Reviewing the New Brazilian President’s 1st Semester: Policy

Sure, federal governments run the postal service, a military that doesn’t have a lot to do, and a few social programs, but what the heck are they good for anyways, besides causing a lot of bickering in Congress?

You’re not likely to find very good answers perusing the news. Look in any newspaper and you’ll see that headlines refer to conflict—the politics of policy make the news, not policy itself. Good policy analysis is difficult to find, which makes understanding what the heck goes on at the federal level a very difficult exercise indeed. Here is a brief overview of some of the more noteworthy policy outputs of the Rousseff administration during her first semester in office:

1. Raising the minimum wage:  I wrote about the raise back in February when it was enacted. The monthly minimum wage went from $510 in 2010 to $545 in 2011 (about US$345), a 6 percent raise. The rise in inadequate, given that Rio de Janeiro and São Paulo are considered among the world’s top 15 most expensive cities at the moment, and inflation is now growing at about 6.5 percent annually. On the other hand, full employment in Brazil is causing labor shortages and wage inflation, which may signal higher real wages. Most workers earn more than one minimum salary; construction workers who work as laborers, for example, earn approximately two minimum wages.

2.  Raising tax exemption rates: A correlate of adjusting the minimum wage is adjusting minimum rates for tax exemption. If you made less than R$1500 per month in Brazil, you were exempt from tax. For each year of the Rousseff government, this rate will increase by 4.5 percent, so in 2011 it is R$1556, and in 2012 it will be R$1637. The rate should theoretically keep pace with inflation, but it currently falls two points short. What this ultimately means is that if inflation continues apace, the government will be taxing more Brazilians each year if wages are adjusted for inflation. Paulo Pereira da Silva (PDT-SP) and the unions proposed an annual hike of 6.47 percent, but the government refused.

3. “Brazil Without Misery” or Brasil sem Miséria: A social program that involves expanding basic services, such as electricity, sanitation, literacy, and other basic public services. The program follows in the tradition of the famous Bolsa Familia championed by Lula (although originated by Fernando Henrique Cardoso), which provides cash transfers to families conditional on their children attending school. The scale of Bolsa Familia and its popularity in the poor northeast are widely viewed to have handed Lula his second presidential election victory. Brazil Without Misery may do the same for Dilma.

4. Creation of Limited Liability Employment: Previously, opening a company required having a partner, to create broader liability and accountability. Now, a single person can open a limited business. The only requirement is that the total capital outlays must equal or exceed 100 minimum salaries, in other words, R$54,500, or about US$35,000. Good for entrepreneurship and the formalization of the informal sector, but still a high capital requirement for most Brazilians.

5. The National Strategic Border Plan, or Plano Estratégico de Fronteiras: The plan is to fight cross-border crime, including arms, animal, and human trafficking, drug-smuggling, and environmental destruction. Announced in June and coordinated by various police forces, the armed forces, and the Ministry of Justice, the plan has generated little if any reporting.

A few Additional Good Policy Calls:

Putting an End to the Pão de Açucar-Carrefour Merger Fiasco:

The President effectively vetoed an embryonic plan hatched by the Grupo Pão de Açucar, one of Brazil’s largest grocers, and tentatively approved by the National Development Bank of Brazil (BNDES): to take over another of Brazil’s largest grocers, the French group, Carrefour. The resulting gorgon would have controlled about a quarter of the national supermarket industry, much to the detriment of other chains and consumers. BNDES has earned a reputation for fostering oligopolies; it funds a small group of privileged Brazilian firms—with taxpayer money at privileged rates—that then proceed to gouge Brazilian consumers. Until 2009 there was absolutely no transparency in the BNDES. The rationale behind the BNDES, apparently, is to fund Brazilian companies to be so large that they can compete on an international scale, notwithstanding their homegrown inefficiencies. According to various news sources, the BNDES President Luciano Coutinho fell out of Rousseff’s good graces after the Pão de Açucar-Carrefour episode.

Mass-Dismissals in the Department of Transport and Infrastructure (DNIT):

The carnage continues until today—more than 15 top officials of the DNIT have been pressured out of a job by the President’s Office, according to today’s Folha de São Paulo. As my last blog post conveys, Rousseff appears to be keen on sending a message to other allied-controlled Ministries: corruption will not be tolerated. Seven cases against DNIT officials have been opened by the Comptroller General. The Ministry of Tourism was the latest government agency to come under scrutiny. According to today’s Jornal Globo, the Ministry paid more than R$52 million for online courses provided by an NGO run by an ex-politico with several corruption cases on his record.

Joining the Open Government Partnership (OGP) as Co-Chair

Although it is questionable whether Brazil should qualify for the OGP, let alone serve as Co-Chair alongside the U.S. , this surprising commitment to open government at least sets up positive expectations. The most important pending issue is to approve the country’s long-awaited freedom of information law. Then active transparency has to be a focus, from tax transparency, transparency on environmental policy questions, to transparency on how public money is being spent. Open government also sets up the expectation for greater governmental open-data initiatives that may be leveraged by Brazil’s advocates, hackers and technologists.

Brazil’s willingness to join the Open Government Partnership is a decisive demonstration that Brazil is not “turning to the left” à la Hugo Chavez, but rather charting out its own pragmatic course. This route is unquestionably closer to the U.S. Not only is Brazil co-chairing the OGP alongside its Anglo-American neighbor, but the U.S. recently promised to lend its “full support” to Brazil in its quest to claim a seat on a reformed U.N. Security Council. The two American Goliaths are undeniable getting cozy with each other.