In Brazil, the suffocating grip of patrimonialism is back

In yet another sad chapter of Brazil's patrimonialist saga, a new Lula administration unleashes a full throttle rent extraction from taxpayers towards interest groups

Last week, Brazil’s Lula issued decrees that, if maintained, would dismantle the legal framework for sanitation, which possibly represented Brazil´s greatest advance in public policy in recent years. In the short period since its approval in 2020, the new law has enabled more than 20 sanitation services concessions to the private sector, in six different states, involving the contracting of BRL 80 billion in investments. The short time of its operation was not, of course, enough to reverse the medieval sanitation statistics in Brazil, forged along the past five centuries when responsibility for such services laid almost exclusively in the hands of state-owned companies.

We will not, in this article, go into the details of the decrees that make them revert, in practice, the rules for granting sanitation services to the status prior to the new milestone. Nor will we explore this and other setbacks of the present government from the point of view of the remarkable consistency existing between the proposed policies and the campaign promises of the current president, which we have already explored in a previous article. Our aim is to discuss the reasons behind this and other poor decisions – under almost any aspect - by this government.

Why, after all, does this administration insist on reinstituting policies that have proved incapable of improving social and health indicators, such as the delivery of sanitation services to state-owned companies, or that provenly have contributed to the economic disaster of 2015-16, such as political rigging of state-owned companies? After all, unsatisfactory social and economic results, if identified with government policies, would, in principle, be unfavorable to the perspective of continuity of this or any other government.

The answer to this question lies in the history of state appropriation by the bureaucratic establishment – or the “stand” - the layer of employees, contractors, and beneficiaries of government resources that, in Raymundo Faoro's^* definition, since colonial times orbits power and uses its proximity to it to collect rents from society. In a previous article, we argued that in the period between Getulio Vargas’ arrival in power, in 1930, and the end of the first 13 years of the PT government, in 2016, the symbiosis between the central government and the stand evolved in a relatively stable way. This balance was altered by the impeachment of Dilma, and the equilibrium was further shaken after the 2018 election.

Although Jair Bolsonaro’s government incorporated some populist practices, for example, the increase in the size of income transfer programs, it is also true that it has weaned important sectors of the stand - by promoting the political disequipment of state-owned companies; reduction of government advertising bills for media vehicles; the intensification of the BNDEs' (the state development bank) deleveraging, which started in the Temer government, and the end of its subsidized loans. The approval of the sanitation framework, in 2020, would represent a major blow against both the state bureaucracies and all those politicians who benefit, in one way or another, from the existence, in the 21st century, of 100 million Brazilians without access to sanitary sewage, and 35 million without access to potable water.

As we also detailed in that article, the reaction of the stand to the Bolsonaro government was very strong, and it intensified markedly in the months leading up to the 2022 election.

Lula, anointed by the stand, and elected by a small margin, is, predictably, making sure he erases all the small advances against the grip of the stand which were conquered, at great cost, by society, during this brief interval of seven years. The reequipment of the state-owned companies will be made possible by an alteration in a law enacted precisely after the economic disaster to which the rigging of state-owned companies during the previous PT administration contributed. The intensity of resistance the parliament might offer to the decrees that modify the sanitation framework, which in theory are subordinated to the law approved in 2020, is still to be seen. Lula also made clear he will also act to revert the privatization of Eletrobrás, the former state-owned company that consumed more than R$ 200 billion of public resources in capitalizations, in the period between 2003 - when the PT withdrew it from the privatization program, until 2022, when it was finally privatized. Lula recently stated that his government “will not carry out any privatizations”, and, although he has not made it explicit, it is clear he will hinder privatization programs of the states in any feasible way.

The recently announced fiscal framework also needs to be understood under the logic of Brazilian patrimonialism. The previous government made an enormous achievement amid a pandemic: a reduction in both taxes and expenses. Like any leftist government, the current administration proposed an increase in taxes and expenses, through a fiscal framework that will only stand if GDP grows ahead at an implausible rate of 2.5% per year, AND the tax burden is raised by 0.5 % of GDP, also annually. Always justifying the perspective of increased expenses under the argument of the need for greater redistribution of resources, the Brazilian state, in fact, will only resume its dual role as an extractor of rents from taxpayers, and deliveryman of such rents to members of the stand - civil servants, executors of public investments, etc. The re-establishment of the casting vote in favor of the government in administrative tax disputes between the union and taxpayers, and the proposal to annul the billionaire fines for contractors involved in the Lava-Jato corruption scandal are also measures consistent with the resumption of government’s brokerage task in rent-extraction deals from society towards the stand.

Lack of sanitation is one of most important attributes in explaining incidence of deaths related to infectious diseases – it is estimated it is directly responsible for the death of 11,000 people per year, in Brazil.  Several studies also show that the income of households lacking sanitation is also significantly smaller than the country’s average. Therefore, and not less importantly, an additional reason for a setback in the sanitation framework lies in the electoral dividends, typically claimed by leftist governments, represented by the maintenance of a high portion of the population in poverty, and, as such, dependent on government entitlements. It is for no other reason that Argentina cannot get rid of Peronism, even though 50% of the population is below the poverty line. Even the Venezuelan dictatorship enjoys popularity among the most miserable layers of the population.

Raymundo Faoro compared the grip of the stand in society to a parasite on a tree, which makes its fruits grow less and less juicy, and its leaves, more and more dry, taking care that, however, the tree does not perish, since the parasite would also perish with it. In this new chapter of Brazil´s sad history of patrimonialism, the stand, stirred up by the few years in which the embrace seemed to loosen, throw themselves at the prey with the force that an anaconda wraps around an old ox. It's hard to think of another moment in Brazil´s history when, like today, a government's objectives were as crystal clear as they were incompatible with those of taxpayers. With no perspective of a new interruption in this process in sight, the economy will likely remain stagnant, what will increase poverty and inequality, results opposite to those allegedly pursued by this government.

*Raymundo Faoro is arguably one of Brazil´s greatest interpreters. His major work is “Os Donos do Poder” (1958).