24) Uma entrevista com Mario Henrique Simonsen (1995)

Do site Brazil Political Comment, do jornalista John Fitzpatrick.
JF is a Scotsman who first visited Brazil in 1987 and has written extensively on the country´s politics, business, economy, culture and history. Before settling permanently in São Paulo in 1995, he spent around 20 years as a print and radio journalist working in several countries.


An Interview with Mario Henrique Simonsen
Neste link.
30 March 1995

The following interview was carried out in March 1995 at Mario Henrique Simonsen´s office at the Fundação Getulio Vargas business school in Rio de Janeiro. At that time Simonsen was undergoing treatment for cancer but he was in good form and spoke over a wide range of topics for almost two hours in fluent English. He died in 1997. This is a shortened version of a subsequent interview which first appeared in a Swiss magazine called “UBS International”.

Civilian rule returned to Brazil just over 10 years ago when the military finally returned to its barracks after ruling Latin America ´s biggest country for two decades. Democracy has brought its own problems and Brazilians have endured much over these last 10 years. Since 1985, for example, there have been four presidents, 13 Central Bank presidents, six changes of currency, a moratorium on international debt, six price freezes, a new constitution, a presidential impeachment, six elections and a plebiscite on whether the country should have a presidential or parliamentary system of government.

Under the “Plano Real”, which the current president, Fernando Henrique Cardoso, introduced when he was finance minister in the previous government, Brazilians are enjoying relative economic stability. However, observers says there are still many constitutional and structural reforms to be fully achieved. One man who has been close to the center of power over the past 25 years is the economist Mario Henrique Simonsen who was finance minister during military.


John Fitzpatrick: De Gaulle is supposed to have once said: “Brazil is not a serious country”. Is Brazil now a “serious” country?
Mario Henrique Simonsen: It depends on what you mean by a serious country. I have lots of doubts about Brazil but I also have lots of doubts about other countries too - although incidentally, not about Switzerland. With its huge current account deficit, the US could hardly be accepted as a serious country yet it´s still the leading economy in the world. The UK has sold state companies to finance its current account expenses and budget and is also considered serious. So, as long as the US and the UK are considered to be serious countries, then Brazil is a serious country.

JF: Do you think the recent stability Brazil has experienced under the Plano Real will continue?
Simonsen: There are two points to consider. One is the crazy indexation system we have developed in which wages followed inflation, and inflation followed wages. This pushed inflation rates up to 50% a month. The good thing about the Plano Real is that it has introduced a skilful “de-inflation” system. It has not abolished indexation completely but extended its minimum period to one year. This means that the indexation fever does not exists any more.
The second thing the government has done is what I would call preliminary fiscal adjustment. The budget for 1994 was kept in balance not because of austerity measures and cutting expenditure but by increasing taxes, both by creating new taxes, such as on checks, and by reducing the transfer of federal revenues to the states. Above all, the increase in economic activity has increased the level of government revenues. However, I still do not think all that is enough to have a stable currency. The government should do more and has not done so yet.

JF: Would you give President Cardoso credit for achieving this stability?
Simonsen: He has a lot of credit - not because of what he has done as president but for what he did as finance minister. He was elected president because of his achievements as finance minister. As a president, he should be able to balance the budget in a definite way. He should go deeper into cutting public expenditure and improving the tax system. That, of course, involves changing social security. He should also make changes in the constitution to increase the flow of foreign capital and ease the position of Brazil in the world economy.

JF: The constitution of 1988 was an unwieldy document which seems to have pleased no-one and from the moment it was published there have been calls for it to be changed. How then did such a constitution come about?
Simonsen: The constitution of 1988 was very much a romantic revolution in response to 21 years of military rule. Everything which the military government had established, including some rationalities in economics, was overthrown by the constitution. There was a lack of synchronization with what was happening in the world when the constitution was enacted. Brazil was returning to nationalistic ideas at a time when the rest of the world was changing. Socialism was ending in Eastern Europe and you already had Reaganomics and Thatcherism.

JF: You had personal involvement in creating these “rationalities in economics” as finance minister during military rule. What freedom did you have as a minister under a military government?
Simonsen: I was finance minister from 1974 to 1979 and had absolute freedom to act. I never had to respond to the military but only to the President and that is what occurs in a civilian regime too.

JF: How did you feel as a minister in a country which was ruled by the military?
Simonsen: The military in Brazil were technocrats. They stepped in because President João Goulart wanted to have a leftist revolution in 1964. The military takeover was a “reactive revolution”. It is possible to say they went too far but they had their reasons for doing so. The military was in control but the press was free. I was violently criticized by the press every day.

JF: Do you think democracy is now firmly entrenched in Brazil?
Simonsen: Yes. It would be very difficult to impose a dictatorship on Brazil today. Dictatorships emerge when they´re fashionable. They were fashionable in the 30s and there were only a few democracies, such as the US, UK, France and Switzerland which resisted them. Then you had the Cold War and leftist dictatorships across eastern Europe. The right-wing revolutions we had in Brazil, Argentina, Chile and other Latin American countries were “reactive revolutions” aimed at preventing Communist takeovers. But once the Cold War ended, both types of dictatorship lost their prestige. Churchill said that democracy was the worst possible system but there was none that was any better.

JF: What are Brazil´s strengths?
Simonsen: The good things are an efficient private sector, the high quality of firms and management and levels of technology. These are by far the best in Latin America and comparable to many places in Europe. The standard of industry in places like São Paulo and agriculture in the south are very good. The real side of the Brazilian economy is very good given the per capita income for an emerging country. I think the Brazilian economy can grow at 4% to 5% a year as long as you don´t cut back savings. This is a big problem. In the 70s, Brazil had a savings rate of 25% - today it´s 18% to 20%.

JF: What about foreign investment?
Simonsen: You can bring foreign investment in only up to a certain point – 2% of GDP at most. More than that and you have the experience of Mexico. From long-term investment you never get more than 2% of GDP – that´s US$10 billion in direct investment. We got US$ 2 billion last year (1994). A realistic goal if you change the constitution would be US$ 5 billion. If you come to Brazil and think on a long-term basis you have the chance to make lots of money. Most people who invested on a long-term basis are pleased and have made reasonable amounts of profit. If you come to make short-term profits on interest rate differentials it´s a lottery.

JF: How do you see the Mercosul free trade group developing?
Simonsen: It´s important in that four countries have the responsibility for coordinating their macroeconomic policies. The best outcome is that you force countries to come to agreement on economic policies.

JF: What about the decision taken by leaders from North and South America in Miami in September 1994 to create a hemispheric free trade zone by 2005?
Simonsen: This is a little bit like the single currency in Europe. It has been put forward several times and postponed and I think it will be put forward again. From the realistic point of view, it´s a little bit too ambitious but it´s better to have ambitious targets than none.

JF: Why is there such a great difference within Brazil between the richer southern areas and the poorer Northeast?
Simonsen: One reason is natural resources. There is much more agriculture in the Northeast. Another is the cultural attitude and values. Instead of working themselves, the people from the Northeast prefer to rely on benefits offered by the government. It´s very different from the south which was influenced by Italian and German immigration. If you ask what the people of São Paulo, Rio Grande do Sul and Santa Catarina want from the government they want to pay less taxes and they want to work. In the Northeast, they want the government to collect taxes from somebody else to give to them.

JF: Is there any danger of the southern states separating?
Simonsen: Brazilians are not very radical and the chances of a part of Brazil separating are none. Frankly, this is the type of question only foreigners ask.

JF: But is it any less serious than the restoration of the monarchy? After all, you had a plebiscite about two years ago in which restoring the monarchy was a serious proposition.
Simonsen: I actually voted in favor of that proposition not because I favor a monarchy, which I think is ridiculous, but I am for a parliamentary system. However, most people prefer a presidential regime.