40
The Center for Latin American Studies University of California, Berkely Rio Branco Forum on Brazil Challenges Facing the New Brazilian Government A lecture by Paulo Paiva January 31, 2003

The Center for Latin American Studies University of California, Berkely

  • Upload
    keala

  • View
    41

  • Download
    3

Embed Size (px)

DESCRIPTION

The Center for Latin American Studies University of California, Berkely Rio Branco Forum on Brazil Challenges Facing the New Brazilian Government A lecture by Paulo Paiva January 31, 2003. Challenges Facing the New Brazilian Government. Election Results The Challenges: - PowerPoint PPT Presentation

Citation preview

Page 1: The Center for Latin American Studies  University of California, Berkely

The Center for Latin American Studies University of California, Berkely

Rio Branco Forum on Brazil    

Challenges Facing the New Brazilian Government

 

A lecture by

Paulo Paiva

January 31, 2003

Page 2: The Center for Latin American Studies  University of California, Berkely

Challenges Facing the New Brazilian Government

• Election Results• The Challenges:

– Promote economic growth with stability– Conciliate macroeconomic stability with growing

social demands– Build a Coalition with the National Congress– Maintain an equilibrium between the representative

democracy and the “new corporatism”– Deal with the international agenda

• Public Opinion Poll

Page 3: The Center for Latin American Studies  University of California, Berkely

Election ResultsElection Results

Page 4: The Center for Latin American Studies  University of California, Berkely

Presidential election

First Round (Thousands) %

Lula 39,443 (46.7)

Serra 19,700 (23.3)

Others 25,347 (30.0)

84,490 (100.0)

Run Off Δ(Thousands) %

52,793 (61.3) 13,349

33,371 (38.7) 13,670

86,164 (100.0) 27,019

Page 5: The Center for Latin American Studies  University of California, Berkely

Senate (81 seats)

2002 2003 2002 2003

PFL 17 19 PT 8 14

PSDB 14 11 PDT 5 5

PPB 2 1 PSB 3 4

PMDB 24 19 PL 1 3

PTB 5 3 PPS 2 1

PSD - 1

TOTAL 62 53 TOTAL 19 28

Change: 9 seats (11.1%)

Cardoso’s Coalition Opposition's Coalition

Page 6: The Center for Latin American Studies  University of California, Berkely

House (513 seats)

2002 2003 2002 2003

PFL 98 85 PT 58 91

PSDB 94 71 PDT 16 21

PPB 53 48 PSB 16 22

PMDB 87 74 PL 22 26

PTB 33 26 PPS 12 15

PCdoB 10 12

Others 14 22

TOTAL 362 304 TOTAL 148 209Change: 61 seats (11.9%)

Cardoso’s Coalition Opposition's Coalition

Page 7: The Center for Latin American Studies  University of California, Berkely

 

  

                                                                                    

   

                                                                                    

   

 

  

Page 8: The Center for Latin American Studies  University of California, Berkely

Major ChallengesPromote Economic Growth with Stability

Page 9: The Center for Latin American Studies  University of California, Berkely

Major ChallengesPromote Economic Growth with Stability

Option to maintain the same macroeconomic policy

Symbolic Actions

Effective Actions

Economic Challenges

Decisions of Macroeconomic Policies

Page 10: The Center for Latin American Studies  University of California, Berkely

Major Challenges Symbolic Actions

•Visited the Presidents of Argentina and Chile

•Visited President Bush

•Announced in DC the name of the Finance Minister

•Met with the WB and IDB Presidents

•Met with the Managing Director of the IMF

Page 11: The Center for Latin American Studies  University of California, Berkely

Major Challenges Promote Economic Growth with Stability

Option to maintain the same macroeconomic policy

Symbolic Actions

Effective Actions

Economic Challenges

Decisions of Macroeconomic Policies

Page 12: The Center for Latin American Studies  University of California, Berkely

Major Challenges Effective Actions

•Named a Financial Market Executive to be President of the Central Bank (Henrique Meireles)

•Maintained the previous board of directors in the Central Bank

•Announced a new project of law sent to Congress to increase the autonomy of the Central Bank (Monetary Responsibility Law)

•Adopted the structural reforms program of the previous government (social security, tax, and labor reforms)

Page 13: The Center for Latin American Studies  University of California, Berkely

Major Challenges Promote Economic Growth with Stability

Option to maintain the same macroeconomic policy

Symbolic Actions

Effective Actions

Economic Challenges

Decisions of Macroeconomic Policies

Page 14: The Center for Latin American Studies  University of California, Berkely

Major ChallengesDecisions of Macroeconomic Policies

• Maintained fiscal policy of austerity, expected primary surplus of 3.75% of GDP in 2003 or even higher• Did not accept to discuss the renegotiation of agreements between federal and state governments (renegotiation of state debts)•Inflation-targeting policy. Price stability as main goal of monetary policy. Economic growth due to lower interest rates more difficult •Maintained floating exchange rates• Commitment to honor existing contracts and agreements•Maintain the agreement with the IMF•First monetary decision of the Central Bank: increased annual interest rates from 25% to 25.5%.

Page 15: The Center for Latin American Studies  University of California, Berkely

Major Challenges Promote Economic Growth with Stability

Option to maintain the same macroeconomic policy

Symbolic Actions

Effective Actions

Economic Challenges

Decisions of Macroeconomic Policies

Page 16: The Center for Latin American Studies  University of California, Berkely

Major Challenges

Economic Challenges

• Restart economic growth in the short run•Approve the structural reforms:

•Social Security Reform – total Social Security deficit (private and public) is around 5.1% of GDP•Tax Reform – current tax burden is around 33% of GDP. If tax reform is not approved this year, the government must propose the maintenance of a) the taxes on checks (CPMF – Temporary Contribution on Financial Transactions) and b) the DRU (Elimination of ear-marked federal tax revenues) •Labor Reform

Page 17: The Center for Latin American Studies  University of California, Berkely

Major ChallengesPromote Economic Growth with Stability

Conciliate Macroeconomic Stability with Growing Social Demands

Page 18: The Center for Latin American Studies  University of California, Berkely

Major Challenges Conciliate macroeconomic stability with growing

social demands

Social Expenditures

Conciliate macroeconomic stability with growing social demands

Page 19: The Center for Latin American Studies  University of California, Berkely

93.3 98.6

120 124.6132.1 137.6 137.5

1993 1994 1995 1996 1997 1998 1999

Social Expenditures

Social Expenditures increased39% from 1994 to 1999

Source: IBGE (1991 and 2000 Census)Source: IBGE (1991 and 2000 Census)

14% of GDP

11% of GDP

Page 20: The Center for Latin American Studies  University of California, Berkely

Major Challenges Conciliate macroeconomic stability with growing

social demands

Social Expenditures

Conciliate macroeconomic stability with growing social demands

Page 21: The Center for Latin American Studies  University of California, Berkely

1. To conciliate macroeconomic stability with growing social demands

2003 budget- primary surplus 2.8%(GDP)- discretionary expenditures: 2.1%(GDP)

distribution of discretionary expenditure:social development 72%infrastructure 13%production 5%defense 2%administration 5%environment 1%knowledge and information 1%others 1%TOTAL 100%

Page 22: The Center for Latin American Studies  University of California, Berkely

•Social demands•minimum wage•increase of civil servant's salaries•Fighting Hunger Program

• Risks•on the economic sideon the economic side

•No compliance with fiscal Targets•Higher inflation•Debt default

•on the social sideon the social side•Unable to meet social demands and expectations

Page 23: The Center for Latin American Studies  University of California, Berkely

Major ChallengesPromote Economic Growth with Stability

Conciliate Macroeconomic Stability with Growing Social Demands

Build a Coalition with the National Congress

Page 24: The Center for Latin American Studies  University of California, Berkely

Major Challenges Coalition with Congress

Senate 2003

House of Representative 2003

Strategy to built a majority

Page 25: The Center for Latin American Studies  University of California, Berkely

To build a coalition in the national congress Senate 2003 81 seats 

Seats missing to: Simple majority (50%) 41-31= 10 Approve constitutional reforms (2/3) 54-31=23

PFL 19 PT 14

PSDB 11 PDT 5

PPB 1 PSB 4

PMDB 19 PL 3

PPS

PSD

1

1

PTB 3

TOTAL 50 TOTAL 31

Opposition Lula's Coalition

Page 26: The Center for Latin American Studies  University of California, Berkely

Major Challenges Coalition with Congress

Senate 2003

House of Representative 2003

Strategy to built a majority

Page 27: The Center for Latin American Studies  University of California, Berkely

Seats missing to: (7 seats: independent) Simple majority (50%) 257-253= 4 Approve constitutional reforms (2/3) 342-253= 89

PFL 77 PT 91

PSDB 63 PDT 18

PPB 43 PSB 29

PMDB 70 PL

PTB

34

41

PPS 19

PCdoB 12

Others 9

TOTAL 253 TOTAL 253

House of Representatives 2003 513 seats  Opposition Lula's Coalition

Page 28: The Center for Latin American Studies  University of California, Berkely

Major Challenges Coalition with Congress

Senate 2003

House of Representative 2003

Strategy to built a majority

Page 29: The Center for Latin American Studies  University of California, Berkely

Major ChallengesStrategy to built a majority

•Composition of the Cabinet

•Composition of Congressional Committees and election of Presidents of Senate and House of Representatives

•Alliance with conservative regional leaderships: José Sarney and Antonio Carlos Magalhães

•In the National Congress, regional leaders have great influence

•Elected politicians changing parties common practice in Brazil)

•Majority will need to be built for each important project

Page 30: The Center for Latin American Studies  University of California, Berkely

Major ChallengesPromote Economic Growth with Stability

Conciliate Macroeconomic Stability with Growing Social Demands

Build a Coalition with the National Congress

Maintain an Equilibrium Between the Representative Democracy and the “New Corporatism”

Page 31: The Center for Latin American Studies  University of California, Berkely

Major Challenges Maintain an Equilibrium Between the Representative Democracy and the “New

Corporatism”

Potential Conflicts between Representative Democracy and Direct Democracy

Neo-Corporatism

Page 32: The Center for Latin American Studies  University of California, Berkely

Major Challenges

Neo-Corporatism

•Composition of the Cabinet

• Economic and Social Development Council subordinated to the Federal Government

Page 33: The Center for Latin American Studies  University of California, Berkely

Major Challenges Maintain an Equilibrium Between the Representative Democracy and the “New

Corporatism”

Potential Conflicts between Representative Democracy and Direct Democracy

Neo-Corporatism

Page 34: The Center for Latin American Studies  University of California, Berkely

Major Challenges Potential Conflicts between Representative

Democracy and Direct Democracy

•Representative democracy versus direct democracy•Need to Strength Institutions (Congress, Political Parties, Judiciary, etc.)•Conflict between Representative Democracy and the practice of direct dialogue between the Executive Branch and the population •Popular Support – For example, trip to Northeastern States• To use organizations of the civil society (councils, for example) to lobby and pressure Congress

Page 35: The Center for Latin American Studies  University of California, Berkely

Major ChallengesPromote Economic Growth with Stability

Conciliate Macroeconomic Stability with Growing Social Demands

Build a Coalition with the National Congress

Maintain an Equilibrium Between the Representative Democracy and the “New Corporatism”

Deal with the International Agenda

Page 36: The Center for Latin American Studies  University of California, Berkely

Major ChallengesDeal with the International Agenda

Strength the Brazilian leadership in Latin America

Strength the democracy and peace in Latin America

FTAAA timeframe from 2003 to 2005

Co-presidency Brazil/USA

Mercosur - Rebuilt it within an environment of economic instability

European Community – Negotiations on barriers to agricultural goods

Page 37: The Center for Latin American Studies  University of California, Berkely

Public opinion results from recent poll

Country’s Satisfaction Index0ct.02: 24.3% Jan 03: 56.6%

Social Economic SatisfactionEvaluation: 34.0% (last 6 months)

Expectation: 63.6% (next 6 months)

President’s PerformanceApprove: Oct 02: 34.7% Jan.03: 83.4%Disapprove: Oct 02: 53.9% Jan.03: 6,8%

(CNT-Sensus: Jan. 19 to 23, 2003)

Page 38: The Center for Latin American Studies  University of California, Berkely

Expectations regarding Lula’s Government

Promises will be fullfilled: 69.9%

It will be a good government: 92.6%

Priority to Zero Hunger: 87.3%

Unemployment will decrease: 78.2%

Inflation will decrease: 63.9%

Interest rates will decrease: 61.4%

New minimum wage: R$ 266.00

Page 39: The Center for Latin American Studies  University of California, Berkely

Major Reforms (Priorities)

Labor Reform: 44.0% Land Reform: 11.5%

Social Security Reform: 11.2% Political Reform: 10.3%

Tax Reform: 4.1%

Page 40: The Center for Latin American Studies  University of California, Berkely

Mercosur and FTAA

Importance of Mercosur: 62.3%

FTAA: in favor: 30.8% against : 38.9%