Transcript 0:00 Only time will tell how the 2018 election will be analyzed by historians. Some believe that the rise of the far right will mark the decline of Brazil's young and fragile democracy. 0:11 Others believe that the aggressive rhetoric of Jair Bolsonaro, the favorite to win the Brazilian presidential election, is pure bravado, and that our institutions will push him towards the center. 0:23 We will begin to find out who is right on January the 1st. That is, if Bolsonaro does confirm his likely election on October 28th. 0:32 One thing seems to be consensual though, the conservative wave that swept across the country marks a major rupture, or instead, a critical transition; a concept developed by Professors Carlos Pereira of Fundação Getulio Vargas, Bernardo Müller of the University of Brasília, Marcus Melo of the University of Pernambuco, and Lee Alston of Indiana University in their book, Brazil in Transition: Beliefs, Leadership and Institutional Change. 1:02 The Brazilian report contributor, Mario Braga, talked over the phone with Carlos Pereira about the Brazilian transition and what will be its impacts on the short-term and long-term future. I'll leave you with them. 1:15 This is Explaining Brazil. [Instrumental music] Professor Carlos, first of all, thank you very much for taking the time to talk to us. 1:30 And to start, I would like you to briefly explain to our listeners what exactly a critical transition is, and what are the elements that are part of such process? 1:41 So a critical transition is a specific moment in which societies have to decide and to, to transform or to change dramatically from one stage to the next. 1:57 And we have been arguing that Brazil is exactly in this moment, in a moment that may change or not from a, a particularistic society, a society that, and, and has been mostly oriented by an oligarchical interest to benefit those oligarchical interests to become a more competitive and a open access society. 2:27 So a critical transition is exactly this window of opportunity for big changes in which a country can take advantage or, and, and exploit this opportunity, or let it pass without being in kind of a prison of the old stage and of a bad equilibrium. 2:47 So the idea of a critical transition is exactly to, to create an opportunity for the country to face and, and conditions to change institutionally and politically as well as economically. 3:02 And okay, so before we try to comprehend the results of this election, let's take a step back for a while and understand what was the state of the Brazilian society before this most recent political event. 3:14 Uh, in the book, Brazil in Transition: Beliefs, Leadership and Institutional Change, published in 2016, you and your fellow colleagues go over the past 20 years or so, the period after the re-democratization of the country. 3:28 What was the assessment you made? What was the state of Brazil from that perspective? Brazil made the transition to democracy mid-1980s, and the dominant belief at that time was development, right? 3:45 Everything became a synonym of development. But the kind of development that Brazil faced during that particular period of time and generated lots of economic, uh, inequality. 4:00 So, and the new government that emerged after the transition to democracy was fairly much and constrained by the necessity to pay a kind of social debt and with the poor, and, and everything became a synonym of social inclusion. 4:20 So the policies, the institutions that have been created and try to, to match that big, eh, expectation of social inclusion. 4:32 And because those governments and try to include everybody no matter what, the country faced lots of pressure in terms of inflation and, and we had a period of hyperinflation in which everything became un-imbalanced up to the real plan of 1994 when finally the country managed to control the hyperinflation. 4:56 But rather than substituting the prior and dominant beliefs of social inclusion, actually it emerged what we call in the book of a fiscally sound social inclusion in which the country delivered, was able to deliver macroeconomic stability, but as well as with some degree of social inclusion. 5:19 And this kind of equilibrium has been in place until 2008, 2010, when the country was somehow affected by three and big exogenous shocks. 5:35 And the first shock in my view was the discovery of the pre-salt reservoir of oil. 5:43 And the big expectation that the country would become rich very soon made the government at that time to relax and the fiscal constraints, and as a consequence, we came back somehow to the prior equilibrium in which we had, we, we no longer had macroeconomic stability. 6:05 The country start spending too much And at the same time and also in the same direction, and the price of the Brazilian commodities in the international market were fairly high and provided lots of liquidity as well of money in the country. 6:24 And also the, the, the big financial crisis in 2008, and especially the reactions of the developed country providing, um, lots of money in, in the market also helped the government to, to, to f- follow the same path and, and also spent lots of money. 6:43 So those three aspects, the, the, the co- the commodity price, the discovery of pre-salt reservoir, and the financial crisis of 2008 somehow, um, helped to shake the, the fiscally sound social inclusion equilibrium that Brazil used to have from 1994. 7:03 Okay. So let's try just to take a look into detail of this process. 7:07 'Cause for example, after these three shocks you mentioned since 2008, uh, can we say that there are major changes in beliefs among the elites, and that's changing beliefs that will lead to the impeachment in 2016? 7:21 Because in the critical transition theory, the beliefs do play a big role in the process, right? Yeah. That's right. I don't believe that, you know, we had big changes in the, in the, in the dominant belief. 7:34 I, I still believe that, um, the fiscally sound social inclusion is still in place. 7:40 A good, um, evidence of that is exactly the actions, um, and that the current administration has been implemented in order to restore the confidence of the country, to restore an inflation control and fiscal balance and so on and so forth, which suggests that, um, um, um, 8:01 that beliefs is still in place. However, I, I have to acknowledge that what happened is, was, was an stress test in those beliefs. 8:12 So the PT administration, especially the second, um, um, administration of Lula and the first administration of Dilma, they crossed the boundary and the country paid a high cost because of that. 8:26 And the impeachment was exactly one way that the political system found in order to restore the prior equilibrium of fiscally sound social inclusion, which are still in place. 8:39 Right now, for instance, the major, um, presidential candidates are trying exactly to offer a narrative, a discourse that fulfill both, um, inclusion and, and fiscal responsibility and macroeconomic stability. 8:57 It, it's another indication that this dominant belief is still in place. All right. 9:02 But one could argue, for example, that, uh, during the current elections, the campaigns of the two candidates in the runoff stage have at some point proposed, for example, a new constitution. 9:14 Wouldn't that be an evidence- Yeah... of a departure from these core beliefs that shaped, uh, Brazil after the redemocratization? And of course, we saw that both politicians later backed off from that proposition. 9:26 But isn't that a sign that, uh, these core values are being somehow questioned now? 9:33 You know, it's a, it's a dynamic process, but as you mentioned, and I, I tend to believe that it was a matter of rhetoric of those two candidates because they are extreme candidates, you know. 9:45 They, they represent opposing views of the world, and they try to, to sell themselves as, uh, as candidates and, and toward those extremes from the left and to- toward the right. 10:00 But as, as you mentioned, in a two rounds, you know, two-stage presidential regime, we have two rounds. We have the first round of election and the runoff. 10:11 The runoff has been able to provide incentives for those two candidates to moderate those discourses and those narratives and, and they are now credibly signaling, um, that they are no longer willing to change the Constitution, right? 10:28 And I think that, um, like the US, in which candidates at, at the primary level, they trend, they tend to radicalize their discourses, but once they have been, 10:41 um, chosen by each specific political parties, they tend to, to, to go to the center of the, the ideological spectrum because it is the median voter that will define the election. 10:55 So the winner of this contest will be the one who is able to credibly, um, convince the median voter. 11:07 And, and this median voter in Brazil is completely, um, committed with the fiscally sound social inclusion, um, belief. 11:15 So in other words, the degrees of freedom for the newly elected president to deviate from this dominant belief is fairly small. 11:24 Of course, the people may try to do so, but it- they would, they w- they will have to f- to face huge political costs for doing that, as Dilma Rousseff did with her impeachment. 11:37 And would you say then that the impeachment was a step that created the necessary conditions or the window of opportunity that can lead or not to a long-term political change? It, it might. You know, it might. 11:53 It is an opportunity, you know. 11:55 We never had in Brazil a credible and competitive right-wing candidate, and although, um, um, well-established democracy in Europe and, and, and also in North America, they do have, um, right-wing competitive candidates. 12:12 The right In Brazil has been very ashamedly right because they have been associated to the military regime. 12:19 So for the first time, we do have a right-wing candidate that is competitive, is actually is, is, is, is the likely winner, but this is part of the game, right? 12:29 This is part of the, uh, of the uncertainty of the demo- This is the beauty of the democracy, you know, to generate an, a uncertainty exactly who's gonna be the winner. 12:40 So it is a window of opportunity to political change, but I don't believe that those political change will provide radical change in the set of the dominant beliefs that I mentioned before, the fiscal sound social inclusion. 12:55 It might be a, a, a, a change that, and especially fulfill 13:02 a voter's expectation concerning corruption control and, you know, authority and some conservative values, but under the umbrella of fiscal macroeconomic stability as well as some degree of social inclusion. 13:21 Right. 13:22 And professor, according to the critical transition theory, and please correct me if I'm mistaken, if political leaders act in these moments of critical transition and actually change the course of a country, with time, these new beliefs will become crystallized among the society. 13:39 And so from what you're saying, we still have the same, uh, core beliefs, uh, in Brazil. 13:44 But how do you analyze then the results of this first round, and not talking about necessarily Bolsonaro's performance, but this wave that we have seen in Congress and some, uh, state, uh, governors, uh, is that an evidence of support for conservative values, and can these be crystallized within time in Brazil? 14:06 Yeah, it's a very interesting question. 14:07 And, you know, despite the fact that Brazil experienced with this first round of the election dramatic change and in the composition of the Congress, and, you know, the rate of reelection declined dramatically and from the historical standard, and the newcomers and are quite large. 14:29 And I just calculated and the, the distribution of the median voter or the distribution of the median preference, sorry, of the new Congress, and you know what I found? 14:40 That the median preference of the Congress did not change dramatically from the current Congress. 14:47 So in other words, uh, we will continue to have a center-right median preference of the Brazilian Congress, despite the fact of the arrival of new legislators, and including legislators that n- have never served in Congress before. 15:04 So which suggests a huge degree of stability, and if we assume that Congress is mirrors, is a representative of the society, represents the median preference of the society, and if the median preference of the current Congress is a center right and the new Congress is also center right, I should not expect big or dramatic change out of this Congress taking into account that the new Congress will somehow represent the current dominant belief. 15:36 Okay, you gave some hints already, but then just so we can have a, a clear analysis, how do we evaluate Bolsonaro's likely victory, and then his, what can we expect from his likely presidency? 15:48 Yeah, Bolsonaro is a, is a, what I call, is a premodern candidate, right? And he's very conservative, and somehow he has some authoritative values. 16:00 And he's a former military, but, you know, it's a good sign that he's running and for the election he is competing, and which suggests that democracy is the only game in town in Brazil. 16:14 But I don't believe that he's, uh, uh, necessarily would behave anti-democratically because, um, many people in Brazil have arguing that, you know, it's a big risk for Brazilian democracy, the, the election of someone not fully committed to democratic values as Bolsonaro used to, you know, to sell himself. 16:39 And I, I think that he's a conservative guy, and he'll try to implement his conservative agenda, but within, um, the boundaries and the limits set up by the Brazilian Constitution and Brazilian political institutions. 16:54 And checks and balance institutions in Brazil are fairly, uh, strong, extremely stable, and will be able to constrain potential non-liberal behaviors from Bolsonaro's administration in case he gets elected. 17:09 So I'm not afraid of that. W- My concern about Bolsonaro's administration is related to how he will deal with Congress because he 17:20 will have conditions given this new median preference of the Congress, which is fairly nearby the preference of his own party. 17:29 And if he builds a coalition with center-right parties, and, and this coalition will fairly much mirror this median preference of the Congress in a very ho- and homogeneous way. 17:42 So he would have the conditions to govern via, uh, a majority coalition, which will, um, easy his relationship with Congress. However, and he is saying that he will not govern based on coalition. 17:59 He will, he's saying that he will, will govern according to one unilateral, um, mechanism, and going directly to direct connection with the public, with voters. 18:13 So this is I am really afraid of because the literature, especially in the West and Congress and, and the executive bra- and legislative congress claims that this going public strategy generates and, you know, positive outcomes for the executive only in the short run. 18:32 But in the long run, this strategy upsets Congress and creates animosity and conflicts, potential conflicts, and because congressmen feel ignored by the executive, sooner or later Congress will raise the cost of support in case the president would face any kind of shock, and that would need Congress in order to survive. 18:59 So if Bolsonaro ignores Congress when he's strong at the beginning under the honeymoon, 19:07 it might be the case that when he really needs the Congress in the near future, the Congress can, you know, turn it, turn hi- its back to him. 19:15 So what you're saying is that either Bolsonaro in the long run, uh, softens his rhetoric and learns how to play with the Congress, or there is a risk that we can see, for example, what was the second administration of former President Rousseff, in which we had this clear attempt of, uh, the executive do as it wish and the confrontation with the legislative, and this led, for example, to her impeachment. 19:44 Is this the scenario you're viewing? That's right. That, that's what I'm trying to say. Yeah. Okay. Yeah, it, it happened before as well with the former President Fernando Collor de Mello as well in 1992. 19:54 And Collor was elected, was in 1989. He was elected first president after the, the military regime. And, 20:02 and, and he decided to build a minority government, ignore Congress, try to govern, and through direct links with voters, disrespecting Congress procedures. 20:14 And in the first year of his administration, he, he seemed to be extremely successful. He approved about everything that he wanted in Congress. 20:23 But when he, he show any vulnerability and under the corruption scandal that he was caught and tried to rebuild connection with Congress, was too late, and Congress said no to him and impeach him. Mm-hmm. 20:40 So, and if Bolsonaro follows the same path, he might get the same result. Right. 20:48 And Professor, just to wrap up then, in the book Brazil Under Transition, you and your colleagues claim that you, and I quote, "Expect Brazil to make the critical transition to a society more akin to the current developed countries in the world." 21:02 And you also pondered that the Car Wash operation might be a bump in the road. This was published in 2016. We have seen that a lot has happened since then. 21:12 What I would like to know from you is how do you assess this forecast? Does that still stand? Do you still believe in that? Yeah, I, I still do, and we are on that particular road. 21:24 However, uh, it, that road is not linear, and, you know, as, as we, we say clearly in the book, that road is full of bumps, ups and downs. 21:35 But we have to look at the trend, and it's much better when we look at the trend or rather than looking to specific episodes. When you look at the trend, we are by far better than 30 years ago. 21:50 We have a very consolidated democracy. Democracy is the only game in town. There is no risk of in, of democratic breakdowns whatsoever. And, and we have been able to provide lots of social inclusion. 22:04 We decreased poverty, economic inequality, and the former administration, they made mistakes, but the current political institutions have been able to correct the route and put the country back on the right track. 22:19 And I believe that regardless of who is gonna be elected later this month, we will continue to follow this path, and, and I hope that Brazil would be able to cross, and that line and become a developed country soon. 22:34 Professor, I really appreciate you taking the time to talk to us. Yeah. It was my pleasure. 22:39 This was Carlos Pereira, professor at the Brazilian Public and Business Administration School at the Getulio Vargas Foundation in Rio de Janeiro. 22:46 We discussed the results of the first round election, the conservative wave in Brazil under the logic of the critical transition theory, and what a likely presidency of Jair Bolsonaro may look like. 22:58 If you like this podcast, please take a look at our website. It's brazilian.report. Every day we have new content about Brazil's politics, economics, and society. 23:07 We also have exclusive newsletter services if you want to be briefed on what's going on in Brazil before starting your day. Subscribe now to our free trial and enjoy all of our content for 14 days. It's really free. 23:20 You don't have to put any credit card information. You can also follow us on Facebook or Twitter, our handle is @brazilianreport. That's all for now. 23:31 See you on Sunday, October 28th with a live podcast about Brazil's second round election. Thank you. [outro music]
