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Brazil – Presidential Message: Commitment to sustainable development

Article by Foreign Policy Centre

February 7, 2012

Read on February 2, the 2012 Message was one of the largest ever sent. With 467 pages, it positively evaluated the government’s achievements adopted so far for the various areas proposed and the developments intended for public policies for this and next years of the mandate.

It presented an extensive set of measures, new or already underway, in the economic and social areas, and also in the improvement of public management, which are to be sufficient to maintain the country’s growth, despite the drawbacks of the global economy still in crisis since 2008. The document goes through the promise of a better 2012 – even with all the challenges faced, 2011 was regarded as “good despite the difficulties.”

The government assesses the external environment adversely. Landmark for the present crisis, the United States grew slightly in 2011 (1.8% projected by the IMF) and should maintain the pace this year. Europe is considered a bigger difficulty to solve its current problems. For all advanced economies, it is expected low levels of growth and high unemployment. The set of economic and monetary measures adopted does not generate the certainty of overcoming the current crisis.

The world will coexist with a differentiated evolution of the economy. And even so, developing countries, less affected by the current crisis, will not be immune to it. The decline in demand in the developed countries decreases the industrial production and prices of commodities exported by them.

The document states measures taken in response to the crisis since 2008, how they were being mitigated from 2010, with the positive responses of the national economy, government action to tackle the inflationary process, from the end of 2010, and the steps again to remove the effects of the crisis in the last quarter of 2011, when production virtually stagnated.

Since December, measures adopted included the loosening of monetary policy, tax relief measures, such as white goods, construction, IOF for individuals, foreign debentures of infrastructure, trucks, commercial vehicles and agricultural machinery.

It is always emphasized that this set of measures did not negatively affect the stringency of fiscal policy. On the contrary, it led to the elevation of primary surplus targets to R$ 10 billion.

The strategy was to ally the strengthening of economic fundamentals with initiatives to increase productivity, qualification of manpower, impulse on technological innovation and investments in infrastructure.

The year of 2012 begins with increases in expenses related to the minimum wage offset by a relative decrease in personnel expenses. The president also shares this positive scenario with the attitude of Congress to postpone the wage adjustment for servers and members of the judiciary power.

The Message concludes that the Brazilian economy has strong fundamentals, better than in 2008, and, unlike other countries, can maintain a sustainable growth path, with fiscal responsibility, without inflation and external imbalances.

The presidential statement is an interesting read, both for the evaluation of the various government programs, and to show short-term courses.

In this sense, there is more space devoted to the presentation and evaluation of ongoing programs than to trace long-term goals. A more adequate and appropriate message for a year in which there is less certainty on the horizon.

The government did not commit to major reforms. After all, reality has shown, including in 2011, that ad hoc adjustments are more feasible than achieving major constitutional amendments.

The government points to the importance of increasing investments. It is noteworthy to mention that they were lower in 2011 than in 2010, even with the announcements of new stages of the Growth Acceleration Program, My House, My Life and Greater Brazil Plan. The government claims problems in the beginning of the administration, but investment also fell as a function of fiscal restraint. The Message did not anticipate how the government will be able to expand these investments in 2012 and keep the promise to meet the fiscal targets. But it will certainly be a good exercise of political articulation and management of economic results.

The measures proposed for 2012 and the targets for the various public policies seek the path of continuity (and not in alternation) in order to assert that necessary measures to increase growth, solve the problems of the productive sector, protect the national economy, expand social programs, reduce poverty and misery will be taken, without jeopardizing fiscal and macroeconomic balance.

After all the government needs to convince economic agents that the country will grow and invite them to a “big deal”, involving companies in a new cycle of productive investments.

The messages of the Parliament

During the reopening ceremony of the work of the Legislative, the chairmen of the House, the Senate and the Supreme Electoral Court (representing the Judiciary) gave important signals about what to expect in 2012.

The chairman of the House, Marco Maia, acknowledged that Congress will have less time to vote on measures, due to the fact that in electoral years the work is drastically affected from June on, when the caucuses begin to define candidates and coalitions.

Marco Maia highlighted some priority issues in the legislative agenda: 1) Supplementary Pension Fund for civil servants, 2) distribution of royalties for oil, 3) the General Law of the World Cup in 2014, and 4) change in “Zero Alcohol Law “, in order to make it more severe the act of drinking and driving.

The chairman of the Senate, Jose Sarney (PMDB-AP), took the opportunity to criticize the executive branch regarding the issue of Provisional Measures. To Sarney, excessive measures hinders the Congress and reduces the quality of laws in the country, since there is little time for Parliament to discuss such proposals.

In 2011 the Senate approved constitutional amendment proposal changing rite of process of provisional measures in the Congress. The proposal is in the House, but the odds of voting this year are small. His pronouncement on the subject will not have any practical effect on this issue.

Sarney also defended electoral and party reforms. In 2011 the matter was discussed in the House and Senate, however, very little progress was made. The outlook for this year is not good and even occasional advances are unexpected.

A highlight in Sarney’s speech was the suggestion to create a committee of experts to discuss federal relations. For him, the relationship between the Union, the states and the municipalities is very worn out and should be examined.

Besides the General Law of the World Cup and the issue of royalties, Sarney mentioned the change in the State Participation Fund (FPE). The Congress will have approve this year a new division for the Fund. In February of 2010 the Supreme Court concluded that the apportionment provided in Complementary Law 62/89 – in effect, therefore almost two decades old – was unconstitutional. This is because, under the Constitution, the FPE should “promote social and economic equilibrium” of the states and Federal District – which is not possible with fixed coefficients of participation, since the revision of percentages, which should have occurred in 1991, was never made . The Supreme remained, however, the application of the criteria of the law until the end of this year.

Electoral Supreme Court Minister Ricardo Lewandowski made a point of highlighting the collaboration between the three branches. Unlike the perception of some, who see the Supreme Court “legislating,” Lewandowski chose to classify this as a coordinated effort between the two powers.

Government, opposition and future

Governmental problems continue emerging from the allied base, and not from oppositional movements. This scenario can signal two trends. The first is that the opposition, as it stands, will not be a match for the government in 2014. The other is that the union of the governing coalition in 2014 will depend on a major commitment of Lula and Dilma. Let’s examine the two trends.

The opposition, despite having received several “gifts” from the government, such as the ministerial scandals, continues as in 2011, without speech or messages, with nothing concrete to say and deeply disorganized. In the midst of disaster, good news: the PSDB already has a candidate. Both FHC and Sergio Guerra, president of the party, announced support for Aecio Neves (MG) as a candidate for presidential succession in 2014.

From this fact, some doubts emerge, as, for example, if José Serra accepts the choice, and if Aécio will be a competitive candidate. Another doubt is if he can unite the opposition. Finally, if he really wants to be a candidate. To be a candidate with a realistic chance of victory, Aécio depends more of others than himself.

To be a strong competitor, Aécio will have to obtain the support not only of all opposition parties. He will to explore very well the split in the government coalition, attracting, for example, the PSB and/or PDT for his side.

Aecio Neves, despite the strong last name and good transit between politicians, has not yet shown skills to play the big game of the presidential race. His profile would be perfect for the 1980s, as a kind of Collor from Minas Gerais. However, Brazil today is more complex and the government is much more powerful than it used to be in the past.

The other issue relates to the second trend: the unity of the political base. Until now, after more than 15 months of Dilma’s government, is evident that the governing base is greater than the ministerial reach.

To complicate matters, there is an irresistible vocation for friendly fire. First, between the parties. Then within the parties. Moreover, no tools are available to deal with this situation. The strategy used it to procrastinate rather than establishing a “judgment” that demarcates and pacify relations.

The government relies on its economic power to satisfy everyone and to promote growth without (much) inflation.The formula is good on the one hand, for the people – that, ultimately, is who decides – is satisfied and trust the president.

On the other hand, the lack of a consistent plan of pacification of the governing coalition will charge a price in terms of efficiency, range and modernity in our public policies. Therein lies the faint hope of the opposition, and also the still uncertain and likely impact of social networks in the dispute.

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