Starting Over: Brazil Since 1985

1. Introduction

1 1 Introduction Brazil has undergone transformative change since its return to civil rule in 1985. The country has started over. As electoral participation has widened, politics has altered. Effective economic policies have become permanent, and economic advance has become more widespread and consistent. With rising income a healthier and longer life is available to a much broader swath of the population, and there is increased opportunity for social advancement. And Brazil’s foreign policy has assumed greater importance within a multipolar world. The Economist featured Brazil in its issue of November 14, 2009. According to the final words both of the lead editorial and the special report, “Its take-off is all the more admirable because it has been achieved through reform and democratic consensus. . . . What makes the country so exciting at the moment is that, thanks to its newfound stability, Brazil’s better self now has a much greater chance of prevailing.”1 This advance was neither continuous nor without occasional good fortune. At times, the challenges facing the new civilian regime seemed beyond its capability to respond. Nor did the “New Republic” begin with a tabula rasa. The past did not just disappear ; rather, its influence gradually eroded over time, as reforms were implemented and a new generation exerted its influence. Initially, after 1985 the prime emphasis was on a new constitution , which was accompanied by political party multiplication 01-2143-7 chap1.indd 1 6/1/11 3:18 PM 2 Introduction and realignment. Emergence from decades of political constraint under military dictatorship was the main concern, in part because a competent technocracy had dealt with the economy, and not altogether badly. Coping with burgeoning inflation had secondary significance; it is not accidental that both Argentina and Brazil failed the first time around in this battle. Other priorities took precedence. The Constitution of 1988 established the basis for the New Republic. A strong executive emerged and remained central to subsequent events. Social principles were enacted, if not immediately implemented. Universal claims to education, health care, and retirement benefits were henceforth legitimate demands upon the state. But these could not be realized until inflation had been successfully eliminated. Brazil finally succeeded in doing so with the Real Plan in 1994. Thereafter, the currency unit has stayed the same, a sharp difference from the previous constant elimination of zeroes and frequent name changes. Freed from these inflationary shackles, the Cardoso years saw much constitutional amendment to better provide an institutionalized basis for moving forward. This was especially the case within the social area: original rights required modification before they could be effectively implemented . In addition, privatization and globalization entered in a decisive way as the economy finally began to grow. International affairs assumed greater importance: Brazil exerted leadership in Mercosul (a customs union of neighboring states), considered the possibility of membership in a new continent-wide Free Trade Agreement of the Americas sought by the United States, reached out to the European Union, and launched an organization of all South American nations. But in the wake of crises in Asia and Russia, Brazil had to devalue its currency and seek assistance from the International Monetary Fund (IMF) and World Bank. Economic matters again assumed priority. A new macroeconomic policy was implemented and has continued into the present: inflation targeting, a primary fiscal surplus, and a floating exchange rate with an open capital account. Slowing economic growth, rapidly rising taxes, and soaring public debt altered domestic politics definitively: Lula and the Workers’ Party (PT) emerged as clear winners in 2002. International capital markets then became extremely worried about future policy, as a sharply devaluing real showed. Their fears were unfounded: the Lula administration retained the preestablished economic framework, including the IMF program. There was no renunciation of public debt. Instead, in the midst of this 01-2143-7 chap1.indd 2 6/1/11 3:18 PM Introduction 3 continuity—unwelcome to Lula’s supporters—the government emphasized social policy. There was larger investment in a conditional cash transfer program, Bolsa Família, incorporating approximately a fifth of the population. Education received attention, as did the universal health system. The burgeoning social security system with its continuing deficit was managed. A highly unequal income distribution has continuously improved. At the same time, greater independence emerged in foreign affairs: Brazil ended its engagement in the Free Trade Agreement of the Americas and devoted greater attention to South-South...