As the fifth largest country on
the planet and one of the most prominent continental powers that contributes to
the performance of our global economy, Brazil has undergone copious amounts of
structural changes to both their economic and social circumstances in the past thirty-seven
years. The years following the 1980s are heavily characterized by economic
volatility and social progress for Brazil, and its recent history suggests that
the country assembles important institutional innovations at critical junctures
in history. Despite being Latin America’s largest economy and one of the United
States’ most important trading partners, Brazil maintains an inherent
dependence on commodity exports
from other countriesES1 , and extremely
high economic inequality and social division still pose a serious threat to
further socioeconomic progress for the country. While we focus on the
forthcoming institutional mechanisms Brazil needs to
implement, diverting our attention to the past advancement the country has made
and critically
assessing ES2 the
functionality of its past economic and social development strategies are
critical to ensuring the country’s capacity for further progress in the decades
to come.

            In an attempt to critically assess the country’s past
socioeconomic progress and the functionality of its chosen trade and investment
strategies with its record of gender and income inequalities, identifying the
distinct changes Brazil has withstood prior to the 1980s is critical to ensure
that we integrate its present success with the ones of its past. The Brazilian
Economy experienced a remarkable growth record from 1920 to 1980 when it
achieved one of the highest rates of growth in the world; during this period,
gross domestic product grew at an annual average rate of 6.2%, while real GDP per
capita increased at an annual rate of 3.6% and in the 70s, the Brazilian
economy had its best performance in this century (Barbosa). ES3 Throughout
this 60-year period, the growth strategy adopted was based on the import
substitution industrialization (ISI) policy. ISI encompassed incorporated
very high tariffs and fiscal incentives for direct foreign
investments alongside direct state intervention through state-owned enterprises
in a variety of sectors in an attempt to stimulate less dependency on commodity
exports (economics.com). Despite the Brazilian military regime between 1964 and
1985 failing to create an institutional structure within the nation that could
promote a lasting transformation of the entire society, the country enjoyed
very high rates of economic growth and made large scale investments in
infrastructure and industry during the 1970s, enabling the formation of new
industries and diversification of the economy.

The
economic progress experienced by the country during the 60-year period
preceding the 1980s was coined the “Brazilian miracle”, however, large
quantities of the population were simultaneously being left behind, further
reinforcing the history of concentrated landownership and inequality experienced
by Brazil prior to their growth. Economic development in the country often
consisted of granting privileges and protection to sections of the political
and business elite, as the development model they implemented foundered
on its gross social inequality and the lack of sustainable macroeconomic
foundations, with repeated fiscal and foreign exchange crises punctuating
episodes of high growth (WB). The rapid industrialization and urbanization was
built upon regional and socioeconomic inequalities, which glaringly exposed the
extent to which the country’s promise of relieving inequality remained
unfulfilled, and necessitated
the prioritization of inequality relief in future policiesES4 .stimulated
the necessity of future policies that would relieve these new inequalities.

Following
the economic success and its corresponding upsurge of socioeconomic inequality,
Brazil experienced slow growth and economic crises during the 1980s and 1990s described
as the “lost decades” for development. The macroeconomic landscape was
dominated by unsustainable fiscal deficit, instability, hyperinflation, an
exceptionally high cost of capital, all
accompanied by low savings and investment rates (ES). Beginning in the 1980s,
Brazil’s economy had entered a period of stagflation perpetuated by two
factors: the ISI policy growth strategy had been exhausted, and there was a
deficit in institutional and political policies to solve the onset of the external debt problem that had been
overlooked. In spite of Brazilian GDP being 21.0 percent higher in 1993 than in
1980, GDP per capita was lower, and in accordance with the economic and debt
crises, most Latin American countries embarked on monetary, fiscal and
financial reforms in the 1990s. In Brazil, these reforms have stabilized
macroeconomic indicators, decreased rates of inflation and allowed the country
to return to international capital markets (UNDP). The reforms enacted during
this time period enabled stimulated the
move toward further social and economic progress to take place in the years
that followed.

In the
1980s, the Federal Constitution of 1988 marked a turning point in the country’s
social protection system, at least in relation to the prevailing legislation.

It guaranteed a broad range of social rights related to pensions, social
assistance and universal coverage of care (PPT). In addition to establishing a
web of accountable institutions with the formal intention of improving governance
and reducing corruption, the economic modifications enacted before the 1980s with
the measures taken to reverse their effects during that time period made social
inclusion more viable for the people of Brazil. The 1990s are considered to be
the “reform decade”; although initial actions such as foreign trade
liberalization and the first privatization operations were taken in the late
1980s, the most significant stages only began to materialize following the
beginning of a new decade. The restoration of democracy in 1985 came with the
recognition that a development model based on exclusion and inequality was not
sustainable (E.S). From 1986 through 1994, a few heterodox plans were deployed
for Brazil. In 1987, the Bresser Plan (unnamed
after the Minister of Finances) sought to freeze prices and salaries aside from
eliminating budgetary investments; the outcome was accumulated inflation of 366%ES5 . In
1989, the Summer Plan once again froze prices and proposed the privatization of
state companies and the dismissal of civil servants; in December alone, the
inflation rate was over 50%. In 1990, the Collor Plan had been introduced by President Fernando
Collor in hopes of eliminating inflation; alternatively, the prices and
salaries were frozen, budget expenses were cut, and taxes were increased,
bringing recession to Brazil instead of eliminating inflation. In 1991, the
Collor Plan’s sequel Plan Color II sought to attack indexation, where all short
term financial transactions were prohibited. This plan ultimately failed mostly
as a result of the weak political support Collor had prior to his impeachment
in 1992.

The
introduction of the Plano Real in 1994 designed to reduce inflation managed to
bring inflation under control and restore macroeconomic balance. Designed by
Henrique Cardoso, the Plano Real sought to improve fiscal strategies while
stimulating monetary reform and opening the economy. Following four decades of
an economy that had been accompanied by the presence of the state as a producer
of goods and services that was previously closed off and also inhibited by a
long period of high inflation with indexing, the end of the 1990s in Brazil
became an economy with a degree of openness to merchandise trade and capital alongside
a reduced power of the state as a direct producer that facilitated further
socioeconomic progress for the turn of the century. In the early 1990s, most
manufacturing enterprises went through a process of rationing their production as one of the ways of opening up to the
competition from imported products, enabling to increase factor productivity in
industry when returns on investment became relatively high and installation of
new equipment occurred.

While
reform programs such as the Plano Real reversed the effects of inflation, these
reforms did not address the underlying structural problems of chronically low
savings, high capital costs and an increasingly overextended and rigid public
sector. To counteract this, in the 1990s and the beginning of the 20th
21ES6 st century,
Brazil carried out significant reforms to social security and government
transfers to make them more focused on the poor. These reforms included
noncontributory unconditional and conditional cash transfer programs targeted
to low income families and older or disabled people (ES). These transfer
programs are the Beneficio de Prestação Continuada (BPC), the CCT program, Programa Bolsa Família (PBF) and the
semi-contributory Rural Pension Program. Alongside higher economic growth, this
ambitious redistribution policy helped shape the progress in poverty reduction
and the promotion of shared prosperity in Brazil (ES). In relation to the early
economic policies implemented in Brazil, those that followed in the late 1990s
are the most accountable for the success they enjoy today.

In
looking back before the turn of the century, the diverse institutional policies
enacted implemented by
Brazil in the 1990s and early 2000s have demonstrated that a more equitable
income distribution is associated with about a third of the fall in moderate
poverty in the past decade, while two thirds of the fall are associated with
gains from economic growth (ES). The introduction of the Fiscal Responsibility
Law in 2000 helped Brazil in controlling public spending. In the years that
followed, control over public spending has increased
significantly and
allowed the government to achieve its target of running sizeable primary
surpluses. Brazil demonstrated its resilience when the 2008 global financial
crisis struck and the quick fall of commodity prices and the strain on
financial markets struck the country. It was during this time that Brazil was
able to enact countercyclical policies during a global crisis, as it possessed
enough buffers to counter the crisis by increasing public spending and lowering
interest rates instead of having to tighten fiscal and monetary policies. In
2009 when the government took to significant fiscal stimulus, the government
had a 2% of GDP primary surplus. Much of their success could be attributed to
their development in trading strategies, one of the primary ones being less
dependencyt on
foreign trade.

The
macroeconomic stability achieved since the late 1990s has facilitated economic
growth in the decade leading up to 2013. In the past two
decades, Brazil has made significant progress in reducing gender inequality.

According to the results of a 2010 study by the Brazilian Institute of
Geography and Statistics (IBGS), illiteracy rates for women aged 15 years and
older fell from 20.3 in 1991 to 13.5 percent in 2000, to 9.8 percent in 2008
(WB). The World Bank also states that as a result, the share of the female
labor force with tertiary education increased from 7.4 in 1992 to 8.5 percent
in 1999 and 11.9 percent in 2007 compared to 5.3, 6.2 and 7.3 for males,
respectively.

In
correspondence with the dramatic change in social inequality, 62 percent of the
decline in extreme poverty in Brazil between 2004 and 2013 was due to changes
in non-labor income, mainly transfers from the aforementioned PBF/CCT
program aforementioned. According to World
Bank date, relative poverty (based on purchasing power parity PPP US$2 per
day metric) has fallen markedly, from 21 percent of the population in 2003 to
11 percent in 2009. Extreme poverty, on the other hand, based on a PPP US $1.25
per day metric also dropped significantly, from 9.8 percent in 2004 to 6.1
percent in 2009. Simultaneously with the fall in poverty was the decline in
income inequality; the income growth rate of the poorest sector of the
population between 2001 and 209 was 7 percent per year, while that of the
richest sector was 1.7 percent. As a result, income inequality (as measured by
the Gini index) fell significantly, from 0.594 in 2001 to 0.521 in 2011 – a
50-year low. The primary drivers behind these achievements have been low
inflation, sustained economic growth, well-focused social programs and real
increases in the statutory minimum wage (WB). The federal government in Brazil
relied heavily on the Human Development Index as a targeting tool for social
programs, specifically during the Cardoso administration from 1995 to 2003; Electricity for All provides electricity
to poor communities selected on the basis of HDI and the Young Agents for Social Human Development Programme provides an
allowance for adolescents between 15 and 17 years old to remain in school with
the intent on preventing violence, drug use and adolescent pregnancy that
approximately $17 million. Because Human Development Programs began in Brazil
when re-democratization was being consolidated, they were not constrained by
political issues. Furthermore, re-democratization was perceived as not only to
re-construct political institutions, but also to address social demands; the
inclusion of those of large segments of the population who were excluded from
the economic gains of the previous regime was greatly emphasized.

To a
large extent, the rapid decline in inequality over the past decade experienced
by Brazil was due to a policy of social inclusion in the context of a booming
economy, fueled by favorable external conditions. Nevertheless, despite a
reduction in poverty and inequality, Brazil remains one of the most unequal
countries in the world, with a Gini coefficient higher than in most countries. A
case study published in Economic Development
by Michael P.

Todaro and Stephen C. Smith ES7 titled Progress in the Struggle for More Meaningful
Development: Brazil identifies the two faces of development for the country:
world-competitive industry that coexists with stagnant, protected sectors. While
the country has experienced advancement in economic growth and significant
improvements in health, education and inequality, the study maintains that
achieving genuine development for the country is still a long way ahead. With
the end of the commodity boom, Brazil finds its social achievements challenged
from two angles. On one hand, to sustain the rise in incomes and job creation,
Brazil needs to find new sources of growth; on the other hand, without the
revenues associated with consumption growth and high product prices, fiscal
space has eroded rapidly, consequently placing Brazil’s economic feats at risk
and raising concerns that the progressive social policies its enacted in past decades
may no longer be affordable.