Brazil

Categories: Overview | Political | Economic | Social | Environmental | Rule of Law | Trade Policy | Money
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Full Report: Brazil

Overview

1910-1916: Brazil is a federal republic, governed by a president with a bicameral congress and a judiciary under the Constitution of 1891. The elites of the pátrias, or autonomous centers of regional control, hold the real power, in particular in the states of Minas Gerais and São Paulo. Lack of inland transportation hinders integration, but Brazil prospers economically, exporting sugar, rubber, and coffee.

1917-1923: The economy expands under President Epitacio da Silva Pessoa. Industrial production, concentrated in the South and Southeast, increases rapidly. Coffee exports remain the economy's driving force. Immigrants working on coffee plantations seek better opportunities in urban areas. The lack of adequate infrastructure development triggers violent strikes against urban living and working conditions.

1924-1929: The most powerful pátrias in Minas Gerais and São Paulo continue to exert control over the federal government. With only 3 percent of the population voting, Washington Luis Pereira is elected president, unopposed. Brazil increases trade and financial ties with the U.S. Economic growth continues until the fall in world demand for coffee, overproduction, and the 1929 world financial crisis.

1930-1934: Dr. Getúlio Vargas, governor of Rio Grande do Sul state, leads a revolution with support from local elites to undermine the growing political power of labor. Vargas rules by decree until a newly formed constituent assembly elects him president under a new constitution in 1934. Vargas centralizes government, and the pátrias give up their power in return for federal protection of their interests.

1935-1939: Vargas imposes martial law to quell a communist revolt he fears could lead to a revolution, then declares a "state of war." He shuts down Congress, dissolves political parties, issues a new constitution for a fascist-inspired "New State," and becomes its dictator. The government nationalizes and centralizes industry. Repression and insufficient social reforms accompany strong economic growth.

1940-1945: Succumbing in part to international pressure, Vargas signs a new constitution, declares amnesty for political prisoners, and allows presidential elections. But the military, united by recent repression and its assistance to the Allies in WWII, stages a coup d'état to cut short the political mobilization of the masses. General Enrico Gaspar Dutra, former minister of war, becomes president in 1945.

1946-1950: Under a new, conservative constitution, Dutra's government drifts rightward, outlawing the Communist Party. The state intervenes minimally in the economy, focusing on infrastructure and education. A vast increase in imports exhausts savings from the war years. Inflation picks up. Advocating accelerated industrialization and expanded social legislation, Vargas wins the 1950 presidential election.

1951-1954: The military and elite fear President Vargas's populist leanings. Political polarization deepens. Deciding that foreign interests are too slow to develop Brazil's energy sector, Vargas creates the Brazilian Petroleum Corporation (Petrobrás). This controversial decision and charges of corruption undermine his administration. The military demands Vargas's resignation, and he kills himself in 1954.

1955-1960: President Juscelino Kubitschek pursues nationalist policies with military assistance. The capital is moved to the newly built central city of Brasília. The economy expands rapidly as public investment strengthens heavy industry and the highway network. Brazil becomes the world's number two food exporter. But economic growth brings a doubling of foreign debt, inflation, and growing inequality.

1961: Nationally elected President Janio Quadros resigns within months when his proposed populist reforms face opposition from landowners, industrialists, and military leaders. His vice president, João Goulart, a populist and former minister of labor under President Vargas, is sworn in as president.

1962-1964: To appease military ministers opposed to Goulart, Congress turns the presidential system into a parliamentary one. Tancredo Neves is named prime minister. But Goulart mobilizes the masses and restores the presidential system by plebiscite in 1963. Rising inflation, lack of middle-class support, and a naval mutiny lead to a military-led revolt against Goulart, who flees to Uruguay.

1965-1969: Congress elects General Branco president. Pressured by the military and elites, Branco expands the president's powers and bans political groupings. His economic reforms do little to relieve inflation or discontent. His successor, Marshal Arthur da Coste e Silva, gives himself dictatorial powers, dissolves Congress, and suspends the constitution. A military junta takes over when he dies in 1969.

1970-1974: The military installs General Garrastazú Médici as president. Severe political repression and censorship accompany record annual economic growth of nearly 12 percent led by state-owned enterprises. A program of economic expansion includes vast projects such as the Trans-Amazonian highway and the world's largest dam at Itaipú, but does not provide for redistribution of wealth.

1975-1979: Médici's successor, General Ernesto Geisel, begins a program of distensão to move Brazil from authoritarian to democratic rule. Successive oil shocks disrupt economic growth, and Geisel opens the Brazilian oil sector to prospecting by foreign firms. Heavy external borrowing finances investment in infrastructure and industry. Geisel succeeds in imposing his successor, General João Figueiredo.

1980-1984: President Figueiredo opens up the political system, lifting the ban on political parties. The military reacts with terrorist acts, reinforcing the public's anti-military sentiment. Faced with soaring inflation, declining productivity, and mounting foreign debt, Figueiredo turns to the International Monetary Fund and imposes a painful austerity program, holding down wages.

1985: When Figueiredo undergoes surgery, millions demand direct election of the next president. A new electoral college comprising members of Congress and six delegates from each state elects Tancredo Neves of the Brazilian Democratic Movement Party (PMDB). But Neves takes ill on the eve of his inauguration and dies a month later. Vice President José Sarney, a military-regime supporter, succeeds him.

1986-1989: Brazil begins a transition from authoritarian to democratic rule. A new constitution supports democratic government with universal suffrage by direct ballot. Massive domestic and foreign debt burden Brazil. Allegations of corruption and a series of unsuccessful stabilization plans that fail to curb inflation undermine Sarney's administration. Fernando Collor de Mello is elected president in 1989.

1990-1994: President Collor fails to provide clean government or economic growth. He privatizes several industries, but inflation and opposition rise. Accused of corruption, he is impeached. Vice President Franco succeeds him, but is poorly prepared to redress the floundering economy. In 1994 Finance Minister Fernando Henrique Cardoso is elected president, riding on the success of his stabilization plan.

1995-1998: Cardoso governs as part of a loose three-party coalition. His popularity soars as the Real Plan of 1994, combined with a strong economic policy that welcomes foreign and private investment, brings economic stability and renewed, albeit limited, growth. Cardoso is reelected despite massive capital flight and financial turmoil sparked by financial crises in Russia and Asia.

1999-2003: A devaluation and carefully planned-out stabilization measures ease Brazil out of its financial crisis. The economy recovers in part, and measures are put in place to control public spending. Political infighting, corruption scandals, and an energy crisis shake Cardoso's popularity. Economic conditions worsen in 2002. Veteran populist Lula da Silva becomes president amid high public expectations.

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Political

1985-1987: President Sarney works with Neves's Cabinet and policies, but he relies heavily on Senate floor leader Fernando Henrique Cardoso. A coalition of the Brazilian Social Democratic Party (PSDB), concentrated in the Southeast, the Liberal Front Party (PFL), concentrated in the Northeast, and the Brazilian Democratic Movement Party (PMDB), the country's largest umbrella party, holds power.

1988-1989: A new constitution supports democratic government with universal suffrage by direct ballot. Significant power devolves from the central government to state governors and from the president to Congress. Inflation and corruption allegations undermine Sarney's administration and the PMDB. Fernando Collor de Mello of the National Reconstruction Party (PNR) narrowly wins the 1989 presidential election.

1990-1992: President Collor advocates free-market policies and a crackdown on government corruption. Collor's coalition flounders as his promises to rid Brazil of inflation are not realized. Opposition grows. Amid allegations of corruption, Collor fires most of his Cabinet, but cannot distance himself from the accusations. In 1992 he is impeached, and Vice President Itamar Franco of the PFL takes his place.

1993-1994: President Franco lacks a clear strategy, and turnover in the Cabinet is high. Congress appoints a committee to investigate its own members and the executive branch in a corruption scandal. Franco fires those involved in the case, but loses the election to Fernando Henrique Cardoso of the center-left PSDB, whose Real Plan is redressing the economy. The PMDB loses strength.

1995-1998: Brazil's largest party, the PMDB, and the center-right Brazilian Progressive Party (PPB) join President Cardoso's governing coalition. Cardoso finds insufficient support for his legislative priorities due to weak party loyalty. Constitutional reforms in 1995 include changes in election and party legislation. Cardoso is reelected in 1998, defeating the Workers' Party, which gains seats in Congress.

1999-2001: Political infighting, corruption scandals within the governing coalition, and an energy crisis cause President Cardoso's approval rating to fall by half. A number of senators and deputies defect to the opposition. Support grows within the PMDB to launch its own presidential candidate, possibly the governor of Minas Gerais (and former President) Franco, for the 2002 elections.

2002-2003: The national election campaign dominates 2002, with longtime Workers' Party (PT) leader Luiz Inácio Lula da Silva, known as Lula, jumping to an early lead in the polls and eventually winning in a runoff. His victory marks a turn across Latin America toward center-left, populist government. He faces both high expectations from his supporters and initial wariness from world markets.

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Economic

1982-1985: The Mexican debt crisis ends Brazil's access to international financial markets. An IMF austerity program enables Brazil to make its debt interest payments, but at the price of economic decline and increasing inflation. Inefficient state-owned enterprises further slow economic growth. A fall in domestic production brings a shift away from import substitution and toward a more open economic policy.

1986-1989: The government implements a series of economic stabilization plans to curb inflation. The value of exports falls as a result of the plans. The 1986 Cruzado Plan brings a brief economic growth spurt, but eventually fails due to the public deficit, an increase in the money supply, and a decline in crop output. During Latin America's "lost decade" of the 1980s, GDP grows 1.4 percent per year.

1990-1992: Collor's government implements trade liberalization measures, privatizes "strategic" state enterprises, primarily in heavy industry and infrastructure, and removes restrictions on free enterprise to increase competition and stimulate productivity. Combined with a stabilization package, the measures fail to redress the economy. GDP declines in both 1990 and '92, rising only 1.1 percent in between.

1993-1994: Lacking a strong economic strategy, President Franco slows the privatization program, focusing on a small number of cash-generating sales, and returns to a national economic plan. The state of São Paulo dominates the economy, producing 50 percent of Brazil's industrial output. Economic growth and stability are weak until Finance Minister Fernando Henrique Cardoso implements his Real Plan in 1994.

1995-1997: Now president, Cardoso develops a strong economic policy, cutting inflation and decreasing government spending in order to receive a major loan from the IMF. He deregulates the economy and privatizes state-owned enterprises in the energy, transportation, and communications sectors through the National Privatization Program. These measures bring limited economic growth, but greater stability.

1998: Cuts in government expenditure and financial crisis in Russia and Asia spark capital flight from Brazil and an economic downturn. Brazil begins an IMF-led structural adjustment program with a US$41.5 billion package. The Southeast remains Brazil's economic "center", while the Northeast, still controlled by a landed oligarchy, remains poor. In the Amazon basin, development is controversial.

1999-2001: A currency devaluation in 1999 helps moderate the economic downturn. Cardoso's privatization policy brings much-needed foreign investment. The economy begins to recover in early 2000, registering 4 percent growth by year's end. A domestic energy crisis and a series of external shocks cause a setback in economic growth in 2001.

2002-2003: Brazil's economy is rocked by intense pressure on its currency, difficulties in arranging IMF support, and the effects of the global slowdown. The persistence of widespread poverty and frustration with reforms is a factor in Lula da Silva's election. He sets a populist tone promising food security and social progress, but attempts to maintain financial orthodoxy at the same time.

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Social

1982-1986: A policy aimed at stimulating settlement of the interior results in slowing urbanization. Brazil's cities are already exploding, surrounded by sprawling favelas (slums) which house millions. The middle class grows rapidly and becomes increasingly politically active. Social and environmental groups proliferate, as do independent labor movements.

1987-1990: Social indicators such as access to basic services improve, even as the minimum wage loses value as a result of inflation. Unemployment rises, and the government cuts down on social spending. New legislation in 1988 focuses on increasing health services and public expenditure on education in the context of public-sector decentralization. Quantity and quality of services varies across regions.

1991-1994: Poverty is widespread, and income inequality reaches one of the highest levels among urban industrial societies. Almost a third of the employed population earns minimum wage or less, while almost half of the economically active population is employed in the informal sector, without job security or benefits. Brazil's rural interior remains desperately poor, and peasant protests are common.

1995-2003: President Cardoso focuses on better management of public health programs and improved quality of education. The Real Plan brings a rise in overall income, but fails to bring with it a significant reduction in unemployment or poverty levels. Frustration with reforms contributes to Lula's resounding election victory and animates his platform of social justice and food security.

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Environmental

1982-1987: The newly created National Environmental Council (Conama) coordinates a National Environment Policy, but enforcement of Brazil's relatively advanced public policies on the environment is poor. Deforestation of the Amazon and air and water pollution increase at alarming rates, slowing somewhat in 1987 as a result of the economic crisis.

1988-1991: The 1988 Constitution includes an article establishing the guidelines for state and society on environmental issues. To put the theory into practice, President Sarney launches an "Our Nature" program designed to incorporate the Amazon and its Indian communities into the national economy. The Institute on the Environment is created to centralize government action.

1992-1997: Local and international non-governmental organizations (NGOs) focus on environmental issues after Rio hosts the 1992 UN Earth Summit. Most major environmental projects focus on sanitation, urban pollution control, and soil erosion. The government creates the Ministry of Environment, but its lack of funds and poorly defined mandate limit its effectiveness.

1998-2003: A new Environmental Crimes Act goes into effect. But the government allows those responsible for environmentally harmful activities to sign a "commitment accord," which is renewable, promising to comply with the law within three years. NGOs and community groups are successful in stalling several large projects. The new Tumucumaque rainforest reserve in the far north is the world's largest.

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Rule of Law

1985-1989: Representative democracy is gradually consolidated. However, many concessions that President-elect Tancredo Neves negotiated with the military remain, including antistrike and repressive press laws as well as limitations on Congress. In urban areas, crime and drug trafficking intensify. In the rural interior, the struggle for land pits workers against landowners in armed conflicts.

1990-1994: Crime rates escalate in the favelas (shantytowns), many of which are controlled by organized crime. Evidence of corruption in the executive branch leads Congress to investigate 50 of its own members through a special committee. The Federal Police is routinely called in to investigate killings, some of which are thought to occur at the hands of the government's notorious Military Police.

1995-1996: Military occupation of the favelas and hills of Rio as a crime-fighting tactic lasts through the end of 1995 and leads to serious violations of civil rights, including torture. That same year sees the massacre of landless workers in the states of Rondônia and Pará. President Cardoso unveils a human rights plan and creates a division of the Federal Police to investigate human rights abuses.

1997-2003: Despite recognition of civil rights in the 1988 constitution, violations are common. Assaults and kidnappings are frequent in urban areas. Salary disparities and lack of transparency make the police and judiciary prone to corruption. A justice minister resigns over government refusal to investigate a corruption case. New president Lula da Silva vows that combating corruption will be a top priority.

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Trade Policy

1982-1985: Export subsidies, a currency devaluation, and a fall in imports resulting from lower oil prices and demand combine to create a trade surplus. The policy of import substitution begins to give way to a more export-oriented policy. A number of direct import controls are cut back, and the list of prohibited imports is reduced. By 1984, exports are double imports.

1986-1989: The trade balance fluctuates as successive stabilization plans decrease the value of Brazil's exports but fail to bring economic stability. Accelerated inflation further erodes Brazil's price competitiveness. A trade agreement with Argentina forms the nucleus of the Southern Cone Common Market (Mercosul) and brings limited trade liberalization. Tariff and import restrictions are gradually reduced.

1990-1994: President Collor advocates trade liberalization and announces a series of tariff reductions to be phased in over three years until they reach a third of their current average of 35 percent. Collor also sets up a Technical Coordinating Office for Trade, a reporting and registration agency with little discretionary power. Brazil negotiates with Uruguay, Paraguay, and Argentina to form Mercosul.

1995-1998: Brazil is a founding member of the World Trade Organization (WTO). Brazil begins to run a trade deficit as a result of President Cardoso's stabilization policies. The deficit gradually increases to a record US$6.8 billion in 1997. Brazil implements a large hydroelectric program, in part to reduce imports of oil.

1999-2003: The trade imbalance widens in 2000, then recedes, and in 2002 Brazil achieves its largest trade surplus in nine years, mainly because of the currency's loss of value. Lula's election raises doubts that Brazil will support rapid establishment of the Free Trade Area of the Americas (FTAA). The government still employs import taxes to protect many agricultural products from international competition.

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Money

1982-1985: Profligate government spending, service of the public debt, and exchange rate devaluations of austerity programs bring further increases to inflation and, consequently, prices. After Mexico's debt crisis in 1982, Brazil is cut off from international supplies of capital, and turns toward domestic borrowing.

1986-1989: Brazil's domestic debt equals its foreign debt. Four austerity shock plans and three consecutive currencies (the existing cruzeiro, the cruzado in 1986, and the cruzado novo in 1989) aim at reducing inflation. The Cruzado Plan, with its price and wage freezes, brings inflation close to zero, but real exchange rate overvaluation and uncertainty bring capital flight and new inflationary pressures.

1990-1992: The cruzado novo is again named the cruzeiro, without a devaluation. Debt renegotiation and falling international financial market interest rates reduce the external debt burden. The combination of slow growth, accelerating inflation, price freezes, and high domestic interest rates causes investment to slump. The public sector is virtually bankrupt. Brazil plunges into recession.

1993-1994: Finance Minister Cardoso executes his Real Plan with the introduction of an equilibrium budget; general indexation of prices, wages, and taxes; and the introduction of a new currency, the real, worth 1,000 cruzeiros and pegged to the dollar. Inflation falls from 45 percent to 1 percent within the year. Capital flows back into the economy in the form of equity investments in Brazilian enterprises.

1995-1998: The U.S. dollar strengthens, and the real begins to be overvalued. Brazil is highly dependent on short-term capital flows and vulnerable to external shocks. The Russian financial crisis of 1998 heightens fears among investors concerning returns in emerging markets. The Minas Gerais state governor's declared moratorium on debt payments to the Central Bank sparks massive capital flight from Brazil.

1999: The cumulative effects of the Asian and Russian crises and the worsening of the current account deficit demand drastic measures. Brazil abandons the defense of its currency and devalues the real in January, allowing the exchange rate to float freely. Within a month, the real falls 32 percent against the dollar. To reduce the devaluation's inflationary impact, interest rates are raised dramatically.

2000-2003: High interest rates and fiscal austerity hold down inflation and sustain the Real Plan, but in 2002 the real comes under heavy pressure and loses more than a quarter of its value. The election of populist president Lula da Silva rattles world markets, but he earns trust by appointing a well-known investment banker to be head of the Central Bank. To fend off inflation, interest rates reach 25 percent.

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Categories: Overview | Political | Economic | Social | Environmental | Rule of Law | Trade Policy | Money
Graphs: Growth | Income | Inflation | Unemployment | Well-being | Trade Volume | Trade (CAB) | Spending

Related: LinksView all categories for years from to | See Full Report | Print