Brazil in the 1990s An Economy in Transition Renato Baumann Director UN/ECLAC Office in Brazil in association with ST ANTONY'S COLLEGE, OXFORD © Renato Baumann 2002 All rights reserved. N o reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, L o n d o n W 1 P OLP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2002 by PALGRAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE is the new global academic imprint of St. Martin's Press LLC Scholarly and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press Ltd). ISBN 0-333-92196-8 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Brazil in the 1990s: an economy in transition/Renato Baumann (editor). p. cm .— (St. A n to n y ’ s series) Includes bibliographical references and index. ISBN 0-333-92196-8 (cloth) 1. Brazil—Economic conditions— 1985- I. Neves, Renato Baumann. II. Series. HC187.B867 2001 330.981'064— dc21 2001040655 10 987654321 11 10 09 08 07 06 05 04 03 02 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire Contents Notes on Contributors Introduction 1. Brazil in the 1990s: An Economy in Transition Renato Baumann 2. Macro- and Microeconomic Aspects of the Reforms Rubens Penha Cysne 3. Social Policies in the Nineties Sônia Draibe 4. Capital Formation in the Context of Brazil's Economic Reforms in the Nineties - A Sectorial Approach Ricardo Bielschowsky, Marcos Thadeu Abicalil, José Clemente de Oliveira, Sebastião Soares, Márcio Wohlers 5. Institutional Change and Technology: Impacts of Deregulation on the National Innovation System Paulo Bastos Tigre, José Eduardo Cassiolato, Marina de Souza Szapiro, João Carlos Ferraz 6. Structural Change in Brazilian Agriculture, 1980-98 Guilherme L. S. Dias, Cicely M. Amaral 7. Employment and Productivity in Brazil in the Nineties José Márcio Camargo, Marcelo Neri, Maurício Cortez Reis 8. Distributive Effects of Brazilian Structural Reforms Marcelo Neri, José Márcio Camargo Index Notes on Contributors Renato Baumann D.Phil, in Economics (Oxford University), Director UN/ECLAC Brasilia Office. Professor, Economics Department, Universidade de Brasilia Cicely Moutinho Amaral Ph.D. in Economics, North Carolina State University, Professor, Faculty of Economics and Management, Universidade de São Paulo Guilherme Leite Silva Dias Full Professor, Faculty of Economics and Management, Universidade de São Paulo João Carlos Ferraz D.Phil, in Economics (Sussex University), Professor, Institute of Economics, Universidade Federal do Rio de Janeiro José Clemente de Oliveira Ph.D. in Economics (Institute of Economics, Universidade Federal do Rio de Janeiro). Former Director, National Development Bank José Eduardo Cassiolato Ph.D. in Economics (University of Sussex). Head of the Research Group on the Economics of Innovation, Institute of Economics, Universidade Federal do Rio de Janeiro José Márcio Camargo Ph.D. in Economics (Massachusetts Institute of Technology), Full Professor, Department of Economics, Pontifícia Universidade Católica do Rio de Janeiro Marcelo Neri Ph.D. in Economics (Princeton University). Chief, Centre for Social Policies, Fundação Getúlio Vargas. Professor, Escola de Pós- Graduação em Economia, Fundação Getúlio Vargas Márcio Wohlers Ph.D. in Economics (Universidade Estadual de Campinas). Professor of Telecommunications, Universidade Estadual de Campinas, member of the Board of Trustees of the CPqD Foundation Marcos Thadeu Abicalil Architect, M.A. in urban and regional planning (Universidade Federal do Rio de Janeiro), technical assistant to the Brazilian Government in water supply N o t e s on Contributors v i i Marina de Souza Szapiro Ph.D. student and research assistant (Research Group on the Economics of Innovation, Institute of Economics, Universidade Federal do Rio de Janeiro), member of the Directing Board of the Brazilian Association for the Advancement of Science Maurício Cortez Reis Ph.D. student (Department of Economics, Pontifícia Universidade Católica do Rio de Janeiro). Holds an M.A. in Economics by the same university Paulo Bastos Tigre D.Phil. in Economics (Sussex University). Full Professor, Institute of Economics, Universidade Federal do Rio de Janeiro Ricardo Bielschowsky D.Phil. in Economics (Leicester University), Professor, Institute of Economics, Universidade Federal do Rio de Janeiro (on leave). Senior Economist at UN/ECLAC Brasilia Office Rubens Penha Cysne Ph.D. in Economics (Fundação Getúlio Vargas). Professor, Fundação Getúlio Vargas, presently a visiting scholar at the Department of Economics, University of Chicago Sebastião José Martins Soares Mining Engineer, with graduate studies at Coppe/Universidade Federal do Rio de Janeiro. Former Superintendent, National Development Bank Sônia Draibe Ph.D. in Political Science (Universidade de São Paulo). Full Professor, Universidade Estadual de Campinas. Secretary-General, Brazilian Political Science Association Introduction The analysis of economic and social transformations requires the identification of the time frame in which they occurred to enable one to associate them with other phenomena. This association often corresponds to the periods defined by the calendar for two reasons: firstly because it facilitates analysis and secondly because data are usually available in that form. In this respect, it has become a virtual consensus, for example, to con­ sider the Eighties a lost decade for Latin America's economies. They experi­ enced a loss of wealth (transference of real funds to countries outside the region), and many social indicators registered a sharp deterioration in the quality of life within the region throughout the decade. For many countries in the region, the hallmark of the Nineties has been an endeavour to recover their former standard of living. Changes in the international arena, combined with a volte-face in the traditional manner of planning and carrying out economic policy, have ushered in an unprece­ dented set of circumstances: low inflation rates, greater penetration of imports, and less state intervention, among other salient features. The Brazilian economy has experienced particularly intense change in the Nineties, and the choice of this decade as the frame of reference for analysis is more than mere chronological coincidence. The Nineties have been the harbinger of a break with the traditional guidelines of Brazil's economic policy, besides marking the advent of a change in the behaviour of a variety of economic agents. The implications of these novelties for the economy's medium- and long-term prospects are as yet unclear. As this remarkable period draws to a close, it should be stated that, despite some positive results, the general context remains clearly unsatis­ factory, especially with regard to Brazil's social indicators and its capacity to compete in an international market operating with new ground rules. In view of this, a systematic analysis of the efforts being made and of the results obtained to date is all the more opportune. With this in mind, the Economic Commission for Latin America and the Caribbean (ECLAC) has coordinated a large-scale research project on Growth, Employment and Equity in Latin America in the Nineties, the aim being to systematize knowledge about the region in the present decade. The project is designed to achieve systematic information about eco­ nomic reforms implemented in the region during the period, producing systematic and new data in addition to identifying common features of national experiences and suggesting possible policy measures. i x X Introduction The study has covered the experience of nine countries (Argentina, Bolivia, Brazil, Chile, Colombia, Jamaica, Mexico, Peru and Venezuela) with regard to five issues: macroeconomic and social reforms; investment and growth; the structure of technical progress and national innovation systems; job generation and income distribution. This book presents a systematic summary of the main results where Brazil is concerned. In the first chapter, Baumann presents an overview of the features high­ lighted by the authors of the other chapters in the book, relating them to the literature on economic reforms in developing countries. He shows that the Brazilian experience in the Nineties has been fairly diversified, and has paid little heed to the traditional recommendations contained in the litera­ ture, choosing rather to alter the sequence of the reforms. Cysne's chapter1 reviewing the macroeconomic reforms provides a detailed account of the different measures adopted over the period and the main results obtained. He demonstrates that, following the stabilization achieved in 1994, the Brazilian economy replaced