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 In a July 1998 Veja magazine interview I suggested that, were he to be elected president, Lula should keep Finance Minister Pedro Malan and Central Bank President Gustavo Franco in their posts for one hundred days. The idea was a simple one: the candidate needed to tranquilize the financial sector, and the new president would need a transition period before initiating the reforms that Brazil expected.
For this idea I was harshly criticized within the Workers Party (PT) as being out of step. There were even some suggestions that I should be expelled. In spite of Fernando Henrique Cardoso's 1998 reelection as president, the risk of destabilization proved to be true in January of 1999. Even the currency readjustment, recognized as necessary, was an element of instability. This confirmed the need for a careful transition.
Two years later, Lula told me in his São Paulo office that he had understood my proposal for a balanced transition. Thereafter I declared in diverse economic forums, in Brazil as well as abroad, that the Lula government would conduct the economy in a responsible manner, with an economic transition policy.
During the 2002 electoral campaign, I said that keeping Malan in his post would now be unnecessary, but that a one-hundred-day transition period would no longer be sufficient. The successive crises in Fernando Henrique's second term, aggravated by the implicit risk of the PT victory, required a relatively long transition for a policy of stability and sustainable growth.
On September 26, 2005, the Lula government marked one thousand days of a stagnate transition. After these one thousand days, the time has come to consider that the economy will be unable to stay on its feet if it does not begin to walk and that it must walk only when there is no risk of falling.
For the government, maintaining the economic policy is no longer a transition; it became a paradigm. And the critics do not either point to a clear alternative or show any concern for the risks of change.
The economy needs to change with fiscal responsibility, without which the inflation will return. It must take into account the existence of an open financial market and accept its rules, while considering the impossibility of unilaterally breaking the contracts already made, including the debts.
But after one hundred days of transition, during which the population would accept these presuppositions, it should already be possible to consider likely changes. This should be done with the understanding that the dynamic would come from outside the economy.
The Brazilian economy is stagnating for reasons external to the pillars of economic policy. Lack of education limits the productivity of our society, which is inefficient due to the excessive bureaucracy and the costs that weigh upon investment and production.
Demand is limited by the absolute exclusion of 70 million poor Brazilians who are unable to consume, and by the low dynamism of the science and technology sector. To walk with secure stability, the Brazilian economy needs to free itself from the straightjacket of the brutal social inequality that is caused by the economy itself and that impedes it from growing.
A Social Shock in Brazil - with public-sector-financed programs, within the limits of fiscal responsibility, and with a progressive, just fiscal policy - can reverse the social inequality while at the same time dynamizing the economy. It can transform continuity into secure transition.
But for this to happen, it is necessary to end the great encumbrance of national corporativism adhering to privileges of the budgetary policy. Determined groups must let go of the advantages that the State assures them.
One thousand days has now been more than sufficient to break the vicious cycle of the budgetary privileges and initiate a new direction for the Brazilian economy, seeking at the same time a new direction for our social structure.
Cristovam Buarque has a Ph.D. in economics. He is a PDT senator for the Federal District and was Governor of the Federal District (1995-98) and Minister of Education (2003-04). You can visit his homepage - www.cristovam.com.br - and write to him at cristovam@senador.gov.br.
Translated from the Portuguese by Linda Jerome - LinJerome@cs.com.
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Although I am not an economist, I do not agree that the Brazilian economy is stagnated. Maybe is not growing at a fast rate. And those demands for a bigger rate of growth are coming from a class worried only about bigger profits in detriment of the poor because that could cause an increase of inflationary rate.
Hello, Mr. Buarque gives us tangible ideas about how to improve our country at all levels. Take the risk. Politics is not for the faint of heart!