Mighty Brazil: an overinflated image?

While Ms. Rousseff and Mr. Mantega tout Brazil’s fiscal management, they seem to be speaking solely in terms of spending control, as opposed to taxation – the other side of the ‘fiscal management’ coin. Tax burdens are getting out of control in Brazil, especially given the offensive quality of public administration that public money buys. The Globo Newspaper reports that tax collection has hit an all-time high, having increased from 33.14 percent of GDP in 2009 to 33.59 percent in 2010. By comparison, the overall tax burden in the US is 24 percent and in Canada it is 32 percent.

Security

Yet public services are regionally uneven and frequently of poor quality – especially for a country doing as well as Brazil supposedly is. Take the most basic responsibility of government – security. According to a report this week in the Globo Newspaper, Brazil solves only 5-10 percent of its approximately 50,000 homicides each year, which compares abysmally to the UK’s 90 percent or even the 65 percent achieved by US authorities. The Globo’s analysis is that Brazil’s rock-bottom performance has to do with a lack of expertise. Given that the average police officer in the State of Rio de Janeiro starts his career with a monthly salary of 1200 reais (~$800), it’s no wonder that experts are lacking.

Health

Health policy is yet another example, and a subject of heated debate right now in the National Congress. According to what the Minister of Science, Technology and innovation, PT faithful Aloizio Mercadante, told the Globo newspaper, Brazil spends 47 percent less per capita on public health than much-poorer Argentina, and 2.5 times less than is spent by the private sector. In Rio de Janeiro, people regularly die in emergency rooms, and public health services are so bad that my wife, a construction manager here in Rio, sends her workers back to their home state of São Paulo to receive urgent medical care. Ironically, the federal government is now fighting against a constitutional amendment (29) that would set a 10 percent floor for government health expenses. The government originally suggested raising a new tax to fund greater health spending, but recanted under well-justified criticism. Now it simply says it cannot afford such a commitment.

Over-stretched?

Perhaps money earmarked for 2012 municipal pre-election spending binge is one of the reasons why officials are so tight-fisted. Perhaps it is lavish spending on the 2014 World Cup or the 2016 Olympics that has the public purse in a bind. Or maybe it’s just poor fiscal management, the sort of mismanagement signaled by corruption scandals and the fall of four Ministers in nine months of a new presidency. But wait, isn’t fiscal mismanagement the developed world’s problem?

Over-taxed

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