Copenhage + 5

The achievement and consolidation of economic stability, at the end of an inflation that reached the annual average of 1.100%, from 1980 to 1993

By putting in place the economic stabilisation plan and by introducing a new currency - the real - starting in 1994*, the rate of inflation was drastically reduced. In 1997, the annual rate was 5%. And in 1998 less than 2%, the lowest rates of the whole second half of the century. In 2000, the Brazilian inflation is expected to range around 6%. The comparison between the price of the basic basket and the minimal wage shows that since 1996 the minimal wage has been higher than the price of the basic basket.

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*For the purposes of converting Brazilian reals into US dollars, an average foreign exchange rate in effect since the adoption of a floating exchange rate can be used. Between January 1999 and May 2000 that rate was U$ 1 = R$ 1,81.

The opening of the economy

The closed economy, based upon the import-substitution model, in force until the end of the 1980s, was replaced by an open economy, one that modernises in order to compete. The deepening of the integration within MERCOSUL became a strategic goal for Brazil, in order to strengthen the country’s position and that of its companies, in more comprehensive processes of integration to the world economy.

The establishment of a sustainable fiscal regime

Two major reforms and one act have established the conditions for the resumption of control over the two main aggregates of the public sector primary expenditure.

The reform of Social Security corrected the most serious unbalances of the retirement regimes, particularly that of private-sector workers. Retirement based upon tenure, a rule virtually obsolete world-wide, was replaced by retirement based upon the period of contribution. In addition, a minimal age for retirement in the public sector was established, and a substitute having equivalent practical effects was defined for private-sector workers. Thus, the minimal bases for the long-term equilibrium of the system were put in place, maintaining the programmes of direct income transfer financed by Social Security, on a non reimbursable basis, for the benefit of the most vulnerable segments of the population, amongst which the elderly, the disabled and circa six million rural workers.

The administrative reform has instituted instruments meant to legally limit the personnel-related expenditure, a particularly serious problem in the sub-national spheres of government.

A general public-finance act, approved early this year, regulates expenditure and indebtedness at the three levels of government: the Union, the states and municipalities. The Fiscal Accountability Act is the broadest institutional framework of the fiscal regime being created, and corresponds to a true revolution in the political practice pertaining to the transparency and accountability of the management of society’s resources by the State.

The restructuring of the financial system

An extensive programme, led by the Central Bank, has allowed the financial system to adjust to the low-inflation environment without undergoing traumas. The programme has increased the participation of foreign institutions, and currently the financial system is structurally more solid and apt to perform its role of promoter of savings.

The re-definition of the role of the State

The process of privatisation and of concession of public services was intensified, highlighting the energy, telecommunication and transport industries. In those sectors in which the State has ceased being present as an entrepreneur, progress has been achieved in the establishment of regulation agencies and regimes that foster competition and ensure channels for the expression of the demands of consumers. The conditions for the resumption of growth were thus created, in the sectors of infra-structure, previously strangled by the loss of the State’s financing ability, the instruments for the preservation of public interest having been preserved.

The telecommunication sector is a typical example, although not the only one, of such changes. Targets were set forth in terms of universal services, thus democratising access to telephone services: the number of mobile phones leaped from less than one million, five years ago, to circa 15 million, in late 1999.

The economy as a whole has modernised and became more competitive. The volume of foreign investments rose from U$ 2 billion, in 1994, to U$ 30 billion, in 1999, including the revenues of privatisation.

Within this process, the gains in terms of quality and productivity highlight, in contrast with the situation prevailing in the late 1980s. Using as a reference a study that gauges the productivity in the transformation industry, one notices that the productivity of work had an increase of over 90%, between 1991 and 1998, corresponding to an average increase of circa 6% a year.

Radicalising democracy

The deep reforms the Brazilian State is going through were underscored after 1995, but they are still far from completion. In Brazil, the thrust to reform the State is based upon the imperative of radicalising democracy. For two decades (1964-1984), the country experienced authoritarianism, focused on the almighty State as the engine of industrialisation and defocused from the social issue. In the 1970s, when the Brazilian "economic miracle" associated high rates of industrial expansion and income concentration, the official rhetoric used to say that first one had to let grow the cake of national wealth, to divide it only afterwards.

The sustainable development project, starting in 1995, is based upon the belief that Brazil may have, at the same time, growth and social inclusion, within the framework of democracy and operating within the conditions of a market economy. Concepts such as those of equity and equality of opportunities started governing the definition of public policies.

New mechanisms of interaction between Government and civil society were created. The process of decentralisation gained momentum, a process that valorises the activities of states and municipalities and democratises the process of transfer of federal funds in the social domains, particularly those of education and health. The space of participation of society expanded, both in the allocation and in the control of the use of public funds, by means of councils and permanent partnerships with the community.

The ever growing pressures from civil society, at the same time as they force the broadening of the public and democratic space, struggle against the historical ills of an elite-oriented attitude, of local authoritarianism and of client-oriented political cliques, as well as exacerbated corporation spirit and undue influence by major economic conglomerates.

The requirements of universality and transparency, however, still meet with resistance, whether from bureaucracy, used to not reporting to society, whether from private groups, built under the protection of a traditional patrimony-based culture that craves for profit, preferably with official subsidies, but abhors competition. That is why democracy in Brazil is not only a new reality, but also an evolving one. It has to be completed and re-invented, thus consolidating a set of values and a way of living together apt to pave the way for the pacific transformation of society