Brazilian Economy: Stucture and Performance in Recent Decades, The

Maria J. F. Willumsen and Eduardo Giannetti da Fonseca, eds. The Brazilian Economy: Structure and Performance in Recent Decades. Coral Gables: North-South Center Press, 1997. Tables, figures, notes, bibliography, index, 288 pp.; paperback $21.95.

Too few contributions by Brazil's many competent economists make their way into English and attract the attention of an increasingly interested audience outside Brazil. This volume helps in meeting that need, and leaves the reader wishing for more such efforts. The articles were originally papers presented at a conference held at the Universidade de Sao Paulo in 1993, and were commissioned by the North-South Center of the University of Miami.

The rapidity of change in the Brazilian economy was accelerated by the profound changes in its structure and performance that resulted from the 1994 Real Plan. It would be unfair to ask the authors of this collection to address the many issues that have risen since their 1993 conference and the subsequent implementation of the plan. What is surprising, however, is how relevant many of the papers remain, even when viewed from this side of the Plano Real. This is especially true of those papers that deal with deeper Brazilian economic problems, which are only peripherally addressed by a stabilization plan like that which began in 1994. Most notable among them are Brazil's still squalid income distribution, and the obstacles to development that low levels of past investment in education have produced. Two of the 11 papers in the volume deal with these two closely related topics.

Although a list of important Brazilian economic topics would undoubtedly vary among authors, editors, or readers, this volume clearly hits many that would be on most lists. The book begins with a brief but useful look by Roberto Macedo and Fabio Barbosa at macroeconomic policies and instability in the period from Brazil's first failed stabilization attempt (the 1986 Cruzado Plan) through the similar failures of Collor Plans 1 and 2. At the center of these failures was the inability of successive governments to deal with the fiscal deficit, a problem that even today has not been resolved. Like most of the papers, this one is altogether too brief to do the topic justice. An additional chapter on the origins of the deficit itself might have added to our understanding of Brazil's macroeconomic travails.

Particular sectors of the Brazilian economy are the focus of three papers. Fernando Homem de Melo examines agriculture, Eli Pelin energy, and Simao Silber the external sector. The results of several projections by de Melo suggest that future expansion of agricultural production will require a geographic shift to the Center-West region, which in turn will necessitate transportation and infrastructure development. This has actually been the pattern since the paper was written, and further agricultural development may be partly dependent on these supporting investments.

Pelin emphasizes the heterogeneity of Brazil's energy sources, which range from charcoal and firewood to nuclear power. Like most professional economists, he questions the economic viability of much of Brazil's investment in alcohol, noting that in the early 1990s the costs per barrelequivalent of alcohol were about triple those of Brazil's petroleum sector. In his view, past energy policy has not paid enough attention to both the economic and social (or at least nonmarket) costs of various energy alternatives, and he concludes by sketching potential energy policies which Brazil might usefully follow.

Silber provides data on trade and a number of related external sector variables for selected years between 1968 and 1985. He identifies several important trends in Brazilian trade, among them a tendency to inherit from higher-income countries economic activities that might be viewed as technological hand-me-downs. These are products and processes for which the technology has matured, and which could then be located in developing countries like Brazil on the basis of specific cost considerations. However accurate a characterization of Brazilian trade this may be-and Silber cites plausible evidence for this view-it is cold comfort for a society that is trying to catch up. Although perhaps pessimistic, it is one reflection of the legacy that relatively low investment in human capital has produced.

The chapter on industrial and technological development by Helio Nogueira da Cruz and Marcos Eugenio da Silva is more optimistic, and provides much useful information on what Brazil had accomplished by the time macroeconomic problems overwhelmed policymakers in the late 1980s. Particular sectors of Brazilian industry, among them the automobile and auto parts sector and the capital goods sector, had become internationally competitive by the mid-1980s. The authors make clear, however, how interlinked Brazil's technological development has become with international markets. They suggest that past attempts to isolate potentially productive high technology sectors from international competition actually impeded Brazilian technology development, a point that is even more obviously true in the late 1990s than when the paper was apparently written, Carlos Longo's examination of stabilization policies in the context of longer-term liberalization attempts raises important questions about the timing and ordering of economic policies. He argues that stabilization must precede successful trade liberalization, and subsequent Brazilian experience suggests that he is right. Longo also emphasizes the credibility of government policy changes: by the early 1990s, many market participants simply did not believe that the reforms announced by a succession of weak governments would be sustained.

Exchange rate policy is the focus of Alvaro Zini's very informative chapter. His characterization of Brazil's exchange rate regime in the early 1990s as one of "dirty floating" (that is, a market-determined exchange rate with significant government intervention as a major buyer or seller) is still valid today and, if anything, has become even "dirtier." Zini argues quite convincingly that Brazil should move toward greater liberalization of the exchange rate to maintain international competitiveness, a position that subsequent governments have not welcomed. Particularly useful is his discussion of various indicators of real exchange rate competitiveness.

Demographics and the labor market, education, and disparities in the distribution of income both across people and across regions are the topics addressed in the last four chapters of the book. Jose Paulo Zeetano Chahad reviews some of the major population trends in the past several decades, showing how the fall in population growth rates is likely to create new pressure in Brazil in the coming decades. As Brazil's population ages, one of those pressures will be for more jobs, as last decade's children enter labor markets. Later-but much sooner than policymakers might wishBrazil will face severe problems arising from past promises to support the elderly through a social security system, to which proportionally fewer active members of the labor force will be contributing.

Brazil's inadequate attention to education and the resulting low rates of human capital formation are the focus of Eduardo da Fonseca's essay. Attributing the inadequacy partly to high rates of population growth in the past and to continuing high inequality in the distribution of income, da Fonseca notes that it has been aggravated by a concentration of government expenditures on middle- and high-income families. Although he devotes more space to description and diagnosis than to suggested remedies, he concludes by arguing that active government intervention is necessary to ensure that all Brazilian children receive adequate educational opportunities.

The persistence of Brazil's highly unequal income distribution has long been acknowledged, and Maria Cristina Cacciamali notes its origins in colonial times. More recent adverse trends are her major focus, however. She presents data suggesting that relative income inequality actually worsened between 1960 and 1980. Although poverty was reduced between 1960 and 1970, the record of the succeeding decades was less cheerful, as the absolute number of poor increased. The reasons for this are complex and as controversial as ever, but her essay provides a number of insights into the perverse effects of many policies on income distribution.

Willumsen's concluding paper on regional disparities uses the wellestablished official division of Brazil by the Instituto Brasileiro de Geografia e Estadistica into five major regions, with the Southeast and South enjoying 1990 per capita levels double or triple that of the impoverished Northeast. Although she discerns a slight tendency toward deconcentration in favor of the less developed areas of the North and the Center-West, the Northeast was not much better off, in relative terms, in 1990 than it had been three decades earlier. Given the apparent pockets of growth in several areas since 1990, such as the Northeastern state of Ceara, however, it would be interesting to know whether the persistence of regional disparities has continued. For an answer to this and so many other interesting questions raised by this informative collection of papers, however, we must await the next conference.

Donald V. Goes

University of New Mexico

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