Brazil Country Report BTI 2016

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Brazil Country Report BTI 2016 BTI 2016 | Brazil Country Report Status Index 1-10 7.60 # 19 of 129 Political Transformation 1-10 8.05 # 19 of 129 Economic Transformation 1-10 7.14 # 26 of 129 Management Index 1-10 6.76 # 14 of 129 scale score rank trend This report is part of the Bertelsmann Stiftung’s Transformation Index (BTI) 2016. It covers the period from 1 February 2013 to 31 January 2015. The BTI assesses the transformation toward democracy and a market economy as well as the quality of political management in 129 countries. More on the BTI at http://www.bti-project.org. Please cite as follows: Bertelsmann Stiftung, BTI 2016 — Brazil Country Report. Gütersloh: Bertelsmann Stiftung, 2016. This work is licensed under a Creative Commons Attribution 4.0 International License. BTI 2016 | Brazil 2 Key Indicators Population M 206.1 HDI 0.744 GDP p.c., PPP $ 15838.0 Pop. growth1 % p.a. 0.9 HDI rank of 187 79 Gini Index 52.9 Life expectancy years 73.9 UN Education Index 0.661 Poverty3 % 9.1 Urban population % 85.4 Gender inequality2 0.441 Aid per capita $ 5.6 Sources (as of October 2015): The World Bank, World Development Indicators 2015 | UNDP, Human Development Report 2014. Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of population living on less than $3.10 a day at 2011 international prices. Executive Summary The period under review has been a difficult one for Brazil. Within the Status Index, the performance of democracy indicators has changed little since the last report, though there has been more change in the performance of market economy indicators. However, there has been a substantial deterioration in the composite indicators that form the Management Index. Since 2003, Brazil has experienced a period of rapid social development with millions of Brazilians lifted out of poverty. This development has been driven by government reforms, affirmative action measures and progressive social policies. However, levels of inequality in Brazil remain among the highest in the world and large inequalities remain in access to public services. Macroeconomic stability has seriously weakened over the last two years after several robust years. Economic growth rates at the end of 2014 were estimated to be only 0.2%, the lowest rate of growth since 2009. Industrial production contracted by 3.2% in 2014 and industrial employment declined by 3.2%. Investment activity and consumer confidence also declined. One of the few positive developments was the continued low level of unemployment. However, the government has found it increasingly difficult to keep inflation under control. For 2014, inflation reached 6.4%. In January 2015, the key interest rate increased to 12.25%, the highest level since mid-2011. In 2014, the Brazilian real weakened by nearly 13% and the country registered its first annual trade deficit in more than a decade. Foreign direct investment (FDI) totaled $64 billion in 2013, equivalent to 3.6% of GDP, though Brazil continued to account for about one-third of all FDI flows into Latin America. In 2013, deforestation increased by 29%, a reversal of an eight year trend of declining year-on-year deforestation rates. This increase continued in 2014. Since June 2013, large-scale demonstrations have taken place in many cities, indicative of increasing public discontent with public services (e.g. infrastructure, transport, education) and dissatisfaction with the political system. In 2013, public survey responses indicated that the degree of satisfaction among the public with democracy has fallen to 26%, while public approval of BTI 2016 | Brazil 3 government fell to 56%. In January 2015, President Rousseff began her second term as president. However, her approval ratings in January 2015 were her lowest since she first became president in January 2011. Similarly, in January 2015, only 23% of survey respondents evaluated the management of the PT-led government as excellent or good, while 44% of respondents considered it bad or terrible. The gigantic corruption scandal around Petrobras, which became public in 2014, remains unresolved. It is clear that the scandal reaches far beyond Petrobras and includes many of the country’s largest construction companies. The economic consequences of the scandal have been substantial. However, the scandal has demonstrated that, though unable to prevent corruption, Brazil’s anti-corruption institutions are at least capable of uncovering and investigating corruption. History and Characteristics of Transformation Democratic transformation in Brazil spanned a period of almost 20 years. The first steps toward liberalizing the authoritarian regime (1964 – 1985) were taken in 1974. In 1984, Brazil experienced the most massive political mobilization in its history, in connection with a campaign calling for the direct election of a democratic president. However, the armed forces insisted on indirect election of the first civil government since 1964. Tancredo Neves was elected president by an electoral assembly in January 1985, but died before he could take office. The office was assumed by the elected vice president, José Sarney (1985 – 1990). A new democratic constitution took effect in October 1988. The transition to democracy was completed in March 1990, when the first directly elected democratic president, Fernando Collor de Mello, assumed office. Implicated in a corruption scandal, Collor was removed from office by the National Congress in September 1992, and Vice President Itamar Franco served out the remainder of his term. The internationally renowned sociologist Fernando Henrique Cardoso won the presidential elections in October 1994. In 1998, after the constitution was amended to allow his re-election, Cardoso became the first president in Brazilian history to be elected to a second term of office (1999 – 2002). On 27 October 2002, Luiz Inacio da Silva (popularly called “Lula”), a former union leader and Workers’ Party (Partido dos Trabalhadores, PT) chairman, was elected president. In October 2006, Lula was re- elected to a second term of office (2007 – 2010). Lula managed to ensure the nomination and election of his protégé, Dilma Rousseff, as his successor. Rousseff was elected in a runoff on 31 October 2010, and took office as Brazil’s first female president in January 2011. Her government’s basic strategic priorities have been the same as those of her predecessor (reduction of poverty and economic inequality, acceleration of growth, the strengthening of democracy and regional cooperation, enhancement of Brazil’s role as a global political and economic player). However, Rousseff has clearly set an individual course. Despite an increasingly difficult economic situation and growing popular discontent, in October 2014 Rousseff was re-elected for a second term. She received 51.65% of the votes, while the oppositional candidate, Aécio Neves, won 48.69%. This was the narrowest victory by a candidate in the seven presidential elections Brazil has held since the 1980s. BTI 2016 | Brazil 4 Brazil’s transformation toward a market economy was guided after the end of World War II by the concept of import substitution industrialization. The developmentalist period lasted until the 1980s. During this time, the Brazilian government set priorities for industrialization and was a primary actor in industry. State-owned enterprises played a central role in many sectors, and the state development bank provided funding for areas deemed by government planners to be of high priority. During the 1990s, a partial reversal of the developmentalist model took place, preparing the ground for privatization and a liberalization of the economy. When President Lula took office in 2003, the government decided the state needed to resume a more active role in industrial development, while taking decisive steps to relieve poverty and reduce inequality. At the same time, the new administration followed a course of fundamental continuity with the macroeconomic policies mapped out under Cardoso. Until 2012, Brazil experienced a period of unbroken macroeconomic stability and noticeable improvements in well‐being. Sound economic policies and countercyclical measures helped the country weather the 2008 global financial crisis with relatively minor effect. While the Lula government did not continue the privatization policies favored by its predecessors, President Rousseff’s administration announced in 2012 that it was turning to the private sector to rebuild the country’s outmoded infrastructure. At the beginning of President Rousseff’s second term in 2015, Brazil was in a severe economic crisis and amidst one of the largest corruption scandals in its history. However, that there was a scandal is also evidence of effectiveness of state institutions. In 30 years of democracy, Brazil has weathered many political and economic crises, and repeatedly demonstrated an ability to learn and adapt. BTI 2016 | Brazil 5 The BTI combines text analysis and numerical assessments. The score for each question is provided below its respective title. The scale ranges from 1 (worst) to 10 (best). Transformation Status I. Political Transformation Question 1 | Stateness Score The state’s monopoly on the use of force is established nationwide in principle, but Monopoly on the does not function completely. Civilian authorities generally maintain effective use of force control of the federal security forces, but there are reports that state-level security 7 forces have committed numerous human rights abuses such as unlawful killings, use
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