Low level of execution is at the heart of the current backwardness…

article by Prof. Jerson Kelman*

Poor people standing in tight crowds at branches of Brazil’s national savings bank (‘Caixa’) to receive the monthly pandemic-survival handout of R$ 600 not only underline the inequality of the country we have built – presumably these are the citizens without bank accounts, willing to risk infection to get their hands on that vital money – but they also provide an embarrassing exhibition of the country’s inability to organize – in this case, to retrieve the names, tax numbers and addresses of the approximately 60 million Brazilians who live on the ‘margins’ of the official Brazil.

Hopefully the violation of ‘social distancing’ which this scene evidences will soon be solved by technology. If so, the aim of preventing the number admitted to hospital each day with the virus, needing intensive care, from being greater than the number leaving hospital (either recovering or dead) on that day will be supported. (If not, people die untreated.)

Brazil is also distributing public funds in the form of subsidized loans to companies, aiming to preserve jobs, and the functioning of essential services such as water and electricity. Without this action, the country’s productive capacity would be dismantled. With it – in contrast to a conventional war – it will be possible for the country to resume production when the crisis is over.

The challenge of debt

Inevitably, though, Brazil will come out of the crisis poorer and with more debt.

An effort of the order of 500 billion Reais is being talked about – enough to build a good housing unit for every single Brazilian currently living in a favela.

To preserve creditors’ confidence that the Brazilian government will be able to pay this new debt – and these creditors include us, Brazilians who invest in government debt backed by the Treasury – there is a need, in the short term, to limit all extraordinary expenses to those strictly related to the virus. We can’t afford to use these funds to piggyback solutions for problems that existed before the crisis.

In the medium term, we have to get back to producing as soon as possible.

But what is “as soon as possible”? This is not easy to answer.

Defining the rules for home isolation is a complex matter, which needs to be worked out not only by epidemiologists but by government administrators (developing healthcare capacity), economists (for forecasts on public finances), logistical managers, to make forecasts on bottlenecks, sociologists, to estimate potential social unrest – and mathematicians, on the spread of the pandemic.

It’s reasonable to suppose that public debt will rise from just over 70% of GDP to approximately 90%. How will this debt be paid? With inflation – as we did in the past, penalizing the poorest? With taxes on property? With an increase in present tax rates? Discussion on these alternatives will influence the political environment in the coming years.

The consequences of the crisis are so serious that it is possible that a miracle may emerge from the ashes of the suffering: an agreement on a new social contract, centered on reduction of inequalities, and increased productivity.

Based on the experience of countries that have been successful, there is no doubt that education is the most secure route to achieving this double objective – provided, obviously, that the focus is maintained for some decades.

But the situation also calls for more immediate parallel efforts. And perhaps the simplest, especially because it is already before Congress, is the proposal for administrative reform.

It’s unquestionable that Brazilian people receive service of much lower quality than it would be possible to produce with the total of taxes and other charges that they pay for these public services. Public managers that are competent and well-intentioned do not accept this. But they are, in general, immobilized by the web of bureaucracy exacerbated – in one of its most pernicious (and paradoxical) effects – by a presumption of blame, rather than, what should be the case, presumption of innocence.

Scaring the dishonest – but dissuading the honest

The exhibition of explicit scenes of corruption in recent years has had the unquestionable merit of inhibiting the activities of dishonest administrators, who in the past were sheltered by certainty of impunity.

At the same time, it had the adverse effect of making honest administrators more cautious, since the public now sees them all with distrust.

And in this environment, it is better for the individual to decide nothing, and postpone. Since diligence in public management wins no prizes, and lack of action is rarely punished, then at least nothing will happen – other than the population being badly served.

This was well argued in the excellent article “Abundance and scarcity of funds in the public sector”, in Valor newspaper, of April 16:

“It’s easier for the administrator to not spend, then take a risk. If there is no reward for results, nor for effort, why expose oneself to risk?

Doing nothing is, paradoxically, the decision that is best for the individual – in spite of being socially a tragedy.…

The bodies that oversee Brazil’s public management need to rediscover their mission: that of guaranteeing good use of public money – not preventing it being used at all.

The numbers are clear: the bleeding that needs to be staunched is in fact the low level of execution, and this is dozens of times more important than the obsession with preventing corruption, especially in the procurement practices of governments below the national level”.

We need Congress to produce an administrative reform that encourages signing of management contracts, enabling the public administrator to adopt more efficient management processes, based on meritocracy, as already applied in the private sector.

This should also tend to prevent contracting of more inspectors than is technically necessary for each event where there is a risk of corruption, or incompetence. An exaggerated contingent of inspectors tends to make life more difficult not only for the corrupt, but also for the honest.

Brazil: a more reliable media is emerging

In these days of crisis, more and more Brazilians are distrusting “fake news”, and they are looking to the media for quality information.

The Brazilian media have in general corresponded to this renewed level of trust, illuminating not only the most horrible examples of malfunctioning of the public structure – when public money is wasted or the citizen disrespected – but also cases in which precisely the contrary happens: cases of public servants, especially health professionals, going to extra lengths to produce a good result.

This, in fact, is an important change in our culture – which in the past has tended to ridicule heroes, and cultivate crooks.

*Prof. Jerson Kelman, who lectures at Rio de Janeiro Federal University, has served as CEO of the important Brazilian utilities Sabesp (water, São Paulo State) and Light (Electricity, Rio de Janeiro); and as Chair of Brazil’s two key regulators: Aneel (Electricity) and ANA (telecoms).

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