Explaining social pacts: Political and Institutional drivers

of social policy in Brazil

Marcus André Melo UFPE CEPAL

Santiago, 20-21 Marzo 2013

Pactos Sociales para uma Proteccion Social mas Inclusiva:

Experiencias obstáculos y posibilidades en América Latina, y Europa

Outline of presentation

• Motivation : Brazil as a role model

• Conceptual framework : incentives and capacities

• Evidence for Brazil

Outline of presentation

• Motivation : Brazil as a role model

• Conceptual framework : incentives and capacities

• Application to Brazil

Outline of presentation

• Motivation : Brazil as a role model

• Conceptual framework : incentives and capacities

• Application to Brazil

Conceptual framework

• Incentives • Who are the partners?

• Social contract, social partners, coalition governments?

• Why partnering for redistribution ? • What factors drive welfare regime expansion?

• Median voter and universalism • Political market failures

• Rudra , Kauffman, Haggard, Segura-Urbiego

• Credit claiming

Conceptual framework

• Capacities

• Political

• Agenda setting and political resources , majority status, executive capacity

• Fiscal

• Administrative

Application to Brazil

• Incentives and Capacity in Brazilian Social Policy

Cardoso 1995-2002

Lula 2003-2010

19 years of political stability

Dilma 2011-

19 years of political stability

Partners in coalition governments

india

mexico

colombia

nigeria

portugal

venezuela

brasil

africa do sul

ecuador

uruguai

chile

austria

paraguai

el salvador

bolivia

guatemala

honduras

peru

espanha

costa rica

argentina

nicaragua

0 20000 40000 60000 80000 100000 120000 140000 160000

The constitution of 1988 and social inclusion

Rise of mass democracy % of population voting in elections 1894-2010

Elections turnout in the Americas Vertical Accountability

Massive turnout

Elections turnout in the Americas

Short term effects: universalism and particularism in the constitution

• Concentrated benefits

• Unsustainable

País/Region

% Pobres Reduccion Percentual en

niveles de pobreza

1990 2002 2005 2007 1990-2007 2002-2007

Brasil 44.9 38.2 - 34.1 29.0 35.4 15.6

America Latina 48.3 44.0 39.8 34.1 29.4 14.3

Poverty reduction in Brazil and Latin America (%) Fuente: CEPAL (2007) and IPEA (2008)

0

50

100

150

200

250

300

350

400

% c

han

ge i

n p

rice

s p

er y

ear

(IG

P-D

I)

24.48%1945-1963

62.66%1964-1984

1,050.62%1964-1984

10.08%1995-2008

1117%

431% 908%

2012%1216%

496%1167%

2851%

19 years of macroeconomic stability Inflation rate 1945-2010

Fiscal Capacity

0

5

10

15

20

25

30

35

40

199

0

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

2004

200

5

Argentina

Bolivia

Brazil

Chile

Colombia

Costa Rica

Ecuador

El Salvador

Guatemala

Honduras

Mexico

Nicaragua

Panama

Paraguay

Peru

D. Republican

Uruguay

Venezuela

Average

Taxation as % of GDP in Latin America (1990-2007)

Sustained fiscal capacity

Changing Combinations of Inequality and

redistribution

Poverty reduction in Brazil 1981-2009

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

under 2 USD

Under 1 USD

11.2 11.011.5

12.3 12.212.6

13.012.9 13.0

13.2

13.8

14.4

14.4

14.2

15.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

0

100

200

300

400

500

600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% o

f GD

P

Fed

eral

So

cial

Sp

end

ing

(R$

bi,

con

stan

t Dec

. 201

0)

.

Federal Social Spending, 1995-2010

.

Inequality before and after redistribution OECD + Brazil

.

Political capacity

• Stable competition, not fragmented system

• Programmatic convergence and logrolling

• Parametric reforms in pension system

• Constitutional amendments

– Cardoso 1998

– Lula 2003

– Dilma 2012

• No reform in Health System

0.00 0.20 0.40 0.60 0.80 1.00 1.20

Chile

Brazil

Colombia

Ecuador

Peru

Argentina

Panama

Uruguay

El Salvador

Venezuela

Guatemala

Dom. Rep

Honduras

Mexico

Bolivia

Costa Rica

Nicaragua

Paraguay

overall legislative powers

reactive powers

proactive powers

Strong constitutional power of Brazilian presidents

Government coalitions in democratic Brazil

0 20 40 60 80 100

sarney 1

sarney 2

collor1

collor2

collor3

collor4

itamar1

itamar2

itamar3

itamar4

itamar5

fhcI 1

fhc 1 2

fhc II 1

fhc II 2

fhc II 3

fhc II 4

Lula I 1

Lula I 2

Lula I 3

Lula I 4

Lula I 5

Lula I 6

0.00 1.00 2.00 3.00 4.00 5.00 6.00

Venezuela

Paraguay

Nicaragua

Bolivia

Argentina

Ecuador

Honduras

Peru

Panama

El Salvador

Guatemala

Colombia

Mexico

Dom. Rep

Costa Rica

Brazil

Chile

Uruguay

Judicial independence in Latin America

Strength of Supreme Audit Institutions

0 20 40 60 80 100 120

Nicaragua

Ecuador

Honduras

Turkey

KyrgyzRepublic

DominicanRepublic

Bolivia

ElSalvador

Argentina

Venezuela

TrinidadandTobago

Colombia

Portugal

Mexico

Spain

Guatemala

Peru

Slovakia

CostaRica

Chile

Italy

Brazil

France

Poland

UK

Germany

NewZealand

Sweden

Norway

Slovenia

US

Quality of Supreme Audit Institutions – Contralorías/Tribunales de cuentas

Unrisd project

Administrative Capacity