Archive | April, 2011

Access to Technology versus Manaus: Brazil’s Conflicting Goals

28 Apr

Among the thirteen pillars of President Dilma Rousseff’s mandate,  number 7 and 8 are about education and technology:

7. To guarantee education for social equality, citizenship, and development.

8. Transform Brazil into a scientific and technological power.

A goal that falls in line with both of these pillars is to make computers more accessible to kids. Brazil would be smart to follow the lead of the one laptop per child concept. Undoubtedly the most important learning tool available, a computer is a window into the  universe and a means to engage in self-learning. Self-learning is especially critical given the quality of schooling in Brazil.

With the average teacher’s salary at around US$650 dollars a month–a third less than what my wife’s secretary makes working at a construction site–teachers often lack the training or enthusiasm that fosters curiosity and a desire to learn. Computers provide an important resource for stimulating kids’ curiosity. Finally, greater access to computers may ultimately make technologists out of kids, helping government fulfill goal #8. This goal is certainly not being achieved through Brazil’s computer industry.

One laptop per child program in Paraguay

An article by The Economist in 2000, “Bungle in the Jungle,” describes Brazil’s ill-advised electronics industry. The military government established an industrial park and duty-free zone in 1967 located in Manaus, 1000 kilometers up the Amazon. The project’s motivations were all backwards; rather than technological advancement, the project was predicated on local employment, colonization of the Amazon, and securing Brazil’s borders. As a result, Brazil has what The Economist describes as a “screwdriver” industry: for the most part an assembly site for imported foreign parts. While more successful than Henry Ford’s disastrous attempt at setting up assembly-line-Utopia in the Amazon, Manaus’ industry is subsidized by government and consumers who pay higher prices for all technology.

The cheapest laptop you might find at Casas Bahia, one of Brazil’s leading retailers, is in the vicinity of R$1000 (US$635). The same computer in Canada or the US is almost half the price. What this means in practice is that the middle classes on up go abroad to buy their computers cheap, and the people who can’t afford to travel abroad– 70 percent of Brazilians–pay close to double. They could go to Manaus’ duty-free zone, but the ticket to Manaus is about as expensive as one to Miami.

Massive tariffs on technology have achieved three principal results. First, they have allowed Brazil’s uncompetitive computer industry to stay afloat, and its directors to make millions– directly and indirectly subsidized by government. Tariffs also mean that Brazilian ‘computer companies’ can afford to be uncompetitive, keeping their costs high, just as long as they are able to undercut their taxed competitors. Second, tariffs provide the government with a  tax grab. And third, in addition to costing taxpayers a pretty penny, artificially high computer prices deny millions of Brazilians access to technology and tools for learning.

One of Brazil’s electronic brands, Gradiente, had apparently not made an operational profit in 10 years as of 2007. That same year it was forced to shut its doors under half a billion reais of debt (about US$350  million), much of it owed to Brazil’s taxpayer-funded development bank, BNDES.You can bet that the directors made off like bandits at the taxpayers expense. Now they’re back. One of the original founders of Gradiente, Eugênio Staub, has put together a consortium of investors and raised $68 million reais to get gradiente back up. You would think that US$40 million wouldn’t be enough to jump-start a company that closed under mountains of debt, but magic sometimes happens in Brazil, and often on the backs of taxpayers and the poor. Point-in-case, the investors in this specious project include the pension systems of Petros (Petrobras, which is majority-owned by government), the government of the state of Amazonas, and the pension system for Caixa (FUNCEF, a federally owned bank ).

Brazil’s electronics market contradicts the Rousseff government’s current goals. If Brazil is serious about moving education and technology forward, it should open up its markets and allow everyone access to affordable technology. The other alternative is to make subsidization of the domestic computer industry transparent– a social policy, so to speak– and ensure industrial efficiency and accessible prices for the poor. Having access to technology is the first step towards fostering technological expertise and leadership.

How the Media Fragments Brazil

21 Apr

Today the Jornal Globo newspaper reported that 40 percent of Governors have their mandate threatened by legal proceedings against them. Most of these suits allege vote-buying or manipulation of the media during 2010 elections. Eight out of ten cases were initiated by political rivals, and two out of ten by the federal government. Oddly, no local civic organizations or news media outlets introduced legal proceedings against governors.

Here, I explore some fragments of a media rationale for why local politics continues to look like the wild-west in Brazil despite a federal government that is exceptionally strong on paper. The larger point is that the quality of Brazil’s news media contributes to the poor quality of local politics, and the unevenness of political institutions across Brazil.

Take a country that 60 years ago shared a lot in common with today’s Brazil: the United States. The U.S. was a fragmented country at the dawn of the Twentieth Century: the South was a different country from the Northeast, as was the Midwest, and the Southwest. Then something amazing happened: radio, and television penetration grew, wire news services were created, local newspapers became regional newspapers, which became influenced by national news sources. A competitive media went national.

Partly as a result, the U.S. became more integrated. Local news, such as black civil rights resistance in the South, began to receive national attention through the media, prompting national outrage and political responses. President Eisenhower deployed a battalion of soldiers to Arkansas in 1954, for example, to enforce a ruling against racial segregation in the case of the Little Rock Nine. The national reach of the news media helped enforce the law of the land, moving political institutions across the country to harmonize and homogenize. In short, the media helped state and local politics become more federal.

A competitive, independent national media had much to do with the political integration of the U.S., and the lack thereof has had much to do with the political and federal fragmentation of Brazil. This is not a simple issue or explanation.

Brazil might have one of the most concentrated and monolithic broadcast news media systems in the World, and at first glance we might even be led to believe that one dominant voice (Globo) might help the cause of political integration. But in the 35 minutes Jornal Nacional (TV news) airs every night, the emphasis falls on federal, international, sports, weather, and heart-warming stories. This might help imbue Brazil with a national identity, but it does little to ensure the pieces of the federal machine are working to harmonize common standards.

News exercises influence in many ways, and one way is by traveling from local to national or international, causing a response that ultimately transforms local politics. But local news outlets in Brazil are often captured by local political bosses. Globo‘s local affiliates–in every state–are frequently owned by local coronels (political chieftains) or their allies, who Globo naturally tries to retain as clients. The result is that reporting on elections, policy formulation, policy compliance, and local political challengers tends to be weak locally and nationally, especially in the absence of a very competitive broadcast news media.

But how about newspapers? Newspapers often ‘set the agenda’ for TV coverage and certainly exert influence in the political arena as a form of inter-elite communication. As much as people say the newspaper is dying, circulation continues to grow in Brazil. Here are some telling facts from the World Association of Newspapers 2011 report:

Brazil is the #8 largest newspaper circulation in the world.

Brazil ranks #4 in terms of the number of newspaper titles, with 672 paid titles.

Brazil’s circulation per capita is extremely low, at 57.3/1000.

Brazil’s most widely circulated newspaper, the Folha de São Paulo, does not even appear in the 200 most widely circulated newspapers in the world. It prints about the same number of copies as the Toronto Star.

What do these numbers say about how newspapers might influence politics? The sheer number of titles, combined with the relatively tiny circulation of Brazil’s largest newspaper, the Folha de Sao Paulo, suggest that newspapers are localized. The bigger papers, which are better able to ‘stand up’ for themselves in the face of political hostility, have relatively low penetration. Many of the smaller or medium size papers, meanwhile, are employed as political vehicles by local political bosses. Minas Gerais largest newspaper, Estado de Minas, was well known to be a vehicle for the governor of Aecio Neves, for example.

As a result, the flow of news from local to national suffers asymmetries–omissions and bias–and what does get to the national level is unlikely to reach much of an audience through a relatively small, fragmented national newspaper market. A highly concentrated TV news sector is also unlikely to air quality local news– for lack of space, or lack of will. How to get quality local news to the national public is a key question for the federal cause. Only public pressure will provoke the sorts of governmental and social responses needed to ensure compliance with political norms and create strong political institutions across the country.

A Freedom of Information Law in Brazil: Two Steps Forward, One Step Back

18 Apr

Article written for, a site curated by the D.C. based National Security Archive,  18 April, 2011:

Heartening events and significant setbacks added more drama to Brazil’s bid for a freedom of information (FOI) law this past week, but the overall outlook is considerably more promising now than before.

Heartening Events: President Rousseff Declares Support for FOI bill

President Dilma Rousseff confirmed her support for the FOI bill, (41/2010), which was approved by the Chamber of Deputies in April 2010 and has since been awaiting passage in the Senate. This is the first time that President Rousseff has publicly expressed support for the law since taking over from President Luiz Inácio Lula Da Silva in January, 2011. Bandwagoning on the President’s commitment, the media has begun to cover the issue with greater enthusiasm— a positive development for fostering much needed public awareness.

Brazil and the Open Government Partnership

The timing of the announcement coincides with U.S. President Barack Obama’s recent visit and an invitation to join an ‘Open Government Partnership,’ an effort that will include more than 70 countries. The Open Government Partnership was established last year with India’s Prime Minister Dr. Manmohan Singh and is expected to be announced at the opening of the United Nations in September of this year.

President Rousseff has set May 3rd, World Press Freedom Day, as the target date for enactment. At just over two weeks from now, this appears to be an excessively ambitious time horizon—barring some creative legislative maneuvering.

Significant Setback: the Unconstitutionality of Brazil’s FOI Bill

A second event of interest was the recognition of the FOI bill’s unconstitutionality last week in the Senate. Article 35 of the bill mandates the establishment of a ‘Mixed Evaluative Commission,’ to be composed of representatives of the Legislative, Executive and Judicial branches of government, to be responsible for deliberating on issues of classification. The problem is the Commission’s multi-branch composition, which apparently contradicts Article 2 of the 1988 Constitution: the three branches of government must be ‘independent’ of each other.

Why this issue was not discovered earlier, and debates of constitutional interpretation aside, nothing short of legislative wizardry will be required to pass the bill within the next two weeks let alone the next two months. The crux of the issue is that the lawmakers may have to amend the bill, sending it back to the Chamber of Deputies for re-approval and then once again to the Senate.

What makes things even more complicated is the feasibility of rushing legislation in a Congress stacked with ‘urgent’ executive orders (medidas provisorias), which have constitutional priority. Presidents tend to dominate the legislative agenda in Brazil with their urgency decrees. To place the FOI bill ahead of these urgent measures will require some adroit stage management.

Legislative Acrobatics?

Three work-arounds have been suggested. First, the Senate ‘arranges’ the text without amending it, obviating the need for re-approval in the Chamber of Deputies. The meaning of this sounds as mysterious as it seems. A second suggestion is to pass the law as is, and have President Rousseff line-item veto the unconstitutional clause, surgically removing undesirable parts. But this option again presents a constitutional dilemma: congressional passage of an unconstitutional law. The most likely scenario will see 41/2010 return to the Chamber of Deputies.

The question is whether Congress is willing to perform the legislative acrobatics needed to meet the President’s goal of a May 3rd enactment. Although the President’s PT party controls wide majorities in both Chambers, its coalition is not one hundred percent reliable. What’s more, the leader of the Senate is former President José Sarney of the PMDB party, who is not likely to pander to Rousseff’s every whim. While the PMDB is the President’s principal ally, it is better known for its commitment to pork-barrel politics than transparency.

These, in short, are the legislative dilemmas currently facing the FOI bill that has been in Congress since May 2009. What is heartening in all of this is the President’s newly stated commitment. With strong control over both chambers, government should succeed in passing a FOI law— at some point.

Replacing a Truth Commission with a FOI Law

In 2000, Mexico’s President-elect Vicente Fox promised a Truth Commission to address human rights atrocities committed during Mexico’s Dirty War, from the 1960s to the early 1990s. But Fox cancelled the Commission because he needed support for his signature reforms in Congress and sought the legislative cooperation of the PRI, the party that had presided over previous decades of abuse.

A similar bait-and-switch may be happening in Brazil. The Brazilian military and the Department of Foreign Affairs (strongly connected to the former) have been the most salient resisters of greater transparency, let alone a Truth Commission. Yet establishing a Truth Commission to reconcile abuses committed during Brazil’s 1964-85 dictatorship was one of President Rousseff’s campaign promises, and the wheels of said Commission were set in motion soon after she took office. Over the past few weeks, however, consideration of the commission has come to a standstill in Congress.

While Rousseff may just be putting the Commission on the backburner for the moment—it boasts a rather narrow constituency of supporters—it could also be possible that Dilma Rousseff will accept a dead-letter Truth Commission if military resisters yield to a FOI bill. On April 4th 2011 Foreign Affairs stated its preference for the FOI bill originally introduced into Congress in May 2009, which has since undergone considerable strengthening improvements. This was grim news, because the Senate Foreign Affairs Committee has yet to approve the FOI bill, and any change or rejection would send the bill back to the Chamber of Deputies. President Rousseff’s public commitment to a FOI bill and the quiet withdrawal of her pressure for a Truth Commission may be one of the FOI bill’s saving graces.

An Example of Brazil’s Need for Greater Transparency

The FOI bill in Congress is the first step to a fiscally stronger Brazil. On March 30th 2011, the lead opinion piece of O Globo newspaper reviewed a 2003 report by the Comptroller General on federal funds misappropriated by municipal government officials – approximately $60 billion reais annually, about the size of Uruguay’s GDP. It is of little surprise that Brazil has the highest tax-to-GDP rate in the western hemisphere, over 35 percent.

Legislative reforms such as the FOI bill currently stalled in Congress are the first step towards the type of monitoring that can help reduce corruption, put the country’s tax dollars to better use, and ultimately lead to a more reasonable tax burden. Government auditors are insufficient for the monitoring task at hand; the scope of the problem is too large and using auditors for enforcement is expensive. The media and citizens need to lead, and greater public sector transparency is a key precondition for effective oversight. The prospective passage of a freedom of information law will finally give Brazilians one of the tools they need.

Published at Brazil in Focus: Brazil needs a Tax Break

13 Apr

See the article, published on 12 April,  Brazil in Focus

During a recent gathering of industrial leaders in Rio de Janeiro, Eliezer Batista da Silva mused that Brazil has the “taxes of Sweden and the services of Angola.” It’s an old saw, but it gained an extra bite in the mouth of Batista, a founder of the multinational mining conglomerate Vale and the father of Brazil’s richest man, energy mogul Eike Batista.

While the elder Batista’s jab may sound like hyperbole, the comment fell on sympathetic ears at Rio’s Industrial Federation, FIRJAN. Tax reform is the business community’s top priority. And if anyone doubted the point, FIRJAN launched an aggressive television and media campaign – the big tax diet – in the run up to the 2010 elections.

The case for reform is well taken. Brazil has the highest tax-to-GDP rate in the western hemisphere, over 35 percent. Worse, Brazilian taxes are so numerous and their codes so complicated that experts say the system encourages informality (hence, tax evasion), discourages innovation, and retards Brazil’s development beyond commodity-based production. There has been no scarcity of proposals to fix the tax system over the years, but most have run into political roadblocks. The principal problem is resistance from federal, state, and municipal governments fearful that any reform, one way or another, will cost them tax receipts.

If the business community wants to make a compelling case for tax reform, the first step should be to shine a light on how government could be saving or allocating resources more efficiently— how they could be doing better with less.

It’s not a difficult case to make. On March 30th 2011, O Globo’s lead opinion piece reviewed a 2003 report by the Comptroller General on federal funds misappropriated by malfeasant municipal government officials— approximately $60 billion Reais worth, about the size of Uruguay’s GDP.

The key challenge for the business community, the media, and public policy advocates is to better monitor government spending and due process. Government auditors are insufficient for the task at hand; the scope of the problem is too large and using auditors for enforcement is expensive.

The media and citizens need to lead, but greater public sector transparency is a key precondition for effective monitoring. To this end, Brazil has an important tool in its hand, the sort that insiders call comprehensive transparency infrastructure and what everyone else knows generically as a public information law (PL 41/2010) Introduced by Dilma Rousseff in 2010, when she served as Chief of Staff to former president Luiz Inácio Lula da Silva, the law passed the Chamber of Deputies in April 2010 and only awaits sanction in the Senate.

The law not only provides obligations for the Brazilian government to ‘proactively’ publish information about spending and regulation, but it also mandates that governments disclose copies of most primary documents upon request. This is key because greater transparency means better government.  Ever aware that society may be looking over their shoulder, public sector officials are driven to do their jobs in a more organized, efficient and accountable manner.

In the U.S. and Canada, businesses are the most frequent users of access to information laws, accounting for about 40 to 60 percent of all requests, with media, policy specialists, and citizens making up the remainder. These countries passed freedom of information laws in 1966 and 1983, respectively.

It is time for Brazil to join the vibrant global movement towards openness. Freedom of information is a fundamental human right enjoyed by more than 5 billion citizens in more than 90 countries. Half of these countries have enacted laws within the last decade, including 12 Latin American nations, the latest of which was El Salvador on March 3rd.

Some countries have already moved on to a new stage of openness, providing citizens with aggregate open-format datasets. Examples include the U.S.’ and the U.K.’s The proposed law now in the Brazilian Senate, 41/2010, includes a similarly modern provision for releasing open-format data.

The main obstacle to the passage of the law is not, apparently, the fear of exposing corruption, inefficiency, and incompetence, but those parts of government worried about exposing what occurred during the 1964-85 dictatorship. Certainly, the law 41/2010 prohibits information from being withheld if it is pertinent to the investigation of human rights abuses. But this is first-and-foremost a law designed for use by everyday citizens. It honors the right-to-information of Brazil’s citizens as stipulated in the constitution of 1988, articles 5 and 37.

If Brazil is to achieve good government, never mind saner taxes or a meaningful public sector reform, business leaders and citizens first needs to draw attention to spending, waste, and misplaced funds. Only by building laws that guarantee the free and unfettered access to information can an emerging society as important as Brazil’s monitor and enforce the efficient – and democratic – allocation of resources.

Narrowing or Widening the Fountainhead of Corruption?

7 Apr

One of the oldest tenets of corruption theory is that election campaign contributions constitute the fountainhead of corruption in government. To repay that three million dollar contribution of BankX, elected candidate X proposes a bill to lower taxes on bank profits. Simple stuff.

Conventional thinking is that if you eliminate this patron-client relationship by financing campaigns with public taxpayer money, the result will be less corporate influence and corruption in government. But at what cost?

Mexico’s system is completely publicly funded, meaning that parties receive money from the Federal Electoral Institute on a proportional basis (based on representation) and cannot accept donations from other sources. The system costs taxpayers over two billion dollars (between 12 and 13 billion pesos per election) per presidential cycle–one presidential and one midterm election.

The U.S. system is privately funded and the result is massive corporate influence in politics, but at the very least  taxpayers do not have to pick up the tab directly (although they may pay for it indirectly through bad policy or tax cuts and privileges for corporations). In 2008, the most expensive election ever, the U.S. spent $2.8 billion on elections. Per capita, this is about twice what Mexico spends on a presidential election, in real terms, unadjusted for purchasing price parity.

A few days ago, the government of Dilma Rousseff deployed its majority in the Committee on Political Reform to pass public financing— the first step to a plenary vote and its ultimate approval as law. In partisan terms, it’s a good time for the government to advance public funding: financing is based on current representation in Congress, and because the government of Dilma Rousseff has an overwhelming coalition majority, the governing parties will be the recipients of most of the public funds to be doled out in the coming election. Traditionally having benefited from the favor of the private sector, the PSDB and parties in the opposition unsurprisingly voted against the proposal.

The pressing question is how much publicly-funded elections will cost in Brazil. Given that there are close to 30 political parties represented in the National Congress, funding might get complicated and imply heavy costs. Under one of the heaviest tax burdens in the world, can Brazilians afford to pay for such a system?