Source: O Estado de S. Paulo, 01/09/2007

RIO - The public sector is paralyzed by the fear of making decisions, and this is a serious medium-term problem for a country that needs to expand and improve its infrastructure. To make matters worse, part of the government and society resisted privatization, which would be a way to undo the nodes that paralyze investments in roads, ports, energy, etc.

The diagnosis is made by economist Marcos Lisboa, 43, who is now executive director of Unibanco, responsible for the areas of risk and internal control ("compliance"). Lisbon was one of the main formulators of the economic policy of former Minister of Finance, Antônio Palocci, as secretary of Economic Policy until April 2005.
 
 
 
 In an exclusive interview with the State, the first that he grants to the press since he left the government (from the Brazilian Reinsurance Institute, which he chaired until 2006), Lisbon criticizes the “criminalization of technical decisions”. He refers to the avalanche of lawsuits against public officials, by a Public Ministry and a Judiciary that, in matters such as the environment, seem to want to assume the role of the Executive in making decisions.
 
 
 
 Lisbon is optimistic about the global economy, and sees two main challenges for Brazil. In the short term, dealing with the rise in inflation, which may force the Central Bank to change the direction of monetary policy, which may provoke reactions from the government and society. In the medium term, the biggest challenge is the lack of infrastructure, which is already being reflected in the rising cost of Brazil. He also criticized the lack of technical rigor in the public policy debate in Brazil, which derives, in his opinion, from the position of intellectuals and politicians.
 
 
 
 During his time at Fazenda, Lisbon actively participated in the macroeconomic strategy of the beginning of the Lula government, such as the decision to increase the primary surplus, but he became known mainly for the so-called “microeconomic agenda”. This action program included numerous measures to unlock and improve the credit markets, the real estate sector, long-term savings instruments, the insurance sector, as well as measures to facilitate business and simplify the resolution of judicial conflicts (in with the Ministry of Justice).
 
 
 
 Lisbon was also influential in the direction of social policy, leading the support of the Treasury to the government's commitment to Bolsa-Família, after the failure of the Zero Hunger. Much of the measures he implemented or initiated in the government were part of the document “Lost Agenda”, prepared by a group of economists and social scientists during the 2002 presidential campaign, under the coordination of Lisbon and economist José Alexandre Scheinkman, from the University of Princeton. The work was commissioned by the then candidate Ciro Gomes, but ended up falling into the hands of Palocci, already with the mission of being Lula's Minister of Finance. Palocci did not hesitate to adopt not only the Lost Agenda, but also to bring to the government the main formulator of the document. The interview follows.
 
 
 
 State - As mr. Do you see the current moment in the global economy?
 
 
 I think we are experiencing a difficult situation in a very good medium-term moment in the world economy. We are in an expansion cycle that is probably unprecedented, both in terms of the duration and the number of countries involved. Today, important parts of the world are driving growth, something unprecedented. After a long historical period of closed economies, world trade is experiencing very significant growth, which has benefited emerging countries, in particular Brazil. And Asian economies in general, and Chinese economies in particular, are very complementary to that of emerging countries, especially Brazil. The growth of Asians demands commodities, food, what we have competitive advantages.
 
 
 
 Estado - What are the reasons for the good performance of the world, in general terms?
 
 
 In addition to the sequence of productivity shocks in communications, information technology, agricultural production, we are reaping the fruits of many years of institutional reforms in developed and peripheral countries. The poorest part of Europe, in the 80s, was somewhat similar to Latin America. These countries underwent profound institutional reforms over the 80s and 90s, in addition to consolidating the macroeconomic balance, and converged towards developed countries with very impressive speed. See Ireland, Spain, and even Portugal. In Eastern Europe, several countries have made great progress. Not to mention the traditional emerging countries that have developed, such as Chile, Korea and Taiwan.
 
 
 
 Estado - What reforms were these?
 
 
 Several of these countries have undergone profound institutional reforms, including bankruptcy law, credit systems, labor law, regulatory agencies, social security, among many other topics. On the other hand, from a macroeconomic point of view, it has converged on fiscal balances, inflation targeting regimes. Real business cycles are part of life, there is little that can be done to prevent them. After much disastrous intervention, governments have become more careful, but perhaps still not enough. Until the 70s, many attempts to prevent the economic downturn resulted in worsening economic cycles, culminating in the stagflation crisis, the worst of all worlds, with recession and inflation. Today, even small things like liquidity assistance by central banks and rediscount are discussed, to see if they do more good than harm. The government not disturbing is already a major advance.
 
 
 
 Estado - But is this improvement in economic policies general?
 
 
 Today we think Hugo Chávez is a bit of a freak thing, a bit of a folkloric thing, a little bit of Odorico Paraguassu, but he wouldn't have been out of the picture in the 80s, when Mitterrand nationalized banks and insurance companies. President Kirchner, of Argentina, today looks like a somewhat unorthodox figure, but in the 80s he would be considered Margaret Thatcher of the pampas. It is true that there is a little price freeze here and there, but there is a fiscal balance never seen in Argentina. And remember, Nixon tried to control prices in the 70s to fight inflation. I am obviously not defending the economic policy of Chavez and Kirchner. On the contrary, I think both are bad, wrong, and will damage their economies in the medium term. I used these examples to show how the perspective has changed, there has been a convergence for the better in economic policy, and the perception of what is heterodox is much more rigid. The left usually says that the world has changed and that is why they had to change. But, as my friend, economist Samuel Pessôa, says, I don't think so, the world remains the same. It was the people who changed, the economic policy that changed, and for the better.
 
 
 
 Estado - Are there other causes for the growth of the global economy?
 
 
 People start to reap all the fruits of the innovations of the media, of information. And it is not only in the information industry, food production techniques have improved enormously, agricultural productivity has taken a leap, and Brazil has benefited from this. Usually, when there is a positive productivity shock, the economy grows a lot and then the income stabilizes at a higher level. In the current phase, there has been a succession of technological shocks, and the economy has been growing systematically above what would be expected.
 
 
 
 Estado - Isn't the turbulence of the last few weeks a sign that this phase may be ending?
 
 
 When we talk about a slowdown in the American economy today, we are not talking about a crisis like the one in 1929, not even one like the one in the 70s. The most pessimistic think that we can have a slight recession, like the one in 1991, two or three quarters with the American economy walking sideways. The surprise of everyone is that, despite the escalation of interest rates, the tightening of monetary policy by central banks, the real economy continued to grow very strong worldwide.
 
 
 
 State - Mr. could you explain it better?
 
 
 The question is as follows. Could it be that, on the one hand, there was a greater problem of default than expected, causing greater damage to the financial system, which would lead to a significant reversal of economic activity? Or is it that, despite the recent difficulties, the world economy, with all the sources of growth that it has, continues to grow a lot, generating inflationary pressures? And this doubt generated volatility, uncertainty, and a very high sensitivity to news, which has been reflected in the markets since the beginning of the year.
 
 
 
 State - As mr. do you see Brazil in this context?
 
 
 The country is better prepared to face a more adverse global scenario, but, in the short term, the latest inflation data lit up yellow. We have to look carefully, because it is no longer just a problem of tradeables (products traded internationally, and more influenced by the exchange rate than by the interest rate). We have a slightly bigger problem, and that discussion about inflation targets didn't help, it even got worse. It coincided with the onset of (international) turbulence, and the interest curve opened (interest rates rose). The Brazilian economy is growing at an impressive rate, which is healthy. But this rise in inflation is a short-term challenge. Monetary policy may have to change direction, and the government and society will have to deal with it. The Central Bank is very exposed at these times.
 
 
 
 State - And in the medium and long term, as Mr. do you see Brazil?
 
 
 If we look at Brazil 15 years ago and today, the country has taken an immense leap, and transformed itself into a much stronger, much healthier economy. We have succeeded in advancing institutional reforms ranging from credit to the design of regulatory agencies, to social policy that is now contributing to reducing inequality and poverty, to the conduct of macroeconomic and fiscal policy. This movement of the Brazilian economy is similar to what happened in several countries. However, our distance from the center may have increased, as other countries have done more than us in less time. We spent more time to do it, took longer to start, and did a lot at half-ass. Brazil is much better than it was, but not so well. There are great difficulties. We have a whole agenda of reforms to guarantee a downward trend in the tax burden that did not take action. As long as we signal, with Social Security, for example, that we will need a high tax rate, perhaps increasing, to finance public spending, we will have difficulties to sustain long-term growth. On the other hand, the government's tax reform proposal is very good.
 
 
 
 State - Mr. talked about other countries going faster. Can you exemplify?
 
 
 If you take Spain, at the end of Francoism, and Brazil in redemocratization, there were differences between the two countries, but not so significant with regard to the stage of development. In a decade, Spain tampered with bankruptcy law, the labor regime, Social Security, incentives for long-term savings. It has become a very close country, from an institutional point of view, to the Anglo-Saxon countries, to the developed countries. Some countries did a lot, like Spain, like Ireland, which put fiscal policy in order, monetary policy in order, which made complete institutional reforms. I think that, despite everything that Brazil has done in the last 15 years, today we are more different from Spain than we might have been in the 80s. Because we did less, we did it in half. This creates an ambiguous feeling. People complain: "We have already done the pension reform". We have already done several, and the way they are done, we will have to do several others.
 
 
 
 Estado - What is your analysis of Social Security?
 
 
 This discussion of whether it has a deficit or not is surreal. Whether there is a deficit or not in Social Security, whether the CPMF should be considered as revenue for the INSS, or whether assistance expenses should be excluded - this discussion is almost intellectual pickling. The problem is this: spending on Social Security has increased a lot in the last ten years in Brazil and will increase even more, for two reasons. First, because several elderly people who did not have access to public resources, called Social Security or assistance, started to have it. We have significantly expanded the population covered, and I think it is very good that the country provides minimum living conditions for the elderly. Second, there is a general question, of the world: people lived 60 years, and now they are 80. In Brazil, our life expectancy is not 80, but in new generations it is already. And in various parts of the world, the retirement age has been raised, from 55, 60, to up to 70, sometimes more. In Brazil, then, as you retire very early, and people live long, you have to increase the tax burden to cover. We will end up taking the CPMF in full and giving it to Social Security, and in ten years we will create a CPMF 2. That's it, or else do what the rest of the world does, which is to increase the average retirement age.
 
 
 
 Estado - What is your analysis of the issue of infrastructure in Brazil?
 
 
 I think that perhaps our greatest evil is that we were unable to consolidate and improve the regulatory framework in the country. We, who defended the model of regulatory agencies, failed to convince society that agencies were good for investment, for growth, for the development. Since the FHC government there has been a great debate about the agency model, and this debate has intensified in the change of government. I think that part of the government and part of the judiciary were touched by the idea that perhaps the agency model was not the best. That perhaps the companies had extraordinary profits, and that perhaps the public interest was not being better served by the design of the agencies. And there were very tough actions in relation to some sectors, as in the case of health insurance, electricity, telephony. In the first year of the government, there was a whole debate about telephone contracts with Anatel (National Telecommunications Agency) and several judges gave injunctions against expected readjustments.
 
 
 
 State - And mr. do you think this attitude had consequences?
 
 
 I think that, four years later, it becomes clearer that the central theses of the critics were not correct, that the companies had extraordinary profits, that the contracts could be revised without important consequences on the investment decision. Investment has declined sharply in vital areas in recent years, largely because of companies' insecurity about the strength of contracts. We did not have, for example, the investments we wanted in the electricity sector, and in several other areas of infrastructure. Today, large insurers no longer offer individual health insurance, they only offer it to companies.
 
 
 
 Estado - The aerial blackout has led many people to question the independence of regulatory agencies.
 
 
 I think this case shows the importance of good institutionality, of the process being well conducted all the time, the nomination being the most appropriate, the Senate fulfilling its role in evaluating the candidates in the most appropriate way, of having a clear regulatory framework to establish the roles that should be played by the agencies and how their executives should be periodically evaluated by the Senate. In addition, agency is not for everything, sectors that were not supposed to have an agency were placed in the model.
 
 
 
 Estado - Aviation had to have regulatory agency
 
 
 It is a good debate. Regulatory agency is for when there are long-term investments, in sectors with very high fixed costs, very low marginal costs, and very long investments, which take ten, 15 years, spanning several governments. Someone invests, and there is a risk that some government, or even the Judiciary, will argue, after the work has been done, that “not so”, that the cost to produce one more unit is very low, that prices should be minors, breaking the established contract, or expropriating the concessionaire. Only, with this risk, companies prefer not to invest. So it was to resolve this issue that the world - it was not Brazil - invented the regulatory agencies, as a state body independent of the government, but with accountability to the National Congress, for sectors such as telecommunications, electricity, transport.
 
 
 
 Estado - What other factors are impeding investments in infrastructure?
 
 
 We have very complicated institutional issues. Take the environment, for example. If an Ibama technician authorizes any work, and the prosecutor disagrees, he can criminally prosecute the Ibama technician for individuals. You criminalize a technical decision. It is not a sign of bad faith, it is disagreement. I mean, with a sword like this over your head, who's going to authorize anything? This is a cost to society.
 
 
 
 Estado - But isn't the issue of the environment a legitimate concern?
 
 
 It is not just a question of development versus the environment. It is worse than that. What you have today is a great inability to analyze cases, to make decisions. Today, we have great paralysis. Of course, there is always a “trade-off”. Which impacts are acceptable, which are not, and what costs society is willing to pay to preserve the environment, such as jobs or income that will no longer be generated. This is a typical problem of social choice. The problem is that today you are unable to make decisions due to personal risks. The Public Ministry and the Judiciary are very important, but in some cases their members seem to try to replace the public official in the decision to be taken, which creates insecurity and paralysis. This problem today does not occur only in the environment, and it makes public sector management less and less effective. If instead of analyzing the illicit, one begins to discuss the technicality of the decision, the good functioning of the government becomes increasingly unviable. Above all, when technical disagreement is accompanied by criminalization of the public manager. Society rightly complains about impunity, the guilty parties released. However, there are also many civil servants who have been wrongfully prosecuted on the basis of purely technical disagreements.
 
 
 
 Estado - What are the consequences of infrastructure paralysis?
 
 
 To answer this question, it must be added that, in addition to the paralysis in the public sector that I have described, there is resistance from part of the government and part of society to privatize sectors that in the vast majority of countries are efficiently managed by the private sector. So things are not moving, and the consequence is that the Brazil cost is rising. It is increasingly expensive to deliver soy at the port, build a factory, have access to energy. This will turn into a loss of income for the country. Society will have a relative impoverishment. The lack of infrastructure increases the cost of the service, creates queues. The queue, the rationing, are sometimes the worst possible price. There is a line to deliver soy at the port of Paraná, a long line, all those trucks stopped. And, the costs come not only from the physical infrastructure, but also from the institutional one. The cost of resolving conflicts in Brazil is very high.
 
 
 
 Estado - Speaking of social policy, with mr. see Bolsa-Família?
 
 
 I was very surprised at the beginning of the government when left-wing intellectuals were radically against Bolsa Família, accused the Ministry of Finance of unduly interfering in social policy, and, above all, argued that allocating resources specifically to the poorest, or focusing on social policy, as it was called, was a big mistake. Bolsa Família is an improvement of programs that started during the Fernando Henrique administration, and that were developed in a fragmented way. We know that the highest percentage of poverty is in families with young children. And it was also known that if anything helps this child, when he becomes an adult, to get out of poverty, it is schooling. The objective was to unify the resources of the various social programs that already exist, to allocate them to these families, with various conditionalities, such as that children should be vaccinated, attend school, etc. Thus, the program, on the one hand, guarantees some minimum income for the family, and, on the other, seeks to encourage the child to stay in school. Bolsa Família has had a significant impact on inequality. Now, you have to be careful, because the program can become very expensive or become ineffective, and social resources are important for health, for education. And Bolsa Família is a program that has costs. Furthermore, like any social policy, or medical treatment, it has side effects.
 
 
 
 Estado - What do you mean?
 
 
 There was the idea at the beginning that the program should focus on very poor and very homogeneous regions. Thus, even if the wrong transfers occur, the error is small, because almost everyone who will receive is really poor. In large, more heterogeneous urban regions, the program has incomparably greater challenges and may not work as well: transfer mechanisms may be subject to the problems we know so well, of influence peddling, electoral use, corruption. Furthermore, how do you know who to transfer the funds to? There is no money for everyone who lives in big cities and inequality is much greater, even in the poorest areas. How do you ensure that you are receiving the right people? And the program can affect the job market, generate incentives to increase the fertility rate in families. I see with concern the fact that Bolsa-Família is growing a lot, perhaps indiscriminately, which can even make it very expensive. It is a risk to adopt the program where it may not work as well, it can burn a good program.
 
 
 
 Estado - What would be the way for the Bolsa-Família?
 
 
 With families already registered in the poorest regions, you could start to have a more in-depth discussion about what additional social policies could be made to lift them out of poverty. The program is already reaching the poorest, the most deprived places in Brazil. But is it working? Do you have anything extra to give? Is there any lack of infrastructure or education for these families? What do they need the most to get out of poverty? Will these children who go to school actually continue and progress in life, will they be able to have a better quality of life than their parents? There's a lot that we don't understand. Perhaps it is time, given the program that exists, to study what additional policies we can do to actually help these families, or the children of these families, out of poverty. Instead, we are expanding into regions where control is much more difficult, where ensuring that resources actually reach the people you want is more difficult.
 
 
 
 State - A reform that does not seem to have started is labor.
 
 
 In fact, we didn't do that. The problem in Brazil is that the debate is very prejudiced. If you don't like the diagnosis, discard the doctor. If I say that I think that labor legislation today worsens the job market, reduces access to employment, if I say that it greatly increases the cost of dismissal, and therefore it generates a cost on admission and discourages the expansion of employment, if I I think it makes the worker's life worse, and I list the reasons, people say it is because I am against the worker and for the company. The argument is disqualified because the conclusion is disliked. Like the patient who changes doctors because he didn't like the cancer diagnosis, and prefers another one who said it was just an indisposition and that nothing like a few cigarettes and enough chop to cure the malaise. This reminds me of the debate on social policy, when the government was going to launch Zero Hunger and First Job. We argued that there were intrinsic design errors, that the programs were not going to work, and then they said that we were against the young worker, or against helping the poor. It seems that people debate teleological social and economic policy, already knowing what they want to hear.
 
 
 
 Estado - How should the discussion be?
 
 
 I think that we should discuss public policy with the same care that we discuss new drugs: tests, control groups, statistical analysis, monitoring over time of the results. That's because even the best conjecture can have unexpected side effects. Above all, one must avoid debate based on the picturesque example, or the argument from authority. When I was a boy, there was always someone who argued that smoking was okay because there was an uncle, or a grandfather, who smoked and was very old. To use another example from my childhood, there was this figure of the taxi driver who always had a thesis, between curious and stupid, to solve some big problem, from the Arab-Israeli conflict to world hunger. There was always some logic to the madness of the argument, obviously very little centered on any careful analysis of the facts. Brazilian intellectuals have a bit of this taxi driver syndrome. Large theses are built with the aim of arguing some complex web of causality, followed by generic public policy prescriptions, which are barely standing. The most curious thing about these approaches, which somewhat resemble esoteric and homeopathic arguments, is the rejection of usual tests of the scientific approach and the careful use of data, whose only role for these intellectuals seems to be to illustrate the argument and not to test it statistically. .
 
 
 
 State - Mr. find it difficult to discuss the problems in Brazil?
 
 
 I think that the left-right debate in Brazil disqualified the importance of management, of technique in public management. Everything became politics, everything became interest. They are all like the taxi driver of my childhood saying what is the best procedure to be taken. When it comes to having heart surgery, everyone thinks the technique is important. But you don't have to do social policy. Worse, instead of debating the arguments, they often seek to disqualify the author from the divergent position, who would be defending some obscure interest. There is a refusal to debate facts and data, and a preference for individual prejudices or opinions. And I don't exchange good empirical evidence for any prejudice or opinion. In the discussion of the readjustment in the price of telephony, energy and health insurance, decisions were easily made without any basis that, in the long run, damaged many people's lives. And it shouldn't be like that. Sometimes people want to do good and end up doing evil.