Former Brazilian President Fernando Henrique Cardoso visited the Bank on
December 9th to discuss the impact of social reform policies enacted during his
two-term presidency from 1995 through 2003. President Cardoso was the guest lecturer
for the Bank’s Practitioners in Development series. Gobind Nankani, Vice
President of the Bank’s Poverty Reduction and Economic Management network, provided
some opening remarks about President Cardoso. He noted the stability Cardoso brought
to Brazil, where he helped reduce inflation, institutionalized fiscal responsibility,
and enacted programs that raised social indicators. Nankani also noted he was
the Brazilian Country Director during much of Cardoso’s Administration and had
a good working relationship with him. He closed by stating that most Brazilians
thought of President Cardoso as one of its greatest president. Nankani was followed
by Shengman Zhang, Managing Director of the Bank, who added some additional
introductory remarks.
President Cardoso said the idea of development has changed since the Bank
was established in Bretton Woods during the Second World War. During the 1950s
and 1960s, the emphasis was on material growth and prodding developing countries
to follow the historical experiences of the richer nations. It was thought growth
would lead to higher living standards. He noted that some thought the way political
and social forces were organized could impact economic growth. He said as an
economic theorist in the 1960’s, he believed there were a variety of ways development
could occur. He characterized this as associated dependant development, which
suggested there were linkages between the interests of multinationals and local
entrepreneurs. The Brazilian experience suggested that economic growth would
not necessarily lead to equity. High growth for Brazil in 1970’s did not translate
into higher social indicators. He cited research he conducted on sewage service
coverage for the poor and growing infant mortality rates to illustrate his point.
The President also cited the emergence of environmental awareness as an important
development in the cause of sustainable development. The Rio Conference in 1992
subsequently led to other large UN based conferences since. He noted that some
conference attendees favored continued industrial pollution because in their
minds it signaled continued economic growth. The Rio Conference, he said, made
it easier to seriously discuss other social policy issues such as women’s rights
and racial discrimination.
He said "what seems to lie behind this deconstruction of the concept of
development is the growing perception that economic growth only proves meaningful
if understood as part of a larger process. This entails respect for the environment
and promotion of human rights and other collective aspirations. The notion of
human development is perhaps the latest and most successful attempt to bring
the concept of development in line with the multiple expectations of contemporary
societies."
Human Development Index’s for Brazil have been rising throughout the 1990’s.
of municipalities improved using this indicator, and municipalities of 50,000
or less improved significantly. Family income per capita rose 30% and average
monthly earning rose 25% during the 1990’s. Life expectancy rose and infant
mortality declined, and the greatest recorded gains were in the poorest section
of the country. Education attendance levels also rose. President Cardoso said
an important aspect of increasing educational enrollment was it also increased
children’s nutritional levels because they received meals at school. Many federal
taxes received are redirected to the poorest in Brazil through a variety of
social programs. Average income among the poorest 20% of the population increased
by 63% during the 1990’s. Poverty rates declined by 20% during this period.
President Cardoso noted that 50 million Brazilians remain in poverty, but progress
has been made as poverty has been reduced by 12 million people. He said "today’s
motto is now ’what to do’ but ’how to do it’ in the most efficient and cost-effective
manner."
During the 1970’s, Brazil had an authoritarian regime and there was strong
economic growth. Democracy, the President said, does not necessarily translate
into economic growth, but there was strong social growth. Still, he emphasized
that increasing social spending was not the only answer, because it is also
very important to spend more wisely on monies spent on social issues. This can
only be done by opening up the participation process during the deliberation
process. He called this reconstructing the state apparatus in a modern way to
cope with the new demands. Social spending went to the poorest and not the middle
income and special interests. He used the HIV/AIDS Prevention Program as an
example of the effectiveness of quality on social spending. Free access to medicine
was provided, and the government disseminated information on safe sex practices.
He mentioned the increased communication developed during his Presidency with
the NGO community.
President Cardoso noted that social indicators still have far to go in Brazil,
but progress has been made and policy makers now have mechanisms to make these
positive changes. One of the main lessons he has learned is that it is necessary
to have good social policies, but this should be tied into economic growth.
Economic growth in Brazil is tied into global economics, however. He believes
under the right conditions, Brazil can achieve an annual growth rate of 6% to
7%. This growth is related to circumstances beyond the control of individual
governments and their leaders. He cited several global financial crises over
the past few years that impacted Brazil’s economic health. The global system
itself needs transformation and reform. He suggested the Bretton Wood institutions
should be involved in these reforms. He cited a lending package from the IMF
in which the markets did not react positively, but were assessing the position
to be taken by the upcoming government instead. Cardoso suggested that the IMF’s
power is limited. He acknowledge the support of the Bank in Brazil’s development,
but again, noted the financial limits of the Bank to help. He called for a democratic
process at the global economic level.
Stanley Fisher, former Deputy Managing Director of the IMF, said Cardoso
was instrumental in cementing democracy in Brazil, which he did with a grace
under pressure. He said Cardoso’s policy interventions succeeded during a period
of macroeconomic difficulty and slow growth in Brazil during the 1990’s. Fisher
also noted that tax revenues in Brazil are higher, however, than regional neighbors,
which can allow for more interventions. He called this an issue of where tax
systems needed to be reformed in other parts of the region. The changes in Brazil
were a result of having a democracy, rather than an authoritarian regime. While
the Human Development Index is a good indicator of social growth, Fisher said
growth was not sufficient to improve social indicators, is not necessary for
short term improvements, that economic growth helps governments improve social
conditions, and redistribution can help for a time but sustained growth is necessary
for the long term. Fisher acknowledge that Cardoso was not calling for aid to
Brazil, but was calling for less volatility in the global system and strengthening
of multilateral institutions. He said Brazil could more to help its own economy
rather than shift blame to global forces. He said that Brazil has not integrated
sufficiently in international trade because of an over-reliance on its agricultural
sector. Fisher said Brazil must more fully develop its industrial sector. Reducing
its own protectionism will help the country more fully access export markets.
Enrique Iglesias, President of the Inter-American Development Bank,
said Cardoso was able to consolidate democracy in Brazil. He called democracy
building a daily act. He noted that Cardoso was able to implement macroeconomic
policies during a difficult time for his country. Iglesias added that the third
outcome was the impact Cardoso’s tenure had on social policies. He called the
Cardoso model instructive for the region and useful for its development goals
currently. He called Brazil an example of the lessons the region learned over
the years when Cardoso and himself were young economists during the 1960’s.
The 1970’s taught them the importance of macroeconomic balance and discipline.
Later they learned the importance of social populism. 1980’s was a period of
large financial crises, and it taught the two of them that it was necessary
to open up economies. Iglesias noted the importance of developing the relationship
between the public and private sectors.
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