Brazil’s President Dilma Rousseff is gearing up for her reelection bid this week, attending political rallies and drumming up support by appearing with former President Lula. As she hits the campaign trail, over the next year she will be campaigning on—or alternatively explaining—her last three years in office. So what has Rousseff accomplished during her time at Brazil’s helm? The results are, in my view, mixed.
Perhaps her most defining successes have been in taking on Brazil’s long-rooted culture of corruption. In her first two years, she fired seven cabinet level ministers for alleged corruption or ethics breaches—a first for modern Brazil. She pressed Brazil’s Congress to pass the Clean Company Act (a far-reaching anti-corruption bill that goes beyond even U.S. anti-corruption legislation), and personally vetoed loopholes that would have limited fines and eased punishments for government-related contracts. Rousseff also backed Brazil’s Freedom of Information Act, judged by scholars to be one of the best in the world, as it guarantees access to information at all levels of government. Finally, she has pushed to end secret voting in Brazil’s Congress; legislation passed in the House earlier this month, and awaits consideration in the Senate.
Rousseff also increased social spending on programs such as Bolsa Familia. Independent studies show this conditional cash transfer program, which now reaches some 47 million Brazilians (roughly a quarter of the population), is one of the most efficient and effective public ways to positively change the lives of low-income Brazilians. And with her support, Brazil’s Congress recently passed a pre-salt oil royalties’ law that directs 100 percent of the revenues to social development, earmarking 75 percent for education and the other 25 percent to healthcare. And finally, she made beneficial changes to Brazil’s pension systems, reining in the long term costs of these expensive and regressive social programs by placing a ceiling on payouts for public servants and capping government contributions for new hires. The Ministry of Planning, Budget, and Management estimates that this will save Brazil some $40 billion in the years to come, and will help stop the ballooning costs, which in 2011 reached some 13 percent of GDP.
Countering these concrete advances is the current economic situation. Growth has been disappointing, up less than 1 percent last year, despite record low interest rates and unemployment levels. The government has also repeatedly had to revise down its GDP growth estimates throughout 2013 and more recently for 2014 due to the continued sluggish performance.
And on the broader policy front, Rousseff hasn’t tackled the real barriers to growth—including the country’s tax or regulatory systems. As a result, Brazil remains a difficult and expensive place to do business. According to the World Bank, it is the worst place in the world to file your taxes (requiring a staggering 2,600 hours to do it correctly). More broadly, the World Bank Doing Business report ranks it at a low 130 out of 185 countries, well behind other emerging market peers such as Mexico, China, and even Russia.
A big part of Brazil’s problem is weak infrastructure, which this government has struggled to improve. Even with solid public private partnership laws, the private sector’s appetite has been tepid—largely due to the unattractive terms offered by the government. Analysts predict that only a third of planned projects will reach auctions due to this low interest. And even the auction for the Libra oil field—one of the alleged crown jewels of Brazil’s pre-salt finds—attracted just eleven participants, far less than the forty expected by government officials. The depth of the problems may well become apparent during the World Cup next June—during the height of the campaign season—as six of the soccer stadium are still not finished, and only two out of the thirteen World Cup airports are ready. In several cities across the country, temporary terminals are being erected, costing billions while adding nothing to Brazil’s long-term infrastructure development.
It is not just investors, but also ordinary Brazilians who are frustrated with their country’s lack of progress. Millions of citizens poured into the streets last summer to demand better schools, healthcare, buses, transportation, and urban infrastructure. Though paying high tax rates, even by OECD standards, many Brazilians feel as though they have little to show for it.
Today Rousseff leads in the polls, ahead of potential opponents Marina Silva (of the not-yet registered REDE party), Aecio Neves (PSDB), and Eduardo Campos (PSB) in a hypothetical first-round election. But if she wants to hold her lead through next October, she will not only have to tout her successes but also address her government’s shortcomings. And if reelected, she will then need a more ambitious plan to take on the barriers that hold Brazil back if she truly wants to lead the nation forward.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.