It's been a good year for Brazil's President Dilma Rousseff, exceeding the expectations of voters and even wowing some skeptics. With a record approval rating of over 70 percent, she exceeded Lula's approval rating after the first year of his presidency by more than 20 points. While there are a number of factors for her popularity, including a strong economy with low unemployment, and proving herself as an independent leader out of Lula's shadow, another important factor has been her crackdown on corruption.
During her first year in office, Dilma sacked six ministers after they came under fire for corruption charges. In the federal government as a whole, 564 public officials were fired for wrongdoing in 2011, though this number is not exactly new: in the past 8 years, over half of the 3,533 public officials who were fired from the federal government lost their jobs because of corruption. Comedy blog Kibe Loco produced a series of videos parodying Dilma's crackdown on corrupt ministers, where an actor dressed in drag would imitate phone calls to her ministers, in which she would yell, using all sorts of profane language, making the ministers cry, and then soothing them like a mother. Dilma's intolerance for corruption was welcomed by many Brazilians, particularly during a year where thousands took to the streets to protest corruption. Popular support to fight corruption also came after the Clean Record Law (Ficha Limpa law) was passed in 2010 after 2 million Brazilians signed petitions in favor of the law, which aimed to bar candidates accused of misdoing from taking office.
But the question is - what now?
The Supreme Court ruled that the Ficha Limpa law would not count towards the 2010 election, and after ruling on several individual cases, the court allowed at least 6 "ficha suja" congressmen and senators to take office, including notorious Senator Jader Barbalho, who took office in late December. (His son came with him, and proceeded to stick out his tongue and make faces for the press, which antagonized the already dismayed Brazilians opposed to his inauguration). It's unclear if the law will be applied to the 2012 municipal elections.
Dilma has made it clear that she won't tolerate corruption in her cabinet, and a minister shakeup in the next few weeks should likely bring in new ministers picked by Dilma, rather than carryovers from Lula's administration. But of the six who left office in disgrace, how many are under investigation and will actually be punished? Cases of ministers returning embezzled funds are few and far between; one of the few is that of former Tourism Minister Pedro Novais, who returned the government funds (worth R$2,156) that he used to pay for a sex motel.
Former Sports Minister Orlando Silva is allegedly planning on running for city councilman in São Paulo in 2012. He wouldn't be the first disgraced politician to come back to life; former President Fernando Collor de Mello, who was impeached in 1992, was elected to the Senate in 2006 and 2010. Notorious politician José Sarney, who also served as president, was first elected to the Senate in 1995, and has served three terms as president of the Senate, a position he currently holds. Another notorious politician, Paulo Maluf, who was on Interpol's "red" list, is currently serving his third term as a federal congressman.
After Dilma's sweep, some are hopeful that it could mean change in Brasília. But without holding wrongdoers responsible and punishing them for their crimes, will corrupt public officials simply try harder to hide what they're doing? And if the Ficha Limpa Law isn't implemented, or if the Supreme Court eventually rules it unconstitutional, will corrupt politicians continue to return to office? Worse yet - will everything acabar em pizza?
Because of its status as a major theater for proxy conflicts during the cold war, Latin America has a long history of leftist insurgencies. Over the past two decades, however, these left wing groups largely abandoned armed struggle as a means of gaining power, turning instead to peaceful electoral politics. In some countries they have been immensely successful. Indeed, the current ruling parties of Nicaragua, El Salvador, Brazil, and Uruguay can all trace their roots -- at least in part -- back to guerrilla insurgencies of the 1970s and 80s.
Nevertheless, a handful of guerrilla movements persist in the region. The most well-known examples are in Colombia, which is home to the Revolutionary Armed Forces of Colombia (FARC) and the National Army of Liberation (ELN). In Peru, two factions of the Shining Path still carry out deadly attacks on security forces, though the group is not the threat that it was at its peak in the early 1990s.
These three are generally cited as the most relevant insurgent groups in Latin America, and they have worked hard to maintain this status. All three have adopted illicit means of obtaining funding, including drug trafficking, bank robbery, kidnapping, and extortion.
In this context, the high profile of Mexico’s largely indigenous Zapatista Army of National Liberation (EZLN) is incongruous. Although much of the organization’s social and political work is supported by international and domestic NGOs, the full nature of its funding is unclear. What is clear is that despite rising up in arms in the southern state of Chiapas in 1994 and having since declared sizable parts of southern Mexico autonomous from the government, the EZLN has largely managed to refrain from criminal activity to support itself.
When criminal allegations have been leveled against them, such as when the group was suspected of carrying out the kidnapping of Mexican politician Diego Fernandez de Cevallos last year, the Zapatistas have vehemently denied them, and a congressional commission even acknowledged that the kidnapping didn’t fit the Zapatistas’ profile.
Their eschewal of crime is due largely to the fact that the EZLN is not a traditional guerrilla army. After their initial uprising in 1994, and the resulting San Andres peace accords in 1996, the group has largely refrained from illegal activity. Instead, they have become more of a grassroots social movement, establishing EZLN-affiliated autonomous communities in Chiapas and attempting to link far-left community organizations throughout the country under the banner of a nationwide movement called the "Other Campaign."
Indeed, the Zapatista’s most public spokesperson, alias “Subcomandante Marcos,” has actively denounced armed groups which have attempted to ally themselves with the EZLN. Through well-publicized letters and communiques, he has castigated groups like the FARC and Spain’s ETA for killing civilians. Marcos has voiced aversion to armed struggle inside Mexico’s borders as well, distancing the EZLN from the small, Guerrero-based People’s Revolutionary Army (EPR), which is known for carrying out attacks on security forces and bombings of infrastructure targets in southern Mexico.
The fact that the EZLN refrains from armed and criminal activity likely has as much to do with self-preservation as it does with the group’s ideology. Since the 1994 uprising, the Mexican government has drastically increased its military presence in Chiapas. According to a 2004 study by the Center for Political Analysis and Social and Economic Research (CAPISE), there are at least 91 military bases in the state, many of which are located near Zapatista communities.
In more recent years, the military presence has increased even more in response to President Felipe Calderon’s crackdown on drug trafficking organizations. The Sinaloa Cartel and Zetas are deepening their activities in neighboring Guatemala, a trend which Mexico is fighting by increasing the number of military checkpoints along the southern border (with mixed success).
Considering the high level of militarization of armed forces in the Zapatistas’ main area of influence, their cessation of military activity is not surprising. If they were to attempt another uprising, it would doubtlessly end in a devastating defeat.
The disincentive for the EZLN to mix itself up in criminal activity is just as strong. The Calderon administration’s security strategy has given the government a powerful policy narrative to justify dismantling drug traffickers’ community control. If provoked, the state could easily turn it against the Zapatistas.
By turning away from armed struggle, the group has also been afforded a certain amount of political legitimacy. Unlike their guerrilla cousins in Colombia and Peru, the Zapatistas have widespread support both from the Mexican left and on the global stage, where they are known as a spearhead of the anti-globalization movement. It should also be noted that the Zapatistas eschew conventional politics with the same ferocity. Ever since their inception they have rejected the notion of joining the Mexican political system, which they view as hopelessly corrupt.
--- Geoffrey Ramsey is a writer for Insight – Organized Crime in the Americas, which provides research, analysis, and investigation of the criminal world throughout the region. Find all of his research here.
The expulsion corresponds with Iranian President Mahmoud Ahmadinejad’s visit to Venezuela yesterday, the first stop on his four-country Latin America tour. Some fear Iran is using the region as a staging ground to attack US interests, an issue that’s especially salient given recent Western anxiety about Iran’s nuclear goals.
In December, a Univision documentary called “The Iranian Threat” linked Livia Acosta Noguera, the Venezuelan Consul General to Miami since March 2011, to a potential cyberattack coordinated by Iran, Cuba, and Venezuela against the US.
There is no indication that American officials have been able to verify Univision's allegations, reports The New York Times. Some analysts say the expulsion had less to do with the merits of the accusation than a desire by the Obama Administration to defuse Republican pressure over Iran during an election year.
“This [expulsion] has to be viewed in the wider context,” says Michael Shifter, president of Inter-American Dialogue. “The tensions are escalating with Iran and the US, so Venezuela becomes a greater concern.... [And] the Obama Administration doesn’t want to be vulnerable as soft on Iran and Latin America.”
Last month four US representatives wrote a letter to Secretary of State Hillary Clinton drawing attention to the documentary's accusations.
“According to the documentary, when she served as the vice secretary at the Venezuelan embassy in Mexico in 2008, she interacted with members from the Iranian and Cuban embassies and students posing as extremists from the Universidad Autónoma of Mexico to coordinate a cyber attack against the U.S. government and critical infrastructure systems at the White House, FBI and CIA,” reads the letter, which was posted on Florida Rep. David Rivera’s (R) website and signed by New Jersey Rep. Albio Sires (D) and Florida Reps. Ileana Ros-Lehtinen (R) and Mario Diaz-Balart (R).
Sen. Robert Menendez (D) of New Jersey, chairman of the Senate Foreign Relations Subcommittee on the Western Hemisphere, called for hearings on the alleged plot.
The Venezuelan government dismissed the Univision report as false and uncorroborated. “They are using a lie as an excuse to attack us,” President Hugo Chavez said in December, calling on allies to be on guard.
Lessons learned from George W. Bush’s first term in office show a confrontational approach to Chavez is not effective, says Mr. Shifter, because criticism "gave Chavez greater ammunition for his own political agenda.”
“Any kind of real confrontational posture towards Venezuela will only help Chavez, as it has in the past,” Shifter says. But Obama, he adds, is under pressure from Congress and the Republican presidential candidates to take action on the perceived strengthening ties between Iran and some Latin American countries. Mr. Ahmadinejad plans to attend President Daniel Ortega's inauguration in Nicaragua tomorrow, another event that prompted outcry from some US politicians.
Chavez, who is also running for reelection this year, frequently paints the United States as an imperialist adversary set out to destroy his socialist government.
“He sees himself as a victim of the [US] empire,” says Shifter. “The US doesn’t want to feed him any new material.”
The request for Ms. Noguera to leave the US within 72 hours could serve as fodder for Chavez’s verbal attacks on US policy, and a reciprocal expulsion of diplomatic staff on behalf of Venezuela can’t be ruled out, Shifter says.
Neither the US nor Venezuela have hosted each other’s ambassadors since 2008, when Mr. Chavez charged American Ambassador Patrick D. Duddy with backing a plot to overthrow him in a military coup. The US removed its ambassador in response, heightening tension between the two nations.
Venezuela has had a strong geopolitical alliance with Iran since Ahmadinejad came to power in 2005. “Both countries want to curtail US power,” says Mr. Shifter, “and they both get benefits out of provoking the United States.”
Over the next week, an important leader from a widely rejected government will be touring Latin America looking to shore up his country's international legitimacy in the face of increasing pressure and rejection.
Obviously, I'm talking about Taiwanese Foreign Affairs Minister Timothy Yang.
The inaugurations of Presidents Daniel Ortega in Nicaragua and Otto Perez in Guatemala are an opportunity for Taiwan to send a high-level delegation to Central America and the Caribbean and shore up support in the few remaining countries that continue to recognize its legitimacy as an independent country. Yang began his trip in St. Lucia, which changed its recognition from mainland China to Taiwan in 2006 and has been generously rewarded with infrastructure projects since that time. With concerns that Nicaraguan President Ortega has considered changing recognition and Guatemala is getting a new president whose views on the China/Taiwan issue aren't particularly concrete, this is a serious trip for Taiwan to hold its ground in Central America.
For this reason, the trip may signal a renewed battle after several quiet years. Following the flipped recognitions of St Lucia and Costa Rica, China and Taiwan called an unwritten truce on their checkbook diplomacy in the region. Mainland China has taken a fairly enlightened view that it can still manage some economic and even backroom political relations with the governments that recognize Taiwan. The PRC appears to be building up a soft power sell in places like Nicaragua, El Salvador, and Paraguay over several years rather than trying to force the hard and decisive switch as soon as possible. Taiwan has been happy to not have to actively defend their recognition in a few places remaining in the world where they can travel and have relations. Plus, it gives them an excuse to stop over in the US and Europe for informal discussions, which Yang will be doing on this trip as well. Taiwan does not want to lose that.
Taiwan knows it's tough being a state under international pressure from a much larger power with greater political, economic, and diplomatic leverage. In such a position, a country looks for recognition where they can find it. Taiwan needs the international visits and big photo ops to show the world that they are not universally rejected. They are willing to sign big economic agreements with the few countries willing to host them in exchange for getting support at the United Nations.
Everything written above is not to deny the important contrasts between Taiwan and that other pariah state whose leader is visiting Latin America this week and receiving far more attention (even though the media should treat China-LatAm issues as more important than Iran-LatAm issues, but I digress....). Taiwan is a democracy that is not trying to build a nuclear weapon or back a terrorist group or shut down a major international shipping lane. Its leader isn't a holocaust-denying idiot who has had his soldiers fire upon crowds of peaceful protesters after a rigged election or threatened to wipe out another country if he gets the chance.
But the comparisons are important too. A state rejected by most of the world that has its back against the wall will take allies wherever it can find them. A state that needs support at the UN is going to try to keep as many votes as it can. When it faces certain economic restrictions from most countries, it is going to sign economic deals any place it can. If that happens to mean Nicaragua and Guatemala, even if they are not the biggest or most important countries in the world, then that state is going to make as big of a show of its support for those few allies as it can.
Taiwan's visit, like that of the other pariah this week, is an attempt to maintain the small number of allies it has against the pressure of a bigger opponent and the rejection of the international community. The fact they have to keep returning to the same allies over and over is a sign of international weakness, not strength. It's a tough position to be in. There are only a few options available, and they are making the most of the limited options they have
—James Bosworth is a freelance writer and consultant who runs Bloggings by Boz.
Chile, which was governed by a military dictatorship from 1973 to 1990, plans to change how its national elementary school curriculum refers to the period, drawing angry criticism and even disbelief.
The curriculum guidelines approved last month used the term "military regime," rather than "military dictatorship," to refer to the 17-year period when Gen. Augusto Pinochet and allied military leaders maintained control over the police, lawmaking, and press. The period complied with definitions of dictatorship, as the governing junta imposed a new constitution and left thousands of Chileans dead, disappeared, or exiled. Chileans who sympathize with Pinochet routinely use the term "military period" or "military regime" rather than "dictatorship."
The curriculum change at the National Education Council revived a longstanding concern about President Sebastian Piñera, who took office last year. He is the country's first right-of-center leader since Pinochet, and his critics often seek to smear him by associating him with Pinochet's human rights abuses. Piñera's brother served as a cabinet minister under Pinochet, but the current president has said he opposed the dictatorship.
The change in language was proposed by the Education Ministry and approved by the council almost a month ago. It didn't receive attention until the online newspaper El Dinamo covered it this week. The newspaper quoted one member of the panel that approved the change, Elizabeth Lira, as saying she "wouldn't be at all surprised" if the changed language had been intentional, as there are members of the government who sympathized with Pinochet.
Education Minister Harald Beyer, who took office just a week ago, faced his first crisis with equanimity. "The more general term will be used, which is 'military regime.' With respect to the concrete terms, it must be recalled that this went to a diverse panel, and that panel approved it," he said.
But that dispassionate tone was far from the norm. Yesterday, the country's news and conversations were filled with people upset over the possibility that Piñera's government would seek to cleanse history classes of the term "dictatorship."
News website El Mostrador collected quotes from people across the political spectrum.
"Dictatorships are dictatorships anywhere in the world, and history should recognize them with the word that fits," Karla Rubilar, a legislator from Piñera's own Renovacion Nacional party, said, according to the newspaper. "It is fundamental for countries to have memory. Only if we can learn from the facts can they not be repeated. This country had a dictatorship that lasted 17 years."
Hugo Gutierrez represents the Communist Party in congress. His party was banned under Pinochet's government and has struggled since to recover members. He said that along with changing the word "dictatorship," there have been efforts to change the term "violations" of human rights to the more neutral "excesses," El Mostrador reported.
Revulsion against the human rights record of the dictatorship remains widespread. A poll released yesterday by the Center for Study of Contemporary Reality found that only 12 percent of the public agreed that "the deaths during the military regime were a necessary evil to impede Communism."
The education panel will revisit the terminology if the Education ministry requests it, the panel said late yesterday in a statement.
"Regarding the new learning objectives in the civics focus, it is important to review the possible lack of coherence between these objectives and the social and historical content of the proposal," the panel said. The goal is to provide "a comprehensive understanding of the historical process alluded to in this controversy," it said.
Aside from the pope's announced visit to Cuba, and some bits of news on the economic front - like need-based aid for Cuban home renovations - there isn't much in the way of news you can use out of Cuba. For instance, Fidel Castro didn't die, despite the trending on Twitter earlier this week. But, if you're nonetheless curious for something to read on the world's most inaccurately foretold death, Fernando Ravsberg obliges over at The Havana Times, reminding us just how often Fidel Castro has (er, has not actually) died in the media, and analyzing how a journalist knows what and when to report, and in the process, explaining the many paradoxes of Cuba.
Back to news you can't use, we return to the US Congress. Rep. Ileana Ros-Lehtinen, Chairwoman of the House Foreign Affairs Committee, is not happy with the Smithsonian Institution, which is hosting several learning tours to Cuba this year. With travelers paying $5,400 each to join the trips, I think Ros-Lehtinen can rest assured that no taxpayer funds were used to arrange these trips - surely that's enough dough to cover the staff time! I kid, but I can't think of why else this latest huff by a Cuban American member of Congress made both The Hill and the The Washington Post blogs, other than for the possibility of a congressional hold on funds for a beloved, venerable US institution. (The Washington City Paper also picked it up, but noted that the Smithsonian's travel division isn't federally funded. Oops.)
SEE ALSO: Cuba Economy
Speaking of travel, Pope Benedict XVI has finalized his agenda for his upcoming visit to Cuba later this spring. His trip coincides with the 400th anniversary of the discovery by Cuban fishermen of the image of La Virgin de la Caridad del Cobre (so dubbed for the copper mining town in which the shrine now housing La Virgin can be found). As such, El Cobre will be his first stop in Cuba, upon his arrival to Santiago de Cuba, on the east side of the island. I've been to El Cobre - it's an amazing place (and I'm not even Catholic). Imagining everything that goes with a papal visit anywhere, but especially to a site like this in the Cuban countryside, I'm incredibly excited for the people of El Cobre, of Santiago de Cuba, and from all over the island who will likely travel to see the Pope make this important pilgrimage.
Finally, writing in the Huffington Post, Yoani Sanchez offers up the year past in review. It's not a pretty picture, not only for the increasing harassment and detentions of Cuban dissidents - and of course, the sudden passing of Ladies in White leader Laura Pollan - but also because Sanchez gauges little hope from Raul Castro's economic reforms (or, "updates," as I've previously noted the government calls the ongoing process) among Cubans in the street. (The latest just-announced reforms include opening more professions up to self-employment on Jan. 1, and the establishment of a government fund for need-based home construction/renovation aid.) It's a pessimistic view, and not hard to imagine given how long the Cuban people have been waiting for an economic system that works for them. So, I'm looking forward to being in Havana next week and gauging the changes - and how people have greeted them - for myself. While I may be too busy to blog it while I'm there, I hope to come back with lots to write about.
SEE ALSO: Cuba Economy
Every New Year’s Eve, many Hondurans publicly burn “año viejo” figures made of papier maché and cardboard, which are commonly made to look like the evils of the past year. In an indication of just how much the population has been affected by the recent surge in crime, El Heraldo reports that this past Dec. 31 saw an unusually large number of organized crime-related figures being burned in the streets of Tegucigalpa. Because “año viejo” figures are often meant to convey some kind of commentary on current events, many of them resembled police officers, a reflection of the widespread corruption within the Honduran police force.
Unfortunately, this symbolic act was tempered by another, equally revealing sign of Honduras’s deteriorating democracy. According to La Prensa, several of these figures were confiscated by police before they could be set ablaze. Despite a call by the director of the National Police for officers to respect citizens’ right to free speech, many seized año viejo figures they deemed particularly offensive, telling their creators that they were an affront to the police force as an institution.
Such incidents are perfectly in keeping with the reputation of Honduran police. In addition to having been accused of cooperating with drug trafficking organizations in some cases, the Honduran National police claim to have “lost” thousands of confiscated weapons, many of which have ended up on the black market.
In response to the widespread police corruption, President Porfirio Lobo has vowed to clean up the institution. In the meantime he has succeeded in convincing Congress to allow the military to take on policing responsibilities. But while the Honduran armed forces have a cleaner reputation than the police, they have baggage of their own. According to a US diplomatic cable leaked last spring by WikiLeaks, members of the military sold light anti-tank weapons to criminal organizations in Mexico and Colombia.
What’s more, it isn’t clear whether Lobo’s commitment to systematically rooting out corrupt police amounts to more than lip service. The Lobo administration framed the November arrest of 176 police officers on charges of connections to kidnapping plots and drug trafficking as part of a national crackdown on police corruption, when, in fact, they were all assigned to the same police station in Tegucigalpa. This is the station where police are suspected of having murdered two university students, meaning that their arrest was likely more related to the case than part of a nationwide purge of the country’s 11,000 police officers.
Meanwhile, transnational drug trafficking organizations have taken advantage of the apparent weakness of the Honduran state to transform it into a primary transit point for US-bound cocaine. In September, Defense Minister Marlon Pascua told local press that 87 percent of cocaine which is sent from South America to the United States passes through Honduras. As InSight Crime has reported, applying this percentage to the United Nations’ latest estimates of the size of the US cocaine market suggests that an incredible 143.55 tons of the drug pass through Honduras annually. A recent Washington Post investigation, citing unidentified US government sources, puts the figure even higher, at 25 to 30 tons of cocaine per month, or between 300 and 360 tons annually. According to an anonymous US official working in Honduras, the Central American nation has become “by far the world’s largest primary transshipment point for cocaine.”
This flow of drugs has been accompanied by a surge in killings. The number of homicides has more than doubled since 2005, and the UN Global Study on Homicide put the country’s homicide rate at 82.1 per 100,000, the highest in the world.
To make matters worse, the vice president of the Honduran Congress, Marvin Ponce, recently claimed to have evidence that powerful sectors of Honduran society could be plotting to overthrow the government of President Porfirio Lobo, just as President Zelaya was ousted in 2009. Ponce told El Tiempo last week that these unnamed interests seek to take advantage of insecurity generated by Lobo’s recent efforts to clean up the country’s police force, and using the situation to weaken Lobo politically. "These groups want to make use of the police crisis and are linked to a section of the Armed Forces, which they could use to cause a coup," said Ponce.
It is worth remembering that this is not the first time that rumors of a coup against Lobo have surfaced. In September 2010, just eight months after taking office, Lobo warned that his critics were planning to overthrow him because of his efforts at reconciliation with the pro-Zelaya camp, though he later scaled this back, saying that carrying out another coup would be like “reaching Pluto.”
Because of the public and international outcry after the coup, it’s likely that it has become a trigger issue for politicians hoping to attract attention. That being said, at the very least the allegations show the weakness of the country’s democracy. This, along with the deep-rooted state of organized criminal activity, suggests that 2012 will be a difficult year for Honduras.
--- Geoffrey Ramsey is a writer for Insight – Organized Crime in the Americas, which provides research, analysis, and investigation of the criminal world throughout the region. Find all of his research here.
“Doing more with less.” As world population heads towards 8 billion, countries and companies across the world aim to use technology, organizational techniques, and training to do more with less: increase productivity and conserve resources while sustaining a decent quality of life.
One of the key concepts here is productivity. I recently participated in a forum where I had the privilege of seeing a presentation by Dr. Carlos Pio of the University of Brasília, an examination of Brazil’s economic prospects through the prism of productivity. I was struck by the importance of this metric; productivity is one of the more neglected economic indicators, a gauge for how well countries use the factors of production – land, labor, and capital. Productivity is a far more accurate indicator of a country’s potential for sustained wealth-creation than GDP or even per capita income.
Brazil’s Productivity Gap
My readers will probably find it unsurprising that Brazil does relatively poorly on productivity indicators. A 2006 report by McKinsey Global Institute found that between 1995 and 2005 Brazil’s productivity grew only 0.3 percent per year, in contrast to 2.8 percent in the US and 8.4 percent in China. McKinsey assigns about one third of this sluggishness to Brazil’s development curve. The remaining two-thirds has to do with “macro-economic factors” (a rather catch-all variable), the fact that labor is cheap relative to capital, a large informal sector, complex regulation, and a weak infrastructure. But much of Brazil’s productivity gap also has to do with the country’s tariff and educational policies, and politicians would do well to pay greater heed to these factors.
High Tariffs Limit Productivity
High tariffs provide Brazilian companies with protection from international competitors, giving them weak incentives to boost productivity. High tariff barriers increase the price of imports, allowing domestic firms to make up for low productivity by raising prices to meet or just beat the inflated price of imports. Imports in the most critical sectors tend to be about double the US price-tag: A car in the US that sells for US$30,000 costs about US$60,000 in Brazil, or more. I am constantly amazed that consumers are willing to get plowed with these kinds of tax-takes. Unsurprisingly, it is rare that you will find most Brazilian-made consumer durables, such as electronics, being sold outside of Brazil – they simply cannot compete.
Some will say that Brazilian consumer durables, much less other sectors, cannot compete because of the inflated value of the currency. But as South Korea, Japan, and other countries have shown, productivity and research and development can partly overcome the negative industrial effects of a strong currency.
Another way of looking at the protected markets of Brazil is like this: The mostly poor population of Brazil gets to buy lower quality goods at higher prices because of the country’s tariffs. Although protecting domestic industry creates employment, it effectively transfers wealth from the poor – who could be buying better quality goods for cheaper – to elites. Because the effect is to re-circulate money within the domestic economy, there is no net gain in Brazil’s wealth, merely a redistribution. We should be reminded of one of the first maxims of the Wealth of Nations: Countries grow wealthy by selling things to other countries. Brazil has traditionally sold mostly primary goods to other countries, and sustained high tariff barriers appear to ensure continuity here.
Why? Because you can’t win in the manufacturing export markets if your productivity stinks. And your productivity is not going to improve unless there is revolutionary investment in research and development (R&D) and education, among other areas.
Investment in Research and Development: a Key Indicator
In most other significant economies, such as China, Canada, the US, and even Spain, the private sector tends to invest more in R&D than government. Indeed, this chart on R&D prepared by Brazil’s BNDES (see can at original post) illustrates that it is only Russia and Brazil who share the distinction of securing less private sector investment in R&D than public sector investment. So in terms of R&D, Brazil is out of the game in most sectors, agriculture being one of the few exceptions.
The Education Conundrum
The easy way out is to blame low productivity on education, which is what Brazil’s private sector has tended to do. In 1946, the country’s electorate was more than half illiterate, so Brazil has come a long way to have achieved an average of seven years of schooling. Nevertheless, other countries have done much better. I’ve written about the education conundrum before, so I will not idly repeat old arguments, facts, and numbers. Suffice it to say that an unequal redistribution is afoot here too. The country’s federal universities are understandably dominated by Brazil’s middle and upper classes, those who are privately schooled or tutored and are thus able to get into these tuition-free cradles of the elite, universities that consume nearly a quarter of the country’s educational budget but educate less than two percent of the country’s population.
Back to Basics
Brazil continues to get a lot of hype, being one of the BRIC countries and having enjoyed an unprecedented spate of good years in the commodity markets. Agricultural productivity has gone up, and is undoubtedly the sector that has seen the most significant gains. Agriculture remains Brazil’s comparative advantage in the world markets, and rightly so; the country is blessed with millions of square kilometers of productive land. Brazil might do well to face up to facts and focus on this comparative advantage, continuing to increase productivity in this sector and, in turn, ratcheting down the tariffs on manufactured goods to increase incentives for greater competitiveness, productivity, and better value for Brazilian consumers.