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Compared to What?Assessing Brazil’s Political Institutions

Article  in  Comparative Political Studies · August 2006

DOI: 10.1177/0010414006287895

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 Compared to What?
Assessing Brazilian Political Institutions
Leslie Elliott Armijo
Reed College
Portland, Oregon
Leslie.armijo@mindspring.com
Philippe Faucher
University of Montreal
philippe.faucher@UMontreal.CA
Magdalena Dembinska
University of Montreal
magdalena.dembinska@UMontreal.CA

Version of July 31, 2004

(Please contact the authors for later revisions.)
Paper prepared for the Annual Meeting of the Latin American Studies Association
LASA 2004, Las Vegas, Nevada, October 7-9, 2004

Abstract
A rich and plausible academic literature has delineated reasons to believe Brazil's
democratic political institutions--including electoral rules, the political party system,
federalism, and the rules of legislative procedure--are sub-optimal from the viewpoints of
democratic representativeness and policymaking effectiveness. We concur that specific
peculiarities of Brazilian political institutions likely complicate the process of solving
societal collective action dilemmas. Nonetheless, Brazil's economic and social track
record since redemocratization in the mid 1980s has been quite good in comparative
regional perspective. Perhaps Brazil's informal political negotiating mechanisms, or even
other less obvious institutional structures, provide sufficient countervailing influences to
allow "governance" to proceed relatively smoothly despite the appearance of chaos and
political dysfunction.
Compared to What?

Assessing Brazilian Political Institutions*

"Brazil…They won't get into trouble because they have no principles."
Attributed by Rudiger Dornbusch to “an official”
What are the practical effects of cross-national variations in formal political
institutions? Many political scientists judge Brazil’s political institutions to be
exceptionally poorly designed. Yet Brazil’s recent economic and political governance
has been reasonably good. We investigate this apparent puzzle, proposing an alternative
interpretation that emphasizes ways in which Brazil’s seemingly chaotic institutions
nonetheless provide desirable incentives for negotiation and compromise.

*
We thank Javier Corrales, Stephan Haggard, Peter Kingstone, Vicente Palermo, Adam Przeworski for
very helpful comments on an earlier version of this paper.
I. POLITICAL INSTITUTIONS IN NEW DEMOCRACIES: THE RECEIVED
WISDOM
A decade ago Juan J. Linz and Arturo Valenzuela, and Albert Stepan and Cynthia
Skatch building on the work of Guillermo O’Donnell, Philippe Schmitter, and Laurence
Whitehead and others, used the experiences of democratic breakdown in Latin America
to make a strong argument that a parliamentary system was a better institutional design
for a new democracy than a presidential system. Among the presumed defects of
presidentialism were a fixed term for the chief executive, making it nearly impossible to
remove unpopular and ineffective presidents, and competing claims of democratic
legitimacy for both the president and the legislature, encouraging intransigence in
incumbents in both branches of government based on their popular “mandates”.1 A
related literature, including analyses by Arend Lijphart, Matthew Shugart and John M.
Carey, and Scott Mainwaring, suggests that electoral rules may also be a key culprit in
countries with apparently severe problems of governance.2 Electoral rules that disperse
power, multiply the number of political parties, and weaken the internal discipline of
political parties often are said to increase the problems of chief executives in new or
fragile democracies.3 By this logic, the combination of presidentialism with “centrifugal”
electoral rules such as proportional representation seems particularly unfortunate. A
separately elected president may use her/his popular mandate as an excuse to avoid
political compromises. Meanwhile, the centrifugal electoral rules can be expected to lead
to legislatures in which multiple political parties have representation. Many members will
pursue their own careers by serving very small constituencies, and will be unwilling to
follow the direction of party leaders. The result may easily be stalemate and policy
immobilism.
Gary W. Cox and Mathew D. McCubbins make a related argument.4 They
evaluate national political institutions along a continuum from "decisive" to "resolute.”
Decisiveness means that the chief executive has broad personal decision-making
authority. In response to a perceived policy emergency, she/he can shift public policy
rapidly, without needing extensive consultation with other actors. The potential problem
with high decisiveness is that a mercurial chief executive, or one subject to strong and
conflicting pressures from societal interest groups, can change her/his mind much too
often and too quickly, leading to policy instability and fostering the perception among
both citizens and outsiders (such as foreign investors) that public policies and the national
economic regulatory regime are unreliable and untrustworthy. In contrast, resoluteness
implies that established policy is difficult to alter. Resoluteness is increased by higher
numbers of "veto players," or those institutional roles whose current occupants must
acquiescence to any policy change before it can occur.5 Some resoluteness is desirable,
and can enhance economic growth by reassuring private investors that a given regulatory
framework is stable. But excessive resoluteness undermines a country’s ability to
confront and cope with crises. Polities located at either end of this continuum arguably
are dysfunctional.
Cox and McCubbins also define "separation of powers" and "separation of
purpose." Separation of powers retains its usual meaning, being greater in a bicameral
rather than unicameral legislature, a federal rather than unitary polity, and a presidential
instead of parliamentary system. Separation of powers rises with the number of veto
players, and represents the familiar set of presumed political virtues captured in the

2
phrase "checks and balances." Separation of powers often, but not always, also implies a
separation of purpose, which means that elected or appointed officials answer to diverse
constituencies, separated by geography, sector (business, labor, rural), or even ascriptive
group (as in India’s tradition of " reserved " legislative seats for women, Muslims, and
persons from lower castes). Separation of purpose makes mutual trust among diverse
veto players difficult. It increases the need for chief executives to induce policy
cooperation by means of political "pork" and "rents".6 Ceteris paribus, separation of
purpose increases the likelihood of fiscally irresponsible and excessively expansionary
public policy.7
A third related literature, which we will not attempt to summarize, points to
special problems suffered by new, and thus typically fragile, democracies.8 Combining
these propositions, the scholarly consensus suggests that a new democracy that is
presidential, has centrifugal electoral rules (such as proportional representation), and
extensive institutional separation of powers and purpose (as with a bicameral legislature
or federal system), should be particularly difficult to govern. It might also be more than
usually prone to fiscal deficits.

II. THE “HYPERACTIVE PARALYSIS” SYNDROME: THE RECEIVED

WISDOM ABOUT BRAZIL

Brazil possesses virtually all of the problematic characteristics identified in the

general political institutions literature, plus additional unfortunate features peculiar to
itself.9 The dominant view of Brazilian political institutions is that they suffer from an
over-abundance of veto points. Vicente Palermo calls this the perception that Brazil has
“dispersed” political institutions and is therefore largely “ungovernable”.10 First, Brazil
is presidential. All presidential systems face the possibility of divided government, in
which the executive and the legislature are controlled by opposing partisan factions.
Second, Brazil has a bicameral legislature, each of whose chambers exercises significant
power. Any amendment to Brazil’s extremely detailed 1988 Constitution (which
specifies, for example, a maximum real interest rate and a particular minimum wage)
requires approval by a 60 percent majority of the total membership of both chambers of
the legislature, and each chamber must pass the amendment twice. Also, the rules of
legislative procedure simply compound the problem of forming a stable governing
coalition. There are no thresholds for a party to win representation in the legislature, no
penalties for members of congress who switch parties while in office, and a party with a
single deputy receives all of the congressional privileges accorded to larger parties.
Third, Brazil’s electoral rules are those of proportional representation (PR), which
creates a fragmented party system. For example, the October 2002 elections returned
nineteen parties to the national legislature, including nine in President Lula da Silva’s
governing coalition. Brazilian parties are undisciplined, exacerbating frequent executive-
legislative deadlocks.11 Facing undisciplined parties, “appointments to the ministério, or
cabinet, constitute a central presidential weapon in the search for legislative support”.12
This imports dissent and conflict into the executive itself.
Fourth, Brazil possesses robust federalism. Fernando Abrúcio and David Samuels
prefer the term “predatory” federalism.13 The national parties are federations of state
parties obsessed with local issues. Even after the Cardoso administration reforms, the

3
fundamental elements of Brazilian federalism remain: a constitutionally mandated
resource base for sub-national governments (without clear state responsibilities);14
powerful state governors; and domination by traditional political elites with parochial
political concerns.15 Governors have stronger electoral coattails than presidents.
Nominations for most political offices, electoral coalition formation, and the distribution
of free media time for campaigns all happen at the sub-national level.16 Having power
over congressmen, governors can control policies and the legislative agenda.17
Finally, Brazilian institutions ensure separation of purpose, or multiple actors
responsive to diverse and fragmented constituencies.18 Brazil has open list PR, in which
the candidates for each party also compete against one another, encouraging the
“personal vote” and undisciplined political parties.19 Brazil also has home-grown
peculiarities, such as the "candidato nato" rule, which provides that no incumbent can be
denied a spot on the next ballot, irrespective of his or her behavior in office, including
switching political parties. In the context of open-list proportional representation, large
multimember districts, candidate selection at the level of sub-national units, and the
possibility of immediate re-election, most federal deputies pay little attention to national
issues or ideology. Instead, they seek secure bailiwicks and strive to overcome their own
electoral weakness through “wheeling and dealing.”20 Presidents have to seek support
from other parties through offering jobs and resources--that is, pork and rents--and the
resulting legislative coalitions are loose and shifting.21 Brazil has long had an usually
high number of political appointees in the federal bureaucracy,22 and presidents have
frequently so despaired of controlling an existing executive branch agency that they have
resorted to creating a competing agency.23
All of these features contribute to centrifugal power and multiple veto points.
Power is excessively “dispersed”24 and the decision-making process overly “resolute”.25
Bolivar Lamounier once characterized Brazil as subject to a "hyperactive paralysis
syndrome"26 (HP), a term we adopt for this general interpretation. In sum, it would seem
that Brazil’s political institutions make the country unusually difficult to govern.

III. BRAZIL IN COMPARATIVE PERSPECTIVE: NOT SO BAD AFTER ALL?

But what does ungovernability mean? In the past decade, Brazil’s

macroeconomic outcomes have been at or slightly above the norm for Latin America, as
shown in Table 1. They have been less volatile than those in several other countries,
notably Argentina and Venezuela. Among the large countries, only Chile and Peru have
performed better, and both have higher unemployment than Brazil. Moreover, Peru
suffered serious political turmoil in the 1990s, while Brazil did not. Social tension in
Brazil since redemocratization probably reached its highest point in mid-1992, when
president Collor, threatened by an imminent vote of impeachment by the Senate,
resigned, while inflation was raging at 30 percent per month. Constitutional order was
preserved as vice-president Itamar Franco was sworn in, supported by a broad coalition
of parties. Economic stability followed. Political stability was maintained through a
major partisan shift, as President Luiz Inácio Lula da Silva and his left-of-center allies
succeeded Cardoso's center-right coalition in 2003.

4
Table 1 Macroeconomic Outcomes, Latin America
Gross Fixed
GDP GDP Capital Inflation, Urban
growth growth/capita Formation CPI Unemployment
1992-2001 1992-2001 1992-2001 1999-2001 1999-2001

(% annual (% annual (% GDP, (%, annual (% annual

average) average) annual aver) average) average)
Argentina 2.6 1.3 15.5 -1.3 15.6
Brazil 2.7 1.3 18.1 5.5 7.0
Chile 5.5 4.0 22.1 3.1 9.4
Colombia 2.5 0.5 15.0 8.5 18.3
Mexico 3.0 1.3 21.7 8.6 2.4
Peru 3.8 2.0 18.1 2.2 10.1
Venezuela 1.6 -0.5 16.3 15.3 9.8
Regional 2.8 1.2 18.5 8.3 8.6
Average
(n=20)
Source: ECLAC 2003
Moreover, the difficult but necessary task of implementing structural economic
reforms has proceeded steadily in democratic, if seemingly disorganized, Brazil.
Eduardo Lora of the Inter-American Development Bank constructs an index of market-
oriented reform that includes a wide range of parameters, from trade liberalization to
rationalization of the tax code.27 Again, Brazil seems to have improved its score just
about as much as most of its regional neighbors. Its score in 1985 was slightly worse
than the regional norm, while it's rating in 1999 is slightly better.
Table 2 Market-Oriented Economic Reform Outcomes, Latin America

1985 1990 1995 1999

Argentina 0.338 0.468 0.595 0.616

Brazil 0.259 0.430 0.515 0.610
Chile 0.488 0.570 0.577 0.606
Colombia 0.291 0.425 0.524 0.562
Mexico 0.290 0.424 0.531 0.511
Peru 0.279 0.335 0.598 0.659
Venezuela 0.284 0.343 0.477 0.514
Regional 0.341 0.436 0.539 0.583
Average
Note: 0.00 means a perfectly unreformed regulatory framework; 1.00 means a perfectly
market-friendly regulatory framework.
Source: Eduardo Lora, “Structural reforms in Latin America : What Has Been Reformed
and How to Measure it,” Working Paper #466 (Washington D.C., Inter-American
Development Bank, Research Department 2001).

5
 Brazilian social indicators, though still abysmal in many respects, have improved
since the restoration of democracy in 1985 and the end of hyperinflation a decade later.
Infant mortality has been dropping since the eighties (falling from 64.4 per thousand
1985-1990 to 38.1 per thousand as projected for 2000-2005 by ECLAC) as a result of
public programs that have contributed to improvement in food availability, dwellings,
and water sanitation.28 World Bank data show that primary enrollment rose from 84 to
95 percent between 1991 and 1999, while access to clean water rose from 73 to 87
percent from 1986 to 2000.29 Finally, foreign investment has flowed to Brazil. Among
all middle and low-income countries, Brazil was second only to China as a destination for
foreign investment from 1995 to 2000. From 1998 to 2001, capital inflows averaged
almost US$29 billion annually. Brazilian exports have increased on average by almost
10 percent per year since 1999.
In sum, Brazil has not done worse than other Latin American countries in either
policy reform or macroeconomic performance. Of course, Brazil’s Latin American
neighbors share with it some purportedly unfortunate political institutions, notably
presidential as contrasted to a parliamentary form of democracy. Like Brazil, Argentina,
Venezuela, and Mexico have federal systems. However, few if any other Latin American
countries have so many rules and procedures that seem to increase both executive-
legislative gridlock and separation of purpose. Thus we have something of a puzzle: a
seemingly “feckless”30 political system with reasonably good public policy performance.

IV. DE FACTO EXECUTIVE DOMINANCE: REVISIONIST

INTERPRETATION #1

We are not the only observers to note that Brazil has been performing reasonably
well despite supposedly dysfunctional institutions. There have been some recent
interpretations of Brazilian political institutions–notably by Brazilian scholars Fernando
Limongi, Argelina Figueiredo, José Antônio Cheibub, and Octávio Amorim Neto--that
we could characterize as revisionist.31 These analysts point to other specific
characteristics of Brazil’s political rules and institutions that may work to counteract
some of the unfortunate effects highlighted by the authors profiled in section two above.
They have argued that Brazilian presidents are stronger vis-à-vis the legislature and state
governors than is often recognized, that parties are more disciplined, that coalitions are
more stable, and, in short, that policymaking is more centralized, decisive, and
predictable than is claimed by proponents of the dominant view. We call this “de facto
executive dominance” (ED), a concept similar to Vicente Palermo’s “concentrated
decision-making powers.”32 The revisionists have reinterpreted several specific
institutional characteristics, including the use of provisional decrees (medidas
provisórias, or MPs), the formation of coalition cabinets and legislative majorities, and
executive control over the distribution of patronage, including at the state and local
levels.
The 1988 Constitution increased the powers of the president with respect to the
legislature as compared to the last democratic Brazilian constitution, that of 1946.
Presidents today may issue legislation by provisional decree (MPs). They wield both
package and partial vetoes, and have extensive agenda setting powers, including the
exclusive power to initiate budget bills and civil service legislation. Of course, laws

6
passed by presidential decree expire in 60 days, unless a new decree is issued (requiring
at least a slight alteration in the text) or Congress is asked to vote on the measure. The
dominant view is that MPs signal presidential weakness: they are the last resort of a chief
executive at the head of a minority government who cannot get bills passed by any other
means.33 But revisionists Fernando Limongi and Argelina Figueiredo argue that
provisional decrees prevent chaos as they enable the president to take effective decisions
and “protect the government majority from debates and votes about sensitive issues.”34
In other words, MPs serve as instruments to control and hem in the Congress.
As noted, Brazilian presidents have to form a multiparty legislative coalition in
order to pass ordinary legislation. They do this in part by distributing cabinet posts.
According to the dominant view, this weakens the president, who cannot appoint
ministers purely on the basis of either technocratic merit or partisan preference. But one
could instead tell this as a story of executive strength, in that it gives the chief executive a
lever with which to manage otherwise fractious political parties. In turn, political party
leaders dole out committee assignments and other legislative plums. Although
Congressional representation is highly fragmented among multiple political parties,
patterns of coalition are recurrent and predictable.35 Groups and factions of federal
deputies and senators can reliably be identified as either pro-government or in the
opposition. Limongi and Figueiredo set the average level of political party disciple at
85.6 percent.36 Lee Alston et al. conclude that, "Brazilian legislators vote according to
their party leader’s indication in order to accumulate greater benefits in the congressional
arena and thus to strengthen their electoral probability of political survival in the local
sphere."37
Arguably, the centrifugal effects of Brazil’s "robust federalism" are weakened by
the chief executive’s power to allocate state resources. A Congressional vote to
appropriate funds for a project is not in practice a guarantee that the government minister
in charge actually will release the funds. Appropriated funds are liberated only with the
president’s approval, each time giving the chief executive an opportunity to trade
political pork for pledges of support.38 Many Congressionally mandated payments are
never liberated, especially in periods of budgetary restraint, as during most of Cardoso's
mandate and now under Lula.39 The pattern is clear: belonging to the government
coalition translates into a favorable and more than proportionate access to federal
resources for one’s state.40 Governors thus push their state’s congressional delegation to
join the ruling coalition.
In sum, those analysts who posit de facto executive dominance (ED) interpret the
actual operation of Brazil’s often byzantine political institutions as considerably more
centralized (that is, more concentrated, decisive, and with fewer veto players) than in the
hyperactive paralysis view presented above. Some though not all scholars in the ED
camp go further still, worrying that Brazilian political institutions are so centralized as to
be undemocratic. In other words, competent governance is achieved only by sacrificing
political legitimacy, as the system only functions when the president employs
questionable tactics to circumvent the opposition.41 For example, the use of MPs
arguably generates resentment from overruled legislators, who then counter by trying to
block the president’s agenda. State governors also resent presidential high-handedness,
and retaliate when they can. This more pessimistic version of ED puts us close to the
intellectual terrain described by Guillermo O’Donnell’s term “delegative democracy,”42

7
in which the electorate chooses a chief executive and then gives her operational carte
blanche, or by the pejorative label “hyper-presidentialism.”43

V. RECURRENT BARGAINING: REVISIONIST INTERPRETATION #2

We suggest an alternative revisionist interpretation of Brazilian political

institutions. Our view is consistent with other recent interpretations that stress Brazilian
pragmatism.44 We might call this interpretation recurrent bargaining (RB), or perhaps
muddling through.45 It rests on four propositions.
First, we agree with the hyperactive paralysis perspective that Brazilian political
institutions, both formal and informal, are quite decentralized and consequently may tend
toward excessive resoluteness (a.k.a. gridlock, multiple veto players, and divided
government). Brazilian political institutions are centrifugal, and decisions inevitably
involve numerous players. Reaching policy agreement, and then implementing the
policy, necessarily are messy operations. Moreover, Brazilian political institutions, both
formal and informal, exhibit high separation of both power and purpose. Chief
executives and their ministers distribute multiple clientelistic side-payments in order to
stitch together even temporary policy coalitions.
However, and second, we also concur with the de facto executive
dominance perspective that Brazilian presidents possess considerable bargaining
resources vis-à-vis legislators, political parties, and governors. Features such as
provisional decrees and the executive’s de facto control over the release of even legally
mandated funds for sub-national government empower the executive sufficiently to allow
governance to proceed.
Yet third, and in subtle contrast to both of the other interpretations, we identify the
reasonably successful core of Brazil’s framework of political institutions as its production
of multiple incentives to all significant players to negotiate and cooperate. The system
provides strong incentives to bargain, in as much as each player retains some politically
relevant resources, but no one, aside from (perhaps) the president him or herself,
possesses actual veto power. These incentives induce compromise by the holders of
formal institutional positions, including presidents, bureaucrats, legislators, governors,
and judges.46 Societal players, such as unions, business groups, and civil society
organizations also bargain and compromise, more or less continuously. Moreover,
almost all players consciously recognize that they can neither attain private goals nor
solve societal collective action problems without allies.47
Fourth, Brazil’s policymaking process, while apparently disorganized and
somewhat wasteful of scarce resources, not excluding the presumably valuable time of
senior elected officials, is highly participatory and even somewhat representative, which
are good things from the viewpoint of constructing stable and legitimate mass
democracy. We do not wish to enshrine Brazil’s often clientelist and chaotic politics as
an alternative superior to clear and principled contestation among political parties
representing substantive, ideologically consistent policy programs. But « muddling
through gridlock »48 is not a bad second best.
We illustrate this view by again reinterpreting three specific institutional features:
provisional measures, sunset legislation, and legislative party discipline. Provisional

8
measures (MPs) passed by presidential decree expire after two months unless they are
explicitly renewed or the legislature votes to continue them. Octávio Amorim Neto and
Paulo Tafner suggest that MPs can be considered negotiating instruments between the
Congress and the president.49 On the one hand, this is a way for the chief executive to
signal that a particular bill is really important. On the other hand, deputies and senators
may hesitate in approving a new law if they are unsure of its impact on their electoral
base. One way to resolve this uncertainty is to let the executive bear the whole
responsibility of the reform, while waiting to see its impact on society. MPs should be
particularly useful to legislators in the case of policies whose costs are expected to be felt
immediately, but whose benefits show up only over the medium to long term—that is,
those policies that suffer from what economists call the “time inconsistency” problem.
Sunset legislation—or laws passed by the regular legislative process, but which
expire after a year or three—also can be read as signifying executive weakness. Sunset
provisions are ostensibly employed only in temporary or crisis situations. But a weak
president might settle for a law passed with a sunset provision when he or she lacks the
votes to secure a permanent change in the law. Alternatively, we might instead consider
laws passed with sunset provisions as a quintessential example of continuous executive-
legislative bargaining. Under this latter interpretation, legislators might oblige the
president by passing, and then later voting to extend, and then later voting to extend
again, a controversial piece of legislation on which the president was willing to expend
substantial political capital. However, each vote gives federal deputies and senators a
new opportunity to extract offsetting concessions from the executive. This is the sunset
provision as a bargaining tactic. It has been used with great regularity in Brazil.
The techniques that chief executives use to construct legislative coalitions may be
understood similarly. The president selects a multiparty cabinet in order to lure enough
parties (and votes) into his/her camp to pass legislation. For example, during President
Fernando Henrique Cardoso’s first term (1995-1998) he usually could construct a
winning coalition, on several occasions pulling together even the three-fifths majority
needed for constitutional amendments. Cardoso had more difficulty during his second
term (1999-2002), yet through persistence passed some important economic legislation.
During President Lula da Silva’s first year in office, the coalition represented by the
composition of the cabinet alone was not enough to provide his government with an
obvious legislative majority. To pass bills, Lula had to negotiate continuously, both with
political parties (notably with the PMDB, the largest single party) and individual deputies
and senators, some of whom ostentatiously changed their party affiliation during the year.
Following the formal entry of the PMDB into the cabinet in early 2004, President Lula’s
coalition apparently commanded a majority in Congress. But in Brazil there is no such
thing as an automatic majority: the executive needs to negotiate for every issue.
Negotiations involve both parties represented in the cabinet and those officially in the
opposition. Thus all parties are "conditional legislative parties, where leaders' actions
depend on the support of party members on a case-by-case basis and where influence
flows from the bottom up."50 Under these conditions, ideology plays a relatively small
part in politicians’ decisions to support or oppose particular legislation. Thus President
da Silva’s party, the PT, once in power, can get conditional support not only from
politicians whose political base is with workers and peasants, but also from those
representing entrepreneurs, agro-business, and the urban middle-class.

9
 Though time consuming, this system of constant negotiation performs the very
important but frequently under-appreciated function of interest aggregation. In a polity
as large and diverse as Brazil, the process of enabling all sectors and regions and
interests to feel themselves to be participating in the national policymaking process is of
utmost importance for democratic legitimacy. Thus a continuous debate between state
governors and federal authorities over fiscal matters and allocation of funds, producing
legislation with sunset provisions requiring periodic re-negotiation, can be viewed as
predatory federalism.51 Or it might instead be re-conceptualized as a Brazilian version of
checks and balances. In a federal system, competition doesn't necessarily preclude
cooperation.52 In an odd, highly incremental, and arguably frustrating fashion, the system
does work. Moreover, its very weaknesses paradoxically might provide the system with
a certain resilience, or even strength.

VI. JUGGLING WITH COMPROMISE: FOUR BRAZILIAN CASES

This section examines four landmark economic policy reforms. We chose the
cases for their intrinsic significance: they represent arguably the most important policy
shifts of the past decade. Each involves multiple policy players, thus permitting us to
assess the quality of their interactions. Each turns on solving a piece of the same
overarching collective action problem: overcoming separation of powers and purpose in
order to reduce fiscal deficits and accumulated public debt. Our four cases also pose
diverse structural challenges for executive branch reformers. Inflation stabilization, our
first case, sets various societal interests, most of whose incomes long have been set by
government administrative decisions, against one another. Each interest would like
someone else to lose; the incumbent’s task is to arrange for binding commitments to
mutual sacrifice. Privatization, our second case, pits the employees of state-owned
enterprises, and the federal deputies and state governors for whom they form reliable vote
banks, against the general public in its roles as taxpayers and consumers. Analytically,
privatization opposes a concentrated interest, whose members can expect large personal
losses, to citizens in general, who can expect gains that are large in the aggregate, but
widely diffused across individuals. The third case, reform of sub-national finances,
requires the re-centralization of authority in the extremely decentralized federal system
constructed after the return of democracy in the mid 1980s. Fourth and finally, social
security reform directly opposes the executive branch to a numerous and politically
potent interest group: public sector employees. In structure, social security reform
resembles privatization—except that in this case the concentrated losses will be borne not
only by the employees of state-owned enterprises, but by the much larger group of all
government employees. Perhaps not surprisingly, the fourth case is the only one whose
outcome remains in some doubt.
Which of the three models of Brazilian political institutions—hyperactive
paralysis (HP), executive dominance (ED), or recurrent bargaining (RB)--offers the most
illuminating interpretation of the policymaking process?

10
Inflation stabilization
Brazil had been recurrently inflation prone for a century. The country’s annual
inflation reached the low triple digits in the early 1980s, and expanded to the mid
quadruple digits by the mid 1990s. For at least fifteen years, since 1980, drastically
reducing inflation had been a major public policy objective. The federal government
itself was a principal direct contributor to inflation through its own deficit spending, both
acknowledged and disguised through various off-budget accounting manipulations. The
sum total of current government outlays needed to be reduced (or funded through
additional taxes or borrowing), making this a classic collective action problem.
Moreover, the various economic ministries of the executive branch set many crucial
prices in the economy by administrative fiat. Certain of the most essential prices, notably
the minimum wage and the formula by which it would receive nominal corrections for
accumulated inflation, were jointly set by the executive and the legislature. Key actors in
macroeconomic stabilization thus included the federal executive (with the finance
ministry often opposed by ministers in charge of functional areas that traditionally had
large budgets), organized societal interest groups such as business associations and
unions, and the national legislature. The interest most poorly represented was that of
society as a whole.53
The 1980s and early 1990s were the years of heterodox shock stabilization plans,
not only in Brazil, but also in Peru, Argentina, and elsewhere in South America.54 By
1993, Brazil had had at least ten stabilization programs since 1980. Those in the early
1980s were mostly orthodox, and those from 1986 onwards mostly heterodox, but all had
in common the fact that they were designed in secret by highly qualified government and
academic economists. Once each was announced to the nation, major economic rules
governing prices, costs, and contracts immediately and dramatically changed, imposing
immediate gains and losses on economic agents and unleashing a scramble as firms,
citizens, and government agencies all tried to protect themselves, while searching for
loopholes in the new regulatory net.
The Real Plan, first announced in late 1993 and implemented gradually in 1994, is
the stabilization plan that finally worked. The interesting question is why. There were,
as always, new and improved technical features, including the use of a fixed exchange
rate as an inflation anchor.55 In our view, however, what fundamentally differentiated
this policy from previous stabilization plans is that it was publicly announced, presented
to Congress, and widely debated for three months (December 1993 to February 1994)
before it was implemented.56 Because it had denounced previous plans that used the
invasive and unpredictable "shock therapy" approach to stabilization, the opposition, led
by the Worker’s Party (PT) and its presidential hopeful, Luiz Inácio Lula da Silva, was
unprepared for a more open and democratic approach to economic policymaking. The
PT initially attacked the government's fiscal restraints, pleaded vigorously for immediate
investment, employment, and growth, and denounced the intolerable constraints imposed
on Brazil's economy by international financial markets. Nonetheless, after having
explained at length what it intended to do, debated with the opposition and other policy
players, and responded to criticisms, the Cardoso team followed the plan and introduced
the reforms. This consistency proved crucial for sustaining the newly restored and fragile
confidence of society in its political leaders.

11
 Following the introduction of a new currency, the real, on July 1 1994, inflation
fell rapidly. From an average of 42 percent per month for the first six months of 1994, it
had fallen to only 2 percent by October’s presidential elections. Cardoso, who had
resigned as President Itamar Franco’s finance minister to run for the presidency, rode the
success and popularity of the stabilization plan to a first round victory. With inflation's
retreat, capital resumed its flow back into the significantly liberalized economy.
How should we characterize this process? If we conceptualize inflation
stabilization as lasting fifteen years and requiring annualized inflation rates of several
thousand percent before a solution could be imposed, then we can make a good case for
hyperactive paralysis (HP) as the best label for Brazilian decision making. The problem
with this interpretation is that it ignores the real shifts in Brazilian politics associated with
the end of twenty years of military rule. Instead, we might plausibly argue that
redemocratization in the mid 1980s was a necessary if not sufficient precondition for
serious stabilization. Brazil’s peculiar regulatory framework had long shielded upper and
middle income groups from most of inflation’s adverse consequences. By this logic, the
president and other politicians didn’t really need to care about stabilization until the poor
(that is, illiterates) received the vote, in the 1986 congressional and late 1989 presidential
elections, respectively.57
Limiting our analysis to the 1990s, by which time any Brazilian chief executive
would have a strong electoral reason to want inflation stabilization, we could make a case
for the executive dominance (ED) analysis. Such an institutional framework requires a
strong and skillful chief executive to make it work. Unfortunately, the two presidents of
the early 1990s, Fernando Collor (1990-1992) and Itamar Franco (1993-1994) both were
exceptionally inept national leaders. Brazilian democracy, despite being new and
presumably fragile, survived without any major threat to the system, but economic reform
was stalled until President Franco appointed a finance minister with the requisite
leadership skills, who then went on to become a chief executive capable of riding herd
over Brazil’s challenging set of political institutions.58
The difference between ED and recurrent bargaining (RB) perhaps comes down to
the selection of the appropriate metaphor. Was Finance Minister, then President,
Cardoso dominating the other players, the better to whip them into shape? Or was he
bringing them into a comparatively open, participatory, and “democratic” process of
collective problem solving? The evidence for the latter view comes from the procedural
contrast between the Real Plan and virtually all of its predecessors back to the early
1980s. The previous plans, both the orthodox programs of the final military government
(Figueiredo 1979-1984) and the heterodox shocks under Presidents Sarney and Collor,
were entirely products of clever economists in the finance ministry. As such, they
addressed the economic knot that was inflation, but made no progress with the associated,
and arguably prior, political conundrum. The response of each adversely affected
societal interest was simply to find ways to raise its prices surreptitiously, meanwhile
fiercely lobbying executive branch ministries and members of the legislature for formal
exceptions from the inevitable (and always overturned) wage-price freeze. In contrast,
Cardoso’s Real Plan was pre-announced, minutely negotiated with powerful societal
interests, and then passed by the Congress as ordinary legislation, a process requiring the
painstaking construction of a multiparty coalition.

12
 Tellingly, policies were maintained, despite early losses to influential players.
The financial sector had large short-term losses, while business' pricing power was kept
in check by an overvalued exchange rate plus trade liberalization. The policy was
politically sustainable because the end of inflation brought immediate improvements in
income distribution.59 Moreover, even losers had had time to voice their objections and
secure symbolic concessions during the implementation process. The federal
government aided its own fiscal adjustment by cajoling the legislature into passing an
additional law with a sunset provision, the Emergency Social Fund (FSE), which
temporarily allocated to the central government some tax revenues which the 1988
Constitution had mandated for transfer to Brazil’s states and municipalities. In our
judgment, the recurrent bargaining model provides the fullest understanding of this case.

Privatization
By at least the early 1980s there were multiple reasons for the national
government to sell Brazil’s historically state-owned enterprises (SOEs). First, fiscal
deficits and debt were a serious problem, and the money raised would be extremely
welcome. Second, the reasons that the federal government had originally begun
producing electricity, petroleum, steel, iron ore, and industrial chemicals had to do with
the paucity of capital and technical expertise in Brazil’s private sector, combined with an
arguably rational fear of complete foreign domination of the commanding heights of the
industrial economy. Those days were long gone. As one of the world’s top ten
economies, possessed of ample indigenous scientific and technical expertise, the
Brazilian state certainly could expect to be able to regulate private domestic or foreign
firms operating in crucial infrastructural and industrial sectors. Third, private foreign
investors and the international financial institutions used progress in privatization as a
key yardstick for evaluating the creditworthiness of emerging market countries.
The politics of Brazilian privatization differed from, but were at least as complex
as, those of inflation stabilization. The major political challenge of privatization was not
time inconsistency (that is, losses today, gains later) but rather the fact that expected
losses were concentrated among a few groups (notably SOE employees, plus state
politicians and national legislators dependent on the vote banks provided by public sector
unions), while the expected gains, although absolutely larger, would be widely dispersed
among all consumers and taxpayers. Moreover, public ownership of several historically
symbolic sectors such as mining and petroleum had been written into the 1988
Constitution, and thus would need a constitutional amendment, implying multiple
legislative votes each passed with a 3/5 majority, before firms in these sectors could be
sold. In addition, and as the experiences of countries such as Russia have made
abundantly clear, hasty or non-transparent privatization breeds gross corruption.
Privatization began in the late 1980s under President Sarney, but large firms were
first sold under President Collor. Initially only domestic purchasers were allowed to
participate. Although President Franco was often labeled an old-style nationalist, it was
under Franco that Congress approved an executive-sponsored bill raising the percentage
that foreign interests were permitted to hold in privatized companies from 40 to 100
percent.60 Presidents Collor, Franco, and Cardoso all used provisional decrees (MPs) to
allow sales of state firms, but in all cases these measures eventually were ratified by
Congress. Constitutional amendments authorizing privatization in energy,

13
telecommunications, and coastal shipping all passed without much of a fight.61 As
expected, opposition came from the Workers’ Party (PT), parties to its left, and unions.
Disgruntled actors used the courts. For a total of 38 privatized firms between 1992 and
1997, there were 460 legal appeals.62 This tactic resulted in delays, but all the courts
eventually ruled in favor of the government. Between 1995 and 1998 annual
privatization receipts rose from under $2 billion to over $35 billion annually.63 Carefully
prepared sales continued during Cardoso’s second term (1999-2002), and even under PT
President da Silva (inaugurated in 2003). Throughout, policymakers took great care to
avoid the perception of conflicts of interest in the awarding of sales contracts in the
various privatization auctions.64 In cases in which real or perceived favoritism or
improper financial procedures were alleged, senior technocrats had to resign.65
Which model fits best? As with the previous example of stabilization, the main
arguments in favor of a finding of HP are that privatization has been highly incremental
and very gradual—having taken place over almost a decade—and has involved multiple
and shifting legislative coalitions, executive MPs, repeated congressional votes, and
multiple societal and official actors, including the federal judiciary. It seems wildly
inefficient. However, we could instead highlight the fact that Brazil has mostly avoided
spectacular scandals and post-privatization public anger, reactions that have occurred
elsewhere when privatized firms have raised rates or offered inferior service. Brazil’s
process has been professional and competent: incremental does not necessarily mean
stalemated or even inefficient. As in our stabilization case, the choice of ED or RB at
least partly comes down to interpretation. In our view, the comparative transparency and
accountability of the process, and the fact that specific rules were sometimes altered in
response to protests, as well as its notable slowness, tips the scale toward a finding of
recurrent bargaining as once more the best description of the functioning of Brazilian
political institutions involved in privatization.

Reforming the finances of sub-national government

Brazil has a long history of financial creativity in both the private and public
sectors, which has enabled the country to live with decades of high and very high
inflation.66 Both the national government and individual state governments routinely
employed non-transparent accounting and large-scale and frequently undisclosed
borrowing, in domestic and foreign capital markets as well as from captive public sector
banks. Despite pervasive inflation indexing for financial assets, inflation nonetheless
often favored clever borrowers. But once the Real Plan succeeded in stopping inflation,
governments had to face reality and stabilize their finances. The national government
had been in particularly dire straits since the passage of the economically populist new
Brazilian Constitution of 1988, which had transferred a good chunk of what had
previously been federal tax revenues to state and municipal governments.67 The
stabilization plan of 1994 increased taxes by 5 percent, cut federal public spending, and
created the Social Emergency Fund (FSE) to receive 15 percent of all federal tax receipts,
before obligatory transfers to subnational government, for a period of two years.68 Then
finance minister Cardoso also announced plans to seek constitutional amendments to
transfer additional spending responsibilities to state governments, commensurate with
their additional revenues since 1988, in the areas of health, education, sanitation, and
other basic services. The battle was joined.

14
 The federal government wanted the states and big cities either to yield up their
post-1988 transfers from the center or accept new spending obligations. President
Cardoso also wanted to prevent future state governors from engaging in unfunded deficit
spending and creative borrowing, which frequently ended up as the central government’s
responsibility. Negotiations between the executive and the states, states and
municipalities, the executive and the legislature, and the executive and economic interest
groups, especially public sector unions, unfolded throughout Cardoso’s first and second
terms, and remain on-going under President Lula da Silva. The legal changes required
have had to pass through Congress, with a super-majority required for constitutional
amendments. The large debtor states of São Paulo and Minas Gerais had to face the fact
that, although they accounted for 47 percent of the population, their representation in
Congress was much less. This meant they had to accommodate the interests of lesser
debtor states in their negotiations. Smaller states would wait in the aisles in the hope that
large debtors would extract concessions from the central government. The executive was
constrained by the number of competing items on its agenda, which opened the
possibility of the formation of competing coalitions.69
A large number of specific laws and regulations were negotiated.70 In 1995 the
FSE was renewed for another two years by the Fiscal Stabilization Fund. When that too
expired in 1999, it finally was replaced by a constitutional amendment that “delinked”
federal tax revenues from the requirement that they be transferred to sub-national
government.71 In the process, it became clear that large commercial banks owned by key
states were insolvent and would need to be sold. This was gradually accomplished,
though at a cumulative cost to the federal treasury to clean the rotten assets from their
books that rose to about $80 billion through 2001.72 The central government’s overall
objective was to reduce (that is, either assume or forgive) the existing debt of states in
return for their pledge to limit their capacity for future borrowing. This string of laws
and regulations was required because, if governors chose to ignore the adjustment targets,
the federal government had only limited means to enforce compliance, such as denying
states the right to credits and imposing penalty interest on existing obligations to the
Brazilian Central Bank.
The culmination of this multiyear process was the Fiscal Responsibility Law
(LRF), which passed the lower house in May 2000, and the Senate in August. It sets debt
limits for federal, state, and local governments and commits them to spend no more than
60 percent of their revenues on salaries and employee benefits. Moreover, state and
municipal governments are required to set explicit and publicly announced targets for
revenues and expenditures (a first!). Governors and mayors who exceed these targets
face automatic cuts in spending and other penalties.73 The LRF introduces a stiff dose of
transparency into sub-national government, and there are consequences for public
officials that violate the law. At long last, the rewards to individual politicians for
honoring the agreement may exceed those of getting around it.74
How might we interpret this process? The inheritance of profound distortion in
the accounting practices and daily operations of public finance resulting from twenty-five
years of very high inflation has to be appreciated. Given the fiscal importance of the
problem, the prolonged negotiations can be seen as a manifestation of wildly exaggerated
resoluteness. This is the view of David Samuels,75 who understands Brazil as suffering
from something like hyperactive paralysis (HP). Or one might discern the heavy hand of

15
hyper-presidentialism and unhealthy executive dominance (ED) in President Cardoso’s
imposition of “quasi-authoritarian” fiscal restraints on the states. But this interpretation
is contradicted by the trajectory of the Social Emergency Fund (FSE). Initially passed
with a sunset provision, it was repeated negotiated and re-passed, eventually evolving
into the Fiscal Responsibility Law of 2000, which is permanent. The bargaining process
occurred within the executive branch--including within the interagency National
Monetary Council, and among public sector banks and federal financial regulators--as
well as among and the president, Congress, governors, state legislatures, and major
economic interest groups. The president gradually sold his reform to other policy
players, who then lobbied one another on the program’s behalf. This process does not
support an interpretation that emphasizes the autonomy of the executive in dominating
the decision-making process. Technocratic imposition was limited, complaints were
resolved on a case-by-case basis by continuous modifications in the program, and the
result was a law with broad multi-party support. We count ourselves among those who
see emerging coherence, regularization of patterns of competition, and increasing
governability as a result of this legislation, a process we term recurrent bargaining
(RB).76

Reforming civil service pensions

Our final case concerns reducing extraordinarily generous pensions for middle
and upper middle class public servants, a process known in Brazil as “social security
reform.” Although public pension reform had been discussed for years, it first became a
central government priority only after the successful inflation stabilization of 1994. As of
this writing in mid 2004, reform had been aggressively pursued by Cardoso through the
end of his second term in 2002, and somewhat surprisingly, was taken up by the Lula da
Silva government shortly after the president’s inauguration in early 2003. Significant
incremental progress has been made, but the political fights over the issue continue.
Social security reform was principally about balancing the federal budget. By
1996 the social welfare system had a $5 billion deficit. But reformers also aspired to
greater democratic equity in public spending. Only those who have been employed in the
formal sector—approximately half of all workers--are eligible for government funded
retirement benefits. Moreover, as of 1988, former government employees were only 15.2
percent of all eligible retirees, but received 43.4 percent of all benefits. Even within the
set of all public employees, retirement payouts were highly skewed toward a few high
income civil servants.77 In a country as poor as Brazil, these abundant entitlements for
the already privileged seemed deeply unjust to the president’s economic team, as well as
to many observers.
Possible reform options included placing new limits on early retirement (formerly
forty-eight for women and fifty-three for men), setting a higher age limit for normal
retirement, imposing a ceiling on total benefits, and taxing pension benefits for high
income recipients. The problem was that a wide swath of Brazilian civil society opposed
this reform. In Brazil, unlike in the United States, white collar unions have been as
numerous and as militant as unions representing blue collar workers. Among white collar
unions, those representing public employees such as bank clerks, school and university
teachers, and engineers and office workers in state-owned enterprises, have been the most
politically active. Not surprisingly, the union confederations (Força Sindical and CUT)

16
have steadfastly opposed most changes to social security entitlements, as did the
Workers’ Party (PT) until very recently. Unions and other opponents have worked
through representatives of almost all parties represented in the Congress. Moreover the
opponents of social security reform often had successfully portrayed it as an attack on all
workers, rather than on the privileges of a small elite.
President Cardoso’s basic strategy was to convince influential sub-national
politicians, especially governors, that their budgetary gains from social security reform
would enable them to buy enough additional political support (through the allocation of
patronage and perhaps even new substantive programs) to make up for incurring the ire
of unions, who controlled the valuable resource of votes. The president could then hope
that the governors’ support could enable him to construct a winning coalition in
Congress. During Cardoso’s two terms, his economic team carefully built coalitions in
advance of numerous votes on various permutations of social security reform. Though a
few minor laws were changed, all of the major amendments to the social security
legislation went down to defeat. Governors often would pressure members of Congress
to support the reform. But strikes by civil servants--which involved the risk of paralysis
in public services—combined with the importance of union support for a number of
federal deputies and senators, made legislators deeply reluctant to go on record as cutting
social security. Moreover, the administration chose to use its more “authoritarian”
instruments, such as the MPs, only sparingly, for fear of deepening the ideological divide
between the “right” and the “left,” which became gradually more salient as the memories
of hyperinflation weakened over time. Cardoso’s team quite intentionally chose not to
attempt to win specific battles by means of techniques that might cause them to forfeit the
war.78
But the long process of negotiation, involving multiple coalitions and votes
through the years, gradually served to socialize Brazilian politicians and opinion leaders
across the political spectrum to the problem. Meanwhile, the drag on public finances
remained. When President Lula da Silva assumed office in early 2003, he and his team
saw no choice but to continue as Cardoso had begun. Riding on his initially
overwhelming popularity, Lula pushed the legislation through Congress--with the
obliging support of Cardoso's party, the PSDB, now formally in opposition. Both houses
of Congress passed major controversial aspects of the reforms (income taxes on higher
retirement benefits, and raising the minimum retirement age to fifty-five for women and
sixty for men) in early December 2003--after “only” 225 days of deliberations on this
version of the reform legislation!79 Legal challenges, reaching all the way to the
Supreme Court, continued through mid 2004.
Obviously, a case can be made for the hyperactive paralysis (HP) interpretation of
the course of civil service pension reform. The active reform process has continued for
almost a decade, with much expenditure of presidential energy and political capital. But
we can probably discard a finding that this process represents de facto executive
dominance (ED), since the executive’s conscious strategy was to build a consensus.
Imposing the reform by decree was certainly contemplated, but administration strategists
considered it counter-productive. This process was the opposite of hyper-
presidentialism. As David Samuels notes, "Cardoso never unilaterally imposed his
most-preferred course of action. Instead, policy output resulted from negotiations
between the central and sub-national governments. Sub-national interests altered

17
important aspects of the president's agenda and forced the president to abandon key
intergovernmental reform proposals."80
In fact, we might take the fact that President Lula da Silva decided to continue his
predecessor’s efforts—even in the face of opposition from many of his longtime
supporters--as a sign of Brazil’s democratic consolidation. As in older democracies,
changes take time, which can be frustrating given Brazil's inequalities. A large number
of options are considered, and debates are open. Players have at their disposal many sets
of institutional rules to present their preferences. During an extended process of
negotiation, a compromise gradually is constructed. This is very much what is implied
by our recurrent bargaining (RB) model. What frequently is presented in the case of
Brazil as an obvious case of institutional weakness is very much, from a Canadian or
American point of view, what federalism is all about.

VII. CONCLUSIONS

It will by now be obvious that we believe Brazilian political institutions constitute

a system with few, if any, true veto players, but multiple policy participants, virtually all
of whom can hold up policy change for awhile, and often until their views are heard and
perhaps responded to by a president bent on policy reform. Yet is doubtful if either the
executive or the legislature can—or at least will find it in its long-term interest to--veto a
policy shift that the other very much desires. Or it may be that the president does possess
true veto power, but the Congress does not. In some cases, the president might try to
construct a winning policy coalition by ignoring Congress and going directly to powerful
state governors. Or disgruntled societal interests, such as public employee unions upset
about privatization, might despair of both the legislature and the executive, while trying
to pursue their preferred policy via the courts. The life of a Brazilian president inevitably
is one of frequent, almost incessant, negotiations and the distribution of side payments—
pork and rents—in order to get policy changes through. The two-year process of
negotiating a new, post-authoritarian Brazilian constitution in 1986-1988 provides an
excellent example, as do the four cases of recent economic policymaking detailed in this
essay. Yet recurrent bargaining arguably is a fairly democratic and representative system
of policymaking. In a country with a recent history of military rule and a profoundly
unequal inherited class structure, political legitimacy and democratic participation count
for a great deal. They serve as a very useful political and social cushion in times of
economic crisis—such as Brazil’s forced devaluation of January 1999 or the run on the
currency associated with the election of President da Silva in September 2002—and
political stress.
We close with an empirical description of Brazilian political institutions by
Timothy Power, an observer who has been somewhat less sanguine about their efficacy
than we have in this essay. Power writes:

The traditional legislative game is played alongside at least three others: a

"decree game", in which presidents legislate via iterated decrees that often
spend months in a parallel universe before being put to a vote; an
"appointment game" in which cabinet posts and other nominations are
used to influence party support in Congress; and a "patronage game", in

18
 which pork-barrel legislation, government concessions, president-
governor relations, debt forgiveness, and other policies are "massaged" to
effect desired legislative outcomes. All three games frequently entail foot-
dragging, blackmail, and brinkmanship on the part of parties and
individuals. The simultaneity of these games means that the nature, scope,
and content of legislation may change significantly between presidential
proposal and legislative ratification…81

Precisely. In comparative perspective, a set of political institutions that require

policymakers to engage in such muddling through may not be such a bad thing for a new
or fragile democracy to possess.

NOTES
1
Mona M. Lyne, “Executive-Legislative Relations in the ABC Countries of Latin
America: The Voters’ Dilemma and Democratic Stability” (Paper delivered at the Annual
Meeting of the Latin American Studies Association, Washington D.C., September 6-8,
2001), p. 4; Juan J. Linz, “The Perils of Presidentialism,” Journal of Democracy, 1
(Winter 1990), pp. 51-69.
2
Arend Lijphart, “Constitutional Choices for New Democracies,” Journal of
Democracy, 2:1 (Winter 1991), pp. 74-84; Matthew Shugart and John M. Carey,
Presidents and Assemblies : Constitutional Design and Electoral Dynamic (Cambridge,
MA : Cambridge University Press, 1992); Scott Mainwaring, “Presidentialism,
Multipartism, and Democracy: A Difficult Combination,” Comparative Political Studies,
26:2 (July 1993), pp. 198-228; Scott Mainwaring, “Multipartism, Robust Federalism,
and Presidentialism in Brazil,” in Scott Mainwaring and Matthew Shugart,
Presidentialism and Democracy in Latin America (Cambridge University Press, 1997).
3
However, Arend Lijphart, Donald Horowitz and others nonetheless favour electoral systems
with proportional representation on the grounds that they are more genuinely democratic and
representative than other systems with majoritarian single member districts. See Arend Lijphart,
“Majority Rule in Theory and Practice: The Tenacity of a Flawed Paradigm,” International
Social Science Journal, 129 (August 1991), pp. 483-493; and Donald L. Horowitz, “Comparing
Democratic Systems,” Journal of Democracy, 1:4 (Fall 1990), pp. 73-79.
4
Gary W. Cox and Mathew D. McCubbins, "Institutional Dimensions of Economic Policy
Outcomes,” in Stephan Haggard and Mathew D. McCubbins, eds., Presidents ,Parliaments and
Policy (Cambridge, Cambridge University Press, 2001).
5
George Tsebelis, “Decision Making in Political Systems : Veto Players in Presidentialism,
Parliamentarism, Multicameralism and Multipartism,” British Journal of Political Science, 25
(July 1995), pp. 289-325.
6
Cox and McCubbins, pp. 47-48
7
See also William Easterly, The Elusive Quest for Economic Growth: Economists’ Adventures
and Misadventures in the Tropics (Cambridge, MA: MIT Press, 2001), ch. 13.
8
Joan M. Nelson, ed., Fragile Coalitions: The Politics of Economic Adjustment (New
Brunswick: Transaction Books, 1989); Stephan Haggard and Kaufman Robert R., eds., The
Politics of Economic Adjustment (Princeton: Princeton University Press, 1992).
9
See especially Bolivar Lamounier, “Brazil at an Impasse,” Journal of Democracy, 5:3
(1994), pp. 72-87; Bolivar Lamounier ,"Brazil: The Hyperactive Paralysis Syndrome," in
Jorge I. Domínguez and Abraham F. Lowenthal, eds., Constructing Democratic

19
Governance: South America in the 1990 (Baltimore, MD: The Johns Hopkins University
Press, 1996); Mainwaring, “Presidentialism, Multipartism, and Democracy”; Scott
Mainwaring, ‘Brazil Weak Parties, Feckless Democracy’, in Scott Mainwaring and
Timothy R. Scully, Building Democratic Institutions. Party Systems in Latin America
(Stanford University Press, Stanford, California, 1995); Mainwaring, “Multipartism,
Robust Federalism, and Presidentialism in Brazil”; Scott Mainwaring, Rethinking Party
Systems in the Third Wave of Democratization: The Case of Brazil (Stanford, Stanford
University Press, 1999); Barry Ames, “Electoral Strategy under Open-List Proportional
Representation,” American Journal of Political Science, 39:2 (May 1995), pp. 406-433;
Barry Ames, "Electoral Rules, Constituency Pressures and Pork Barrel: Bases of Voting
in the Brazilian Congress,” Journal of Politics, 57:2 (May 1995), pp. 324-343; Barry
Ames, The Deadlock of Democracy in Brazil (Ann Arbor, University of Michigan Press,
2001); Barry Ames, "Party Discipline in the Chamber of Deputies,” in Scott Morgenstern
and Benito Nacif, eds., Legislative Politics in Latin America (New York, Cambridge
University Press, 2002), pp. 185-221; David Samuels, “Ambition and Competition:
Explaining Legislative Turnover in Brazil,” Legislative Studies Quarterly, 25:3 (August
2000), pp. 481-497; David Samuels, “Concurrent Elections, Discordant Results.
Presidentialism, Federalism, and Governance in Brazil,” Comparative Politics, 33:1
(October 2000), pp. 1-20; David Samuels, "The Cardoso Administration and ‘Predatory’
Federalism in Brazil,” in Ambition, Federalism, and Legislative Politics in Brazil
(Cambridge, Cambridge University Press, 2003), ch. 9; David Samuels, "Pork Barreling
Is Not Credit Claiming or Advertising: Campaign Finance and the Sources of the
Personal Vote in Brazil,” The Journal of Politics, 64:3 (August 2002), pp. 845-863;
David Samuels and Fernando Luiz Abrúcio, "Federalism and Democratic Transitions:
The ‘New’ Politics of the Governors in Brazil,” Publius: The Journal of Federalism, 30:2
(Spring 2000), pp. 43-61; Timothy Power, "Political Institutions in Democratic Brazil:
Politics as a Permanent Constitutional Convention,” in Peter R. Kingstone and Tomothy
J. Power, eds., Democratic Brazil. Actors, Institutions and Processes (Pittsburg,
University of Pittsburg Press, 2000), pp.17-35; Scott Desposato, ‘The Impact of
Federalism on National Party Cohesion in Brazil’ (Paper presented at the Annual Meeting
of the Latin American Studies Association, Dallas, Texas, March 27-29, 2003).
10
Vicente Palermo, "Como se Governa o Brasil? O Debate Sobre Instituições Políticas e Gestão
de Governo,” Dados, 43:3 (2000), pp. 521-557.
11
Ames, The Deadlock of Democracy.
12
Ibid., p. 160; Sérgio Henrique Abranches, "Presidencialismo de Coalizão: O Dilema
Institucional Brasileiro,” Dados, 31:1 (1988), pp. 5-33; Power, "Political Institutions in
Democratic Brazil.”
13
Fernando Abrúcio, "Jogos federativos: o modelo predatório brasileiro" (unpublished
manuscript, Sao Paulo: CEDEC, 1996); Samuels, “Ambition and Competition” ; Samuels,
“Concurrent Elections, Discordant Results”; Samuels and Abrúcio, "Federalism and Democratic
Transitions.”
14
Lourdes Sola, "Estado, Regime Fiscal e Ordem Monetária: Qual Estado?," in Lourdes Sola
and Leda M. Paulani, eds., Lições da Década de 80 (São Paulo, Brazil: Editora da Universidade
de São Paulo, EDUSP, 1995); Eliza J. Willis, Christopher Garman, and Stephan Haggard, “The
Politics of Decentralization in Latin America,” Latin American Research Review, 34:1 (1999), pp.
7-56.

20
 15
Frances Hagopian, Traditional Politics and Regime Change in Brazil, Cambridge, Cambridge
University Press, 1996); Samuels, "The Cardoso Administration,” p. 39; Samuels, "Pork
Barreling.”
16
Desposato, “The Impact of Federalism.”
17
Samuels, “Concurrent Elections, Discordant Results,” p. 16.
18
Ibid.
19
This contrasts to an alternative system (closed list PR) in which the party leadership
creates an ordered list of candidates, thus creating incentives for all party members to
cooperate to elect as many candidates from the slate as possible.
20
Ames, “Electoral Strategy,” p. 430.
21
Mainwaring, “Multipartism, Robust Federalism, and Presidentialism,” p. 74; Kurt Gerhard
Weyland, Democracy without Equity: Failures of Reform in Brazil (Pittsburgh, Pa : University of
Pittsburgh Press, 1996).
22
Schneider, Ben Ross, Politics Within the State:Elite Bureaucrats and Industrial Policy in
Authoritarian Brazil, (Pittsburg, University of Pittsburg Press, 1991)
23
Barbara Geddes, Politician's Dilemma: Building State Capacity in Latin America
(Berkeley, CA: University of California Press, 1994).
24
Palermo, "Como se Governa o Brasil?.”
25
Cox and McCubbins.
26
Lamounier, “Brazil at an Impasse.”
27
Eduardo Lora, “Structural Reforms in Latin America: What Has Been Reformed and How to
Measure It,” Working Paper #466 (Washington, D.C.: Inter-American Development Bank,
Research Department, 2001).
28
Brazil’s rating on the Human Development index increased from 0.643 in 1975 to 0.777 in
2001. United Nations, Human Development Report 2003, New York: United Nations.
http://hdr.undp.org/reports/global/2003/pdf/hdr03_HDI.pdf
29
World Bank, "Brazil - country brief" (consulted on-line February 20th 2004)
http://wbln0018.worldbank.org/LAC/LAC.nsf/ECADocByUnid/A220784F5BC3A1FB85256DB
40070253B?Opendocument
30
Mainwaring, “Brazil: Weak Parties, Feckless Democracy.”
31
See especially Fernando Limongi and Argelina Figueiredo, “Presidential Power,
Legislative Organization, and Party Behavior in Brazil,” Comparative Politics, 32:2
(January 2000), pp. 151-170; Fernando Limongi and Argelina Figueiredo, “Decision-
making Structure and Agenda Legislative Power: The Brazilian Democratic Experiences”
(manuscript, 2002); Fernando Limongi, Argelina Figueiredo, and Jose Antônio Cheibub,
“Presidential Agenda Power and Decision-Making in Presidential Regimes: Governors
and Political Parties in Brazilian Congress” (Paper presented at the Annual Meeting of
the American Political Science Association, August 29 - September 1, 2002); Octávio
Amorim Neto and Fabiano Santos, “The Executive Connection. Presidentially Defined
Factions and Party Discipline in Brazil,” Party Politics, 7:2 (March 2001), pp. 213-234;
Octávio Amorim Neto, "Presidential Cabinets, Electoral Cycles, and Coalition Discipline
in Brazil,” in Morgenstern and Nacif, eds., Legistalive Politics, pp. 48-78; Octávio
Amorim Neto and Paulo Tafner, "Governos de coalizão e mecanismos de alarme de
incendio no contrôle legislativo das medidas provisorias,” Dados, 45:1 (2002), pp. 5-38;
Lee J. Alston, Marcus André Melo, Bernardo Mueller, and Carlos Pereira, "Political
Institutions, Policymaking Processes and Policy Outcomes in Brazil,” Research Proposal

21
(Inter-American development Bank, 2003, available on-line at:
http://www.iadb.org/res/laresnetwork/projects/pr225finaldraft.pdf ).
32
Palermo, "Como se Governa o Brasil?.”
33
Power, "Political Institutions in Democratic Brazil,” p. 24.
34
Limongi and Figueiredo, “Decision-making Structure,” p. 6.
35
Limongi and Figueiredo, “Presidential Power,” p. 167.
36
Ibid., p. 151.
37
Alston et al., p. 10.
38
Desposato, p. 9.
39
Of the thousands of special amendments proposed by elected representatives during the
annual debate over the budgetary law, the value of amounts liberated represent no more than 2
percent of total budgetary expenses. Camilo Capiberibe, “Transferencias Voluntaries e Emendas
Parlamentares: Relaçoes federativas e Representaçao Politica no Brasil pos-constituinte,”
Master’s Dissertation, University of Montreal, 2004.
40
Limongi, Figueiredo, and Cheibub, p. 19.
41
See the discussion in Palermo, "Como se Governa o Brasil?.”
42
Guillermo O’Donnell, “Delegative Democracy,” Journal of Democracy, 5:1(January 1994),
pp. 55-69.
43
Graciela Ducatenzeiler and Phillip Oxhorn, "Democracia, autoritarismo y el problema de la
gobernabilidad en America Latina,” Desarrollo Economico, 34 (April-June1994), pp. 31-52.
44
See Vicente Palermo, “La gestion du Plan real et la crise financière au Brésil,”
Problèmes d’Amérique latine, 33 (April-June 1999), pp. 27-57; Palermo, "Como se
Governa o Brasil?’; Peter R. Kingstone, “Muddling through Gridlock: Economic Policy
Performance, Business Responses, and Democratic Sustainability,” in Kingstone and
Power, eds., Democratic Brazil; Maria Herminia Tavares de Almeida, "Pragmatismo por
necessidade: os rumos da reforme economica no Brasil,” Dados, 39:2 (1996), pp. 213-
234; Amorim Neto and Tafner, "Governos de coalizão”; Lourdes Sola, Eduardo
Kugelmas and Laurence Whitehead, eds., Banco Central: autoridade política e
democratização—um equilibrio delicado (São Paulo: FGV Editora, 2002).
45
Charles Lindblom, “The Science of ‘Muddling Through,’” Public Administration Review, 19
(1959), pp. 79-88.
46
On the judiciary as a political actor see Alston et al.
47
We do not here inquire into the origins of compromise and pragmatism in Brazilian political
culture. Arguably, it characterizes Brazilian politics throughout the 20th century.
48
Kingstone, “Muddling through Gridlock.”
49
Amorim Neto and Tafner, "Governos de coalizão.”
50
Ames, "Party Discipline in the Chamber of Deputies,” p. 214.
51
Abrúcio, "Jogos federativos”; Samuels, "The Cardoso Administration.”
52
Canada is a good example of highly competitive but quite functional
federalism.
53
Leslie Elliott Armijo, "Mass Democracy – The Real Reason Brazil Ended Inflation?"
(manuscript, forthcoming, available at http://www.mindspring.com/~leslie.armijo).
54
Manuel Jr. Pastor, Inflation, Stabilization, and Debt: Macroeconomic Experiments in Peru
and Bolivia (Boulder, CO: Westview, 1992).
55
Werner Baer, The Brazilian economy : growth and development (Westport, Conn. ; London
: Praeger, 5th ed., 2001); Eliana Cardoso and Ann Helwedge, "Currency Crises in the 1990s: the
Case of Brazil" (1999, available on line: http://www.stern.nyu.edu/globalmacro/); Albert
Fishlow, "Is the Real Plan for Real ?,” in Susan Kaufman Purcell and Riordan Roett, eds., Brazil
under Collor (Boulder, Lynne Rienner Publishers, 1997), pp. 43-61.

22
 56
Kingstone, “Muddling through Gridlock,” p. 195.
57
Armijo, "Mass Democracy.”
58
Ted Goertzel, "Eight Years of Pragmatic Leadership in Brazil" (2003, available on line at:
http://crab.rutgers.edu/~fhc.htm).
59
William C. Smith and Nizar Messari, “Democracy and Reform in Cardoso's Brazil: Caught
Between Clientelism and Global Markets?,” (Miami, the University of Miami, North-South
Center, Agenda Paper no33, 2001).
60
Luigi Manzetti, Privatization, South American Style (New York, Oxford University
Press, 1999), pp. 157,173.
61
Maria Herminia Tavares de Almeida and Maurício Moya, "A Reforma Negociada: O
Congresso e a Política de Privatização,” Revista Brasileira de Ciencias Sociais, 34 June
(1997), pp. 119-132.
62
Almeida, "Pragmatismo por necessidade.”
63
Edmund Amann and Werner Baer, "The Illusion of Stability: The Brazilian Economy Under
Cardoso,” World Development, 28:10 (October 2000), p.1812.
64
Daniel Treisman, "Cardoso, Menem, and Machiavelli: Political Tactics and Privatization in
Latin America,” forthcoming, Studies in Comparative International Development.
65
“Leia a defesa dos envolvidos no grampo,” Folha de São Paulo, Sunday, May 30, 1999.
66
Leslie Elliott Armijo, "Inflation and Insouciance: The Peculiar Brazilian Game," Latin
American Research Review, 31:3 (Fall 1996), pp. 7-46.
67
Samuels, "The Cardoso Administration”; Sola et al.
68
Amann and Baer, “The Illusion of Stability.”
69
William Dillinger and Steven B. Webb, "Fiscal Management in Federal Democracies:
Argentina and Brazil" (The World Bank, March 1998).
70
These included Law 9496 of 1997, National Monetary Council Resolution 2653 of 1999, and
Senate Resolutions 78 of 1998, and 40 and 43 of 2001.
71
Eliana Cardoso, "Brazil's Currency Crisis : The Shift From an Exchange Rate Anchor to a
Flexible Regime,” in Carol Wise and Riordan Roett, eds., Exchange Rate Policies in Latin
America (Washington, D.C., Brookings, 2000), p. 16.
72
Author interview with Gustavo Loyola, Oxford, February 22-27, 2002.
73
Cardoso, p. 21.
74
"Brazil: Issues in Fiscal Federalism" (Report no. 22523-BR, Brazil Country Management
Unit, World Bank, May 31, 2002).
75
Samuels, "The Cardoso Administration.”
76
See especially Palermo, “Como se Governa o Brasil?.”
77
Goertzel, "Eight Years of Pragmatic Leadership,” p.15.
78
Former minister Luiz Carlos Bresser Pereira has stressed this point in several conversations.
79
David Fleischer, Brazil Focus – Weekly Report, Brasilia, weeks of April 14-27, and December
6-12 2003.
80
Samuels, "The Cardoso Administration,” p. 36.
81
Power, "Political Institutions in Democratic Brazil,” p. 24.

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