From the Archives: An Interview with Fernando Henrique Cardoso

JOURNAL: Compared to other developing regions, such as Africa and South Asia, Latin America and the Caribbean are malting a lot of progress on meeting the Millennium Development Goals (MDGs), particularly in regard to Goal 1—to halve between 1990 and 2015 the proportion of people whose income is less than US$1 a day. Brazil, in particular, appears to have done a lot in making the MDGs a reality by 2015. 

Despite these encouraging developments, according to the 2004 "Brazil Monitoring Report on Achieving the MDGs," the country still has a long way to go in reaching the established targets. Access to safe drinking water remains an issue in rural areas, the number of slum dwellers has increased, there has been little progress on agrarian reforms, and infection rates of HIV/AIDS are on the rise among women and the poor. Given this situation, do you feel that it is realistic that Brazil will achieve all of the MDGs by 2015?

CARDOSO: Upon taking office as president in 1995, I said that Brazil was not a poor country, it was a socially unfair one. Over the second half of the 20th century, we have been able to build the basis of a modern industrial economy, but we have not succeeded in providing access to opportunities and social welfare in a more equitable way. In recent years, thanks to a democratic government, we are finally tack ling social issues that date back in one way or another to slavery, while at the same time strengthening the competitiveness of the economy. This is certainly not an easy task, given the heavy burden of the past, on the one hand, and the asymmetries of globalization, on the other.

Yet Brazil is clearly moving ahead on both social and economic terms. From 1975 to 2002, it was the country that made the biggest strides in human development indicators in the fields of education and health. And the pace of improvement in social indicators accelerated from the nineties onward. In that context, I was personally awarded the "Mahbub ul Haq Award for Outstanding Contribution to Human Development" by the United Nations. In the nineties, we also left hyperinflation behind and embarked on a positive, although sometimes turbulent, integration into the world economy, which is clearly bearing fruits now. In brief, I strongly believe Brazil is geared to meet most, if not all, of the MDGs by the year 2015, provided we continue to unfold the reform agenda opened with the Real Plan.

JOURNAL: The government of the current President of Brazil, Luiz Inacio "Lula" da Silva, has launched a number of social programs, most notably Fome Zero and Bolsa-Familia, which promote food distribution and income transfers among Brazil's poorest through partnerships with the private sector. Programs such as these are credited with dramatically improving child mortality rates. You have always emphasized the role of civil society in achieving improvements in human welfare, and many of these social programs are extensions of initiatives that you launched while president. As per the "Cardoso Report" that you prepared as Chair of the Eminent Persons Panel on UN Civil Society Relations, how do you feel that efforts with civil society could most effectively be managed?

CARDOSO: Child mortality rates were halved throughout the nineties in Brazil. Partnership with civil society was crucial in both enhancing the quality and widening the coverage of health programs focused on maternal and childcare. Two main factors explain that outcome: (i) the end of hyperinflation, which meant an increase in the purchasing power of poor people, and (ii) a significant improvement—in terms of both quality and quantity of resources—in health programs. To begin with, the Health Ministry attached top priority to these programs, in accordance with the general guidance of shifting the emphasis from curative to preventive programs. It also engaged in full cooperation with grassroots movements linked to the Catholic Church, which had been conducting a small-scale but very effective program to fight child mortality.

A similar "model" of public policy explains the success of the anti-HIV program, which is based on a national network of governmental and non-governmental institutions under the guidance and coordination of the Health Ministry. How can these successful local partnerships between government and civil society, under democratic regimes, be translated into or adapted to the multilateral level, thereby making them more responsive to global civil society (assuming there is a global civil society in the making)? The challenges on both levels are similar if not the same. First, there is the conceptual challenge of striking a new balance between two different sources of legitimacy, one based on traditional national sovereignties and another based on the fact that some issues enjoy a certain degree of international jurisdiction for the simple fact that they cut across borders. Second, there is the practical challenge of designing and implementing mechanisms that might trans late this new balance into operational institutions with a view to increasing the state of preparedness and the institutional capacity, at the global level, to tackle trans-border issues. The scale and complexity of issues at stake are such that cooperation, both among member states themselves and between member states and non-governmental organizations, is needed. NGOs are today indispensable sources of information, agents for implementation and for monitoring any public-policy initiative, be it local, regional or global. 

How far should the participation of NGOs go in decision-making, especially decision-malting that generates mandatory legislation? Here we should draw a clear line between "voice" and "vote," lest we subvert a key assumption of democracy. In other words, the power to act in the name of others is contingent upon a mandate conferred through free and fair elections. Provided that assumption is duly respected, I think we should experiment with different institutional arrangements in order to enlarge the role of NGOs in policymaking.

JOURNAL: Brazil has participated in the discussion of ways to finance development in various world forums. In January 2004, Brazil—together with France and Chile— announced the Geneva Declaration, which set up an action plan to identify alternative financing sources for poverty alleviation and development. Included in the action plan were incentives for voluntary contributions by socially responsible companies, and taxation of financial transactions. While president, you were criticized for many of your privatization efforts, though afterward your opposition has continued such reforms. Much of the success of your approach has been attributed to the concurrent development of regulatory bodies with private enterprise, and the fact that privatization included domestic as well as foreign investment. What do you feel the role of the private sector will be in the achievement of broader development objectives? Do you feel that in growing countries like Brazil, private enterprises will continue to serve as pure engines of economic growth, or is it possible to establish a partnership for development between the public and private sectors even in developing economies? If such partnerships can be established, how might the instability of speculative investment be mitigated?

CARDOSO: Brazil has a deep-seated concern over the asymmetries in the world economy. It can be traced back to the forties—to after World War II when the international institutions dealing with trade, finance and aid were designed and built. Brazil has since voiced its demands for measures and rules that can help poor countries develop their economies. 

From the very beginning of my term in office, I emphasized the need for a different kind of globalization whose impact on the poor could be offset by measures such as effective social safety nets. To fight hunger effectively, aid is necessary—especially in famine-ridden countries. But the fact remains that international trade, as defined by a fair, rules-based system in the WTO, is much more important, not only to fight hunger, but also to foster development worldwide. As to volatile capital flows, mitigating instability is an end in itself, since abrupt changes in the direction of capital flows may cause national economies to collapse and can thereby become a major source of social distress, especially in the least developed countries. In this regard, let me add that little, if anything, has been done in connection with the need for redesigning the IMF, as well as democratizing its governance. Contrary to what some people think—rather naively in my view—the world needs a stronger (and more democratic) IMF rather than a weaker one. I daresay that a more effective and more democratic IMF may eventually prove more important to advancing development than a potentially huge aid fund financed by taxes on capital flows.

With regard to the role of private enterprises, let me make a somewhat theoretical point. Market forces and state interventionism have been seen mostly as antagonistic principles throughout history. Keynesianism was a relatively brief interlude in the highly polarized and ideological atmosphere that has prevailed over the last two centuries. After the collapse of Keynesianism and the partial reversal of the high tide of neo-liberalism that followed suit, I think conditions are now ripe for a more pragmatic and open-minded approach to that issue. First, we have a decline of the comprehensive ideologies according to which the market versus state dispute should play a pivotal role. Second, we have the empirical and theoretical development of studies on market as well as on government failures, and on how institutional change can make the market and the state complementary rather than opposing forces. Third, under fiscal restraint, the spread of democracy worldwide and the unleashing of pent-up demands in the wake of this democratic wave are forcing elected governments to work out new ways to meet these demands. 

Privatization is one answer, but not the only one. Different forms of public-private partnership or cooperation are an effective alternative, especially when profitability is not attractive enough for the private sector and the costs involved are too high to be supported solely by public funds. Fiscal restraint is not the only reason, however, to engage private sector and non-governmental organizations in the supply of public goods. Generating more efficiency through competition and diversification on the supply side is no less important. The quality of regulation is key to whatever form of new institutional arrangement prevails in the supply of public goods. A prof it-oriented enterprise working efficiently in a proper institutional setting is in itself a partnership for development between the private and the public sector. Can the private sector go beyond that and engage in activities that are not immediately profitable, such as those involved in turning depressed industrial districts into a dynamic cluster of information technology businesses? Yes, it can, provided they reap the benefits of that investment in the longer term. In other words, if we want the private sector to be more than "pure engines of growth," we should work hard to ensure a business environment that makes private firms confident in their business prospects. The more confident they are, the more they will be inclined to engage in wider public-private partnerships for development.

JOURNAL: Brazil encouraged the Global System of Trade Preferences (GSTP), whose objective is to promote trade among developing countries by means of tariff concessions. While South-South trade has increased over the last decade, the increase is predominantly attributed to the natural expansion of global trade, not the GSTP. What do you feel the role of trade is in the promotion of development among poorer nations? What might need to accompany trade liberalization to effectively support growth, and what is the responsibility of the developed world in establishing such trade arrangements? engage in wider public-private partnerships for development.

CARDOSO: The GSTP was launched in 1986 at almost the same time that the Uruguay Round of trade talks started at the General Agreement on Tariffs and Trade (GATT), the predecessor of the World Trade Organization (WTO). The timing of this was not merely a coincidence.

Developing countries feared then that they might be adversely affected by the outcome of another round of negotiations that would include new issues such as intellectual property rights, trade-related investment measures and services within the GATT disciplines. There was a heavily polarized atmosphere at that time. North South relations were acrimonious and contaminated by the East-West conflict (the Berlin Wall was to be dismantled only a few years afterwards). And the GATT was seen by the South as a sort of "rich man's club."

Against this background, Brazil, India and other developing countries decided to launch the GSTP as both a kind of alternative—more rhetorical than real—to North South trade, and as a small provocation to the rich countries within the Uruguay Round context. No one has been truly surprised by the slow progress in the GSTP; in fact, South-South trade has expanded over the past few years much more as aresult of regional or bilateral free-trade agreements than by the GSTP scheme. Time has, in a nutshell, proved that the GSTP was never to be a serious alternative to the GATT. The GATT in turn was converted, in 1994, into the WTO and is today the forum for any relevant discussion on international trade. On that point, both rich and poor countries now agree.

As I have already mentioned, increased flows in international trade are the key to promoting the development of poor countries. This applies both to South-South and North-South flows. They are not excluding alternatives; they are complementary. What is really a key element to increasing international trade, more than regional or bilateral trading arrangements, is that the multilateral, rules-based system used by the WTO be strengthened and preserved against unilateralism and protectionism, especially from OECD countries. The developed world has a responsibility here. Unlike the eighties, when Southern countries were suspicious of the GATT/WTO, today they put their trust in this institution. It is no longer considered a "rich man's club," especially after the creation of the G-20 and its growing influence on discussions there.

JOURNAL: With regard to the promotion of external debt relief of less developed countries for the reduction of poverty, Brazil (with great difficulty as a debtor itself) has followed the recommendations of the Paris Club, the informal group of official creditors first formed in 1956 to find sustainable solutions to the payment difficulties of debtor nations. A key vehicle promoted for the discount of debts is the Heavily Indebted Poor Countries (HIPC) Initiative. The great majority of Brazil's debtors face difficulties in servicing their debt and will probably need substantial debt reduction in order to manage payment. Brazil, in fact, has not received payments from some of its debtors since the 1980s. You were criticized for assuming IMF loans and their attendant fiscal restraints, which now require the country to maintain criteria like a 4.5 percent budgetary surplus—eating into money that could be reinvested in needed social or economic programs. As both a debtor and a creditor, the issue of debt management is complicated for Brazil. What is your opinion on debt relief and cancellation as a means for stimulating development? How much can the different outcomes in Argentina and Brazil be attributed to their treatments of debt responsibilities?

CARDOSO: Brazil's positions as a creditor and a debtor are not conflicting ones. This is a false dilemma. I agree that Brazil should give debt relief to the heavily indebted countries. These are countries in a much worse situation than Brazil. And I am very straightforward on that. As a debtor, Brazil has always negotiated the best possible terms for paying its own debt.

Brazil still pays a heavy price, internally and externally, for the disastrous debt moratorium of 1987, which eroded foreign confidence in the Brazilian government and has since exacted a price in all foreign debt negotiations. Yet today, Brazil's foreign debt is manageable and is less and less of a problem for the country. The fiscal restraints faced by Brazil (which did not prevent substantial GDP growth last year) were reinforced by my successor, President Lula, largely as a result of his party's dubious statements in the past. Fortunately enough, his administration's economic policy is totally at odds with what he and his political party have traditionally voiced with regards to the payment of foreign debt.

The case of Argentina is different. The issue was bankruptcy and insolvency in 2001 and 2002, rather than a declared moratorium in 1987, as was the case in Brazil. The processes are different and the results are different accordingly.

JOURNAL: In many cases while you were president of Brazil, you sought to involve the people in decision-making processes—especially in critical situations such as reducing hyperinflation or evading an energy crisis. When it comes to more long-term government initiatives that involve a high degree of international involvement, such as the MDGs, do you feel it is possible to enable citizens to participate in deliberations? Since these initiatives are aimed at the most at-risk populations, how might their increased participation be encouraged?

CARDOSO: Participation is a word prone to be misinterpreted, since its meaning can vary widely, from "direct participation in the decision-making process" to "adherence to public campaigns." To say that at-risk populations can participate in any meaningful way in deliberations related to the policy strategies to meet the MDGs is sheer demagoguery. On the other hand, at-risk populations not only can but should be active in the implementation of public policies at the micro-level. For example, take the goal of allowing every child to complete a full course of primary schooling and learning to read, write and count adequately by the year 2015. It is well known that the more committed families are with their children's education—even when parents do not have enough formal knowledge to help them with learning—the better children's performance at school tends to be.

JOURNAL: Given the exceptional level of biodiversity in Brazil and the global importance of ecosystems such as the Amazon rainforest, environmental policy emerged as an important issue in the 2002 national elections. Do you feel that the current administration is truly pursuing "sustainable development"? Should it be? How can a fair balance between environmental considerations and economic growth be achieved, and is it appropriate for a sustainable development approach to be promoted through international agendas such as the MDGs?

CARDOSO: I think I have little to add at this stage to the international debate on sustainable development. The concept was defined in the eighties by the Brundtland Report—the product of a United Nations-appointed international commission charged with proposing strategies for improving human welfare in the short term without threatening the environment in the long term. The concept was incorporated into international commitments and treaties in the nineties, especially after the Rio Conference in 1992, and into national legislation and projects since then. It is an issue that is on international and national agendas for good. This is certainly the case of Brazil. I have seen since the nineties, with satisfaction, a certain line of continuity in the efforts by successive governments in Brazil to pursue sustainable development. This is not a divisive issue in the country.

JOURNAL: You have recognized "globalization" as a dynamic of history that is inevitable, yet you state the importance of maintaining cultural identities and rectifying some of the asymmetries that exist in globalization in its current form. How do you think that what you have called a "cosmopolitan vision" for development can be established without undermining these cultural identities? Given the necessary role that international institutions must play in promoting and financing the MDGs, do you feel that there is a danger in particular donor countries unduly influencing the development of recipient countries? If so, how might these power dynamics be mitigated?

CARDOSO: I see "cultural identities" not as unchangeable realities. "Cultural identities" are to a greater or lesser degree the temporary amalgamation resulting from the interaction of different people, values, traditions, institutions, and so on, over history. The vitality of a "cultural identity" is commensurate to its ability to absorb and digest other influences, constantly changing itself but not beyond recognition. I reject a fundamentalist conception of cultural identity. By the same token, when I refer to a "cosmopolitan vision," I do not have in mind a monolithic vision dictated by abstract reason. A true cosmopolitan vision stems from the perception that there are an increasing number of issues that can be appropriately dealt with only globally and only by multilateral institutions. And it requires a commitment to make existing multilateral institutions more effective, comprehensive and democratic. In terms of its contents, a cosmopolitan vision is not an ex ante definition but an ex post product of deliberation within multilateral institutions. My emphasis on procedures leads me to your second question.

Mitigating unjustifiable asymmetries of power within multilateral institutions—either by redistributing formal power among their members or by giving more voice to civil society—is certainly a great challenge. However, no matter how imperfect multilateral institutions may be, they are the best mechanisms in place to avoid the sheer prevalence of the strong in world affairs. Given that, with respect to the MDGs, I am more concerned with the relative weakness of existing multilateral institutions—be it to ensure peace and security, to prevent severe financial crisis or to foster development—than with the risks associated with big donors influencing the policy choices of small recipients.