The Centralized Federal Republic of Brazil

Magno Karl

In 1823, Thomas Jefferson wrote a letter to Judge William Johnson, in which he justified his preference for the states as those who could best govern our home concerns and explained why he would not like to see all offices transferred to Washington. In the capital, he said, further withdrawn from the eyes of people, they may more secretly bought and sold in the market. Despite being in name a Federal Republic, Brazils government structure does not even resemble an appropriately decentralized administration. The Federal Government holds in its hands more than 70% of taxes revenues, weakening local governments and subjecting the country to the hurdles brought by economic and political centralization. Political convictions are bought and sold in Brasilia, as representatives of local governments arrive in the capital in need of financial resources from the federal government. Historically, autonomy to local government has never been very popular in Brazil, a country with a vast territory whose integrity was preserved by the use of force and money. In the nineteenth century, the Brazilian Empire crushed a republican revolution that hoped to free our southernmost state from the Kingdom based in Rio. In 1937, the Brazilian dictator, Getlio Vargas, banned all states and municipalities flags and promoted a mass event where the banned flags were ritually burned to celebrate the end of regional competition. It remains hard to make a case for decentralization and subsidiarity in a country where competition is not seen as a race to the top and a vital stimulant for creativity and innovation, but rather as a source of disunion, foul play, and economic Darwinism -- condemning locations seem as less competitive, and its entire population, to die a slow death. The country experimented with a limited-sort of tax competition among states from the last decades of the twentieth century, but it soon got a bad name (fiscal war) and it is likely to disappear soon. Intended to bring investments to poorer areas of the country, the tax breaks were not used to increase the competitiveness of a region neither were they available to every interested investor. They were mostly political tools, favors distributed among business executives that stood closer to power. Brazils most daring experiment with states autonomy of

the last decades is about to be reformed and suffer radical changes through legislation being appreciated now in the Senate. Oddly, those changes will not move legislation on the matter to a clearer and simpler path, but to more complicated, bureaucratic, and inevitably more costly for new businesses. The fact that almost three quarters of the total tax revenue goes straight to the Brazilian federal branch of government pockets constitute the center of the problems related to local governments in the country. Dependent on money handouts from the central authority, local governments have little incentive to adopt independent policies, alternative strategies for growth, or even to express political disagreement with the federal authorities. The concentration of resources is a pervasive issue that spreads its bad seeds all over local initiatives. The Brazilian Constitution grants authority to the states over the Military Police, which is responsible for most of the daily police operations, the Civil Police, and secondary schooling. Municipalities handle primary schools, some degree of urban planning, garbage collection, and a Municipal Guard. This list is by no means exhaustive, however, with very limited resources, Brazilian local governments cannot aspire to fulfil many more obligations and given the current state of the Brazilian public opinion, it is unlikely that any of those services will be released for private operations anytime soon. From my point of view, currently, most efforts of the Brazilian civil society seem to be focused on educating people about a good use for public money, rather than question if the state should be extracting those resources from private pockets or have the authority to perform the services it has promised to deliver at all. Together, the three levels of government in Brazil - municipal, state and federal collect one third of the countrys GDP in taxes, and very few of this money is actually transformed in satisfactory public services. The benefits of decentralization and competition among municipalities and states are one of the main propaganda points for liberal organizations in Brazil, and one in which we must continue to work on. Despite the current blindness of political parties regarding this issue, there seems to be a rebirth of civil society activism, raising awareness about the benefits of competition, the connection between decentralization and freedom, and the risks of a growing centralizing state power.