Country Brief: Brazil

Country Brief: Brazil

Saul CunowPOLI 134AA

April 30, 2014

Brazil (Very) Basics

• How many people live in Brazil?• How big (geographically) is Brazil?• How many countries in South America border

Brazil?• What is the national language?• How big is the Brazilian economy?

What’s new in Brazil?

• Brazil is much richer, more equal, and more stable politically than at anytime in its recent history (or ever?)

• World Cup this summer!!

• National elections in October

• Summer Olympics in Rio in 2016

What’s not new in Brazil?

• Poverty and inequality

• Corruption at all levels of government

• Political fragmentation

• Popular discontent with elected officials

State of Democracy in Brazil

• Brazil democratic progress mirrors progress in the region since the early 1990’s

• Since impeachment of Collor in 1992, elections have been stable, regular, and fair

• Democracy in Brazil has survived despite extreme inequality, violent cities, and poor living conditions for many Brazilians

• In some areas (e.g. election technology), Brazil is among the most advanced in the world

Political Dynamics in Brazil

• National dynamics are often not reflected at the local level

• More than two dozen political parties in Congress• Presidential parties never have majorities so they

rely on coalitions to govern• PT / PSDB = government / opposition cleavage• PMDB and others act as “fair weather fans”

supporting whichever team will win presidency

Brazil Political Basics

• Presidential system with bicameral legislature– (Sound familiar?)

• National and state elections every four years• Municipal elections every four years• Very advanced electronic voting system– No exit polls or hanging chads!!

• Presidents, governors, and mayors are powerful actors• Political parties not so powerful (in most cases)– More than 2 dozen parties represented in Congress

Electronic Voting in Brazil

Executive Elections• Presidential elections in Brazil are similar to in the U.S.

– Few candidates– Parties matter > last 5 elections disputed by same two parties– Substantive campaigns– Plenty of negative campaigning (sound familiar?)– Some, but not too many crazy people (familiar?)– Runoff if no majority in first round– Two consecutive terms limit

• Gubernatorial elections and mayoral elections are also similar– Runoffs except in municipalities with <200,000 inhabitants

Brazilian Senate

• Senatorial elections are similar to in the U.S.– Substantive– A few prominent candidates in each race

• 81 seats– 26+1 states x 3 seats

• Plurality is used to select senators• Every 8 years voters cast votes for two senators• Currently 17 parties hold seats

Legislative Elections

• Elections in the Chamber of Deputies are “the Wild West”– Very different from elections in the U.S.– Similar to elections in Ecuador, Colombia, Peru– Lots of candidates!

• Deputado Estadual• Jeferson Camillo• Tiririca

Chamber of Deputies

• Brazil’s lower house with 517 seats• Extremely malapportioned– 11 states with minimum 8 seats– Roraima 450,000 people/8 seats = 56,250 people per

seat– São Paulo 42 million people/70 seats = 600,000 people

per seat– Who benefits from this setup?

• Deputies elected in statewide districts using open-list PR

How does OLPR work?

1. Voters cast vote for one candidate or party (most voters do not vote for party lists)

2. Voters for all candidates in each party (*or coalition) are added up

3. Parties are allocated seats proportional to vote share

4. Individual candidates’ vote totals determine their order on party lists and whether or not they are elected

Consequences of Brazil’s OLPR• Personalistic politics – candidates compete with their co-partisans for list

position

• Bacon! - Pork is an easy way for candidates to connect with voters and differentiate themselves

• LOTS of parties and candidates– 60-80 in the least populous states– Over 1,000 in São Paulo and elsewhere

• “Paradox of Choice” in elections– Many candidates means many good options– But choice-making becomes difficult

Lula• Like soccer players, Brazilian presidents are usually not

referred to by their last names

• Luiz Inácio “Lula” da Silva– Born in Pernambuco but raised in São Paulo state– Raised in a poor family with almost no education– He worked as a shoeshiner before moving on to steel and

automobile factories

• By the mid-1970’s he had become an important union leader in the ABCD region of São Paulo

Fourth Time’s a Charm• In 1980, Lula was a founding member of the Workers’ Party (more on

them soon)

• He was active in the campaign to end military rule (1964-1985)

• Lula was elected to Congress in 1986

• He ran for president and lost in 1989, 1994, and 1998

• In 2002, he was elected president after adopting a more moderate image and rhetoric– Lula 80’s– Lula 2nd Term President (2009)

Lula’s Presidency

• Lula’s election was transformational for many– (Imagine Obama x 10)– “One of the people” was elected president– This is rare in Latin America and Brazil– Triumph for the Workers’ Party and the left

• Lula was reelected fairly easily in 2006 despite a serious corruption scandal

Lula’s Presidency• Once in office, Lula governed from the center• Continued many of the policies implemented by his

predecessor, Fernando Henrique Cardoso (FHC) of the (now oppposition) PSDB

• Orthodox fiscal and monetary policy• Markets and business elites were appeased by these

moderate policies• The lower and working classes were thrilled• Militants in the PT were among the most displeased• FHC and the PSDB are “resentful” that Lula “gets all the credit”

for these policies

Lula’s Accomplishments

• Important accomplishments– Securing Olympic games and World Cup– Economic, political, and social stability– Significant reductions in poverty and inequality– Social programs• Fome Zero (Zero Hunger)• Bolsa Família (more on this in a minute)

Lula and the Mensalão Scandal• PT leaders made monthly payments to deputies to win their

support for government legislation

• “Dinheiro na cueca” (“Cash in the underwear”)

• PT leadership felt it was “above politics”

• PT leaders, deputies are now in jail including Lula’s Chief of Staff

• “Teflon Don” president was largely unaffected

Lula’s 2nd Term Approval Ratings

Bolsa Família

• Conditional Cash Transfer Program (CCT)• “Family stipend” started by FHC but expanded by Lula• Federal government provides poor families with direct

financial transfers (debit cards)– Around $15 per child for families earning <US$55 a month– Why debit cards?

• Money is conditional on certain behaviors– Children must attend school– Vaccinations

• Program covers over 40 million people

Bolsa Família• Payments are given to female heads of household

– Any ideas why?

• Long term and short-term benefits– Like what?

• Similar programs are in place across the world and Latin America

• Bolsa família is considered a model

• Limited corruption/leakage

Bolsa Família Economic Impacts

• Relatively cheap (0.5% of GDP)– Pensions represent ~13% of GDP in Brazil

• Substantial reduction in (extreme) poverty– Especially rural poverty

• Substantial reduction in inequality

• Boosts demand in domestic market

Inequality in Brazil

(Source: The Economist)

Poverty Reduction in Brazil

(Source: The Economist)

Bolsa Família Political Impacts• Changed political landscape in Brazil

• Workers’ Party (PT) support base has shifted from laborers and educated voters in Southeast to poorer, rural voters in Northeast

• Traditional bastions of conservative political bosses and parties became Worker’s Party (PT) strongholds

• Limited scholarly evidence of causality here– Lula is a big part of this story too

Lula -> Dilma

Dilma

• Dilma Rousseff was born in Minas Gerais to a Bulgarian father and Brazilian mother

• During the military government she was active in Marxist-Leninist rebel groups– “Joan of Arc” of the guerrilla movement

• She was arrested and tortured for weeks• After return to democracy she helped found the PDT• Dilma worked her way up the ladder to Minister of

Energy to Lula’s Chief of Staff when José Dirceu resigned (mensalão scandal)

“The Chosen One”

• Lula was termed out in 2010• Prior to running for president, Dilma had never run

for elected office• She ran a campaign based on continuity with Lula

and his policies – he was present throughout• Dilma Campaign Ad 2010• She defeated José Serra 56% to 44% in the 2nd round• Dilma is Brazil’s first female president– Wave of women in elected office in Latin America

Dilma’s First Two Years

• Delivered promised continuity• Also sacked some ministers and others

leftover from Lula’s administration• She was given credit rather than blamed for

corruption scandals• Economic slowed and inflation increased• “Teflon Dona”?

Record Low Unemployment

Protests Break out in 2013

• Protests were sparked by increases in bus fares

• Fare in São Paulo increased from R$3 to R$3.20

• Bus fares were a focal point but underlying complaints were more serious

• Hundreds of thousands (if not millions) of people took to the streets across the country

What were the protests about?• Brazilians pay very high taxes but get low quality government

services (including transportation)• Inflation

– Brazil’s cities are among the most expensive in the world ($40 pizza)– Big mac index

• Wages have not kept up– Mean salary is < US$700 a month– Federal minimum wage is US$325 a month (8 pizzas?)

• The “bar has raised” – what will come next for the new middle classes?

• Corruption– World Cup and Olympics (more on this in a minute)

Different types of protesters

• Lower and middle class Brazilians– Largely peaceful– Upset with poor governance and social services– High costs of living

• “Black blocs”– Hardcore anti-government protesters– Responsible for violent provocations– Vandalism and destruction of property

Dilma’s Plummeting Popularity

• Dilma began her presidency at record highs for a first term president

• Reelection in first round seemed certain

• Now she’s in trouble…

Protests and the New Middle Class

• What does it mean to be middle class in Latin America? Brazil?– Not the same thing it means in the U.S.

• How are the demands of these middle classes different from the demands of the poor?

• These protests will likely continue through the World Cup but not clear how widely

The World Cup

• Brazil will host the 2014 World Cup this summer• 12 cities will host games• Why is a nation obsessed with soccer upset

about the World Cup?• What are the political implications?– Brazil on the world stage (positive? risky?)– Substantial government investments– Real electoral consequences of the performance of

the national team?

What World Cup Cities Need

• Stadiums

• Airports

• Highways, buses, and subways

• Hotel rooms

• Is the World Cup good for economic growth?

World Cup Host Cities - São Paulo

• Largest city in South America (20+ million people)• Brazil’s economic capital• At least 3 important soccer teams• New Itaquerão stadium– Estimated cost – R$820 million (US$360 million )– Final cost – R$1 billion (US$450 million )– Future home to Brazil’s 2nd most popular soccer team– Venue for opening match– Target ready date December 2013– Actual ready date ??

World Cup Host Cities – Rio de Janeiro

• Brazil’s most famous city• Almost 11 million people in the greater

metropolitan area• Major soccer city• Most famous stadium – Maracanã– Attendance of 200,000 in 1950 World Cup!!– Estimated cost – R$705 million (US$315 million )– Final cost - R$1.2 billion (US$540 million )

World Cup Host Cities - Manaus

• Gateway city to the Amazon• Population 2 million• Local team plays in Brazil’s 4th division (think single-

A baseball)• Average attendance for local team is less than 2,000• New stadium capacity is 42,374• Estimated cost – R$500 million (US$225 million)• Actual cost - R$670 million (US$300 million )

World Cup Infrastructure• Brazilian infrastructure has not kept pace with rapid growth

and expanding middle class– Middle class people don’t want to take the bus!– Would have been hard to keep up

• The Cup is an “excuse” for the government to invest in infrastructure. (Does the government need one?)

• Are these the “right” investments?

• Will they be ready in time?

Growth in Brazilian Air Traffic

Twitter pic of subway construction

World Cup “Takeaways”• Is the World Cup every a good investment?

– Short-term costs outweigh benefits– How can we measure “downstream” benefits?

• Cost overruns aren’t uniquely Brazilian (Sochi Olympics ~US$50 billion)• Not everyone can build like China

– 2nd Avenue subway in NYC was planned in 1929 (still not built)

• Most economists believe Brazil needs substantial investments in infrastructure– Could these happen without the cup?

• What if the Brazilian government were performing better in other areas?– World Cup is a focal point for public discontent

Thank you!

• Email me if you have any questions– scunow@ucsd.edu

• Go visit Brazil! (maybe not during the Cup?)