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Country Commercial Guides for FY 2000: Brazil Report prepared by U.S. Embassy Brasilia, released July 1999 Note*

CHAPTER III.   POLITICAL ENVIRONMENT

Nature of Political Relationship with the United States

The United States was the first country to recognize Brazil's independence in 1822 and the two countries have traditionally enjoyed friendly and active relations encompassing a broad political and economic agenda. By many measures -- geographic size, population, and gross economic product -- Brazil is Latin America's dominant country. It has played an important role in international collective security efforts -- from sending an expeditionary force to the Allied campaign in Italy during World War II to dispatching a battalion to Angola as UN Peacekeepers from 1995-1997 and coordinating the Military Observer Mission on the Peru-Ecuador border (MOMEP). It has also led political efforts for economic integration in the Southern Cone of South America.

With the Inauguration of Brazil's internationally oriented, reformist President Fernando Henrique Cardoso on January 1, 1995 and his reelection to a second term in 1998, U.S.-Brazilian contact and cooperation has intensified. This is reflected in the unprecedented number of high-level contacts between the two governments, highlighted by President Cardoso's state visit to Washington in April 1995 and President Clinton's reciprocal visit to Brazil in October 1997. It has also included visits to Brazil by First Lady Hillary Clinton, Secretary of State Albright, Secretary of Defense Cohen, Secretary of Commerce Daley and U.S. Trade Representative Charlene Barshefaky, and many other exchanges between U.S. and Brazilian cabinet and sub-cabinet officials. Apart from trade and finance, important topics of discussion and cooperation have included: United Nations reform and peacekeeping efforts; cooperation on the U.N. Security Council; nonproliferation and arms control; successful efforts to help resolve the Peru-Ecuador border conflict and support for democracy in Paraguay; human rights; counter-narcotics; and environmental issues.

Major Political Issues Affecting Business Climate

The Cardoso administration has made stabilization and reform of the economy and modernization of the state its highest priorities. The government's vaunted "Plano Real" stabilization plan dramatically lowered the annual rate of inflation. In 1998 the government passed a major constitutional amendment allowing public administration reforms necessary to consolidate economic stabilization and lay the groundwork for future growth and development in Brazil. Congress had already approved in 1995 constitutional amendments permitting private (including foreign) investment in the sectors of petroleum exploration, coastal and river shipping, telecommunications, and natural gas distribution, formerly reserved to parastatals. In 1996, it passed patent reform legislation. In 1997, it amended the constitution to permit reelection of the president, governors, and mayors. In 1998, it reformed the Social Security system, passed Civil Service reform and a number of emergency fiscal measures to deal with the economic problems caused by the Asian and Russian crises.

The need for judicial reform is widely recognized because the current system has led to backlogs of cases and shortages of judges. Lawyers often drag out cases in part because they believe it enhances the chances for a favorable decision and because they are paid according to the amount of time they spend on a case. At the appellate court level, a large backlog of cases hinders the courts' ability to ensure fair and expeditious trials. In a press interview, the president of the Federal Supreme Court complained about the volume of appeals that by law the Supreme Court must review. It takes 8 years to reach a definitive decision in the average case, a delay that the Supreme Court president considered unjust. The judiciary is, in many instances, unable to ensure the right to a fair and speedy trial, particularly in rural areas, where the judiciary is less capable and more subject to influence or intimidation by local landowners. In early 1999, a congressional committee of inquiry (CPI) began investigating the issue of judicial reform.

Brazil is a federal republic with 26 states and a Federal District. The federal government is comprised of the executive, legislative, and judicial branches. The system is governed by the 1988 Constitution, which grants broad powers to the federal government. The President may be elected to two four-year terms and appoints his own cabinet. The Congress consists of two houses, the Senate and the Chamber of Deputies. There are 81 Senators, three for each state and the Federal District, and 513 Deputies. Senate terms are for eight years (with elections staggered so that two-thirds of the upper house is up for election at one time and one-third four years later). Chamber terms are for four years, and Deputies are elected statewide. State representation in the Chamber is only loosely proportional. Each state is eligible for a minimum of 8 seats; the largest state delegation (Sao Paulo's) is capped at 70 seats. The net result is a system heavily weighted in favor of the less populated states.

In addition to geographic imbalance, Congress is characterized by a large number of political parties -- 16 in mid-1999. President Cardoso was elected by an alliance of his own center-left Social Democratic Party, the PSDB, and two center-right parties, the Liberal Front Party (PFL) and the Brazilian Labor Party (PTB). Brazil's second largest party, the centrist Brazilian Democratic Movement Party (PMDB), joined Cardoso's governing coalition after the election, as did the center-right PPB, the Brazilian Progressive party, in 1996 after its formation from three smaller conservative parties the previous year. Federal deputies and senators do not always vote with their parties, a consequence of weak internal party discipline. As a result, President Cardoso has had difficulty maintaining sufficient congressional support for many of his legislative priorities, despite the fact that his "coalition" parties hold an overwhelming majority of congressional seats. Among several opposition parties, the left-of-center Workers Party (PT) is the largest.

States are organized like the federal government, with three branches of government. Because of mandatory revenue allocation to states and municipalities provided for in the 1988 Constitution, Brazilian governors and mayors have exercised considerable power since 1989.

Presidential, congressional, and gubernatorial elections took place in October 4, 1998. President Cardoso was re-elected over his main challenger, PT candidate Luiz Inacio Lula da Silva, by a 53-32 percent margin. Municipal elections for the nation's mayors will be held in October 2000. The results of the congressional elections of 1998 left the balance of power in Congress largely unchanged.

Orientation of Major Political Parties

The following are Brazil's major political parties, in order of the size of their congressional delegations at the end of 1998 (since it is common for politicians to switch parties, the proportion of congressional seats held by particular parties changes regularly).

PFL    -   Partido da Frente Liberal (center-right)
PSDB   -   Partido da Social Democracia Brasileira (center-left)
PMDB   -   Partido do Movimento Democratico Brasileiro (center)
PT     -   Partido dos Trabalhadores (left)
PPB    -   Partido Progressista Brasileiro (center-right)
PDT    -   Partido Democrático Trabalhista (left)
PTB    -   Partido Trabalhista Brasileiro (center-right)
PSB    -   Partido Socialista Brasileiro (left)
PL     -   Partido Liberal (center-right)
PPS    -   Partido Popular Socialista (left)
PCdoB  -   Partido Comunista do Brasil (left)