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ECONOMIC LEGACY OF THE NEOLIBERAL GOVERNMENTS OF CARDOSO, LULA AND ROUSSEFF

Fernando Alcoforado *

Brazil met throughout his story four models of development: the first, the agrarian export model that began in the colonial period and ended with the Revolution of 1930; the second, the national-developmentalist model, which began in 1930 and ended in the mid-1950s with the end of the second Vargas government; the third, the capitalist dependent development model opened with Juscelino Kubitchek in 1955, deepened by the military regime from 1964 to 1985 and concluded at the end of the 1980s the government of José Sarney and, finally, the neoliberal model initiated in the Fernando Collor government and maintained by Fernando Henrique Cardoso, Luiz Inacio Lula da Silva and Dilma Rousseff governments.

The agrarian export model that prevailed in Brazil from the colonial period until 1930 had as key stakeholders in maintaining the class of landowners and agro-export sectors. This model ended as a result of the global economic crisis, which affected deeply Brazil exports to the international market from the "crack" of the New York Stock Exchange in 1929, from the emergence of a industrial bourgeoisie committed to the modernization of the country's and the national development and political crisis resulting from the fraudulent election to the succession of President Washington Luís which resulted in the Revolution of 1930 and the rise to power of Getulio Vargas.

The agricultural export model was replaced by the national-developmentalist model after the Revolution of 1930, when Getúlio Vargas rises to power and begins the period of industrialization in Brazil. Vargas based his administration on the precepts of populism, nationalism and Labour. The economic policy came to value the domestic market, which favored industrial growth and, consequently, the process of urbanization. The Vargas Era brand, therefore the change of the direction of the Republic, by transferring the nucleus of political power from agriculture to industry.

The two periods of administration of President Vargas, from 1930 to 1945 and from 1950 to 1954, was also characterized by the defense of national sovereignty and interests of workers. In this sense, President Vargas sought to cement two covenants: one between the government and the national bourgeoisie in order to make more developed and less dependent on the outside and the other, between the government and workers to neutralize the action of communists and fascists called “integralistas” who sought to put down roots in the union area, especially the first.

With the deposition of Vargas in 1945 and the rise to power of President Dutra began dismantling the national-developmentalist model. With the end of the 2nd World War, the process of economic and political evolution of Brazil came under strong influence of the United States, which took the condition of hegemonic power in the West and began to act with determination in backward capitalist countries like Brazil to expand their businesses in these markets and, politically, to ensure alignment of each of them by its side in the confrontation with the Soviet Union during the Cold War. The American interference in the internal affairs of Brazil became crucial to its economic and political future development.

Getúlio Vargas, to return to power in 1950, attempted to resume the implementation of the national development model, but was frustrated in his claim to the political-military

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crisis that occurred in 1954 that led to his suicide to avoid deposition. Taking into account that Getúlio Vargas, in exercising dictatorial power 1930-1945 and returning the presidency in 1950 by popular vote, his government developed a policy of populist and nationalist character, became the target of American government and its local allies in order to overthrow him.

The suicide of President Vargas in 1954 was the natural consequence of this process. In this historical moment, the correlation of political and economic forces hung favorably to those interested in harnessing Brazil to international capital. The death of Vargas also meant "requiem" of national-developmentalist model that was replaced by dependent capitalist development model from Kubitchek government.

With the model of dependent capitalist development opened with Juscelino Kubitchek in 1955 was carried forward the process of import substitution started in 1930 with the Vargas government. President Kubitchek established the triple alliance between the state, the national bourgeoisie and international capital for sustaining the new model. The growth of the Brazilian economy took place in that period thanks to government investments financed with inflation and direct foreign investment. Numerous foreign companies settled in Brazil was attracted by the tax and financial facilities offered by the government.

The industrialization process was resumed with the expansion of the industry of consumer goods and the federal government made massive investments in the construction of Brasília and of power infrastructure and transport to enable the auto industry in the country and integration of the internal market. The industrialization process has given rise also to the emergence of a working class and an increasingly claimant unionism in the defense of workers' interests.

The decline of this model in the early 1960s with the consequent deterioration of social, political and institutional crisis resulting therefrom, which led to the resignation of Quadros and tumultuous rise to power of Vice President João Goulart in 1961, constituted determinants factors of emergency of the coup of 1964. President João Goulart, who advocated the same ideas of Getúlio Vargas, was also dismounted from power in 1964. The military dictatorship, implemented in Brazil since 1964, continued the model of dependent capitalist development started in Kubitchek government.

To finance the expansion of the Brazilian economy, the various military governments that followed deepened the triple alliance between the state, the national bourgeoisie and international capital, have attracted sizeable direct investments from abroad and raised funds from international banks to finance the expansion of infrastructure energy, transport and communications. From the late 1960s until the mid-1970s, the Brazilian economy experienced high rates of economic growth. However, the tripling of oil prices and the sharp rise in interest rates by international financial system were determinants of the decline of the dependent capitalist development model that deepened throughout the 1980s.

The decline of the Brazilian economy was parallel to the structural crisis of the world capitalist system in the late 1970s that put on the agenda the need for industrialized countries to restructure it. This restructuring had as main objective the opening of global markets by reducing the size of government and less interference of national governments in economic activity. For those emerging countries like Brazil, it was advocated the application of Washington Consensus, expression adopted in 1990 by the

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English economist John Williamson, which includes a set of measures established by the IMF and World Bank to stabilize the economies of peripheral capitalist countries to adapt them to the new world economic order in pregnancy centered on globalization.

The neoliberal model had started its deployment in Brazil in 1990 during the Fernando Collor government, when it was initiated the process of dismantling the institutional apparatus that characterizes Vargas Era, the Kubitchek government and the military regime in Brazil. Internal and external factors had contributed to changes in the institutional apparatus. Internally, the financial crisis of the state, which caused it to become unable to act as investor, insufficient domestic private savings, the cessation of funding from international banks and the reduction of foreign direct investment in Brazil from the debt crisis external in the 1980s put into question the development model in force until then.

Implementing the strategy of neoliberal adjustment made by the Washington Consensus, Fernando Collor and Fernando Henrique Cardoso (FHC) governments started to fulfill its three steps described below: 1) stabilizing the economy (fighting against inflation); 2) structural reforms (privatization, deregulation of markets, financial and commercial liberalization), and 3) resumption of foreign investment to boost development. The Cardoso government processed fighting against inflation with the Real Plan, privatized state enterprises and opened the national economy to international capital. The Lula government maintained the same policy of FHC, with the exception of privatization policy. The government Dilma Rousseff continued the FHC and Lula resuming the privatization policy.

The neoliberal model brought damaging consequences for Brazil during the Cardoso government. During 1994/2001, GDP growth in Brazil has been declining and the deficit in the external accounts, the public sector debt, the public deficit, the trade deficit and the interest payments on the debt were rising. That situation shows that the FHC (Fernando Henrique Cardoso) government led Brazil to become increasingly vulnerable economically and financially in the internal and external levels. FHC favored the interests of foreign capital to the detriment of national interests. This is corroborated by indicators relating to foreign investment, the share of foreign capital in equity companies, the remittance of profits abroad and imports of machinery and equipment showed that presented rincreasing numbers at the expense of domestic production.

The only success by the Cardoso government in this period was to have been able to control the rate of inflation at low levels through the Real Plan. This success was achieved thanks mainly to the opening of the Brazilian market to imported goods, which started to compete with products manufactured in Brazil forcing their low prices and the overvaluation of the exchange rate which contributed to further cheapen imports of goods and services . International reserves reached high values during 1994/1999 due to interest rates adopted by the federal government reached stratospheric levels to attract foreign capital seeking to cover the deficit in the external accounts. The high interest rates contributed to the disincentive to investment in productive activities and the increase in unemployment that, in Brazil, have been increasing during the Cardoso government.

In 1999, the Brazilian economy suffered the onslaught of speculative capital which resulted in the escape of foreign currency of the country in the last months of 1998 and in January 1999. Due to this fact, the Brazilian government was forced to release the rates in January 1999 and hence to get maximum devaluation of Real Brazilian currency

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against the dollar to avoid the depletion of international reserves. Despite these measures, the Cardoso government did not succeed having to resort to the IMF to finance the deficit in the balance of payments. During the Cardoso government, existing bottlenecks in the infrastructure as in the electricity sectors conspired against the resumption of growth in Brazil and this fact has caused a multitude of blackouts in the electrical system.

After the failed neoliberal and anti-national government of Fernando Henrique Cardoso, it was expected that Lula and Dilma Rousseff governments would represent a step forward in relation to economic and social development of Brazil with the adoption of a national development model. While the average growth rate of GDP in Brazil FHC period (1998/2002) was a paltry amount of 2.3% per year, the economic growth of the country during the Lula government (2003/2010) was also piddling (3.6% per year). With Dilma Roussef, Brazil grew even less (1.45% from 2010 to 2013) and are expected to have zero growth in 2014. When Fernando Henrique Cardoso assumed the Brazilian government in 1994, the federal public debt, which totaled approximately R$ 108.8 billion jumped to R$ 658 billion in 2002, while during the Lula government public debt that was R$ 658 billion in 2002 increased to R$ 1.562 trillion in 2010. In 2014, public debt reached R$ 2 4 trillion during the Dilma Rousseff government.

As far as the Cardoso government, the governments of Lula and the PT Rousseff maintained the neoliberal model that contributed to cause real havoc in the Brazilian economy from 2002 to 2014. The PT governments of Lula and Dilma Rousseff provoked a true devastation in the Brazilian economy from 2002 to 2014 configured in: 1) meager economic growth and decontrol of inflation; 2) bottlenecks in existing economic and social infrastructure; 3) the deindustrialization of the Brazilian economy; 4) the explosion of internal and external public debt, denationalization of the Brazilian economy and the deepening financial crisis in the public sector; 5) the failure of government social policy and the elimination of regional inequalities; 6) worsening the situation of the environment; and, 7) the resumption of privatization policy.

1. Meager economic growth and decontrol of inflation

Lula and Dilma Rousseff governments were not able to promote the economic growth of Brazil sustainably with rates above 5% per year necessary for the generation of employment and income in Brazil. The average growth rate from 2002 to 2012 was 3.45% per year. The reasons for the low economic growth in Brazil are: growing deficit in the transactions of goods and services with the rest of the world, the difficulty of investing in infrastructure, inflation above-target requiring increase in the interest rate to curb consumption and high public debt. The government spends more than it collects accumulating debts that are among the highest in the emerging world. With consumption growing faster than production capacity of the country that does not rise due to insufficient investment, increase domestic prices fueling inflation rates which tend to outperform in 2015 the ceiling of the inflation target of 6.5% per year .

2. Bottlenecks in existing economic and social infrastructure

There is difficulty of the Brazilian government to invest in infrastructure resulting from the failure of public and private savings in Brazil that should be of the order of 25% of GDP (Gross Domestic Product) to facilitate the economic growth of 5% annually and currently represents 17.2% of GDP.

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It's very low rate of public investment in Brazil (1.09% in 2012). Private investment has been insufficient due to the "Brazil Cost" whose causes are endemic corruption in Brazilian public sector whose annual cost in Brazil is around 41.5 and 69.1 billion reais, high and rising public debt, high interest rates real, high "spread" banking, high tax burden of 35% of GDP, high labor costs, high costs of the pension system, complex and inefficient tax laws, high cost of electricity, poor infrastructure and lack of skilled labor. In turn, public investment is insufficient due to over commitment of the Republic budget with the payment of interest and amortization of domestic debt.

In Brazil, the necessary investments in ports (R$ 42.9 billion), railways (R$ 130.8 billion) and highways (R$ 811.7 billion) totaled R$ 985.4 billion. Adding this value to the required investments in ports and inland waterways (R$ 10.9 billion), airports (R$ 9.3 billion), power sector (R$ 293.9 billion), oil and gas (R$ 75.3 investment billion), sanitation (R$ 270 billion) and telecommunications (R$ 19.7 billion) totaled R$ 1,664.5 billion. The health sector requires investments of R$ 83 billion a year, the education sector needs investment of R$16.9 billion / year and the public housing requires R$ 160 billion. The total investment in economic infrastructure (energy, transport and communications) and social (education, health, sanitation and housing) corresponds to R$ 1,924.4 billion, which is almost R$ 2 trillion.

The main brand of Rousseff's government is incompetence in all areas of governmental activity. However, their incompetence is most prominent in the management of the energy sector, particularly in the Brazilian electric sector that is facing the threat of "black outs" of electricity supply in 2015. Survey conducted by the Brazilian Center for Infrastructure (CBIE) reveals an alarming as the difficulty since the national electricity system has to meet the needs of the country. Since January 2011, until February 4, 2014, 181 "black outs” were reported.

The incompetence in management and the existence of corruption at Petrobras are also trademarks of PT governments. Petrobras, the largest company in the country, has lost market value and presented poor results. A situation difficult to be imagined some time ago. Petrobras is now worth about 40% of that value in 2011. Over the past three years, the market value of Petrobras plummeted from R$ 413 billion to R$ 184 billion. All this sets configure mismanagement, besides being also demonstrated a lack of commitment of those responsible for the conduct of Petrobras with the company and its shareholders, and also with national interests.

Brazil has 1.7 million kilometers of roads many of them in poor condition and only 200,000 km paved (11% of total). The Brazilian rail network has around 30,000 km that beyond trashed and small, has the different gauge from one region to another making it impossible for a train to move between tracks over the country. Brazil has only 19 thousand km of pipeline system and 14,000 km of waterways. As for the ports of Brazil, it is estimated that the cost of cargo handling at the port is more efficient than US$ 13 per ton, while the world average is US$ 7.00. In summary, the situation of Brazil's transportation infrastructure is pitiable.

The quality of education in Brazil is low, especially in basic education. The UNESCO report points out that despite the improvement shown between 1999 and 2007, the rate of repetition in Brazilian fundamental school (18.7%) is the highest in Latin America and is significantly above the world average (2.9%) . The high dropout rate in the early years of education also feeds the weakness of the educational system in Brazil. Approximately 13.8% of Brazilians drop their studies in the first year in basic school. In

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this regard, the country only gets ahead of Nicaragua (26.2%) in Latin America and, once again, well above the world average (2.2%). As for spending on education in Brazil, much of the budget is directed to higher education, there are few resources for other levels of education, which leads to significant social distortions. It is estimated that about 46% of the resources of the Federal Government for higher education benefit only individuals who are among the richest 10% of the population. In health the situation is also regrettable. The Brazilian public health has proved of extremely poor quality and inadequate quantity to serve the population, especially the poor population.

3. Deindustrialization of the Brazilian economy

The opening of the Brazilian economy since 1990 and maintained by governments Lula and Dilma Rousseff worsened the situation of the Brazilian industry that lost competitiveness due to the barriers represented by an overvalued currency and the “Brazil Cost” (high real interest rates, high taxes, high labor costs, high costs of the pension system, complex and inefficient tax laws, high cost of electricity, poor infrastructure and lack of skilled labor).

The pity is that Lula and Dilma Rousseff governments have failed to reverse the deindustrialization process started in Brazil in 1985 that showed in 2011 participation equivalent to that recorded in 1956 when the Juscelino Kubitschek government launched its Plan Goals (14.6% of GDP) after a period of great expansion of the Brazilian industry from 1947 to 1985. The weakening of the Brazilian industry was decisive for half of foreign direct investment in Brazil in recent years were aimed at the acquisition of many domestic industries denationalizing the Brazilian economy.

4. Explosion of internal and external debt, denationalization of the Brazilian economy and deepening financial crisis in the public sector

Because the federal government spends more than it collects accumulating debts that are among the highest in the emerging world, the gross debt of Brazil is R$ 2.4 trillion in 2013 (67% of GDP). Besides Venezuela and China, Brazil is cited by the IMF (International Monetary Fund) between economies where there are increasing risks to budget and public debt. Has been increasing the allocation of budget resources for the payment of interest and amortization of internal public debt. The largest expenditures of the Brazilian government in 2013 are interest and amortization of debt corresponding to 43.98% of the budget, to social welfare corresponding to 22.47% of the budget and transfers to states and municipalities that represent 10 21% of the budget.

In addition to the high expenditure on the servicing of public debt, high interest rates Selic adopted by the Central Bank of the federal government, the fifth largest in the entire world economy, as well as the growing public sector deficit decisively contribute to the continued increase public debt in Brazil. Maintained the trend to allocate more resources for the payment of interest and amortization of debt, there will be fewer resources available (federal, state and local) government to invest in economic and social infrastructure. Besides the domestic public debt, notes the existence also of a massive foreign debt in the amount of US$ 357.2 billion in January 2011.

The fact that almost half of the Brazilian government budget to be allocated to the payment of interest and amortization of internal and external debts tend to grow in coming years will result in the increasing inability of the Brazilian government at all levels (federal, state and municipal ) to invest in solving the problems of economic and

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social infrastructure and to promote the development of the country. This will cause the Brazilian government is bound to attract foreign capital further increasing their dependence on outside. In other words, besides having as consequence the denationalization of the Brazilian economy with the adoption of this measure, profoundly affect the development of Brazil that will not have the resources necessary for their economic growth and overcoming their deep regional inequalities.

Due to insufficient funds, the federal government, states and municipalities will face severe financial crisis in 2015 when many of them will be driven to bankruptcy. This problem adds to crisis management in the public sector at all levels (federal, state and municipal) due to inefficiency and ineffectiveness of their organizational structures that contribute to the generation of waste of public resources of all kinds.

5. Failure of government social policy and the elimination of regional inequalities

The failure of Lula and Dilma Rousseff governments in the social sphere is reflected in the fact of not having promoted the true social inclusion of the poor pçopulation with their entry to the labor market as a result of GDP growth, ie, the increase in national wealth. There was a false social inclusion because it took place with the granting of "alms" to 50 million Brazilians poor through the income transfer program “Bolsa Familia” with funds from the Treasury. The failure of PT governments in the social plan is also embodied in the fact that the real unemployment rate corresponds to 20.8% of the economically active population as opposed to the official rate of 5.3% recorded in October 2012.

The official jobless rate is low because many unemployed were left out of the calculation of the index such as the “Bolsa Família” beneficiaries. A striking proof that the unemployment rate is high is the fact that public spending on unemployment benefits climb without stopping in Brazil. The logical thing would be public spending on unemployment insurance be the minimum possible with occurrence of low unemployment rates. This contradiction exists only because the official unemployment rate is wrong, underestimation of the amount of people effectively jobless in Brazil. The federal government is cheating the official data of formal employment. Adding the growing unemployment with the increasing expense of “Bolsa Familia”, one can conclude that there are many Brazilians increasingly depending on state handouts to keep.

The precariousness of public services in education, health, public transport and housing are that Brazil is positioned in last place in the world as these public services to the population of low-quality provider. To complete the grave social situation in Brazil notes the existence of high crime in the country that has the highest rates in the world with an annual rate of about 22 homicides per 100,000 inhabitants while the United States and France, considered examples , recorded six murders and 0.7, respectively.

The PT governments also failed to overcome regional disparities. Regional inequalities in Brazil are quite high. The Southeast region accounts for 59% of Brazil's GDP, while the southern region participates with 16%, the Northeast region with 13%, the Midwest region of 7% and the North with 5%. There is an excessive economic concentration in the Southeast region of the country.

6. Worsening situation of the environment

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Brazil is the 4th largest polluter on the planet and is responsible for 5.4% of global emissions of greenhouse gases. Almost 25% of national emissions are coming from industry and modern agriculture, and 75% come from traditional agriculture and inefficient activities or predatory logging. 75.4% of emissions of greenhouse gases in Brazil resulting from deforestation and fires, 22% from fossil fuels, 1.6% from industrial processes and 1% from other causes. The PT governments have failed to reduce environmental aggression in Brazil.

Another major threat to the environment in Brazil are the supply of electricity in the country by 2030 with the construction of several large dams in the Amazon which will produce environmental impacts on the Amazon forest and the indigenous communities living there, the implementation of four nuclear power plants with all the problems associated with security and the disposal of nuclear waste and the deployment of conventional power plants using coal, oil and natural gas which will result in increased emissions of CO2 to the atmosphere with harmful consequences from the standpoint of global climate change.

7. Resumption of privatization policy

The policy of privatization of state enterprises countered by the PT during the Fernando Henrique Cardoso is being carried forward by the Dilma Rousseff government that arrived at the absurdity of delivering 60% of the oil field Libra subsalt layer to foreign capital. The so-called public private partnership (PPP) implemented by the current government is nothing more nor less than the new name given to the privatization of ports, airports, highways process, etc.

This is therefore the legacy of FHC, Lula and Dilma Rousseff in the last 20 years of serious consequences for Brazil. Low economic growth in Brazil and the disproportionate rise in federal debt during the Cardoso, Lula and Dilma Rousseff governments demonstrate the infeasibility of the neoliberal model implemented in the country and the incompetence of those rulers who conducted the destinies of the Brazilian nation. FHC not only left a legacy of compromising economic development of Brazil.

The future of Brazil is demanding not just replacing a president incompetent by a more capable, but mostly replacing the failed neoliberal model on the other, national developmentist, based on the selective opening of the Brazilian economy from the outside which should encompass the following :

1. Priority of national production for the domestic market in order to make Brazil less dependent on external markets;

2. Increase in public savings and to raise private domestic investment rates of the Brazilian economy and avoid dependence on foreign capital;

3. Reduction of public spending and private consumption to increase levels of public and private savings of the country;

4. Promotion of import substitution to encourage domestic production and generate more jobs and income in the country;

5. Selective imports of raw materials and essential commodities from abroad to reduce expenditures in foreign currency of the country;

6. Maximization of Brazilian exports to expand foreign exchange earnings of the country, leveraging the growth of the national economy and, consequently, raise levels of employment and income;

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7. Realization of foreign investments preferably in the areas targeted for exports and those in which domestic firms are not able to supply the domestic market;

8. Formation of "joint ventures" between Brazilian and foreign groups to serve the domestic market and especially in the conquest of world markets;

9. Strengthening of agricultural and national industry exposed to international competition;

10. Realization of national public and private investments in the expansion and modernization of infrastructure sectors of energy, transport, communications and sanitation;

11. Sharp reduction in interest rates to encourage investment in productive activities; 12. Control of the inflow and outflow of capital to prevent tax evasion and restrict

access of speculative capital in the country; 13. Granting of tax incentives to attract private investments in less developed regions

such as North, Northeast and Midwest regions of Brazil, and making investments in critical economic sectors in workmanship;

14. Increase in research and development and educational system of the country activities; e.

15. Adoption of compensatory public policies of social point of view.

* Fernando Alcoforado , member of the Bahia Academy of Education, engineer and doctor of Territorial Planning and Regional Development from the University of Barcelona, a university professor and consultant in strategic planning, business planning, regional planning and planning of energy systems, is the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011) and Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), among others.