those forces that had actively supported the military regime. Besides, the access to the presidential power took place without specific popular election: the

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Congress elected President Tancredo Neves and Vice President José Sarney. José Sarney had been the leader of the party (PDS) that supported the military regime and an active member of the forces that, in the Parliament, voted against the reestablishment of popular direct elections to define General Figueiredo's successor. With the dramatic events leading to the death of President Tancredo Neves, Vice President José Sarney became the incumbent president supported, but not enthusiastically, by a large fraction of this broad and heterogeneous political front called the Democratic Alliance. This transition coalition included old active supporters of the military regime the center-to-the-right forces grouped around the PMDB, but excluded specific forces from the left of the political spectrum, particularly those organized around the Workers party (PT) and the Democratic Workers party (PDT). For better or for worse, this was the political price of the "negotiated transition." Fourth, the transition government took office with an ambiguous definition of the duration of its term (the old constitution, which guaranteed a six-year mandate, should be replaced by a new one, in which this duration could change) and, as we have seen, an agenda loaded with substantive problems to solve. Therefore, and distinct from what occurred in Spain, the transition government had to establish new rules for the political game and, at the same time, to play this game both in terms of securing political results for the conflicting interests and of delivering policy outputs to tackle the substantive issues. The political limitations this "agreed upon transition" imposes on the improvement of the Brazilian system of social policy became progressively clear. At the beginning, the more progressive forces within the governing coalition had access to decision centers from where the reforms could be launched. However, they had to face unpredictable resistance, first, from the existing interests that kept the control over second-level, but strategic, decision spots within the state apparatus by inertia, inefficiency, and even active opposition. Progressively, this opposition coalesced around the more conservative political forces controlling some important ministries and the inner power circle around the presidency. As a result, structural reforms of the social policy system, with the possible exception of those in the area of the Ministry of Social Security and Public Assistance, lost momentum. In the long run, the strategy of distinguishing short-term emergency policies from structural reforms was actively appropriated by the president and the more conservative forces coalescing around him: stronger emphasis was placed on the emergency plans. These programs were more easily conducted clientelistically and could be manipulated to provide electoral leverage. Finally, in the aftermath of the Cruzado Plan (and its failure to control

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inflation and to bring back the acceleration of growth rates), the controversial questions concerning the length of the president's mandate and the system of government (presidentialism vs. parliamentarianism) became central in the constitutional debate. As a result, the difficulties faced by the more progressive forces within the government increased and the transition political coalition, the Democratic Alliance, imploded. Progressive forces abandoned or were forced to abandon the high-level decision and implementation positions they held. The structural reform of the social policy practically disappeared from the government agenda. On the economic side, it was crucial to find a solution to the external debt problem that would bring back the flow of foreign investment, on one hand, and that would stop the drainage of resources to pay the debt financial services, on the other. Together with the improvement of the exporting capacity of the country, this could improve the performance of the economy in terms of its growth rates. On the administrative sphere, it is mandatory to recover the government capabilities: the "governability crisis" has to be confronted. In this regard, it is crucial to solve the public sector deficit, by cutting marginal expenditures, and to simplify the bureaucratic structures, by eliminating redundancy, inefficiency, and fragmentation. In order to do this, it is vital to restore the legitimacy and the credibility of the public authorities. On the political dimension, where the focal point of the present crisis is located, there is no alternative other than the reinforcement of the democratic consolidation process. Only more democracy, organized around a strong and stable party-system as well as around other institutional mechanisms (such as the labor unions movements, the social movements, and organized capital) developed to provide a legitimate ground for negotiation leading to more consensual and realistic priorities can, in the long run, bring some improvement. President Sarney, his popular image eroded and looking for new sources of legitimacy, has reinforced the clientelistic pattern of social services delivery. The control over these services became an important instrument for political co-optation, hardening the power game within the transition alliance. In combination, the structural inequalities, the inherited shortcomings of the existing social policy, the historical malfunctioning of the democratic process, and the pitfalls of the Brazilian transition toward democracy work to limit the Nova República performance in the social policy front. The transition toward democracy was completed with the election of the new president, by universal suffrage, at the end of 1989. President Fernando Collor de Mello (a young, modernizing politician of a center-

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to-the-right populist persuasion) was elected after a relatively tight competition against Luis Ignácio "Lula" da Silva, the union leader of the leftist Partido dos Trabalhadores; he is perceived as an "outsider" and does not have adequate party support in the Congress. President Collor came to power after a relatively long period of economic stagnation, strong inflationary pressures, and ungovernability. In order to try to reestablish the capacity of the federal government to promote development through economic policies, his first set of measures—known as the "Plano Brasil Novo"—has been an attempt to stop inflation abruptly and to reform the state apparatus. After three months, by June 1990, there were signals of economic recession and indications that the new government was facing increasing difficulties in managing the complex instruments of economic policy that the "Plano" seemed to require. It is still too soon to evaluate the final consequences of these measures and to assess the performance of the new government in the area of social policy. Notes This chapter was written in April 1988, when the Brazilian Congress was still drafting a new constitution. The new Brazilian Constitution, promulgated in October 1988, introduced some important changes concerning the introduction of new social rights, the increase of state and municipal expenditures on education, changes in the budgeting of social programs, the indexation of some social security benefits, and measures of decentralization of services. However, there were no major changes concerning the general profile of the Brazilian social policy discussed here. Economists and congress members of different political persuasion, concerned with the problems of public deficit, claim that the changes introduced by the new constitution will aggravate the deficit problem, particularly regarding the social security system. The impact of the new constitution on social policy, however, is not considered here. 1. There exists an extensive bibliography on the transition in Brazil. In this chapter we use extensively the work of Bolivar Lamounier, "Apontamentos sobre a questão democrática brasileira," in A. Rouquie, B. Lamounier and J. Schwarzer, eds., Como renascem as democracias (São Paulo: Brasiliense, 1985); G. O'Donnell, P. Schmitter, and L. Whitehead, eds., Transitions from Authoritarian Rule: Comparative Perspectives, 4 vols. (Baltimore and London: John Hopkins University Press, 1986); M. do Carmo Campello de Souza, "A Nova República brasileira: sob a espada de Damocles" (unpublished, 1988); and Fabio W. Reis, "Consolidação Democrática e Construção do Estado" (unpublished, 1987). 2. The literature about the social situation in the country at the beginning of the 1980s and about the social policies of the military governments is extensive. See, for example, M. Herminia Tavares de Almeida and Bernardo Sorg, Sociedade e política no Brasil pos-64 (São Paulo: Brasiliense, 1983); Vilmar Faria and Pedro L. Barros Silva, Transformações estruturais, políticas sociais e dinâmica

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demográfica, a discussão de caso, Brasil, 1950-1980 (unpublished, 1985); Ε. S. Bacha, H. S. Klein, eds. A transição incompleta, Brasil desde 1945 (Rio de Janeiro: Paz e Terra, 1986); Helio Jaguaribe, Brazil 2000—para um novo pacto social (Rio de Janeiro: Paz e Terra, 1986); Wanderley G. dos Santos, Cidadania e justiça (Rio de Janeiro: Ed. Campus, 1987); Sonia M. Draibe, "Notas (desanimadas) sobre a política social da Nova República" (Paper presented at the Eleventh Encounter of the National Association of Research in Social Science [ANPOCS], 1986); NEPP/UNICAMP, Brasil 1985—relatório sobre a situação social do país (Campinas, São Paulo: Ed. UNICAMP, 1986); NEPP/UNICAMP, Brasil 1986— relatório sobre a situação social do país (São Paulo: Ed. SEADE, 1988); and World Bank, "Policies for Reform of Health Care, Nutrition, and Social Security in Brazil," Report no. 3286-BR, January 1987. For a political platform, see the document of the Brazilian Democratic Movement Party (PMDB) entitled Esperança e mudança. 3. Campello de Souza, "A Nova República brasileira," p. 66. 4. According to the recent analysis of the World Bank, the Brazilian public sector expends 18 percent of the internal gross product on social expenses, a value greater than the average for developing countries. Other indicators, such as the rate of infant mortality, enrollment in high school, housing deficits, and social security payments, place Brazil among the least developed countries (see the World Bank Report 1988). 5. Lamounier, "Apontamentos sobre a questão." 6. Draibe, "Notas (desanimadas)." 7. Eduardo Fagnani, "A política social da Nova República: impasse na viabilização das reformas estruturais" (IE/UNICAMP, Campinas, São Paulo, March 1987, unpublished manuscript). 8. This summary is based on four principal documents: NEPP/UNICAMP, Brasil 1985 and NEPP/UNICAMP, Brasil 1986; Fagnani, "A política social"; World Bank, "Policies for Reform," 1987. Although this analysis follows closely the Unes of arguments in these documents, the responsibilities for specific analysis lies with the authors of the current work. 9. The so-called Calmon Amendment, approved by Congress in 1984, increased compulsory spending for education. 10. NEPP/UNICAMP, Brasil 1986—Relatório sobre a situação social do País, Ed. SEADE, 1988, chap. 3. 11. Ibid., chap. 1, which also contains an evaluation of the short-term effects of the Cruzado Plan. 12. Ibid., chap. 5. 13. Ibid., chap. 8; and World Bank, 1987. 14. The housing and urbanization policy led real estate developers to the practice of "leap-frogging" in the urban areas, displacing the poor toward the remote periphery of the cities and enhancing land speculation. The health care system, by privileging high-tech curative medical practice, unnecessarily increased laboratory tests and surgeries, as in the case of cesarean section deliveries, which reached the rate of 31 percent of all hospital births, the highest rate in the world. 15. Roberto Macedo, "The (Mis)targeting of Social Programs in Brazil" (University of São Paulo, 1987, unpublished manuscript).

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16. World Bank, 1987, p. iv. 17. Santos, Cidadania e justiça. 18. O'Donnell, Schmitter, and Whitehead, Transitions from Authoritarian Rule-, Lamounier, "Apontamentos sobre a questão"; and Campello de Souza, "A Nova República brasileira."

8· Health Policy in Brazil: The State's Response to Crisis

Angela Atwood Introduction Brazil's success in economic development has been tainted by its failure to improve the lives of significant numbers of people who are unhealthy and impoverished. About two-thirds of Brazilians continue to live below the poverty line, and even though per capita income increased by 5 percent each year for more than a decade in the 1970s, malnutrition persists at levels observed before the "economic miracle."1 There is enormous disparity in rates of life expectancy: the wealthy can expect to live seventy years; the poor, only fifty-five (see table 8.1). Although the achievement of better health for many Brazilians has been significant, the extent to which a large share of the population continues to suffer, without effective access to basic health services, indicates that a reevaluation of policy is in order. According to the World Health Organization, about 40 percent of all Brazilians lack adequate medical coverage.2 Brazil's investment in medical and other health-related items has not been commensurate with the country's national wealth, amounting in the late 1970s to only about 2.5 percent of the Gross National Product.3 The current health care system reflects the national economic priorities pursued in recent decades: it is urban-biased, benefits higher-income groups, is individual rather than collective in its approach, and is concentrated primarily in the industrial Southeast. The new civilian government faces quite a challenge in its proclaimed commitment to establish a new social contract and to improve the general health of the Brazilian people.4 The obstacles confronting the administration are great. There exists a formidable pressure from within the private sector by groups who seek to preserve the current system as well as a continuing economic crisis that makes the redirection of the funding necessary to remedy the current health conditions more difficult to rationalize. Administrative problems are evidenced by the conflictual relationships between various institutional entities and by the structural barriers (such as the highly centralized nature of the state

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Table 8.1. Estimated Life Expectancy at Birth According to Monthly Family Income Groups, 1976 Monthly Family Income Less than minimum wage 1-2 times minimum wage 2-5 times minimum wage More than 5 times minimum wage National average

Estimated Life Expectancy (years) 54.8 59.5 64.0 69.6 60.5

Source: J. L. Madeira et al., A dinâmica do movimento natural da população brasileira. Série Estudos e Pesquisas, IBGE, Rio de Janeiro, 1979. Indicadores Sociais - Relatório, 1979.

apparatus) that have impeded program implementation for decades. The improvement of the levels of health for all Brazilians will entail not only the redistribution of health resources (which will require overcoming opposition from special interests, intersectoral cooperation, and decentralization), but also the commitment of the government to adopt policies to improve the economic conditions of the poor and of the disadvantaged regions of the country. Several questions arise regarding the development of a national health policy that would substantially improve the health of the population. Is the government of Brazil willing to confront seriously the breach that separates the rich and the poor in health matters and to adopt concrete measures to mend it? Is the government willing to introduce the radical changes needed to restructure the health care system into a model that treats primary, rather than curative, health care as the principal priority? Is the government willing to confront the technical, social, and political obstacles facing the universal introduction of primary health care? Finally, and perhaps fundamentally, are policymakers willing to reevaluate their social and economic priorities, which seem to have sacrificed the welfare of the people to profit a few, and to adopt policies that will truly effect the redistribution of health and health resources? This chapter is about how the distribution of income and resources affects the distribution of health in Brazil. It will examine how the government has responded to the health needs of the population, and to what extent various health policies adopted since the rapid industrialization of the country have improved the general health conditions of the population. The next section will trace the emergence of a national health policy in Brazil. Public health was not considered a social issue in Brazil until

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the beginning of this century, when the accelerated industrialization and urbanization of the country profoundly modified the living conditions of the population.5 The rapid concentration of a poorly paid urban labor force created many problems. Inadequate housing, poor sanitation, mass epidemics, and malnutrition were only some of the problems that interfered with the supply and productivity of labor during a time of dramatic economic expansion. Public health measures, such as sanitation campaigns and basic health services, became requirements for the creation, maintenance, and reproduction of an urban labor force; rudimentary social security benefits were also formed during this period, as a means of control. Both of these actions, initiated by business and state authorities, were the embryonic structural components of the Brazilian health care system. In Brazil, the public health sector comprises the collective-preventive subsystem and the individual-curative subsystem. The former component includes the Ministry of Health and the state secretaries of health, and emphasizes services and programs directed toward the community as a whole that target the prevention of disease,· for example, vaccination and sanitation campaigns, maternal-child health care, and nutrition programs are all services that are collective-preventive in nature. These measures are developed through the state and municipal secretaries of health, the Superintendency of Sanitation Campaigns (Superintendência de Campanhas, or SUCAM), and the Foundation of Public Health Services (Fundação de Serviços de Saúde Pública, or FSESP). To deliver these services, the state and municipal secretaries maintain networks of clinics, which function precariously and vary in availability across regions. These clinics administer programs that control transmissible diseases such as tuberculosis, leprosy, and measles through sanitation and vaccination campaigns, and that offer nutrition, prenatal, and postnatal care. The collective-preventive subsystem emphasizes community involvement, primary health care, and preventive measures as the means for improving the health of the population. Funding for this subsystem comes primarily from the general revenues of the federal government. The second and major component of Brazil's health care system is the individual-curative subsystem, now comprising the Ministry of Welfare and Social Security (Ministério da Previdência e Assistência Social, or MPAS). It is responsible for providing medical care to persons covered by social security and is funded by an obligatory payroll tax. Some services are provided through ambulatory and hospital units owned by the MPAS and administered by the National Institute of Medical Assistance and Social Security (Instituto Nacional de Assistência Médica e Previdência Social, or INAMPS). However, the bulk of medical care is

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delivered by the private sector through contracts with the federal government. The individual-curative subsystem is organized around the hospital and emphasizes treatment of the sick individual. The separation of services, represented by the Ministry of Health and the Ministry of Welfare and Social Security, influences not only the organization and functioning of the health sector, but also the formulation of health policy. The two subsystems have developed at widely divergent rates. Prior to the military coup of 1964, the great bulk of public expenditure on health went to the collective-preventive subsystem. However, the trend since then has been the progressive marginalization of the Ministry of Health and the abandonment of collective-preventive measures, with the individual-curative subsystem climbing to the dominant position within the health care system. The impact of this trend cannot be overemphasized; the result has been a highly privatized health care system that is regionally concentrated and organized around the needs of higher-income groups, thus effectively denying the majority of the population access to desperately needed services. The last section will discuss this trend of privatization and its consequences for the Brazilian people. Some officials claim that since the economic recession of the early 1980s, there has been a reversal in this trend away from collective-preventive health care as well as a movement within the individual-curative subsystem to emphasize basic, inexpensive health care and thereby reduce some of the costs incurred by a hospital-based system. Whether this reversal signifies an actual change in national priorities or merely a response to the current economic crisis, the consequences of the policies pursued in the past two decades will not be easily undone. Industrialization and Health Policy in Brazil Public health grew as a social question in Brazil simultaneously with the emergence of industrial capitalism. The first stage of capitalist development occurred at the beginning of the twentieth century with the boom of the coffee economy and was characterized by the emergence of a wageearning labor force and accelerated urbanization. Health problems were mainly related to endemic diseases and the precarious living and working conditions endured by the urban population. In order to develop a spatially concentrated labor force, the state developed a strategy to attract and retain labor that basically entailed promoting hygiene and combating pestilence and infectious diseases. In the 1920s, public health gained new contours. The economy was expanding to its limits and new sources of labor were essential to continued growth. Various state governments and businesses set up health units that offered basic

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health services of maternal-child health care, hygiene, and sanitation. The financing of the health units was basically provided by the states, supplemented by small contributions from the federal government. Interestingly, the Rockefeller Foundation also participated by maintaining various health posts in the Northeast to "create sanitary conditions adequate for the development of a labor force required for capitalist development."6 In 1923, the National Department of Public Health (Departamento Nacional de Saúde Pública) was created as a coordinating entity; however, the problems of rural and urban sanitation, as well as the combat of endemic diseases, remained under local jurisdiction. In an attempt to stimulate immigration, practices of hygiene and public health were developed—as much by public as private initiative. Thus, it would seem that the development of public health services was a response to the expanding needs of the economy for new labor. In some cases, business adopted measures that protected the health of individual workers, allowed them to recuperate, and offered benefits to supplement their inferior incomes. During this period of rapid economic expansion, some of the official measures developed to control and regulate the labor market would constitute the core of the social security system. Retirement and Pension Funds (Caixas de Aposentadorias e Pensões, or CAPs), which were organized by business and financed by the states, employees, and employers, offered a limited range of benefits. Until the 1930s, workers depended on these limited benefits offered by some businesses, thus excluding a great proportion of the wage-earning urban labor force from health services. During the 1930s a national health policy began to emerge. More precisely, the necessary apparatus for executing a national health policy began to take shape. However, technically and financially it was restricted in terms of coverage. In response to the increased number of workers living and working in precarious health conditions (due to the increased urbanization necessitated by the economy), a centrally organized national policy arose in the structural dichotomy that exists today: public health measures (i.e., the collective-preventive subsystem) and social security benefits (or the individual-curative subsystem). The former would dominate policy until the 1960s; thereafter, despite the existence of serious public health problems, the latter would assume continuous control. Both of these subsystems became effective requirements for the process of industrialization. Evolution of the State Apparatus The health policy of this period was initially the incorporation and

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transformation of the state units created in the 1920s. The revolution of 1930 destroyed the "excessive" federalism of the First Republic and began the process of reducing state autonomy through several centralization reforms.7 In 1930 the Ministry of Health and Education was created and consisted of two departments: the National Department of Health and the National Department of Education. In 1934 the National Department of Health became the National Department of Health and Social-Medical Assistance. The department reinitiated the health campaigns, suspended from 1930 to 1934, which would become the central element in the national institutionalization of public health in Brazil. The campaigns were centrally coordinated and executed in a "military" fashion.8 The Department of Health and Medical-Social Assistance assumed the coordination of state departments of health, which basically entailed their standardization and the imposition of strict regulations. This increased attention to the interior can be related to the general movement to create a national labor market: the migration of labor to the dynamic centers of industry originated in areas where rural endemic diseases existed. Thus, the process of urbanization brought new public health problems to the cities where conditions were conducive to their spread. In 1937 the first actual public health service with national dimensions was created: the National Service of Yellow Fever. Two years later, a second campaign, Malaria Services of the Northeast, was initiated with the help of the Rockefeller Foundation. The foundation aided in the creation of the Special Public Health Services (Serviços Especiais de Saúde Pública, or SESP), a federal entity that significantly amplified the extension of health campaigns to areas of the country where economic expansion was occurring. The state's drive to centralize, the reforms in state health services, and the creation of multiple agencies and new funding services constituted a national health policy. During the 1940s, state organizations of health were expanded and reformed, becoming increasingly concentrated in the federal ministry, whose efforts to combat endemic disease were increasing. In 1941 the Ministry of Health and Education underwent important reorganization, incorporating not only endemic-disease services, but also the training of public health officials. The Constitution of 1946, which would remain in place until 1967, was vague regarding the health sector, although the central government was delegated exclusive responsibility for responding to rural endemic diseases and establishing norms for state and municipal programs. States, given residual powers by the constitution, became most active in preventive measures and the cure of nonendemic diseases.9 The number and quality of services provided by states and municipalities varied widely in correspondence with regional incomes and tax base differentials. In 1949, per capita state

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expenditures on health in the Southeast were three times greater than those in either the Northeast or frontier regions.10 In an attempt to control public health services more effectively, and thus signal the relatively greater importance of public health in the state's health policy, the National Department of Health and Medical-Social Assistance separated from the Ministry of Health and Education, and in 1953 became the Ministry of Health. During the 1950s the public health sector developed the basic structure that exists today. The state apparatus assumed under the Estado Novo grew as much by the relative extension of services as by its accentuated centralization. However, public health policy was still limited in its effectiveness due to technical and financial barriers that had, since the beginning, marked the sector. Even though public health was recognized as a social question, it was not in any sense among the priority state projects. In terms of expenditures during this stage of industrialization, the state concentrated its still relatively scarce resources in areas that directly advanced the process of industrialization. Moreover, in terms of revenue, the state had a narrow financial base. Thus, the low priority accorded to public health was a reflection of limited industrial development as well as the absence of support and social pressure for radical reforms. Under these conditions, public health suffered from chronic shortages of resources at the expense of the health of the population.11 The transition from rhetoric to practice was a slow one. However, the administrative rationalization and concession of greater bureaucratic status to public health was demonstrated by the creation and centralization of health campaigns. In 1956 the National Department of Rural Endemic Diseases (Departamento Nacional de Endemias Rurais, or DNER) was established to act in areas of economic activity where the amassing of critical factors that facilitate development (e.g., transportation, resources, and abundant labor) was impeded by the lack of a healthy environment.12 The intention of extending public health services and promoting health campaigns (as promulgated in the reforms of the 1950s) signifies the economic transformation of the period, which saw the acceleration of internal migration movements, the interiorization of economic expansion, profound urbanization, and high rates of growth of the urban population from 1950 to 1960.13 The basic characteristics of reform during this period were administrative rationalization and greater bureaucratic status attributed to public health and the creation of fundamental institutional elements within the Ministry of Health. Public health expenditures on the collective-preventive subsystem represented a relatively favorable portion of the national budget from

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1956 to 1964; greatest participation occurred in the years from 1961 to 1964, when the ministry recorded 4.57 percent, 4.31 percent, 4.10 percent, and 3.65 percent of the national budget.14 Although the Ministry of Health was the principal apparatus of public health, its funds were already diminishing. Though the health policy pursued in the 1940s and 1950s improved health conditions for certain segments of the population, infectious and parasitic diseases and high rates of morbidity and infant mortality persisted. By the mid-1960s, despite these unresolved problems, the collective-preventive subsystem had declined substantially in relative importance in terms of funding. Three explanations for the deterioration of funding for the Ministry of Health are a lack of public pressure on the government to expand its services, insufficiency of available funds due to a restricted tax structure, and a bias among national policymakers toward economic rather than social policy.15 Parallel to the marginalization of the Ministry of Health was the centralization and growth of the social security system, whose formation and development will be analyzed below. Development of the Social Security System The evolution of the Brazilian social security system occurred during a period characterized by: (1) increased centralization of public health programs; (2) accelerated growth of an urban wage-earning labor force that required the extension of medical coverage; (3) increased demands by various worker groups for improved and standardized benefits and services provided by the system,· (4) economic policies that created packages of investments for the industrial sector,· and (5) improved postwar technology in medical services that raised efficiency (and costs) and transferred the hospital to the center of the system. Thus, social security would provide medical services essentially individual-curative in nature. During this period, the state was being transformed in the direction of centralization and mobilization of resources, a process that would be consolidated after 1964. A national social security system emerged in Brazil in the 1930s with the creation of the Retirement and Pension Institutes (Institutos de Aposentadorias e Pensões, or IAPs). While it is true that retirement and pension funds connected to big business and state policies of hygiene and health were developed in the 1920s, they were limited in benefits and coverage and organized at the regional level. A national social security system was not created until the 1930s, when the total influence of the reforms and alterations in state apparatus (characterized by the tendency of the Estado Novo toward centralization of services) resulted in a plan with the intention of extending social security benefits to all wage

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earners in urban areas. However, until 1963, the system extended only to groups of the urban population tied to basic sectors of production (e.g., commerce, banks, industry, maritime).16 These programs essentially followed traditional social insurance lines—that is, to provide old-age, disability, and related benefits. Health services were supplementary in nature and were offered primarily as an attempt to reduce the demand for disability benefits. The marginal status attributed to health benefits is evidenced by the fact that, as of the mid-1940s, less than 10 percent of the social security budget went to health services.17 The IAPs differed considerably from the CAPs in both structure and function: ( 1 ) funds became organized by professional and occupational category and not by business, thereby including workers of smaller businesses; (2) IAPs were constituted as autonomous entities, thus implying greater control by the state over the system than existed previously; and (3) benefits were equalized for all workers within the same occupational category; benefits varied according to wage differentials, not by region or business. Until the 1950s, there was no significant expansion of medical benefits to the Brazilian population. Medical and hospital assistance was still, to a great extent, provided by the private sector, although the importance of financing medical assistance with public resources was becoming recognized. Health expenditures were a minimal and decreasing proportion of the total social security bill: 47.1 percent in 1923,13.8 percent in 1930,10.2 percent in 1939, and 7.3 percent in 1949.18 As the number of contributors grew, so did the system's financial base. Until the 1950s, the social security system enjoyed a healthy financial situation. However, during the 1950s, with the discovery of new pharmaceutical products and the growing sophistication of medical equipment, the costs of medical care increased dramatically. Thus, from the late 1950s until 1966, the social security system suffered serious economic crises in its ability to meet the growing demand for medical care. In 1949, only 7.3 percent of the social security budget was directed to medical assistance. By 1960, this figure had already reached 19.3 percent.19 This increase reflects not only the elevation of technical costs, but also the growing demand for medical care resulting from the increased coverage of a growing urban labor force in the 1940s and 1950s. The urban labor force was subjected to generally poor working conditions and low wages; thus, the benefits of social security were indispensable supplements demanded by workers in their struggles for higher wages and better living conditions. The social security system also played an increasingly important role in the recuperation and maintenance of the productive capacity of labor. The system resisted labor's demand for more economic and political power by substituting worker

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control with indirect redistribution of income via social programs. Medical care was integral to the welfare state and grew in importance. By 1966, medical assistance accounted for 29.6 percent of the social security bill, and there was no indication of the trend reversing.20 In this same period, parallel to the process of increasing medical costs, a trend of privatization was apparent within the hospital sector. From 1950 to 1960 the proportion of private hospitals to the total increased from 43 percent to 62 percent.21 This movement was accompanied by the growth of the pharmaceutical industry and the substantial expansion of medical equipment imports. What followed was a greater cooperation between the state and the private health sector. The relative increase in demand for medical services combined with higher cost delivery, the trend toward privatization, the concentration of services around hospitals, and the cumulative effect of retirement and pension plans, in which beneficiaries outnumbered active contributors, all thrust the social security system into crisis. The crisis, beginning in the late 1950s and continuing into the next decade, was a structural one due largely to the capitalist patterns of organization that had come to characterize the health sector. Crisis and the Privatization of the National System of Health As we have seen, the beginning of the 1960s was characterized by a phase of acute crisis for the national health system. On the one hand, the social security system exhibited an inability to respond to the growing demands of the urban labor force. On the other, the public health system suffered from insufficient funding from the state as a result of its increasingly marginalized status. The "Boom" of the Individual-Curative Subsystem In all countries, there was an extraordinary rise in the costs of health care because of the scientific and technological transformations of the postwar period. There was a profound change in the medical knowledge base and the practice of medicine, which resulted in increased utilization of sophisticated medical equipment, diagnostic services, and drugs. These transformations greatly altered the public's concept of health care, which was becoming more and more specialized in both services and personnel and which positioned the hospital as the central and fundamental element. As a result, costs grew rapidly, denying access to the majority of the population and threatening institutional capacity to finance the health care guaranteed by social security. Brazilian government institutions were unprepared to meet the crisis.

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The specific difficulties encountered by the health care institutions occurred within the more general context of national problems at the outset of the 1960s. The economy had developed profoundly in the preceding decade, creating the necessary technical base for rapid industrialization. After the military coup of 1964, reform was characterized by the strengthening of state apparatus. A rigorous economic model was introduced. A series of institutional acts reinforced the power of the state and provided the means to use coercion to ensure implementation of programs. These administrative and financial reforms produced in the health care system the characteristics of a predominantly capitalist model. In the area of social security, the government adopted an ideology of "administrative modernization of state institutions. "22 "Modernization" meant structurally changing the program to make it more centralized and authoritarian in nature. New relations of power began to emerge between the state bureaucracies and the private sector in the area of medical enterprises and private hospitals. These ties were consolidated throughout the period and created conditions conducive to the privatization of medical services provided to beneficiaries. The structural reforms that would redress the crisis brought greater centralized control, increased funds, and extended coverage. During this period, the state came to accept the responsibility for providing medical assistance.23 This change was a result of the accelerated process of industrialization that generated a mass of waged laborers in urban areas whose working and living conditions necessitated more and more medical care. However, the system was pressured to its limits and became increasingly incapable of guaranteeing care. The response of the state was, in 1966, to unify the old IAPs into one institution, the National Institute of Social Security (Instituto Nacional de Previdência Social, or INPS) and thereby centralize social security funds. That same year the Ministry of Labor suspended the representation of employees in the Social Security Administrative Council, which had been created in 1923 and had always included employee participation. The government also transferred the duty of providing medical care to group medical enterprises. Thus, the government released itself, to a great extent, from the direct provision of services to workers and effectively placed their health care in the hands of the private sector. These two reforms—denying worker representation on the administrative council and contracting with the private sector—increased the control of the state and set the stage for the privatization of public medical care. The government contracts for services with the private sector in two ways: directly with private facilities and indirectly through group

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medical companies. Commercial and industrial firms, in order to provide medical assistance to their employees, establish contracts with group medical companies (empresas médicas de grupo, or EMGs). The government pays a fixed amount each month (5 percent of the existing minimum wage per worker) to the firm, which passes it along to the EMG with an additional fee, which can be deducted from the firm's income tax.24 Medical assistance provided by EMGs is almost completely financed by the government through INPS. The EMGs establish ambulatory clinics at the work site, as well as in peripheral areas, and staff the facilities with their own consultants. EMGs offer varying levels of services—"standard, extra, executive, special"—depending on the workers' position within the wage hierarchy of the firm; in other words, EMGs offer varying levels of quality of care that discriminate against low-wage workers.25 All in all, the structure of service delivery established by EMGs benefits the contracting firm and the state because of its rigid control over the worker. Since the EMG provides on-site medical care, the worker does not lose time away from the job waiting in lines at state or municipal health centers. EMG doctors also determine the necessary amount of recuperation time. In addition, EMG doctors determine whether referral to another specialist is necessary and supply the certificates of sickness that validate absenteeism. Also, EMGs provide generally low-quality services. In seeking to reduce costs, the owners require doctors to perform the minimum number of exams needed for diagnosis.26 Finally, workers covered by EMGs lose their right to medical care through INPS, whose facilities and services are diminishing except in situations of long and costly treatment. Approximately 30 percent of the urban labor force receive medical care from EMGs.27 The Plan for Immediate Action recommended in 1974 that the number of public hospitals not be increased and that those existing be privatized.28 This plan only formalized what the state had been practicing since the military coup in 1964. After the creation of INPS in 1966, fewer and fewer contracts with other public health facilities (university, state, and municipal hospitals) were established, and its own hospitals were underutilized. By the late 1970s, INPS contracted for 300,000 private hospital beds and maintained only 7,800 of its own, which were nearly half empty.29 The total number of INPS facilities in the country (8,000 beds in 35 hospitals) was only slightly larger in 1982 than it had been twenty years earlier.30 The state also contracts directly with private hospitals and ambulatory units for services for its beneficiaries. Payment is done on a fee-forservice basis according to a price schedule formulated by the state. Due to the lack of supervision or evaluation on the part of the state, this

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system of payment has resulted in gross distortions: inadequate and unnecessary services, maldistribution of service delivery, utilization of excessively high-tech equipment and services, excessive costs for drugs and exams, and underutilization of public facilities. In 1981, 72 percent of the INPS health budget went to the private sector.31 The growing volume of public money gushing into private business has caused an uncontrollable fever of corruption. INPS estimates that in 1981,90 percent of the bills presented to it by the private sector contained irregularities. For example, in 1970, private hospitals contracted by the state performed 100 percent more cesarean-section deliveries than public hospitals.32 This corruption is a double attack on the already weakened health of the workers. The money that supports this system comes from the workers' pockets via a compulsory payroll tax, yet care is either of low quality or inaccessible. The population that should receive health care guaranteed by social security supports a system that excludes them due to its emphasis on high-tech, individual-curative treatment. The domination of the private sector has resulted in a health care system that is geographically and financially inaccessible to the majority of the population. The rapid expansion of the private health sector from 1967 to 1977 was essentially subsidized by the state, which made third-party payments out of its payroll tax and which provided highly subsidized loans for the construction of private hospitals. In 1970, the real level of spending by INPS on health was already 95 percent higher than in 1967.33 Medical care vis-à-vis other benefits available through INPS grew substantially. Originally conceived as a supplementary benefit, health became the major program within the social security program. This is evidenced by the sustained rates of growth of medical care expenditures in relation to the total INPS budget: by 1976, health accounted for 31.3 percent of the total.34 Such growth is principally the result of the high rates of expansion after 1972, when social security was extended to rural workers as well as to self-employed and domestic workers. The importance of the subsystem was further demonstrated by the creation of the Ministry of Social Security and Welfare in 1974. The impact of this substantial expansion of coverage on the private sector was great. The state did not intend to construct any new facilities of its own, so contracts with the private sector proliferated. The establishment of new units in rural areas meant increased demand for personnel, medical equipment, and pharmaceuticals. INPS spending on ambulatory care increased 400 percent between 1970 and 1976.35 All in all, from 1967 to 1978 INPS expenditures on health increased 437 percent.36 Ironically, the state must solve a problem aggravated by its own policy. On the one hand, the state must act to contain the rising costs of medical

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assistance: the unlimited demands of beneficiaries and the unreliable demands of the private sector compromise the state's financial equilibrium. On the other hand, the state is the principal source of finance for capital accumulation in the private health sector. The centralization of the social security system created conditions conducive to the extension of coverage and thereby increased the capacity of the private sector to expand its services. Private medical enterprise turned to the financial market of INPS and boomed. Subsidized by the state, the private health sector was free to import the most sophisticated technology, emphasize costly services, and stimulate health-related industries—all which diverted important resources away from the majority and benefited only a few. The privatization of medical care, accompanied by the diminished priority given to the collectivepreventive subsystem, has resulted in a model of health care that yields few social benefits. The Marginalization of the Collective-Preventive Subsystem There is not much debate over the fact that public health was essentially abandoned during the 1960s. The low priority accorded to collectivepreventive health measures is demonstrated by the Ministry of Health's diminished participation in the global national budget: between 1968 and 1974 the ministry's budget fell from 2.2 percent to 0.9 percent of the national budget.37 The decline of public health as an important social policy is more directly represented by the deterioration of support for specific institutional programs. Expenditures for maternal-child health care decreased substantially, and by 1969 were, in real terms, inferior to those of 1957. Tuberculosis services received less in 1969 (in real terms) than in 1964, and even less than in 1956. Funds directed to programs developed to combat rural endemic diseases, which until 1965 were privileged, were so severely cut that by 1969 their real level was below that of 1964 and 1958.38 These decreases in funding were not due to the achievement of satisfactory levels of health or improved environmental conditions. On the contrary, health conditions were worsening. The decreases were the result of a political decision to support the individualcurative subsystem over the collective-preventive subsystem (table 8.2). Furthermore, economic policies pursued after 1964 overwhelmingly subordinated social concerns, including questions of public health, to the economic development of the country.39 Between 1965 and 1972, due to the restricted funds allocated to the Ministry of Health, direct spending on health fell behind indirect spending through social security. The various actions that are characterized as collective-preventive (e.g., immunization and sanitation cam-

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Table 8.2. Percentage Distribution of Preventive and Curative Shares of Brazilian Health Expenditures, Selected Years, 1949-1982 Year

Medical-Hospital or Curative

Primary or Preventive

1949 1965 1969 1975 1978 1979 1980 1981 1982

12.9 35.8 59.2 70.2 81.3 81.9 84.9 82.2 84.6

87.1 64.1 40.8 29.7 18.7 18.1 15.5 17.8 15.4

Source: William Paul McGreevey, Sérgio Piola, and Solon Magalhães, Health and Health Care since the 1940s, World Bank, 1985.

paigns, maternal-child health care, nutrition programs) have a more direct impact on the health conditions of low-income groups than do individual-curative programs. In this period of diminished resources for collective-preventive measures, which were not substituted by more effective or efficient measures, it was inevitable that the general health of the population would worsen. The period from 1965 to 1972 was characterized by a deterioration in income distribution as well as a decline in real wages. It was a period noted for its elevated rates of accumulation and also for its substantial deterioration of the level of health of low-income groups.40 By 1973—with an atrophied public health sector and an impoverished population—the antagonism between economic development and social welfare was apparent: the coexistence of chronic-degenerative diseases and contagious-infectious diseases,· a high incidence in urban areas of endemic diseases previously found only in rural areas,· the resurgence of tuberculosis and the persistence of malnutrition and high rates of infant mortality. The state responded by revitalizing the Ministry of Health's budget to some degree, but still gave it noticeably low priority in the national budget. Actual rejuvenation of the Ministry of Health did not occur until 1975, when its resources expanded 35.7 percent from its 1974 budget.41 The elevation in funding corresponded with the ministry's attempts at institutional rearticulation. One sign of this change was increased financial transfer to state health entities and increased funding for SUCAM. These actions reflected the reactivation of the battle against

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endemic rural diseases, which in some areas had reached crisis proportions. Thus, the Ministry of Health indirectly revealed the contradictions between itself and the Ministry of Social Security and Welfare (created in 1974), as well as the urgency of the situation resulting from the rapid economic development of the previous six years. After 1974, the end of the "miracle," the question of health grew politically. The impotence of individual-curative care for large populations was exposed. Crisis levels of malnutrition, infant mortality, and certain endemic diseases like spinal meningitis and malaria plagued the country. The state responded with a series of socially oriented measures that attempted to correct the distortions of the economic model. The period from 1974 to 1979 was marked by health campaigns directed toward the resurgence of certain endemic diseases. Due to the appeals of public health officials, several programs were developed or enhanced to reach parts of the population that had suffered the most from economic development. However, all programs were marked by limited success. One such program was the National Immunization Program, established by the Ministry of Health. Its objective was to reduce the risk of preventable sickness and death through immunization. Subprograms that vaccinated children against measles, diphtheria, whooping cough, tetanus, smallpox, and polio were administered by SESP and executed by the state secretaries of health. The goal was to immunize all infants less than a year old. However, by 1978, the highest rate of coverage for any subprogram was 46.6 percent for the diphtheriapolio-tetanus vaccine, and the lowest rate was 30 percent for the smallpox.42 This meant that over half of the infant population was not being reached. The lack of a broad network of basic health facilities, especially in rural areas, was a major obstacle to better coverage. Interestingly enough, a program that would have established such a network, the Program for Grass Roots Health and Sanitation Actions in the Northeast (Programa de Interiorização Ações de Saúde e Saneamento no Nordeste, or PLASS) failed due to lack of support. In 1976, PIASS was created by a committee composed of representatives from the Ministries of Health, Social Security and Welfare, the Interior, Agriculture, and Planning and was coordinated by the Ministry of Health. The main principles promulgated by the program were: 1. Many health problems can be successfully prevented and treated at the community level without recourse to expensive hospitalization. 2. Preventive and basic curative services should be integrated with more complex curative services through coordinated institutional networks. 3. Health services alone tend to have limited impact on community health standards. Services should be combined with improved water and

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sanitation systems, vaccinations, nutrition, and other preventive-health programs.43 PIASS was to set up health posts and centers throughout the Northeast with funding from both the Ministry of Health and the Ministry of Social Security and Welfare, which would also provide recurrent funding. However, PIASS was hardly successful. Officials estimated that PIASS covered only 25 percent of the target population. Explanations for failure include insufficient administrative decentralization, inadequate distribution of supplies, poor staff organization and recruitment, shortage of funding, and bureaucratic problems in acquiring the land for PIASS facilities.44 Many officials recognized the advantage of adopting the PIASS approach to other regions. Although health problems are generally most serious in the Northeast, it was recognized that other regions, both rural and urban, could benefit from the program's principles, which emphasized the use of public facilities and community involvement and deemphasized the role of the physician. However, this idea met resistance from the private health sector. Physicians who felt threatened by community involvement and the use of auxiliary medical personnel fought support for the program and thereby limited its expansion.45 The Ministry of Health, through the National Institute of Nutrition ¡Instituto Nacional de Nutrição, or INAN) elaborated a food and nutrition program (Programa de Alimentação e Nutrição, or PRONAN). The goals of the program were to provide food supplements and care for the malnourished and support for the training of nutrition specialists and continued research. PRONAN intended to reach around 16 million people—especially children, pregnant and nursing woman, low-income families, and families on small rural farms. A 1982 study estimated that only 2.8 million persons were covered (15 percent of the original goal) and that, of the 540,000 families on small rural farms, only 41,000 (7.6 percent) were benefited.46 The distribution of food supplements, which were to be natural food items produced by small farmers, were substituted by processed foods due to pressure from MPAS. Thus, in the process of giving incentive to small farm producers, the food-processing industry, a sector predominantly controlled by transnational corporation, was stimulated.47 Once again, health policy would have its social objectives compromised by economic objectives tied to growth objectives. The National Program for Basic Health Services (Programa Nacional de Serviços Básicos de Saúde, or PrevSaúde) was proposed by the Ministry of Health, the Ministry of Welfare, and Social Security with the objective of extending basic health services to 90 percent of the Brazilian population. The pilot project, which was examined in 1981 by the Council for Social Development, was "mutilated" in its initial stages of

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formation. The program proposed the building of new public facilities,· as a result, opposition barriers emerged from the INPS bureaucracy, the Brazilian Hospital Federation, the Brazilian Medical Association, and the Brazilian Group Medical Association—all of whom denounced PrevSaúde as "socialist."48 Reversing the Trend: Is It Possible? Health experts in the 1970s sought to reverse the growing imbalance between the collective-preventive and the individual-curative subsystems, but with hmited success. They recognized that the solution to the problem of extending basic health care would involve a restructuring that would deemphasize doctors and hospitals and strengthen the use of paramedical personnel, clinics, and integrated preventive measures. But, as noted above, the expansion of programs like PIASS, PRONAN, and PrevSaúde was successfully opposed by medical and hospital interests, and the relationship between the two ministries representing the basic components of the health care system in Brazil was fraught with tension and disputes. By the early 1980s, a geographic distance had also developed between the two ministries, with the Ministry of Health addressing the health problems of the rural Northeast and the Frontier, and the Ministry of Social Security and Welfare specializing in the problems of the affluent Southeast, South, and Central-West regions. MPAS spent twice as much per capita in the Southeast (Rio de Janeiro, São Paulo, Minas Gerais, Espírito Santo) than in the nine poorer states of the Northeast between 1979 and 1981.49 Obviously, this inequality of expenditure is exactly the inverse of health conditions: the worst levels of health are where the least per capita spending is directed. Because of the lack of public facilities, people are forced to use private facilities, and for the poor, health care costs can become a formidable percentage of their income. The economic recession in Brazil during 1981-1983 exacerbated an already difficult situation. The combined effect of economic deprivation and decreased health services on the health status of the low-income population was negative.50 For Brazil as a whole, public expenditures on health fell by 13 percent, and by much more on a per capita basis, between 1978 and 1984.51 The largest cuts in the federal budget occurred in the area of health, severely affecting the programs directed toward the Northeast, which depend almost completely on state funding. Treasury allocations were one-third lower in 1984 than in 1982.52 The economic recession also influenced the MPAS budget. Because of the decline in wages, funds for medical care through INAMPS declined precipitously. As a result, several changes occurred: ( 1 ) a new payment

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system replaced the fee-for-service system and worked to contain more effectively the costs of contracting with private hospitals; (2) some services were cut back; (3) restrictions on elective hospitalization in private hospitals were increased and admissions into public facilities were prioritized; and (4) emphasis was increased on ambulatory care. Between 1980 and 1983 per capita hospital admissions declined 13 percent and the number of ambulatory visits per capita increased 16 percent.53 Thus, it appears that the cost-containment reforms slowed the growing concentration of health care on curative services and augmented the preventive subsystem. Some officials claim that reforms since the recession have begun to shift in favor of the needy. Partly to reverse the trend away from collective-preventive health care, the government established the Fund for Social Investment (Fundo de Investimento Social, or FINSOCIAL) in 1982 to finance food programs, disease control programs, and medical supply distribution. Policies in addition to FINSOCIAL marked the beginning of a process to reverse the growing privatization of costly medical-hospital care. MPAS began committing an increasing share of its budget to contracts with state secretaries of health in the Northeast who emphasize primary health care. An interministerial coordinating body of Health, Social Security, and Education has influenced the foregoing change in part through its primary health care program of Integrated Health Actions (Ações Integradas de Saúde, or AIS). Despite reform efforts, Brazil's health care system is still unsatisfactory. The levels of health of the population have continued to deteriorate. Health authorities report high levels of malnutrition, tuberculosis, AIDS, polio, leprosy, yellow fever, and other endemic diseases.54 This current health crisis can in part be attributed to the predatory route to development pursued by the military regimes of the last two decades, which were bent on pushing the country into the position of a leading industrial world power. Development, as well as underdevelopment, undermined the health of the people. Health not being a national priority, the most recent military government reduced the funding for rural endemic disease control by 25 percent.55 As a result, many endemic diseases have reached crisis levels. Chagas' disease, a parasitic disease typical of underdeveloped regions characterized by high rates of malnutrition, has infected an estimated 5 million persons.56 Malaria, which was nearly eradicated in the late 1960s, has resurged with vigor. The number of reported cases increase from 51,000 in 1970 (the lowest number reported in a twelve-month period in the history of the country) to 430,000 in 1986.57 Tuberculosis is still an important public health problem, despite improved measures for its control and cure since World War II. Leprosy, although curable,

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has infected an estimated 230,000 persons.58 Approximately 30 percent of the population suffers from malnutrition.59 Why? One partial explanation is that the current health structure seeks to cure rather than to prevent disease. The World Bank estimates that 80 percent of all deaths caused by infectious and parasitic diseases may be reduced or prevented by appropriate intervention.60 Infant mortality could be cut in half if basic care was received by pregnant women. In 1984,25 percent of pregnant women did not receive prenatal care and in rural areas 51 percent of the women gave birth without ever having seen a doctor.61 Simple sanitation measures could substantially reduce the high rates of some transmissible diseases, but in 1983, 65 percent of all households were without potable water and 70 percent were unconnected to an efficient sewerage system.62 In recent years, approximately 4 percent of the GDP goes to public health services; of this, only one-eighth is directed toward sanitation.63 Public officials are well aware of the fact that it is far more costly to combat an epidemic than to prevent its resurgence. However, inaction persists on the part of the government. In 1985, SUCAM officials warned of an impending Dengue fever epidemic and requested 340 million cruzados for its prevention. They received 40 million cruzados in 1986 to combat the epidemic.64 In 1986, SUCAM presented an institutional program that would require 3.1 billion cruzados. Prior to the Cruzado Plan, SUCAM was promised 2 billion cruzados, and in the end received 1.5 billion—less than half of the original request.65 In order to defend itself, a government must use sociopolitical terms that suggest an interest in bettering the lives and health conditions of the poor: programs of nutrition, sanitation, and income distribution. The language used implies intentions to change the system, but the policy appears to be deliberate inaction. The government claims to act in the interests of the majority, but nevertheless remains relentlessly tied to the interests of private financial institutions and industry. The government must struggle with the contradiction between ensuring the accumulation of capital and at the same time legitimating its power by maintaining conditions that make accumulation possible and by creating stable social conditions through programs. Programs developed in the late 1970s were the state's response to the economic rupture of 1974 that destabilized social conditions. But as noted above, the programs did not substantially improve the living conditions of the majority of the population. Their limited success was blamed on bureaucratic ineptitude and lack of sufficient funds. While these are easy explanations, they are not very convincing. The dangers of not maintaining programs are well known, and bureaucratic naivete, while it might explain initial periods of resurgence after preventive

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programs have been relaxed, cannot explain the government's inaction once the crisis is recognized. In every instance, the failure of a specific program has been attributed to inadequate administration, inadequate supplies and trained personnel, inadequate infrastructure, and underdeveloped socioeconomic conditions, all of which could be solved by increased funding. In times of crisis, one would expect the government to shift resources away from less pressing projects. The continuing resurgence of certain endemic diseases raises difficult questions about the politics of public health. It is interesting to note that although health campaigns are integral to broader objectives, they are narrow in the way they focus only on battling particular parasites or vectors of the disease at hand. Such methods as using pesticides to fight malaria do not promote general improvements in nutrition, sanitation, or income. Public health policy has generally aimed to maintain a productive work force at reasonably low costs, not to redistribute the wealth generated by development. Thus, public health gains status in policy when the economy suffers from the inefficiency of a sick labor force. Decisions to foster public health are not based on the existence of poverty or disease, but are developed around the expanding needs of the economy. If the formation of health policy in Brazil is politically motivated, the prospects for the substantial improvement of the health of the population seem remote. If health policy has been developed as a strategy for controlling workers' struggles for higher wages, maintaining social order, and legitimating the existing power structure, then any modification in current health policy will be achieved only by those who suffer the consequences. Notes 1. Helio Jaguaribe, Wanderley Guilherme dos Santos, Marcelo de Paiva Abreu, Winston Fritsch, and Fernando Bastos de Avila, Brasil 2000: Para um novo pacto social (Rio de Janeiro: Editora Paz e Terra, 1986), p. 60; William Paul McGreevey, Learning from the Brazilian Recession and Its Impact on Health and Nutrition (Washington, D.C.: World Bank, 1986), p. 4. 2. P. A. Kluck, "The Society and Its Environment," in Richard F. Nyrop, ed., Brazil: A Country Study (Washington, D.C.: American University, 1983), p. 151. 3. Ibid. 4. Jaguaribe et al., Brasil 2000, p. 9. A study mandated by President José Sarney, it addresses serious social problems in Brazil and proposes, through a "novo pacto social," to adopt measures and policies that will lead the country to a "substantially more equitable social order." 5. Madel T. Luz, As instituições médicas no Brasil (Rio de Janeiro: Edições Graal Ltda, 1979), p. 55.

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6. José Carlos de Souza Braga and Sérgio Góes de Paula, Saúde e previdência: estudos de política social (São Paulo: CEBES-HUCITEC, 1981), p. 45. 7. Ibid., p. 53. 8. Ibid., p. 54. Sanitation campaigns were important elements in the process of centralization of public health and marked the increased control of federal government over state governments. 9. Richard Knight and Ricardo Moran, Brazil Human Resouics Special Report (Washington, D.C.: World Bank, 1979), p. 20. 10. Ibid. 11. Braga and de Paula, Saúde e Previdência, p. 56. 12. Ibid., pp. 57-58. 13. In the period from 1950 to 1960, urban population growth rates were 67.9 percent in the northeast, 66.6 percent in the southeast, and 70.3 percent in Brazil. IBGE, Censos Demográficos, 1976, p. 332. 14. William Paul McGreevey, Sérgio Piola, and Solon Magalhães, Health and Health Care since the 1940s (Washington, D.C.: World Bank, 1985), p. 62. 15. Braga and de Paula, Saúde e previdência, pp. 64-65. 16. Knight and Moran, Brazil Human Resources, pp. 20-21. 17. Ibid., p. 21. 18. Braga and de Paula, Saúde e Previdência, p. 68. 19. Ibid., p. 72. 20. McGreevey et al., Health and Health Care since the 1940s, p. 33. 21. Ibid., p. 35. 22. Hesio de Albuquerque Cordeiro, "Políticas de saúde no Brasil," Saúde e trabalho no Brasil (Petrópolis: Vozes, 1982), p. 83. 23. Celia Maria de Almeida and Raquel Abrantes Pego, "Organizaçados serviços de saúde," Saúde e trabalho no Brasil, p. 63. 24. Ibid. 25. Jayme Landmann, Medicina não é saúde: as verdadeiros causas da doença e da morte (Rio de Janeiro: Editora Nova Fronteira, 1983), p. 153. 26. Ibid., pp. 21-22. 27. Roldão Arruda, "De mal a pior," Retrato do Brasil (Rio de Janeiro: Editora de Livros, Jornais, e Revistas Ltda., 1984), p. 495. 28. Cordeiro, "Políticas de Saúde no Brasil," p. 87. 29. Arruda, "De mal a pior," p. 495. 30. McGreevey et al., Health and Health Care since the 1940s, p. 23. 31. Arruda, "De mal a pior," p. 485. 32. Ibid., p. 496. 33. Braga and de Paula, Saúde e previdência, p. 99. 34. Ibid. 35. Ibid., p. 115. 36. Ibid., p. 101. 37. Cordeiro, "Políticas de saúde no Brasil," p. 84. 38. Braga and de Paula, Saúde e previdência, p. 91. 39. "O Brasil esta doente," Visão (May 21, 1986), p. 32. 40. Edmar Bacha, "Issues and Evidence of Recent Brazilian Economic Growth," World Development, vol. 5, nos. 1 and 2 (1977), p. 54. 41. Braga and de Paula, Saúde e previdência, p. 96.

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42. Knight and Moran, Brazil Human Resources, p. 12. 43. Ibid., p. 29. 44. Ibid., pp. 30-31. 45. Ibid., p. 31. 46. Cordeiro, "Políticas de saúde no Brasil," pp. 88-89. 47. Ibid., p. 89. 48. Ibid., p. 90. 49. McGreevey, Learning from the Brazilian Recession, p. 41. 50. Ibid., p. 3. 51. Ibid., p. 32. 52. Ibid. 53. William Paul McGreevey, Health and Health Care in the Brazilian Recession (Washington, D.C.: World Bank, 1985), p. 7. 54. "Brazil's Health Crisis: The Plague Is Just One Part," New York Times, February 13, 1987. 55. Cordeiro, "Políticas de saúde no Brasil," p. 89. 56. "O Brasil esta doente," p. 30. 57. "Brazil's Health Crisis," New York Times. 58. Ibid. 59. Ibid. 60. Knight and Moran, Brazil Human Resources, p. 6. 61. Arruda, "De mal a pior," p. 496. 62. Ibid. 63. "O Brasil esta doente," p. 32. 64. Ibid., p. 35. 65. Ibid.

9. National Housing Policy and the Favela in Brazil

Lea Ramsdell One of the outstanding features of rapid urbanization in Latin America has been the widespread formation of squatter settlements in the absence of low-cost urban housing. In Brazil, this type of settlement, referred to by the generic term favela, has proliferated to the point where, in Rio de Janeiro alone, it is estimated that there are more than three hundred favelas.1 In light of this fact, the national government has attempted to address the issue of housing for the urban poor by means of three general policy approaches: eradication of the favela and relocation of its inhabitants to public housing projects,· "urbanization" of the favela through integrating it into the larger urban system,· and a policy of "no policy" at the national level. Though the favelas may differ greatly in their essential features, they all qualify as squatter settlements under the definition offered by Anthony Leeds: "Primordially and predominantly residential areas whose only uniform identifying characteristics are their illegal and unordered origins by accretive or organized invasion and, because of their origin, their continued juridically ambiguous status as settlements. " 2 Leeds suggests that the evolution of any particular favela may be explained by three sets of variables, each corresponding to a different level of analysis. The primary variables refer to policies and attitudes at the national level; the secondary ones originate at the city-regional level and include the history of the city and its development, and the tertiary variables take into account the internal features of any one favela.3 This chapter analyzes and evaluates the three different national approaches to urban housing—eradication, urbanization, and "nopolicy"—in terms of these three sets of variables and infers from them the current status of urban housing policy under the new democracy. Toward this end, the study begins with a discussion of the policies and attitudes at the national level that have influenced the housing conditions and general character of the favela. It then focuses on the factors at the city-regional level in Rio de Janeiro and São Paulo and the

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implications of national housing policy for the favela and low-income population of these two urban centers. The tertiary variables guide the examination of the case studies: the eradication and urbanization approaches taken in the Rio favelas, Catacumba and Bras de Pina, as well as the "no policy" approach to housing in São Paulo. Factors Affecting the Favela at the National Level Perceptions of the Favela As favelas proliferated and became more visible, especially between 1930 and 1960, Brazilian society responded with essentially three different attitudes. 4 These attitudes correspond to those held by government officials and policymakers and thus form the basis for the different policy approaches toward the favela. 1. The Favela as a Parasite. Those holding this attitude maintain that the favelados are a drain on the urban economy since, in their view, they require large amounts of government assistance but contribute little to the economy in return. They see the favela as a sick environment that is unsanitary and unsafe and that breeds typically "marginal" segments of society such as thieves, drunks, prostitutes, and other "undesirables." The favelados do not attempt, nor do they wish, to conform to the social norms of urban life, preferring instead to isolate themselves and to associate only with one another. Besides the public menace that the favela represents, it is an eyesore that damages the city's image and occupies valuable land that could be utilized in ways more beneficial to society.5 The appropriate policy posture emerging from this view is removal of the favela and relocation of the favelados. Those adhering to this position consider the favela to be composed primarily of outsiders who chose to move to the city and who should therefore bear the consequences of their decision. Accordingly, zoning and land use regulations that prohibit the illegal occupancy of land should be strictly enforced, as should housing and sanitation codes. Such an approach calls for the eradication of the favela and the removal of the favelados to low-cost housing projects located on the periphery of the city. This solution eliminates the threat that the favelados pose to the public welfare of the city and frees valuable land to be used for constructive purposes. The vision of the favela as a parasite prevailed under the military governments, which responded accordingly with their eradication campaign and their policy decisions to enforce strictly land use regulations and to finance massive construction of low-cost housing. 2. The Favela as a Community. The concept of the favela as a com-

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munity contrasts directly with the preceding. Favelados are seen as striving to improve their community and as having to confront obstacles from the urban society and government systems constantly. Rather than feeding off of society, they are presented as workers in the formal and informal sectors and as consumers. Proponents of this attitude cite their initiative and organization in self-help, collective building projects, and their network of social and political organizations as evidence of their ability to become gradually integrated into the larger urban system. Those who perceive the favela in this way claim that government has targeted it as a scapegoat, assigning it blame for embarrassing social and economic problems. They contend that this sort of policy only aggravates the situation as favelados themselves come to believe that they are inadequate and to see their situation as hopeless. From this perspective, the appropriate policy would be to pursue legalization and urbanization of the favela locale through granting land titles, credit assistance, longterm loans, and other policy instruments. Implied in this policy approach is an emphasis on the promotion of self-improvement projects that bring the favelados into the implementation process. This perception of the favela as a community has never predominated in national policy. However, certain individual government officials have periodically held this attitude since the 1930s: José Arthur Rios, director of the Special Service for the Recuperation of Favelas and Unsanitary Housing (Serviço Especial para a Recuperação de Favelas e Habitação Anti-Sanitãrias, or SERFHA) from 1960 to 1962, and the director of the Company for Community Development (Companhia para o Desenvolvimento das Comunidades, CODESCO) in the early 1970s. The efforts of these individuals and their relative success in achieving the urbanization of the favela on a limited scale are cited as precedents by those who view the favela as a community rather than as a social disease. 3. TheTavelaas Urban Blight. The rapid urbanization of Brazil brought with it certain natural consequences. Those who interpret the favela as one of these consequences adhere to its perception as an inevitable blight. In their view, favelados tend to be "marginals" but, unlike the concept of the favela as a parasite, they see this as the consequence of the subhuman conditions in which favelados must live. Unable to better themselves, they are confined to life in the favela because of their lack of education and low income. This tends to be the attitude held by the traditional elite, one that advocates a policy approach of tolerance and limited assistance to the favela. The adoption of paternalistic measures, such as the distribution of clothing and food or the organization of social clubs, is the typical manifestation of this attitude. The practice of troco de interesses, or

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"exchange of favors," evolved out of this common perception. This was the means used by politicians to solicit the votes of the favelados through promises of paved roads, electricity, sewers, or other favors that would better conditions. These informal practices influenced the evolution of the favela as a squatter settlement more than any official policy prior to 1960.6 The outcome of policies designed in this vein is the continued control of the urban masses by keeping them satisfied with palliative types of assistance without affecting the status quo of the urban society at large. Historical View of the Favela The first official recognition of the urban housing problem in Brazil came in 1906 with the publication of a report entitled "Habitações Populares," by Evernardo Backheuser, an engineer in President Rodrigues Alves's administration. 7 But no serious consideration was given to the housing problem presented by the favelas until the 1930s, when agricultural crises in combination with rapid industrial growth stimulated migration to the cities. The "controlled populism" of Vargas's Estado Novo attempted to control the urban masses concentrated in the favelas through limiting their growth and encouraging their eradication. In 1937 Vargas established the Código de Obras, or Building Code, which represented the first legal recognition of the favela. The code prohibited the construction of new dwellings in the favela as well as the improvement of already existing structures. It also called for the elimination of the favela and the construction of "proletariat housing." 8 This code set in motion the eradication approach to the favela issue in national policy. It continued to serve as the legal basis for this approach for several years. After the elections of 1945, which removed Vargas from office, there was increasing concern over the possibility of "communist infiltration" of the favelas since the Communist party had gathered substantial support in the elections. This concern provoked the creation of the Leão XIII Foundation by the Catholic church under the auspices of the government in order to promote the "recuperation of the favelados."9 The foundation's plan was to "urbanize" the favelas of Rio by installing in each urban services and creating social centers, schools, and clinics. This first attempt at urbanization was limited in scope and was criticized for its "generalized, isolated" methods and for "not adequately considering the factors of the problem and its relationship to the development of the rest of the city."10 Post-1945 governments vacillated between efforts at urbanization and attempts at eradicating the favela, but neither approach was imple-

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mented on a scale that actually effected major changes. The improvements that did occur were largely the result of the common practice of troco de interesses.11 Under the so-called democratic populism of the Kubitschek, Quadros, and Goulart governments between 1955 and 1962, this practice continued on a regular basis. However, during these years, the first serious program for urbanizing the favela was carried out by a newly formed agency called SERFHA. This agency became especially prominent during 1960-1962 under the direction of José Arthur Rios. He believed that "a great majority of the favela population is self-sufficient, lacking only the orientation, support, and good-will of the authorities." 12 Rios's Operação Mutirão, or Mutual Help Operation, established residents' associations and provided legal and technical assistance for the installation of infrastructure on a broad and intense scale throughout the favelas of Rio de Janeiro. The project was so successful that several of the most powerful legislators began to feel threatened since they could no longer depend on the practice of troco de interesses to ensure the favelado vote.13 The governor of Guanabara, Carlos Lacerda, subsequently dismissed Rios in 1962. With the inauguration of military government, a new era in use of the eradication policy approach began with the creation of the National Housing Bank (Banco Nacional de Habitação, or BNH) in 1964.14 The BNH promoted the construction of low-income housing projects not only as a solution to the housing problem in the favela, but also as a means of stimulating the national economy through the creation of new jobs in the construction industry. This agency was responsible for the construction of several housing projects, the most impressive of which were the Vila Kennedy and the Vila Alianza. The BNH channeled its funds for low-income housing through a variety of subagencies, principally the Popular Housing Company (Companhia para Habitação Popular, or COHAB).15 Those who purchased COHAB housing were expected to make monthly payments that would be used to repay the funds lent to COHAB by the BNH. However, the COHAB projects failed to take into account the additional costs in terms of transportation, informal sector job opportunities, and community cooperation. In 1968, the Coordination of Social Interest Housing of Metropolitan Rio (Coordenação de Habitação de Interesse Social, or CHISAM), a local agency of the BNH, was formed for the express purpose of ensuring that there would be "no more people living in the slums of Rio de Janeiro by 1976."16 However, the directorate refused to refer to their policy approach as "eradication" and spoke, instead, of "elimination" or "disfavelazation" as their objective since these implied the possibility of

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urbanization strategies and did not have the negative connotations associated with the term "eradication." In response to the creation of the BNH and its agents that implemented the eradication policies, the Neighborhood Associations of Rio banded together to form the Federation of Favela Associations in Guanabara (Federação das Associações de Moradores na Guanabara, or FAFEG) in March 1963 in order to represent the favelado resistance to removal. This group mobilized the residents of many favelas to protest the eradication of the first favela targeted for removal by CHISAM in 1968. The FAFEG leaders responsible for the demonstration were arrested and threatened with more severe repercussions if such a protest were to recur. Open protest by the organization came to an abrupt halt and FAFEG gradually dissipated.17 Thus, the extensive control and repressive nature of the military regime, particularly in the late 1960s and early 1970s, allowed it to implement its eradication policies on a much larger scale than had ever been possible under the populist governments. The eradication campaign not only eliminated the physical presence of the favela it also destroyed a way of life. The favelados living in low-cost housing, which was generally located a considerable distance from the center of the city, became alienated and marginalized in this new environment. Yet, in spite of national policy to the contrary, experiments with urbanization of the favela in loco continued on an isolated basis. The most notable of these was a program sponsored by CODESCO for the urbanization of three favelas located in the North Zone of Rio de Janeiro.18 With the assistance of several young professional sociologists and architects, CODESCO embarked upon a creative program providing the infrastructure for electricity, water, and roads, as well as the administration necessary to obtain land titles. The key to the success of the project was that, although the favelados were required to become involved in the program in order to participate in the benefits of urbanization, they were not obliged to participate in any facet of the program in which they chose not to become involved. In many ways, the CODESCO project became a model for subsequent urbanization efforts.19 Factors Affecting the Favela at the City-Regional Level City Histories—Rio de Janeiro and São Paulo By 1890, Rio de Janeiro was already a prominent city of 550,000 as a result of its status as the national capital and principal port.20 The foundation of its economic development during the nineteenth century was slavery, vestiges of which continue until today to affect the present labor market

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and social divisions.21 The unusual topography of the city and its geographical setting limited its ability to expand in an orderly fashion and also caused problems in the construction and maintenance of necessary urban infrastructure. Favelas began to emerge in Rio at the beginning of the century and proliferated on a large scale in the 1930s as the city evolved into a major center of capitalist production and consumption.22 From 1930 until 1960, before the national capital was shifted from Rio to Brasilia, a middle class, employed largely in the public sector, grew at a continuous rate. Along with this growth went the steady expansion of the working population. These peoples tended to settle on untitled lands near employment centers and transportation, areas initially located on the periphery of the city. The expanding middle class often followed and settled in titled lands surrounding these proletariat neighborhoods. The result was that most of these areas are now physically incorporated within the city and may be found near its center. Though no official policy regarding low-income urban housing was stated during the formative years of the favela, a tradition of tearing down run-down or low-income housing in order to construct housing for the higher classes had already been established by the 1930s.23 São Paulo also began rapid expansion early in the century as it became an industrial center associated with the coffee growers. Unlike Rio, the location of São Paulo did not present any major physical barriers to the city's growth. It was able to expand in a concentric fashion, and as the city limits moved outward, transportation infrastructure was constructed to serve the new area. Rooming or small rent houses, called cortiços, were rapidly built to accommodate much of the growing working-class population. Economic development in São Paulo was based on industry, and growth in this sector made it possible to absorb the increasing waves of migrants into the labor force and into "standard" housing.24 Because of these differences in origins and evolution, the proliferation of favelas has become more extreme in Rio de Janeiro than in São Paulo. By 1964, estimates for the number of persons living in Rio's favelas ranged from 430,000 to 1,070,000, whereas the estimated favela population in São Paulo at that same time was 50,000-100,000.25 This discrepancy in the estimates given for Rio indicates in itself the pervasiveness and uncontrolled nature of this growth. The favela population in São Paulo, according to these estimates, was only about one-tenth that of Rio, though it still constituted a substantial proportion of the total urban population. It was toward Rio, then, that the national government began focusing its attention in terms of urban housing policy in the 1960s. The military government that came to power in 1964, along with Carlos Lacerda, the

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governor of Guanabara, decided to make Rio de Janeiro the example of an eradication campaign that would relocate the favelados to public housing projects whose construction was funded by the newly created BNH.26 Lacerda had been one of the civil instigators of the military coup and remained in good standing with the military government, thus allowing him the national support and resources for his eradication program.27 The eradication and relocation program was administered at the local level by CHISAM, whose objective it was to eliminate all of Rio's favelas by 1976. Though it fell short of this goal, it did succeed in removing almost all of those located on prime land in the South Zone.28 The favela Catacumba was among one of the first to be eradicated from the South Zone. Beginning in the early period of rapid proliferation oí favelas in the 1930s, many favelados formed neighborhood associations as an organized effort to improve living standards within their respective favelas. In many instances, these associations were effective in obtaining government funds or commitments to provide infrastructure in the way of paved roads, water, and electricity. In the 1960s, under Governor Lacerda's favela removal program, the associations of Rio banded together to organize FAFEG at the metropolitan level. FAFEG advocated the rights of the favelados during the eradication campaign of the military government with limited success. Due to its activism and that of a few neighborhood associations, official policymakers did concede to a sort of "experiment" with the urbanization of three favelas within Rio, one of which was Bras de Pinas.29 CODESCO was created at this time for the express purpose of implementing an urbanization program in two of these favelas. During this time, the favelas of São Paulo received little national attention. They were relatively few in number and seemed to pose less of a problem. Some feeble attempts were made at eradication and removal of the favelados to housing projects under the administrations of the São Paulo prefects Faria Lima (1965-1969), who had constructed thirteen buildings for the purpose of relocating favelados, and Figueiredo Ferraz (1971-1973), who entertained the idea of building "provisional housing villages."30 But in general, under the military government no policy solutions to the urban land and housing question were implemented in São Paulo.31 As a consequence of the lack of a coherent national policy in this area, in combination with the decline in the real wage characteristic of the economic "miracle" as orchestrated by the military, the housing shortage increased, as did the number oí favelas.32 Since the rate of growth of the favelados exceeded that of migration, the increase in the favela population of São Paulo, as shown in table 9.1, cannot be attributed solely to migration. In addition, 41 percent of the

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Table 9.1. Favela Population in São Paulo Year

Number of Favelas

Number of Shacks

Population of Favelas

Percentage of Total Population

121 525 942 —

5,439 14,500 23,958 —

— 71,840 117,398 400,000

— 1.20 1.60 5.00

1970 1972-1973 1974-1975 1977

Source: Gabriel Bolaffi, 'Tara uma nova política habitacional e urbana: possibilidades económicas, alternativas operacionais e limites políticos," in Licio do Prado Valladares et al., eds., Habitação em questão (Rio de Janeiro: Zahar Editores, 1980), p. 169.

recent arrivals came from a better living situation to the favela through a process of impoverishment and downward mobility.33 These factors indicate that the economic situation of the urban poor declined significantly during the military regime. Case Studies Eradication of a Favela—CHISAM Program Plan for Catacumba In August 1969, the Secretary of Social Services, under the Coordination of Social Interest Housing of Metropolitan Rio (CHISAM), began to conduct a survey in Catacumba of residents' income levels. It was soon recognized within the favela that this information would be used to determine each family's ability to make mortgage payments for government housing, and therefore was a first step in the removal process.34 Since residents had been threatened with removal before, many did not take these preparatory steps seriously, believing that eradication of an established favela the size of Catacumba would be next to impossible. The leadership of the neighborhood association, however, realized the seriousness of the threat, especially in the aftermath of the repression carried out against FAFEG in 1968.35 For this reason, the association drew up a plan for urbanizing the favela in loco. It called for the construction of two rows of high-rise apartments and one row of two-family houses on the top of the hill. The favelados proposed to build and pay for these structures themselves. The plan was presented to several state agencies and was published in O Dia, a Rio newspaper, in September 1969.36 But it went unheeded, and preparation for eradication and removal of Catacumba proceeded.

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The results of the CHISAM census were used to determine to which housing project each resident would be relocated. The CHISAM breakdown indicated that a total of 2,158 dwellings would be removed. The newly completed Guapore-Quitungo project would house 1,420 of the Catacumba families, while another 350 would be sent to the older and cheaper project Cidade de Deus. Vila Kennedy would house 87 families, and 350 families unable to make the mortgage payments required in the other projects would be removed to a triagem (temporary holding area).37 The main, but not only, disadvantage of these housing projects was their location. Guapore-Quitungo, a new project, was located in Rio's North Zone, an hour away from downtown. It consisted of 2,880 apartments closely arranged in seventy-two blocks. Its streets were not paved and, though there was one elementary school in the vicinity, there were no recreation areas, medical clinics, or churches in the area. Cidade de Deus, built between 1965 and 1970 in the Jacarepagua area, was even farther removed from the central district. The buildings in this project were poorly constructed, the streets were unpaved, and the project had a reputation for its high crime rate. Vila Kennedy, built in 1964 partly through U.S. AID funds, housed 25,000 people.38 Unlike the other projects, many of the Vila Kennedy residents had chosen to live there and had made considerable effort to improve conditions. Because of this, the mortgage payments were higher and only eighty-seven of the Catacumba residents qualified to live in this project. Once Catacumba was targeted for removal, CHISAM took measures to ensure the smooth operation of the eradication process. One of these was the practice of co-optation, whereby the former leaders of the neighborhood association were assigned positions as officers in the Department of Social Services.39 These positions carried with them a certain degree of status and the new officers were held directly responsible for any disturbances in the favela or for any attempts on the part of the favelados to change their dwellings or their surroundings. This proved to be an effective means of eliminating any serious opposition to eradication and relocation; residents became resigned to the fact that any channels toward changing their fate were now closed. The actual removal of Catacumba went smoothly from the point of view of CHISAM, which claimed that the favelados were anxious to move to government housing where "they would have piped water, light and human, livable conditions."40 Not all of the Catacumba residents agreed with this assessment, however. Many were given less than twenty-four hours' notice that they would be removed, and often they did not know where they would be relocated. Also, many of their possessions were left behind or destroyed in the moving process. The carelessness and callous nature of the CHISAM operations as they

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appeared in the press only served to further alienate the favelados, as well as the general public. The Rio newspaper Correio da Manha published an article on January 21,1971, four months after the eradication of Catacumba, and described conditions for the displaced Catacumba residents in the housingprojects.41 The article stated that most were unable to make their monthly payments for rent which, in combination with utility costs, transportation costs, and other expenses, made the cost of living in the housing projects "more expensive than the rent of an average apartment located in Ipanema."42 In addition, the article described the housing conditions as "poor" and, since many residents would default on their payments and be forced to move, questioned the success of the eradication program. Janice Perlman, an American anthropologist, carried out her own follow-up study in 1973, three years after the removal of the Catacumba favela.*3 She found that the principal complaint of former Catacumba residents was the location of the housing projects and the increased expenses that this caused in terms of transportation. She determined that 59 percent of the relocated favelados continued to work in the South Zone because of the contacts that they had established there and that 71 percent traveled an hour or more each way to work. Only 13 percent required less than half an hour to reach their jobs, as compared to 79 percent having had this access when in Catacumba. Only 20 percent of the relocated Catacumbans were up to date in their payments, while 46 percent were more than six months' behind. Perlman found that, if given the option, 69 percent of the former favelados would return to the favela and, if given the choice to remain in public housing or to move to an urbanized favela, 82 percent would choose the latter. In 1972, CHISAM made public its official justification for the removal of Catacumba, stating that it was because of the "instability of the soil and pollution of the nearby Rodrigo Freitas lagoon."44 Until 1975, litigations concerning ownership of the land were not settled and the area remained vacant and overgrown. However, during 1975-1976, high-rise luxury apartments were built in the area and the land value was said to be $300 per square meter.45 Urbanization of a Favela—CODESCO Program Plan for Bras de Pina Under the threat of removal, the neighborhood association of Bras de Pina, like that of Catacumba, proposed an urbanization plan to the government. The government considered the Bras de Pina plan, unlike the Catacumba plan, and chose this favela and two others in the North Zone of Rio to serve as pilot urbanization projects. The Company for Community Development (CODESCO) was formed

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in 1968 and charged with the task of urbanizing these favelas. Like CHISAM, CODESCO was a financial agent of the BNH, but its stated objective contrasted with that of CHISAM in that it promoted the integration of the favela into the larger urban system through a comprehensive plan of urbanization. The personnel involved in CODESCO were, for the most part, university students in urban planning, which contributed to the innovative approach in the urbanization of Bras de Pina. The economic status of these favela families was not unlike that of other favelas. Families with an income of two minimum salaries or less made up 77.5 percent of the population. The favorable location of the favela in relation to the work market was reflected in the fact that most of the economically active population (51 percent) were employed in the same administrative district where they lived, while another 7.9 percent worked in a neighboring district. However, the unemployment rate, 22.6 percent at the time of the study, was very high. In 1964, under the removal campaign pushed by Governor Carlos Lacerda, Bras de Pina was targeted for eradication. In reaction to this, the three neighborhood associations operating in the favela united as one called the United Association of Defense and Improvement of Bras de Pina. The association appealed to FAFEG, and together they were able to limit the removal to only one-third of the favela population. At this point, the association "decided that the only way to guarantee its existence was to execute a plan which would prove to the authorities that urbanization was possible."46 The remainder of the population consisted of 4,416 persons grouped into 892 families living in 812 shacks.47 The principal guidelines established by CODESCO for its urbanization projects emphasized the necessity of addressing the poorest segment of the population (those earning three minimum salaries or less) and of mobilizing and educating the favela inhabitants so that they would participate fully in the process. The integration of the favela into the urban community was to take place in three stages: First, short-term provision of infrastructure and urban services to the area,· second, medium-term improvement in housing; and third, directed long-term socioeconomic development. In the infrastructure improvements made during 1969, the role of the favela residents was crucial. Existing dwellings had to be removed so that a water and sewage system could be installed. It was decided that one designated area at a time would be cleared for installation. After infrastructure installation was complete, shacks could be replaced in that area and a new one would undergo the same process. Each head of household was responsible for tearing down his or her shack, moving it,

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and then rebuilding. In this way, the inconvenience to the favelados was kept to a minimum, as they were displaced for only a short time while the infrastructure was installed. One of the basic principles of CODESCO's housing program was that the favelados build their own houses with minimal technical assistance from the company. However, community cohesion was encouraged and the self-help project inspired a sense of community solidarity. The favelados not only assisted one another in the physical labor of construction, but they also exchanged ideas in solving the problems encountered in the construction process. The final phase of the CODESCO urbanization plan called for longterm socioeconomic development of the favela. The stated line of action by CODESCO was to intervene in the socioeconomic development of the community only to the extent that it could help the residents "recognize their needs and realize their aspirations as they assumed more and more responsibility for the solution to their problems through expanding their capacity to participate in an organized fashion."48 In the beginning, community efforts at promoting solidarity had been fruitful. There was a sense among the residents of working toward a common goal guided by good association leadership. Once they had their own houses, however, it was difficult to convince the residents to think about community needs and responsibilities because they became more concerned with their individual maintenance problems. Also, economic development was restrained by the limited financial resources available to CODESCO through the BNH, which had been providing consistently less and less funding to the project. In addition, land tenure and legalization of title continued to be obstacles to the complete urbanization of the favela. CODESCO considered land ownership by the residents essential to a genuine integration of the community into the urban system, and the company devised a plan whereby the residents could receive monthly loans to purchase their lots. A large portion of the land in Bras de Pina was owned by the BNH financial agent COHAB, which had transferred ownership to CODESCO; the remainder of the land was to be disappropriated. The legal process to transfer the land titles to the residents, however, proved to be much more complicated and complex than anticipated. Due to the nature of the federal and state laws regarding property, the residents continued to occupy their lots and houses illegally. The integrated and innovative approach to urbanization carried out in Bras de Pina drastically changed the character of the community, not only in its physical appearance but also in its economic status and relationship to the city as a whole. The housing program in particular was successful, as shown in table 9.2, from the standpoint of both the

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Table 9.2. Physical Characteristics of Bras de Pina Dwellings, 1967 and 1975

1967 Percentage

Type of dwelling

Number

Masonry Stucco Wood shacks Unoccupied land Total

30 12 770

3.8 1.4 94.8

812

100.0

—

—

Number

1975 Percentage

687

75.9

213 4 904

23.7 0.4 100.0

—

—

Source: Gilda Blank, "Bras de Pina: experiência de urbanização de favela," in Licio do Prado Valladares et al., eds., Habitação em questão (Rio de Janeiro: Zahar Editores, 1980), p. 110.

government and the residents themselves. The principal reason for this satisfaction was that the residents participated directly in the decision-making process and in the actual construction so that their houses not only met government standards but were also functional and affordable for the residents. The main role of the government in this process was to extend the initial loans necessary for the purchase of construction materials and thus to stimulate "the acceleration of a development process which had already existed and been desired."49 The physical improvement of the favela in terms of housing and infrastructure was largely responsible for the consequent socioeconomic alterations in the community. Bras de Pina had become a more attractive place to live, and families moving there after 1967 tended to be from a higher socioeconomic level than the established residents. This modification in the population had a definite impact on the economic character of the community. On the one hand, the average number of persons living in a dwelling increased by 16.7 percent between 1967 and 1975, while, during the same period, the proportion of the favela population earning more than one-and-a-half minimum salaries grew from 9.1 percent to 25 percent.50 The high unemployment that had characterized the favela before urbanization dropped from 22.6 percent in 1967 to only 7.5 percent in 1975. These changes in the economic situation of the favela contributed to the overall increase in the average monthly family income. However, this gain in income was absorbed in large part by property taxes and payments on house loans, which, in effect, forced the residents to adopt a strategy of increasing income in order to retain their houses and remain

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in the community. The means used by the residents to solve family income problems often included working longer hours, sending more family members into the work force, or renting out portions of their houses.51 The response of many residents to the financial demands made on them was to decrease expenses in addition to increasing income. Many times this was accomplished by spending less on recreation and on household items such as furniture and clothing. Thus, though the economic indicators may appear to demonstrate considerable advances in the favela economy, it is important to interpret these figures in the appropriate context. The urbanization process, though largely successful in the physical and economic sense, did not fully take into account the positive and negative effects that these improvements would have on the internal and external relationships of Bras de Pina. Initially, the residents were united by a common goal and understood that their participation was mandatory in order to prevent the eradication of their favela. But once the construction of houses was complete, community spirit dwindled. Residents became more preoccupied with individual concerns such as house maintenance and loan payments. Social stratification within the community also became more apparent due to the higher social status of new residents and to the marked division between those residents who had built masonry houses and those who had opted not to participate in the program and continued to live in shacks. In summary, an evaluation of the innovative approach to urbanization implemented by CODESCO reveals several pertinent points that should be considered in the formulation of housing policy. The housing program emerges as the most successful, and perhaps most important, phase of the urbanization process. Within this program, it was shown that the participation of the residents in planning and actually constructing their own houses was both possible and integral to their overall satisfaction with the new living conditions. However, the importance of the government's role in the process cannot be denied, especially from a financial standpoint. The initial government loans were essential to the successful implementation of the program. The innovation of the urbanization program was recognized and praised not only within Brazil itself, but internationally as well. This recognition certainly did not hurt the image of the military regime in power. In addition, the urbanization approach to Bras de Pina required less government intervention and funding than the eradication of the favela would have. The government, in effect, served only as the impulse to accelerate a process that was already in progress. In spite of these advantages, the state discontinued its support for the program, and in 1975 CODESCO was dissolved after suffering internal

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and external pressures. Its decline began in 1970, when the original leadership was replaced and when Negrão de Lima, the governor of Guanabara, was succeeded by Chagas Freitas, who was much less sympathetic to urbanization efforts. The company was also under increasing pressure from the BNH, which continued to support the contradictory position of eradication and to funnel money for this purpose to its agents CHISAM and COHAB. In its last three years of existence, CODESCO became more and more bureaucratic and authoritarian, and the objectives of the original urbanization plan were no longer guiding its operations.52 Even those who had been involved in the initial activities of the company were not opposed to its liquidation given the manner in which it had devolved into a relatively inactive, bureaucratic agency. Nonetheless, the urbanization of Bras de Pina was viewed as a success and became a model on which to base the urbanization of other favelas. Though the infrastructure installation and housing improvements were most often cited as the greatest accomplishments of the project, perhaps the more important outcome was that it demonstrated the ability and willingness of the urban poor to organize and participate in the resolution of their problems. At the same time, it was evident that the favelados needed funding from the government in order to implement their solutions. Since the military regime and state government effectively withdrew its support of the project before the long-term, socioeconomic phase could be carried to completion, it is difficult to know whether the limitations of this aspect of the program were caused by a lack of community participation or of government commitment to economic development. Evolution of Self-Help Housing—São Paulo In São Paulo, the absence of any specific national policy directed toward urban housing and the lack of action toward increasing the low-cost housing stock by government agencies such as the BNH forced the lowincome urban population into using what resources it had to solve its housing problems on its own. Beginning in the 1950s, many of the poor in São Paulo chose the option of buying small lots in peripheral subdivisions of the city and constructing their own houses.53 The self-help housing alternative offered several advantages over the options of living in the favelas or the cortiços, the small, proletariat rent houses first constructed in the 1930s. First, it appealed to the urban worker because of the security and stability that having a house affords during times of unemployment or high inflation. Second, it was a relatively low-cost alternative, since peripheral land was often of poor quality and located

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at some distance from downtown (though, more recently, speculation has made the purchase of land a more costly proposition). The reduced cost of labor in the self-help construction process also kept overall costs low. Third, the process of buying the lot and building the house was a progressive one, taking place in stages that could be extended over a period of time. The flexibility of this process makes it an attractive alternative for the urban working population whose limited resources make large-sum investments in a project impossible. Several of the advantages and disadvantages associated with this strategy are brought to light in a survey of a sample of 407 São Paulo residents who had undertaken self-help housing projects in the peripheral subdivisions during 1950-1978.54 The residents were questioned about their background, their reasons for opting for self-help housing, the collective operation of the process, and their financial resources in completing the project. The results showed that 88 percent of the 407 surveyed were of migrant origin. The large majority had family incomes of less than nine minimum salaries, with 51.2 percent of the sample falling in the low range of less than one-to-four minimum salaries. Most of the residents earned this salary in secondary-sector employment, especially in the qualified and semiqualified categories. The nuclear family was the predominant family structure among the residents, while less than 10 percent were extended families. The reason most often given for choosing self-help housing was the desire not to have to pay rent (26.3 percent) because paying rent in the city required a sizable proportion of the residents' limited income. The second most common response was the aspiration to own a house (24.1 percent), since it was a wise investment in a fluctuating economy and eviction would not be a threat in times of economic hardship. Other important factors that had influenced the residents' decision to build their own houses were that the construction could be carried to completion over an extended period of time, and thus proceed in accordance with the residents' economic means, and that the house could be adapted to the family's needs. The collective effort of self-help housing has been noted as one of the more important aspects of this alternative. In the sample surveyed, various actors participated in the actual construction of the house, including family members, neighbors from the residents' "old" and "new" neighborhoods, work companions, and other friends. Of the 407 residents in the sample, 44.5 percent had construction experience,· 69 percent of these had acquired that skill through their jobs, while another 27.1 percent had obtained experience through previously helping others in their self-help projects. Another 37.6 percent knew nothing about construction, but enlisted the help of skilled family members and friends or hired labor.

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The reduced cost of labor emerges as the obvious advantage of the collective strategy. Almost half of the residents built their houses with no labor expenses. Among the half who did hire some labor, 82.2 percent paid for labor to complete a specific task in the construction process, such as the necessary masonry work, but did not employ outside labor on a regular basis, thus keeping costs at a minimum. Though collective labor is essential to making self-help housing a viable option, the contribution of the future homeowners themselves is the most significant factor in keeping costs at a minimum. The majority of residents surveyed responded that, especially in the early phases of construction, the families worked every night and weekend possible and during vacations and periods of unemployment. Among the members of this sample, the typical scheme for acquiring the resources needed to purchase land and build the house consisted mainly of either saving a portion of the family income, reducing family expenses, working longer hours, or some combination of the three. Any of these means for accumulating the necessary sum to begin the self-help project required considerable sacrifice on the part of the urban poor who chose this alternative. The use of loans or financial institutions was generally avoided when possible, 60 percent of whom were aware of the extremely unfavorable terms and consequences of taking out a loan. Nonetheless, in order to purchase the lot and begin the building process, the residents were obliged to borrow money. The ability of most families to arrange to keep up with the loan payments was evidenced by the fact that only 31.1 percent of the residents were late one or more times in their payments. Of this portion, 67.4 percent managed to update their payments while the remaining 32.6 percent suffered various consequences, such as an increased interest rate, fines, or in some cases, being forced to repurchase their lot. Many of the residents also found it essential to borrow for the purchase of construction materials. In addition to the measures described above, other arrangements became more common in the 1970s for making payments on loans and on house maintenance. Many residents bought their lot jointly with another family and thus reduced the cost of buying land. Others rented out a portion of their completed house or built another house on their lot that they rented out so their family income was increased and they were able to make loan payments. The Impact of Redemocratization on Urban Housing Policy "Only popular control of executive actions by means of a free and direct v o t e . . . will be able to create the political conditions indispensable for

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a more effective State attitude regarding the housing problem and the other problems afflicting the masses."55 Has the Brazilian government's return to democracy had this intended impact on the urban housing problem? The absence of information regarding housing policy for the urban poor suggests that, at least at the national level, the issue is not of prime importance to the democratic government. It seems that the system of troco de interesses associated with Brazil's more populist governments, and which became the dominant means of initiating change in the housing conditions of the favela during the last years of the military regime, continues to be the only effective system of operation under the official policy of "no policy." The past experience of eradication efforts has effectively eliminated this approach as a viable policy option. The new democracy does not have at its disposal the tremendous financial resources to launch such a program as the military was able to implement, and then with only limited success. Neither does the government have the consolidation of power that allowed the military regime to impose its eradication policies. Finally, the removal of the favelados from specific areas does not result in a decreased demand for housing but, to the contrary, " . . . it simply creates new squatter areas somewhere else."56 The widely accepted conclusion that the eradication campaign was a failure makes this approach politically unappealing, especially under a democratic system. The urbanization policy approach is likewise a highly improbable alternative, given the current economic crisis in Brazil. The enormous costs involved in providing trained personnel to work with the favelados and in providing the funds necessary for infrastructure and housing improvements renders this approach unrealistic on a large scale. However, on a small scale in the form of pilot projects, urbanization policies are feasible and would be politically beneficial to the image of the new democracy. Because of the democratic government's inability to formulate effective urban housing policy, it becomes apparent that the favelados themselves will have to take the initiative to improve their conditions by using the resources at their disposal, just as they did under the more populist regimes. Urbanization of the favela through the political bargaining power of the neighborhood associations and self-help housing in peripheral subdivisions of the city are two predominant manifestations of favelado initiative in the resolution of the housing problem. The most significant effect of the return to civilian government, however, is that the bargaining power of the favelados has increased substantially over that which they had under the populist regimes. This may be attributed, in part, to the increased numbers of favelados and the

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votes that they represent under the democratic system. But the most notable change actually began during the abertura, or the relaxation of the military regime's repression, particularly under President Figueiredo in the early 1980s. At this time, the church and the Workers' party (Partido Trabalhista, or PT) began to take an active role in organizing the favelados.57 Since the 1985 regime transition, the widespread participation of the urban poor in grass-roots organizations, such as the neighborhood associations or church organizations, has led members of the Constituent Assembly to approach the urban housing issue seriously. One of the results has been the inclusion of Article 368 in the draft constitution. This article states that adequate housing is a basic human right of every citizen.58 Inclusion of this clause in the final constitution, suggests that it may well be possible that a new policy strategy will be formulated toward rectifying the urban low-income housing dilemma. Efforts to resolve the housing problem for the urban poor have also become more frequent at the state and local levels in response to the demands being made by favelado organizations. For example, it is estimated that nearly 20 percent of the voting population in greater São Paulo resides in favelas and has pressured the state government to implement several projects designed to facilitate favela urbanization.59 The Concessão de Uso, or Concession of Use Law, has been a significant move in the direction of urbanization, since it grants the use of favela land in public areas to the residents for a period of ninety-nine years. Such a law guarantees a certain stability to the favelado and thereby encourages self-help projects while avoiding the long and complicated legal process of transferring land titles. It also allows the government to retain ultimate control over the land with the assurance that certain land use conditions will be met. This type of law has been adopted by several Brazilian cities since, due to the experience of past housing policies, it has been recognized that land tenure is one of the most basic and important demands of the urban poor.60 However, the state and municipal governments do not dispose of the necessary funds to meet the demands being articulated by favela organizations. The cities must depend on the federal government for their financial resources in the way of housing, and the amount being allocated has been insufficient to meet housing needs. A quick and complete redistribution of the nation's wealth is called for in order for the cities to receive adequate funding to deal with urban low-income housing. For this reason, favela associations are demanding that they be allowed to participate in the discussions of the national, state, and municipal budgets before September when the budgets must be submitted to city councils, the state assemblies, and the national Congress for approval.61 If the housing problem is not addressed, favela associations are capable

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of taking on a more revolutionary character. This has already been demonstrated in São Paulo, where the PT and the church have aided in the organization of land invasions and where looting and other crimes have become commonplace. It is crucial that the members of Congress, as well as state and municipal officials, be made aware of the potential revolutionary force that the urban poor represent and that they devise a means by which the favelados are able to participate in all levels of government. Notes 1. Janice Perlman, The Myth of Marginality (Berkeley and Los Angeles: University of California Press, 1976), p. 198. 2. Anthony Leeds, "The Significant Variables Determining the Character of Squatter Settlements" (Institute of Latin American Studies Offprint Series, no. 105, the University of Texas at Austin, 1972), p. 44. 3. Ibid., p. 52. 4. Perlman, The Myth of Marginahty, p. 200. 5. Gabriel Bolaffi, "Para uma nova política habitacional e urbana: possibilidades econômicas, alternativas operacionais e limites políticos," in Licio do Prado Valladares et al., eds., Habitação em questão (Rio de Janeiro: Zahar Editores, 1980), p. 167. 6. Perlman, The Myth of Marginality, p. 200. 7. Anthony Leeds and Elizabeth Leeds, A sociologia do Brasil urbano (Rio de Janeiro: Zahar Editores, 1978), p. 189. 8. Ibid., p. 192. 9. Ibid., p. 199. 10. Ibid., p. 200. 11. Ibid., p. 206. 12. Leeds and Leeds, A sociologia, p. 209. 13. Ibid., p. 213. 14. Ibid., p. 246. 15. Banco Nacional da Habitação, BNH: avaliação e perspectivas (Rio de Janeiro: Editora Lidadora Ltda., 1974), p. 14. 16. Perlman, The Myth of Marginahty, p. 202. 17. Ibid., p. 206. 18. Gilda Blank, "Bras de Pina: experiência de urbanização de favela," in Valladares et al., eds., Habitação em questão, p. 120. 19. Carlos Nelson Ferreira dos Santos, "Velhas novidades nos modos de urbanização brasileiros," ibid., p. 23. 20. Ibid., p. 64. 21. Ferreira dos Santos, "Velhas novidades," p. 25. 22. Leeds, "Significant Variables," p. 65. 23. Evelyn Levy, "Olhando para trás: 40 anos de planejamento urbano em São Paulo," Espaço & Debates (Ano 5, no. 15, 1985), p. 34. 24. Leeds, "Significant Variables," p. 65.

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25. Ibid., p. 64. 26. Leeds and Leeds, A sociologia, p. 214. 27. Carlos Nelson Ferreira dos Santos, Movimentos urbanos no Rio de Janeiro (Rio de Janeiro: Zahar Editores, 1981), p. 32. 28. Leeds and Leeds, A sociologia, p. 234. 29. Levy, "Olhando para trás," p. 42. 30. Ibid., p. 45. 31. Bolaffi, "Para uma nova política habitacional," p. 169. 32. Ibid., p. 170. 33. Ibid. 34. Perlman, The Myth of Marginahty, p. 223. 35. Ibid., p. 227. 36. Ferreira dos Santos, "Velhas novidades," p. 32. 37. Perlman, The Myth of Marginahty, p. 226. 38. Ibid. 39. Ibid. 40. Ibid. 41. Ibid., pp. 230-233. 42. Ibid., p. 233. 43. Ibid. 44. Ibid. 45. Ibid. 46. Ferreira dos Santos, Movimentos urbanos, p. 32. 47. Blank, "Bras de Pina," p. 96. 48. Ibid. p. 106. 49. Ibid., p. 118. 50. Ibid., p. 112. 51. Ibid., p. 114. 52. Ferreira dos Santos, Movimentos urbanos, p. 80. 53. Ferreira dos Santos, "Velhas novidades," p. 38. 54. Secretaria de Economia e Planejamento, Coordenadoria de Planejamento e Avaliação do Estado de São Paulo, Construção de moradias na periferia de São Paulo: aspectos socioeconômicos e institucionais (São Paulo: Estudos e Pesquisas, January 1979). 55. Bolaffi, "Para uma Nova Política Habitacional," p. 172. 56. Gill-Chin Lim, "Housing Policies for the Urban Poor in Developing Countries," Journal of the American Planning Association 53:2 (Spring 1987), p. 180. 57. Author interview with Enrique Ricardo Lewandowski, Secretary of Judicial Affairs, São Bernardo, Brazil, and Professor, University of São Paulo Law School, in Austin, Texas, April 22, 1987. 58. "Capítulo V—Da Morada," Anteprojeto de Constituição, Artigo 368. 59. Interview with Lewandowski. 60. Lim, "Housing Policies," p. 183. 61. Interview with Lewandowski.

10· The Growth of Cities and National Urban Policy in Brazil

Anne Hall Introduction With the liberalization of authoritarian Brazil, questions arise concerning the future of the urban poor in Brazil. Will they see any change in their position within the structure of society? Will nationally directed policies that affect urban living conditions reflect a more balanced approach to the contradictions inherent in rapid modernization? The answers that Brazil chooses to these basic policy questions will define the nature, and possibly the longevity, of its fledgling democracy. For any "redemocratization" to occur in Brazil, the state must be prepared to allow popular input, particularly at the municipal level. Since the late 1970s, local organizations such as neighborhood associations and base communities have increasingly demanded participation in municipal administration and planning. Only a comprehensive urban policy is capable of addressing the imbalances present in cities that have witnessed extensive in-migration and industrial development, and has the potential to effect the broad societal changes necessary to move toward more equitable development. The intent of this chapter, then, is to determine what Brazil's national response to problems of rapid concentrated urbanization has been. The study will begin with the early 1960s and emphasize in particular the post-1964 period of centralized planning and rapid industrial development. Evidence of recent shifts toward broader participation in planning and administration at the municipal level will be explored within a historical context of municipal administration and populism, in hopes of bringing together the forces behind and resultant trends in urban planning at both the national and local levels. Brazil faces a problem of rapid urbanization with both interurban and intraurban consequences. From 1940 to 1980, the percentage of Brazil's population living in urban areas more than doubled, from 31.2 percent to 67.6 percent, while in 1980 the proportion of national income held by

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the lower 40 percent of the population was only 8.8 percent.1 At the same time, Brazil's particular migratory patterns and model of industrialization maintained and accentuated demographic and economic concentration in the Center-South region, where 68 percent of the nation's urban population resided in 1980. Such forces have not been present only in the interurban sphere, however. Their ramifications can also be found on the intraurban level, where industry is not able to absorb the expanding labor force and cities are marked by high levels of poverty and by increasing deficiencies in the provision of basic infrastructure, education, and health care. Formulation of appropriate policy to address rapid, concentrated urbanization is difficult due to the complex nature of the process. The main determinants of urbanization are the rate of development and the structure of the agricultural sector, heavily influenced by land tenure,· industrial location decisions that affect the distribution of service activities as well as manufacturing among cities; transport and communication systems,· and migration.2 Most of these determinants are economic or demographic, and thus affect urban growth or settlement indirectly, or "accidentally." Policies that are commonly thought of as "intended" urban policies include the provision of housing, transportation, communication, water, sanitation, and other elements of urban infrastructure.3 However, although sectoral planning often has urban implications, it does not constitute an urban policy. Hence an apparent incompatibility arises between the main determinants of urbanization and the instruments most often directed at the problem. As suggested by Bertrand Renaud, in Brazil, as in most developing countries, the role of the state is significant enough that to adopt a laissez-faire approach to the location of population and economic activities is impossible. The government has an inevitable influence through its policies, the location of infrastructure investment, and the public enterprises that it controls. Because the government is central to the growth process, it must clarify its objectives and strategies.4 The responsibility of urban policy is to direct the implications of all other policies, be they agricultural, industrial, technological, population, or foreign trade, into one coherent policy for state intervention in the urban sphere. An appropriate national urban policy would ameliorate the unintended and unwanted spatial effects of national economic policies and would promote the more equitable management of growth within cities. Specific strategies for such a policy would necessitate political commitment at the highest level and appropriate adjustments of the goals of economic development. It is the hypothesis of this chapter, however, that urban policy-making

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in Brazil has been characterized by a lack of the necessary high-level commitment to intervene in the urbanization process and hence an unwillingness to modify the strategies of national economic development. The following section will examine both the evolution of national definitions of the "urban problem" as well as national attempts to address those problems. The last section will draw upon conclusions made concerning past policy to explore the implications for future policy and planning in light of the current "redemocratization" and recent demands by local organizations for more input into the policy-making process. Policy Responses Since World War II, two approaches to urban policy have predominated in Brazil: the populist, or intracity, and the technocratic, or intercity. The populist approach arose out of colonial and early-twentieth-century municipal practices and was an essentially laissez-faire approach to urbanization. It was oriented toward the appearance of redistributing the benefits of industrialization from the system to the popular sectors of the society, in order to maintain popular support for a national government that was pursuing rapid industrialization. Treatment of urban problems was limited to the context of the city and centered on ameliorating housing deficits. Mechanisms for policy development and implementation were distributionist and arbitrary. The technocratic approach emerged with the 1964 coalition between the military and industrial elites. After a period of transition during which the focus remained on housing and intracity deficiencies, the technocratic approach reached its apex with the introduction of the Second Plan of National Development (Segundo Plano Nacional de Desenvolvimento, or IIPND) in 1975. IIPND represented Brazil's first attempt at a nationally formulated urban policy. In its chapter on urban development, an ambitious and comprehensive plan was set out, calling for the reorganization of urban space to better serve the needs of industrialization. Regional demographic and economic disparities were recognized and addressed, placing intracity concerns second. Hence, the focus shifted toward strengthening the administrative planning apparatus in metropolitan regions and middle-sized cities in order to reorient both population and industry toward secondary cities and less-developed regions. This section will discuss the two approaches and the transition between them in terms of their political environment as well as their particular urban concerns. Institutional case studies are provided to illustrate the nature of the activities.

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The Populist/Intracity Approach Brazilian populism has been defined as "innovative politics in the early twentieth century . . . that attempted to correct abuses of elitist government and accommodate rapid urbanization and industrialization. It was urban, electoral, multiclass, reformist, 'popular,' nonauthoritarian, and charismatic in leadership."5 According to Michael Conniff, populism in Brazil in part grew out of, and was legitimized by, a colonial and early-nineteenth-century legacy of municipal autonomy, elections, a holistic social structure, and interventionist local government.6 Although the "metropolitan revolution" and efforts by reformers to help Brazil modernize rapidly without inducing violent upheavals were perhaps more important in the evolution of populism, Brazil's unique early history contributed to twentiethcentury developments, and may do so again with the return to more democratic government. Until the mid-nineteenth century, Brazilian cities enjoyed considerable autonomy, which had roots in Portuguese legal traditions that invested the câmara, the city council, with the representation of local citizens. The município normally possessed enough rural land to make it self-sufficient, and the câmaras were able to execute enough "comprehensive judicial and political functions" to result in a local body able to exercise real authority.7 Colonial cities also had the capacity to elect local officials, another characteristic of Brazilian populism. Offices were seldom sold or inherited, as in the Spanish system. As would be expected, agricultural interests in the form of sugar planters were the best-represented group on the councils. However, artisans and nonvoters were also represented by several seats that were reserved for guildmasters and by the election of a procurador do povo, or "representative at large."8 Those prohibited from voting included slaves, former convicts, women, children, and, most important for the focus of this chapter, any person who did not own property. Hence, Conniff argues that the early foundations of the Brazilian system demonstrated a clear commitment to broad representation. The interventionist nature of the colonial câmaras also became incorporated into twentieth-century populism. City officials possessed legislative, fiscal, executive, and judicial authority, and thus exercised jurisdiction over nearly all aspects of city life. Within their jurisdiction lay the ability to regulate business in order to guard against the making of profit at the expense of the collectivity. Conniff suggests that capitalism and profiteering were hardly absent from colonial Brazil, but that the system might be termed "municipal socialism in a capitalist world."9

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However, as the economic order shifted in the late nineteenth century to manufacturing, local and national eûtes began to adopt urban laws then employed in Europe and the United States. They implemented elitist methods for development and social control, and free market determination of services and physical growth replaced the former interventionist city that had served collective interests. Thus, the First Republic (1889-1930) constituted a new approach to urban policy and social control. The older traditions could not be completely eradicated, and out of the two systems emerged twentieth-century populism. While populist politics could not recreate colonial-style systems, it was able to harmonize national authority with municipal autonomy. The nature of Brazilian populism varies according to analyst: Francisco Weffort posits that populism "was a certain concrete manner of manipulation of popular classes but also a means of expressing their frustrations,... it was a structuring of power for the dominant groups and a principal form of expression of popular emergence in the process of industrial and urban development. It was one of the mechanisms by which the dominant groups exercised control but also one of the ways that control was threatened."10 Octavio Ianni suggests that "Brazilian populist democracy was a political form adopted by mass society in the country," or, as reinterpreted by Conniff, "democratic and positive, a legitimate expression of the will of the masses."11 Populist policies were formulated within the context of a fragile balance between technicians and populist-style politicians, or economic development and mass demands. Issues at the forefront of national development tended to be developed by technicians in isolation from mass pressures. Populist policies addressed those questions closest to urban mass interests, and thus maintained popular support of the system. Most such policies were distributive, with the appearance of redistributing resources from the system to the poor. Because of their importance to urban constituencies, policies concerning salaries, welfare, and housing were the pillars of Prazilian populism.12 In the 1950s the lack of available and affordable housing in larger urban places became the primary preoccupation of populist politicians. The populist system did not employ a comprehensive approach to urban problems, but instead responded to the inputs of individual politicians and architects who recognized the problem in terms of heavy rural-tourban migration and the lack of housing options faced by migrants upon arrival to the cities. Many early efforts to address the housing issue were symbolic. On May 1, 1946, President Dutra issued a decree-law that created the Popular Housing Foundation (Fundação da Casa Popular). His objective

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was to make possible the purchase or construction of houses in urban or rural areas. Beneficiaries employed in private business were targeted to receive 60 percent of the units, those in the public sector, 20 percent, and all others, 20 percent. However, as planners and politicians gained experience in providing housing, an awareness of the necessity of a broader urban policy began to emerge. Responsibility for the funding of water supplies, electricity, and sanitation was placed under the aegis of the foundation, and research attempted to link the housing question with a more comprehensive understanding of the physical, social, and economic aspects of urban space.13 However, political pressures and lack of funding prevented the foundation from achieving its goals.14 Fifteen years later, President Jânio Quadros issued his Housing Assistance Plan (Plano de Assistência Habitacional), which established the National Council of Planning for Popular Housing (Conselho Nacional de Planejamento de Habitação Popular). It is likely that Quadros was reacting to political agitation in the form of peasant leagues and labor mobilization that supposedly threatened the survival of the democratic regime.15 Hence, the council was expected to reorient housing policy toward the least-favored groups, as well as to coordinate policy between the federal government and the municipalities. Although more emphasis was given to planning than had previously been the rule, the language utilized in the issuing decree was vague and general. Thus, "the passage from a directly allocative program, such as the casa popular, to a more ambitious and comprehensive policy plunged the policy-makers into a world of greater uncertainties; for many, their motivation was superseded by the limited understanding and information then available."16 Once again, financial resources were scarce, and in both programs the distributive considerations took precedence over more technical or universal concerns. However, in spite of the inadequacies of prior attempts at state intervention in urban questions, populist politicians saw housing deficiencies more and more as symptomatic of more profound problems that needed extreme remedies. During the presidency of João Goulart, the theme "urban reform" became central. As a prerequisite to urban reform, severe laws were to be legislated to correct distortions in the land and housing markets, and methods of disappropriation were to be defined and utilized if necessary. In 1963, during the height of campaigns for "fundamental reforms," the government proposed an urban reform to be executed by a new superintendency. The Superintendency of Urban Policy (Superintendência da Política Urbana, or Supurb) and later the National Council of Urban Policy (Conselho Nacional de Política Urbana, or Copurb) were created by decree-laws in 1964. For the first time, housing was officially viewed within the broader context of urban

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development, as "only the tip of a giant iceberg," and revolutionary changes were called for.17 However, before such ambitious populist plans could be put into operation, a new coalition took control of the government and policy-making was profoundly altered. Transition, 1964-1975 The regime that assumed power in 1964 possessed a concrete doctrine that legitimized the elimination of populism. While it was not possible for the new coalition to ignore many of the populist issues that over many years had become firmly ingrained in Brazilian politics, it successfully deideologized and depoliticized those issues. Thus, fiscal, agrarian, and urban reforms were addressed, but in terms of more rational resource allocation—those resources that had previously been subject to distributionist policies were assumed to have better alternative uses. In particular, the new regime believed that the redistribution of resources from the more prosperous to the less favored groups of society would not better the conditions of the latter, but instead would reduce the capacity of the state to accumulate the capital necessary for sustained economic growth. To affect their desired reform of the political system, any procedures that had been supportive of populist practices were suspended or limited. The legislative role in policy formulation was curtailed, particularly in the area of budgeting. State governors and mayors of state capitals and some other cities were no longer elected, but were nominated by the federal government. As a result, administrative and financial power became increasingly centralized at the federal-executive levels. Hence, the uncertainties of populist politics that stemmed from popular inputs into decision making were to be rendered nonexistent. The authoritarian period can be divided into two subperiods with respect to its treatment of urban problems. During a transition period from 1964 to 1973, urban policy was limited to housing policy, the elimination of subsidies for public services, and two programs aimed at achieving comprehensive, integrated urban planning at the national, state, and local levels. In the mid-1970s, policy shifted significantly toward spatial considerations, in order to lessen regional imbalances. To carry out this more complex policy, a new institutional structure was designed. Metropolitan regions were created in 1973, along with a national commission of urban planning, a national transportation firm, and the Ministry of Urban Development and the Environment (Ministério de Desenvolvimento Urbana and Meio Ambiente, or MDU) in 1985. The formulation and implementation of such a complex policy belied fundamental changes in the nature of the political regime and organization of the state: the level of economic intervention and centralization achieved

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new heights, and there was a growing separation between urban policy and the formulation of economic development policy. To the extent that urban policy diverts public and private investments into urban services and infrastructure, it limits the amount of investment capital available for developing the economy. And, conversely, to the extent that public investments are channeled into productive sectors that stimulate industrial expansion, the resources available for redirecting regional growth and improving urban living conditions are reduced.18 Thus, the model adopted provided for investments in and incentives for industry, which maintained and reinforced existing inter- and intraurban imbalances. In 1964 the Castelo Branco administration moved quickly to develop its Program of Action (Programa de Ação, or PAEG), which outlined a new reliance on the market economy and state intervention only to eliminate distortions detrimental to the play of free market forces. The combat of inflation was cited as the government's principal goal. Inflation was argued to have been inexorably intertwined with excessive populist distributive practices, which included empreguismo and nepotism in the public sectors, as well as subsidies to public services and social welfare. Expenses were to be reduced, and prices of public goods and services were to be fixed more realistically. Thus, the public sector was subject to a new set of allocative criteria. Instead of public services financed by taxes, cost recovery was to be achieved by pricing policy. The public sector was to adopt a management style more in accordance with that found in the private sector, where priorities of efficiency and cost recovery prevailed.19 Cintra points out that within the context of this new emphasis on planned action, policymakers long involved in urban problems were able to convince the authorities of the need for a more comprehensive and systematic approach to urban problems, of which housing policy would be only one strategy within a larger program. It was apparent to the new government that it needed to pacify the urban population, which had increased by 63 percent between 1950 and 1960, if it wanted to avoid a potentially explosive situation in the cities and gain legitimization. Policymakers determined that a vigorous housing program would provide jobs and housing to low-income urban residents, while stimulating an industry vital to sustained economic growth. 20 Chapter 12 of the PAEG thus addressed the urgent necessity of establishing a national housing policy,· accordingly, the Federal Housing System (Sistema Federal de Habitação), National Housing Bank (Banco Nacional da Habitação, or BNH), and the Federal Service of Housing and Urban Development (Serviço Federal de Habitação e Urbana, or Serfhau) were created in 1964. Serfhau and BNH had a dual role: stimulation of the poorly developed construction industry via massive investments in

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housing, and provision of some benefits to the urban masses. In 1966 the Guaranteed Fund for Time and Service (Fundo de Garantia por Tempo e Serviço, or FGTS) was established, 25 percent of which would go to BNH, in addition to BNH's other sources, which comprised letras imobiliárias and voluntary savings.21 However, by 1968 BNH had begun to move away from investments in housing toward programs that financed the provision of basic urban infrastructure, that is, sanitation and transportation, to be implemented by local and state authorities throughout the country. In its initial phase, BNH applied the majority of its resources to housing construction: 51.4 percent of available funds went to housing construction in 1967. Up until then, the financing of housing for high-income groups ("as mais altas rendas") had taken 41 percent of total resources, with only 35 percent targeted to low-income groups via cooperatives. Between 1972 and 1975, BNH invested approximately 29.7 percent in housing, 43.8 percent in sanitation, 12.3 percent in transportation, and 41.2 percent in urban development.22 This change of orientation has been attributed to the need for investment of the growing quantity of resources allocated to BNH and the need to respond to the deficits in the urban physical environment, which had begun to threaten the rates of capital accumulation in the urban sector.23 Hence, BNH operated more as a national development finance bank than as a housing bank, directing resources acquired by voluntary savings, compulsory savings (FGTS), and letras imobiliárias into public and private agencies involved in supplying urban infrastructure.24 The creation of Serfhau represented an attempt to move beyond housing to more complex integrated development projects. As originally conceived, BNH was to fall under the regulations and planning authority of Serfhau. However, the project that created BNH was modified and their positions were essentially reversed.25 Serfhau's role was therefore not fully defined or organized until late 1966, when it was named coordinator of the National System of Local Integrated Planning (Sistema Nacional de Planejamento Local Integrado) and was provided with a special fund to support its activities.26 Local integrated plans were to be formulated along the lines of regional development in the Ministry of Regional Institutions (Ministério dos Organismos Regionais), renamed the Ministry of the Interior (Ministério do Interior) in 1967. Serfhau was to operate in cooperation with both the Ministry of the Interior and the Ministry of Planning (Ministério do Planejamento). From the date of its creation, however, the Ministry of the Interior was responsible for the majority of urban policies implemented. In 1969 the government of Costa e Silva formulated the Program of Concentrated Action (Programa de Ação Concentrada, or PAC).27 PAC fell under the

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supervision of the Ministry of the Interior and was designed specifically to promote urban development by focusing on local communities and addressing problems of sanitation, housing, and municipal administrative reform. Like Serfhau's earlier program, PAC incorporated a comprehensive concept of planning that relied on municipal governments as a means of strengthening urban development. 28 It was founded on the belief that the planning process should begin at the municipal level and could be coordinated from above to encourage a broad range of integrated communities. 29 Local political bodies and civil associations were expected to be integrated under the more general plan; municipal development councils and intermunicipal associations would be established. All plans were to be made by private firms under the supervision of Serfhau to ensure that the PAC would be modeled according to liberal and competitive criteria. Although it was part of the larger ten-year plan, and in spite of stated support by the federal government, the PAC was never implemented. Causes have been attributed to budget constraints and a liberal ideology of municipalismo.30 Municipalismo represented a reaction by local authorities to the growing political and fiscal centralism by the federal government. Within the changing financial system, the municipality could control no more than 15 percent of all taxes collected in its territory, in comparison to 55 percent directed to the federal government and 30 percent to the states. Thus, the PAC budgets were considered insufficient for the broad needs concerning sanitation, housing, and administrative services that were articulated by local authorities through the PAC process. Other reasons cited for the lack of a coherent urban policy during the 1964-1975 period include administrative discontinuity, the lack of precise objectives, and inconsistency between proposals and instruments. Throughout the period, the city was seen as an isolated body; linkages with other cities and regions were not considered. In both programs for more integrated urban planning, the hoped-for coordination was never carried out, partly because the regional plans did not carry city-level detail, and partly because the meaning of municipal development was never sufficiently defined. In fact, one source notes that federal assistance from the Program Integrated Action was unknown at the municipal level. 31 The objectives of both the Local Integrated Planning and the PAC were vague and nebulous, and in the case of Local Integrated Planning, the sum of all investments suggested by the local plans would have exceeded the national savings. 32 It may be concluded, then, that no coherent urban policy existed at the national level from 1964 until approximately 1975. What did occur, however, was the increasing centralization of planning at the national

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level and the technocratization of planning throughout the system. The Technocratic/Intercity Approach, 1975-1984 The technocratic/intercity approach was marked by the building of national institutions necessary to formulate and implement Brazil's first national urban policy. Attempts at integrated local urban development, begun during the transition period, continued in the Programs of Metropolitan Regions and Middle-Sized Cities, but within the context of a new focus on territorial reorganization. Cities were no longer approached as isolated entities but instead were viewed in terms of their territorial function and their potential role in redirecting undesired flows of economic activity and population.33 It has been said that centralized planning, which had grown in importance since the Vargas era, reached its highest level of internal coherence and precision with the formulation of the Second Plan of National Development (II PND), promulgated in 1975 under President Geisel. National development was defined in spatial terms as "the compatibilization of objectives, strategies and instruments of the policy of national development with the existing urban system and the model of territorial organization that it wishes to achieve."34 Goals were well specified and appropriate monetary resources were designated for their realization.35 The II PND thus marked an "important transformation of the conceptualization and process of urban policy" by envisioning a series of state mechanisms that would develop and implement comprehensive policy based on the idea of combating regional imbalances in order to create a more integrated capitalist order, "a modern and industrialized society under a competitive system."36 Questions of "intraurban" nature received secondary emphasis, as intervention occurred primarily in the form of massive investments in transportation. The spatial emphasis of the II PND reflected both policymakers' and the opposition's growing concerns about the rapid concentration of population and economic activity that had occurred through the 1970s. The share of the total urban population found in the largest eight cities had increased dramatically since 1950—from 17.6 percent of the total population to 29 percent in 1980. To address this problem the government sought a means to stimulate a redistribution of the population and to deconcentrate economic activity. In 1973, Supplementary Law 14 had been promulgated to create metropolitan regions, followed in the same year by a decree that deactivated Serfhau and established in its place the body that was to direct national urban policy, the National Commission of Metropolitan Regions and Urban Policy (Comissão Nacional de Regiões Metropolitanas e Política Urbana, or CNPU).

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CNPU was formed as a joint commission with representatives from each of the Ministries of Planning, Finance, Transportation, Industry and Commerce, and the Interior. It was as a direct result of studies carried out by CNPU that the general strategy for urban development was formulated in II PND. First priority was given to the integrated planning of the metropolitan regions, and CNPU was appointed to assist in that planning. Directories, or deliberative councils, were established in each metropolitan region to coordinate federal funds targeted for urban development. The policy called for a more equitable distribution of the urban population and existing resources by promoting disincentives to the growth of Rio de Janeiro and São Paulo while strengthening regional middle-sized cities, in particular by encouraging growth in northeastern regional centers and promoting urbanization of the North and the Center-West. 37 CNPU was responsible for developing and coordinating a national policy of urban development; supervising and setting up the metropolitan regions; proposing legal instruments to encourage urban policy innovations,· and coordinating among ministries, regional development agencies, and other institutions involved in urban development. 38 In hopes of strengthening its ability to coordinate effectively and to implement the programs set up in accordance with II PND, CNPU was reorganized to become the National Council of Urban Development (Conselho Nacional de Desenvolvimento Urbano, or CNDU) in 1979, and passed to the jurisdiction of the Ministry of the Interior.39 In 1979 C N D U passed Resolution 003, which introduced for the first time a consideration of historical and structural factors in Brazilian urbanization. It reflected a policy orientation along the same spatial lines introduced by II PND and proposed the development of a more spatially appropriate urban system. 40 To implement the proposed spatial reorganization of the country, C N D U targeted four spatial catagories around which the changes would occur: ( 1 ) areas of decompression: São Paulo and Rio de Janeiro to receive fewer government incentives for the growth of secondary and tertiary sectors,· (2) areas of con trolled expansion: Belo Horizonte, Porto Alegre, Salvador, Curitiba, and Recife to undergo "the creation of administrative and institutional instruments necessary for the implementation of planning and maintenance of reserve areas for future infrastructure needs"; (3) areas of dynamization: Belém and Fortaleza to be oriented toward the "interiorization" of development; and (4) areas with special functions: targeted locations for industrial poles, settlement and colonization, tourism, ecological preservation, and historic preservation.41 Central to the plan were its "strategic programs." The strategic programs were associated with types of urban centers—metropolitan

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regions, middle-sized cities, small cities, and urban support nuclei—and were expected to provide the necessary coordination and linkage within the strategy of territorial organization. The two most important programs, the Program of Metropolitan Regions (Programa das Regiões Metropolitanas, or PRM) and the Program of Middle-Sized Cities (Programa das Cidades de Porte Médio, or PCPM) constituted the essence of national attempts to achieve a comprehensive urban policy during the early 1980s. The Program of Small-Sized Cities was intended to complement the two larger projects. The Program of Metropolitan Regions targeted cities according to the spatial areas listed above. Supervision of the metropolitan regions fell under the authority of CNPU, and later CNDU, with the administrators of the regions appointed by the governors and the councils formed by the mayors.42 In 1975 the National Fund for Urban Development (Fundo Nacional de Desenvolvimento Urbano, or FNDU) and its subfund, the Fund for the Development of Urban Transportation (Fundo de Desenvolvimento de Transportes Urbanos) were set up as financial resources for CNDU. In the initial stages of the project, CNPU studied the needs of the metropolitan regions and formed teams of professionals for assistance to the deliberative councils. Beginning in 1976, broad plans were formulated at the metropolitan level. Each plan was disaggregated into investment programs, which required elaborate series of negotiations with the federal government. Specifically, plans were elaborated for land use, investments, infrastructure, and public administration.43 In 1980 and 1981 resolutions were passed that attempted to strengthen CNDU's capabilities as a coordinating body, as well as to make its plans and programs more compatible. The power of CNDU had been severely limited by the transfer of FNDU funds in 1979 to the national budget, and by the transfer, in 1980, of the FDTU to the Ministry of Transportation. Moreover, although the establishment of CNDU was intended to increase its power relative to the ministries, in fact, when its power base moved from the Ministry of Planning to the Ministry of the Interior, it became more subjugated to the goals and interests of economic decision making, and thus actually lost position.44 However, despite such difficulties, CNDU was able to make substantial strides in the development of an urban policy. Perhaps most important, it was responsible for a rising awareness of the problems encountered in the metropolitan regions, and thus was able to provide the stimulus needed for the establishment of more comprehensive and effective metropolitan administrations. In addition, CNDU obtained passage of two particularly important laws in 1979 and 1980 that dealt with industrial zoning in critical areas of pollution and with the division

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of urban land. Their relevance lies in the creation of a rudimentary body of laws upon which metropolitan administrations can rely, and within which both the federal government and private industry must operate.45 The principal criticisms of the Program of Metropolitan Regions suggest that the "comprehensive understanding of the policy was not able to generate an effective comprehensive policy," due primarily to faulty institutional linkages and the ensuing inability to carry out the anticipated levels of coordination.46 Proponents of this position cite, first, the failure of CNDU to consider regional diversity adequately in the formulation of metropolitan plans. Second, the legislation that created the metropolitan regions, Lei Complementar 14, was promulgated without the involvement of local authorities,· hence, the deliberative and advisory councils that had been set up scarcely evolved into effective entities. Third, both the CNPU and CNDU encountered serious legal deficiencies that made it impossible for them to bring state entities such as BNH into their sphere of influence. And fourth, the financial resources available to both CNPU and CNDU were increasingly scarce, as indicated by their diminishing investments (table 10.1). Table 10.1. National Council of Urban Development, Investment in Metropolitan Regions and Middle-Sized Cities, 1976-1984 (in billions of constant 1984 Cruzeiros) Year

Amount

1976 1977 1978 1979 1980 1981 1982 1983 1984

714 356 622 262 75 12 24a 42a 33a

Source: CNDU, May 1984. From Benício Schmidt, A presença do estado nas grandes cidades, Fundação Universidade de Brasília, June 1984. Cited in Ministério do Interior, Secretaria-Executiva, "Avaliação da implantação da política de desenvolvimento urbano de regiões metropolitanas e cidades de porte médio. I. Política urbana e regiões metropolitanas, uma tentativa de avaliação," Seminário sobre política de desenvolvimento urbano. Documentos apresentados (Brasília, 1984). a World Bank (BIRD) funds.

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In addition to the obvious dwindling of investments made by CNDU between 1976and 1984, those resources that were invested were increasingly concentrated in urban transportation via the FDTU.47 Thus, governmental action oriented toward comprehensive urban development was superseded by a sectoral policy of urban transportation. Middle-sized cities were assigned the functions of deconcentration for those cities capable of presenting an alternative to the metropolitan regions, particularly São Paulo and Rio de Janeiro in the Southeast, and dynamization for those cities located in areas to which development was to be directed and that had the potential to develop and disseminate that development in their area of influence.48 Two programs directed at middlesized cities were implemented during the period 1979-1985: the Program of Support for Capitals and Cities of Medium Size (Programa de Apoio para Capitais e Cidades de Porte Médio, or CPM/Normal) and the Special Project of Middle-Sized Cities (Projeto Especial para Cidades de Porte Médio, or CPM/BIRD), funded in part and administered by the World Bank. With the extinction of FNDU, CPM/Normal lost ground until it was, for all practical purposes, deactivated in 1981.49 The relatively small amount of funds invested in CPM/Normal made it apparent that reorganizing the urban network could be achieved only through a long-term financial commitment. To overcome the financial limitations of CPM/ Normal, a special project, CPM/BIRD, was created with the objective of continued long-term investment in strategically located urban centers. Of the U.S. $200 million project, 35 percent was funded by the World Bank; the remaining funds were equally divided from the national budget and the states and municipalities. While CPM/Normal had targeted 112 middle-sized cities, CPM/BIRD concentrated on only 13 cities to receive massive investments. The project was able to build upon CPM/Normal's success in establishing municipal planning processes and forming local technical teams.50 In cooperation with World Bank technical assistance and training programs, local planners targeted three areas to be addressed: employment and income, urban and community infrastructure, and municipal administration. The limited analyses available indicate that the project has generated significant intraurban improvements, reinforcing the economic infra-structure of the cities, generating employment and income and assisting the mayors in the process of municipal administration. Consequently, the participating cities, should, in the short run, present improvements in economic productivity and the quality of life of the population . . . The implantation of local systems of integrated planning, training of local teams,

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and sectoral integration of the municipal, state and federal levels are impressive successes. ("Cidades de porte médio," n.p.) Apart from the apparent strides made by the Special Program of Middle-Sized Cities, the most important development in urban policy to date has been the creation of the Ministry of Urban Development and the Environment (Ministério do Desenvolvimento Urbano e Meio Ambiente, or MDU) in 1985. MDU was designed to function as the legal coordinator of the multiple actions and sectoral programs of BNH, CNDU, the Special Secretariat for the Environment (Secretaria Especial do Meio Ambiente, or SEMA), the National Environmental Council (Conselho Nacional do Meio Ambiente, or Conama), and the Brazilian Company of Urban Transports (Empresa Brasileira dos Transportes Urbanos, or EBTU). Thus, the creation of MDU was a giant step toward meeting the aspirations of many of those involved in urban questions. To date, there is no indication, however, that MDU has been able to unify and redirect sectoral interests,· it therefore has been limited in its ability to formulate urban policy.51 Conclusions The causes of regional urban imbalances and the complex nature of intracity contradictions require a comprehensive policy with broad political support at the highest levels of government. In effect, policymakers in all sectors and at all decision-making levels must recognize the need to redirect the progress of their country toward more desired regional urban development and more equitable city management. If the recognition and commitment are lacking, then a policy as complex as urban policy, given even the most well-intentioned planners and thoroughly designed plans, can never be implemented. This analysis of urban policy confirms the hypothesis that urban policy-making in Brazil has been characterized by inadequate high-level political commitment to modify the goals of national development according to considerations of urban development. The transfer of FNDU and FDTU funds in 1980 and 1981, respectively, to the national budget effectively stopped implementation of CNDU plans. Clearly, some advances were made during the period studied—namely, in the areas of institution-building and dissemination of an awareness of urban problems and need for more effective municipal planning. But available information suggests that the only real strides were made in the World Bank-administered and (in part) funded, Middle-Sized Cities Program. And even though initial analyses indicate positive results from the program, the overall funding for urban development, as indicated by

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CNDU investments, declined considerably from its high in 1976 of 714 billion cruzeiros to approximately 100 billion cruzeiros in 1984. The problems faced currently by the Ministry of Urban Development and the Environment suggest that the degree of political commitment necessary to forge a coherent urban policy is still not present in Brazil. Thus, while the Second Plan of National Development introduced Brazil's first attempt at articulating such a policy, policymakers were not able to put in place a set of instruments sufficient for achieving the stated goals. Furthermore, two important "indirect" causes of urbanization problems—the agrarian structure and industrial location policy—were never directly challenged or reoriented to the goals of urban policy. Urban development, then, has never received the priority it requires in Brazilian policy-making. Until 1975 it was characterized by a laissezfaire approach to urban problems, with a few isolated attempts at integrated local development. Since 1975 national institutions have been put in place, but never furnished with the power, and consequently the instruments, to implement an effective long-term policy. Furthermore, policy-making became increasingly centralized and technocratized subsequent to the populist period, which had employed some mechanisms for local input. There is no historical indication that an ideal level of national political commitment for urban policy will emerge in Brazil, and the current economic crisis makes such prioritization of urban problems even less likely. However, the liberalization of authoritarianism has allowed experiments in municipal democracy and increased mobilization of the urban poor, both of which suggest a move toward broader participation in planning at the municipal level. In the early 1980s, Lages, Santa Catarina, Boa Esperança, and Espírito Santo were reorganized into a form of participatory democracy to confront the problems of high subemployment and poor economic performance in the face of limited finances with which to provide urban services. In both cities, local government responded to a rising presence of neighborhood associations and base communities by creating more representative means of administration.52 The cases of Lages and Boa Esperança are a clear indication of the ability of the municipalities to react with flexibility in the face of organized demands. And as such, they suggest the possibility that a more bottom-up approach to urban policy could be reconciled with centralized directives in Brazil. Current discussion of liberalization by administrative and financial decentralization indicates a willingness on the part of the state to move in the direction of increased municipal autonomy.53 If the last twenty years are viewed in a historical context, the extreme centralization of decision making coupled with complete elimination of popular input

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can be considered an aberration. Whereas, since the days of Vargas Brazil has planned centrally, the government has always, except for this recent brief period, been legitimized by some manner of popular support. Just as pre-1964 populism arose out of the traditions of colonial and earlytwentieth-century practices, the present "redemocratization" is clearly a transition out of which will evolve some modified form of broader participation, which will undoubtedly contain elements that were present in Brazilian politics and planning prior to 1964, as well as others that emerged during the authoritarian period. The shape of future popular input is still being formed. However, the experiments of Lages and Boa Esperança, and the continuing presence of neighborhood associations and the church among urban low-income residents, coupled with federal initiatives at decentralization, indicate that the municipalities may strengthen their position in the federal system, and may even become the innovators of the new system. The Brazilian state has historically directed change by organizing it or coopting interests before autonomous elements present a challenge to established patterns of policy-making. If federal and local interests can allow the municipalities to respond with flexibility to rising demands for broader participation in the community, then municipalities may come to serve as buffers between the masses and the state. Given the nature of urban policy, coordinated planning at the federal level will not and should not disappear with the liberalization of authoritarianism in Brazil. The Brazilian variant of federalism could allow a process of urban policy-making to emerge that would be more responsive to impulses from the local and state levels—a meeting of the top-down and bottomup. More participatory and thus effective municipal planning could ensue, resulting in more equitable distribution of goods and services. Involvement of local officials and popular interests in the formulation of national policy might lead to a more tedious decision-making process but should result in higher rates of program success. Given a political environment that is not willing to address questions of agrarian reform or industrialization, it is suggested that the greatest possible strides could be made through nationally coordinated programs that depend primarily on popular input during both the preparation and implementation stages. Such optimism must be tempered, however, by acknowledging the severe financial limitations faced by Brazilian cities. Without adequate resources to address growing problems, administrative autonomy, even if reinforced by the availability of greater legal powers, will not provide municipal administrators with any more real alternatives. If, as one source suggests, the state apparatus has become so accustomed to its inflated share of revenues that it is unable to effect any redistribution of

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those revenues back to local levels, then many municipalities will continue to be completely incapable of meeting growing demands for even the most basic services.54 Moreover, the demise of the Lages and Boa Esperança experiments in the 1982 elections may indicate the ability of more traditional, conservative interests at the municipal level to organize when threatened.55 Consequently, while many variables suggest that a more bottom-up approach to urban policy could be reconciled with centralized directives in Brazil, both the power relations that operate in many municipalities and the financial limitations faced by all unquestionably present limitations to the realization of change. Notes 1. Instituto Brasileiro de Geografia e Estatística (IBGE), Anuário Estatístico, p. 76. 2. Bertrand Renaud, National Urbanization Policy in Developing Countries (London: Oxford University Press, 1981), p. 7. Published for the World Bank. 3. Joel Bergsman, "Urban Growth Policy in Brazil: Intended and Accidental," in Wayne A. Cornelius and Felicity M. Trueblood, eds., Latin American Urban Research, vol. 5: Urbanization and Inequality: The Political Economy of Urban and Rural Development in Latin America (Beverly Hills: Sage, 1975), pp. 199— 200. 4. Renaud, National Urbanization Policy, p. 6. 5. Michael L. Conniff, Urban Politics in Brazil: The Rise of Populism, 19251945 (Pittsburgh: University of Pittsburgh Press, 1981), p. 3. 6. As argued by Conniff in Urban Politics in Brazil. 7. Ibid., p. 4. 8. Ibid., p. 5. 9. Ibid., p. 6. 10. Francisco Weff ort, O populismo na política brasileira (Rio de Janeiro: Paz eTerra, 1978), pp. 62, 71,84-85. Cited in Connif, Urban Politics in Brazil, p. 17. 11. Octavio Ianni, O colapso dopopuhsmono Brasil (Rio de Janeiro: Civilização Brasileira, 1968). English translated by Phyllis B. Eveleth, as Crisis in Brazil (New York: Columbia University Press, 1970), p. 198. Cited in Conniff, Urban Politics in Brazil, p. 18. 12. Antonio Octavio Cintra, "Planejando as cidades: política ou não política," in Antônio Octavio Cintra and Paulo Roberto Haddad, eds., Dilemas do planejamento urbano e regional no Brasil (Rio de Janeiro: Zahar Editores, 1978), pp. 189-190. 13. Ibid., pp. 185-186. 14. Benício Schmidt and Ricardo Farret, A questão urbana (Rio de Janeiro: Zahar Editores, 1986), p. 21. 15. Ibid. 16. Cintra, "Planejando as cidades," p. 187. 17. Schmidt and Farret, A questão urbana, p. 22; Cintra, "Planejando as cidades," p. 189.

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18. John J. Harrigan, "Political Economy and the Management of Urban Development in Brazil, in Cornelius and Trueblood, eds., Latín American Urban Research, vol. 5, p. 212. 19. Benicio Schmidt, O estado e a política urbana no Brasil (Porto Alegre: Editora da Universidade, 1983), pp. 45-50,103; Cintra, "Planejando as Cidades," pp. 196-197. 20. Cintra, "Planejando as Cidades," p. 198. 21. Schmidt and Farret, A questão urbana, p. 34. 22. Ibid., p. 40. 23. Vilmar Faria argues that the value of investments in housing actually increased, although the proportion of total investments may have declined. Author interview with Vilmar Faria, Professor, Department of Social Sciences, University of Campinas, Brazil, in Austin, Texas, April 29, 1987. 24. Schmidt and Farret, A questão urbana, p. 40. 25. Serfhau's first superintendent was selected by Sandra Cavalcanti, president of BNH, and it inherited its personnel, and much of its philosophy, from the old Foundation of Popular Housing. 26. Serfhau received multiple responsibilities oriented toward local development. Its activities included the coordination of research on the housing question, including physical, technical, and socioeconomic aspects of housing; the promotion, coordination, and provision of technical assistance to regional and municipal housing programs "of social interest"; the provision of technical assistance in conjunction with educational programs for community development and organization; and assistance to the states and municipalities in the formulation of general plans [planos directores). Cintra, "Planejando as Cidades," p. 200. 27. The only detailed account of the Program of Concentrated Action available in the United States is Schmidt and Farret's A questão urbana. The following discussion is taken largely from that account, and essentially paraphrases the Portuguese. 28. According to the definition of a microregion formulated by IBGE, 3,938 municipalities were chosen to test the program. The criteria utilized to choose the cities were as follows: ( 1 ) the largest cities in each microregion; (2) cities with populations equal or superior to 20,000 persons in the states of Sao Paulo, Minas Gerais, Rio Grande do Sul, Bahia, and Pernambuco; (3) only the first 50 cities that satisfied (1) and (2) for each state. Eventually, 455 municipalities were chosen, and plans were to be applied according to the utilization of two basic instruments: 1. The Preliminary Report—an initial document aimed at compiling general suggestions about urban planning for the benefit of local authorities. The program attempted to obtain the information rapidly, by investigating the principal problems and indications existing in the short run. It was, essentially, an attempt to motivate policymakers, and to mobilize political support in favor of urban planning. 2. The Immediate Plan of Action—a broad plan designed for implementation in the larger urban centers. It involved complex sectoral programs to be implemented by means of more detailed plans formulated with budgets in mind.

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29. Different interpretations as to the motivations of the PAC exist. Hamilton Tolosa emphasizes the participation of local bodies in the formulation of PAC plans, while Benicio Schmidt looks at local participation in terms of manipulation by the federal level. 30. Schmidt and Farret, A questão urbana, p. 38. 31. Author interview with Enrique Lewandowski, Secretary of Judicial Affairs, São Bernardo, Brazil, and Professor, University of São Paulo Law School, in Austin, Texas, April 15, 1987. 32. Tolosa, "Política urbana e redistribuição de renda," p. 43. 33. Vilmar Faria points out that planners involved in the Minas Gerais Program of Middle-Sized Cities viewed the city of Belo Horizonte entirely within the perspective of its hinterland. Regional concerns such as problems in the agriculture sector, regional transportation, and urban markets for agricultural products, to name a few, were focused on in the planning process. However, as the plans reached higher administrative levels, many of the regional, or hinterland, concerns were minimized and the focus moved to the central city. Interview with Faria. 34. Ministério do Interior. Conselho Nacional de Desenvolvimento Urbano, Secretaria-Executiva. "Análise crítica da política urbana," in Seminário sobre política de desenvolvimento urbano. Documentos apresentados (Brasília, 1984), p. 4 (hereafter, "Análise crítica da política urbana"). 35. Schmidt, O estado e a política urbana no Brasil, p. 110. 36. Tolosa, "Política urbana e redistribuição de renda," p.42; Schmidt, O estado e a política urbana no Brasil, p. 111. 37. Tolosa, "Política urbana e redistribuição de renda," pp. 42-43. 38. Schmidt and Farret, A questão urbana, p. 42. 39. Council members included the general secretaries of each of the Ministries of Planning, Finance, Transportation, Industry, Commerce, Aeronautics, and the presidents of BNH and EBTU, the national urban transport firm. 40. "Análise crítica da política urbana," p. 6. 41. Ibid., pp. 9-10; Schmidt and Farret, A questão urbana, p. 47. 42. Interview with Faria. 43. The succession of CNPU by CNDU in 1979 resulted in a push for more detailed priorities concerning the resources to be allocated by the FNDU. Ministério do Interior, Conselho Nacional de Desenvolvimento Urbano, Secretaria-Executiva, "Avaliação da implantação da política de desenvolvimento urbano de regiões metropolitanas e cidades de porte médio. I. Política urbana e regiões metropolitanas, uma tentativa de avaliação," in Seminário sobrepolítica de desenvolvimento urbano. Documentos apresentados (Brasília, 1984), p. 9 (hereafter, "Política urbana e regiões metropolitanas"). 44. Ibid., p. 10. 45. Ibid., pp. 14-16; Schmidt and Farret, A questão urbana, p. 47. 46. Schmidt, O estado e a política urbana no Brasil, ρ, 43. 47. The establishment of the Program for the Mobilization of Energy maintained the tendency toward a favored transportation sector. "Política urbana e regiões metropolitanas," p. 13. 48. Ministério do Interior, "Avaliação da implantação da política. Π. Cidades de porte médio, " in Seminário sobrepolítica (hereafter, "Cidades de porte médio").

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49. Only that part of the program that benefited northeastern cities continued to function, in part. "Cidades de porte médio," n.p. 50. The basic instrument of planning established by CPM/Normal was the "Perfil da cidade" (City profile). "Perfis" defined local needs and proposed "how, where, and when" to act upon those needs. Municipal mayors, assisted by the states and regional superintendencies, elaborated perfis for 90 percent of the cities targeted by the program. "Cidades de porte médio," n.p. 51. Schmidt and Farret, A questão urbana, p. 90. 52. Edison Nunes and Pedro Jacobi, "Movimentos populares urbanos, participação e democracia," in Luiz Antônio Machado da Silva, ed., Ciências sociais hoje, 2: movimentos sociais urbanos, minorias étnicas e outros estudos, (Brasília: ANPOCS, 1983), pp. 42-49. 53. See, for example, Eduardo Palma, "Uma visão política da des-centralização, " Revista Econômica do Nordeste 15 (1984): 223-247. 54. Interview with Lewandowski. 55. Interview with Faria.

11. The Constituent Assembly and the Transformation Strategy: Attempts to Shift Political Power in Brazil from the Presidency to Congress David Fleischer This chapter will review the evolution of Brazil's political transition from the military-authoritarian regime, which took power in 1964 and began a "slow, gradual and secure" extrication strategy in 1974. This process has lasted over thirteen years and has been overlaid with the regime's preoccupation with maintaining an open Congress, functioning parties, and regular elections, with severe manipulation of the latter to sustain majorities in a Congress stripped of its powers.1 When Brazilians were again able to elect directly their state governors in 1982 and a Constituent Assembly in 1986, many felt that final redemocratization was close at hand. However, the Assembly, meeting in 1987 and 1988 under reduced sovereignty and heavy coercion from the president and the military, tried to adopt the structural changes that Brazil needs to reach the twenty-first century without a major social upheaval. After 613 days of work, the Assembly ended the 8,955-day authoritarian period with the promulgation of the new constitution on October 5, 1988. Election Trends The military government installed in 1964 had two basic requirements of the party system in Congress: ( 1) to maintain viable majorities in both houses with strong party loyalties; and (2) to maintain a sizable opposition group that posed no real threat to the regime.2 The latter was deemed important to show the international arena that Brazil was a functioning democracy. Both conditions were weakened in 1965, when the BPR (Revolutionary Parliamentary Bloc), the military government's support coalition in Congress based on the 1946-1965 pluriparty system, proved ineffective, and PSD (Social Democratic party) gubernatorial candidates tied to banned President Juscelino Kubitschek won direct elections in the key states of Minas Gerais and Guanabara. In 1966, a loyal government party (ARENA, or National Renovating Alliance) and a consenting opposition

The Constituent Assembly and the Transformation Strategy

211

(MDB, or Brazilian Democratic Movement) were organized.3 In 1968, the ARENA majority proved to be "unworthy," and the dictatorial AI5 (Fifth Institutional Act, decreed in December 1968 and rescinded in January 1979) was signed and the Congress closed. The twenty-one-year period of military regimes was marked by a concern for manipulating the electoral system to "produce" majorities for its support party (ARENA, and after 1979, PDS [Democratic Social party]). As seen in table 11.1, this "search for legitimacy" was a serious problem for Brazil's five military presidents, for only once (the proportional elections of 1966) was a majority of over 50 percent of ballots cast achieved.4 The electoral Achilles' heel of successive military governments was the steadily increasing and politically conscious opposition vote in Brazil's large and even middle-sized urban areas, which became more apparent in the 1974, 1978, and 1982 results. In table 11.1, we observe that although turnout rates climbed slowly (from 78 percent to 83 percent) over the five elections, enfranchisement (electorate to population) increased dramatically, from 26 percent in 1966 to 48 percent in 1982. Most of these new voters were part of the exploding urban population. These demographic tendencies were also occurring on a North-South dimension, favoring the more urbanized and industrialized Southeast and South. Table 11.2 illustrates well these tendencies in the 1978 election. Nationwide, the ARENA party began receiving majorities only in cities with populations of less than 100,000. An inverse relationship, in which the smaller the município, the larger the ARENA vote, emerged. Along the regional dimension, ARENA fared worse in the more developed and urbanized Southeast (38 percent) and South (51 percent). This inverse relationship was present in all regions, but less pronounced in the lessdeveloped North and Northeast. Similar data for five selected states are presented in table 11.3, which compares the 1978 and 1982 elections. With the exception of Rio de Janeiro, the PDS fared worse in 1982 than the ARENA in 1978. In São Paulo, the most developed and urbanized state, for example, the PDS began accumulating majorities only in municípios with populations under 10,000. The "city size versus opposition vote" tendency was generally reconfirmed in 1982.5 Abertura, 1979-1982 The abertura (or opening-up) period impinged heavily upon the Congress and involved further manipulation of the party and electoral systems within a "transformation" strategy aimed at retaining some kind of a

The Political Economy of Brazil

212

Table 11.1. Majority and Proportional Elections in Brazil by Party, 1966-1982 (in %) PARTY/ Election

2966a

1970a

1974a

1978a

1982b

ARENA/PDS Majority Proportional

44.7 50.5

43.7 48.4

34.8 40.9

35.2 40.0

37.3 36.7

MDB/Opposition Majority Proportional

34.2 28.4

28.6 21.3

50.1 37.8

46.6 39.3

52.2 48.2

Blank Votes Majority Proportional

11.7 14.3

21.7 20.9

9.2 14.2

10.1 13.5

7.5 10.9

Null Votes Majority Proportional

9.4 6.8

6.0 9.4

5.9 7.1

8.1 7.2

2.7 4.2

Totalc Majority Proportional

(17,260) (23,493)d (17,286) (22,436)

(28,981) (28,981)

(37,602) (37,554)

(48,214) (48,481)

Electorate Turnoute

(22,335) (28,966) 77.4 81.1

(35,811) 80.9

(46,030) 81.7

(58,616) 82.7

Population (84,996) (94,865) (104,548) (113,894) (123,192) Enfranchisement 26.3 30.5 34.3 40.4 47.6 a

Election for senator and federal deputy. b Election for governor and federal deputy. c In thousands. d Election for two Senate seats. e Voters as percentage of electorate. f Electorate as percentage of population.

Table 11.2. Distribution of ARENA Chamber of Deputies Vote by Municipal Population and Region, 1978 (excludes Brasilia precincts) Municfpios by Size: Northa Population Bracket

No of % Munc. ARENA

Northeastb % No of Munc. ARENA

South

Southleast % No. of Munc. ARENA

No. of % Munc. ARENA

BRAZIL·

Central-West No. of Munc.

% ARENA

% No. of Munc. ARENA

Over 500,000

02

41.2

03

42.7

09

22.2

02

37.6

01

34.8

17

26.8

100,00050,000

03

57.3

32

57.7

58

35.5

24

45.3

04

50.5

121

42.1

50,000100,000

15

71.8

70

76.1

90

45.0

50

47.6

11

55.2

236

54.3

20,00050,000

44

77.5

359

82.6

235

55.6

164

55.7

66

61.2

868

66.0

10,00020,000

45

81.2

429

83.1

321

66.9

213

59.1

103

63.6

1,111

71.6

5,00010,000

19

79.6

327

83.6

339

70.1

186

62.2

82

64.8

953

73.9

2,0005,000

06

90.9

138

81.9

331

70.6

76

67.3

50

69.0

610

74.3

Under 2,000

00

16

78.0

27

84.7

04

81.5

00

38

82.3

1,374

72.4

1,410

38.3

719

51.3

317

3,954

50.4

TOTAL Number of Votes'1

134

61.0 818,926

6,907,626

14,464,693

Source: PRODASEN data base. Excludes Acre and Rondônia. b Excludes Fernando de Noronha. d Excludes blank and void ballots. a

c

6,031,381

57.5

1,461,103

Excludes Acre, Rondônia, and Fernando de Noronha.

29,683,765

Table 11.3. Distribution of ARENA vs. PDS Chamber of Deputies Vote by Municipal Population in Selected States, 1978 and 1982 (excludes Brasilia precincts) Municipios by Size: Population Bracket

Bahiaa

Cearáa %e %d No. of ARENA PDS Munc. 1978 1982

Minas Geraisb

%d No. of ARENA PDS Munc. 1978 1982

Rio de Janeiro0

São Pauloc

%e %d %d %· %d PDS No. of ARENA PDS No. of ARENA PDS No. of ARENA 1982 Munc. 1978 1978 1982 Munc. 1978 1982 Munc.

Over 100,000

05

55.8

49.4

09

48.0

33.5

12

34.5

29.8

15

22.8

28.3

34

26.2

19.7

50,000100,000

13

78.1

84.0

17

86.6

66.7

33

50.0

40.4

11

39.3

35.8

43

38.9

31.1

20,00050,000

59

86.6

85.5

110

85.0

75.6

98

68.4

54.2

18

44.4

43.9

99

45.8

38.5

10,00020,000

33

86.8

90.6

126

87.5

81.2

172

77.0

60.0

16

49.0

40.9

122

54.4

48.1

5,00010,000

26

89.9

89.4

67

88.2

82.6

204

78.6

64.5

14

59.0

48.0

121

58.3

50.0

Under 5,000

05

91.8

91.3

07

91.0

78.2

203

77.1

65.4

00

—

—

152

64.9

60.5

141

75.5

74.1

336

74.8

63.4

722

58.0

47.4

64

25.3

29.9

571

33.1

26.7

— 1,276 1,695

—

1,742

2,570

— 3,497

4,876

— 3,479

4,680

—

7,019

9,769

TOTAL f

Number of Votes

Source: PRODASEN data base. Two parties elected deputies in 1982. b Three parties elected deputies in 1982. c Five parties elected deputies in 1982. d "Crossover" and party label votes permitted. e "Crossover" and party label votes prohibited. f In thousands. Excludes blank and void ballots. a

The Constituent Assembly and the Transformation Strategy

215

workable coalition to support the last two years of the Figueiredo government (1983-1984), and providing the basis for the election of a "sympathetic" civilian president for the 1985-1991 period. First Phase (1979). Opening the "straitjacket" two-party system from its "yes-no" plebiscitary character into a looser, moderate pluralism of party blocs in the Congress became a prime objective. Survey research conducted in early 1979 showed 92 percent of the MDB and 85 percent of the ARENA in favor of a change to a pluriparty system. 6 Justice Minister Petrônio Portela's strategy foresaw an implosion of the ARENA as well, so that its successor party would hold but a simple majority in Congress and thus depend on a coalition with a new center party to be created by ex-ARENA dissidents and ex-MDB moderates. Second Phase (1980-1981). The first phase of abertura did not survive to see the first party realignments in Congress due to the untimely death of Portela in January 1980. This weakened the efforts of the organizers of the new centrist party (Partido Popular, or PP, "Popular party"), and reduced the desertions from the ARENA to only thirty; its successor, PDS, maintained an absolute majority of 225 in the lower house by counting 24 new converts from the ex-MDB. The PMDB (Party of the Brazilian Democratic Movement) was still the second largest party, although it was reduced to about one-half of its 1979 strength in the Chamber ( 189 to 94). The new PP was strongest in Minas Gerais and Rio de Janeiro and counted 68 deputies and 7 senators. The attempts at recreating a strong PTB (Brazilian Labor party) were thwarted by rival factions that split in May 1980, with Ivete Vargas keeping a weak PTB label and Leonel Brizóla forming his own PDT (Democratic Labor party). A new obreirista (worker) movement had begun in 1978 and evolved into the formation of the PT (Workers' party), which "acquired" five deputies and one senator in early 1980. The Figueiredo government was able to postpone municipal elections scheduled for November 1980 to coincide with the general selections of 1982, but in the consolidation of the new parties in Congress, the PDS majority had by early 1981 dwindled close to the minimum absolute majority in the Chamber (211). Right-wing terror increased and culminated with the Riocentro bombing episode on April 30, 1981. This coupled with a series of political defeats at the hands of Planning Minister, Delfim Netto, led General Golbery to resign his position as master political coordinator of the military government in August 1981. Third Phase (August 1981-February 1982). Golbery had imagined a "populist" strategy for the 1982 elections with the reemergence of the old PSD (Social Democratic party)-PTB alliance through adroit coalition-building in many states, in which the PDS and PP would cover the rural areas, and use the PP, PTB, or PDT in many urban centers to dilute

216

The Political Economy of Brazil

the ever-increasing force of the PMDB. PDS dissidents joined the opposition on several occasions in the second semester of 1981 to defeat government bills in the Chamber, most important of which was the attempt to add the sub-legenda artifice to the direct elections for governor scheduled for 1982. With SNI (National Information [Intelligence] Service) research pointing to opposition victories in most states, upon President Figueiredo's return to the presidency (following heart treatment in Cleveland) in November, the government counterattacked with a massive election manipulation package (including straight-ticket voting and no coalitions), which provoked the reincorporation of the PP into the PMDB in February 1982/ Fourth Phase (February-December 1982). With this action, the government was able to reinforce its Chamber majority and inflate the PTB (under Delfim's guidance) as an erstwhile partner. Thus strengthened, the government approved yet another "reform" package, which again raised the constitutional quorum to two-thirds and reworked the composition of the 1984 electoral college in favor of the PDS.8 These precautionary measures were taken because the government was fearful that it might lose its majorities in Congress (the opposition could then have changed the constitution at will), as well as in the electoral college. The 1982 Elections Having again synchronized municipal elections with those at the state and federal levels (for the first time since 1970), and having established mandatory straight-ticket voting, the government hoped to "localize" the elections and provoke a "reverse coattails" effect. Because the PDS controlled an overwhelming majority of mayoral and city council offices in all states except Rio de Janeiro, palace strategists expected that voters would support local PDS candidates and consequently the top of the ticket (governor and senator) as well, at the risk of invalidating their ballots. This proved to be the case in the "solid Northeast," where these artifices helped the PDS to victory.9 As has been the case with Brazil's long history of electoral law manipulation, the "witchcraft returned to haunt the witch" in the South-Central and Northern regions, where the opposition won ten of Brazil's twenty-three states—an area accounting for nearly 70 percent of Brazil's population, GNP, and tax base. The PPPMDB fusion had greatly strengthened the latter, and the election resulted in a "straight coattails" effect in the South-Central region in favor of the PMDB, which decimated the PDS at the municipal level.10 Despite the desperate election manipulations cited above, the PDS lost its Chamber absolute majority by five votes, while retaining an

The Constituent Assembly and the Transformation Strategy

217

Table 11.4. Election Results, November 1982, and Electoral College Composition, January 1985, by Political Party PDS Votes

No.b 17,780 (43.2%)

PMDBa

PDT

PTB

PT

TOTAL

17,674 (43.0%)

2,393 (5.8%)

1,829 (4.5%)

1,449 (3.5%)

41,136 (100.0%) 23

Governorsc

13

9

1

0

0

Senatorsd

45

22

1

1

0

200 (41.8%)

23 (4.8%)

13 (2.7%)

8 (1.7%)

479 (240)e (100.0%)

Delegates Electoral Collegef 81

51

6

0

0

138

Electoral College Compositiong 361

273

30

14

8

686 (344)e

Federal Deputies No. 235 (49.0%)

69 (35)e

Hypothesis: Electoral College if 1978 norms were in force. Delegatesh Composition

i

90

89

16

0

0

195

367

314

40

14

8

743 (372)c

Source: Compiled from preliminary election statistics reported by the Superior Electoral Court (TSE), Diário da fustiga, November 28, 1983, pp. 18630-18686. a The PP entered a fusion with the PMDB in February 1982. b Election for federal deputy. (Excludes 5,286,684 blank and 2,058,459 void ballots.) In thousands. c Only 12 PDS governors were elected directly; Rondônia appointed through 1987. d Includes 44 senators elected in 1978 (22 "bionics"), and 3 new seats elected from Rondônia. With the death of Sen. Nilo Coelho (PDS-PE) at the end of 1983, the PMDB acquired its 22nd seat, because the alternate elected in 1978 had since left ARENA for PP and then PMDB. Thus, the PDS lost its 2/3 majority. e Numbers in parentheses indicate the absolute majority. f Six delegates representing the majority party in each of the 22 state assemblies. Due to a tie in Mato Grosso do Sul, the PDS and PMDB each got 3 delegates. g Met on January 15, 1985. Includes senators, federal deputies, and delegates. h Minimum of 3 per state, plus one for every million in population. i Would have met in October 1984.

218

The Political Economy of Brazil

absolute majority in the electoral college and a two-thirds majority in the Senate, as detailed in table 11.4. The Senate margin was based on the PDS's eighteen "bionic" senators elected in 1978. By reducing the electoral college delegates to an equal six per state, instead of making them proportionate to the state's population (as had been the case in 1978), the PDS accumulated a seventeen-vote margin in the indirect presidential election scheduled for January 1985. However, had the 1978 rules remained in force (a hypothesis detailed in table 11.4), the combined opposition parties would have held a five-vote margin. Table 11.4 also depicts the inequalities of representation in Brazil's lower house, in spite of the system of proportional representation used. With its 43.2 percent of the party vote, the PDS received 49 percentage of the seats. On a one-person/one-vote basis, instead of its eight deputies, the PT should have elected seventeen. Tables 11.5 and 11.6 analyze the regional basis of these inequalities. With only 29.3 percent of the population and 23.8 percent of the voters in 1982, the Northeast commanded 39.2 percent of the Senate, 31.1 percent of the Chamber, and one-third of the electoral college. Within the PDS (table 11.6), the inequalities are even more striking, due to the Table 11.5. Regional Political Representation in Brazil: 1982 Elections, 1984 Congress, and 1985 Electoral College (in %) Electoral College

Region North

5.0

4.2

3.8

17.4

9.8

12.1

10.4

Northeast

29.3

25.8

23.8

39.2

31.1

33.5

32.0

Southeast

43.4

46.2

48.9

17.4

35.3

29.9

33.9

South

16.0

18.0

18.2

13.0

17.1

15.9

16.1

6.3

5.8

5.3

13.0

6.7

8.6

7.6

100.0

100.0

100.0

100.0

100.0

100.0

100.0

479

686

743

Cen-West Total %

Electorateb 1982

Congress 1984b Votersb 1982 Senate Chamber

Populationa 1980

TOTAL Ν 119,071,000 58,616,588 48,481,170 69 a

1985-Ac 1985-Bd

IBGE Census, September 1980. Diário da Justiça, November 28, 1983. c Includes 69 senators, 479 federal deputies and 138 state delegates. d Would have included: 69 senators, 479 federal deputies, and 195 state delegates. b

The Constituent Assembly and the Transformation Strategy

219

party's hegemony in the Northeast region. With 35.6 percent of the PDS national vote in 1982, the Northeast delegation held a 53.3 percent absolute majority within the government party bloc in the Senate and a simple majority of 42.1 percent in the Chamber, as well as 43.2 percent of the party's August 1984 national nominating convention and 49 percent of the PDS's votes in the January 1985 electoral college. As we shall see below, these inequalities assisted Maluf's convention victory, but were also an important part of his defeat in the electoral college. Because of the Northeast's weight in the electoral college, both Tancredo Neves and Paulo Maluf chose running mates from that region. In contrast, the more populous Southeast region, with 43.4 percent of the population and 48.9 percent of the 1982 votes, had but 17.4 percent representation in the Senate, 35.3 percent in the Chamber, and only 29.9 percent in the electoral college. Still worse, these four states (São Paulo, Rio de Janeiro, Minas Gerais, and Espírito Santo) gave the PDS its largest number of voters (37.2 percent) in 1982 (table 11.6), but accounted for only 11.1 percent of the PDS Senate delegation, 25.5 percent of the Chamber, and a mere 18 percent of the PDS's votes in the electoral college. Table 11.6. Regional Political Representation of the PDS: 1982 Elections, 1984 Congress and PDS Convention, and 1985 Electoral College (in %) Congress 1984b

Region

Votersb 1982

Senate

North Northeast Southeast South Cen-West Total %

4.3 35.6 37.2 18.0 4.9 100.0

20.0 53.3 11.1 8.9 6.7 100.0 45

TOTAL Ν 17,779,849 a

1984e PDS Convention

1985-Af

1985-Bg

11.9 42.1 25.5 14.9 5.6 100.0

13.1 43.2 24.4 13.8 5.5 100.0

11.9 49.0 18.0 14.2 6.9 100.0

11.2 50.1 17.7 15.5 5.5 100.0

235

961

361

367

Chamber

Electoral College

IBGE Census, September 1980. Diário da Justiça, November 28, 1983. c Includes 69 senators, 479 federal deputies, and 138 state delegates. d Would have included: 69 senators, 479 federal deputies, and 195 state delegates. e Included 45 senators, 235 federal deputies, 560 state delegates, and 121 members of PDS National Directorate, f Includes 280 senators and federal deputies and 81 state delegates, g Would have included 280 senators and federal deputies and 87 state delegates. b

220

The Political Economy of Brazil

Transition (1983-1985) True to the traditional Brazilian theme of "ganhou mas não levou" (where one wins but does not reap the rewards), the government and its PDS began an inglorious descent into defeat in early 1983. During this period, the PDS declined from 361 electoral college votes "won" in the 1982 elections, to 248 by November 1984, to a final 180 votes cast on January 15, 1985. Early in 1983, President Figueiredo lost his best opportunity to reassert political command of the PDS and the succession process when his apparent in pectore candidate (SNI Director General Medeiros) was eliminated during the "star wars" corruption and violence scandals in January, which included the alleged assassination of a journalist. Had Figueiredo reorganized his cabinet, eliminated "tainted ministers," and chosen to favor a "clean" politician of the center, such as Vice-President Aureliano Chaves, the PDS would have had better chances of maintaining a majority in the electoral college. The disintegration of the PDS began in mid-1983 with humiliating defeats by Maluf-led factions within the São Paulo and national party committee elections. After two months of convalescence from a coronary bypass operation, President Figueiredo returned in time for the first defeats ever of military decree-laws by the Congress in October. Forced to operate with a simple majority in the Chamber, PDS leaders tried to strike a coalition bargain with the PTB in return for some minor subcabinet appointments. However, in October, most of the PTB and several PDS dissidents bolted the coalition against the repressive salary decree-laws, and the government never recovered a majority. President Figueiredo's positioning was reminiscent of the 1937 presidential campaign, when President Vargas supposedly encouraged the "semiofficial" candidate, José Américo de Almeida, but never gave his public blessing, all the time plotting a continuista strategy (to prolong his stay in office). Interior Minister Mário Andreazza seemed to be playing the role of José Américo, while close presidential associates tried to broker the idea of an extended mandato-tampão for Figueiredo in return for direct presidential elections in 1986. Survey research conducted in November 1983 showed that Congress was close to a two-thirds majority on direct elections but, except for Brizola's PDT, very negative on the issue of the mandato-tampão.11 January 1984 marked the start of the three-month popular campaign to pressure Congress, especially PDS deputies, in favor of the Dante de Oliveira amendment calling for "Diretas Já" (direct elections). Sensing a last-minute ground swell in favor of the amendment, the government hastily introduced its own massive package two days before the crucial

The Constituent Assembly and the Transformation Strategy

221

vote and pulled out all the authoritarian stops: (1) Brasilia and the surrounding region were placed under emergency military rule; (2) PDS mayors and city council members were impeded from traveling to Brasilia to pressure "their" deputies; (3) live television and radio coverage was muzzled; and (4) Planning Minister Delfim Netto applied severe economic pressure on wavering PDS deputies.12 The amendment failed the two-thirds quorum in the Chamber by twenty-six votes on April 25,1984, and the government's miniconstitutional reform package (establishing direct elections in 1988) suffered a similar fate two months later due to "bad faith" drafting. At this point (June 1984), PDS presidential hopefuls, Senator Marco Maciel and Vice President Chaves, together with ex-PDS president Senator José Sarney, formed a Liberal Front as a dissident bloc from the PDS and in August formalized the Democratic Alliance with the PMDB and constituted the Tancredo Neves-José Sarney ticket. Because most of these PFL (Party of the Liberal Front) dissidents were still credentialed as delegates to the PDS national nominating convention in August 1984, they were instructed to vote for Deputy Paulo Maluf because he was seen as easier for the Alliance to defeat in the electoral college than Minister Andreazza, who would have better reunited the PDS. In addition, some two-thirds of the convention delegates were local party "hacks" holding no elected office, and thus more vulnerable to Maluf s campaign tactics. In late 1983, Neves sealed two political agreements: (1) a "mineiros' pact" (a pact of representatives from the state of Minas Gerais) with Chaves—whoever waxed strong in his respective party and got its nomination would receive the total support of the other,· and (2) an understanding with Deputy Ulysses Guimarães, PMDB elder statesman, national party president, and the "anticandidate" in 1973 that if the "Diretas Já" amendment passed, Neves would support Guimarães within the PMDB, and if it were defeated, Guimarães would support Neves, the master coalition builder. Thus, with the PMDB and Minas Gerais united, and with a dissident PDS running mate from the Northeast, Tancredo Neves needed only to maintain popular mobilization and secretly strike a bargain with more moderate members of the army high command with authority over troop commands. The latter was orchestrated by Generals Ivan Souza Mendes and Leônidas Pires Gonçalves, who were appointed minister-director of the SNI and army minister, respectively, by Neves in March 1985. This pact included assurances that the 1987 Constituent Assembly would be congressional (elected in November 1986), and not independent and autonomous (elected separately in the first semester of 1986). The final coup de grace was delivered to Maluf by the Superior Electoral Court (TSE) in November in a ruling stating that the party fidelity sanctions in

222

The Political Economy of Brazil

the Organic Party Law applied to legislative proceedings in Congress, and not to the electoral college—thus freeing PDS dissidents to vote for Neves. The Electoral College Meeting as scheduled, in a climate of complete liberty with abundant national and international news coverage, the electoral college chose Tancredo Neves with 480 votes against Maluf's 180, with 26 abstentions. The Neves-Sarney slate received312 votes from the four opposition parties combined (32 votes short of the absolute majority), and 168 from the PDS ( 113 of the latter from the PFL). Obviously, without the support of these PDS dissidents, Neves's victory would have been impossible. The Northeast gave the Neves-Sarney ticket 155 of its 230 votes, and many of these crucial votes were from PDS dissidents. This was Maluf's Waterloo and became President Sarney's problem, as he attempted to conciliate the PFL and the PMDB in this region in the distribution of federal appointments and other "political goods." The Democratic Alliance in Power (1985-1986) With the formal constitution of the PFL as a party bloc within the Chamber and Senate in February 1985, the PMDB achieved a simple majority in the Chamber and the PMDB-PFL alliance and absolute majority in the Senate (table 11.7). In the Chamber, the PDS accepted the PMDB's majority status and quickly agreed to a proportional division of the seven-member governing board, with the PMDB holding the presidency. Within the PMDB caucus, Deputy Ulysses Guimarães defeated his "authentic" challenger, Deputy Alencar Furtado. However, when the latter took his challenge to the final floor vote and sought a bargain with the PDS Malufistas, Ulysses was forced to accept an arrangement whereby the internal Chamber staff appointments orchestrated by outgoing President Deputy Flávio Marcílio (PDS-CE [Democratic Social Party of the State of Ceará] and Maluf's running mate) would be left intact. Elected with only a five-vote margin, Ulysses began his term in a weakened position, in most part due to the positioning of "authentic" PMDB deputies who, although recognizing Ulysses as the most revered and prestigious PMDB leader, saw him as a personal choice of the president-elect and thus an unacceptable continuation of executive branch tutelage of the Chamber's internal decision making. The Senate played out a somewhat different scenario. The PDS stubbornly argued that it had accepted the majority criteria in the Chamber and demanded that the Democratic Alliance accept the PDS's

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223

Table 11.7. Party Delegations in Congress, 1983-1987 Party

Feb. 1983

June 1985

July 1986

Feb. 1987

Chamber PMDB PFL PDS PDT PTB PT PCB PCdoB PSC PSB PDC PMB PL PPB PTR TOTAL

200 — 235 23 13 08 — — — — — — — — — 479

199 100 135 25 10 05 03 02 — — — — — — — 479

222 127 68 23 12 06 03 02 04 03 03 02 02 01 01 479

257 120 35 23 17 16 03 03 01 01 05 00 06 00 00 487

Senate* PMDB PFL PDS PDT PTB PSB PL PDC PMB TOTAL

21 — 46 01 01 — — — — 69

25 17 25 01 01 — — — — 69

24 22 13 03 01 02 03 01 — 69

45 15 05 02 01 01 01 01 01 72

a

Senate totals for 1983-1986 include 46 senators elected in 1978; those for 1987 include 23 senators elected in 1982.

simple majority position in the Senate—which would have given the PDS the Senate presidency. Of course, this was unacceptable to the Democratic Alliance and the president-elect because the Senate president presides over important joint sessions of Congress. The Alliance argued that the PMDB-PFL (Party of the Liberal Front) coalition was the majority (absolute), and in the absence of a bargain

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The Political Economy of Brazil

would elect the full board of officers on the floor vote, which it proceeded to do. However, when the PMDB caucused to choose its slate, "young Turk" alternates who had taken office in 1983 (many from the ex-PP) elected Senator José Fragelli (PMDB-MS, or Party of the Brazilian Democratic Movement of the State of Mato Grosso do Sul) as president and defeated Senator Humberto Lucena (PMDB-PB, or Party of the Brazilian Democratic Movement of the State of Paraiba), who had been articulated by President-elect Neves. The new Alliance leadership quickly moved to reorganize top Senate staff positions and to reform administrative procedures, and was much more in command politically than in the Chamber. Because of Tancredo Neves's sudden infirmity, the Congress was forced to occupy rapidly the power vacuum thus created and to assume an advanced institutional role beyond what it would have had with Neves firmly in power. Acting President José Sarney was very constrained in exercising the presidency so as not to appear the "crass usurper" of Neves's presidency and therefore sought support and legitimation from legislative party leaders. The latter took the initiative during the wee hours of March 15, 1986, even before Sarney was sworn in as vice president, and negotiated the transfer of power to the vicepresident-elect in a manner acceptable to the outgoing regime. During the first sixty days, the new government functioned as an informal semiparliamentary system, with Senator Fernando H. Cardoso (PMDB-SP, or Party of the Brazilian Democratic Movement of the State of São Paulo) and Chamber President Ulysses Guimarães acting as "coprime ministers." The Democratic Alliance leadership took over the coordination of the remaining (and hotly contested) subministerial appointments. Important political and financial decisions that had been quickly resolved by previous military governments through presidential decree-laws or simple administrative fiat were thrust upon the Congress or became the initiative of it, such as the resolution of the Banco Sul Brasileiro bankruptcy case, the election-party package for the November 15 elections for mayors of state capitals and national security municípios, and the amnesty proposal for military officers cassados after 1964. Of the twenty-one nonmilitary cabinet ministers appointed by Tancredo Neves, fourteen were either current or former legislators (five federal deputies, three senators, and six ex-deputies—three of the latter cassados). With the exception of nephew Dornelles at Finance and Antônio Carlos Magalhães at Communications, all civilian cabinet positions were filled with nominees from the PMDB or PFL in an effort to cement the Democratic Alliance in power. This brought legislators and parties into government even more than during the João Goulart presidency, and rivaled the Jânio Quadros and parliamentary periods of the early 1960s.

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225

Although the PMDB and PFL have had more access to decision making than did the ARENA "party of the government," the former were not totally "parties in government." President Sarney had established his own inner-circle palace power group by the end of 1985, and especially the PMDB in 1986 found itself blamed for many problems in the federal sphere, without any real power to change things. The ups and downs of party support for "the government" (President Sarney and the executive branch) within Congress is depicted in table 11.8.13 In general, the Senate was more favorable than the Chamber, and until the Cruzado stabilization plan was enacted on February 28, 1986, the PFL was more favorable than the PMDB in the Chamber. During the second semester of 1985, all parties (except the PT) increased their support from the levels of October-November 1985, due to the initial euphoria with the Cruzado Plan. However, as shortages, hoarding, and surcharges began to appear, this support began to diminish through June 1986. The case of the PFL is very interesting: in April, May, and June the PMDB had a higher support index, reversing the previous situation— perhaps reflecting the interpretation that the PFL had been benefited by the inflationary spiral and/or hurt by the stabilization plan that curtailed public spending in a campaign year. A similar index was found among the general population in the Gallup presidential approval rating (see figure 11.1). As inflation spiraled, the rating plummeted from+23 in April 1985 to-24 in December 1985. With the cabinet reform in February 1986 and especially the Cruzado Plan in March 1986, the rating soared to +86, only to decline to +34 in September 1986. In the municipal elections of November 1985, the PDS joined forces with the PFL and PTB to defeat the PMDB in the latter's own stronghold—the city of São Paulo, which returned ex-President Jânio Quadros to the post where he had begun his political ascent in 1953 by defeating F. H. Cardoso. Of the seven largest state capitals, the PMDB won only two (Belo Horizonte and Salvador), and in many states ran better in the interior than in the larger cities. Had the PMDB become another ARENA, with its popularity eroded by the exercise of power at the state level and incomplete power in Brasilia? The 1986 Elections The 1985 municipal elections were the first stage in the Sarney group's strategy for influencing the November 15, 1986, elections, which were seen as crucial for the continuation scenario, the group having already defeated the PMDB in five of Brazil's seven largest cities. Brazil's election legislation for 1986, adopted in 1985, called for the

Table 11.8. Index of Congressional Support for Government by Party, 1985-1986 (Chamber and Senate) 1st Sem 1985 Chamber PMDB PFL PDS PDT PTB PT PCB PC do Β PDC PS PSB PL PMB PPB PSC PTR No Party Average Senate PMDB PFL PDS PDT PTB PDC PSB PL No Party Average

+66 +70 -45 -29 -59 -77

— — — — — — — — — — —

Aug. 1985 +56 +64 -84 -65 -20 -56 + 100

— — — 00

— — — — — —

Sept. 1985

Oct. 1985

Nov. 1985

+35 +63 -85 -86 -60 -82 00 -20

00 +79 -81 -83 -80 -90 +33 -50

+34 +60 -93 -50 -67 -81 00 +50

00 -100 00

-100 -100 00

+ 100

— — — — — —

— — — — — —

— — 00

— — — — —

Mar. 1986 +80 +90 -32 -42 +75 -100 + 100 00

— — — 00

— — — —

Apr. 1986

May 1986

June 1986

+58 +41 -76 -100 -100 -100 00 -67 00

+38 +09 -096 -88 -100 -100 +50 -100 -100

+75 +25 -71 -56 00 -100 +50 00 00

00 00 00 00

+50 -100 00 00 00 00 -100 -44

+ 100 00 00 00 00 00

+38 +82 -25 -75 00 00 + 100 -50 +47

—

— —

—

+22

-05

-36

-47

-33

00 +52

00 -27

+69 +70 -69 -56 +67

+67 +90 -70 -100 00

+20 +82 -65 -100 00

+88 +75 -82 00 00

+60 +84 -69 00 -100

+ 100 +100 +89 00 + 100

+81 +94 +57 -50 +67

+50 00

00 00

+60 +90 -09 -67 00 +33 +33 00

+75

+52

— — — —

+06

— — —

+75 +46

— — —

-83 -17

— — —

-100 +06

— — — —

+26

Source: Assessoria Parlamentar, SEPLAN/PR, "Pronunciamentos Parlamentares," June 1986.

— —

+96

— —

—

—

—

+21

—

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227

Figure 11.1. Popularity Index for President José Sarney, April 1985 to September 1986

Approval Index = (very good + good) - (regular + bad + very bad) Source: Gallup Poll data cited by Augusto Nunes, "Popularidade de Sarney ainda é grande, mas declina," Jornal do Brasil, October 12, 1986, p. 4. a Tancredo Neves's death, April 21, 1985. b Municipal elections, November 15, 1985. c Cabinet shakeup, February 15, 1986. d Cruzado Plan, February 28, 1986. e Cruzado Plan "Adjustments," August 1986.

desincompatização (resignation) of cabinet ministers nine months prior to the elections, and of other executive office holders at the state and municipal level six months prior to the elections. Thus, February 15, 1986, became Sarney's first chance to reorganize the cabinet in his own style, as several Tancredo appointees left to become candidates. This reorganization was very conservative in nature and favored the right within the PMDB and the PFL; the latter was given the Casa Civil position (i.e., a place in the President's Office) through Senator Marco Maciel. This cabinet reform was further aggravated by record inflation rates of more than 15 percent in January and February, and produced a rapid erosion of political support for the government. The Democratic Alliance fell apart, and the PMDB became divided over the question of

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The Political Economy of Brazil

continuing support for the Sarney government. A "quick fix" was desperately needed. When Dilson Funaro became finance minister in August 1985, government economists and advisers began exploring the possibility of a heterodoxical shock, similar to the Argentine Austral Plan, to zero Brazil's inertial inflation. These economists had planned to apply such a plan in mid-1986 because, judging from the Austral experience, readjustments would be needed after four or five months. Thus, if adopted in July, the first adjustments could be safely made in late November or December—after the elections. President Sarney obliged the economists to speed up the timetable for the Cruzado shock plan for February 28 which, as was seen in table 11.16, boosted the president's popularity, silenced criticism of the new cabinet, and temporarily reunited the Alliance and the PMDB. However, the first readjustments needed on the Cruzado Plan in July-August (in the midst of the campaign) were vetoed by President Sarney and politicians of the PMDB and PFL. The result was very negative: producers' boycotts, desupply, surcharges, and so on in the second semester of 1986. Although Casa Civil Minister Marco Maciel articulated anti-PMDB coalitions in São Paulo, Minas Gerais, Bahia, and Pernambuco, the PFL was defeated in all states except tiny Sergipe, and the PMDB swept all the races for governor and elected majorities in the Chamber (53 percent) and Senate (63 percent), with 54 percent in the Constituent Congress (table 11.7). In many states (Pernambuco and Bahia are the best examples), the PMDB candidates for governor anticipated very close races and, in an effort to strengthen their tickets, accepted last-minute "joiners" from the PDS and PFL until the legal deadline of May 15. Elected and in office since 1987, many of these PMDB governors were faced with very divided delegations in their respective state assemblies in addition to their severe financial situations where state revenues are not sufficient even to meet state payrolls. With regard to party strengths in Congress in 1987, as compared to the 1985-1986 period, the PDS suffered such a reduction that in early 1987 proposals for auto-dissolution were silenced only when Senator Jarbas Passarinho (PDS-PA, or Democratic Social party of the State of Pará) assumed the presidency of what was at one point the "largest party in the Western world"—reduced from 235 deputies in 1983 to a mere 35 in 1987. The PFL, PDT, and PTB more or less held their own in the 1986 elections, but the PT (Workers' party) nearly tripled its strength in the Chamber and broadened its geographical base from three to eight states. The two communist parties (PC and PC do B) fared very badly, mostly due to their decision to run on separate tickets and not join coalitions

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229

with the PMDB. Among the minor parties, the PL (Liberal party) and the PDC (Christian Democratic party) increased their delegations slightly. The PMDB-PFL Democratic Alliance, which had successfully elected the Tancredo-Sarney ticket in the January 15,1985, electoral college and maintained an unstable support coalition in 1985-1986, increased its combined strength from 72 percent to 78 percent. At first glance, one would think that such an overwhelming majority would have an easy task of rewriting Brazil's constitution in 1987. However, just the opposite occurred during the deliberations of the Constituent Assembly: The Alliance was nonoperational and the PMDB was rent with severe internal divisions. The Constituent Assembly After nearly ten years of pressures from the political opposition (MDB, PMDB, PT, PDT, etc.) to the military regime and from civil society (the bar association and other groups), finally, in 1986, the Brazilian Congress passed a convocation of a Constituent Assembly to be elected on November 15,1986, which would convene on February 1, 1987, to draft a new constitution. The 1946 Assembly as Precedent. Following the ouster of President Getúlio Vargas in October 1945 (after nearly fifteen years of authoritarian rule), Brazilian voters elected (directly) a new president (General Eurico Gaspar Dutra) and a Constituent Assembly on December 2,1945. The latter convened in January 1946 and drafted a constitution that was promulgated on Brazil's Independence Day, September 7, 1946. This Assembly had been convoked under election rules dictated by Vargas prior to his ouster and deliberated with the authoritarian 1937 Estado Novo Constitution still in force.14 Many pressured Dutra that, under the rules of the document in force, he had the "acquired right" to a six-year mandate, and the 1946 Assembly had no right to alter his term of office. Dutra, however, stated that he would abide by the Assembly's decision, which fixed his mandate at five years. Prior to 1930, Brazil's republican tradition had fixed presidential mandates at four years, and federal legislative mandates at nine and three years for the Senate and Chamber, respectively. The 1946 Assembly also altered the latter to four years for deputies and eight for senators. Before closing, the 1946 Assembly also elected a vice president (Senator Nereu Ramos, PSD-SC [Social Democratic Party of the State of Santa Catarina]) indirectly and convoked direct elections for state governors and assemblies, and for local mayors and city councils for March 1947. These direct elections also served to elect a third federal senator from each state, as the new constitution had increased their number from two

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The Political Economy of Brazil

to three, and some additional federal deputies in a few states, as mandated by the new criteria adopted for determining the size of state delegations in the Chamber of Deputies, based on the population of each state in the 1940 Census. However, the 1946 Assembly took the liberty of reconfirming itself as a regular legislature until the next general elections (1950 for deputies and senators elected in 1947 and 1954 for senators elected in 1945), in that new elections were not called, as had been the case following the 1891 and 1934 Constituent Assemblies. Finally, during the deliberations of the 1946 Assembly, President Dutra governed the country by decree-laws in a discrete fashion (as the Assembly did not have the concurrent legislative function), even though the Estado Novo Constitution remained in force until September 7, 1946. Convocation 1986-1987. The convocation and operations of the Assembly elected in November 1986 were part of the negotiations of the "pact of elites," which sealed the "Democratic Alliance" and assured its viability with the military high command in the second semester of 1984. Fearful of possible radicalism and "tyranny" of an exclusive and all-powerful Assembly in 1986, the military and PFL leaders extracted a promise from presidential candidate Tancredo Neves that the Assembly would not be exclusive and that its sovereign powers would be limited (no alterations on the 1967-1969 military constitution during the 1987 Assembly's deliberations). With this in mind, Sarney's convocation message sent to Congress in 1986 included a very significant phrase to the effect that the senators and deputies elected on November 15, 1986, would meet as a Constituent Assembly after February 1,1987, but not in detriment of their constitutional functions. The real purpose of this phrase was to erode the exclusiveness, sovereignty, and powers of the Assembly by forcing the Senate and House to elect their respective presiding officers and committee structures as required by the 1967-1969 constitution and function parallel to the Assembly. The final version of the convocation passed by Congress deleted the above-mentioned phrase. In the final "rump session" of Congress [followingthe November 15 elections) before adjournment on December 5, Chamber President Deputy Ulysses Guimarães guided the Chamber in passing an amendment that would have granted exclusiveness to the Assembly, allowed Sarney to continue to govern by decree-laws, and instituted a legislative committee of senators and deputies to deliberate important measures on demand. Guimarāes's proposal was defeated by the Senate on December 4, as Sarney and the government forces were able to muster the support of many conservative, lame-duck senators (of

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231

the forty-six Senate seats up for reelection, only eleven were returned) to block the proposition. Twenty-three of the latter were handpicked "bionics" elected indirectly under military control in 1978. Many of the twenty-three senators directly elected in 1982 were apprehensive lest they be excluded from the Assembly elected in 1986 (the convocation did not clarify their participation). Thus, the bitter power struggle between Deputy Ulysses Guimarães, leading "his" PMDB, and President Sarney, supported by the PFL, PMDB conservatives, and the military-guided "system," had begun in mid1986, or even on March 15,1985—the day fate propelled Sarney into the presidency. This power struggle involves several dimensions: ( 1 ) who would have the upper hand during Assembly deliberations to control the depth of structural changes produced; (2) how the country would be governed in 1988 and afterward; (3) the date and type of the next presidential elections (the former would determine the length of Sarney's mandate); and (4) the form of government after 1988 (a parliamentary, "mixed," or presidential system), determining whether Sarney would finish his mandate with reduced powers. Obviously, Sarney and the "system" that guided and supported his presidency wanted "none of the above"—rather, they wanted full presidential powers with a six-year mandate until 1991, and no alterations on the 1967-1969 Constitution during 1987-1988. With the authoritarian force of the latter still in place, Sarney and the military retained exceptional powers to intervene in states at will, and, if necessary, to cordon off the city of Brasilia, as was done in April 1984 during the voting on the direct-elections amendment. Profile of the 1987 Assembly Prepared in late March 1987, this profile includes the alternates who took office when elected Assembly members assumed some governorships on March 15, as well as those alternates who had been substituting for members occupying cabinet positions since 1986. However, this analysis excludes those substitutions required by Assembly members assuming state cabinet positions and ministerial changes in May and thereafter. The numeric strengths of the party delegations in the Assembly (as depicted in tables 11.9, 11.10, 11.11, 11.12, and 11.13) are slightly different from those in table 11.7 for several reasons: ( 1 ) the only deputy elected by the PSC (Social Christian party) joined the PTB; (2) the only senator elected by the PMB [Brazilian Municipalist party in coalition with the PMDB) is included in the latter in lieu of local political affinities,· and (3) five members elected under other party labels were

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232

Table 11.9. Past Party Affiliations (1979 and 1983) of Members of the Brazilian Constituent Assembly by Party, 1987 Party in 1987 Affiliated PMDB PFL PDS PDT PTB PT PL PDC PSB PCB PC do Β TOTAL Affiliated PMDB PFL PDS PDT PTB PT PL PDC PSB PCB PC do Β TOTAL

Party Affiliation in 1983 PDS

PMDB

PDT

PTB

PT

None

TOTAL

0 1 1 0 0 0 0 0 0 0 0 2

0 2 0 0 1 0 0 0 0 0 0 3

0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 1 0 0 0 0 0 0 1

72 97 32 5 7 0 2 2 0 0 0 217

0 0 0 5 0 0 0 0 0 0 0 5

1 0 0 1 2 0 0 0 0 0 0 4

0 0 0 1 0 1 0 0 0 0 0 2

0 0 0 0 0 0 0 0 0 0 0 0

141 4 0 8 4 1 2 1 1 3 1 166

2 0 0 6 0 0 0 0 1 0 0 9

0 0 0 1 2 0 0 0 0 0 0 3

1 0 0 1 0 14 0 0 0 0 0 16

28 11 0 5 2 1 2 2 0 1 1 52

85 32 6 13 8 15 3 3 1 4 6 176

with ARENA in 19791 30 94 31 5 5 0 2 2 0 0 0 169

42 0 0 0 0 0 0 0 0 0 0 42

with MDB in 1979 3 3 0 0 1 0 1 0 0 0 0 8

137 1 0 1 1 0 1 1 1 3 1 147

No Party Affiliation in 1979 PMDB PFL PDS PDT PTB PT PL PDC PSB PCB PC do Β TOTAL

7 18 6 0 4 0 1 1 0 0 0 38

47 3 0 0 0 0 0 0 0 3 5 58

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233

Table 11.10. Occupations of Constituent Assembly Members by Order of Importance, 1987 (in %) Occupations

Activity by Ozder of Importancea First Second Third Fourth Cumulativeb

16.3 Agriculture 7.2 Comm.-Serv. Insure. 12.2 Fin.-Bank-Bus. Media (Owners) 2.3 Industry-Transpt. 5.4 Lawyer-Judge 9.1 Medicine 6.4 Dental-Pharmacy 0.5 Engineers 4.7 Teaching 9.3 Religious 1.1 Journalists 9.1 Economists 2.1 Social Science 0.5 12.9 Public Servants Military 0.9 TOTAL % 100.0 (559) Total (N) a b

8.0 6.7 12.2 0.7 2.8 25.3 2.5 0.7 6.9 11.7 2.1 4.1 4.1 1.6 9.9 0.7 100.0 (435)

3.1 4.5 9.8 0.4 2.7 29.9 1.8 0.4 9.4 12.9 2.7 5.4 8.5 1.8 4.9 1.8 100.0 (224)

0.0 3.2 1.6 3.2 0.0 46.0 1.6 0.0 6.3 17.5 0.0 4.8 6.3 0.0 7.9 1.6 100.0 (63)

23.8 14.5 25.8 3.4 8.6 46.0 9.3 1.3 14.5 25.6 3.8 15.0 9.5 2.5 23.4 2.3 — (559)

Importance defined by larger proportions of income. Cumulative total of constituent members in each respective activity over the total of 559 members; thus, these percentages do not sum to 100.0 percent.

Table 11.11. Occupations, Socioeconomic Status, Age, and Seniority of Constituent Assembly Members by Party, 1987 (in %) PMDB

PPL

PDS

PDT

PTB

PT

PL

PDC

PSB

PCB

PCdoB

TOTAL

18.1 22.1 3.4 9.7 6.4 11.1 11.1 6.4 11.1 0.7

13.5 23.3 6.8 9.0 6.8 6.0 5.3 8.3 19.5 1.5

15.8 26.3 13.2 5.3 2.6 5.3 5.3 13.2 10.5 2.6

11.5 11.5 3.8 3.8 7.7 3.8 23.1 11.5 23.1 0.0

26.3 10.5 0.0 6.3 5.3 10.5 15.8 21.1 0.0 0.0

0.0 12.5 18.8 0.0 12.5 31.3 0.0 12.5 6.3 0.0

14.3 14.3 14.3 0.0 14.3 14.3 0.0 14.3 14.3 0.0

66.7 33.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 50.0 50.0 0.0 0.0 0.0 0.0 0.0

0.0 57.1 0.0 14.3 28.6 0.0 0.0 0.0 0.0 0.0

0.0 0.0 14.3 28.6 14.3 0.0 0.0 28.6 14.3 0.0

16.3 21.6 5.4 9.1 7.0 9.3 9.1 8.4 12.9 0.9

38.9 24.2 36.6 0.0 0.3

37.6 31.6 30.1 0.8 0.0

50.0 23.7 26.3 0.0 0.0

19.2 30.8 46.2 0.0 3.8

42.1 21.1 36.8 0.0 0.0

0.0 6.3 62.5 12.5 18.8

57.1 28.6 14.3 0.0 0.0

100.0 0.0 0.0 0.0 0.0

0.0 0.0 100.0 0.0 0.0

42.9 14.3 42.9 0.0 0.0

0.0 0.0 85.7 0.0 14.3

37.7 24.9 35.8 0.5 1.1

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Total (N)

(298)

(133)

(38)

(26)

(19)

(16)

(07)

(06)

(02)

(07)

(07)

(559)

Age: Feb. 1, 1987 Seniority (Years) % "Freshmen"

47.53 4.12 47.70

48.51 4.53 43.60

51.40 5.49 44.70

48.97 5.24 61.50

51.00 3.02 57.90

43.73 2.00 81.30

49.60 6.86 57.10

53.48 3.33 66.70

53.96 0.53 50.00

50.21 5.14 57.10

33.81 1.69 57.10

48.07 4.26 49.00

Principal Occupation Agriculture Com.-Bank-Bus.-Fin. Indust.-Trans. Lawyer/Judge Health Profs. Education Journalism Other Profs. Pub. Employees Military Socioeconomic Status Capital-Owners Managers White-collar-Super. White- collar-Other Manuals TOTAL %

Table 11.12. The Capitalist Class in the Constituent Assembly: Sectors of Economic Activity by Party, 1987 (in %) PMDB

PFL

PDS

PDT

PTB

PT

PL

PDC

PSB

PCB

PCdoB

TOTAL

46.6 12.9 22.4 8.6 6.0 3.5

36.0 12.0 22.0 18.0 10.0 2.0

31.6 0.0 42.1 26.3 0.0 0.0

60.0 0.0 0.0 0.0 40.0 0.0

62.5 0.0 0.0 0.0 25.0 12.5

0.0 0.0 0.0 0.0 0.0 0.0

25.0 25.0 0.0 25.0 0.0 25.0

66.7 16.7 16.7 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 66.7 0.0 0.0 33.3

0.0 0.0 0.0 0.0 0.0 0.0

43.1 10.9 22.7 11.8 7.6 3.9

100.0 (116)

100.0 (50)

100.0 (19)

100.0 (05)

100.0 (08)

0.0 (00)

100.0 (04)

100.0 (06)

0.0 (00)

100.0 (03)

0.0 (00)

100.0 (211)

26.9 13.4 31.3 7.5 3.0 17.9

28.1 15.6 28.1 12.5 6.2 9.5

31.3 18.8 18.8 0.0 6.3 24.8

0.0 25.0 75.0 0.0 0.0 0.0

14.3 28.6 57.1 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0

25.0 0.0 0.0 50.0 0.0 25.0

0.0 0.0 0.0 0.0 0.0 0.0

50.0 0.0 0.0 0.0 0.0 50.0

0.0 0.0 100.0 0.0 0.0 0.0

26.3 15.0 30.8 8.3 3.8 15.8

100.0 (67)

100.0 (31)

100.0 (16)

100.0 (04)

100.0 (07)

0.0 (00)

0.0 (00)

100.0 (04)

0.0 (00)

100.0 (02)

100.0 (01)

100.0 (133)

First Activity Agriculture Comm-Serv. Fin.-Bank.-Bus. Industry-Trans. Media Others TOTAL %

(NI

Second Activity Agriculture Comm.-Serv. Fin.-Bank.-Bus. Industry-Trans. Media Others TOTAL % (Ν)

Table 11.13. University Degrees of Constituent Assembly Members by Party, 1987 PMDB

PFL

PDS

PDT

PTB

PT

PL

PDC

PSB

PCB

PCdoB

TOTAL

Law Medicine Den.-Pharm.-Bio. Agric.-Vet. Economics Administration Phil.-Theo.-Education Soc.Sci. -Psychology Journalism Eng.-Architec. Military Science

144 25 05 04 18 09 09 04 07 36 02

52 11 02 07 10 05 03 03 02 13 02

12 03 01 00 08 00 02 00 00 04 02

12 03 00 01 02 00 00 02 01 03 00

10 03 01 01 00 00 01 00 00 02 01

01 02 00 00 02 01 04 03 00 00 00

02 01 00 00 01 00 00 00 00 02 00

04 00 00 00 00 00 00 00 00 00 01

01 01 00 00 00 00 00 00 00 00 00

02 01 01 00 00 00 01 01 00 01 00

03 01 00 00 01 00 00 00 00 01 00

243 49 10 13 42 16 20 13 10 62 08

TOTAL

263

110

32

24

17

13

07

05

02

07

06

486

% with Complete University Degree

88.3

82.7

84.2

92.3

89.5

81.3

100.0

83.3

100.0

100.0

85.7

86.9

Degree Completed

Table 11.14. Political Careers of Constituent Assembly Members by Party, 1987 PMDB

PFL

PDS

PDT

PTB

PT

PL

PDC

PSB

PCB

PCdoB

TOTAL

Adminis tia tivea

42.3

60.9

68.4

46.2

36.8

6.3

71.4

33.3

50.0

14.3

28.6

47.2

Federal State Municipal

10.1 30.2 10.7

18.8 54.1 15.0

31.6 47.4 7.9

11.5 34.6 11.5

10.5 10.5 15.8

0.0 6.3 6.3

0.0 42.9 42.9

0.0 16.7 16.7

0.0 50.0 0.0

0.0 14.3 0.0

0.0 28.6 0.0

12.9 35.8 11.8

Electiveb

56.4

54.9

63.2

30.8

52.6

18.8

42.9

33.3

100.0

71.4

42.9

53.8

State Municipal

43.6 32.9

24.1 30.8

47.4 28.9

19.2 15.4

26.3 42.1

12.5 6.3

14.3 42.9

16.7 16.7

100.0 100.0

42.9 42.9

28.6 14.3

40.3 30.9

Governor/Vice State Cabinet State Deputy Mayor/Vice City Council

08 43 125 49 70

09 45 50 25 21

05 11 14 07 06

00 06 05 02 02

01 01 04 03 05

00 00 02 00 01

00 02 01 01 02

01 00 00 00 01

00 00 02 01 01

00 00 03 01 03

00 00 02 00 01

24 108 208 89 113

TOTAL (N)

(298)

(133)

(38)

(26)

(19)

(16)

(07)

(06)

(02)

(07)

(07)

(559)

Key Positionsc

a

Includes those positions by political appointment, in %. b Includes those positions by popular direct election, in %. c In absolute numbers.

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Table 11.15. Profile of the "Various" PMDBs in the Constituent Assembly by Past Party Affiliation (in %) Party Genealogies: 1978-1982 Sequence ARENA- ARENA- MDBPDSP MDB PMDB

NonePMDB

Others

None- TOTAL None

Principal Occupation 23.2 Agriculture Comm.-Serv.-Insur. 10.0 Finance-Bank. -Bus. 13.3 10.0 Media (Owners) 0.0 Industry-Transport 6.7 Lawyer-Judge 3.3 Medicine 0.0 Dental-Pharmacy 3.3 Engineers 3.3 Teaching 3.3 Religious 10.0 Journalists 0.0 Economists 0.0 Social Science 13.3 Public Servants 0.0 Military 100.0 TOTAL %

33.3 7.1 11.9 2.4 0.0 7.1 7.1 0.0 4.8 4.8 0.0 4.8 0.0 0.0 16.7 0.0 100.0

17.5 7.3 9.5 0.0 2.2 13.1 5.1 1.5 3.6 13.9 0.7 13.9 1.5 0.0 8.8 1.5 100.0

10.6 4.3 17.0 2.1 4.3 8.5 8.5 0.0 2.1 17.0 2.1 6.4 4.3 0.0 12.8 0.0 100.0

14.3 7.1 14.3 0.0 0.0 0.0 7.1 0.0 7.1 0.0 0.0 35.7 0.0 7.1 7.1 0.0 100.0

7.1 14.3 17.9 3.6 17.9 7.1 3.6 0.0 0.0 10.7 3.6 3.6 0.0 0.0 10.7 0.0 100.0

18.1 7.7 12.4 2.0 3.4 9.7 5.7 0.7 3.4 11.1 1.3 11.1 1.3 0.3 11.1 0.7 100.0

57.1 26.2 16.7 0.0 100.0

27.7 27.7 43.9 0.7 100.0

34.0 14.9 51.1 0.0 100.0

35.7 14.3 50.0 0.0 100.0

57.2 21.4 21.4 0.0 100.0

38.9 24.2 36.6 0.3 100.0

9.5 21.2 37.2 21.9 10.2 100.0

21.3 23.4 40.4 10.6 4.3 100.0

7.1 42.9 14.3 14.3 21.4 100.0

17.9 25.0 25.0 28.6 3.6 100.0

10.9 31.8 32.4 15.4 9.5 100.0

(47)

(14)

(28)

(298)

Socioeconomic Status 56.6 Capital-Owners Managers 26.7 White-collar-Super. 16.7 Manuals 0.0 TOTAL % 100.0 Regional Profile North Northeast Southeast South Central-West TOTAL %

6.6 70.1 10.1 6.6 6.6 100.0

9.5 23.9 21.4 19.0 26.2 100.0

TOTAL (N)

(30)

(42)

(137)

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239

added to both the PCB (Brazilian Communist party, founded in 1922, legal existence 1945-1948 and after 1985) and the PC do Β (Communist party of Brazil, Stalinist splinter organized after 1958, legal existence since 1985) delegations. Party "Genealogies." Although party labels are but fragile indicators of politicians' behavior patterns in Brazil over the past twenty years, they are useful for mapping the process of political "transformation" during the final stages of abertura since 1979. Table 11.9 tracks the "family trees" of the current eleven 1987 parties, from the two-party system existing through 1979 and through the opening to five parties in the 1980-1984 period. This transformation strategy is quite apparent, as the former allies of the military regime quickly adapted to the "new reality" and changed uniforms as easily as do Brazilian soccer players. The most startling observation in table 11.9 is that the PMDB was not the largest political group in the Assembly; rather, in terms of 1979 political affiliations, the ARENA had the largest group (217 members), while the more authentic PMDB counts but 212. The 298-member PMDB delegation included 30 members who were PDS in 1983, and another 42 who were ARENA in 1979. Thus, instead of its nonhegemonic "majority" of 53 percent in the Assembly, the PMDB counted on only a 40 percent plurality, once these "fellow travelers of the right" are excluded. Even if the PMDB could count on the 58 votes of "comrades" further to the left (PDT, PSB [Brazilian Socialist party], PCB, PT and PC do B), an absolute majority is not possible. In contrast, the profiles of the PFL and the PDS are much more consistent. Occupation. One of the most important indicators of the political behavior of Assembly members on polemic questions are their economic activities and ties to certain sectors of the economy. Tables 11.10, 11.11, and 11.12 analyze these dimensions. The economic activities of members were coded to include up to four different activities, in decreasing order of economic importance, based on the proportional contribution to income. Thus, a lawyer who practices law on the side but whose major source of income is cattle ranching, was coded as first, Agriculture, and second, Lawyer,· or a religious who became a teacher but who is also the owner of a private school was coded as first, Businessman, second, Teacher, and third, Religious. Table 11.10 discriminates the sixteen categories of economic activities by order of importance to income. In terms of principal activity, the Assembly has large contingents from the sectors of business, agriculture, and public service, and considerable groups of teachers, journalists, and practicing lawyers. Certain liberal professions increase proportionately as the second

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most important activity: lawyers, teachers, engineers, economists, religious, and so on. For example, of the 257 lawyers by training (46 percent of the Assembly), only 51 (9.1 percent) are practicing lawyers as their principal economic activity. Sectors of economic activity and socioeconomic status of the party delegations are detailed in table 11.11. Although the profiles of the PMDB and the PFL are similar, the former has larger proportions from agriculture, education, and journalism, while the PFL has more business people, professionals, and public servants. In terms of socioeconomic status (SES), no less than 37.7 percent of Assembly members receive a majority of their income from capitalinvestments-property—led by the PDC ( 100 percent), PL (57.1 percent), PDS (50 percent), PCB (42.9 percent), PTB (42.1 percent), PMDB (38.9 percent), and PFL (37.6 percent). Three parties elected no capitalists (PT, PSB, and PC do B), and the PDT had only 19.2 percent in this category. This same status profile also shows the PT in the middle- and workingclass segments, followed closely by the PC do Β and the PDT. The PMDB, PFL, PTB, and PCB have larger contingents from the middle classes. Where do these 211 capitalists come from? We find (in table 11.12) that 91 are in agriculture (PMDB, 54, and PFL, 18), 48 in the businessbanking-financial sector (PMDB, 26, and PFL, 11), and 23 from the commerce-insurance-service sector (PMDB, 15, and PFL, 11). All told, 55 percent of these capitalists are PMDB and 23.7 percent are PFL. The agricultural sector is most surprising: of the 91 Assembly members listing agriculture as their principal economic activity, all are landowners. If we count the four activities listed, we find that 23.8 percent ( 133) of the Assembly are landowners. For this reason, the sections of the new constitution dealing with the problems of agrarian reform and the social function of property saw very little or no innovation leading to structural changes in Brazil's land tenure system. Turnover. The number of members with no prior legislative experience in Congress is an important socialization and attitudinal indicator, especially in light of the challenges raised by the anjinhos (little angels), or freshmen members, during the preparatory sessions in February. Three basic indicators may be used to calculate turnover: ( 1 ) the number of "newcomers" who have never served in Congress before (Senate or Chamber); (2) a reelection index of the percentage of veteran legislators who sought reelection and were returned; and (3) the number of "new faces," which sums the newcomers with ex-legislators who have returned after a certain interval of nonparticipation, which included the 1983-1987 session. The first indicator of turnover is used in table 11.11.

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241

Thus, if we exclude all veterans who served in the Senate or Chamber prior to 1987 (including the 4 ex-senators who were elected to the Assembly as deputies and the 31 ex-deputies who were elected senators in 1986), the Assembly has 274 (49 percent) "freshmen" members—a figure comparable to turnover rates in previous sessions of the Brazilian Congress—but much lower than the 60 percent-plus figures cited in Brazilian newspapers following the November 1986 elections. Lowest turnover is found in the PFL (43.6 percent), with the PDS (44.7 percent) and the PMDB (47.7 percent) close behind—the three largest parties, where the chances of reelection were greater. Among the other parties, the PT stands out with the largest turnover (81.3 percent) in that it nearly tripled its tiny delegation to 16. The rates for the PDC (a new party hastily organized in 1986) and Brizola's PDT (organized in 1980) were also high—66.7 percent and 61.5 percent, respectively. Considering that the PDT delegation remained the same size (26), its reelection rate was very low and the infusion of "new blood" was great. Seniority. This indicator in table 11.11 calculates the mean number of years of prior service in the Congress for each party delegation. A more experienced party delegation should have more ability to perform legislative activities, whereas a delegation with less accumulated experience might take more time to adapt to Assembly procedures. This indicator, however, does not take into account legislative experience acquired in state assemblies or city councils. We find that the PL (6.86 years), the PDS (5.49 years), and the PDT (5.24 years) have the most prior experience in the Congress,· and the PSB (0.53 years), the PC do Β ( 1.69 years), and the PT (2.00 years) have less seniority. University Training. The Constituent Assembly has 486 members with a university degree (86.9 percent), slightly higher than the figures for 1983 (84.7 percent) and 1979 (84.5 percent). The lowest figures for university education belong to the PT, PFL, and PDC. Three party delegations have total university education: PL, PSB, and PCB. The PDT, PTB, and PMDB have figures slightly above the overall mean (table 11.13). University training is an important indicator of the levels of technical expertise the Assembly has available for the delicate task of drafting the highly technical content of many of the sections of the new constitution. As we saw in table 11.9, the largest contingent holds degrees in law, but few really practice this profession. There are relatively large groups of economists, medical doctors, and engineers. With regard to the corporatist question of the requirement of a journalism degree to be able to practice this profession, we find in table 11.10 that 84 members earn some income as "journalists"; however, in table 11.13 we observe that only 10 actually have degrees in journalism. This means that seventy-

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The Political Economy of Brazil

four were "grandfathered" into this profession when the diploma became obligatory a few years ago. Political Career, In table 11.14, we examine the prior political careers of Assembly members before first election to the Congress; that is, their experience in elected or nominated positions at the three levels— federal, state, and municipal. We identified 135 members who had no previous political experience prior to election to Congress. Of the remaining 424, we detected a slight tendency in favor of elected positions; 53.8 percent have been popularly elected as city council persons, mayors, state deputies, and/or governors. Because most of the members of the PFL, PDS, and PL delegations "descended" from the ARENA/PDS (as seen in table 11.9), which controlled the federal government through 1985 and nearly all state governments through 1983, these parties have very high frequencies in administrative (appointed) positions, especially the PDS at the federal and the PFL at the state levels. For the same reasoning reversed, the PT, PCB, and PC do Β have very low frequencies in appointed positions. Regarding experience in elected offices, the highest frequencies are claimed by the PDS, PSB, and PCB, and the lowest belong to the PT, PDT, and PDC. PT members seem to have been elected more as a function of their loyalty to the party and militancy in labor and social movements than because of election or appointment to prior political positions. Although the PMDB has a slightly higher frequency in elected positions than the PFL, a more significant difference is detected. The prior experience of PFL constituent members in elected positions at the municipal and state levels seems to have been mutually exclusive; that is, those elected mayor or city councilperson were not elected state deputy or governor, and vice versa. The PMDB (and also the PDS), on the other hand, exhibit a certain tendency to accumulate experience at both levels. Turning to the analysis of "key positions," we observe that, in spite of their smaller delegations, the PDS and the PFL have proportionately more ex-governors than the PMDB. The PFL and the PMDB have the same number of ex-state cabinet members (although the PFL has more proportionately), which demonstrates that the PMDB was able to elect many who served in the 1983-1986 period. But it is exactly in the traditional "career ladder" legislative offices of city council and state assembly that the PMDB members have greater proportionate experience. In all, these data reveal a Constituent Assembly replete with politicians of considerable experience and ties at the state and local levels, which indicate strong support for constitutional changes in the areas of tax reform and a "new federalism" in Brazil.

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243

Subprofile of the "Various PMD Bs." Because of the interesting data presented in table 11.9, which revealed two waves of "penetration" of the PMDB by politicians migrating from the ARENA/PDS in 1982 and 1986, we decided to separate the PMDB delegation into six subprofiles, according to each member's "party genealogy" sequence 1979-19831987, in table 11.15: (1) ARENA-PDS-PMDB (last-minute joiners); (2) ARENA-PMDB-PMDB (next-to-last-minute joiners); (3) MDB-PMDBPMDB (historic, or authentic PMDB); (4) None-PMDB-PMDB (party militancy only in 1982); (5) Other sequences (includes 10 via PDS in 1982); and (6) None-None-PMDB (new militants recruited in 1986). Among those originating in ARENA (groups 1 and 2), we find the largest contingents of rural land owners, business people, media owners, and public servants. The historic/authentic PMDB group has more lawyers, professors, and journalists (a profile very similar to the 19661979 MDB), while the 1982 PMDB militants have a similar profile, but with more professors and public servants. Those from "other sequences" are concentrated in journalism. Finally, the PMDB anjinhos, who had no party affiliation prior to 1986, are largely from the business sector, including industry-transportation. In terms of socioeconomic status, this latter group of PMDB anjinhos are mostly capitalists, as their profile is similar to that of those coming from ARENA—nearly 60 percent of the property class—although the ARENA group tend to be more predominately rural property owners. Probably, both the 1986 joiners and these anjinhos were recruited (or accepted) by their respective state PMDB campaign organizations to reinforce the party's "war chest"; the former concentrated in the Northeast, and the latter divided among the Northeast, Southeast, and South. The authentics, 1982 militants, and others have similar profiles, with less from the propertied classes, and more from the middle classes. The 1986 joiners are predominantly from the Northeast (70 percent), while, as might be expected, authentics and 1982 militants are more concentrated in the Southeast. Minority Representation, Although the 1986 elections did not return Indian Chief Deputy Mário Juruna (PDT-RJ, or Democratic Labor Party of the State of Rio de Janeiro), seven blacks, twenty-six women, and three orientals were elected—a new record for women and blacks in the Congress. Traditional kinship ties were reinforced in 1987, as nearly eighty members were thus elected. Several husband-wife, father-son, and sibling pairs were elected, in addition to other pairs of more distant relatives (uncles, cousins, etc.). Religious affiliation was a decisive factor in the election of a small but significant group of members. Three ex-priests and some thirty from

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Protestant evangelical denominations were elected. A majority of the latter were adepts of the Assembly of God, most of whom were elected from frontier and peripheral areas. Assembly Operations and Drafting As scheduled, the Assembly was duly installed by STF (Federal Supreme Court) President, Minister José Carlos Moreira Alves, on Sunday afternoon, February 1, 1987. However, national PMDB president, Deputy Ulysses Guimarães, and his party were unable to restrain their delegation in the Senate, who caucused on January 30 to select Senator Humberto Lucena (PMDB-PB) as president of the upper house for the 1987-1988 session, and the full Senate proceeded to elect its slate of presiding officers on January 31. On Monday, February 2, Minister Moreira Alves reconvened the Assembly to elect Ulysses as its president. First term anjinhos, totaling 142 from the PMDB, plus progressive veteran xiitas from the PMDB and other parties, organized a compact group to force some immediate direct changes during the first preparatory sessions of the Assembly, which sent chills through the presidential "guidance group." The objective was to adopt constitutional acts (the democratic equivalent to the military regime's "institutional acts" after 1964) that would have immediately altered the 1967-1969 Constitution to remove most of the abusive "authoritarian trash" (emergency laws, national security law, press, and antistrike laws), to restore legislative immunities and prerogatives, and above all, to establish clearly the full powers and sovereignty of the Assembly. Thus, it was thought, the Assembly would have had complete freedom to deliberate with no possible threats or coercion from the executive branch. The first challenge came on February 2 in a point of order as to whether the senators elected in 1982 could participate in the first session of the Assembly (to elect its president). Contrary to the game plan of Palace strategists, Alves brought the issue to a vote of the Assembly,· the issue involved the precedent (dangerous in the minds of said strategists) of having the 1967-1969 Constitution interpreted or modified by the 1987 Assembly. The challenge failed; the twenty-three senators were seated, and Guimarães was elected—but the precedent also had been established. In a widely criticized accumulation of four leadership positions (including PMDB national president, potential acting president of the republic, and Assembly president), Ulysses was reelected as Chamber president. Ironically, this latter election ran counter to Item H of Article 30 of the 1967-1969 Constitution, which terminally prohibits the

The Constituent Assembly and the Transformation Strategy

245

consecutive reelection of presiding officers of the Chamber or Senate from one two-year session to the next. As Ulysses had been elected Chamber president in 1985, he was clearly ineligible. In their effort to maintain Ulysses in the immediate line of succession to President Sarney, the government (in this case) had no problem with "aborting the current legal order," that is, the 1967-1969 Constitution. The unacceptable (to the Palace) alternative would have been the election of Deputy Fernando Lyra (PMDB-PE, or Party of the Brazilian Democratic Movement of the State of Pernambuco), the progressive ex-justice minister in Sarney's first cabinet inherited from Tancredo Neves. The Rules Battle. Continuing his open guerrilla warfare with Sarney and his military-backed support group, Ulysses discreetly encouraged the anjinho-xiita, prosovereignty group within the PMDB caucuses, which flamed to a majority and truly frightened the Palace strategists. When Senator Fernando H. Cardoso (PMDB-SP) finally made public his synthesis report on the draft Assembly rules the week of February 16, prior to the Carnaval recess, the die was cast. Cardoso's proposal allowed the Assembly to adopt Proposals of Decision with regard to relevant and important measures—a window through which to amend the current 1967-1969 Constitution with an absolute majority in Congress, and not by a two-thirds majority as stipulated by that constitution's rules. Military governments also had had no respect for this question. In 1977, President Geisel used his AI-5 powers and reduced the constitutional quorum to an absolute majority because the MDB, having elected a 43 percent minority in the 1974 elections, could veto any amendment initiative by the government. Five years later, in 1982, a PDS majority, fearful that the combined opposition might elect an absolute majority in Congress, again raised the quorum to two-thirds. Sarney felt betrayed by the PMDB. His loyal PFL jumped to his defense and mobilized those "friends of Sarney" in the PMDB and other parties to exit the Assembly floor on February 25 to deprive the PMDB of the necessary votes to approve the rules package, but with enough nay votes present to assure its defeat. The PMDB put off the floor vote and proceeded to negotiate a new version during the Carnaval recess. The Assembly internal rules as approved in early March 1987 included the following basic elements: 1. Assembly members were divided among eight content committees to take testimony and draft respective sections of a working document. Each committee was divided into three subcommittees when proceedings started after the Easter recess in the second half of April. Members were assigned to subcommittees by their party leadership (one assignment per member) proportionate to each party's size (figure 11.2). 2. A twenty-fifth committee to systematize and integrate the final

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The Political Economy of Brazil

Figure 11.2. Organization of Constituent Assembly Committees and Subcommittees I. Sovereignty and the Rights and Guarantees of Men and Women a. Nationality, Sovereignty, and International Relations b. Political Rights, Collective Rights, and Guarantees c. Individual Rights and Guarantees II. Organization of the State a. Federal Government, Federal District, and Territories b. States c. Municipalities and Regions III. Organization of the Three Powers and System of Government a. Legislative Branch b. Executive Branch c. Judicial Branch and Public Prosecutors IV. Electoral and Party Organization and Institutional Guarantees a. Election System and Political Parties b. Defense of the State and Society and Their Security c. Guarantees of the Constitution, Its Reform, and Amendment V. Tax System, Budget, and Finance a. Taxation, and Sharing and Distribution of Revenues b. Budget and Fiscal Oversight c. Financial System VI. Economic Order a. General Principles, State Intervention, Subsoil Property Ownership, and Regime of Economic Activities b. Urban Questions and Transportation c. Agriculture, and Land Tenure Policies and Agrarian Reform VII. Social Order a. Rights of Workers and Public Employees b. Health, Social Welfare, and Environment c. Blacks, Indians, Disabled, and Minorities VIII. Family, Education, Culture, Sports, Communications, Science, and Technology a. Education, Culture, and Sports b. Science, Technology, and Communications c. Family, Minors, and the Elderly

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reports from the eight committees was established, but not as a "great committee" with final authority, as in the 1946 Assembly, which had been envisioned by some. 3. This Integration Committee, with 93 members, had the power to pass initial judgment on Proposals of Decision constituted over the signature of at least 187 members, before consideration by the full Assembly, coordinated by President Ulysses Guimarães. 4. Impartial media access for the Assembly was assured and requisitioned in prime time slots. 5. The minimal number (56) for formal procedural questions was high enough to deprive the smaller parties of access to this artifice. This was important in calling for item votes during the final floor deliberations on the constitution. 6. Popular groups who may feel fenced out of the process were allowed to submit formal proposals to the final stage of floor deliberations by petitions signed by at least 30,000 registered voters. 7. No Constitutional Acts or Proposals of Decision were passed. Thus, the 1967-1969 Constitution remained in force, but Sarney's mandate and Brazil's future system of government remained undefined until March 22, 1988. 8. No decision was made on whether to submit the draft constitution to the voters via a national referendum; the Transitory Dispositions segment of the document could have included this. Deliberations. Each of the eight committees chose a president, two vice presidents, and a reporter, and each of their respective three subcommittees chose a president and reporter, in addition to the presiding officers of the final Integration Committee. Thus, a total of eightyfour committee officers were chosen and the remaining members apportioned among the committees and subcommittees before the Easter recess. The PMDB bargained to have most of the reporter positions, and divided the other positions among the other parties. By the third week in May, the twenty-four subcommittees had finished their reports after hearing testimony and receiving amendments in a two-stage process. Each committee then received the three reports from its respective subcommittees and finished its report on June 15. Due to obstruction on a deadlocked eighth committee (Family, Education, Science, and Technology) no report was completed, and the Integration Committee had to rely on the three subcommittee reports. In three stages, the Integration Committee produced its final draft, which was being debated and deliberated in 1988: (1) a first working draft on July 15; (2) after preliminary discussion of the latter by the full Assembly, a second draft included the popular amendment petition suggestions,· and (3) the final draft voted out of the Integration Committee in late

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November. The most significant innovations done by the eight committees in June were: 1. The expansion of basic human rights and guarantees against torture, hunger, and unemployment; habeas corpus; and habeas data. 2. The creation of six new states. 3. The adoption of a hybrid parliamentary system with a weaker president than in the current French model; the creation of a new constitutional court; the setting of Sarney's mandate at five years. 4. The adoption of a "mixed" electoral system similar to that of West Germany,· a provision for federal funding of parties and elections; the creation of a Council of the Republic to make national security and stateof-siege and emergency decisions. 5. The allotment of more taxing powers to states and municipalities; the return of tax and budget powers to Congress. 6. The maintenance of state enterprise capitalism, but the partial breaking up of Petrobras's petroleum monopoly; the maintenance of state domain over subsoil resources,· a loose definition of a "Brazilian firm" that would open doors to multinationals; the allowance of agrarian reform expropriations of unused land as first priority, with payment in bonds for land and in cash for buildings and improvements. 7. Making labor unions no longer dependent on the state,· a forty-hour work week (it had always been forty-eight); job stability after ninety days,· the right of public employees to organize and strike. 8. The provision that public funds would not be allocated to private schools,· the establishment of a National Communications Council (overseen by Congress) to judge granting (and lifting) radio and TV licenses,· no abortion,· the maintenance of divorce,· the maintenance of the concept of market reserve. Conflict was most acute over the questions of system of government; presidential mandate,· national security doctrine,· roles of the state, private, and multinational enterprises,· agrarian reform,· media licensing; work week; job stability,· market reserve,· and public education. The lobbies were very active during the subcommittee-committee stages, including the military, foreign capital/banks, Brazilian media, labor unions, landowners, rural workers, the churches, and so on. The result of these eight committee reports was somewhat of a "Frankenstein monster" combination, which the Integration Committee had to balance and equate to eliminate inconsistencies and aspects not germane to constitutional law in order to produce the first working draft document. The final draft voted out of the Integration Committee in November was conciliatory on the critical questions of social and economic order,

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but resolute regarding institutional arrangements. Future presidential mandates were set at five years, but Sarney's mandate was shortened to four years,· and a full parliamentary system would be adopted immediately following promulgation of the new constitution (thus stripping Sarney of presidential powers during the remaining months of his mandate). This would have meant presidential elections on November 15, 1989. The Second Rules Battle, Incensed by the Integration Committee's final report, conservative forces began mobilizing for a second rules battle in early December to amend the procedures under which the full Assembly would conduct its final deliberations in 1988. Under the rules passed in March, during final amendment/item vote deliberations, articles passed by the Integration Committee would take precedence in voting, and only after such might be defeated could floor amendments be considered. Articles were to be voted by their numerical order, which meant that system of government and future presidential mandate would be decided before Sarney's current mandate was considered in the final "Transitory Dispositions" section. The more conservative forces in the Assembly considered themselves to hold a majority (as suggested by our data above), and felt that party leaders had "stacked" the Integration Committee with a nonrepresentative liberal/progressive profile. To a certain extent this was also true in the subcommittee-committee deliberations, as many more conservative members, especially those maintaining business-commercial-financial activities in their home states, were not able to sustain a constant presence in Brasilia,· thus, the more full-time, progressive/ liberal members had proportionately more weight. By mid-December, the conservatives were able to mobilize their full presence in Brasilia and with a three-hundred-plus majority imposed amended rules on the Assembly. Ajiy amendment running counter to the Integration Committee's draft, which had an absolute majority (280) signatures, would take precedence in voting. However, they were not able to muster the same majority to impose an inversion of the order of article voting (in order to vote the questions of system of government and mandate first) as President Sarney desired. When the short amendment submission period opened in January, the conservatives were hard-pressed to encounter many of their adepts to sign the petitions, and operatives were dispatched to Florida, New York, and Western Europe, to collar absentee signatures. In late January 1988, the full Assembly began the potentially long process of voting articles, chapters, and titles of the draft, deliberating over three thousand amendment proposals. Only a political agreement negotiated among party leaderships could shorten this process.

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The Battle for Institutional Political Power Supposedly, the pact negotiated by Tancredo Neves and the Democratic Alliance in 1984 determined that the Constituent Assembly would be the final act of political transition, providing the nation with a new and durable legal-institutional framework and determining direct elections for a new president shortly after the promulgation of the new constitution. The Neves-Sarney mandate was thus envisioned as a three-and-ahalf to four-year transition to full democracy. However, the Sarney inner circle and its military support group did not see "transition" this way. Because the Brazilian transition from a military-authoritarian regime to a democratic system did not follow a clear rupture (as in the cases of Argentina and Uruguay), but rather a negotiated "pact of elites," continuity has been very strong.15 In 1985, some fifty thousand federal political appointments, down to the fifth echelon, were analyzed, and 85 percent were found to have held similar positions in the Medici, Geisel, and Figueiredo (military) governments. The system in power in Brazil from 1964 through 1990 desperately tried to buy time in order to devise a new transformation strategy and thus to conserve a large part of its power within the new institutional arrangement: five or six years for Sarney,· a strong presidential system,· the maintenance of national security doctrine and relevant power instruments,· and the military's role in keeping domestic law and order—as well as control of the alternatives for the direct election of Brazil's next president.16 Although the PMDB has nearly three hundred Assembly members, its more progressive leaders do not command a majority of their delegation because of some one hundred "fellow travelers from the right" elected under the PMDB label in 1986, who are considered "friends of Sarney" and are more interested in maintaining prestige through federal appointments and disbursements than in a return to popular democracy.17 These elements, together with most of the PFL and the PDS, plus the PL and the PTB, coalesced into the so-called Democratic Center in the second semester of 1987, calling itself the Centrão (Big Center) during the December conservative reaction described above—along the lines of Tancredo's "Popular Party" (1980-1982). The Centrão became the first wave of conservative "penetration" of the PMDB in 1982, as we saw in the PMDB subgroup profiles in table 11.15. While the PMDB was "responsible" for the Cruzado Plans of 1986 and 1987 and their ultimate negative effects on the economy as perceived by most voters, the Democratic Center strategy appeared to be that of provoking a severe division within the PMDB in 1987-1988, dramatically breaking with the Democratic Alliance and pinning the negative economic receipt around the neck of what was left of the PMDB at the

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polls (in 1988, 1989, and/or 1990).18 In that all state governments (including São Paulo) are in severe economic difficulty and desperately need budget support and public debt rollover from the federal government, President Sarney is trying to coopt the newly elected governors to his transformism strategy and in turn pressure their PMDB delegations in the Assembly to this end. However, as the economic crisis deepened19 and the governors were faced with severe popular discontent and civil strife in large cities, this co-optation weakened. Much of the economic crisis was deliberately fostered by the Sarney government so as to place the blame on the "crisis of political uncertainty." As Sarney said in a nationally televised speech on May 18, 1987 (and reiterated in January 1988), "Give me a five to six year mandate and full presidential powers, and we can surmount the economic crisis." In late 1987 and early 1988, Sarney;s dilemma was further complicated by discontent within the powerful São Paulo Federation of Industries (FIESP) and kindled presidential ambitions among key governors and party leaders. The most decisive question regarding institutional power shifts from the executive to the legislative branch was system of government—the adoption of a presidential or parliamentary system; and second, if the presidential system was to be maintained, how should the powers of the president and Congress be redistributed so as to achieve a more harmonious equilibrium? A mixed parliamentary system had been reported from the Systematization Drafting Committee in November 1987, similar to the French case and on the lines of the Afonso Arinos Committee suggestions in 1986. Supporters of this system were divided into three groups: (1 ) those motivated by reasons of doctrine, (2) those seeking a means of removing President Sarney as chief of government as soon as possible, and (3) those fearing that Leonel Brizola would be Brazil's next President. The Sarney government decided to throw all its "political chips" into the March 22 voting on this question. Newspapers calculated that the government distributed close to U.S. $100 million in TV and radio concessions, pork barrel disbursements, and other "political goods" in the ten-day period prior to the vote, but did not estimate the distribution of resources coming from the private sector. The presidential system passed by a near forty-vote margin, and included the votes of Sarney's adversaries in the PT and PDT. Two days later, on a much closer vote (minus the PT and PDT), present and future presidential mandates were fixed at five years. These two key votes marked the first and only time that the Centrão and the Palace Group were able to muster all 559 Assembly members present and voting in Brasilia. Although the military was divided over the parliamentary system, their "spokesmen" in

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the Assembly maintained heavy threats that if Sarney's mandate was reduced to four years, some sort of intervention would be likely. These watershed votes meant that Sarney would remain president until March 15, 1990, and that Brazil would have a "solitary" presidential election (without the coattails of gubernatorial or general elections) on November 15, 1989 (the centennial of the Brazilian Republic). Having spent all its available chips during these March votes, the Centrão was unable to maintain its ranks in Brasilia for the rest of the voting on the first draft. Thus, the Progressives and Center-Left were able to approve major advances in the areas of basic and social rights, and moderate advances in the section dealing with the economic order. The latter included some restrictions on foreign capital, especially in the areas of mineral extraction and petroleum risk contracts. Regarding the balancing of powers between the executive and legislative branches, the Congress got back most of its pre-1964 prerogatives: complete powers to revise and modify the president's budget and tax proposals, as well as pluriannual plans,· strong oversight powers, including legislative veto powers over regulations and norms determined by executive agencies and the president himself; Senate approval of all nominees, including the president and directors of the Central Bank; Senate approval of all treaties and international agreements signed by the executive branch, including debt renegotiations with foreign governments, private creditor banks and multilateral agencies (BIRD [World Bank], IMF [International Monetary Fund], Paris Club, etc.). The president lost most, but not all, of his authoritarian powers left over from the military period: decree laws,· decurso de prazo-, nominations to the federal civil service only by competitive public exam; control over distribution of resources from the inflation-generated slush fund (fundo perdido)-, budget surpluses must be appropriated and allocated by Congress,· and emergency intervention powers, only by expressed approval of Congress. On the other hand, presidential decrees with decurso deprazo (automatic approval if Congress did not act within thirty days) were substituted with "provisional measures" (similar to the Italian Constitution), where such decrees lose their effectiveness if Congress does not act in thirty days. President Sarney signed nearly 150 of these expedients during his last eighteen months in office, while President Collor de Mello signed nearly forty in his first two months in office. Congress is trying to "regulate" this provision to restrict presidential use of this expedient. Because of the prospects of losing control of the 1989 budget (which was approved in mid-December 1988), and Senate discussion and voting on debt renegotiation agreements with the creditor banks and the IMF in the second semester of 1988, the Sarney government opted for an obstructionist strategy in an attempt to delay the promulgation of the new constitution until December 1988 or early 1989. Assembly and

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PMDB president, Deputy Ulysses Guimarães, adroitly steered the deliberations toward first draft approval in July, at times accelerating, at times delaying the proceedings. These machinations cost Guimarães (eternal presidential candidate) a major portion of the PMDB's progressive sector. In late June 1988, some eighty Assembly members left the PMDB to organize the PSDB (Party of Brazilian Social Democracy), led by Senators Mário Covas, José Richa, and Fernando Henrique Cardoso (as was predicted in our analysis of table 11.15). Plagued by chronic absenteeism of some 120 Centrão members on the average, and having played most of his political chips in March, Sarney made a desperate move on July 26. Sensing a ground swell of approval of the final vote on the first draft, the president instructed his legislative liaison and Assembly floor leaders to articulate the outright rejection of the first draft, culminating with a direct prime-time TV appeal the evening of July 26. This pathetic and melancholic presentation enumerated his accomplishments as Brazil's democratizing president, and condemned the first draft of the new constitution as promoting new institutional and financial arrangements that would leave the nation bankrupt and ungovernable, at best, a counterproductive effort. Ulysses's response was quick and devastating. Before the government had time to muster its absentee Centrão members, Ulysses pushed the first draft vote the next day, prefaced by a stinging and impassioned speech from his Assembly president's chair, which resulted in approval by a 403 to 13 vote margin.20 The second round of voting was accomplished in short order, with final approval coming on September 1, 1988, which left too short an interval to organize the formal protocol for promulgation on Brazil's Independence Day, September 7. After its defeat in late July, the government opted for an alternative lateral strategy in its battle to retain as much institutional political power as possible. Ulysses's timing strategy had worked well. With the municipal election campaign heating up in August, many of the conservatives allied with Sarney faced a double dilemma: (1) if Assembly proceedings were delayed into September and October, their direct (as candidates) or indirect participation in the campaign would be difficult; and (2) their parties' candidates (PFL, PDS, PDC, PL, PTB, CentrãoPMDB) would be branded as unpatriotic, having delayed Brazil's return to democracy and the "State of Law." Thus, they yielded to Ulysses's steamroller pressures easily, which might not have been the case in May or June. Because some two hundred gray areas in the new Constitution need legislative action to have the new concepts put into practice, and both houses of Congress have to adopt new internal rules, the Sarney government understood that it would be nearly impossible for the Congress to achieve much in this area in the remainder of 1988, due to the reduced

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quorums before the November 15 municipal elections. Thus, Sarney's legal counsel, Saulo Ramos, diligently began a massive drafting operation in late July, with two objectives: (1) restructure many of the executive agencies and bureaus before October 5, thus anticipating changes done by the Congress, as a fait accompli;21 and (2) regulating many of the gray areas by decree, executive orders, directives, and legal briefs, in a blatant usurpation of legislative prerogatives.22 Even before the October 5 promulgation, the battle of the budget had begun. The new constitution calls for a "new federalism" and revenue sharing that will reduce the federal government's tax base by some 25 percent, phased in over a five-year period, and give new program initiatives (and tax bases) to states and municipalities. The planned net result would be a "shrinking" of the massive federal bureaucracy and inefficient "trickle-down" programs. In a desperate effort to maintain funding for manipulative pork barrel programs, the planning ministry was instructed to embark on Operação Desmonte (take apart the state). This entails the elimination or reduction of basic social programs, forcing massive programs on the states, while reducing the federal transfers to the states. Estimates calculate that the new responsibilities acquired by the states would be more than double (in cost) than the new revenues accrued. On the other hand, by reworking the federal tax system, and reducing its program responsibilities, the federal government might have approximately the same or even a greater level of resources available in 1989 and 1990, crucial years for the continuation strategy. State governors with presidential ambitions, or their combined support of a PMDB candidate, would be severely impaired. The new congressional Joint Budget Committee took up the challenge of Operação Remonte (put the state back together) and has succeeded in uncovering some gross budget errors in the 1989 budget proposal.23 In the final months of 1988, Congress worked to restore many important programs, and eliminate much of Sarney's built-in pork. The president's budget proposal called for the states to retire 25 percent of their foreign debts in 1989, and the Congress, under pressure from the governors, reduced this figure to a flexible 0 to 10 percent. Amid threats of "fiscal terrorism,"24 Sarney stated that if his budget was not approved as submitted, he would veto the modified version.25 As the old Brazilian saying goes, "Too much pipe smoking makes the mouth crooked." In 1989, Sarney again tried to "sunset" several state enterprises and federal agencies, which Congress restored. Although his budget planning advisers recommended to President Sarney that he veto some thirty modifications Congress had made to his 1990 budget proposal as unconstitutional, in early 1990, he decided to sanction the document in toto.

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Conclusions: Whither Brazil? Even as the protocol ceremony of the new constitution's promulgation unfolded on October 5, 1988, complete with an impassioned speech by Senator Afonso Arinos and Sarney's pledge to uphold the new document (while his right hand trembled visibly), followed by a vigorous speech by Assembly president, Deputy Ulysses Guimarães, condemning Sarney's coercive tactics and the excesses of the military regime, Brazilians wondered when their newly acquired rights and responsibilities would become effective, and what would be the nature of the new relationships between the executive/president and Congress. Perspectives for Brazil's economic and political future are at best mixed. With a new constitution in place, which gives citizens new political rights and socioeconomic gains, expectations have been raised, without any provision for real income redistribution away from the increased inequalities from the 1970s. Despite an annual inflation rate of over 1,000 percent, the country still experiences real economic growth. On the other hand, government policies give the appearance of a deliberate trashing of the economy, in favor of immediate economic gain for an inner circle of cronies, which may produce social unrest within the continuation strategy, leading to popular clamor for a return to a more austere, authoritarian regime. After having recovered from Sarney's second "heterodoxical economic shock" perpetrated on the country in January 1989 (the "Summer Plan"), by midyear Congress again began a massive reallocation of budget items, while at the same time not acting on the task of approving legislation "regulating" important parts of the new constitution. Demoralized by a Senate Special Committee investigation of executive branch corruption, Operação Desmonte was forgotten during this lame-duck period. During the 1989 presidential campaign, candidate Fernando Collor de Mello bitterly attacked "Sarney's corrupt government" as well as "the do-nothing Congress only interested in maintaining its perks." The anti-Congress media campaign was intensified in 1990, as the first directly elected president in twenty-nine years aimed at defeating most of Congress's traditional leadership in the 1990 general elections. With a solid and loyal absolute majority in 1991, Collor de Mello will attempt major constitutional revisions that may include a "loose" parliamentary system, which would allow him to become prime minister after his term ends in 1995. Given the new government's massive "New Brazil" program launched on March 15, 1990, the most far-reaching government intervention in

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the economy in Brazil's history, and his authoritarian use of the "Provisional Measures," if this plan goes sour by August-September, his supporters may not be able to return a working majority in the October 3 elections. This scenario would produce very difficult relations between the president and Congress in 1991 and beyond, which may result in constitutional revisions prior to 1993, as prescribed by Article 3 of the Transitory Depositions. Notes 1. For an analysis of the transition to the two-party system, see David Fleischer, "A evolução do bipartidarismo no Brasil," Revista Brasileira de Estudos Políticos 51 (1980): 155-156; and Robert Wesson and David Fleischer, Brazil in Transition (New York: Praeger, 1983). The best recent work on the Brazilian party system is Bolivar Lamounier and Rachel Meneguello, Partidos políticos e consolidação democrática: O caso brasileiro (São Paulo: Ed. Brasiliense, 1986). 2. A third requirement was the election of loyal governors in the key states of São Paulo, Minas Gerais, Rio de Janeiro, and Rio Grande do Sul. 3. For an in-depth analysis of the MDB from 1965 to 1979, see Maria D;Alva Gil Kinzo, "An Opposition Party in an Authoritarian Regime: The Case of the MDB (Movimento Democratico Brasileiro) in Brazil, 1966-1979," (PhD diss., St. Antony's College, Oxford University, 1985). 4. For a chronicle of political "casuismos" in Brazil, see David Fleischer, "Constitutional and Electoral Engineering in Brazil: A Double-Edged Sword," Inter-American Economic Affairs 37:4 (1984): 3-36. 5. The association between levels of urbanization and the increasing opposition vote in Brazil has been noted by many authors, among them are Glaucio Soares, Colégio eleitoral, convenções partidárias e eleições diretas (Petrópolis: Vozes, 1984), pp. 22-26; and Fabio W. Reis, "O eleitorado, os partidos e o regime autoritário brasileiro," in Bernardo Sorj and Maria Hermínia T. Almeida, eds., Sociedade e política no Brasil pós-1964 (São Paulo: Ed. Brasiliense, 1983), pp. 7083. 6. Luiz H. Bahia, Olavo Brasil de Lima Jr., and Cesar Guimaraes, "O perfil social e político da nona legislatura," Jornal do Brasil, April 22-24, 1979. 7. See Fleischer, "Constitutional and Electoral Engineering in Brazil." The November 1981 package was passed by decurso de prazo. 8. For a description of the changes made by the May 1982 package, see Jornal do Brasil, June 24, 1982, p. 4. 9. In contrast, without these artifices and with unfettered access to television campaigning, in 1974 the MDB won in five of these nine states. 10. In São Paulo, the PMDB expanded its municipal victories from 38 to 307 (voice. 253 for the PDS). In Goiás, the PMDB grew from 60 cities to 185, and in Paraná from 14 to 183. Because these PMDB mayors held mandates until 1989, they constituted a formidable machine for the 1986 elections. 11. Survey conducted by the Correio Braziliense on November 8, 1983, and analyzed in David Fleischer, "Partidos e mudanças institucionais: congresso nacional" (paper presented at the Eighth Annual Meeting of ANPOCS, Aguas de

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São Pedro, SP, October 23-26,1984). Brizola supported the two-year continuismo mandate [mandato-tampão), so that he could have a shot at the presidency by direct election in 1986. 12. This fourth measure, withholding or increasing disbursements for local projects, was very effective, a sort of local "pork barrel·' or carrot and stick. 13. This index is prepared monthly by SEPLAN by classifying speeches made on the floor of the Chamber and Senate by content (pro-government, neutral, or contra). The index is constructed in the following manner: (Pro-Contra / Pro) x 100—When Pro larger than Contra. (Contra-Pro / Contra) x 100—When Contra larger than Pro. 14. The opposition to the Vargas regime (UDN and PCB) tried to affirm the basic sovereignty of the 1946 Assembly by challenging the authority of the presiding officer of the opening sessions (the president of the TSE), that this role should be performed by the oldest Assembly member present; and that the 1937 Constitution be immediately revoked and the more liberal 1934 Constitution be temporarily reinstated during the deliberations of the 1946 Assembly. However, Dutra's PSD held a 60 percent majority in the 1946 Assembly, and thus easily defeated these proposals. See João Almino de Souza Junior, Os democratas autoritários: liberdades individuais, de associação política e sindical na constituinte de 1946 (São Paulo: Ed. Brasiliense, 1980). 15. Ronald M. Schneider, "Transition without Rupture: Parties, Politicians, and the Sarney Government," in Julian M. Chacel, Pamela S. Falk, and David V. Fleischer, eds., Brazil's Economic and Political Future (Boulder, Colo.: Westview Press, 1988), pp. 188-198. 16. See Walder de Goes, "Military and Political Transition," ibid., pp. 120129; and Alfred Stepan, Rethinking Military Politics: Brazil and the Southern Cone (Princeton: Princeton University Press, 1988). 17. This physiological instinct of "political survival" in a system dominated by an all-powerful state apparatus is not new in Brazilian politics. The pre-1964 context is well analyzed in Barry Ames, Political Survival: Politicians and Public Policy in Latin America (Berkeley: University of California Press, 1987), pp. 103-139. 18. This strategy was weakened by Sarney in January 1988 when he ousted the PMDB ministers of finance and planning, and replaced them with "neutral" bureaucrats of his own choosing. 19. In January-February 1988 the monthly inflation rate was increasing from 15 to 20 percent, and most indicators reflected a slowdown in economic activity. 20. "Ferida, a fera fere: Sarney procura apoio militar, parte para seu mais duro ataque a Constituinte e sai derrotado pela responsa do Ulysses," Veja, August 3, 1988, pp. 32-44. 21. The new constitution stipulates a drastic reorganization of the National Security Council (CSN) into a "Council of National Defense," and the elimination of the CSN's powerful and secretive "General Secretariat" (Article 91). By administrative order, Sarney abolished the secretariat, and then reconstituted it as an advisory board attached to the presidency. 22. The new constitution states that the limit of real interest rates should not

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exceed 12 percent per year (3o. of Art. 192). Sarney immediately instructed the Central Bank to sell notes at "market rates" until enabling legislation was passed by Congress. On October 13, the Central Bank established the overnight rate at 50 percent per month. 23. Inácio Muzzi, "Erro vai atrasar orçamento de 89," Jornal do Brasil, September 12, 1988, p. 4. 24. These threats included: abolishing the Brazilian Rural Extension Service (EMBRATER), eliminating the federal school lunch program, deep cuts in the federal housing program, and canceling all federal highway construction and repair contracts. Regarding the latter, the allegation was that all highway programs will be the responsibilities of the states. 25. Guiomar Campelo, "Governo não acita mudar orçamento: se congresso alterar proposta original, lei deixara se ser sancionada," Correio Braziliense, October 11, 1988, p. 6.

12· Organized Labor in Brazil

Peter Swavely Introduction The contemporary Brazilian labor movement must be seen in the context of the desperate and precarious situation of the majority of working people in Brazil. While extreme social and economic inequalities are nothing new in Brazil, the working class today is in many ways worse off now than it was forty years ago. For example, 33 percent of the Brazilian work force earns the minimum wage—the equivalent of $49.45 per month in January 1987—or less. This figure represents less than onethird of the minimum wage in 1940.1 Organized labor, traditionally dependent upon and subordinate to the state, has not been—until recently—a powerful force in Brazilian society, and still represents a relatively small percentage of the working class. According to the International Labor Organization, only 10 to 20 percent of the Brazilian work force is unionized.2 Well before Brazil's return to a civilian government in 1985, however, important segments of organized labor had begun to assume an autonomous political role of great importance. As a part of the opposition movement during the military government, the novo sindicalismo (new unionism) contributed to the demise of overt military rule and the coming to power of the coalition of civilian politicians that had supported the candidacy of the respected veteran opposition politician Tancredo Neves for president. Since 1985, labor has, for the most part, continued to exercise its independence, showing little inclination to adopt a subordinate or merely supportive stance toward the civilian-led government in the so-called Nova República. To the exasperation of President José Sarney, whose government demonstrated a new sensitivity to labor when it took power, unionists resisted calls for a "social pact" in the first months of the new regime.3 Labor leaders continued to press for concessions from government and business, and a growing wave of strikes attested to their increasing strength and militancy. With the introduction of the popular Cruzado Plan in February 1986, however, the

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government seemed to deal a blow to labor militancy. The government had at least temporarily won the overwhelming support of working people, and a confident President Sarney stopped talking about a social pact with the unions. Although wary of the Cruzado Plan, labor leaders lent it cautious support while rejecting its wage-freeze provisions and continuing to call for basic reforms in labor law. With the end of the Cruzado Plan just weeks after the November 1986 elections and the deepening economic crisis that followed, organized labor has shown a renewed militancy. The government response to labor activism in the post-Cruzado period will be an important indicator of its willingness to accept the legitimacy of the new unionism—and of the extent to which Brazil might be "democratized." Organized labor and its representatives in the new Congress elected in November 1986 will also play a key role in shaping a new Brazilian constitution. The extent of labor's influence in drafting that document and the nature of labor law reform will also be an important indicator of the nature and extent of political change in Brazil. Organized labor, however, is by no means a unified movement in Brazil, either institutionally or politically. Its institutional structure—largely the heritage of the quasi-fascist Estado Novo of President Getúlio Vargas, which lasted from 1937 until the end of the Second World War—is fragmented, and although many of the unions have affiliated themselves with one of two major extralegal national workers' centrals, the leadership of these centrals, the Single Workers' Central (Central Unica dos Trabalhadores, or CUT) and the General Workers' Central (Central Geral dos Trabalhadores, or CGT), remains divided over important questions of union organization, organized labor's relationship to the state, party political orientation, and political strategy and tactics. Recent events in Brazil, particularly the general strike of December 1986 in which the CGT and CUT cooperated, may indicate a lessening of these divisions. Nevertheless, an examination of the differences between the two groups will help to clarify the key issues facing the labor movement, the government, and the Constitutional Congress as they try to work out a new role for organized labor in Brazilian life. It is the assertion of this chapter that an independent, militant, organized labor movement has become a political fact in Brazil, and that to a large extent, the legitimation of that fact is a prerequisite to the democratization of Brazil. Given the complexity and fluidity of labor affairs in Brazil—as well as that country's economic and political volatility—this chapter will focus on recent trends in the evolution of organized labor and on the labor policy of the Brazilian government (including divisions within the government regarding that policy), in an attempt to gain some insight into the nature and extent of political change in contemporary Brazil.

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Origins and Structure of Brazilian Labor Organizations The recent history of organized labor in Brazil begins with the promulgation of the Consolidation of the Labor Laws (Consolidação das Leis do Trabalho, or CLT) in 1943. While labor played an important role in Brazil before this time, the origins of today's labor movement, and by implication, the political challenge facing labor today, are found in the CLT. As a consolidation of various labor laws and regulations that had been enacted since the revolution of 1930 and especially under the Estado Novo, the CLT established an integrated labor system that essentially made labor organizations a part of the Brazilian state apparatus. With some modifications, this system has persisted for over forty years and still forms the basic legal and institutional framework for organized labor in Brazil. The central feature of this system is a vertical or pyramidal structure of trade union organization based upon the sindicato (union). The sindicato, however, functions more as an arm of the Labor Ministry than as a union in the North American sense. Each official union represents all the workers of a given "category" (e.g., bank workers, textile workers, etc.) in a single geographical area, usually a município (roughly equivalent to a county or a metropolitan area). Unions of the same category are affiliated to (usually) statewide federations, which in turn are affiliated to an appropriate national confederation comprising federations of various categories. Today there are eight major national confederations, as well as several federations and unions that are not affiliated to national confederations. The CLT makes no provision for union representation on the shopfloor or for horizontal organizations of workers across categories or geographical regions (i.e., labor centrals). All unions, federations, and confederations are dependent upon the Ministry of Labor for legal recognition, finances, and other benefits. The imposto sindical(the union tax, later changed to the contribuição sindical, οr union contribution) is collected from all workers in Brazil and then distributed to the unions by the Ministry of Labor. The CLT allows the Ministry of Labor to veto candidates for union office and under certain circumstances to intervene in a union, removing officers and appointing an "interventor" to run the union. As strikes were illegal under the Estado Novo, a system of special labor courts was established to adjudicate disputes between labor and management by compulsory arbitration (the disidio coletivo). The CLT was not simply a mechanism of control, however. While its provisions did not originally apply to rural or domestic workers or to public functionaries (rural workers' unions have since been organized), the CLT and its amendments provided a measure of protection to the

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organized urban working class. It protected workers from arbitrary dismissal and regulated compensation in case of dismissal (by means of the Lei da Estabilidade, or Tenure Law), established the eight-hour work day and the minimum wage, guaranteed a paid annual vacation for all workers, and set up a system of social security administered by the unions. The CLT reflected the corporatist political philosophy of the Estado Novo, which conceived of society as an organic whole, each of whose parts performed an essential function in the creation and maintenance of national well-being. The state was seen as the guarantor of the security of each group in society and of the common good. Indeed, not only workers of the same category, but employers and professional groups were organized in sindicatos as well. In this scheme of things, there was no place for class conflict or the recognition of a fundamental antagonism between labor and capital. Vargas himself described the labor statutes as "laws of social harmony."4 When it was promulgated by presidential decree in 1943, the CLT was widely seen as a great step forward for the Brazilian working class, and in important ways it was. As Brazil became more urbanized and industrialized, with more people entering the work force for the first time, the CLT provided a measure of social and job security for unionized workers, especially unskilled workers, and it gave labor as a whole a measure of representation in the state apparatus. Getúlio Vargas was hailed by many as the pai dos pobres and the protetor dos trabalhadores (the father of the poor and the workers' protector), and is so remembered by many Brazilians today. But, while the CLT established a basic institutional framework for organized labor that offered some protection from the worst excesses of exploitation, it also hindered labor's ability to organize autonomously. As appendages of the Ministry of Labor under the Estado Novo, trade unions became bureaucratized agencies for the distribution of state welfare benefits to the membership,· their pelagot5 officials were little more than employees of the government.6 In the last year of the Vargas regime, the president turned increasingly to the working class for political support, and the tight controls called for by the CLT were relaxed de facto as part of an increasingly "populist" political program. The Communist party (Partido Comunisto Brasileiro, or PCB) was legalized, extralegal horizontal associations of unions were tolerated, and after the overthrow of the Vargas government in late 1945, a series of strikes were staged across the country. The new government of General Eurico Gaspar Dutra, however, quickly cracked down on labor activity,· strikes were banned by decree, the PCB was officially outlawed, and proposals for the abolition of the CLT and the establish-

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ment of free trade union organizations were rejected by a new constituent assembly (which in other respects was attempting to lay the foundation for a new liberal-democratic regime). The corporatist labor system was left largely unmodified.7 With Vargas's electoral victory in 1950 and his return to power at the head of a political coalition dependent upon labor support (the political form of which was the getúlista Brazilian Workers' Party (Partido Trabalhista Brasileiro, or PTB), the Brazilian labor movement entered its populista phase. Until 1964, union leaders worked within the CLT structure in patron/client relationships with government officials who were willing to grant benefits, favors, and services in return for the political support of organized labor groups.8 Thus developed a relationship of mutual dependence between labor leaders and populist politicians in which each had a stake in the maintenance of the system. Significantly, the political left in the labor movement (especially the PCB), which increasingly came to dominate the leadership of unions, embraced the populist arrangement and used it effectively to further the immediate interests of workers (e.g., wage increases and other benefits) as well as broader political goals, especially in nationalist economic development policy. Indeed, the principal concerns of labor leaders were almost exclusively political ones, and in this respect the CLT system was seen as a vehicle for the acquisition of political power and influence within the government rather than as a hindrance to autonomous working-class organization. There was a tacit acceptance of the principle of state tutelage by labor leaders and politicians of various political stripes, and it was to the state that labor leaders looked for the satisfaction of their demands; workplace concerns and labor relations with individual employers were largely left for the labor courts to deal with.9 A key aspect of the populist arrangement was the de facto relaxation of much of the labor code's system of controls (which were never rescinded legally), especially concerning the right to strike and to organize interunion associations. In 1962, the labor movement, by then dominated by Communists and radical nationalist union leaders, organized an extralegal workers' central, the General Workers' Command (Comando Geral dos Trabalhadores, or CGT), whose fortunes became inextricably linked to those of President (and former Labor Minister) João Goulart. While it soon became clear that Goulart's political survival depended on the CGT, the extent to which the CGT's power— and the political strength of labor in general—had come to depend on Goulart was less obvious. Allied to important politicians who depended on them for their political power, labor leaders were able to command significant blocs of votes in national elections and to mobilize large numbers of workers for demonstrations and strikes. The unions them-

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selves, however, were still largely bureaucratic entities with few active members and little or no actual rank-and-file organization in the factories. While populist politicians and leftist union officials used the unions for political ends, the union system itself had been designed to prevent the mobilization of workers as an autonomous political force.10 Labor unions were still wholly dependent upon the state for their institutional legitimacy and their financial viability, so when the military took power in 1964, the populist coalition that had given labor so much power came crashing down. Labor leaders and populist politicians alike discovered how weak the labor movement actually was. By failing to seek some measure of organizational autonomy and a strong organizational base in the rank and file, labor leader-bureaucrats had failed to prepare the labor movement for the new rightist regime that had seized control of the state apparatus. In the pre-1964 period, then, the apparent power of organized labor disguised a fundamental weakness: the fatal dependence of the populist labor organizations on the state. The new authoritarian regime moved quickly to establish its control over the labor organizations. The long-unenf orced provisions of the CLT were now strictly enforced, the CGT was abolished, strikes outlawed, and most important, unions were subjected to the intervention of the Labor Ministry. Politically suspect union officials were removed from their posts,· at the same time, purged unions were reorganized and new unions created to tighten state control over the working class as a whole. Labor activists were principal victims of the generalized repression that immediately followed the 1964 coup, and labor organizations continued to be targets of sporadic repression thereafter.11 As part of a new anti-inflationary economic policy, which included a "wage-squeeze" (the arrocho salarial ), several modifications were made in the labor code, the most significant of which was the replacement of the Tenure Law by the Time-in-Service Guarantee Fund (Fundo de Garantia por Tempo de Serviço, or FGTS). A forced-savings device to stimulate capital accumulation, the FGTS shifted the responsibility for job security to the state and thus effectively eased employers' financial responsibility for compensating dismissed workers, allowing them more flexibility to hire and lay off workers in a dynamic economy. The FGTS represented a step away from corporatism, at least for business, and according to John Humphrey, the lesson was not lost on perceptive workers: "The principle of tutelage, protection as well as control, was replaced by the need for productivity and the logic of capital."12 There was little that workers could do in the face of the new order. Lacking autonomous organizations, they were largely at the mercy of the state, which had apparently abandoned the protective role assigned to it by the CLT. Ironically, however, in its hostility to the working class, the

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regime may have been laying the groundwork for the development of autonomous workers' organizations. In 1967, some union leaders in São Paulo responded to Labor Minister Jarbas Passarinho's call for a renovação sindical by organizing an Inter-Union Movement against the Wage Squeeze (Movimento ínter-Sindical Anti-Arrocho, or MIA). The MIA spawned "union oppositions" (oposições sindicais) in some unions that tried to circumvent the state-controlled unions and deal directly with employers.13 In 1968 the first important manifestation of the new spirit of autonomy occurred at Contagem, an industrial suburb of Belo Horizonte, where fifteen thousand workers staged a wildcat strike in defiance of the official union. Several months later, a similar strike occurred in the São Paulo industrial town of Osasco, where the action was carefully planned by unofficial factory committees linked to the local metalworkers' union, which was led by union opposition officials.14 In important ways, these strikes, both of which were crushed by police, represented new tendencies in the labor movement. Organized by workers in the most advanced manufacturing sectors, which had previously been peripheral to the populist labor movement, they displayed an unprecedented independence on the part of unofficial rank-and file groups at the individual factory level.15 Also in 1968, the National Confederation of Rural Workers (Confederação Nacional dos Trabalhadores na Agricultura, or CONTAG), 90 percent of whose unions had been closed after the 1964 coup, was captured by a new leadership that began to encourage the formation of representative unions in the countryside.16 This rural movement would bear fruit in the 1970s, when rural unions became, along with a "new unionism" [novo sindicalismo) in the modern industrial sector, a significant presence in the national opposition to the dictatorship. With the promulgation of the draconian Institutional Act no. 5 in December 1968, these new trends in the labor movement were brutally suppressed. Intimidation, torture, and police terror were used to silence those labor leaders who threatened the "social peace" of the new order.17 In this atmosphere, workers avoided direct confrontations with the state, and what little organizing occurred was concentrated in ad hoc actions aimed directly at the employers. Several "spontaneous" strikes in 1972 won some wage concessions for workers in São Paulo, while labor shortages associated with the "economic miracle" led to several successful "overtime" strikes by workers in the São Paulo auto industry and other modern-sector industries in 1973.18 At about the same time, the Metalworkers' Union of São Bernardo do Campo (an industrial city in São Paulo where much of Brazil's auto industry is located) chose a new leadership that concentrated on rank-

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and-file organization, focusing attention on workplace issues that could be dealt with through direct talks with employers. By organizing factory committees and stressing rank-and-file concerns, the São Bernardo leadership was laying the foundation for a democratic, participatory unionism that would soon spread to other workers' groups in the advanced industrial sector. In his analysis of the leading role of automobile workers in the formation of the new union movement in Brazil, John Humphrey suggests that the development of modern industries, especially the auto industry, concentrated large numbers of workers in large factories and industrial towns and made possible the new forms of organization that—in the face of state hostility—would give rise to the novo sindicalismo.19 In 1977 the new administration of General Ernesto Geisel, which had initiated a policy of distensão (decompression), revealed that the cost of living increases in 1973 and 1974 had been miscalculated by the government. The admission sparked a popular movimento contra o custo da vida ( a cost of living movement) and a demand by union leaders for a reposição salarial (wage increase) of 34.1 percent. In São Bernardo, the metalworkers used the issue to push a demand for trade union autonomy and decided to begin negotiations directly with employers. The union refused to participate in the annual discussions with the government over the 1978 wage increases, and on May 10, after the government had announced a wage package in April, workers at the Saab-Scania automobile factory in São Bernardo went on strike. The strike, which soon spread to otlier factories and other industries, was the first major strike in Brazil in ten years, and it marked the emergence of the novo sindicalismo as a major new force in the Brazilian labor movement and in national politics. Taken by surprise, the employers were forced to grant major concessions, and the government did little to interfere.20 Later in 1978, the São Bernardo leadership, headed by the union's president Luís Inácio (Lula) da Silva, along with other auténtico (authentic) labor leaders, issued a Letter of Principles following a national congress of the National Confederation of Workers in Industry (Confederação Nacional dos Trabalhadores na Indústria, or CNTI) in Rio de Janeiro. This Carta de Princípios called for union democracy and autonomy, as well as for modifications in national economic policy, controls on the activities of multinational corporations, agrarian reform, free collective bargaining with employers, amnesty for political prisoners, and a constituent assembly.21 With the May strike and the Letter of Principles, Lula and other auténtico unionists had become not only leaders of a new labor movement, but a part of a national grass-roots political movement including segments of the church, community groups, and other forças populares (popular forces) urging an end to the dictatorship and a general

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democratization of Brazilian life. The São Bernardo metalworkers also took the lead in a major strike over wages in 1979. Striking metalworkers for the first time had the benefit of a strike fund as well as the active support of the Roman Catholic Diocese of São Paulo. As in 1978, the strikes spread beyond the industrial heartland of São Paulo and assumed a more clearly political character as part of the nationwide movement of popular protest and opposition to the military regime. It was also in 1979 that Lula and other leaders of the new union movement, along with activist Catholic, peasant, and other grass-roots groups and various leftist political activists, founded the Workers' party (Partido dos Trabalhadores, or PT) to represent the interests of the new democratic movement in the expanding political space created by the abertura (opening) initiated by the new administration of President Figueiredo. In 1980, another major strike led by the São Bernardo metalworkers, whose major concerns were job stability and "democratization" of the workplace, resulted in government intervention in the metalworkers' union and the removal of its leaders, including Lula, who were charged with violating the National Security Law.22 Lula and his group continued to dominate the union's affairs, however, as Lula himself had become a rallying point and a political figure of national importance. While representing an obvious challenge to the pelagos, the new unionism represented by Lula and the São Bernardo metalworkers was also distrusted by many leftist intellectuals and labor activists, who saw in it a manifestation of a relatively privileged sector of the working class. Many felt that the auténtico brand of labor activism could have only limited appeal to workers in the more traditional industries, who did not have the organizing strength of the automobile workers. It was not only the pelagos who were less inclined to break so thoroughly with the principle of state tutelage, especially as the gradual liberalization of the regime seemed to hold the promise of an eventual transfer of power to a government more friendly toward labor. Many union leaders and leftwing political activists followed the traditional PCB line that the Brazilian working class was not ready for "autonomy," but needed to build alliances with other "progressive" sectors. They feared that the proliferation of autonomous unions might eventually lead to deeper divisions within a heterogeneous working class and to a strictly "economistic" activism (such as U.S.-style "business unionism") on the part of a "labor aristocracy" willing to play by the capitalist rules.23 This tendency found expression in the Unidade Sindical group, reflecting the traditional leftist/populist Une, and was associated politically with the opposition Brazilian Democratic Movement party (Partido do Movimento Democrático Brasileiro, or PMDB)—which included the

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then-illegal Communist parties.24 Unidade Sindical concentrated on organizing to win the leadership of unions, federations, and confederations, particularly in more traditional sectors. The auténticos, on the other hand, concentrated on factory-level organizing, gaining control of individual unions, and negotiating directly with employers. They largely ignored the federations and confederations as irrelevant.25 When the representatives of the activist labor movement met at the first Working Class Conference (Conferéncia das Classes Trabalhadores, or CONCLAT) in 1981 to elaborate a common program and to choose a commission that would organize a new workers' central, a serious split developed between those auténtico delegates associated with the PT on the one hand and those associated with Unidade Sindical and the PMDB on the other. The PT faction favored the construction of a radical CUT to include "authentic" unions and opposition groups attempting to gain control of their unions from pelago leadership. They envisioned a CUT constructed "from the base" that would exclude pelagos and be independent of the official structure of federations and confederations. The PMDB and Communist factions favored a central organized on the principle of "unity" that would include leaders of the federations and confederations—even pelagos—as well as unofficial union oppositions.26 The split was not overcome, and plans to hold a second CONCLAT in 1982 went unrealized. Eventually the auténtico faction organized the CUT in 1983 and coordinated a nationwide general strike in July following government wage-cutting measures.27 The other group formed the CONCLAT (now the CGT). Differences within the labor movement were submerged in the national mobilization for direct presidential elections that swept the country in early 1984. They reemerged, however, with the campaign of Tancredo Neves for the presidency later in the year. While the CONCLAT, following the PMDB line, supported Tancredo's indirect election by the electoral college, the CUT and PT, while tacitly supporting the opposition candidate, considered the electoral college illegitimate, and PT members of Congress abstained from voting. Since the transition to civilian government in March 1985, the political positions of the two workers' Gentrals have generally followed this pattern. At the risk of overgeneralization, the actions of the CUT can be said to reflect a more uncompromising, confrontational stance toward both employers and the government and a determination to press for radical changes in Brazilian society. The CGT, on the other hand, has generally been less strident and, at least before the collapse of the Cruzado Plan in November 1986, more inclined to support the government. The differences between the two centrals are widely seen as a reflection of partisanship in the top leadership of the CUT and CGT,

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where political party allegiances act to perpetuate divisions. The differences between the two groups are deeper than this,· however, they concern the organization of Brazilian trade unionism and its relationship to the state. The Cut and the CGT As mentioned above, only 10 to 20 percent of the Brazilian work force is unionized, and not all of these unionized workers belong to unions that are affiliated with one or the other of the two major centrals. For example, the rural workers' confederation, CONTAG, which is independent of the centrals, has many more members than the CUT and CGT combined.28 Out of 5,500 labor unions in Brazil, however, well over half are affiliated with either the CGT or the CUT. At the founding conference of the CGT in March 1986, 1,341 affiliated unions were represented.29 This probably does not represent a great increase over the number of CONCLAT affiliates of several years ago. When the CUT was founded in 1983, however, it counted only 500 affiliated unions. The number had risen to over 1,000 by the end of 1985 and to nearly 1,400 by the end of 1986.30 In addition, the CUT also includes in its membership trade union activists working to affiliate their unions with the central While its power base remains the ABC (Santo André, São Bernardo, and São Caetano) industrial region around São Paulo, the CUT has expanded beyond its base among workers in heavy industry to include, among others, pharmaceutical and bank workers. The rapid growth of the CUT can be explained in part by its aggressive organizing strategy based on rank-and-file recruiting and attention to shop-floor, rank-and-file concerns. CUT activists are often resented for their "intrusions" into unions—from the base—and for organizing CUT chapas (slates of candidates) to challenge non-CUT leadership for the control of unions. While this practice is seen by the CGT as undermining trade union "unity, " the fact is that workers are often receptive to the CUT activists precisely because of their shop-floor orientation. The CUT has generally been more combative, quicker to use the strike, and more tenacious in job actions. Not surprisingly, workers in CUTaffiliated unions tend to be better paid.31 The CUT's organizing tactics and strategy reflect the overarching vision of a radically democratic Brazil and of an autonomous labor movement first articulated by the auténticos in the late 1970s. At that time, many of today's CUT leaders learned that the workers gained nothing except by direct action or the threat of it. This fundamental distrust of employers and the government, a recognition of a perpetually adversarial relationship between capital and labor and between the state

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and the working class, continues to animate the CUT today. Deeply suspicious of the state, the CUT continues to insist upon union autonomy as part of a radical new system of labor law and to resist political bargaining for a social pact with the government and employers. The CUT, then, represents a militant, democratic unionism based in the rank and file, totally independent of the state, capable of organizing a conscious working class in defense of workers' rights and for a democratic transformation of Brazilian society. The CGT, on the other hand, has continued, in the tradition of the Unidade Sindical, to concentrate its energies on gaining control of the existing trade union structure. Consequently, the CGT is much better represented at the federation and confederation levels than is the CUT. The CGT also works to increase its influence in national politics, trying to influence broad social policy from its position within the trade union structure. Because of this "class alliance" strategy, and because of its links to the PMDB party—which has sustained the Sarney government since the advent of civilian rule—the CGT has had more access to the government. It has also been less militant in its rhetoric than the CUT, less inclined to strike, and more inclined to participate in political bargaining with the government. However, it would not be fair to say that the CGT represents a new form of the populista unionism of the pre-1964 period. As the labor movement as a whole has gained strength, and as the CGT has had to compete with the more radical CUT for worker loyalty at the rank-andfile level, the CGT has itself become more militant, and perhaps more responsive to pressures from its rank and file, especially since the end of the Cruzado Plan and the decree of Cruzado II on November 21, 1986. The different reactions of the CUT and the CGT to the government's Cruzado Plan is illustrative of their different political strategies. The CGT immediately hailed the popular plan when it was announced at the end of February 1986, and for the most part supported the government for the duration of the price freeze. The CUT, on the other hand, was much more suspicious of what it saw as a "social pact" unilaterally decreed by the government. It continued to press aggressively for wage increases, though with limited success.32 Its policy was to demand a bigger "slice of the pie" for labor during a period of phenomenal economic growth and to continue to push labor's demands even though most workers were (temporarily, as it turned out) better off than before the plan. In short, while the CGT leadership saw the Cruzado Plan as a positive step, justifying a strategy of class cooperation and qualified support of the government, the CUT leadership continued to act autonomously and to play an adversarial role.

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Labor's Proposals for Legal Reform The political differences between the centrals, rooted in the disputes between the auténticos and the Unidade Sindical during the 1970s, are also reflected in their proposals for the constitutional reform of the labor system. Both labor centrals advocate a trade union system free of government control, but while the CUT advocates total autonomy from the state, the CGT's proposals, while representing a radical departure from populista -style unionism, are not as extensive as the CUT proposals. In September 1986, the Center for Union Studies (Centro de Estudos Sindicais, or CES), a research group associated with the CGT, published a detailed proposal for the reform of Brazilian labor law in its magazine, Debate Sindical The basic objectives of labor reform, for CES, are freedom from state control, activist unionism rooted in the workplace, and union unity. To achieve these general goals, the CES calls for legal reforms that would prohibit state intervention in unions, preserve the principle of unicidade sindical (a single union for each category of workers in a given locality—to be defined, however, not by the state but by a national union organization), remove obstacles to the formation of new unions (including by public employees), end the legal prohibition of horizontal inter union organizations, and redefine confederations by job category. The CES proposes a new vertical union structure for each category of workers based on factory commissions, and including single unions in a given area affiliated to state or interstate federations. These in turn would be affiliated to national federations organized by category. All national federations would then be affiliated to a union central The CES foresees a national union electoral commission—presumably to be organized by the central—to oversee union elections, as well as congresses of workers in each category to elect federation leaders. New labor legislation would only indicate the broad outlines of this system, according to CES. The details would be elaborated by workers themselves.33 CUT proposals for the reform of Brazilian labor law differ more in degree than in kind. For CUT, the basis of a new system of labor law should be the International Labor Organization's ILO Convention 87, which calls for the autonomy of trade union organization and its complete freedom from state interference or control. Consequently, the CUT proposes the abolition of the union tax, which it sees as a mechanism of state control. The CUT argues that the union tax represents a dangerous dependence upon the state, encouraging bureaucracy, political patronage, and pelaguismo, and discouraging union militancy.

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The CGT argues that the union tax is absolutely essential for the survival of many unions, federations, and confederations, and that its precipitous abolition would actually weaken the union movement as a whole. The CES proposal would transfer control of the union tax revenues to "sovereign assemblies" of workers, although it is unclear how this would solve the problem of dependence upon the state.34 The CGT also sees ILO Convention 87 as a threat to the principle of unicidade sindical, which would weaken the union movement and serve the interests of business by permitting competing unions in a given area. The CUT and the CGT agree that a reformed system of labor law must guarantee job stability in some form, guarantee the right to strike, institute a forty-hour work week, establish a realistic minimum wage, and provide for free access to adequate medical services and stricter regulation of health and safety conditions of the workplace, which are notoriously bad in Brazil.35 In September 1986, the special commission appointed by President Sarney to prepare a draft constitution presented the results of its work to the president. In that document, the articles dealing with labor for the most part reflect the proposals of the labor centrals. For instance, the draft document calls for a forty-hour week, a prohibition of unsafe labor, guarantees of job stability, the right of collective bargaining, free association of workers, union democracy, prohibition of state intervention in unions, and the recognition of workers' right to organize factory commissions.36 Also in 1986, Brazil's labor minister, Almir Pazzianotto, submitted a plan for the reform of the country's labor code based on the Principles of ILO Convention 87. Its proposals include the "de-bureaucratization" and "democratization" of the union system, the establishment of a U.S.style system of collective bargaining, and the recognition of the right to strike. While there apparently is a broad consensus for labor reform in Brazil, the extent and nature of constitutional and legal reform—not just of labor law, but of the Brazilian political system generally—will depend to a great extent on the political strength of the labor movement and the government's response to it. In the Constitutional Congress itself, there can be little doubt that the CGT enjoys a considerable advantage over the CUT. The political parties to which it is linked are well represented in the Congress, which is just the sort of forum in which the CGT's political bargaining approach is most effective. The CGT also dominates the union movement's political lobby, the Interunion Agency for Parliamentary Advice (Departamento Intersindical de Assessoria Parlem en tar, or DIAP), founded in 1983. The CGT's influence is somewhat dissipated, however, by the divisions within the PMDB itself, and between

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the PMDB and the Communist parties. While the CUT leadership is more or less clearly identified with the PT and is thus able to articulate a coherent program in the Congress, the PT has fewer representatives there. Although Lula, its principal leader, received the most votes of any federal deputy elected in November, and will no doubt be a major voice in the Congress, the PT in general fared quite poorly in the elections (held before the Cruzado Plan was scrapped). Typically, the CUT and PT have been highly critical of the constitutional project in general. Just as they rejected the legitimacy of the electoral college that "elected" Tancredo Neves in January 1985, the CUT and the PT regard the new Congress as highly unrepresentative, and have called for a "true" constitutional convention, rather than a constitution-writing Congress chosen under the rules of what is, in their view, a discredited, undemocratic system. Whatever the merits of the CUT-PT position, it is clear that the PT's meager representation in the Constitutional Congress is not a true indication of labor's political strength. If this were the case, it would be difficult to understand the vehemence with which the PT and the CUT are denounced as "subversive" and "disloyal" by much of the Brazilian press and by government ministers, and why the government security apparatus has so often resorted to provocation and intimidation in an effort to discredit them.37 According to some observers, the labor centrals have changed historical places with political parties and are now the dominant political forces on the left. One CUT official claims that the centrals are "stronger, more representative, have control over more workers, and are much more rooted in society" than the political parties.38 According to this logic, labor will have more of an influence on the Constitutional Congress exerting pressure from the outside than the number of labor's representatives in Congress would suggest. If this is the case, then a more realistic indicator of organized labor's political strength would be its ability to mobilize workers for actions like the mass demonstrations for direct elections in 1984 and the general strike of December 12, 1986. Although the strike was for the most part reported in the Brazilian press to have been a failure, a closer look reveals that despite the weaknesses in the union movement that it revealed, it was on balance a relatively successful demonstration of political strength, the implications of which have not escaped the government. The End of the Cruzado Plan and the December 1986 General Strike With the end of the Cruzado Plan and the proclamation of Cruzado Π after the November elections, the Brazilian labor movement entered a new phase marked by a notable shift in power and influence within the

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movement to the CUT. The CGT leadership, seen by some as having been compromised by its tacit support for the government during the wage-and-price freeze, joined with the CUT and eight national labor confederations in calling a one-day general strike for December 12,1986, to protest government economic policy. Although the government was willing to modify its proposals for de-indexing wages when threatened by the strike, the union leadership refused to call off the walkout—the first general strike in Brazil since 1983. The strike was only a partial success, having only limited impact in the major industrial centers of São Paulo, Rio de Janeiro, and Minas Gerais. Surprisingly, the strike was most successful in many provincial capitals, especially in the Northeast.39 The Brazilian newsweekly Senhor reported that the Ministry of Labor cited as the principal reasons for the strike's relative lack of success: (1) the inherent difficulties of organizing and coordinating a nationwide general strike in a country the size of Brazil and the lack of a historical tradition of national strikes; (2) the failure of union leadership in many areas to establish a consensus in favor of the strike among the rank and file; and (3) organizers' underestimation of the extent to which the government would act to intimidate potential strikers.40 In retrospect, it seems clear that the strike call was probably premature, as the dimensions of the developing economic crisis were not yet clearly apparent in early December. The strike was noteworthy, however, for several reasons. First, despite its apparent weaknesses, the strike demonstrated the growing strength of organized labor and its impressive potential for mobilization. In the last general strike, called by the CUT in 1983 during a period of deep recession under the government of General João Figueiredo, approximately two million workers struck, principally in the South-Central region of the country. By contrast, the government's own estimates of the December action indicate that at least ten million workers— representing at least 20 percent or more of the work force—stayed off the job.41 In addition, the strike was truly national, affecting twenty-two of twenty-three states.42 Second, the strike was the first successful example of tactical cooperation between the CUT and the CGT since their organization as rival labor centrals. While mutual suspicion still exists between the leadership of the centrals—and may even have increased in the wake of the strike—the potential for continued cooperation was demonstrated successfully. As the economic crisis deepens in 1987, with inflation worsening and the government pressured by foreign banks to adopt recessionary policies as a condition for needed loans, circumstances may well encourage further cooperation, a sort of tactical unity for the labor movement. During the Cruzado period, the CUT and the PT tended to

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be seen by many Brazilians as "bad sports"; with the return of economic crisis, though, their influence within the union movement is likely to grow. Likewise, the CGT, faced with unrest in the rank and file and from its more radical factions, is likely to continue to move toward a more militant position, even if only in response to CUT pressure. The strike also revealed weaknesses in the union movement, however. The fact that the majority of Brazilian workers did not heed the strike call was especially embarrassing to the CUT, and raises questions about the CUT's vaunted base in its affiliated unions' rank and file. For example, the strike failed in the ABC region of São Paulo, the heartland of CUT unionism, while in Salvador, where PC do Β activists in the CGT are prominent in the union movement, the strike was a near total success. In addition, strike leaders' apparent overreliance on halting bus service to ensure a successful strike reflects a failure on the part of union leaders to convince the rank and file to participate. It is ironic that the CUT, which prides itself on having its pés no chão (feet on the ground, i.e., its base in the rank and file), should appear to be guilty of the old populist sin of cupulismo (bossism). The strike seemed to indicate a relative lack of "political consciousness" among workers. As was pointed out in a 1986 article in Senhor, it's easier to mobilize a thousand favelados (slum-dwellers) to demand that a street be paved than to mobilize them for a general strike.43 And for most Brazilian workers, it seems, politics is an "ethereal game of gentlemen in ties."44 According to one CGT leader quoted in the same article, "'deep down, what the worker wants isn't socialism or a regime which affords him a greater participation in power, but rather a car, his own house, and education for his kids.'" The article continues: "Perhaps it goes without saying that only with greater participation in power will the worker have, some day, a car, his own house, and education for his kids."45 The lack of political consciousness might also help to explain the labor movement's relative lack of electoral success. A poll taken in September 1986 at several automobile factories in the ABC region showed workers in some of the factories favoring Paulo Maluf or Antônio Ermírio, both conservative candidates, for the governorship of São Paulo.46 The November election results have been seen as evidence that the PT, increasingly riven by left-wing political sectarianism, may be losing touch with its ostensible base of support in the working class. It must be remembered, though, that the Cruzado Plan was still in effect at election time in November, and the general strike was held so close on the heels of the Cruzado II decree that the full impact of the impending economic crisis may not yet have been foreseen by most workers. The renewed fear of economic disaster, the disunity and drift

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that many see in the government, and the national debate over a new constitution—especially with Lula in Congress—will no doubt do much to raise political consciousness in the labor movement. Continuing labor militancy and the government reaction to it in 1987, even more than the labor law reforms of the new constitution, will determine the role of organized labor in the Brazil of the future. Government Labor Policy in the Nova República As of early 1987, at least three tendencies in the Sarney government's labor policy could be discerned. At least until March, the dominant trend was represented by Labor Minister Almir Pazzianotto, a former labor lawyer who represented the São Bernardo metalworkers during the epochal strikes at the turn of the decade. Pazzianotto was named to his post by President-elect Tancredo Neves during the transition period before the inauguration of the current government in March 1985. Pazzianotto has been responsible for the more open policy toward labor that has distinguished the Sarney government from its predecessors. In the first months of the Nova República, Pazzianotto moved quickly to establish his bona fides with labor with a series of reform proposals, including the quasi-legalization of the workers' centrals.47 Although viewed with suspicion by some unionists (especially in the CUT) for participating in what they see as a hostile and illegitimate government, he is generally regarded as a friend of the new unionism. After the collapse of the Cruzado Plan, Pazzianotto emerged as a key figure in the government, the point man in negotiations with labor leaders in an attempt to formulate a social pact. Within the government, Pazzianotto represents the most conciliatory tendency. For example, after the collapse of the Cruzado Plan, he argued for the retention of a wage "trigger," which would peg wage levels to inflation. The second tendency was represented by then-Finance Minister Dilson Funaro. Funaro favored an end to the gatilho, which he regarded as inflationary, and in general would like to see government labor policy subordinated to broader economic policy. This position is the more familiar one in Brazil, and is likely to gain renewed credibility as pressure from foreign lenders increases. Pazzianotto, on the other hand, insisted that his ministry should be responsible for government wage policy. Pazzianotto used the same logic in refusing to negotiate union demands for a debt moratorium, claiming that finance policy is Funaro's business, just as wage policy is Pazzianotto's. This staking out of new turf by the labor minister, and its acceptance by President Sarney, can be seen to represent a recognition by the president and his closest advisers that any decision on broad economic policy must take the independent labor

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movement into account. The third tendency in the government, best described, perhaps, as a traditional "law and order" approach to labor policy, was represented by Justice Minister Paulo Brossard and the military ministers. Brossard has repeatedly denounced union leaders, especially the CUT, as subversive, disloyal, and antidemocratic and blamed civil unrest on the CUT, although his charges have been shown to be largely groundless.48 The military, including the National Information Service (Serviço Nacional das Informações, or SNI), has repeatedly used provocative tactics to discredit the CUT and the PT, and during the general strike the army deployed troops and heavy armor—most notably in Rio de Janeiro—to intimidate strikers and potential strikers. It was reported at the time that the "uniformed ministers" viewed the December strike as a test of strength, and that the hard-line element in the military was strengthened by its apparent success in containing the strike.49 This view was confirmed when the military intervened in the March 1987 maritime workers' strike and took "preventive action" in the same month to intimidate petroleum workers who were threatening to strike. According to the Brazilian press, these decisions were made by conservative elements—including military men—within the government without the participation of Pazzianotto.50 Conclusions: Current Trends and Possible Futures In early 1987, President Sarney appeared to be backing Pazzianotto in his efforts to come to an agreement with labor. However, Pazzianotto came under increasing criticism in the conservative press for appearing to coddle labor leaders, and his rivals in the government grew increasingly bold in their attempts to discredit him.51 In any case, there appeared to be little chance of the unions' accepting a social pact during a period of inflation and economic instability, so labor unrest was expected to grow. As there appeared to be little chance of Pazzianotto negotiating a broad agreement with labor—or at least with the CGT—pressure from the economics ministers and the military for a unilaterally decreed social pact was expected to increase. More important, the constitution is not likely to disturb the basic distribution of power in the Brazilian political system. The Congress that wrote the new document is a mostly moderate-to-conservative group whose role will most likely be to ratify and legitimate the de facto but restricted liberalization of the Nova República. The military, for example, will in all likelihood retain their historic role as "defenders of the constitutional order." It is doubtful, though, whether a new constitution written by anything less than a constituinte de verdade (a sov-

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ereign constitutional assembly, rather than a constitution-writing Congress) will resolve the crisis of legitimacy faced by President Sarney—an unelected president who came to power under the rules established by his military predecessors—and his government. The PT and the CUT have been among the loudest and most persistent gainsayers of the government's legitimacy, and since the end of the Cruzado Plan, they have been joined by others. It would be a mistake, then, to overestimate the importance of changes in legal structure and status. In a sense, constitutional change of the labor system will simply ratify de jure what is already recognized de facto: that a militant and independent unionism has become a political reality in Brazil. As an indicator of democratization, the acceptance by the government and the privileged classes of this reality in practice is more important than changes in legal status of organized labor, and this acceptance will depend on labor's continued ability to mobilize the working class. Pazzianotto, when he was the lawyer for the São Bernardo metalworkers, used to say that, in Brazil, there are no such things as legal or illegal strikes,· rather, there are victorious or defeated ones.52 Now, as then, it is only through the exercise of its power that labor will make a place for itself at the Brazilian table. More fundamentally, independent unionism represents a break with traditional Brazilian political culture, in as much as the recognition of its legitimacy is also a recognition of the political equality of workers themselves.53 A society of great economic, social, and cultural dynamism, Brazil in many ways is still constrained by its heritage of profound social and economic inequality, paternalistic social relations, and systemic class violence. The new union movement challenges this heritage, and it is perhaps in this context that the new unionism represents the greatest potential contribution to the democratization of Brazilian society. Notes 1. Senhor, February 3, 1987, p. 41. 2. Ibid., November 4, 1986. This percentage is comparable to that of Ecuador, Peru, or Panama, according to Senhor. Argentina's is 30-40 percent. 3. Margaret E. Keck, "The 'New Unionism' in the Brazilian Transition," in Alfred Stepan, ed., Democratizing Brazil (New York: Oxford University Press, 1989). 4. Cited in John Humphrey, Capitalist Con trol and Workers ' Struggle in the Brazilian Auto Industry (Princeton: Princeton University Press, 1982), p. 14. 5. Pelago is a slang term for a co-opted union official. 6. Humphrey, CapitaUst Control and Workers' Struggle, p. 15. 7. For a brief discussion of the historical debate as to the reasons for the failure of labor leaders to push for autonomy at this time, see Humphrey,

Organized Labor in Brazil

279

Capitalist Control and Workers' Struggle, pp. 18-19. On the role of the PCB in the origins of sindicalismo populista, see F. C. Weffort as cited in Coletivo Edgard Leuenroth, Movimento Operário Brasileiro 1900/1979 (Belo Horizonte: Ed. Vega, 1980), p. 49. 8. Kenneth Paul Erickson, The Brazilian Corporative State and WorkingClass Politics (Berkeley: University of California Press, 1977), pp. 6-7. 9. Humphrey, Capitalist Control and Workers' Struggle, p. 21. 10. Ibid., p. 23. 11. Maria Helena Moreira Alves, State and Opposition in Military Brazil (Austin: University of Texas Press, 1985), pp. 45-47. 12. Humphrey, Capitalist Control and Workers' Struggle, pp. 46, 47. 13. Erickson, The Brazilian Corporative State, p. 178. 14. Francisco C. Weffort, Participações e Confhto Industrial: Contagem e Osasco 1968 (São Paulo: Cadernos CEBRAP, no. 5, 1972). 15. Erickson, The Brazilian Corporative State, pp. 170-171, and Humphrey, Capitalist Control and Workers' Struggle, p. 25. 16. Alves, State and Opposition, p. 12. 17. Ibid., pp. 95-100. The AI-5 closed Congress and gave the military the power to govern by decree, to close Congress and state and municipal legislatures, to remove elected and other government officials (including judges) from office, to try political prisoners in military courts, and so on: in short, to govern arbitrarily. 18. Erickson, The Brazilian Corporative State, p. 171. 19. Humphrey, Capitalist Control and Workers' Struggle, pp. 26-29. 20. Ibid., p. 160-175. 21. Alves, State and Opposition, p. 193, and Humphrey, Capitalist Control and Workers' Struggle, p. 191. 22. Humphrey, Capitalist Control and Workers' Struggle, p. 200. 23. Ibid., pp. 228-233. See also Hermínia Tavares de Almeida, "Ό sindicato no Brasil: novos problemas, velhas estruturas," Debate e Crítica 6 (São Paulo, July 1975), and Annez Andraus Troyano, Estado e sindicalismo (São Paulo: Símbolo, 1978). 24. The Communist party of Brazil (Partido Comunisto do Brasil, or PC do B) split from the Moscow-oriented PCB in the early 1960s. Originally Maoist, it now follows an Albanian line. Both parties are now legal. The October 8 Revolutionary Movement (Movimento Revolucionário 8 de Outubro, or MR-8) began as an urban guerrilla group, and has since adopted a "class alliance" strategy and generally supports the Nova República. It has remained a faction within the PMDB. Each of these groups continues to identify with the Unidade Sindical position, now embodied in the CGT. 25. Keck, "The 'New Unionism.'" 26. Retrato do Brasil (São Paulo: Ed. Política, 1984), pp. 271-272. Arelatively minor workers' central, the União Sindical Independente (USI) was organized in 1986. It will not be considered in this study. 27. Alves, State and Opposition, pp. 239-248. 28. Retrato do Brasil, p. 106. 29. Debate Sindical 1 (May 1986), Centro de Estudos Sindicais, São Paulo, p. 13. 30. Veja, December 25, 1985, p. 17, and December 17, 1986, p. 36.

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31. Stanley A. Gacek, interview with author, January 6, 1987, Washington, D.C. 32. A wave of strikes in September 1986 met with considerably less success than those of the previous September. 33. Magnus Farkatt and Altamiro Borges, "Uma proposta para democratizar a estrutura sindical brasileira," Debate Sindical 2 (September, 1986), pp. 4—9. 34. Ibid., p. 9. 35. Senhor, November 4, 1986, p. 50. 36. Folha de São Paulo, "Guia da constituinte," special ed., September 19, 1986. 37. For examples of typical denunciations of the CUT and the PT, see Veja, "Carta ao leitor, " December 17,1986, p. 35; Folha de São Paulo, "'Quinta-coluna' ameaça cruzado, adverte Sarney," September 10, 1986, p. 1. The Brazilian press has documented several cases of provocation and intimidation of labor over the past several years. For a recent example, see the discussion of the Leme case in Senhor, November 4, 1986, p. 30. 38. Senhor, December 16, 1986, p. 38. 39. Veja, December 17, 1986, pp. 40-41. 40. Senhor, December 16, 1986, p. 34. 41. Ibid., December 23, 1986, p. 27. 42. Veja, December 17, 1986, p. 37. 43. Senhor, December 16, 1986, p. 38. 44. Ibid. 45. Ibid. 46. Ibid., September 23, 1986, p. 29. 47. Keck, "The 'New Unionism.'" 48. Senhor, February 10, 1987. 49. Ibid., December 13, 1986. 50. Ibid., March 31, 1987. 51. Ibid., February 10, 1987. 52. Ibid., January 13, 1987, p. 33. 53. Keck, "The 'New Unionism.'"

13· Conclusion· Public Policy and Political Transition: A New Direction for Brazil? Robert H. Wilson The study of policy-making leads invariably to questions of political economy,· policy decisions can be judged in terms of "technical rationality" but, as this volume so clearly shows, these decisions cannot be understood except in the broader context of power and influence in the policymaking process. In a dialectic fashion, though, patterns of power and influence evolve due both to policy decisions and social change. From economic, social, and political change, new centers of power and influence emerge, partially displacing the old centers and producing governmental actions more consistent with their interests. The problem faced by the Brazilian military regime was that the political processes and governing institutions through which it exercised control were unable to address the policy dilemmas of an increasingly complex society. We found that policies pursued by the military contributed to their own undoing. The military has been relinquishing political control, but has not, as David Fleischer noted in the "Pact of Elites," abandoned its self-defined core values. The broader problem facing the country is whether or not political institutions are sufficiently responsive and flexible to assimilate and respond to the societal demands that went unattended during the military regime or whether the political order established during the regime will survive largely intact and prosper in a democratic regime. The policy directions established under the military have changed only modestly in the Nova República. Does this reflect the continuation of the preceding political order or is it explained by other factors in the policy-making environment? In this volume, we have attempted to address this question through the examination of a number of institutional and policy issues. Though the principal focus has been the evolution of policy during the present transition period, it was necessary to place these issues in a historical perspective. The increased complexity in the current policy agenda is derived from the interplay of long-term economic and demographic forces and past policy decisions. In this concluding chapter, we will try

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to make explicit a number of themes that run throughout these papers. First, we will look at the agenda-setting process and the way in which constraints on policy-making are created through the interaction of the social, economic, and political conditions. We then reflect on specific policy choices of the military government and their subsequent impact on the policy-making environment. We then examine the institutional/ political response to the new policy environment of political transition. The change of one political order to another in Brazilian history is premised on shifts in political power, as discussed by Richard Graham. Political power frequently follows economic power and, consequently, shifts of political power may occur as an economy evolves. The Vargas period of the 1930s was the political expression of a vibrant urban, industrial sector. The economic policy of this period principally benefited the manufacturing sector, though rural interests were not ignored. The social policy of the period, especially labor policy, had a political objective of ensuring the support of labor for the regime. While the policies served these purposes well for a period, Vargas was unable to maintain his coalition of political forces following World War II. This Vargas period is relevant to current policy studies for several reasons. Political power was transferred from a rural oligarchy to a newly emerging industrial sector based in São Paulo, thus demonstrating our premise concerning changes in the political order. In addition, as we have seen in this volume, many of the contemporary policy issues and political institutions can clearly and directly be traced to the Vargas era. Does the current transition represent a change of political order? Certainly the electoral process has become more open and the new constitution promises change, but have policy-making and policy choice changed significantly? It is reasonable to assume that agenda setting and policy-making during the military regime were under relatively few constraints. While the regime had to maintain a certain level of legitimacy, its power to repress dissent meant that many groups in the society were without influence. Though the policies of the regime, particularly during the early 1970s, lead to substantial economic growth, social policy of the period, as argued by Faria and Castro, had the effect of aggravating social inequalities. As noted by Baer, and Clements and McClain, the ability of the regime to repress wage increases and to ignore social issues was not, however, without limits. The Geisel adminstration adopted a policy of rapid economic growth, in part for political reasons, even though the policy meant incurring substantial debt and increasing inflation. While the economic decompression of the late 1970s and modest movement to democracy did not satisfy much of the Brazilian population, the military regime chose rapid growth policies with an eye toward political control. It is equally clear that the economic policy of

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this period contributed significantly to the continuing debt crisis of the 1980s and undermined the legitimacy of the military regime. To date, the transition has brought few major reversals of the past policies, at least with respect to the policies considered here. Though fundamental decisions of policy direction must await the resolution of constitutional and political issues, this volume has produced ample evidence that policy reversals are not likely to be forthcoming in the near future. The limitations on agenda setting and policy decisions are of several types. First, a number of important and significant new actors are now part of the policy environment, and these actors will promote positions consistent with their interests. Hence, the policy environment is much more complex. To give an example, there is an emerging advanced technology industry in Brazil with participation of multinationals, state enterprise, national industrialists, and the military. Other nations, especially the United States, are also actors. These groups have different interests and varying degrees of influence. Policy-making in an environment with many actors and conflicting interests is extremely difficult, and though policies may be elaborated that do not produce zerosum games, any policy choice will have winners and losers. New actors have appeared in the agenda-setting arena for many reasons. A repressive labor structure and labor laws contributed to the formation of a militant, autonomous labor movement, as described by Swavely. The political transition is producing less-restrictive labor laws, and one can expect new labor organizations representing other classes of workers, such as domestics, to emerge. The interests of currently unorganized workers may differ considerably from the interests of workers in the industrial sectors. To take another example, small businesses represent a sizable share of the economy and a potentially potent electoral force. These businesses have benefited little from economic policy under the military regime, and one should expect this sector to exercise influence in policy-making. The proliferation of such organizations and associations is to be expected and is even desirable under a democratic regime. This brings, however, more actors to the policy arena, thus introducing new demands on political institutions and complicating the decision-making process. The policies of the military regime promoted or facilitated the growth of governmental institutions, which have themselves, along with their constituencies, become very important actors in the policy arena. State enterprises are tremendously powerful and quite, though not entirely, independent. National bureaucracies, such as those for health, welfare, and social security, have quite powerful allies, according to Atwood and Faria and Castro, and will resist changes in current policies. In these cases, past policies and the resulting institutions have created new

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centers of influence, with their own unique interests, inside the governmental apparatus itself. This point is particularly important given the centralization of policy-making during the military regime in the executive branch; the policy-making function and capability of the Congress have atrophied. The papers in this volume describe a complex policy-making environment. Many new and influential actors have emerged during the last twenty years. Some have appeared as a result of the electoral requirements of redemocratization, and some are the product of a growing and increasingly diversified and sophisticated economy. Yet others are the result of policies of the military regime itself. The emergence of new actors should not be surprising; rather, it verifies the fact that policymaking in complex democratic societies places extraordinary demands on political institutions, which must assimilate and respond to numerous actors and their demands. In such an environment, major policy reversals are unlikely, even under a democratic regime. An interesting perspective on the effectiveness of a number of policies of the military regime and the legacy of these actions for the transition can be derived from the papers in this volume. Frequently, one finds that past policies have created conditions that later render the policies ineffective. In some instances, such as favela eradication discussed by Ramsdell, policies were simply founded on incorrect analyses and made problems worse. But in other instances, policies may have been successful, at least in terms of their original objectives, yet their broader, long-term effect was to undermine the effectiveness of the policy. This type of policy dilemma is seen in the Clements and McClain chapter on export policy. The Geisel adminstration adopted a policy of economic growth through import substitution policy. The mounting foreign debt of the 1970s, required to ensure growth, also required the growth of exports. This policy set the stage for debt crisis in the 1980s. Although the austerity measures, sanctioned by the IMF, of the early 1980s were politically acceptable because of the military's promise to "return to the barracks, " the resulting recession consolidated the political opposition and the military was forced to exit early from electoral politics. Today, policies that would satisfy the international community, such as improving export performance, opening internal markets, and reducing public spending, are in substantial conflict with policies that respond to internal pressures for growth of the domestic economy and investments in social infrastructure. The Geisel administration adopted the growth policy for political reasons, as noted above. This policy was intended to raise the standard of living in the country, and this, presumably, would secure broad public support for the regime. However, the wage and social policies of this

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period exacerbated the already striking social inequalities and undermined the political legitimacy of the military regime. The enormous public debt incurred during the 1970s and early 1980s now places severe fiscal restrictions on government spending and forces the indefinite postponement of actions that could ameliorate the living conditions of the country's poor. Yet another example of the dilemmas produced by policy choices of the military is examined by Anne Hall. Under the import substitution policy, industry concentrated in large cities, particularly São Paulo. The resulting migration and population growth accelerated the growth of large cities and created an urban underclass. To the extent that the military regime dealt with these problems, it produced an urban policy based on what might be called technocratic efficiency. While these technocratic solutions can be viewed as successful in a limited sense, the basic problems of the urban poor were unattended. This, in combination with ineffective national social policies, places enormous problems before local governments. The urban poor, and many other groups not heard from during the military regime, are bringing their demands to the political process. What can we learn from this volume about the resiliency of institutions and the ability of the political processes to incorporate these demands? We have seen that even the military regime was forced, at times, to respond to the demands of certain constituencies, including the military itself. Even so, a relatively narrow range of interests was effectively expressed in policy-making. The policy-making process under the military regime was centralized in the executive branch in Brasilia. Though local and state governments were never strong, according to Lewandowski, under the military regime power was even further concentrated in the federal executive branch to the detriment of state and local government and the Congress. Consequently, much of the capability of the governmental apparatus to respond to societal demands atrophied during the twenty-year military rule. Although electoral politics may rejuvenate local and state governments, an equally likely scenario is that old patterns of patronage may emerge. These papers offer little hope that the former will occur. The forces for continuation of past policies are strong. Economic plans continue to be presented by presidential decree. The military appears to be successfully protecting its core values. In addition, if one accepts Congress as a proxy for the national will, the governing party, PMDB, is looking less and less like a party with a policy agenda distinct from that of the past. Fleischer found that a significant number of the PMDB congressmen were former members of the military's government party, and, in any event, the Congress by no means represents a socioeconomic

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cross section of the country. Although there are more actors in the policy environment, the cast of policymakers has not changed significantly, suggesting that the redemocratization process has not yet produced a change in the political order of the country. These papers, however, have identified other factors that contribute to the continuation of the policy direction established in the past. Policy-making in Brazil is becoming increasingly complex due to the emergence of new and powerful political actors and due to the lasting effects of past policy decisions. In addition, the policy-making function of state and local governments and Congress has atrophied. Local and state governments, in particular, are severely constrained by their fiscal dependency on the federal government. The political transition and new constitution may produce a change in the power structure and the policy-making apparatus. Even so, the prospects for a more socially responsive policy direction are formidable.

Index

Abertura, 16-18, 183, 211, 215-216, 267 AEA. See Association of Amazonian Entrepreneurs Agrarian reform, 109-110 Agricultural workers, 11, 19, 105106, 109, 265, 269. See also Peasant farmers in Amazon region Agricultural Workers' Federation. See National Confederaton of Rural Workers Agriculture, 19, 47, 96-97, 103-109, 114-115 Agrópolis, 101 Agrovilas, 101 AI-5 (Fifth Institutional Act), 211, 245, 279 AIS. See Integrated Health Actions Almeida, José Américo de, 220 Altamira, 101 Alves, Rodrigues, 167 Amazon Development Agency, 98 Amazon region: and business interests, 101-106; colonization procedure in, 100-101; colonization programs from 1964-1973, 97-101; continuing land conflict in, 106-107; current initiatives concerning, 107-110; evaluation of policy initiatives, 110-114; highway programs in, 97, 98100; image of, 94; motivations for occupation and development, 96-97; National Integra-

tion Plan, 98-99; Operation Amazon, 97-98; peasant farmers in, 96-107, 108, 109, 114-115; Polamazonia Program, 104-106; policy from 1975-1980, 103107; policy questions concerning, 94-96; shifts in policy from 1973-1974, 101-103; TransAmazon Highway, 98, 99-100 Anjinho-xiita, 245 ARENA (National Renovating Alliance), 210-215, 225, 239, 242, 243 Argentina, 228, 250 Arinos, Afonso, 251, 255 Arraes, Miguel, 14 Arrocho salarial, 264 Assistencia Medica e Previdencia Social. See National Institute of Medical Assistance and Social Security Associação dos Empresarios da Amazonia. See Association of Amazonian Entrepreneurs Association of Amazonian Entrepreneurs (AEA), 102 Austerity program, 49-53, 59-60 Auto industry, 265-267, 276 Autonomy, 28 Autoritarismo. See Military regimes Backheuser, Evernardo, 167 Bahia, 205n.28, 228 Banco Nacional de Habitação. See National Housing Bank

288 Banco Sul Brasileiro bankruptcy case, 224 Bank of Brazil, 84 Banks and banking: Banco Sul Brasileiro bankruptcy case, 224; Bank of Brazil, 84; Central Bank, 252, 258n.22; international banks, 25n.27, 45-46, 50, 60n.8; International Monetary Fund, 50-51, 52, 60n.8, 64, 7476, 77; National Economic and Social Development Bank, 44; National Housing Bank, 130, 168, 169, 175, 176, 179, 193194, 199, 201; World Bank, 84, 90, 125, 139n.4, 160, 200, 201 Barbosa, Ruy, 30 Base Communities, 20, 186 Belém, 197 Belém-Brasília highway, 97, 98 Belo Horizonte, 197, 206n.33, 265 Bernet, Jean, 85 Bionic senators, 28, 218 BNDES. See National Economic and Social Development Bank BNH. See National Housing Bank Boa Esperança, 202-204 Bourne, Richard, 110 BPR (Revolutionary Parliamentary Bloc), 210 Branco, Castelo, 193 Branford, Sue, 113 Bras de Pina, 174-179 Brazil: agenda of the Nova República, 122-125, 129-130; autoritarismo government of, 7, 15-18, 20-21; balance of power between presidential and legislative branches, 250-254; civilian president of, 7, 18; colonial Brazil, 189-190; compared with U.S. polity, 2; coronelismo government of, 710, 18-19; direct election for president, 7, 18; as empire, 26; federalism in, 30-37, 203; as federative republic, 26-27; First Republic, 190; independence of,

Index 26; local government in, 26-27; policy perspective on, 1-4; populism in, 7, 19-20, 189-192, 203; relations with U.S., 13, 14, 17, 21; stages of centralization and decentralization in, 30-32; transition from authoritarian to democratic government, 1, 3-4, 122-123, 135-136, 210, 250256, 281-286. See also Amazon region; Economic policy; Housing policy,· Social policy; and names of specific presidents Brazilian Communist party. See PCB Brazilian Company of Urban Transports (EBTU), 201 Brazilian Democratic Movement. See MDB Brazilian Expeditionary Force (FEB), 13 Brazilian Group Medical Association, 158 Brazilian Hospital Federation, 158 Brazilian Institute of Agrarian Reform (IBRA), 100 Brazilian Legion of Assistance (LBA), 128 Brazilian Medical Association, 158 Brazilian Municipalist party. See PMB Brazilian Rural Extension Service (EMBRATER), 258n.24 Brazilian Socialist party. See PSB Bresser Pereira, Luiz Carlos, 57-58 Bresser Plan, 57-58 British colonies, 27, 28 Brizóla, Leonel, 215, 220, 251, 257η. 11 Brossard, Paulo, 277 Bunker, Stephen, 102, 111 Business: Amazon region and, 101— 106; large firms and exports, 7984, 90; multinational firms and exports, 84-89, 90; multinationals, 20-21, 25n.27, 62, 283; privatization of state-owned

Index companies, 20 CACEX, 84 Caixa Econômica Federal, 130 Caixas de Aposentadorias e Pensões. See Retirement and Pension Funds Calmon Amendment, 126, 129 Campello de Souza, M. do Carmo, 135 Campos, Roberto, 64 CAPs. See Retirement and Pension Funds Cardoso, Fernando H., 224, 225, 245, 253 Castelo Branco, Humberto, 14, 17 Catacumba, 172-174 Catholic church, 20, 105, 106, 167, 183, 184,203,267 Cattle ranching, 96, 103, 106 Caudillos, 16 Ceará, 222 Center for Union Studies (CES), 271, 272 Central Bank, 252, 258n.22 Central Geral dos Trabalhadores. See CGT Central Unica dos Trabalhadores. See CUT Centrão, 250, 251-252, 253 Centro de Estudos Sindicais. See Center for Union Studies CEPAL, 78,81-84,86 CES. See Center for Union Studies CGT (General Workers' Central), 260, 263, 264, 268-275, 279n.24 Chaves, Aureliano, 220, 221 Child health care. See Maternalchild health care CHISAM. See Coordination of Social Interest Housing of Metropolitan Rio Christian Democratic party. See PDC Cidade de Deus, 173 Cintra, Antônio Octavio, 193 Cities. See Municipal government; Urban policy

289 Clientelismo, 125, 130, 131 CLT. See Consolidation of the Labor Laws CNDU. See National Council of Urban Development CNPU. See National Commission of Metropolitan Regions and Urban Policy CNTl. See National Confederation of Workers in Industry CODESCO. See Company for Community Development COHAB. See Popular Housing Company Cold war, 15-16 Collor de Mello, Fernando, 18, 20, 137-138, 252, 255-256 Colonial Brazil, 189-190 Colonization of Amazon. See Amazon region Comissão Nacional de Regiões Metropolitanas e Política Urbana. See National Commission of Metropolitan Regions and Urban Policy Comissão Pastoral da Terra. See Land Commission Commission for the Government Action Plan, 124 Communist parties, 13, 20, 167, 228-229, 239, 262-263, 268, 273, 279n.24 Communist party of Brazil. See PC do Β Companhia para Habitação Popular. See Popular Housing Company Companhia para o Desenvolvimento das Comunidades. See Company for Community Development Company for Community Development (CODESCO), 166, 169, 171, 174-179 Conama. See National Environmental Council Concessão de Uso. See Concession of Use Law Concession of Use Law, 183

290 CONCLAT. See Working Class Conference Confederação Nacional dos Trabalhadores na Agricultura. See National Confederation of Rural Workers Confederação Nacional dos Trabalhadores na Indústria. See National Confederation of Workers in Industry Conferéncia das Classes Trabalhadores. See Working Class Conference Congress: during abertura period, 211, 215; battle for institutional political power, 250-254; bionic senators in, 28, 218; convocation of Constituent Assembly, 229; Democratic Alliance in, 222-225; election of 1982, 216-219; election of 1986, 226, 228-229; during military regimes, 210-211, 284; traditional nature of, 285-286; transition from 1983-1985, 220222 Conniff, Michael, 189, 190 Conselho de Segurança Nacional. See National Security Council Conselho Nacional de Desenvolvimento Urbano. See National Council of Urban Development Conselho Nacional de Planejamento de Habitação Popular. See National Council of Planning for Popular Housing Conselho Nacional de Política Urbana. See National Council of Urban Policy Conselho Nacional do Meio Ambiente. See National Environmental Council Consolidação das Leis do Trabalho. See Consolidation of the Labor Laws Consolidation of the Labor Laws (CLT), 261-263, 264

Index Constituent Assembly (1946), 229230,257n. 14 Constituent Assembly (1987): assembly operations and drafting, 244—249; committees and subcommittees of, 246, 247-249; convocation of, 230231; deliberations of, 247-249; internal rules of, 245, 247; minority representation in, 243244; occupations of members of, 233, 234, 239-240; political careers of members of, 237, 242; political parties in, 228, 229, 231-244; purpose of, 250; rules battles of, 245, 247, 249; university training of members of, 236, 241-242 Constitutions: constitution of 1934, 31, 257n.l4; constitution of 1937,31,229,230, 257n.l4; constitution of 1946,31, 146; constitution of 1967, 32, 34; constitution of 1969, 32, 33-34; constitution of 1988, 33-37, 59, 138, 210, 254-256, 257n.21, 258n.22, 277-278; of federal states, 27-28; first Republican Constitution of 1891, 26, 30; state constitutions, 30-31 CONTAG. See National Confederation of Rural Workers Contribuição sindical, 261 Cooperative federalism, 29 Coordenação de Habitação de Interesse Social. See Coordination of Social Interest Housing of Metropolitan Rio Coordination of Social Interest Housing of Metropolitan Rio (CMSAM), 168, 169, 171, 172174, 175, 179 Copurb. See National Council of Urban Policy Coronéis, 8, 16 Coronelismo government of Brazil, 7-10, 18-19 Costa e Silva, General, 17, 194

Index Council for Social Development, 157-158 Covas, Mário, 253 CPM/BIRD. See Special Project of Middle-Sized Cities CPM/Normal. See Program of Support for Capitals and Cities of Medium Size CPT. See Pastoral Land Commission Crédito premio, 66, 68, 73, 74 Cruzado Plan, 26, 53-56, 58, 76, 77, 128, 136-137, 160, 225, 228, 250, 259-260, 268, 270, 273, 275, 276, 278 Cruzado Plan Π, 56, 270, 273, 275 Cruzeiro devaluation. See Economic policy CSN. See National Security Council Cuibá-Santarém Highway, 98 Curitiba, 197 CUT (Single Workers' Central), 260, 268-278 Dallari, Dalmo de Abreu, 28, 30 Dante de Oliveira amendment, 220221 Da Silva, Luís Ignácio (Lula), 19, 21, 138, 266-267, 273, 276 Death squads, 17 Debt, 44-46, 47, 58, 74-76, 137, 284, 285 Democratic Alliance, 136, 137, 221, 222-225, 227, 228, 229, 230231,250 Democratic Center, 250 Democratic Labor party. See PDT Departamento Intersindical de Assessoria Parlementar. See Interunion Agency for Parliamentary Advice Departamento Nacional de Endemias Rurais. See National Department of Rural Endemic Diseases Departamento Nacionalde Saúde Pública. See National Department of Public Health Devaluation of cruzeiro. See

291 Economic policy DIAP. See Interunion Agency for Parliamentary Advice Diseases. See Health policy Disidió coletivo, 261 Distensão, 266 DNER. See National Department of Rural Endemic Diseases Dutra, Eurico Gaspar, 13, 14, 190191,229, 230, 257n.l4, 262 EBTU. See Brazilian Company of Urban Transports Economic policy: austerity program, 49-53, 59-60; balance of payments from 1971-1986, 4243; consumer prices and, 56, 57; devaluation of cruzeiro, 47-48, 49, 73; devaluation of the cruzado, 77-, under Figueiredo, 46-53, 59; foreign debt and, 4446, 47, 58, 74, 137, 284, 285; foreign investments and, 11, 59; under Geisel, 41-46, 59, 282, 284-285; income distribution in Brazil, 46, 51; inflation and, 45, 46, 47, 49, 53, 57, 77; under Medici, 41, 44; under military regimes, 63-69, 282-285; of Nova República, 122-125; oil crisis and, 41, 47, 69; under Samey, 53-59, 60; Second National Development Plan and, 44, 69-70; tariff reform, 64. See also Exports; Imports; Labor policy Ecuador, 278n.2 Education, 36, 129, 133 Elections: direct elections, 7, 18, 220-221, 229-230; election of 1978, 211, 213, 214; election of 1982,211,214,216-219; election of 1986, 225, 227-229, 256n.l0; majority and proportional elections from 19661982, 212; during military regimes, 210-219; transition from 1983-1985, 220-222

292 Electoral college, 217-219, 222 EMBRATER. See Brazilian Rural Extension Service Emergency assistance, 125, 126, 129, 136 EMGs. See Group medical companies Employment. See Labor force Empreguismo, 193 Empresa Brasileira dos Transportes Urbanos. See Brazilian Company of Urban Transports Empresas médicas de grupo. See Group medical companies Ermirio, Antonio, 275 Ernesto, Pedro, 11 Escola Superior de Guerra (ESG), 1415, 17 ESG. See Escola Superior de Guerra Espirito Santo, 158, 202, 219 Estado Novo, 3 1 , 147, 148, 167, 260, 261-262 Evans, Peter, 64 Executive Group for the AraguaiaTocantins Region (GETAT), 105-106, 108 Exports: during early twentieth century, 9; elimination of export subsidies, 47, 48, 89; growth of, 53, 62, 66, 67, 70-71, 76; incentive programs for, 47, 66, 68-70, 71, 72, 73, 89-90; large firms and, 79-84, 90; under military regimes, 63-69, 284; multinational firms and, 84-89, 90; policy and growth during 1980s, 71-77; policy implications of, 89-90; promotion program for, 62; tariff rates and, 64; trade liberalization and, 78-79, 90. See also Imports Extraordinary Ministry for Land Affairs, 106-107 FAFEG. See Federation of Favela Associations in Guanabara Faria, Vilmar, 205n.23, 206n.33

Index Favela: as community, 165-166; definition of, 164; eradication and relocation policy, 164, 165, 167, 168-169, 171, 172-174, 182; factors at the city-regional level, 169-172; historical view of, 167-169; impact of redemocratization on, 181-184; neighborhood associations in, 169, 171, 182-184; as parasite, 165; perceptions of, 165-167; policy of "no policy" toward, 164; in Rio de Janeiro, 169-171, 172-179; in São Paulo, 170, 171-172; self-help housing in São Paulo, 179-181; as urban blight, 166-167; urbanization of, 164, 166, 167, 168, 171, 174179, 182-183 FDTU. See Fund for the Development of Urban Transportation FEB. See Brazilian Expeditionary Force Federação das Associações de Moradores no Guanabara. See Federation of Favela Association in Guanabara Federal Housing System, 193 Federal Service of Housing and Urban Development (Serfhau), 193-194, 205n.26 Federalism: in Brazil, 26-27, 30-37, 203; characteristics of, 27-28; and Constitution of 1988, 3 3 37; cooperative federalism, 29; dual federalism, 29; new federalism, 29-30; in United States, 26, 27, 28-30, 33 Federation of Favela Associations in Guanabara (FAFEG), 169, 171, 172, 175 Ferraz, Figueiredo, 171 FGTS. See Time-in-Service Guarantee Fund FIESP. See São Paulo Federation of Industries Figueiredo, João, 17, 18, 46-53, 59,

Index 136, 183, 215, 216, 220, 250, 267, 274 Filho, Manoel Gonçalves Ferreira, 33 Financial autonomy, 28 FINSOCIAL. See Fund for Social Investment First National Congress of the Landless, 109 FNDU. See National Fund for Urban Development Food and nutrition program (PRONAN), 157, 158 Food and nutrition programs, 129, 133, 143, 155 Foreign debt. See Debt Foreign investments, 11, 59 Fortaleza, 197 Foundation of Public Health Services (FSESP), 143 Fragelli, José, 224 France, 36 Freitas, Chagas, 179 FSESP. See Foundation of Public Health Services FUNAI, 108 Funaro, Dilson, 276 Fund for Social Investment (FINSOCIAL), 159 Fund for the Development of Urban Transportation (FDTU), 198, 200,201 Fundação de Serviços de Saúde Pública. See Foundation of Public Health Services Fundo de Desenvolvimento de Transportes Urbanos. See Fund for the Development of Urban Transportation Fundo de Garantia por Tempo de Serviço. See Time-in-Service Guarantee Fund Fundo de Investimento Social. See Fund for Social Investment Fundo Nacional de Desenvolvimento Urbano. See National Fund for Urban

293 Development Furtado, Alencar, 222 GATT. See General Agreement on Trade and Tariffs Geisel, Ernesto, 14, 17, 18, 41-46, 59, 60n.5, 69, 101, 135, 245, 250, 266, 282, 284-285 General Agreement on Trade and Tariffs (GATT), 73, 74, 89 General Workers' Central. See CGT GET AT. See Executive Group for the Araguaia- Tocantins Region Glock, Oriel, 113 Goiás, 256n.l0 Golbery do Couto e Silva, General, 14, 17,215 Gonçalves, Leônidas Pires, 221 Goulart, João, 11, 14, 18, 63, 168, 191,224,263 Governors, 32, 192, 210, 229, 256n.2 Crilheiros, 19 Grindle, Merilee, 112 Group medical companies (EMGs), 152 Grupo Executivo das Terras do Araguaia-Tocantins. See Executive Group for the Araguaia-Tocantins Region Guanabara, 168, 179,210 Guapore-Quitungo project, 173 Guaranteed Fund for Time and Service. See Time-in-Service Guarantee Fund Guimarães, Ulysses, 221, 222, 224, 230,231,244-245,253 Gutierrez, Andrade, 108 Health policy: cities and, 36; collective-preventive subsystem of, 143-144, 147-148, 154-161; current problems in health care system, 159-161; evolution of state apparatus for, 145-148; funding for health services, 146148, 155, 158-159; group medical companies, 152;

Index

294 hospitals and, 152-153; individual-curative subsystem of, 143-144, 150-154; industrialization and, 144-150; maternalchild health care, 129, 143, 154, 155, 156, 160; of military regimes, 125-126; mistargeting of, 133, 139n.l4; obstacles facing, 141-142; privatization of health services, 144, 150-158; public health reform, 126-128; sanitation campaigns, 143, 145, 154-155, 160, 162n.8; social security system, 148-150; vaccination and immunization campaigns, 143, 154, 156 Hebette, Jean, 108 Henriques, Maria, 107 Herzog, Vladimir, 24n.22 Highway programs, 97, 98-100, 258n.24 Hospitals, 152-153 Housing Assistance Plan, 191 Housing policy: broad context of, 191-192; under Dutra, 190191; eradication of favelas and relocation, 164, 165, 167, 168169, 171, 172r-174, 182; factors affecting favelas at the cityregional level, 169-172; historical view of favelas, 167-169; impact of redemocratization on, 181-184; of military regimes, 126,193-194; mistargeting of, 132-133, 139n.l4; national approaches to, 164-165; of Nova República, 129-130; perceptions oí favelas, 165-167; policy of "no policy" toward favelas, 164; under Quadros, 191; Sarney's threats to cut housing program, 258n.24 ; self-help housing in São Paulo, 179-181; technocratic/intercity approach to, 196-201; transitional period from 1964-1975, 192-196; urbanization of favelas, 164, 166, 167, 168, 171, 174-179,

182-183 Humphrey, John, 264, 266 Ianni, Octavio, 190 IAPs. See Retirement and Pension Institutes IBRA. See Brazilian Institute of Agrarian Reform Illness. See Health policy ILO. See International Labor Organization IMF. See International Monetary Fund Immunization programs. See Vaccination and immunization programs Imports: growth of, 47; importsubstitution program, 51, 63, 69-71, 284, 285; trade liberalization and, 78-79, 89-90. See also Exports Imposto sindical, 261 INAMPS. See National Institute of Medical Assistance and Social Security INAN. See National Institute of Nutrition Income distribution, 46, 51, 141 INCRA. See National Institute of Colonization and Agrarian Reform Industry, 8-9, 11-12, 54, 58, 144150 Inertial inflation, 46 Inflation, 45, 46, 47, 49, 53, 57, 77, 228 Infrastructure Financial System (SFS), 130 Infrastructure Program for the Low Income Population (PROSANEAR), 130 INPS. See National Institute of Social Security Institutional Act No. 1, 31 Institutional Act No. 5, 17, 24n.22 Instituto Brasileiro de Reforma Agrária. See Brazilian Institute of Agrarian Reform

Index Instituto Nacional de Colonização Reforma Agrária. See National Institute of Colonization and Agrarian Reform Instituto Nacional de Nutrição. See National Institute of Nutrition Instituto Nacional de Previdência Social. See National Institute of Social Security Institutos de Aposentadorias e Pensões. See Retirement and Pension Institutes Integrated Colonization Project (PIC), 100-101 Integrated Health Actions (AIS), 127, 159 Inter-Union Movement against the Wage Squeeze (MIA), 265 International banks and banking. See Banks and banking International Labor Organization (ILO), 259, 271, 272 International Monetary Fund (IMF), 50-51, 52, 60n.8, 64, 74-76, 77, 89, 252, 284 Interunion Agency for Parliamentary Advice (DIAP), 272 Johnson, John J., 8 Juruna, Mario, 243 Kleinpenning, J. M., 112, 113 Kubitschek, Juscelino, 8, 11, 14, 32, 97, 168, 210 Labor courts, 261, 263 Labor force, 19, 20, 49, 51, 52, 57, 59, 60n.7, 128, 143, 259. See also Agricultural workers Labor laws, 261-263, 264, 271-273 Labor movement: in auto industry, 265-266, 278; current trends and possible futures of, 277278; CUT and CGT, 268-273; government labor policy in Nova República, 276-277; lack of political consciousness among workers, 275-276;

295 during late nineteenth century, 10; military and, 12-13, 14, 2021, 259, 264-265; origins and structure of, 261-269; percentage unionized, 259, 269; populismo government and, 10Ι 6, 14; populista phase of, 263264; proposals for legal reform, 271-273; right to strike, 10, 263, 272; rural unions, 265, 269; Sarney and, 259-260; U.S. policy and, 14, 21. See also Strikes Labor policy, 49, 51, 52, 57, 60n.7, 264, 265, 266, 276-277 Lacerda, Carlos, 168, 170-171, 175 Lages, 202-204 Lamounier, Bolivar, 75-76, 135 Land programs. See Amazon region Land reform, 109-110 LBA. See Brazilian Legion of Assistance Leão ΧΙΠ Foundation, 167 Lei da Estabilidade, 261 Liberal party. See PL Lima, Faria, 171 Lima, Negrão de, 179 Local government. See Municipal government Lucena, Humberto, 224, 244 Lula. See Da Silva, Luís Ignácio Luz, Berta, 11 Lyra, Fernando, 245 Macedo, Roberto, 132 Maciel, Marco, 221, 227, 228 McNamara, Robert, 44 Magalhães, Antônio Carlos, 224 Malaria Services of the Northeast, 146 Maluf, Paulo, 219, 220, 221, 222, 275 Manufacturing, 11-12, 19, 62 Marcílio, Flávio, 222 Maternal-child health care, 129, 143, 154, 155, 156, 160 Mato Grosso do Sul, 222 Mayors, 32, 192, 229, 256n. 10

296 MDB (Brazilian Democratic Movement), 211, 212, 215, 229, 256n.9 MDU. See Ministry of Urban Development and the Environment Mediei, Emílio Garrastazú, 17-18, 41, 44, 98, 101, 250 Mendes, Ivan Souza, 221 Metalworkers' Union of São Bernardo do Campo, 265-266 Metropolitan regions, 35, 192, 196, 198, 199. See also Urban policy Mexican debt moratorium, 50, 74 MIA. See Inter-Union Movement against the Wage Squeeze Military: during coronelismo government, 9; opposition to urban labor, 12-13, 14, 277-278; populismo government and, 1214, 15-16 Military regimes: abertura period, 16-18, 183, 211, 215-216, 267; agenda setting and policy making during, 282-285; definition of autoritarismo, 7; economic policy of, 63-69, 282285; election trends during, 210-219; favelas and, 168-169, 182-183; history of autoritarismo, 15-18; housing policy of, 192-201; labor movement and, 20-21, 259, 264-265; linha dura (hard-line) approach, 16-17; problems of, 281 ; social policy of, 125-126, 131-132,135-136; support for, 20-21; torture used by, 17, 24n.22; transition from authoritarian to democratic government, 122-123, 135-136, 250256. See also names of specific presidents Minas Gerais, 7-8, 30, 158, 205n.28, 206n.33, 210, 215, 221, 228, 256n.2, 274 Mining, 20, 59, 86 Ministério da Previdência e

Index Assistência Social. See Ministry of Welfare and Social Security Ministério de Desenvolvimento Urbana and Meio Ambiente. See Ministry of Urban Development and the Environment Ministério do Interior. See Ministry of the Interior Ministério do Planejamento. See Ministry of Planning Ministério dos Organismos Regionais. See Ministry of Regional Institutions Ministry of Education and Health, 146, 147 Ministry of Health, 147, 156, 158 Ministry of the Interior, 194, 198 Ministry of Labor, 261, 262, 264 Ministry of Planning, 194, 198 Ministry of Regional Institutions, 194 Ministry of Transportation, 198 Ministry of Urban Development and the Environment (MDU), 192, 201,202 Ministry of Welfare and Social Security (MPAS), 143, 153, 156, 157, 158 Monteiro, Góes, 13 Moran, Emilio, 102, 114 Moreira Alves, José Carlos, 71, 244 Moura, Alkimar R., 75-76 Movimento contra o custo da vida, 266 Movimento Inter-Sindical AntiArrocho. See Inter-Union Movement against the Wage Squeeze Movimento Revolucionário 8 de Outubro. See October 8 Revolutionary Movement MPAS. See Ministry of Welfare and Social Security MR-8. See October 8 Revolutionary Movement Multinational businesses, 20-21, 25n.27, 62, 84-89, 90, 283 Municipal government: history of,

Index 26-27; increased autonomy of, 202-204; mayors, 32, 192, 229; Organic Laws of the Cities, 37; policy-making function of, 286; powers under 1988 constitution, 35-36; taxation and, 32, 37, 195, 254; urban policy and, 195. See also Urban policy Municipal Organization Statute of Minas Gerais, 30 Municipalismo, 195 Mussolini, Benito, 13 Mutual Help Operation, 168 National Cities League v. Usery, 29 National Commission of Metropolitan Regions and Urban Policy (CNPU), 196-198, 199, 206n.43 National Confederation of Rural Workers (CONTAG), 265, 269 National Confederation of Workers in Industry (CNTI), 266 National Council of Planning for Popular Housing, 191 National Council of Urban Development (CNDU), 197-202, 206n.43 National Council of Urban Policy (Copurb), 191 National Department of Education, 146 National Department of Health, 146 National Department of Health and Social-Medical Assistance, 146, 147 National Department of Public Health, 145 National Department of Rural Endemic Diseases (DNER), 147 National Development Plan of the Nova República (I PND-NR), 124 National Development Plan (PND I), 98 National Economic and Social Development Bank (BNDES), 44 National Environmental Council (Conama), 201

297 National Fund for Urban Development (FNDU), 198, 200, 201, 206n.43 National Guard, 9 National Housing Bank (BNH), 130, 168, 169, 175, 176, 179, 193194, 199, 201 National Immunization Program, 156 National Information Service (SNI), 216,220,277 National Institute of Colonization and Agrarian Reform (INCRA), 99-102, 104-109, 113 National Institute of Medical Assistance and Social Security (INAMPS), 143, 158-159 National Institute of Nutrition (INAN), 157 National Institute of Social Security (INPS), 151-154, 158 National Integration Plan (PIN), 9899,111 Nationalism, 11 National Plan for Agrarian Reform, 109 National Program for Basic Health Services (PrevSaúde), 157-158 National Program of Milk for Needy Children (PNLCC), 129 National Renovating Alliance. See ARENA National Security Council (CSN), 105, 106-107, 257n.21 National Security Law (1969), 17 National Service of Yellow Fever, 146 National System of Local Integrated Planning, 194 Neighborhood associations, 169, 171, 182-184, 186,203 Netto, Delfim, 48, 215, 216, 221 Neves, Tancredo, 18, 124, 136, 219, 221, 222, 224, 245, 250, 259, 268, 273, 276 New Deal, 29 New federalism, 29-30 Nobrega, Mailson da, 58, 78

298 Novo sindicalismo, 259, 265 Nuclear power, 21, 60n.5 Nutrition programs. See Food and nutrition programs Obreirista movement, 215 October 8 Revolutionary Movement, 279n.24 O'Donnell, G., 135 Oil crisis, 41, 47, 69 Oil industry, 11,59 OPEC oil shock. See Oil crisis Operação Amazônica, 97-98 Operação Desmonte, 254 Operação Mutirão. See Mutual Help Operation Operação Remonte, 254 Operation Amazon, 97-98 Organic Laws of the Cities, 37 Osasco, 265 PAC. See Program of Concentrated Action PAEG. See Program of Action Panama, 278n.2 Pará, 101, 108 Paraguayan War, 9 Paraiba, 224 Paraná, 256n. 10 Paris Club, 252 Partido Popular. See PP Partido Trabalhista. See PT Party of Brazilian Social Democracy. See PSDG Party of the Brazilian Democratic Movement. See PMDB Party of the Liberal Front. See PFL Passarinho, Jarbas, 228, 265 Pastoral Land Commission (CPT), 106, 108 Pazzianotto, Almir, 272, 276, 277, 278 PC do Β (Communist party of Brazil), 223 226, 228-229, 232, 234-237, 239-242, 275, 279n.24 PCB (Brazilian Communist party), 223, 226, 232, 234-237, 239242, 262, 279n.24

Index PCPM. See Program of Middle-Sized Cities PDA Π. See Plan for the Development of the Amazon, second PDC (Christian Democratic party), 223, 226, 229, 232, 234-237, 240, 241 PDS (Democratic Social party), 136, 211,212,214-418,220,221223, 225, 226, 228, 232, 234237, 239-243, 250,256n. 10 PDT (Democratic Labor party), 136, 215,217,223,226,228-229, 232, 234-237, 239-241, 243, 251 Peasant farmers in Amazon region, 96-107, 108, 109, 114-115 Pedro Π (emperor), 26 Peixoto, Marshal Floriano, 9 Pension funds, 132, 145, 148, 149 Perlman, Janice, 174 Pernambuco, 205n.28, 228 Peru, 278n.2 Petroleum industry. See Oil crisis; Oil industry PFL (Party of the Liberal Front), 221229, 230-232, 234-242, 250 PIASS. See Program for Grass Roots Health and Sanitation Actions in the Northeast PIC. See Integrated Colonization Project PIN. See National Integration Plan PIS. See Programa de Integração Social PL (Liberal party), 223, 226, 229, 232, 234-237, 240, 241, 242, 250 Plan for Immediate Action (1974), 152 Plan for the Development of the Amazon, second (PDA Π), 103, 104 "Plano Brasil Novo," 138 Plano de Assistência Habitacional. See Housing Assistance Plan Plano Nacional de Desenvolvimento. See National Development Plan PMB (Brazilian Municipalist party),

Index 223,226,231 PMDB (Party of the Brazilian Democratic Movement), 136, 215-217, 221-229, 231-232, 234-244,250,251,253, 256n.l0, 257n.l8, 267, 268, 270, 272-273, 285 PND I. See National Development Plan PND Π. See Second National Development Plan PNLCC. See National Program of Milk for Needy Children Polamazonia Program, 104—106 Political economy, definition of, 2 Political parties: during abertura period, 211, 215-216; and Brazil's redemocratization, 135136, 137; in Constituent Assembly, 229, 231-244; Democratic Alliance, 222-225; election of 1978, 211, 213, 214; election of 1982, 211, 214, 216219; election of 1986, 225, 227229; during military regimes, 210-219; social policy and, 134; transition from 1983-1985, 220222. See also names of specific parties Polity, definition of, 2 Pompermayer, J. M., 112 Popular Housing Company (COHAB), 168, 176, 179 Popular Housing Foundation, 190191 Popular party. See PP Populism, 7, 10-16, 19-20, 189-192, 203, 263-264 Portela, Petronio, 215 Porto Alegre, 197 Posseiros, 95, 113 Poverty, 11, 20, 131-133, 141, 186187 PP (Popular party), 215, 216, 250 PPB, 223, 226 Prestes, Luís Carlos, 10, 13 PrevSaúde. See National Program for Basic Health Services

299 Price, Dan K., 2 Price Reference Unit (URP), 57 Privatization of state-owned companies, 20 PRM. See Program of Metropolitan Regions Programa da Integração Nacional. See National Integration Plan Programa das Cidades de Porte Médio. See Program of MiddleSized Cities Programa das Regiões Metropolitanas. See Program of Metropolitan Regions Programa de Ação. See Program of Action Programa de Ação Concentrada. See Program of Concentrated Action Programa de Alimentação e Nutrição. See Food and nutrition program Programa de Apoio para Capitais e Cidades de Porte Médio. See Program of Support for Capitals and Cities of Medium Size Programa de Auto-Suficiênca im Imunobiolôgicos. See Program for Self-Sufficiency in Vaccines for Immune Diseases Programa de Controle das Grandes Endemias. See Program for the Control of the Major Regional Endemic Diseases Programa de Desenvolvimento do Amazonia. See Plan for the Development of the Amazon, second Programa de Integração Social (PIS), 66 Programa de Interiorização Ações de Saude e Saneamento no Nordeste. See Program for Grass Roots Health and Sanitation Actions in the Northeast Programa Integrado de Colonização. See Integrated Colonization Project

300

Programa Nacional de Servicos Básicos de Saúde. See National Program for Basic Health Services Program for the Control of the Major Regional Endemic Diseases, 127 Program for Grass Roots Health and Sanitation Actions in the Northeast (PIASS), 156-157, 158 Program for the Mobilization of Energy, 206n.47 Program for Self-Sufficiency in Vaccines for Immune Diseases, 127 Program of Action (PAEG), 193 Program of Concentrated Action (PAC), 194-195, 205-206n.29 Program of First the Child, 129 Program of Metropolitan Regions (PRM), 198, 199 Program of Middle-Sized Cities (PCPM), 198, 206n.33 Program of Support for Capitals and Cities of Medium Size (CPM/ Normal), 200 Project for Extractive Settlement, 109 Projeto de Assentimento Extrativo. See Project for Extractive Settlement Projeto Especial para Cidades de Porte Médio. See Special Project of Middle-Sized Cities PRONAN. See Food and nutrition program PROSANEAR. See Infrastructure Program for the Low Income Population PSB (Brazilian Socialist party), 223, 226, 232, 234-237, 239, 240, 241 PSC (Social Christian party), 223, 226,231 PSD (Social Democratic party), 210, 215,229, 257n. 14 PSDG (Party of Brazilian Social Democracy), 253 PT (Workers party), 19, 136, 183,

Index 184,215,217,223,226,228, 232, 234-237, 239-242, 251, 267, 268, 273, 274-275, 277-278 PTB (Brazilian Labor party), 13, 215, 217, 220, 223, 225, 226, 228, 231-232, 234-237, 240, 241, 250, 263 PTR, 223, 226 Public assistance programs, 128129, 131 Public health. See Health policy Public Health Reform, 126-128 Quadros, Jânio, 168, 191, 224, 225 Ramos, Nereu, 229 Ramos, Saulo, 254 Reagan, Ronald, 29 Recife, 197 Renaud, Bertrand, 187 Reposição salarial, 266 Republican Manifesto of 1880, 30 Retirement and Pension Funds (CAPs), 145, 149 Retirement and Pension Institutes (IAPs), 148, 149, 151 Revolutionary Parliamentary Bloc. See BPR Ribeiro, Nelson, 109 Richa, José, 253 Rio de Janeiro, 9, 11, 12, 158, 168179, 197, 200, 215, 219, 256n.2, 274 Rio Grande do Sul, 7-8, 9, 12, 205n.28, 256n.2 Riocentro bombing episode, 215 Rios, José Arthur, 166, 168 Rockefeller Foundation, 145, 146 Rondônia, 107 Roosevelt, Franklin D., 29 Rural-Urban Settlement Plan, 101 Rurópolis, 101 Rusk, Dean, 15 Salvador, 197, 275 Sanitation campaigns, 143, 145, 154-155, 160, 162n.8 Santa Catarina, 202

Index Santo André, 269 São Bernardo metalworkers, 265266, 269, 276, 278 São Caetano, 269 São Paulo, 7-8, 9, 31, 158, 170, 171' 172, 179-181, 197,200, 205n.28, 219, 220, 224, 225, 228,251, 256nn. 2, 10,265, 267, 269, 274, 275, 285 São Paulo Federation of Industries (FIESP), 251 Sarney, José, 18, 53-60, 109, 136, 137, 161n.4, 221, 222, 224, 225, 227, 228, 230, 231, 245, 249256,257n. 18, 258nn. 22, 24, 259-260, 270, 272, 276-278 Schwartz, Bernard, 29, 30 Second Plan of National Development (Π PND), 44, 69-70, 188, 197,202 Secretaria Especial do Meio Ambiente. See Special Secretariat for the Environment Segundo Plano Nacional de Desenvolvimento. See Second Plan of National Development SEMA. See Special Secretariat for the Environment SERFHA. See Special Service for the Recuperation of Favelas and Unsanitary Housing Serfhau. See Federal Service of Housing and Urban Development Sergipe, 228 Serviço Especial para a Recuperação de Favelas e Habitação AntiSanitárias. See Special Service for the Recuperation of Favelas and Unsanitary Serviço Federal de Habitação e Urbana. See Federal Service of Housing and Urban Development Serviço Nacional das Informações. See National Information Service Serviços Especiais de Saúde Pública.

301 See Special Public Health Services SESP. See Special Public Health Services SFS. See Infrastructure Financial System Sindicalismo, 266 Sindicato, 261 Single Workers' Central. See CUT Sistema Federal de Habitação. See Federal Housing System Sistema Nacional de Planejamento Local Integrado. See National System of Local Integrated Planning Smith, Nigel, 114 SNI. See National Information Service Social Christian party. See PSC Social Democratic party. See PSD Social indicators, 131, 132, 139n.4, 141, 142 Social policy: agenda of the Nova República, 122-125; education, 129; emergency assistance, 125, 126, 129, 136; funding for social programs, 124-127, 131, 139n.4; health care reforms, 126-128; housing and urban development, 129-131; importance of, 122-123; of military regimes, 125-126, 131-132, 135-136; performance of Nova República in areas of, 125-131; political structure and democratic transition, 133-138; public assistance programs, 128-129, 131; social security system, 128, 148-150; underdevelopment and structural inequalities and, 131-133, 139n.l4. See also Health policy; Housing policy; Urban policy Social Security Administrative Council, 151 Social security programs, 125-126, 128, 148-150, 261 Sovereignty, 27-28

302

Special Project of Middle-Sized Cities (CPM/BIRD), 200-201 Special Public Health Services (SESP), 146 Special Secretariat for the Environment (SEMA), 201 Special Service for the Recuperation of Favelas and Unsanitary Housing (SERFHA), 166, 168 State-owned companies, 20 States: constitutions of, 30-31; financial situation of, 28, 32, 251; governors of, 32, 192, 210, 229; policy-making function of, 286; powers under 1988 constitution, 34-35; taxation and, 32, 36, 37, 195, 254 Strikes: in auto industry, 265, 267, 276; cooperation between CGT and CUT, 260; general strike of 1986, 273-276; government banning of, 261, 262, 264; labor's view of, 278; during late nineteenth century, 10; military response to, 14, 277; nationwide, 268; right to strike, 10, 263, 272; in September 1986, 280n.32; wildcat strikes, 265. See also Labor movement SUCAM. See Superintendency of Sanitation Campaigns SUDAM. See Superintendência do Desenvolvimento da Amazônia SUDS. See Unified Health Services Superintendência da Política Urbana. See Superintendency of Urban Policy Superintendência de Campanhas. See Superintendency of Sanitation Campaigns Superintendência do Desenvolvimento da Amazônia (SUDAM), 98, 101-102, 106, 113 Superintendency of Sanitation Campaigns (SUCAM), 143, 155, 160 Superintendency of Urban Policy

Index (Supurb), 191 Superior Council of Social Security, 128 Supreme Court, U.S., 29 Supurb. See Superintendency of Urban Policy Switzerland, 26 Tariffs, 64, 69-70, 78 Tax credit premium, 66, 68, 73, 74 Taxes and taxation, 32, 36-37, 66, 195, 254, 261, 271-272 Tenentes, 10, 13 Tenure Law, 261, 264 Time-in-Service Guarantee Fund (FGTS), 66, 194, 264 Tolosa, Hamilton, 205-206n.29 Torture chambers, 17, 24n.22 Trade. See Exports; Imports; Tariffs Trade unions, 261, 262-263. See also Labor movement Trans-Amazon Highway, 98, 99-100 Transamazônica Highway. See Trans-Amazon Highway Transportation. See Highway programs; Urban transportation Troco de interesses, 166-167, 168, 182 Tucuma colonization project, 108 Tyler, William G., 71 Unemployment insurance program, 128 Unicidade sindical, 271 Unidade Sindical, 267-268, 270, 271, 279n.24 Unified Health Services (SUDS), 127-128 Union contribution, 261 Union tax, 261, 271-272 Unions. See Labor movement United Association of Defense and Improvement of Bras de Pina, 175 United States: and Brazilian trade subsidies, 73; cuts in foreign aid to Brazil, 63; federalism of, 26, 27, 28-30, 33; military regimes

Index and, 17; policy impact on Brazil, 13, 14, 283; relations with Brazil, 21 Urban policy: characteristics of, 201-202; colonial cities, 189190; disincentives to municipal growth, 197; financial limitations of cities, 203-204; growth of cities, 35, 162n.l3, 186-187, 193,196; increased municipal autonomy and, 202-204; migration to cities, 35, 187; mistargeting of, 139n.l4; in Nova República, 129-131; populist/intracity approach to, 188, 189-192; poverty and, 186187; rapid urbanization, 186187; technocratic/intercity approach to, 188, 196-201, 285. See also Housing policy; Municipal government Urban reform, 191-192 Urban transportation, 129, 200 URP. See Price Reference Unit Uruguay, 250 Vaccination and immunization programs, 143, 154, 156 Vale do Rio Doce mining company,

303

20,86 Vargas, Getulio, 8, 10-14, 19, 20, 31, 37, 133, 167, 196, 203, 220, 229, 257n.l4,260,262, 263, 282 Vargas, Ivete, 215 Venturini, Danilo, 107 Vieira de Silva, Lourenço, 103 Vila Alianza, 168 Vila Kennedy, 168, 173 Wage policies, 49, 51, 52, 57, 60n.7, 264, 265, 266, 276 Wagley, Charles, 110 Water and sewer systems, 129, 130 Weffort, Francisco, 190 Werneck, Rogério L. Furquim, 51 WHO. See World Health Organization Women, 11, 243. See also Maternalchild health care Workers' party. See PT Working Class Conference (CONCLAT), 268, 269 Working people. See Labor force World Bank, 84, 90, 125, 139n.4, 160, 200, 201, 252 World Health Organization (WHO), 141 World War Π, 13