Transcript Senator Tasso Jereissati

Brazilian Regional Policy
Russia and World Bank Workshop on Regional
Development Strategies – March, 31st 2008
Senator Tasso Jereissati (2003-2010)
Former Governor of the state of Ceará (Northeast Brazil)
Introduction
This presentation is divided in two parts:
o In the first part, I will be talking about the regional
development in Brazil and the new concept of
regional policy I worked together with other
senators at the Brazilian Senate.
o In the second part, I am explaining how the
government of a poor state can implement prodevelopment policies despite lacking the active
support of the federal government. This part of my
presentation is based on my previous experience as
the governor of the state of Ceará in Northeastern
Brazil (1985-89; 1995-98 and 1999-02).
Part I – Regional Policy in Brazil
 Brazil is a country divided into five regions. Two
regions (North and Northeast) still have social and
economic indicators far behind the average for the
country.
 The Southeast region with 42% of the population
accounts for 58% of the Brazil’s GDP; while the
Northeast region with 28% of the Brazil’s population
accounts for only 13% of the Brazil’s GDP.
 The per capita GDP in the Northeast region is 47% of
the average for the country and in the North region this
figure is 66%. These are the two regions in Brazil with
the highest poverty rates.
REGIONAL INEQUALITIES - BRAZIL
POPULATION
2007
(BR=100%)
GDP per capita
(BR=100%) 2005
4,6
7,9
62
15,6
NORTHEAST
13,1
28,0
47
24,6
SOUTHEAST
57,8
42,3
133
7,5
SOUTH
17,6
14,5
113
7,0
7,0
7,2
125
9,7
100,0
100,0
100
12,8
REGIONS
NORTH
CENTER-WEST
BRAZIL
GDP 2005
(BR= 100%)
SOURCE: IBGE. Contagem Populacional, 2007.
IBGE. Contas Regionais. PIB Municipal, 2007.
IBGE. Pesquisa Nacional por Amostra de Domicílios, 2006.
* % of 15 and older.
ILITERACY
RATE 2006*
Municipal Human Development
Index (HDI) - 2000
The areas with the
lowest HDI (in red)
are in the North and
Northeast regions.
The three phases of regional development
policies in Brazil
The First-Phase (1960s – 1980s): the main policy was to
provide venture capital to new investments in poor
regions.
 The government created three regional funds to provide venture
capital to new investments in the three poorest regions in the
country : North, Northeast and Center-west.
 These funds were operated by three regional development
agencies. One for each poor region (SUDAM, SUDENE and
SUDECO). In addition, the state governors also participated in
the policy proposals of these regional agencies.
 These funds and the regional policy worked well until the mid
1980s. In the 1990s, the regional development agencies were
gradually dismantled and the funds for venture capital were
discontinued.
The second-phase (1988-2003): the policy aimed at
providing subsidized credit to private firms and
increasing in-cash transfers to the poor.
• The Brazilian Constitution created three new regional financial
funds (FNE, FNO and FCO) and established many programs of
in-cash transfers.
 The new regional financial funds started to provide subsidized
credit for investment capital in the North, Northeast and Centerwest.
 The government gradually increased the cash transfers to the
poor: rural workers and elders.
In the 1990s, the focus of the Brazilian regional
polices was in-cash transfers.This policy was
named by some economists as “the growth of the
non-productive economy”.
Therefore, the Brazilian states embarked in a
fiercely competition to attract investments from the
south and southeast Brazil.
The state governments started to grant tax
incentives based on their own revenues to attract
new investments from Brazil’s South and Southeast
 “Fiscal Wars”
The third phase (2006-2008): the design of a new
regional policy.
 In the president Luis Inácio Lula da Silva’s term (2003-2010), the
government decided to re-create the regional development agencies. But
it has not been implemented yet.
 At the Brazilian Senate, we tried to re-create the regional development
agencies based on the idea that regional policy, nowadays, involves
investments in the people living in poor regions (health and education),
higher investments in infrastructure as well as subsidized credit to new
investments;
 The law creating the regional development agencies was approved at the
end of 2006; but the government vetoed many of the innovations we
approved at the senate, including a new fund to provide venture capital
to important investments in the North, Northeast and Center-west of
Brazil.
 At the senate, we demanded that the federal government
propose a regional multi-year plan with specific goals to
economic and social indicators (GDP per capita, average
years of schooling, infant mortality rate, sewage, etc.).
 Every year, the regional development agencies would
evaluate whether the economic and social indicators of
states and regions were converging to the Brazil’s average.
If not, the federal government would have to take additional
measures to make the figures meet the goals established in
the regional development plan.
 The idea is similar to the United Nations Millennium
Development Goals. But this concept of regional policy
approved at the Brazilian Congress at the end of 2006 has
not been implemented yet.
Where are we today (2008)?
 At the senate, we are debating a tax reform that will curb the
state’s incentives to attract new investments.
 But I am convinced that a political coalition to approve the tax
reform will depend on the commitment of the federal government
to provide funds to finance the regional development.
 Therefore, despite the recent re-creation of the regional
development agencies, we are still struggling to convince the
Brazilian federal government to effectively implement the new
ideas embedded in the law approved at the Senate.
 A regional policy must go beyond in-cash transfers. It should also
involve higher public investments in poor regions coupled with
incentives to increase the private investment. Unfortunately, incash transfers to the poor by itself will not bring new jobs to
emerging regions.
Part II – Local development policy
 Ceará is a poor state located in
Northeast Brazil – the poorest
region in the country.
 The per capita GDP (2005) in
Ceará is among the five lowest
for the 27 Brazilian states.
 In spite of being a poor state
located in a poor region, the
state has been showing an
impressive progress in both
economic and social
indicators.
Important indicators
1.
The Life expectancy in Ceará for over 40 years (19401980) was exactly the same -- 46 years. However, since the
mid 1980s this figure has been increasing steadily and it
reached 70 years in 2005.
2. The Infant mortality rate: in 1980s, the infant
mortality rate in Ceará was 102 per 1,000 (the number of
infant deaths by the number of 1,000 live births). This
figure was among the worst in Latin America. When I left
the government, this figure had dropped to 35.1 and
reached 30.8 in 2006. This sharp drop was the highest in
Brazil and led the state of Cerá to be awarded by UNICEF.
3. Average years of schooling: The average years
of schooling in Ceará went up from 3.4 years in
1992 to 5.1 years in 2005;
4. The percentage of households with
electrical energy went up from 65.4% in 1992
to 95.6% in 2005; and
5. And in the 1990s the Ceará’s GDP growth
outpaced the economic growth of both the
Northeast region and Brazil. This fast economic
growth happened hand in hand with a sharp fall in
poverty rates and a fast increase in the HDI.
GDP growth rates (1985-2005) – Ceará vs. Brazil – % per
year (5-year average)
Humand Dev. Index and Poverty rates
Human Development Index
(HDI) - Ceará
Povert Rate in Ceará
50.00%
45.00%
45.20%
0.700
0.680
40.00%
0.700
0.660
0.640
35.00%
0.620
30.00%
0.600
0.580
0.597
26.30%
25.00%
25.40%
0.560
0.540
1991
2000
26.10%
24.80%
20.00%
1992
2002
2003
2004
2005
How can we explain this economic and social
progress in Ceará from 1986 to 2005?
 Our government made a huge fiscal reform in the
1980s. It was this reform that allowed the government
to increase its spending on social policies and make
new investments in infrastructure;
 In my first term as the state governor, I implemented a
preventive health program together with the
community councils;
 I also invested heavily in education; and
 I adopted an aggressive policy to recruit new
investments to Ceará; grating tax incentives for new
industrial investments.
Fiscal reform (1986-1990)
Preventive health program
(1987)
 We decreased the number of civil
servants; many of them did not
even exist but were in the state
payroll;
 The program involved a close
partnership between the state
and the communities councils;
 The state government recruited
new tax inspectors to increase
local tax collection;
 The state provided financial
resources to the cities to hire the
health agents.
 The state of Ceará was the first in
Brazil to sign with the federal
government a plan to increase
the maturity of the state debt;
 The revenue that resulted from
the privatization of state
companies was invested in
infrastructure and not current
spending.
 The health agents are local
unskilled workers who are
trained to teach basic and
preventive health care to local
families;
 This program was replicated by
the federal government to all
Brazilian states in the 1990s.
Educational reform
 The state and municipal
governments hired 30,000 new
professors;
 The state started an ambitious
program to promote the training
of all state professors
(undergraduate and graduate
courses);
 The state established a program
to evaluate public schools and
students;
 The state increased the local
communities control over the
public schools – community
councils.
Economic incentives targeted at
new investments (1990-2002)
 The state government started to
grant tax incentives for new
investments;
 The tax incentives did not
decrease the state’s revenue
because it was based on the tax
increase brought about by the
new investments;
 The tax incentives were higher
for firms located in the state
countryside;
 Ceará today has the highest labor
force in the industrial sector in
the Northeast region.
conclusion
1. Local governments can contribute to the local
development if they are able to get the funds to invest
in education, health and attract new investments.
2. But there is a limit. A poor state will need the
assistance of the federal government to promote the
development no matter how good the local
government is.
3. I believe that we must look to the European Union
regional policy. They have three different funds to
invest in education, infrastructure and promoting new
private investments in lagging regions. Brazil and
Russia need to follow suit.
THANK YOU
Senator Tasso Jereissati
http://www.senado.gov.br