Introduction

What can we celebrate on the third anniversary of the Real Plan?

As each year passes, it is becoming clearer that the effects of the new currency were not limited to the drop in inflation and to the consequent increase in the population's purchasing power, and especially that of the lowest income groups.

Currency stabilization unleashed an intense transformation process that is changing the make-up of the country and bringing concrete gains to Brazilian producers and consumers, workers and businessmen, students and housewives, i.e., to all Brazilians.

Everything began, it is true, with the reorganization of the economy. Brazil returned to sustainable growth rates. From 1981 to 1993, per capita income had fallen by 5%; in the last three years, it has increased by 9% as a result of an average annual growth rate of 4.4%. This growth occurred simultaneously with a significant income transfer to consumers, and especially to lower income consumers. In July 1994, the basket of basic food items cost R$106.95; in June 1997, it cost R$112.03. Meanwhile, the average real income of workers increased by 22%.

The removal of economic uncertainties made it possible once again for consumers with low purchasing power to have access to credit. Thus, these consumers were able to buy more costly goods. Sales of electric appliances increased 66% from 1994 to 1997.

As a result of the effort to reorganize the public accounts, federal government social expenditures have increased 27%, in real terms, since the Real Plan was introduced. It is important not only to spend more, but also to spend more effectively. Through partnerships with the states, municipalities and even local communities, the implementation and supervision of many social programs are being decentralized. This process is being applied in education, where resources are sent directly to the schools and are spent under the supervision of the Parent-Teachers Association (Associação de Pais e Mestres). In the health area also, more and more decisions are being left to the Health Councils (Conselhos de Saúde). Finally, in housing and sanitation, financing requests are approved after being reviewed by organs comprised of representatives from the public sector and from non-governmental organizations.

Because of these factors, Brazil today has fewer poor people. In 1994, the poor comprised 33% of the population in the principal metropolitan areas; last year they represented 25%. The degree of inequality in income distribution, although still high, declined.

The government created and is implementing the Brazil in Action Program (Programa Brasil em Ação) to promote the physical infrastructure and human resources necessary for investments. The privatization program that is now in progress and the constitutional amendments that are under review in Congress complete the framework of reforms necessary to assure growth in the coming decades.

As Brazil's economy is being restructured, its democratic system is being strengthened. The government welcomes society's desire to participate, and is stimulating this participation by decentralizing decision-making and control over a growing number of public-sector activities.

Democracy today represents also a daily struggle against violence and discrimination. The National Human Rights Program (Programa Nacional dos Direitos Humanos) affirms the commitment of Brazilian society and government to defend these rights. Lamentably, occasionally, the vestiges of a past that we would like to extinguish flare up and embarrass Brazil. However, the combined efforts of everyone are offsetting the impunity of those violent forces that infringe the rights of the unprotected.

These broad, profound transformations are rebuilding Brazil step by step.

Actually, the Real Plan initiated a broad movement to remove the chains that have impeded Brazil from realizing its potential: to build a truly representative and increasingly participatory democracy; to mobilize the human and physical resources needed to assure a sustainable growth rate capable of generating more jobs and better salaries; to promote a reform of the state and to focus the government's efforts where they are needed most; to redirect public services toward those who need them most in order to provide opportunities to those who never have had them, and who would have continued without them had it not been for the profound changes now taking place.

It is true that all this cannot be credited solely to the Real Plan. The changes that are taking place are, above all, the result of the determination and hard work of every Brazilian. However, it is also true that none of the significant gains would have occurred had it not been for the Real Plan, which finally succeeded in ending a cycle of economic disorganization, blunders and loss of self-esteem that characterized Brazilian society for more than a decade.

With the end of inflation, legitimate demands from different segments of society emerged with unquestionable vigor, broadening considerably Brazil's agenda. This trend is positive. However, the intensity of the demands bears no relationship to the ability of the society and of the government to respond. One cannot expect that long-standing problems, many of them centuries old, can be resolved overnight.

Relative to the past, much has been achieved. Relative to existing needs, much remains to be done. We know this. That is why we continue working, convinced that Brazil is back on course and that we are in a position to confront the country's extensive needs.

The scope of the work that lies ahead cannot prevent us from seeing that we have come a long way in a short time. The continued economic growth since 1994; an unprecedented redistribution of income; the emergence of a powerful consumer market; the return of productive investments; the effort to remove economic obstacles; and the gains that are already being felt in education, in health and in the improved living conditions of the lowest income population are different aspects of the same reality: the redefinition of Brazil's development process.

Gradually, Brazilians are regaining their self-confidence. They participate, they demand their rights, and they contribute to the new Brazil that we want to build. It is this partnership working for a better Brazil that we can celebrate on the third anniversary of the Real Plan.

Fernando Henrique Cardoso

Publicações

Contents

I - Currency Stabilization