Archive | December, 2011

Brazil’s Productivity Gap

28 Dec

“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[1] 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 U.S. 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 U.S. price-tag: a car in the U.S. 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 U.S. 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 (a poor scan, I know) 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.

 



[1]The Inter-American Dialogue, hosted by the Fundação Getúlio Vargas, 17-19 December, 2011.

Analyzing Brazil’s New Freedom of Information Law

13 Dec

Transparency and Historical Reconciliation were Campaign Promises

When Brazilian President Dilma Rousseff promulgated the country’s new freedom of information law on November 18th, she signed on to a measure that is among the strongest in Latin America, and perhaps more importantly, she endorsed a law that made inordinate improvements over bill (5228) introduced  by her predecessor, President Luiz Inácio Lula da Silva, in 2009.

Laws, Decrees, and Pending FOI Initiatives across the Region

As the blurb at the side of my blog describes, I am in the midst of writing a book on the adoption of freedom of information laws across Latin America. Part of the study requires to me to ‘score’ the strength of freedom of information laws across the region. For my dissertation, I originally scored the bill 5228, introduced by the administration of President Lula da Silva in May 2009. That bill earned a 1.8 out of a possible score of 3, qualifying it as ‘moderately weak’ in the benchmarks established by my index.[1]

By contrast, I recently finished scoring the newly enacted law, 12.527, and it earned a 2.4, qualifying it as ‘moderately strong.’ Although the bill has some significant weak points, it mostly reflects the trend towards internationally accepted better practice standards. Brazil’s achievement deserves a caveat: the laws now coming out generally tend to be legally stronger than older laws because they reflect more evolved standards and stronger pressures to join the fray of standard-bearing adopters. This is certainly not a rule, but I can marshall good empirical evidence to make the case.

Brazil is the 10th country to adopt a modern, comprehensive freedom of information law in Latin America. Six other countries have yet to adopt such a measure. These include Argentina and Bolivia, which possess presidential decrees establishing FOI in the Executive branch; and Colombia and Costa Rica, which also possess certain administrative allowances for disclosure. [2] Until Brazil enacted legislation on the 18th of November, it stood among the ranks of Paraguay and Venezuela, countries that possessed no generalized disclosure mechanisms of note.

In this Long Post

The current post analyzes six aspects of the Brazilian law, characteristics by which all freedom of information laws are measured. I examine the Brazilian law’s 1) scope, 2) procedures, 3) appeal system, 4) exceptions to disclosure and classification system, 5) the duties of government agencies to promote the law and publish information, and 6) the sanctions and protections for officials administrating access to information requests.

Scope

Because Brazil’s law regulates the country’s constitutional provisions for freedom of information (articles 5, 37, and 216), it regiments all branches and levels of government: the Executive, Legislative, and Judicial branches of government, and Federal, State, and Local governments. Positively, it also regiments non-profits receiving government funds and state-owned-enterprises. The law’s scope is just about as wide as it can get. This clear breadth is a vast improvement over the bill Lula introduced in 2009. That measure did not even define what government entities would be regulated by the law.

While the breadth of the law is impressive, it is also impressively daunting. Mexico discovered the scale of this challenge shortly after amending its constitution in 2007 to guarantee the right of universal access to information. In Brazil, it remains to be seen whether the territorial units will write their own disclosure policies, and what standards will regulate them. In the case of Mexico, there is an established ‘minimum standard’ for subnational units to follow. No such standard has yet been discussed in Brazil.

Questions of implementation and regulation aside for the moment, the law adopts a strong statement of openness in Article 3, referring to the “fundamental right of access to information,” and establishing the famous rule: “publicity as the general precept, and secrecy as the exception.”

The most significant problem with Brazil’s law is not the scope, but the oversight of its ambitious scope. Unlike other countries in the region, such as Mexico, Chile, or even Honduras, the Brazilian law provides no agency to define the implementation, regulation, and enforcement of the law. Even though it is widely assumed that the Comptroller General will oversee the law, the text does not specify responsibility. It merely states (Art. 41) that the President will appoint the oversight agency. As it stands, the Comptroller is only responsible for deciding appeals. The regulatory vacuum that the law implies is thus its most obvious shortcoming, and measures should be taken to establish a well-endowed, independent central authority. The Comptroller is inappropriate to the task; its multiple attributions and dubious independence from the presidency make it a sub-optimal oversight mechanism.

Procedures

The law’s procedures (Articles 10,11, 12, 13, and 14) are clear, user-friendly, and fall within international better standards. Officials have 20 days to respond to a request, and they may extend this timeframe by 10 days if they alert the requester in writing.  Officials also have obligations to help requesters file requests, convey misplaced requests to the appropriate entity, and inform requesters of their options for appeal in the case of a denial. The procedures also stipulate that denials must be justified (Art.11); fees can only be levied on the materials used for photocopying; the legally-defined poor are exempt from paying any costs; and requesters can receive responses in various forms. Perhaps the law’s most innovative feature is its emphasis on formats that are open, machine-readable, and non-proprietary (Art. 8 VI:3 ii & iii). This provision will help technologists, data-based journalists, and skilled citizens to re-use public information for analysis or applications with greater ease.

Promotion and Duty to Publish

The law obligates governmental agencies to actively publish a wide assortment of information, independent of requests (Art. 8). Active transparency obligations include official contact details of all employees, financial operations, spending, procurement contracts, and answers to commonly asked questions, among others.  Unfortunately, the law specifies no agency for promoting the law, as discussed at the end of the section on ‘Scope.’ The President must appoint this agency (Art. 41), who will annually present a report of activities to Congress, as is better practice. A key point is that the heads of all government entities are expected to specify their information officers within 60 days of the law’s enactment. I have already talked to my colleague Fabiano Angélico about this provision, and beginning on January 18th 2012 we are determined to find out just how successful the process of assigning information officers has been.

Exceptions to Disclosure and Classification

The law provides the standard battery of exceptions to disclosure and also provides for a severability clause, meaning that citizens can have access to classified documents, albeit with sensitive portions ‘blacked-out.’ One standard exception is missing from a list that is otherwise in fine condition: ongoing legal cases. These cases are typically withheld from the public until concluded. Exceptions to disclosure could be strengthened by balancing tests, to see whether harm caused by information justifies withholding, or whether the public interest of possessing the information in question outweighs the public interest of maintaining it outside the realm of public knowledge. As with most other freedom of information laws, the measure does not override the secrecy statutes of other laws, i.e. subjecting the secrecy provisions of other laws to the freedom of information law’s list of exceptions. This is unfortunate, but lamentably the norm.

Finally, the most glaring deficiency of the law’s classification scheme is its three tiered secrecy provisions and its deviously long reserve periods. ‘Ultra-secret’ information is withheld for 25 years before being subject to a re-classification or de-classification process. The other two tiers are ‘secret’ (15 years) and ‘reserved’ (5 years). Twenty-five years is an outlandishly long reserve period, and three tiers of secrecy are wholly unnecessary. Chile’s reserve period stipulates 5 years, Mexico’s 12, and the highest in the region –before the Brazilian law was enacted – was Uruguay’s at 15 years. There is no rhyme or reason for information to be denied a re-classification process after 5-10 years.

Appeals and Complaints

The appeals and complaints system promises Kafkaesque journeys into the dark recesses of the Brazilian bureaucracy. Well, perhaps not that bad. Positively, requesters may ask for a written explanation when access to information is denied (Art. 14). Having this justification should greatly expedite the appeals process, as the need for a pre-ruling investigation should be all but obviated.

One problematic aspect of the appeal regime are the timeframes: requesters can lodge an appeal within 10 days, which is all fair and well, but decisions must be rendered within a very demanding 5 days. This period of time is hopeful, but unrealistic. The likelihood is that public sector entities will constantly transgress this timeframe, which may leaves citizens cynical and upset, and detract from the integrity of the law. Once a public sector surpasses the allotted timeframe, all bets are off as to when they may be disposed to resolve an appeal. Thus as my colleague Andrew Ecclestone points out in one of this post’s comments, it would have been better to set a more realistic timeframe for resolving appeals.

Petitioners must obligatorily appeal to the “hierarchically superior” official, as a first recourse. Failing a positive response, the requester can then lodge an appeal with the Comptroller General, which again, must be answered within 5 days. If that fails, the requester may appeal to the ‘Mixed Commission on Information Re-Validation.” No timeframe for a decision is given. The law makes no mention of recourse to the courts, and I am uncertain as to whether the courts will accept a case once the Comptroller has denied an appeal. This would seem to be the logical progression, especially given that the Comptroller should only have constitutional say over requests to the Executive Branch. I am interested to figure out how the courts fit into the appeal process—so if you have any ideas, please let me know.

All told, however, the appeals process does not look promising. Internal appeals are notoriously ineffective, and appeals to an institution that lacks the attributes of a strong oversight mechanism are not ideal. Finally, there is no established timeframe for the third and final appeal process.

Sanctions and Protections

Finally, the Brazilian law scores reasonably well on sanctions and protections. Article 32 provides a comprehensive list of offences for which officials can be punished, such as hiding or destroying information. The list even includes “using bad faith when analyzing access to information requests.” The punishments are dictated by a host of legislation on administrative conduct. Unfortunately, the law does not provide whistle-blower protections or protections for those who disclose sensitive information in good faith. But again, this shortcoming is so common as to be the norm among the region’s laws.

Conclusion

So there it is. There is much more, but these are some of the more important points. The law is much better than the original bill (5228) introduced into Congress by Lula in 2009. But one of the problems is that Lula set the bar so low that it was difficult to make that paradigm jump to a really exceptional law. As it stands, the law is good; it’s strong on its breadth, its duties to publish, and its exceptions from disclosure and sanctions and protections are mostly in order. Where the law really falls is on the issue of oversight – there is no central oversight agency to promote, implement, regulate, enforce, and protect the law and the disclosure process. It also comes up really short on classification: a three tiered secrecy scheme with a ghastly 25 year reserve limit.

Clearly, the surrender of secrecy will be an ongoing struggle in Brazil. The strong pull towards obfuscation and impunity gives reason to question whether Brazil can make good on the law. But here’s a new beginning. The question now is whether the enormity of implementation can be achieved in 6 measly months. According to a recent article, top officials from the Comptroller General’s Office are asking the same question.



[1] For more information on the scoring, the index, and benchmarks, please see the appendix to my dissertation.

[2] Colombia possesses a law from 1985 that can best be described as ‘skeletal’ and does not even include any reference to appealing denied information. It is therefore not ‘modern.’ Costa Rica guarantees freedom of information through an assortment of administrative statutes, but still has no comprehensive law.

Addendum to last post: The Forest Code

12 Dec

Folha de São Paulo reports today that, for the second time this year, President Dilma Rousseff has let de-foresters off the hook. This Monday the President issued a decree to extend the date at which fines will be levied for failures to re-forest and register legally protected land. The last extension occurred in June, and the new extension is now for April 2012. Brazil’s controversial forestry legislation is heading back to the Lower House of Congress after the Senate amended the original bill several weeks ago. It is widely believed that powerful agri-business and construction groups will seek to have the bill weakened or killed.

 

 

The Forest Code: Campaign Contributions of Agri-Business Pit Legislators Against Public Opinion

8 Dec

The Código Forestal or Forest Code now being debated in Congress will determine the future of Brazil’s forests, including the world’s last great rainforest, the Amazon. In order to make good on a 1965 forest code that was rarely if ever enforced, President Dilma Rousseff introduced strong legislation in 2010. Legislators in the Lower House then weakened the bill substantially, and after being approved with minor alterations in the Senate, it is now heading back to the Lower House for congressional sanction.

Truckin'

The bill “constitutes one of the worst regressions for environmental legislation in Brazil,” according to Marina Silva, the rebellious Minister of the Environment under President Luiz Inácio Lula da Silva and the third place candidate in the last presidential election. The Forest Code’s policy example illustrates how representational democracy is not translating citizen interests into law, a universal problem that travels far beyond Brazil.

What Brazilians Want Done

One the country’s leading pollsters surveyed[1] 1,268 citizens across Brazil about the Forest Code in early 2010. They found high public approval for harsh measures against illegal forestry, as reflected by the bill President Rousseff sent to Congress in early 2010. An overwhelming 98 percent of respondents supported the President’s measures and rejected a proposed amendment in the Lower House to grant amnesty for offending de-foresters. It is estimated that amnesty for those who de-forested between 1998 and 2009 will disclaim 8 billion Reales, according to Greenpeace – a huge loss for tax payers.

What Legislators Do

Yet despite overwhelming public opinion in favor of stricter environmental measures, a huge loss in tax revenue, and the principle of accountability – making lawbreakers pay for their actions – legislators chose to favor the interests of big agro-business. No wonder – the Folha de São Paulo recently reported that agro-interests spent over R$15 million (nearly US$ 9 million) to stuff the party coffers of 50 representatives deliberating on the bill. Donating companies spent 42 percent more on lobbying in the past two years than they contributed to candidates during the entire 2006 presidential election. The largest donor was the cellulose industry (paper), which donated R$4.7 million. Influential governors, such as Bahia’s Jacques Wagner (PT), received R$4 million.

A Weaker Forest Code

In addition to the blanket amnesty for de-foresters, the bill as it now stands has substantially weakened the original presidential proposal. Whereas de-forested river banks had to be re-planted 30 meters back from the edge of ‘peak’ water levels, the new bill stipulates 15 meters from ‘average’ river heights. To comply with the legal forest reserve quotas – 80% forested in Amazon, 35% in the Amazon highlands, and 20% in the rest of the country – land owners may now use 50% ‘exotic’ trees for re-plantation, which opens up the possibility of mono-culture fruit orchards.

Given the way that representatives take action contrary to the expressed public interest, i.e. that business interests trump public interests, news that de-forestation in the Amazon has ‘slowed’ this year by more than 10 percent gives us little reason to be hopeful for the future of Brazil’s forests. Brazil needs to adopt and enforce mechanisms to ensure greater accountability – such as lobbying regulation – if true representational democracy is to take hold and do what is right for the country and the planet.

Check out an interesting video on issues surrounding deforestation in the Amazon (part III of IV).



[1]   See, “Jungle Politics,” Brazil in Focus, June 13, 2011. Available at: http://brazilinfocus.com/samba/green-zone/237-jungle-politics.html

“Development at Any Cost?”– Post on Brazil In Focus

7 Dec

This editorial was written by Sergio Abranches for Brazil In Focus and provides a brief overview of how Brazil’s environmental prospects are being compromised by short-termism and a government that easily succumbs to powerful lobbies:

Brazil sacrifices the enviroment on the altar of growth

A year ago presidential hopeful Dilma Rousseff went on record as a strong defender of the environment. On the campaign trail, she said she opposed the pardoning of scofflaws for past crimes against the environment. At the same time she spoke forcefully about the need to conciliate preservation with the imperative of feeding a hungry nation. But what has been the Rousseff government’s track record? Sergio Abranches weighs in.

by Sergio Abranches
The Brazilian government facilitates economic activity with scant regard for the environment. Brasília’s decisions on energy and on managing conservation areas, plus its negligence in discussions of the Forest Code, demonstrate that public policy flouts global concerns over climate change and irremediable environmental damage.

Go to Brazil in Focus to read more…

Surrendering Secrecy in the Senate

5 Dec

On the 25th of October 2011, The Brazilian Senate enacted a keystone measure to shore up the country’s growing transparency infrastructure, a freedom of information law.  Signed by President Dilma Rousseff on the 18th of November, the law will go into effect 180 days from the date of promulgation, on May 18th, 2012. The question is now whether Brazil’s freedom of information law will open windows into the inner workings of government, or merely serve as window-dressing.

This first post looks at enactment of this law in the Senate, and the next post will examine the law’s features.

Below is a timeline representing the major events along the freedom of information law’s trajectory and some blog posts that have accompanied it. Have fun with it:

Brazil is a country that struggles with secrecy, and the new freedom of information law reflects this struggle. It has the longest reserve period of any country in Latin America (25 years), three levels of secrecy (reserved, secret and ultra-secret), and Brazil was among the last quartile of countries in Latin America to pass a law. The law’s final day in Congress also reflected Brazil’s struggle with secrecy.

Dissecting the Rhetoric of Secrecy

On that day, one of the measure’s most fervent opponents made an impassioned plea to foil openness. During the preceding half-year, disgraced ex-President and Senator for the poor northeastern state of Alagoas, Fernando Collor, had used his position as Chair of the Foreign Relations Committee to delay enactment of the FOI bill (see timeline). On the 25th of October, the Senator was repeatedly told to wrap-up his speech, which lasted over an hour and a quarter. His goal was to convince the Chamber to support his proposed amendments, even though his text dismissed much of what the Chamber of Deputies and three committees in the Senate had already approved.

The speech featured two lines of reasoning that made ample use of prevarication.  Senator Collor’s first argument held that his committee’s amendments brought the freedom of information bill back into line with the bill originally introduced into Congress by then-Chief-of-Staff Dilma Rousseff in 2009. This claim was simple fabrication; as I have previously argued, Collor’s amendments would have destroyed the law. Lula’s 2009 bill was on the weak side, but not explicitly in favor of secrecy, in contrast to Collor’s. The Senator’s second argument stipulated that Brazil would “be the first country to open up all its documents to the world,” posing a real danger to national security and the integrity of the state. With this argument Collor tried to convince Senators that the bill did not make a distinction between ‘administrative’ and ‘state’ information. This line of argument simply confounds the issue of sensitive information, which is not based on a state-administrative dichotomy, but rather on the law’s section on ‘exceptions’ from disclosure.

These rhetorical canards did not work; legislators were well-enough informed to recognize that the bill approved by the Chamber of Deputies was more in line with international principles than the low-ball legislative proposal introduced by Lula administration in 2009; and they also recognized that the law provides for a series of robust exceptions to disclosure. Collor’s deceptive claim that all information would be indiscriminately opened up to the public clearly failed to alarm most Senators, many of whom had (surprisingly) read the measure. Speaking in front of the Senate a few minutes after Collor’s tirade, Senator Aloysio Nunes (PSDB) openly questioned the veracity of Collor’s words: “in my understanding of the law, not all of the acts of government have to public.” In the end, Collor’s amendments were voted down in devastating fashion: 9 votes in favor and 43 against.

Collor’s speech demonstrated that justifications for secrecy are so weak in this day and age, that few options apart from fear-mongering, exaggeration, and prevarication exist.

The Next Couple Posts– Historic Democratizing Advances in Brazil

5 Dec

Back after more than a month-long hiatus, I am overwhelmed by recent events deserving of attention. Most importantly, the week of the 25th of October 2011 will go down in history as one of Brazil’s great democratic moments of reckoning: the country enacted a freedom of information law after more than 3 years of deliberation, and a Truth Commission that has been on the agenda since Brazil emerged from a twenty-year dictatorship in 1985. President Dilma Rousseff’s presidency continues to signal a promising new chapter in Brazil’s consolidation of democracy. Most impressively, the President has managed to dispatch 6 ministers accused of corruption while avoiding blame for the crookedness of her cabinet. The next couple of posts will examine the freedom of information law, the Truth Commission, and Dilma’s remarkable resilience.