As Brazil’s president, Fernando Henrique Cardoso pledged to bring fiscal responsibility, social reforms, and financial stability and prosperity to his nation. Despite persistent congressional and judicial resistance, he achieved many of his goals, passing on to his successor a more stable economy and government.
When he took office in 1995, Fernando Henrique Cardoso inherited the largest economy in Latin America, one that for most of the twentieth century had suffered through a series of corrupt democracies or military rule. Brazil also had one of the world’s most unequal distributions of income. Cardoso set out to turn the country toward a new and positive future.
In 1993, having been appointed finance minister by then president Itamar Franco, who had replaced a president impeached for corruption, Cardoso implemented a program designed to curb the country’s crippling inflation. The plan included a new currency, the real, and constitutional reform that would redistribute federal funds in a way that would help balance the budget. Cardoso’s plan reduced inflation from 40 to 2.5 percent a month by the end of 1994, and on the strength of his economic successes, he was elected president. He immediately set further goals: land reform, privatizing state-owned companies to give the government needed income, creating more jobs, improving health care and education, and reducing poverty. To many Brazilians, Cardoso offered a corruption-free government, improved civil rights, and a stable economy.
Brazil’s economic problems stemmed largely from an inflated bureaucracy, a burdensome pension system, inefficient tax collecting, and inadequate social security contributions. The 1988 constitution had shifted presidential power and federal revenue from the central government to the states, municipalities, and courts, leaving no funds for social programs. In addition, thirty-two million Brazilians lived in poverty, and nearly a third of Brazil’s labor force could not afford adequate food and housing for their families. Addressing these problems, Cardoso encountered strong resistance from the Brazilian congress, whose members served powerful groups benefiting financially from the status quo. In urgent need to reorganize public finances and allow faster economic growth, Cardoso turned to other sources of revenue, including privatization of state-owned businesses, raising taxes, and improving tax collection.
Cardoso had powerful and savvy political allies in his struggle to balance the budget and implement social reforms. One of his strongest aides was Sérgio Roberto Vieira da Motta, Cardoso’s friend and business partner who cofounded the Social Democratic Party. Perhaps Motta’s greatest contribution to Cardoso’s government was the sale of Telebras, Brazil’s giant telecommunications company. Despite criticism from Itamar Franco, who had turned against Cardoso after leaving the central government, the sale continued, taking two years to complete. The final settlement included the establishment of a governmental regulatory authority, embodied in a new telecommunications law. The sale gave a boost to Cardoso’s campaign for a second term, which required an amendment to the constitution. At the last moment, however, Cardoso’s reputation for personal honesty was tarnished, and his hopes for reelection were jeopardized, when Motta was accused of paying several congressmen to vote for the constitutional amendment that would allow the president and other politicians to seek a second term.
Cardoso won reelection and continued to push for reforms to avoid a prolonged economic crisis, all the while trying to maintain financial stability. He pressed for fiscal austerity to curb inflation and to restore confidence in Brazil’s economy to encourage foreign investments. In a show of support for Cardoso’s budgetary concerns, many states trimmed bloated payrolls, but in early 1999, Brazilians were again facing an economic crisis, exacerbated by Itamar Franco, who had become governor of Minas Gerais, one of Brazil’s southern states. Franco stopped payment on his state’s huge federal debt, causing a devaluation of the real and heightening the crisis. A few months later, he joined other governors and labor leaders in denouncing the Cardoso government. Cardoso’s troubles increased when the Brazilian Supreme Court blocked a proposed increase of pension contributions meant to save the government $1.2 billion.
By January, 2000, the economy had begun to recover, but Brazil’s congress continued to resist pension reform. At issue was a new formula that determined pensions according to age, previous contributions, and life expectancy after retirement. Eventually, the Supreme Court ruled against the opposition.
Cardoso made efforts to improve other areas of government as well. He allocated $3.5 billion to modernize Brazil’s air force and another $1.7 billion to combat the increase in violent crime. The police force was also to be enlarged and given further training, and command of the country’s drug war was shifted from the ineffectual police forces to the federal Justice Ministry.
By 2000, government agencies throughout Brazil began to rid themselves of corrupt politicians, replacing incumbents with candidates who promised to clean up the government. Cardoso saw these changes as a desire among leaders and voters alike to bring higher standards into public service. Additionally, the new era included the establishment of anticorruption courts. Ironically, just as voters were ejecting corrupt politicians from office, Cardoso faced accusations of corruption in his government by Antônio Carlos Magalhães, who had been one of Cardoso’s strongest political allies. Cardoso had alienated Magalhães by backing a rival of Magalhães in the race for speaker of the senate. Magalhães sought revenge by trying to obtain secret voting results from federal prosecutors, and when the attempt was exposed, he was disgraced and forced to resign his office.
In the remaining months of his presidency, Cardoso also helped to reform the civil service and establish a bureaucracy needed to carry out social programs. For eight years, Cardoso’s policies and practices enabled the government to function positively without disruption. He established a more open and stable system of government. His administration privatized $91 billion worth of government-owned enterprises, including industrial and mineral businesses, telecommunications, and most of the government-owned banks. His measures resulted in the Fiscal Responsibility Law of 2000, requiring states and municipalities to improve accounting practices.
Cardoso brought fiscal discipline to the political realm while maintaining economic growth. Serious social problems remained at the end of his presidency, such as increased crime and deficits in the social security system, but he had made genuine gains in Brazil’s economic and social realms.
Brazil suffered a wide array of problems, both internally and externally, before Cardoso took office as president. In the eight years preceding 1994, the government had revalued the currency five times, and by 1995, thirty-two million Brazilians were classified as destitute. Congress comprised nineteen distinct and disorganized political parties whose members were dedicated to aggrandizing themselves and to protecting the interests of those who elected them. The government’s pension system was a ruinous drain on the federal budget, and foreign debt had risen to $52 billion. The country’s budget had not been balanced in two decades.
Cardoso brought credibility to the federal government and made a sincere effort to institute political, financial, and social reforms. He stabilized the country’s finances and brought a degree of unity to a government widely known for corruption. Perhaps the most significant contribution Cardoso made was bringing integrity to Brazil’s political offices. His prestige as finance minister, his strong political skills and commitment to fiscal restraint, his knowledge of economics, and his dedication to solving the country’s major economic and social problems raised Brazil’s standing as a member of the world’s financial institutions and gave hope to Brazilians that their country was stable and prosperous.
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Goertzel, Ted George. Fernando Henrique Cardoso: Reinventing Democracy in Brazil. Boulder, Colo.: Lynne Rienner, 1999. Traces Cardoso’s transition from a leftist intellectual to a leader of Brazil’s democratic party, assessing Cardoso’s political achievements to the end of his presidency. -
Mainwaring, Scott. Rethinking Party Systems in the Third Wave of Democratization: The Case of Brazil. Stanford, Calif.: Stanford University Press, 1999. Examines Brazil’s political system, showing the weaknesses responsible for corruption and the ineffective leadership that obstructed Cardoso’s efforts toward reform. -
Nylen, William R. Participatory Democracy Versus Elitist Democracy: Lessons from Brazil. New York: Palgrave Macmillan, 2003. A study of Brazil’s Workers’ Party shows how citizen participation in the political system can strengthen democracy, even in the United States. -
Smith, William C., and Nizar Messari. Democracy and Reform in Cardoso’s Brazil: Caught Between Clientelism and Global Markets? Paper 33. Coral Gables, Fla.: University of Miami, North-South Center Press, 1998. Discusses Cardoso’s attempts to make Brazil’s economy competitive in the global market and the conflicts between Cardoso’s efforts at social reforms and entrenched social and political interests. -
Weyland, Kurt Gerhard. Democracy Without Equity: Failures of Reform in Brazil. Pittsburgh: University of Pittsburgh Press, 1996. Examines efforts to redistribute wealth and power through the democratic process, citing initiatives to reform Brazil’s taxation laws, social security system, and health care program.
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