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Local Governments in Brazil: Are They the Hub of the Brazilian “Welfare State”?
(Forthcoming in Handbook of Research on Comparative Politics and Reformation in Local Governments)
Celina Souza
Research Fellow at the Federal University of the State of Rio de Janeiro (Unirio), Brazil
Abstract
Brazil is a federal country in which local governments have recently become the main
providers of universal social services funded by the three tiers of government. The
chapter presents the general characteristics of the country´s local governments and its
position in the federal system, describes the distribution of revenue and governmental
functions, shows the incremental increase in local resources and their earmarking for
social policies, the complex system of funding and regulation created and discusses the
role of local governments in the provision of universal social services. The argument
put forward is that local governments have become the hub of the provision of universal
social services funded by federal, state and local taxes while the federal government is
in charge of policies targeting the very poor. Local governments now enjoy
considerable administrative autonomy, responsibility for policy implementation and an
unprecedented share of public resources. Local governments, however, are dependent
on funding from other levels of government raising concerns about the sustainability of
the provision and the expansion of universal social services as well as concern about
improving their quality.
Key-words: Brazil; Federalism; Redemocratization; Local Governments; Social
Policies.
Introduction
Brazil is a federal country with a presidential system which it has had for over a
hundred years since it became a republic. The federal government has always been the
leading actor in the federation throughout both authoritarian and democratic regimes.
Throughout its history and until the 1990s, Brazil has had a history of economic boom
and bust and its development has been hampered by high inflation, excessive
indebtedness, political turmoil and two long periods of authoritarian rule. The federal
system has also experienced periods of centralization followed by decentralization.
Redemocratization in the mid-1980s, the approval of a new constitution in 1988 and of
several constitutional amendments after 1996 were the main events that explain the
leverage of local governments both financially and as the main provider of universal
social services. Restoring democracy meant, among other things, a commitment to
improving the role of local government and of local financial resources, together with
the empowerment of local communities. Local governments are now accountable for the
provision of basic health care, fundamental education and social assistance to the
destitute together with other functions such as urban development and local public
transport.
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The drawing up of the 1988 Constitution was met with enthusiasm and optimism for the
country's future. For twenty months Congress and Brasília were the centre of Brazilian
life, a visible exercise in democracy and political participation. Among the most
powerful lobbies one was led by mayors demanding financial decentralization. The
mayors' plea had many supporters among constitutional drafters given that 54% of them
had previously been either a mayor, a local councilor, a governor or a state lawmaker,
hence their close ties with local and state constituencies (Souza, 1997). However, and as
argued elsewhere (Souza, 1997; 2002), the 1988 Constitution did not mark the
beginning of fiscal and political decentralization and a stronger commitment to local
government. Several other measures and events prior to 1988 were signals that financial
decentralization would be one of the most likely outcomes of the constitution. The
importance of the 1988 Constitution rests on the fact that the decision to upgrade the
financial and the political role of the municipalities and of local communities was not
taken by the government and/or by pressure groups but rather by the constitution-
makers themselves. The decision to decentralize and to change the system of local
governance was therefore a political decision. If not, why would elected representatives
acting as constitution-makers bother with it?
After almost twenty years of military regime, Brazilian political elites drew up a new
federal and democratic order in which financial resources for local and state
governments increased vis-à-vis the federal government. As well as this, constitution-
makers made Brazil a three-tiered federation by incorporating municipalities as part of
the federation together with the states, reflecting a tradition of municipal autonomy and
little state control in municipal matters. This means that Brazilian municipalities are no
longer a creation of the states. Furthermore, since the new constitution, municipalization
is not limited to the transfer of responsibility for policy implementation to local
governments. It also gives local communities a share of decision-making responsibility
regarding the provision of local public services. The 1988 Constitution contains several
mechanisms enabling grassroots movements to participate in certain decisions and to
oversee public matters, particularly at the municipal level. Participatory forums
stimulated by the 1988 Constitution, federal legislation, federal programs, multilateral
organizations and municipal governments themselves are now widespread in Brazil's
local communities in an attempt to increase local democracy. The decisions taken by
constitution-makers are explained by the fact that democratization and decentralization
were seen as synonymous.
In the mid-1990s, however, a consensus was reached about the need to control Brazil´s
long-lasting inflation. The strategy taken was to decrease public spending as a whole
but also increase federal revenue vis-à-vis subnational revenue. With the success of the
stabilization plan in 1994 and the consolidation of the new democratic regime, since
1996 the federal government has started to submit for congressional approval a series of
constitutional amendments with rules about the financing and the provision of universal
social services, the latter granted to local governments, as well as restoring local
resources previously withdrawn for inflation control. Later, in the 2000s, federal
regulation also made local governments the main providers of care for the elderly,
disabled, children and adolescents in need.
Local governments, however, face complex challenges. Firstly, Brazil´s 5,570
municipalities are extremely uneven in their technical and financial capacities and the
federal mechanisms to decrease inequality are insufficient. Furthermore, institutionally,
each constituent unit has the same powers, i.e. Brazil has adopted symmetrical
federalism in a socioeconomically asymmetrical polity. Secondly, the provision of
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social services by local governments are mainly financed by resources from state and
federal governments and they are highly regulated by the federal sphere, overloading
local bureaucrats with the demands of different federal agencies. Thirdly, social services
are labor-intensive. Municipalities are constrained in expanding services and improving
the quality of their delivery because a federal law sets a ceiling for subnational payroll
expenditure. Fourth, local revenue, which has increased in recent decades compared to
state revenue, is earmarked for the provision of social services, leaving little room for
other local policies.
Based on secondary data, on the literature on federalism and on local governments, this
chapter presents an overview of the role of local government in the Brazilian federation,
and in particular the reforms brought about by redemocratization and the drawing up of
a new constitution in 1988. Explaining the position of Brazilian local governments in
the federation is important because as students of federalism know there is no single
federal model and each federation is created and designed according to the country´s
particular political, cultural and economic trajectories. Furthermore, the balance
between centralization and decentralization in federal countries may change as much as
in unitary countries. The role and the resources of local governments in Brazil have
followed these trends but what has been constant is that during democratic regimes their
financial resources and their institutional position in the federation improve.
Departing from the analysis above, I argue that since the 1988 Constitution it has been
difficult to describe the Brazilian federation as either centralized or decentralized. It has
been marked by federally centralized and regulated policies and by constraints on local
freedom to introduce legislation and policies because of the earmarking of their
resources for the provision of universal social services. Local governments, however,
have become the hub of the provision of such services funded by federal, state and local
taxes while the federal government is in charge of policies targeting the very poor. On
the one hand, local governments now enjoy considerable administrative autonomy,
responsibility for policy implementation and a share of public resources they had never
previously enjoyed. This federal model has created interdependence of the different
levels of government in policy making and implementation. This shows that in certain
federal countries such as Brazil bargaining and negotiation among actors of the three
levels of government and among national parliamentarians towards changing policies is
possible, even when they require a qualified majority in Congress to change the
constitution. This also shows the importance of the design of institutions such as
constitutions and federalism when it comes to changing the status quo. On the other
hand, the dependence of local governments on funding from other levels of government
raises concerns about the sustainability of the provision and the expansion of universal
social services as well as about improving their quality.
The chapter is organized as follows. The first section presents the general characteristics
of the country´s local governments and their position in the federal system. The second
describes the distribution of revenue and governmental functions in the federation and
shows both the incremental increase in local resources after the approval of
constitutional amendments, their earmarking for social services and the complex system
of funding and regulation they have created affecting intergovernmental relations. The
third section discusses the role of local governments in the provision of universal social
services. The fourth and last section summarizes the main information and analyses of
the previous sections and discusses at length the chapter´s arguments.
Local Government in Brazil: General Characteristics
4
All Brazilian municipalities enjoy the same legal status. The official definition of a
municipality, the município, encompasses municipal and district areas, as well as rural
and urban ones, although they vary enormously in every aspect. The official definition
of urban places is merely administrative, including all municipal and district areas,
regardless of their size. Using these criteria, Brazil's degree of urbanization increased
from 45% in 1960 to 81.25% in 2000 and to 84.36% in 2010. Among Brazil's 5,570
municipalities, 26 state capitals plus the Federal District are of major importance
because they account for one-third of the country's population and are where financial,
economic and political resources are concentrated.
Brazil's federal system is bound by the country's regional inequalities which in turn
affect the capability of local governments to deliver services. It is important at this point
to pause to present some figures to illustrate this inequality. Territorial and social
inequalities exist among regions, within regions, and among municipalities. The most
striking inequality is among Brazil´s five geographical regions. This inequality is
illustrated by the fact that the Northeast, the country´s poorest region, contains 28% of
the country´s population but is responsible for 13% of its GDP, while the Southeast,
which is home to 43% of the population, generates 57% of the country´s GDP. Social
indicators amplify this inequality. As argued elsewhere (Souza, 2002), deep regional
inequalities imply that the capabilities of subnational governments in general and local
governments in particular to respond to the demands of their constituencies are highly
uneven.
Empirical studies show that in the Northeast, for instance, over 200 municipalities have
no way in which they can expand their revenue. These municipalities lack economic
activity and are bound by the poverty of their population. Almost 90% of the
municipalities with 10,000 or fewer inhabitants depend on federal transfers for 90% or
more of their revenue. In contrast to this, the municipality of São Paulo collects from
one local service tax alone more than what 17 states collect from a value-added tax
(Afonso and Araujo, 2000). As well as social and economic differences, demographic
differences among municipalities of Brazil's five regions are also striking.
From the beginning of its republican history Brazil has been marked by the persistence
of deep-rooted regional and social inequalities. The mechanism used to overcome these
regional inequalities, i.e. fiscal transfers from economically better-off states and
municipalities to worse-off ones, although important, have failed to redress them.
Despite the efforts made by the 1988 drafters to decrease economic concentration
through the increase in the distribution of resources from better-off to worse-off regions
and federal investment in the poorer regions in the 2000s, economic concentration in the
Southeast and in the South regions persists.
Despite socioeconomic and territorial inequalities, there is reasonable cultural and
political homogeneity. Investment in transport and telecommunications since the 1960s
has contributed to a widespread diffusion of urban lifestyles and consumption patterns,
as well as political values.
Municipal governments are managed by an elected mayor and an elected council. Every
municipality holds local elections for mayors and municipal councils for a four-year
term. The mayor can be re-elected once. In municipalities with more than 200,000
voters a second round election has to be held should no candidate achieve a majority.
Like all other legislatures in Brazil, municipal councilors are elected through the system
of open-list proportional representation. The number of councilors varies from a
minimum of 9 to a maximum of 55, according to population size. The rules for
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municipal elections and councilors´ pay ceilings are also stipulated federally. The rules
that apply to municipal governments, including those concerning financial resources,
are also written in the federal constitution.
Despite demographic and economic disparities among municipalities, since the late
1990s municipal governments have become the main providers of basic health care and
fundamental education, following rules and using earmarked resources determined by
constitutional amendments. The reason for this federally supported municipalization of
public services was to guarantee local citizens access to health care and education based
on national programs and minimum standards regardless of the place where they live.
Local governments’ response to their new functions has been considered a success.
This success can be credited to a policy favoring a complex system of
intergovernmental relations and transfers that combines incentives and sanctions. The
health care program injects additional resources into the municipal purse, and the
education program penalizes municipalities that fail to improve school attendance rates
at the fundamental level. This transfer of policy implementation based on rules has
reduced conflict among municipal governments for federal resources. One of the
consequences of this model is that intergovernmental relations are now more common
between the federal government and the municipalities rather than between them and
the states.
Intermunicipal relations have developed rapidly in recent years. The municipalities have
created hundreds of consortia through which they share costs, equipment and personnel
required to deal with issues such as health care, environmental protection and economic
development.
Brazilian constitutions have always treated local jurisdiction mostly as a matter of
common responsibilities, or concurrent powers, between the three levels of government;
therefore, a significant number of functions are left under the common responsibilities
of federal, state and local levels (Table 1).
Table 1 - Concurrent and local spending assignment in Brazil
Level of government
Spending category
Federal-state-local (shared)
Mainly local
Only Local
Health and social welfare
Services for disabled persons
Historic, artistic and cultural preservation
Protection of the environment and natural resources
Culture, education and science
Forests, fauna and flora protection
Agriculture and food distribution
Housing and sanitation
Combating poverty and social marginalization
Exploitation of minerals and hydroelectricity
Traffic safety
Small business improvement policies
Tourism and leisure
Pre-school and fundamental education
Preventive health care
Historic and cultural preservation
Public transport (inner-city)
Land use
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After the promulgation of the 1988 Constitution the municipalities could draw up their
own constitution, known as Organic (Basic) Law. In 2001, a law known as the City
Statute was approved by federal legislation after more than ten years of intense
negotiations, widening the legal-political role of local governments by granting them
the right to issue guidelines for urban planning, as well as control the process of urban
development and management.
Politically, local government has always been of great importance. The mayors, in
particular, play an important role.1 A recent study by Avelino et al. (2012) found that a
mayor's election in 2008 influenced the party's electoral performance of those voted for
the House of Representatives and for the state legislatures in 2010. Their findings
suggest that a mayor's election increases the number of votes for the same party in the
elections for state and federal legislatures two years later. This result is evidence of
intra-partisan linkages, whereby mayors help the election of federal and state
lawmakers. Their conclusion is that subnational electoral dynamics have been
influenced by a “reverse coattail” effect, i.e. municipal elections do impact state and
federal-level elections.
Local party politics also reveal the diversity among municipalities. In October 2012, the
last municipal election, over 98 million Brazilians went to the polls to vote for mayors
and city councilors. The results show that 26 different parties now govern Brazilian
cities. Large cities and state capitals tend to be governed by parties situated to the left of
the political spectrum but the greatest number of municipalities are governed by a catch-
all-party, the PMDB (Party of the Brazilian Democratic Movement).
Decentralization and municipalization is not only limited to the transfer of policy
implementation to local governments, but it has also meant a transfer in a share of
decision-making responsibility to local communities. The 1988 Constitution provided
several mechanisms to give grassroots movements access to participation in some
decisions and to oversee public matters, especially at the local level. Brazilian local
governments are carrying out several experiments in participation, ranging from
community councils for several social policies to implementing Participatory Budgeting
(PB). There are, therefore, two different paths followed by participatory policies at the
local level. One is through community councils in which representatives of local
residents and/or service users have a seat. The other is through what has become known
as Participatory Budgeting (PB).The latter was first introduced in Porto Alegre, a
Brazilian municipality administered by the Workers´ Party (PT) back in 1989. Between
1989 and 2004 more than 300 Brazilian cities governed by different political parties and
cities of over 30 countries have adopted PB (Wampler and Avritzer, 2005).
The creation of community councils is mandatory for a municipality to receive federal
resources. The role of community councilors is to take decisions about resource
allocation and mainly to control the use of resources. For each social policy area, a
different council is required. There are two different types of community councils, one
related to policy areas and the other to the defense of collective or individual rights.
Among the former are councils for health care, fundamental education, employment,
welfare services, rural development, environment, urban management, drugs and
poverty alleviation. Among the latter there are councils for the rights of women and
children and adolescents.
1 During the military regime, competitive elections were forbidden for federal and state executive
positions and for hundreds of municipalities.
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Evaluations show, however, that the existence of a council is insufficient to ensure that
councilors perform their role as policy-makers and as controllers of resource allocation.
Côrtes (2002) presents a typology of community councils based on empirical evidence.
The first type is made up of those that have become real decision-making arenas and in
which participants have an active role. The second type is those in which members act
as brokers of different demands and interests and the real decision-maker is the local
government. The third type is dominated by pro-reform policy communities that voice
their demands but have little power to make decisions, which are then taken by the
government or influenced by business interests. The Brazilian experience of community
councils shows that local governments are trying to reconcile two rival views of the role
of local government. The first sees local government as the main locus of service
provision, in particular social services. The second view sees local government as a
locus for the practice of democracy by pursuing a more equitable balance between
decision-makers and stakeholders, thereby contributing to the creation of social capital.
The view of local government as regards participation, however, varies considerably.
Despite the varying interpretations and great variety of experiments, local communities
have been taking part in the decision-making process at the local level, ranging from a
more restricted approach to participation, such as a greater voice for local citizens, to a
broader view of participation, such as empowering people as a way to change social and
political inequalities.
This section has shown that despite different local realities regarding demographic and
socioeconomic patterns, Brazilian municipalities have being leveraging their position in
the federation, both politically and as the main provider of social services.
Local Finance: Structure and Developments
Local government revenues have always been guaranteed in Brazil's constitutions.
However, no constitution prior to 1988 had provided local governments with the same
amount of resources as they now enjoy. These resources accrue from transfers from
federal and state taxes and from taxes under the sole jurisdiction of local government.
Table 2 shows the structure of local tax allocation after the 1988 Constitution and the
constitutional amendments passed since 1988.
Table 2 - Local taxes and constitutional transfers to the municipalities
Local Tax
Federal Transfer
State Transfer
Service tax (ISS)
Urban property tax (IPTU)
Frontage tax
Property transfers (ITBI)
22.5% of income tax
50% of rural property tax
25% of the tax on industrial
products (IPI)
70% of the tax on financial
operations on gold (IPF/gold)
25% of value-added tax
(ICMS)
50% of motor vehicle
registration tax (IPVA)
25% of exported goods
Notes: Municipalities that are producers of minerals, gasoline and natural gas are entitled to a share of a
tax collected by the federal government. Municipalities can also charge (a) fees for their services and (b)
an improvement fee whenever a local public investment raises the value of a property in a specific area.
The trajectory of the distribution of public revenue by level of government is shown in
Table 3.
Table 3 - Distribution of public revenue by level of government, 1960-2010 (%)
Year
Federal
State
Local
Total
1960
59.44
34.75
5.81
100.00
1980
68.16
23.27
8.57
100.00
1988
60.09
26.61
13.30
100.00
8
2006
57.20
25.38
17.42
100.00
2013
57.10
24.60
18.30
100.00
Source: Afonso (2014)
Figures show that in the last fifty years there has been a steady increase in local
revenue, including during the military regime (1964-1985), and a concentration of
resources at the federal level during the military regime. The federal government
remains the main beneficiary of public revenue, which decreased slightly after 1988,
when the constitution was enacted. The states, however, lost 10% of their revenue
between 1960 and 2013.
Despite the uneven results accruing from inter- and intra-regional inequality, there is a
consensus that Brazil is one of the most decentralized countries in the developing world
and that financial decentralization has favored the municipalities to a greater extent than
the states. Local governments now administer around 18.3% of the country's total public
revenue, taking into account their own revenue and federal and state transfers.
Brazilian municipalities, however, have limited ability to raise taxes, which on average
correspond to only 6% of total local revenues in a sample of municipalities with less
than 51,000 inhabitants. This represents less than 1% of local GDP (Corbi, Papaioannou
& Surico, 2014). Their funding is therefore highly dependent on transfers from the
states and the federal government. A major role is played by an automatic federal fiscal
transfer scheme, the Fundo de Participação dos Municípios (FPM). FPM is the largest
program of transfers to local municipalities, accounting for almost 80% of all types of
federal transfers and 32% of total municipal revenues. FPM funds are allocated to each
municipality according to a predetermined mechanism that relies on local population
estimates and per capita income. The FPM transfers 10% to state capitals, 86.4% to
small municipalities and 3.6% to municipalities with more than 156,216 inhabitants.
The distribution, therefore, benefits less populous municipalities.
Federal transfers to the municipalities represent the main source of revenue for small
and medium-sized municipalities, i.e. those that shelter the very poor and those in
sparsely populated areas. In municipalities with a population of up to 5,000 inhabitants,
the FPM provides 57.3% of their revenue while state transfers from ICMS, a value-
added tax, constitutes the main source of revenue for economically better-off
municipalities. The transfer rate is ensured by the constitution: each municipality
receives 3/4 of the ICMS collected within its boundaries and the state government is
free to determine the transfer criteria for the remaining 1/4.
Since the 1990s, however, municipal governments have made a great effort to raise their
own revenue. Between 2012 and 2013, for instance, there was a 14.53% increase in the
collection of local taxes (Frente Nacional dos Prefeitos, 2014). This increase contradicts
one of the assumptions in the literature on fiscal federalism which states that
subnational governments tend to relinquish their own revenue collection when transfers
are relatively high.
Rules concerning the source and the destination of financial resources by the three
levels of government are written in the constitution. This means that any change
requires a qualified majority in Congress. Since the approval of the 1988 Constitution,
several constitutional amendments have been passed changing or regulating some
decisions taken by the 1988 constitutional drafters. As regards local government,
constitutional amendments mainly concern the imposing of limits on local
governments’ freedom to spend their resources, as a requirement of the federal policy of
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fiscal control, and the earmarking of specific resources from the three levels of
government to be spent on the provision of health care and fundamental education.
Local governments and the provision of universal social services
There was a consensus, including among its Latin American neighbors, that Brazil was
a laggard in adopting welfare-state policies and provisions to combat the country´s
outrageous records for poverty, income inequality and limited access to health care and
fundamental education.
After 1996, Brazilian presidents started several initiatives to improve the living
conditions of the poor and sponsored constitutional amendments approved by Congress
regulating the financing and the provision of health care and education. Amendments to
the federal constitution regarding education were enacted in 1996 and 2000, the latter
expanding the role of local governments to encompass pre-school provision. The
constitutional amendment regarding health care provision was enacted in 2000.
Today there are several pro-poor policies set up by the federal government. One of these
initiatives which is highly praised internationally is a conditional cash transfer program
known as Bolsa Família. The 2013 report by WHO (World Health Organization)
showed that Bolsa Família is significantly associated with a reduction in mortality
(whether from all causes or from poverty-related causes) in children under five years of
age. The effect of consolidated Bolsa Familia coverage was greatest on mortality
resulting from malnutrition and diarrhea in the under-fives. In addition, the program
also led to increased vaccination coverage and prenatal visits by mothers and reduced
hospitalization rates in under-fives.2 Bolsa Familia beneficiaries are also required to
enroll their children in school. This shows the interdependence between federal and
local programs as well as the coordination capacity of both levels of government by
merging the rules which are applied to target population and to the provision of
universal social services.
Now not only Bolsa Família but a basket of federal-led social policies reach the very
poor. Social policies in general, provided either by municipalities or by the federal
government, are significant because of the amount of resources involved coupled with
their universalized nature or clear targeting. These policies have been stable throughout
the last twenty years, are designed with incentives for the adherence of subnational
governments, have clear rules for access, earmark revenue from the three levels of
government and are less dependent on direct political support from governing elites
(Arretche, 2012; Fenwick, 2009; Hall, 2003, 2012). Two of these policies are
implemented by local governments with the financial backing of the three levels of
government through the earmarking of their revenue – basic health care and
fundamental education. Other services such as protection of the elderly, children and
adolescents and disabled people in need are also provided by local governments with
their own revenue and the financial support of the federal government. Resources for
the provision of the latter services, however, are not earmarked and local funds are the
main source of resources3, unlike what happens with health care and fundamental
education.
After centuries of playing little or no role in the provision of social services,
municipalities have become their main providers. This is not a trivial task, mainly
because the 1988 Constitution universalized access to health care. Evaluations have
2 The 2013 WHO report found that conditional cash transfers in Brazil, Colombia, Honduras, Malawi,
Mexico and Nicaragua were associated with increased use of health services and better health outcomes.
3 See Mesquita, Martins & Cruz (2012).
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shown the relative success of basic health care and fundamental education provided by
municipalities over the last decade. The main reason for this relative success is that the
taking over of these services by local governments was incremental and financed by
federal, state and local funds. This distinguishes Brazil from countries such as
Argentina under Menem’s leadership and the US during the Reagan administration
because in these countries mandates decentralizing services to subnational governments
were unfunded. Furthermore, health care and education policies were designed
following a combined system of incentives and sanctions to stimulate their rapid take
over by local governments. Constitutional amendments earmarked part of local revenue
for the provision of these two services hence making rational the adherence of local
officials to the provision of these two policies. These policies are based on national
standards and federal regulation. As is well-documented, basic health care has been
proven to have had an enormous redistributive effect in a short period of time and
access to fundamental education is now universal.
Transforming these initiatives into programs has been made possible because of certain
features of Brazilian federalism. The federal executive and Congress can
constitutionally take the initiative to introduce, earmark and finance policies to be
implemented by local governments. In this sense, Brazil´s recent experience challenges
the literature on welfare policies in federal countries which often concludes that federal
systems are less redistributive than unitary ones and that federalism decreases the
redistributive capacity of the state (Oblinger et al., 2005). Part of this literature also
claims that in “federal countries social policy initiatives are highly interdependent but
often only modestly coordinated” (Pierson, 1995). This chapter shows that this is not the
case nor has been the case in Brazil since the late 1990s.
Making local governments the main provider of universal social services has also been
possible because of the design of the 1988 Constitution. Since its enactment, the
Brazilian Constitution of 1988 has been amended 89 times. Why have Brazilian
presidents and Congress changed such a young and successful constitution so many
times? As I argued elsewhere (Souza, 2009) there have been two drivers of changes.
The first driver is institutional; the rules governing constitutional amendments have
become easier to fulfill compared to other countries and to Brazil´s previous
constitutions, reflecting the uncertainties constitutional designers initially faced
regarding, for instance, public policies in general and social policies in particular.
Although a qualified majority – 60% of votes in Congress in two rounds of roll-call
voting in which the House and the Senate vote separately is necessary, this percentage is
low in comparison to other countries. The second driver is contextual; changes in the
political and in the macroeconomic contexts quickly followed the enactment of the
constitution and therefore several issues that had been embedded in the constitution
required constitutional revisions or amendments to be enforced. This has been the case
of universal social services. By erecting few obstacles to constitutional amendments, the
designers of the 1988 constitution untied the hands of future legislators and presidents
enabling them to adjust it to changing political and macroeconomic conditions.
Brazilian governments as a whole have indeed upgraded or maintained their expenditure
on social services this decade, as shown in Table 4.
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Table 4 – Social spending by level of government as a percentage of total spending, 2000-2008
Year
Federal
State
Local
Total
2000
52.52
24.79
22.69
100.00
2001
53.61
23.85
22.54
100.00
2002
53.06
23.90
23.04
100.00
2003
54.19
23.18
22.63
100.00
2004
55.49
23.27
21.24
100.00
2005
56.50
23.48
20.02
100.00
2006
54.63
23.09
22.28
100.00
2007
52.92
22.52
24.56
100.00
2008
50.39
24.48
25.13
100.00
Source: Castro and Afonso (2009: 9)
The table above displays the figures for all social programs. Because local governments
are not involved in all of them, the table below displays only spending by the three
levels of government that are mostly implemented by municipalities, i.e. education,
culture, housing, urbanization, health care and sanitation. These are universal policies
that differ from pro-poor federal policies which target specific sectors of the population.
Table 5 - Social spending by level of government on universal social policies as a percentage of total
spending, 2000-2008
Year
Federal
State
Local
Total
2000
26.69
33.58
39.73
100.00
2001
25.71
35.93
38.36
100.00
2002
24.27
35.58
40.15
100.00
2003
23.60
35.61
40.79
100.00
2004
25.10
35.85
39.05
100.00
2005
25.81
36.76
37.43
100.00
2006
23.51
35.26
41.24
100.00
2007
20.60
34.50
44.90
100.00
2008
19.52
35.64
44.85
100.00
Source: Castro and Afonso (2009: 12).
The table above shows the steady increase in local government spending on universal
social services. Since 2000, when the effects of constitutional amendments earmarking
revenues for health care and fundamental education became effective, local
governments turned into the main providers of universal social services. As argued
elsewhere (Souza 2004) Brazil is now a country in which the federal government is
accountable for financing and administering pro-poor policies and local governments
are accountable for implementing universal policies with their own resources but also
with the financial backing of the federal and the state governments.
The data and analyses above demonstrate the great effort that the three levels of
government have made to address the main problems faced by poor people in Brazil.
This is not to say, however, that the provision of universal services is sorted. As shown
below, Brazil is the country which spends more on health as a percentage of GDP
compared to other federal countries and countries with similar socioeconomic
characteristics. Expenditure per capita, on the other hand, is lower than in Argentina and
Russia.
Table 6 - Expenditure on health in selected countries, 2012
Total expenditure on health
Brazil
India
South Africa
Argentina
Russia
Total expenditure on health per capita (Intl $,
2012)
1,109
157
982
1,551
1,474
Total expenditure on health as % of GDP
9.3
4.1
8.8
8.5
6.3
12
Source: http://www.who.int/countries/zaf/en/
The quality of education also remains a challenge. The results of the 2012 PISA
(Programme for International Student Assessment), which accesses the competencies of
15-year-olds in reading, mathematics and science in 65 countries show that the reading
capacity of Brazilian students is low, at 410; the OECD average is 496; in mathematics
it is 391 and the OECD average is 494; and in science it is 405 and the OCDE average
is 501. Furthermore, the percentage of students who have repeated a year during
primary, lower secondary or upper secondary school is one of the highest among PISA-
participating countries and economies - 36.1%, rank 7/64. The difference in the quality
of educational resources between socioeconomically advantaged and disadvantaged
schools is also one of the greatest among PISA-participating countries and economies -
1.09 PISA Index, rank 4/62. Despite these poor results, the country annualized change
in score points was 2.3 and the OECD average was 0.5.4
Concluding notes
This chapter has shown that the Brazilian experience of local governance has been
marked by institutional innovation and by a complex but successful system of
intergovernmental relations, particularly between federal and local governments.
Innovations were first a result of the commitments taken on by political elites when
democracy was restored and later of decisions taken by the federal executive and
Congress when the political and macroeconomic contexts became favorable. Despite
the uneven capabilities of local governments, there is evidence that these innovations
have been successful and local governments have been able to deliver universal social
services, although there is much room for improvements.
The chapter has also shown that federal transfers to municipalities are a viable political
option for the provision of universal social services provided by local governments. In
this sense, it contributes to the literature on welfare provision in federal systems by
showing that institutions such as federalism and constitutions do not necessarily inhibit
the adoption of social policies when political and economic circumstances are favorable
as has happened in Brazil over the last two decades.
Local government dependence on funding from other levels of government for the
provision of universal social services raises concern, however, about the sustainability
of this federal-state-local financial scheme. This is because sustaining social and
economic gains depends upon several variables, including the global and the domestic
environments. Nevertheless, if one believes that institutions matter, then social and
macroeconomic policies in Brazil are now governed by well-established institutions.
Universal social services provided by local governments enjoy wide political and
societal support. In other words, social progress may slow if macroeconomic conditions
deteriorate but there is no reason to believe that the country will return to its past
trajectory of outrageous poverty and lack of opportunity for the very poor.
The chapter concludes by returning to its main argument, i.e. the Brazilian federation
cannot be labeled as either centralized or decentralized. The design of federalism after
redemocratization has made local governments the hub of the provision of universal
social services. The sharing of financial responsibility among the three levels of
government has led to interdependence between different levels of government in social
policy making and implementation.
4 Data available at http://www.oecd.org/pisa/keyfindings/pisa-2012-results-overview.pdf.
13
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