Brazil – The Transition to Democracy, 1983-2003

“The New Republic”

Sarney & the Military

• Transition to democracy and civilian rule was a gradual process.

• The military continued to influence the decision –making on all major issues.

• Little progress was made to solve the social and economic problems of Brazil

Land Reform

• Major Obstacle was the wealthy landowners• Hire former military for private militias

External Constraints

• Foreign Debt = 120 billion (1990)• The drain of the foreign exchange negatively

impacted social and economic reform.• Choice between paying the interest or

supporting development.

Stabilization Program – Plan Cruzado

• Freeze wages, prices, and rents• Replace monetary unit (cruzerio to cruzado)• Devaluations of goods• Closings or mergers of state companies• Increases in postal rates, utilities, fuel, and

sugar

New Democratic Constitution of 1988

• Rejection of all the late military regime had stood for

• Basic civil rights were guaranteed• Granted worker’s right to strike and collective

bargaining• Promised protection of the indigenous culture

and habitat• This was a sharp swing to the LEFT.

Fernando Collor de Mello

• Elected president in 1989• Critical of corruption• Campaign promised to reduce the

bureaucracy, attract foreign capital, and institute a free market economy.

Collor’s Econ Policy

• Conformed to the most traditional IMF recipes for economic solvency.

• Reduction of gov spending and services, halt wage increases, end collective bargaining, and privatize state enterprises.

• This causes production to decrease, layoffs to increase, and numerous bankruptcies among companies.

Land Problem Continues

• Violent Clashes between great landowners and small farmers

• Rent-a-killer agencies• The Collor gov did little to protect peasant

leaders or punish their assassins.

Devastating Effects for Collor

• Many unions went on strike• 1992 - Collor resigns to avoid impeachment

on the grounds of personal corruption.

Itamar Franco

• Collor’s vice president is named acting president

• There is conflict between his cabinet’s “social sector” and its “economic sector”

• Leaned toward the neoliberal on econ reforms (Fernando Cardoso – economic reform team leader)

The 1994 Election

• Promised to be the most important election in Brazil’s history

• Cardoso’s “viable left” vs Lula’s “utopian left”• Cardoso’s trump card was his new economic

stabilization plan, the “Real Plan”• Got the support of moderates and

conservatives to win decisively

Cardoso Faces Problems

• Extraordinary vulnerability to global economic changes

• The grossly inequitable distribution of land (<3% of pop owned >60% of the land). Lead to the Landless People’s Movement (MST).

• Widespread poverty (nearly half of the pop lived in poverty)

Politically Divided

• His blend of neoliberal, market-centered policies, and state-supported social services made Cardoso an elusive target for political enemies.

• Won reelection in 1998 (slightly >50%)• Highest income inequality in L.A., but his

populist rhetoric and a divided political opposition ensured repeated electoral success.

Lula da Silva’s Turn (2002)

• 2002 – Argentinean market collapses and causes a reduction in foreign investment and demand for exports in the region.

• Broke with neoliberal economic model• Suspended the privatization program• Sought to unite a broader coalition of leftist

parties (Liberals – Communists)

Volvo: a case study

• Why Brazil?• What are the mutual benefits?• How has it impacted the city / community?