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8 August 2013, Gateway House

Brazil: Why protests will persist

Though Brazil is a vibrant democracy, grievances over inadequate provision of public services and government overspending will not be resolved quickly due to the political disconnect with the needs of the people. Fernando Veloso blogs about the possible determinants and consequences of the protests

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In the last decade, Brazil has experienced macroeconomic stability, an increase in economic growth and a sharp reduction in poverty and inequality. Moreover, the current unemployment rate of 5.5% is at its lowest level since 2002. In this context, the mass protests that erupted in June and are still ongoing were completely unexpected.

In hindsight, the most surprising aspect of the wave of protests was not so much the underlying frustrations, but the timing and intensity with which they erupted. After the onset of the international financial crisis in 2008, Brazil experienced a recession in 2009, followed by strong growth in 2010. However, the growth rate declined sharply in 2011 and it was only 0.9% in 2012, which implied a decline in income per capita. Despite sluggish growth, in the last couple of years inflation has been consistently above its target of 4.5% per year, and it is now close to the ceiling of 6.5% established by the monetary authorities.

Moreover, there are signs that the dynamics behind the increase in social inclusion in the 2000s may be running out of steam. Between 2003 and 2012, more than 40 million people became part of the middle class in Brazil. Social programs, and in particular Bolsa Família, a conditional cash transfer program targeted to poor families, had a significant contribution for the reduction of poverty and inequality.

However, most of the rise of the so-called new middle class was due to the great increase in formal jobs associated with the expansion of the service sector. The increase in credit also played an important role, climbing from 25% of Gross Domestic Product (GDP) in 2003 to 50% in 2012. Even though unemployment is still low, there has been a slowdown in the creation of new jobs, and the degree of indebtedness of Brazilian families has increased considerably.

Both the growth slowdown and the surge in inflation contributed to the protests, but the main factor was the frustration of citizens with the low quality of public services. Brazil has a tax burden of 36% of GDP, which is comparable to developed countries, but it stands in stark contrast with the dismal quality of education, health, urban transportation and public security. There is also a perception that widespread corruption contributes to the poor provision of public goods.

Even though this general dissatisfaction has been latent for quite some time, the spark that sent millions of Brazilians to the streets in June was triggered by two episodes. First, a peaceful protest against an increase in bus fares in São Paulo was violently repressed by the state police, which generated indignation and additional protests in other big cities, such as Rio de Janeiro.

The issue of low quality service also came to the fore as the country hosted in the same month the Confederations Cup, a warm-up tournament for the 2014 FIFA World Cup that will be held in Brazil next year. It was then widely reported in the press that the government overspending on the construction and renovation of football stadiums. It also became clear that the improvement in urban infrastructure that was promised in conjunction with the event is not likely to materialise. In addition, the high ticket prices and strict FIFA standards raised the question of whether such an expensive event will be beneficial for the majority of the population.

In reaction to the protests, some cities suspended the increase in bus fares and several initiatives against corruption have been debated in Congress. The federal government, on the other hand, proposed a referendum on political reform, allegedly to improve political accountability. However, this has been perceived by many as an attempt of President Dilma Rousseff to blame Congress and other political actors for its inability to respond to the core issues raised by the protests.

A recent poll confirmed that good provision of public services, in particular health, education and public security, are the main concerns of the population. They are also cited as the main motivation of further protests, in addition to corruption. The poll also revealed that the majority of the population is not satisfied with the initiatives proposed by the Executive and Legislative in response to the protests. As a result, there was a collapse in the approval rating of the president (24 percentage points) and the popularity of some state governors also dropped considerably. This may explain why the protests continue, even though without the same intensity as in June. At this moment, it is not clear how they will evolve and whether they will trigger fundamental changes.

The recent protests in Brazil made it clear that the social policies that brought huge political dividends for the Lula administration, and that were mainly responsible for the election of President Dilma Rousseff, will have to be broadened in order to address the demand for better education, health, public security and urban infrastructure. The main difficulty with this agenda is that it is much more complex than policies based on social transfers, and even in the best scenario it will take some time for the results to materialise.

Another issue is how the message of the protests will be processed by the political system. On the one hand, the spontaneity of the protests was critical for its proliferation across the country. On the other hand, it will make it more difficult to translate the general dissatisfaction into concrete proposals, and thus it may end up in frustration. Even though Brazil is a vibrant democracy, there is a strong demand for more accountability of politicians. The fact that millions of people had to go to the streets to express their frustration highlights the existence of problems with political representation and accountability of elected representatives.

Since the issues raised by the protests have deep-rooted determinants, they are not likely to be short-lived. The presidential elections next year, as well as for Congress and state governments, will show whether the political system understood their message and which candidates were better capable of addressing it.

Fernando Veloso is Researcher at IBRE / FGV, Brazil and Executive Secretary of the Brazilian Econometric Society. He has a PhD in Economics from the University of Chicago.

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