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[Mac Margolis] Brazilian politicians dance around reform

By Bloomberg

Published : Aug. 29, 2017 - 17:55

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“Two steps here, two steps there”: When storied singer Elis Regina purrs the honeyed Brazilian bolero, lovers tingle. When deft politicians take up their familiar two-step, voters know that democracy is in for a hit. So it has been in recent weeks as national lawmakers have finally begun to overhaul Brazil’s discredited political system.

It’s about time. With 35 registered political parties -- 28 of them with seats in congress -- Brazil is home to one of the most convoluted and politically fragmented governing establishments in the world, according to Getulio Vargas Foundation political scientist Octavio Amorim Neto. No other major democracy has so many legislative claim-stakers, or a national agenda ransomed to so many centrifugal interests.

All of that would seem to back the tired refrain that political reform -- the “mother of all reforms,” as Brazilians sometimes put it -- ought to top the congressional to-do list. After all, such a predatory ecosystem is what regularly sabotages policymaking and turned Brasilia into a tropical Gomorrah. Look no further than the Car Wash case, Latin America’s biggest corruption scandal, in which government contractors made lawmakers and bureaucrats their men Friday.

The good news is that the political class, finally, is being forced to answer in court for their part in the scandal, and part of their response, sensibly, has been to back reforms -- capping public spending, opening the oil sector, loosening labor laws -- designed to revive the prostrate economy and reverse an unprecedented crisis of confidence. But don’t hold your breath. With general elections looming next year, Brazil’s quickstepping incumbents are now looking to tweak the rules just enough to pass as reformists but not so much that they’ll threaten their careers.

Consider the plan to create a publicly financed campaign fund of as much as 3.5 billion reais ($1.1 billion). Now, that may sound reasonable. Brazilian campaigns are pricey: The 2014 general elections officially cost around 5 billion reais. Throw in bribes and off-book donations, and total campaign spending might have been -- no one knows for certain -- four times that.

In 2015, with the corruption scandal in full swing, the Supreme Court banned corporate donations, a traditional sluiceway for bribes. Reformers hailed that landmark decision as a first move to scrub politics of freebooters and reset Brazilian democracy. And yet the political party fund seems more a distortion meant to fix another distortion. Not only would taxpayers have to pony up for candidates they may not even know, much less back, the funds will be distributed by political parties themselves -- some of the least trusted institutions in Brazil. “Politicians want to replace an explosion of private donations with an explosion of public money,” said Fernando Schuler, a political analyst at the Sao Paulo management school Insper.

Fearing public backlash, poll-shy legislators curbed their lavish business plan this week, endorsing the fund but not the amount of money to be set aside. Brazilians will have to be doubly vigilant to avoid such apparent restraint from becoming a blank check.

Another promising idea is simplifying Brazil’s confusing electoral system, with its fractional parties and formfitting campaign coalitions. The problem dates back to 1988, when Brazil was emerging from a long dictatorship and lawmakers wanted to hardwire democracy into a new constitution by encouraging the creation of new political parties. As a counterweight, the constitution also granted the elected president exceptional powers over budgets and policymaking. The result was “coalition presidentialism,” a peculiarly Brazilian monstrosity by which even the most popular executives had to court congressional majorities, roll call by roll call -- a sure recipe for gridlock and graft.

Whenever crises flared, critics called for a shakeout by establishing a minimum of votes each party’s block of candidates must garner in national elections to survive -- a measure Schuler reckoned could reduce Brazil’s current 35 parties to seven. However, the Supreme Court, under pressure by microparties, overturned the “performance clause” in 2006. And because each accredited party is now entitled to a cut of public funds -- from about $370 to $33 million, depending on the number of votes garnered in the last election -- Brazilian politics soon became an assembly line for acronyms.

Of course, self-interested political grandees would welcome downsizing the competition, but in a land where the three largest parties control fewer than 40 percent of congressional seats, the Lilliputs prevail. No wonder the bill currently making the rounds in Brasilia calls merely for easing in tougher party performance clauses -- by 2030.

Sure, there are other sound proposals that might actually help reset Brazil’s dysfunctional politics. Voting by smaller districts, instead of in Brazil’s statewide free-for-alls, could force legislative candidates to answer to local demands instead of grandstanding on national issues. A parliamentary government or semi-presidential system, in which a prime minister shares executive duties with the president and congress could recall the national leader without destabilizing government, could spare Brazil the trauma of impeachment, which has befallen two of the last four elected presidents.

And Brazil can do better than to simply ban private donations and then pass on the bill to taxpayers. “Elections cost money, and without elections, there’s no democracy,” Brazilian political scientist Bolivar Lamounier of Augurium, a think tank, told me. And since most voters are poor, he added, “The solution is a mixed system of private and public donations, in modest amounts, subject to rigorous rules of disclosure and real time oversight on the web.”

Brazil, goes an old saw, is drunk, not sick. Credible reforms could go a long way to reviving interest in what may be the hemisphere’s most underachieving economy. Tellingly, investors scrambled this week when the government announced a huge sell-off of assets, including the Sao Paulo downtown airport, the government mint and the giant power company Eletrobras, whose share prices surged.

Now if only the politicians could carry the tune.

By Mac Margolis

Mac Margolis writes about Latin America for Bloomberg View. -- Ed.