Ex-president Cardoso speaks at the Rio+20 development conference in 2012. Photograph by Fabio Rodrigues Pozzebom, courtesy of Agencia Brasil.
After the military regime fell in 1985 and civilians returned to power, Brazil entered into a period of renewed democracy. The transition was not smooth, however, and Brazil continued to suffer from repeated economic crises and uncontrollably high inflation. In 1988 the Constituent Assembly was tasked with writing a democratic constitution. The constitution was ratified in 1989, thereby ensuring that Brazil would be able to hold its first truly democratic elections since 1960.
Early Flaws in the Democratic System
The interim years between the end of the military regime and the new constitution were politically tumultuous. The first president chosen by an electoral college vote, Tancredo Neves, died almost immediately after his inauguration. His vice-presidence, José Sarney, a defector from the official party of the military regime, did not have a broad base of support and struggled to have his proposals passed.
After resigning the presidency in disgrace in 1992, Fernando Collor de Mello made several other bids at lower offices. In 2006 he was elected to the Brazilian senate, representing his home state of Alagoas. Photograph by Fabio Pozzebom, published under Creative Commons by Agência Brasil.
After an initially popular radical currency stabilization program failed to curb inflation, Sarney lost favor. With the constitution’s implementation of direct elections, he left power.
Despite the ability to democratically elect a president, the country was still not without its leadership issues. In 1990 Fernando Collor ran on an anti-corruption platform, yet once he was elected, it became clear that both he and his brother had profiteered greatly during his election campaign. Ashamed and abandoned by his constituents, Collor resigned, allowing his vice president Itamar Franco to come to power. Collor followed in the footsteps of his predecessors; outside of the military regime, few Brazilian presidents had managed to serve an entire term. This type of political instability was very frustrating for the Brazilian people.
An Academic as President
If there was ever a situation that demanded the skills of a sociologist, it may have been the chaos that confronted Brazil in the early and mid-1990s. Ours was a country in crisis. While Brazil had recently returned to democracy, the transition had been difficult. Our first democratic president tragically passed away just before taking office; our second was impeached under a cloud of suspicion.
Meanwhile, our economy was suffering the cumulative effects of years of mismanagement and growing inequality. Perhaps the clearest symptom was inflation—in 1993, it reached more than 2,500 percent. Brazil had seen seven different failed currencies in the last eight years. People were using words like “basketcase” and “pariah” to describe our country. This was perhaps the period when that regrettable saying by Stefan Zweig, about Brazil being the eternal country of the future, was heard most frequently (Cardoso, 2012).
Fernando Henrique Cardoso got his start as Franco’s minister of finance. Through radical economic and social change aimed at controlling the wildly fluctuating economy, Cardoso aimed to fix Brazil’s dire economic situation, quiet its critics, and discredit those who made the wry observation that Brazil “is the country of tomorrow—and always will be.” How successful he was at transforming Brazil into the country of tomorrow once and for all remains to be seen, but a close examination of the steps he took to reduce social inequality demonstrates his utmost commitment to democracy and that he did radically change Brazil and help it become the emerging world power it is today.
A bill in the new series of the Brazilian currency, the Real. 100 reais are equivalent to about US$50.
The Plano Real
Appointed minister of finance by Itamar Franco in May 1993, Cardoso introduced the Plano Real, which became a landmark of his time in office. The plan aimed to end hyperinflation and bring financial stability to Brazil. In 1993 monthly inflation was at 30 percent, a result of the crash following the end of the dictatorship and the failure of Sarney’s “Plan Cruzado.”
The Real Plan was a comprehensive package of austerity measures that cut back government spending, tightened tax collection, and collected on debts state governments owed to the federal government. But the plan’s centerpiece involved two measures targeted directly at stabilizing the economy by preventing inflation, which were informed by the failures of Sarney’s earlier plan. What would be the country’s new currency began as an indexing system; the Unidade Real de Valor (Unit of Real Value), which was tied to the U.S. dollar, which soon came to be used as the official indicator of value in taxes, official prices, and contracts. In mid-1994, less than a year after the plan began to take effect, the government introduced a currency, the Real, that was equal to the URV and thus equal to the dollar.
The new, stronger currency gave consumers purchasing power, putting them in a position to bargain because they did not assume their money was rapidly losing value. The government introduced a higher interest rate and limits on loans in order to prevent speculation, and the country saw boosts to real wages, returns on assets, and foreign investment.
The spectacular growth that immediately followed the implementation of the plan diminished with slow export performance and the dampening effects of high interest rates. With reduced barriers to international trade, Brazil lagged behind other countries in producing goods for trade, and many believed that this gap would best be filled by increased domestic productivity. In a 1998 study, however, the McKinsey Global Institute found that Brazil’s faith in greater productivity than its competitors was falsely optimistic:
With the exception of steel, the productivity of all sectors in Brazil is less than half the productivity in the US, with both food processing and food retailing less than 20 percent of the US. Even the modern sectors of airlines, telecoms, retail banking, and auto assembly are below 50 percent (Baer, 144).
A graph of inflation shows how, with the implementation of the Real Plan, the hyperinflation that had marked the cruzeiro—Brazil’s previous currency—subsided substantially. Data from the International Monetary Fund.
Read an interview with Brazilian economist Persio Arida about the success of the real 18 years later here.
Cardoso’s Neoliberal Tendencies
In addition to curbing inflationary trends, Cardoso also undertook the privatization of large state-owned companies. This caused some conflict with powerful politicians from Minas Gerais, where he denationalized the mineral industries, but it is generally believed that the companies sold by the government achieved increased profitability as a result of their disengagement from the state. In addition to privatizing industry, he encouraged policies that eliminated barriers to trade. One example is Mercosul (Mercado Comum do Cono Sul), the customs union between Brazil and other South American countries. Cardoso emphasized that the union not only increases trade between the countries, but also ensures democracy in the region through its “democracy clause,” which requires countries to remain democratic in order to continue as members.
The flag of Mercosul, an international trade organization among countries of the Southern Cone, is raised in Brasília. Photograph by Marcell Casal, published under Creative Commons by Agência Brasil.
Cardoso implemented several measures focused on reducing inequality and providing social services, such as expanding primary education, organizing a television system to train teachers, educating parents in child care in order to lower infant mortality, and implementing programs to improve sanitation, sewage, and water treatment. Many of these programs were part of Comunidade Solidária, a program organized largely by his wife Ruth Cardoso. This program ran on the basis that civil society should make proposals to the state on what services need to be provided and the state will help fund these programs.
Thus Comunidade Solidária, rather than directly provide services through the government in policy that might have been considered overly nationalist or socialist, encouraged a huge proliferation of NGOs that would come to the state to look for help financing their projects. These projects covered a wide variety of social welfare issues including health care, reproductive rights, and the provision of social services in poor neighborhoods. Cardoso also aimed to redistribute funds at a national level in order to make public education fair and recognized the need to increase teachers’ salaries in order to attract high-quality candidates.
Hope for Reform
Cardoso came to power at a time when, even more than in earlier decades, observers questioned whether reform would ever be possible in Brazil. The pervasive clientelism and corruption that have dominated Brazilian society and politics throughout history had been reinforced by Collor’s disastrous presidency and impeachment. Cardoso clearly worried about this image, discussing the role of jeitinho, the Brazilian approach to obstacles (from the Portuguese jeito, meaning way):
Jeitinho has a double meaning. One meaning is good—that you try to solve problems rather than to put up obstacles; which is not bad, it’s an attitude, “Let’s try to solve this, let’s try to help you.” That’s positive. But there is another meaning, which is to disregard the law, the rules. Not to effect rules. And when I say, “hopefully,” it’s not yet clear if the Brazilian civic culture is strong enough—in the democratic sense—to respect the rule of law. It’s not possible to have democracy without the rule of law (Scott, 12).
According to Cardoso, although jetinho can be an impediment, the belief that Brazil cannot change is neither productive nor universal. “It’s a matter of attitude; more traditional people prefer not to change anything. And they are always accusing the ‘reformers’ of being self-serving and the poor will suffer the consequences. It’s not necessarily true, but they use this as an excuse not to change” (Scott, 12).
Cardoso, who opposed the dictatorship as an academic and an activist, worked within a number of political parties after the regime.
They are not ideologically oriented, although they believe otherwise. Brazilian parties are interest oriented. Every organization in Brazilian society has a representative in Congress. Legislators represent good interests … but fragmented ones. So it is very difficult to understand how the Congress will vote (Hoge, 73).
Cardoso understood the importance of coalition-building within congress in Brazil. His election was based upon the unlikely coalition of his own moderate-left Social Democratic Party and two right-wing parties, the Liberal Front Party and the Brazilian Labor Party.
A 2003 postage stamp pays homage to President Cardoso, shown in front of the famous Alvorada Palace, the official presidential residence in Brasília.
While the long-term effects of Cardoso’s policies will not become evident for a number of years, it is already clear that he was able to effect significant changes in Brazil. His greatest reforms remain his Plano Real and his wide-reaching social initiatives. He knew how to operate successfully within Brazilian society and within the Brazilian political process. Cardozo took major strides in helping Brazil to realize its potential as a ‘country of tomorrow’ and helped transform the country into the emerging world power that it is today.
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