Brazil - Economic analysis of government's policies, investment climate and political risk.

THE

McKEEVER INSTITUTE

OF

ECONOMIC POLICY

ANALYSIS

BRAZIL: Economic Policy Analysis

This site presents an analysis of the Brazilian government's economic policies compared to a list of 34 economic policies as prepared by student Ms. Rosangela Nicolini with the McKeever Institute of Economic Policy Analysis (MIEPA)in the Fall of 2004. To read the analysis scroll through this site. To learn more about the background policies, click here

Introduction and Policy Recommendations

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Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Brazil is shown below. The ratings herein are based on the following rating scale:

RATING SCALE

5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 1996. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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BRAZIL:

Comparison of Brazil's economic policies to MIEPA criteria as prepared by native student of Brazil, Ms. Rosangela Nicolini, studying in San Francisco in Fall 2004. This study updates an earlier study of Brazil completed in 2001.

RATING SUMMARY:

POLICY NUMBER      RAW SCORE   ADJUSTED SCORE     POSSIBLE  PERCENTAGE

      1               5.0           15.0             15.0       100%

      2               2.0            6.0             15.0        40

      3               1.0            3.0             15.0        20

      4               5.0           15.0             15.0       100

      5               3.0            9.0             15.0        60

      6               4.0           12.0             15.0        80

      7               3.0            9.0             15.0        60

      8               1.0            3.0             15.0        20

      9               1.0            3.0             15.0        20

      10              2.0            6.0             15.0        40

      11              5.0           15.0             15.0       100

      12              1.0            3.0             15.0        20

      13              2.0            4.0             10.0        40

      14              5.0           10.0             10.0       100

      15              1.0            2.0             10.0        20

      16              1.0            2.0             10.0        20

      17              1.0            2.0             10.0        20

      18              1.0            2.0             10.0        20

      19              3.0            6.0             10.0        60

      20              1.0            2.0             10.0        20

      21              3.0            6.0             10.0        60

      22              3.0            6.0             10.0        60

      23              2.0            4.0             10.0        40

      24              1.0            2.0             10.0        20

      25              2.0            4.0             10.0        40

      26              1.0            2.0             10.0        20

      27              3.0            6.0             10.0        60

      28              3.0            6.0             10.0        60

      29              3.0            3.0              5.0        60

      30              1.0            1.0              5.0        20

      31              3.0            3.0              5.0        60

      32              1.0            1.0              5.0        20

      33              5.0            5.0              5.0       100

      34              1.0            1.0              5.0        20           

  TOTAL              80.0          179.0            375.0       47.7%
                    =====         ======           =====        =====
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INDIVIDUAL POLICIES

1. Freedom from internal control: 5.0

High score to Brazilian government because Brazilian citizens are free to relocate throughout the country. In addition, all citizens are free to engage in any business activity, as long it is a legitimate activity.

Source: 1) Personal

2. Freedom of speech: 2.0

Brazil has laws protecting the freedom of speech for all; however, for a person to exercise his or her rights of freely speak can be a dangerous move. In Brazil, crime and corruption are a problem. The police and judicial enforcement rarely bring justice to those who lost their lives while freely speaking out against corruption. "Don't speak otherwise?" is a common advise to hear if you had born in Brazil. Even people in high ranks of the government try to stop those who exercise their rights of free speech. Brazilians worldwide were embarrassed a few months ago, when the Brazilian president, Lula, used his power to revoke Larry Rohter's, NY Times reporter, visa. Rohter wrote an article about the president's habit of drinking, but luckily, the Brazilian judicial system stopped the president's goal. It is always important to remember that in Brazilian history, many people were not that lucky, and many Brazilians had lost their lives after exercised their rights of free speech.

Source: 1) "Corruption remains the same in Brazil," by Carmen Gentile - www.washtimes.com/upi-braking/2004

2) IPI - www.freemedia.at/Death_watch/d-watch2004.html#Brazil

3) Personal

3. Effective, fair police force: 1.0

Brazilian citizens feel unsafe while walking in the streets; therefore, low grade to Brazil. Brazilians' perception of unsafe could range from 43% through 59% in some cities, like Sao Paulo and Rio the Janeiro. Crime rates have been increasing, and many are not reported. This perception frequently can compromise one's decision of opening a small or media enterprise. Police fails to assure safety for citizens as well for business. Into the large corporations such fear is reduce due to fact that large companies can afford to pay for an team of security guards.

Source: 1) www.zonalatina.com/Zldata194.htm

2) Personal

4. Private property: 5.0

High score for Brazil because anyone, citizens or noncitizen, are allow to own private properties in Brazilian territory. Governmental offices issue a title of property, which guaranty one's ownership of a real, personal, or intellectual property. The process of issuing a property title can be somewhat time consuming; however, when the process is due, the owner is protected by laws, and enforced by judicial system. In addition, some Southern cities had successfully settle negotiations over public land in order to help low income citizens to own a private property.

Source: 1) Dennis Borges Barbosa & Melissa Barros Tavares Pereira - www.nbb.com.br

2) Personal

5. Commercial banks: 3.0

The banking system in Brazil has been improving over the past few years; however, more than 50% of the Brazilian population has no means to ever get a bank loan, neither open a bank account. The first problem is that millions of Brazilians have low income. The second problem lies on the credit bureau, which has a deficiency on tracking one's credit history. Most Brazilians prefer to use the direct financing system, in other words, a store finances one's purchase, breaking it in small monthly payments, and charging very high interests. If the individual do not pay his or her bills, then the store can confiscate the product, and report his or her name to the credit bureau. The credit bureau tried to maintain an updated data; however, by law if an individual has been with bad credit over a period of six years, he or she can apply for exoneration of credit, in other words, he or she will have his or her credit clear out without any expenses. Such process can prevent commercial banks to rely on accurate data from the credit bureau, and banks can have a hard time to evaluate the risks of loaning money to an individual. New laws and efficiency on the credit bureau will have to happen before Brazilian and banks can have a better relationship.

Source: 1) Banco Central do Brazil - www.bcb.gov.br

2) Personal

6.Communication systems: 4.0

Brazilian communication system is good. Cities and countryside are equipped with many means of communications (phone, cell phones, fax, television, radio) with exception of computer. The use of computers as a mean of communication is a process that has been growing in Brazil, but due to the high cost of computer hardware it still a slow growth. The most popular mass communication is television, and Brazilians love soap opera. TV networks strategically start the TV news between the hours of the most popular soap opera, seven to eight p.m. In addition, house and cell phones became more affordable for Brazilians since the Brazilian government had privatized its telecommunication corporation. There is a real potential growth for computer in Brazil. It is believe that soon, the Brazilian government will facilitate and lower taxes for import of computers, which will make computers much affordable item to Brazilians.

Source: 1) COPETRAC - www.geocities.com/copetrac/portal1.hmtl

2) Personal

7. Transportation: 3.0

Brazilian transportation system is reasonable; it has some good and bad sides. Brazil has roads, rail, air, and ships, but not all works efficiently. Brazil is fortunate because it has south to north regions connected by the Atlantic Ocean. Therefore, the navigation system is good for transporting large volume of goods throughout the Brazilian coast, but it is not good for transporting people due to long journey. The Brazilian air system excellent, and recently it is becoming more affordable to Brazilians, but still not cheap to many. The railroad system is, with exception of urban rails, in precarious condition. It requires a great amount of capital investment, mostly for repairs of rails, newer and faster trains, more employees, and newer distribution of rails throughout the country. In similar situation are the roads of Brazil. Highways and interstates are in great need for repair and expansion. Many enterprises have difficulties in transporting goods among states because the highways are very dangerous. Brazilian highways and interstates are filled with dangerous fissures on the road, not enough roads, and damaged bridges. To make things worse, highway pirates are a big problem in Brazil. Often, the news channel announces the robbery of a loaded truck, and the death of the truck driver. High rates of lost, employees and goods, forces enterprises to reevaluate the company's expansion due to high costs and risks of transporting goods.

Source: 1) Governo do Brazil - www.mre.gov.br/cdbbrasil/itamaraty

2) Personal

8. Education: 1.0

Brazil educational system is not satisfactory. Both, lack of quality and quantity are the main issues in Brazil. In 2000, the US Bureau statistics showed that 86.1% of Brazilians are literate. However, such data failed to show the real literacy situation in Brazil. Unfortunately, Brazil has high rates of grade repetition and dropouts. Only 45% of first grade students will make through high school. About 31 million students had repeated at least ones a grade in school. Around 50% of the Brazilian students are not well prepared to perform, in class, exercises or debates about the subjects' equivalent to their grade. Only 3% of Brazilian students are considered to equally perform as a student from developed countries would. To make things worse, Brazilian educational system has been increasing the number of "acelerado" courses. In other words, if a student had repeated few grades, and if this student is behind, he or she will be able to attend a special class that give him or her the chance to jump one, two, or three years in one semester. Such data clearly shows how precarious is the Brazilian educational system.

Source: 1) Folhaonline, by Heloisa Helvecia - http://www1.folha.uol.com.br

2) Unicef - www.unicef.org

3) "Causes and consequences of grade repetition: evidence from Brazil," by Joao Batista Gomes-Neto, Eric A. Hanushek, Oct 1994 v43 nl p117(32).

9. Social Mobility: 1 .0

Low score to Brazil because one's ability to create wealth is filled with barriers, especially for low background citizens. It is important to say that if one's will is strong, he or she might have a chance to advance economically; however, such dream is not a reality to millions of young Brazilians. First, Brazilian education system does not embrace the minority groups. Ironically, the public universities, free education, are primarily composed of elite youth, and private universities are composed of poor or middle class youth. Several philanthropic entities focus on helping Brazilian kids to develop some kind of skills, in order to help them to get a job, but these entities mistakenly forget to encourage and educate kids to pursue an academic life. In general, Brazilian society believes that if one has born poor, he or she will never make a good living.

Source: 1) Unicef - www.unicef.org

1) Personal

10. Freedom from outside control: 2.0

Theoretically, Brazilians are free from outside control; however, the Brazilian government owes $ 500 billions of dollars to the International Monetary Fund. Therefore, the IMF heavily influences the Brazilian government decisions on money expenditure, and other financial decisions. In other words, freedom from outside control is only in theory for Brazilians.

Source: 1) EIR - www.larouchepub.com/other/2002/2943lula_braz.html

2) Personal

11. Foreign currency transaction: 5.0

Brazilian government requires that all business transactions be made in Brazilian currency (reais), and all foreign currencies must be converted before any business transactions; therefore, high score to Brazilian legislators.

Source: 1) Governo do Brasil - www.mre.gov.br

2) Personal

12. Border Control: 1.0

Despite of the Brazilian government efforts to control it's border, such deed has not been satisfactory. It is important to remember that Brazil has borders with 10 other South American countries, and its border extension is around 10,000 miles. Brazil's border control is a problem because of the smuggling of drugs, money, and arms. First, possible coming from Colombia, drugs enter illegally in Brazil territory, and then they are ship to Europe. In 2003, the Brazilian federal police caught around 7.3 tons of cocaine, 128 kilograms of crack, and 157.7 tons of marijuana. Second, Brazilian laws are very strict about gun control; however, one can buy any kind of gun in the black market. In the poorest neighborhoods, called favelas, kids 10 or 12 years old carry gun machines to defend the "boss"--drug lord. By Brazil's borders or via shipment, illegal guns enter in Brazil territory, and then they are sell in black market; it is not difficult task to buy an illegal gun in Brazil. Third, in Brazilian territory anyone, citizen or not, can open a bank account and deposit huge amounts of cash, without being question about the nature of the money. It is concluded that Brazil has serious problems of smuggling, and such receive a greater attention of Brazilian legislators.

Source: 1) US Department of State - www.state.gov

2) Hizbollah in South America, by blnca Madani - www.jdo.org

3) Personal

13. Currency: 2.0

Brazilian government requires that only one currency be use inside the country, and the Brazilian currency is called the "real". However, many businesses will accept dollar or euro as form of payment for good or services. Many Brazilians will save the foreign bills as form of investment because they believe that such currencies will rise in value, and if they not, at least it will not devalue as reais would. In addition, some fortunate business people prefer to be paid in dollar because it, later, will be transported outside the country.

Source: 1) Governo do Brazil - www.mre.gov.br

2) Personal

14. Cultural, language homogeneity: 5.0

Brazilian official language is Portuguese, and all schools must educate its students in the official language. In addition to Portuguese, a large percentage of Brazilian population also speaks Spanish because both languages are very similar in backgrounds. English and French languages are optional in school, and German and Italian are spoken in certain Southern regions. Guarani and Tupi are spoken in some native Brazilian tribes. According to 2000 US Bureau, Brazil is composed of 55% white (Portuguese, German, Italian, Spanish, Polish) citizens, 38% mulattos, 6% of African Brazilians, less than 1% of native Brazilians, and 1% of other ethnicities (Japanese, Arab, Amerindian). Brazil has, in large part, mix of ethnicities, and its citizens take great pride while identifying themselves as a mixed population. Generally speaking, the market segregation is not affected by language or cultural differences because Brazil is mostly homogeneous. The main religion in Brazil is Roman Catholic, with reaches 80% of population, followed by other Christian religions, and African religions.

Source: 1) US Bureau - www.cia.gov/cia/publications/factbook

2) Unicef - www.unicef.org

15. Political effectiveness: 1.0

Brazilian legislators are far from calling themselves effective in work. Brazilian economy still has non-satisfactory fluctuation, more than 40% of the population lives in total poverty, infant mortality is high, transportation and educational system have big issues to be solved, and crime and corruption are a huge problem. After Fernando Henrique Cardoso, former president, first year in office, several denounces came about some Brazilian legislators being involved in scheme and corruption scandals. Such news did not surprise most Brazilians, except for the fact that someone had the courage to speak out.

Daily, such scandals are increasing and openly denounced in Brazilian newspapers. Brazilians are still waiting to see which, those who had abused of their positions for personal profit, will go to jail. Too many legislators are involved in these scandals; it is logical that political effectiveness is in absence.

Source: 1) "Human Rights in Cardosos's Brazil," by Linda Rabben - www.crab.rutgers.edu/~goertzel/rabben1000.htm

2) Personal

16. Institutional stability: 1.0

Brazil has no yet achieved institutional stability. Government, courts, school, business, and specially law enforcement are struggling to bring solid bases of stability for Brazil. Fernando Henrique Cardoso, former president, did a good job in recognizing the state's responsibility for the injustices during dictatorship. On the other hand, violations of human rights still an issue in Brazil, Inflation seems under control for now, but Brazilians had experienced inflation as high as 5,000 percent a year, during late 80's. Most recently, the revocation of rules, and addition of new provisions are still happening in Brazil. Therefore, skepticism is among Brazilians, and international observers.

Source: 1) "Human Rights in Cardosos's Brazil," by Linda Rabben - www.crab.rutgers.edu/~goertzel/rabben1000.htm

2) Personal

17. Honest government: 1.0

In 1992, a former Brazilian president, Fernando Collor de Mello, was impeached from the office for having been involved in a extortion scheme that robbed millions of Brazilians savings account. Since then, the honesty among Brazilian legislature is strongly doubtful. Most recently, scandals involving federal, state, and municipal office members continue to leave the Brazilian population skeptical. Since Collor's impeachment, it seems that the democracy process has been improving; however, it will take generations until Brazilians can trust again in their government. In addition, Brazilian government will have to make an extreme effort to end corruption in public sectors.

Source: 1) Corruption remains the same in Brazil, by Carmen Gentile - www.washtimes.com/upi-breaking/2004

2) Political corruption in Brazil - www.zonalatina.com/Zldata194.htm

3) IACC (International Anti-Corruption Conference) www.transparency.org "The Federal Court of audit in Brazil TITLE Institutional Arrangements and its Role in Preventing Fraud and Abuse of Public Resources, by Bruno Wilhelm Speck.

4) Personal

18. Common laws: 1.0

Brazilian judiciary system has some flaws. First, Brazil has a considerable number of laws, acts, normative, and decree-laws with combine can make justice officials and lawyers stressed and confused. In 1988, Brazilian government tried to improve this situation by passing a constitutional provision with implements the mechanics of creation of new laws. Second, most Brazilians cannot interpret the Brazilian constitution mainly because it is written in an excessive elaborate way. Millions of Brazilians have no idea of their constitutional rights; therefore, these members of society are vulnerable.

Source: 1) Doing Legal Research in Brazil 2002, by Edilenice Passos - www.llrx.com/features/brazil2002.html

2) Overview of Legal System - www.law.edu/elliot/sfeinle/Overview.htm

3) Personal

19. Central bank: 3.0

The Brazil Central Bank manages commercial banks and currency in the country. While things have been improving for the last 5-6 years, historically Brazil has experience some of the worst inflation ever recorded. At one point, it was as high as 70% per month. In 1964, Brazil created the Central Bank, for managing the commercial banks and currency. In addition to out of control inflation, the bank was considered to be out of control. One example is, because of problems with the national treasury, the Central Bank began issuing currency itself. However, the bank did not do this to serve the needs of the country, or the people, but solely for the needs of the bank itself.

After bringing inflation down to a more reasonable level, the Central Bank has remained a highly political organization, regularly charged with corruption by the media and the public. Government investigations rarely lead to charges of any kind. As recently as 1999, the Central Bank was charged with mishandling an attempt to raise the minimum wage. The result was a significant reduction in the value of Brazil's currency, a loss of $1.2B(us), to the taxpayers, and an equal profit for a small number of private banks, personally selected by the central bank to share in the illegal profits.This particular investigation will conclude this year, with no charges or convictions.

Source: 1) The Central Bank of Brazil (structure and functions) - www.bcb.gov/ingles/himf1900.shtm.

2) "Something Rotten," by Paulo Rebelo - www.brazil-brasil.com/pges/ecomay99.htm

3) Personal

20. Domestic Budget Management: 1.0

My score to the Brazilian government domestic budget management is one (the lowest) because Brazilian government has been consistently causing a budget deficit in its domestic budget.

The Brazilian government's net income has been negative over several years. In other words, the Brazilian government has been spending more than it collects from taxes each year. For example, in 1983 the budget deficit was $11.0B dollars (U.S.), in 1993 the deficit was $12.1B, and in 2003 it reached a high of $18.5B. It appears that Brazilian government is weak in caters to special interests.

Source: 1) The World Bank Group - www.worldbank.org/data

2) Personal

21. Government Debt: 3.0

Median score to Brazilian government because it must reduce its external debt in order to not be vulnerable to from outside control.

In 2003, Brazil's total external debt was $236.2B, which is around 47.9% of GDP. This is a relatively high percentage, but Brazil might not be considered extremely excessive in debt. This is because the percentage of its debt service is well below 50% of its GNP. In 2003, the debt service percentage was 11.5%. Such a low percentage is good. However, this 11.5% of the GNP that did not go towards wealth creation for Brazilians.

Source: 1) The World Bank Group - www.worldbank.org/data

2) Personal

22. Economic Statistics: 3.0

Brazilian government relies on statistical data from several sources; for example, IBGE (National Statistical Office), Ministry offices, and other independent surveys like FGV (Foundation Getulio Vargas), UNICAMP (University of Campinas), etc. For most part, all sources produced reasonable statistical data; however, the accuracy and plentifulness of such surveys are not widely satisfying. The problem lies on the use of non-standard mechanisms of surveying, which also are consider outdated by nowadays economists. Recently, the United Nations has proposed some changes on the national statistical system; the Brazilian institutions had accepted and improved some of the mechanisms. Still, economists expect more improvements before relying completely on Brazilian national statistical data.

Source: 1) The United Nations Statistics Division - "Social Statistics in Brazil: Producer and User Strategies" by Maria Martha Malard Mayer, April 24 2003.

2) Personal

23. Protection of Public Health and Safety: 2.0

My score to the Brazilian government protection of public health and safety is two because infant mortality and mal-nutrition are the leading reasons fo1r death among children between ages one to five.

Researches show that, at year 2003, 33 of every thousand Brazilian babies die before their first year of life and 37 babies will die before age five. Such causalities might seem a small percentage to some; however, it is important to comment that the data might not be accurate. There are places in Brazil, like Amazon and countryside of Northeast states, have difficult access; therefore, doctors and hospitals are difficult to reach. In these places, a person has to walk for miles before finding a health clinic. In addition, the rate of poverty is very high in these states.

Brazil is a socialist country; therefore, health treatments and education are free for Brazilian citizens, so more than 50 percent of the population relies on the free public health services. Diseases like Malaria, HIV, Measles, Polio, EPI, ARI, Hepatitis 3B, etc are almost eradicated in Brazil due to the success of governmental programs; however, mal nutrition still kill children and adults in Brazil. In addition, the Brazilian government has poor management of waste, and food inspections. The Brazilian government has a long way to go before infant mortality rate decreases to worldwide standards.

Source: 1) UNICEF - "At a glance: Brazil" - www.unicef.org/infocountry/brazil_statistics.html

2) Personal

24. High Wage Policies: 1.0

My score to the Brazilian's wage policies is one (the lowest) because its average per capita is not acceptable.

Brazil has 21% of its total population living below poverty, and 9.6 % living in extreme poverty. The GNI per capita was U$ 3,900.0 at year 1999, U$ 2,860.0 at year 2002, and U$ 2,710.0 at year 2003. The GNI certainly has been declining, and so is the living standard of Brazilian citizens.

Brazilian government has a long history of resisting the increase of minimum wages. Its main reasons are: a) if minimum wages increase the Brazilian government will not have enough money to pay for all the social security pensions, and governmental employees; b) factory companies say that if minimum wages are increased it would be catastrophic for the companies growth, since their budget for wages and benefits will increase tremendously. In addition, companies claim that if the minimum wages are increase some companies will be force to file for bankruptcy with leads to lay-offs, and increase of national unemployment rates.

It is true that the benefits paid to the Brazilian employees are many, and true that the social security pensions are huge, with 65,8% expenditure of collected imposts. But, the Brazilian government must find a middle ground, so it could increase the minimum wage without hurting the industry or pension beneficiaries.

Sources: 1) TWN-Third World Network - "The Brazilian Economic Crisis," - www.twnside.org.sg.title/brazil-cn.htm

2) World Bank Conference - "Social protection policies in Brazil," by Jose Cechin - d

3) Personal

25. Environmental protection: 2.0

My score to Brazilian environmental protection policies is 2.0 (almost the lowest) because I believe each country must have environmental laws, and each must be reinforce without exceptions. Despite the fact that Brazil authorities are trying to implement and reinforce new environmental laws, they still have a long way to go.

Brazil has some of the most strict environment protection laws in the world; such laws are design to protect citizens, the fauna, and flora of Brazilian territory. Despite of the governmental efforts, the process of reinforcing such laws has not been successful; part of it is due to the inefficiency of some governmental agencies. For example, the Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renovaveis (IBAMA) is an the governmental agency responsible for the formulation, coordination, execution, and reinforcement of environmental laws.

The IBAMA has limited resources which makes difficult the relationship and cooperation with business entities. For example, before any business entity receive a license to start the development of a factory headquarters; this entity must present a plan to IBAMA, which must contain details of the plan, and its possible environment impact. The IBAMA has to carefully analyze the business plan, increment further discussions about environment impacts, and secure an agreement with in the business must accept responsibility, and with a prevention plan avoid environment disasters. So far, business entities have been resisting the implement of such law; they claim that the negotiations with the IBAMA takes too long, which leads the business in an increase of the budget planning.

In addition of the IBAMA's limited resources and difficulties in reinforcing the environment laws; the second agent for the inefficiency this agency is the fact that environment laws are relatively new, and the agency and industry are not quite certain with actions must prevail during this process.

It is expect that over the years, Brazilian government must implement its environmental agencies, and support it with an increase in budget, as well trained and experimented employees.

Source: 1) Economic Institute of UFRJ - by Valeria da Vinha (valeriavinha@ie.ufrj.br)

2) Personal

26. Strong army: 1.0

My score to Brazilian peaceful policies is 1.0 (the lowest) because I believe every country must have a strong army to defend it's citizens from a possible invasion.

Brazilian army has old guns, not enough resources, and inefficient training for mandatory recruiting. The Brazilian army is truly in bad shape, and it even fails to control internal problems; for example, the Rio the Janeiro army fails to invade and restore control in the "favelas"--dangerous mountains controlled by heavily armed traffickers whose soldiers are young kids who care semi automatics, or gun machines.

Despite my negativism, many Brazilians have no reason to worry about restructuring its army strength because the country has no actual potential safety issues, so far. In addition, during 1964 to 1985 Brazil was under a severe military regime. Since 1985, Brazil had restructured its democracy, and militarism became discredited by the public view. Brazilian government has primarily focus in stipulated peaceful agreements and strength its international relations with expectations that such measure maintain the nation's safety. Nerveless, the under-estimate Brazil's capability to defend it self is a mistake. Brazil is the fifth biggest country in the word, it has 172 million people--most young, and it has enough natural resources and infrastructure to build a strong army in a relative short time.

Source: 1) Country Watch News - countrywatch.com

2) Personal

27. Foreign trade impact: 3.0

Reviewing the analysis between the years of 2001 through 2003, Brazil shows minimal signs of vulnerability to outside forces. Brazil's foreign trade impact ratio was 24.68% in 2003, 28.9% in 2002, and 22.1% in 1999. It is likely that Brazil could create more wealth to its citizens by increasing its foreign trade impact ration close to 33%; however, in the most recent year, the impact ration decreased over the previous year.

Source: 1) Foreign Trade Online - http://www.foreing-trade.com

2) Personal

28. Protection of foreign currency earning enterprises: 3.0

My score to Brazil is 3.0 (middle range) because I believe that any country must protect and promote national enterprises; however, Brazilian government is being over protective. It causes an unbalance cycle of dependency among Brazilian enterprises, which have more to lose because free market would promote competition, and consequently it promote the development of new technology and money flow. Brazilian government has a long history of being over protective toward its national enterprises. The means in which the government uses as protection strategies vary and it changes time to time. For example, Brazil has an extended list of shipping requirements for imported goods; these requirements cause a difficult time to foreign enterprise, and the process of shipping a nightmare. In addition, the import taxes are high, restrictions on foreign-produce advertising is a strict, and complex bureaucratic process--all make foreign enterprises less capable to compete with Brazilian enterprises in Brazilian territory.

Sources: 1) Official Journal of the European Union - European Commission Directorate-General for Trade - by Mr. Ignacio Garcia Bercero

2) Foreign Trade Online - http://www.foreing-trade.com

3) Personal

29. Management of Foreign currency budget: 3:0

Throughout the late 1990's, Brazil produced foreign currency budget deficits. Since 2000, Brazil has made significant improvements in its exports, while total imports have continued to decrease. The result is the foreign currency budget nearly reached zero in 2002, but unfortunately in 2003 produced a $25B surplus. Brazil clearly needs to improve its consumption of foreign products and services, or face large foreign currency budget surpluses that will weaken the economy.

Sources: 1) The World Bank Group - worldbank.org/external/CPPprofile

2) Country Watch News - http://aol.countrywatch.com

3) Personal

30. Layers of collective action: 1.0

My score to the Brazilian policy towards layers of collective action is one (the lowest) because I believe that citizens and professors should locally have much higher influence over schools' decisions and budgets. The Brazilian central government pays for most of the schools costs; therefore, the federal education agency dictates how money should be spend in schools. In addition, this agency makes most of the rules, and decides most of the subjects that Brazilian students will learn during their school years. Parents and professors have a minimum influence over the disciplinary subjects, and expenditure of budget. Citizens pay taxes with goes to the central government; the central government redistribute the budget to states; the states redistribute the money to schools--all this absurd redistribution of money only increases the costs for the central government offices with consequently reduces the amount of budget that should be sent to schools. The private school and private universities have more freedom to choose how budget expenditures; however, they too have to follow many of the federal education agency. The Brazilian educational system is archaic; students learn to memorize subjects, but not often they learn to analyze data for future references. Outragesly, Brazilian professors and school staff do not receive their monthly salaries--with sometimes can happen for months--because of budget problems and money redistribution from the central government.

Sources: 1) Jose Tavares de Araujo Jr. http://www.mre.gov.br/cdbrasil/itamaraty

2) Personal

31. Pro business climate: 3.0

Many Brazilian citizens dream with the idea of opening their own business; however, due to high taxation, and labor benefits Brazilians are skeptical about the risks of opening a small or median enterprise. Nerveless, Brazilians citizens welcome new business enterprises because it generates jobs for the citizens. On the other hand, there is a popular believe that if one opens a business enterprise he or she must dodged taxes. Brazilians often avoid paying taxes, as much and as long as they can, because they not believe in the socialist system.

Sources: 1) Dennis Borges Barbosa & Melissa Barros Tavares Pereira - http://www.nbb.com.br/publicmemos12.html.

2) Personal

32. Government enterprises: 1.0

My score to government enterprises is one (the lowest) because Brazil still needs to focus in the privatization of other governmental enterprises. Recently, Brazilian government has privatized some of the federal enterprises, with can be considering a progress because none of these federal enterprises had made a profit. However, Brazilian government still owns some other enterprises for social concerns purposes. For example, Petrobras is an oil exploration company; some of the biggest Brazilians universities are federal universities--with means own by the government. In addition, the Brazilian government owns nation wide schools, utility companies, hospitals, post office agencies, police department, etc. Since all the money collected from taxes goes to the central government and it is redistribute to all of its agencies and enterprises. The conclusion is if Brazil continues to privatize its federal enterprises, its citizens have more to gain since privatization leads enterprises to competition and consequently to the decline of prices and better quality of services.

Sources: 1) Federal Reserve of Brazil -http://www.fazenda.gov.br/top.asp

2) Personal

33. International security agreements: 5.0

My score to Brazilian international security agreements is five (the highest) because I believe under the actual circumstances in Brazil; it has no resources to be share with any other country. Brazil has no mutual defense treaties with any country, and its national army is in bankruptcy. Since 1985, when the last military president--Joao Figueredo--announced the return of democracy--part by uncontrolled high inflation rate, and part by constantly national protests--the support from the congress diminish toward budgets for the army. Therefore, the Brazilian national army is very much weak.

Sources: 1) Brazilian Embassy http://www.brasilemb.org/economy/economy1.shtml

2) Personal

34. Protection of domestic enterprises from government mandated costs: 1.0

My score to the Brazilian protection of domestic enterprise policies is one (the lowest score) because it has to find a middle ground in order to protect enterprise's growth and workers' interest. Despite of recent attempts of Brazilian legislators to protect and encourage domestic enterprise growth, their failure is quite clear. In my opinion, such failure is due to high costs of labor force, and taxations. For example, Brazilian enterprises are obligated to pay federal, state, and city taxes, plus labor obligations, and social security charges. The factors to such taxations and obligations vary depending of the type of business; however, it estimate that a business enterprise will pay between 80% to 145% of its monthly payroll in labor benefits, security charges, and other taxations. In addition, there is 8% for the FGTS--Guarantee of Term of Service Charge--and a variation of 7.8 % to 21 % for the Social Security Contribution. Such high taxations and obligations to be paid lead Brazilian enterprises to continuously imposing against the increase of minimum wage. Labor obligations create cost more problems for Brazilian enterprises; for example, every Brazilian citizen works 12 months to receive 30 days full-paid vacation; pregnant women have the rights to 3 to 6 months full paid maternity leave; extra worked hours--every hour that exceeds 44 hours weekly--are doubled paid. Brazil is socialist country; therefore, the government, and its citizens do not believe on the good intentions of business enterprises towards the work force. This distrustful relationship forms a confusing battle among enterprises, whose capitalist view wants to make a profit, and the government, whose socialist view wants to protect the workers.

Sources: 1) Maria da Conceicao Tavares - http://www.abordo.com.br/mctavares

2) Personal

Other sources:

1) Unicamp: University of Campinas - hhtp://sisadm1.unicamp.br:8000/biblioteca/conteudo.html

2) IBGE - Geographic and statistic Brazilian Institute http://www1.ibge.gov.br/english/estatistica/economia/cadastroempresa/default.shtm

3) Getulio Vargas Fundation http://fgvdados.fgv.br/

3) TWN - Third World Network http://www.twnside.org.sg/title/brazil-cn.htm

4) Mundo Joven (enter view with Jose Luis Fiori) - http://www.mundojovem.com.br/capa11.htm

5) Correio da Cidadania (enter view with Jose Luis Fiori) - http://www.correiocidadania.com.br/ed220/politica.htm

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CONTENTS OF SITE

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Introduction and Policy Recommendations

Winning Essays: There Are Alternatives Project (TAA)

Essay: Balanced Trade: Toward the Future of Economics

Moral Economics

McKEEVER INSTITUTE of ECONOMIC POLICY ANALYSIS

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