My name is Samuel Pessoa.
Today, I work at the Institute of Economics at Getúlio Vargas Foundation (FGV)
I am head of economic research at Julius Baer Family Office
and I have a weekly column in Folha de São Paulo.
I think this poor definition of the rights to property in Brazil today
is greater in rural properties.
And as we get closer to the Amazon, the problems increase.
We are thinking about the right to property,
we are thinking about land, or an apartment, a housing unit.
We are thinking about the person who lives in a slum,
without the presence of the State in a formal sense,
without the most basic public sanitation services.
We know that in the 19th century we made two serious mistakes.
We made a mistake in the Land Law.
And in the issue of slave labor.
In the Land Law, in a country like Brazil, which is huge,
with a lot of public lands,
we did not create a land distribution mechanism for poor people.
We didn't stimulate agricultural production and a more effective, more efficient peasantry.
And to distribute land is to distribute wealth, is to give a bargaining power
so that the person can work and generate income for themselves,
which increases the remunerations in the cities and therefore generates
a more rational use of the workforce, not to mention productivity.
But we had other difficulties besides the Land Law.
We have the difficulty
that the Brazilian topography is a mess,
transportation in Brazil is much more expensive than it is in the United States.
This high transportation cost made it difficult to build markets
and also makes it difficult to distribute land.
In a place where transportation cost is very high,
the land far away does not have much value.
Because as a state-owned company, regulation works very little.
When the company is state-owned, the regulatory agencies do not intervene,
you cannot fire the director of such a company, you have a series of political issues that stop you.
Not to mention corruption in the purchase of resources.
But I am talking straight from the operational perspective.
When a company becomes a private company,
there is an immediate obligation for the private sector to comply with what is written in the contracts.
So this difference is brutal.
My name is Elena Landau, I am an economist
with a master's degree in Economics at PUC and a law degree by the same university.
I was a teacher for many years,
worked in the Fernando Henrique administration doing the privatization of state-owned companies,
then specialized in regulation in the electricity sector.
Today I am chairman of the Academic Board of Livres.
In economy-related companies, which are not companies providing services,
privatization is essential because the State is inefficient in much of the services provided.
Not because the civil servant is more incompetent,
but because they must obey a series of rules, public tenders, hiring processes,
and reorganization of labor which the private sector doesn't.
So when you privatize an economic activity, you improve efficiency in service provision.
Without productivity, we do not grow, how are we going to include people in the labor market?
I have all the arguments for you about privatization, all the arguments about reforms.
How will this improve the lives of the base of Brazil's social pyramid?
After the privatization of electricity and also telecommunication companies,
there was a whole change of regulation from the consumer's point of view,
and the poorest consumers, because a social tariff was sought after, a whole standard was established.
What matters is that we managed to include a population
that was totally excluded from society in terms of cellphones and electricity in their homes.
You can imagine the difference in a person's life
if they can have electrical energy to conserve food, for example,
if they can connect with the world through a television.
"Privatization! Because Brazil can't fall behind!"
"Government of Brazil: our priority is the citizen!"
What are the great reforms we have today?
We have to do the tax reform.
First of all, for simplification, right?
There are two equivalent objectives, one of which is a simplification to improve the ability to do business in Brazil.
An abiility to anyone!
Imagine a low-income population having to go through
the labyrinths of tax payments, starting a company, and so on.
Second of all, because of regressive taxation.
One of the causes of inequality in Brazil is regressive income taxation in Brazil.
The rich pay very little tax in Brazil.
The Brazilian indirect tax system
- we need to think like this -
there are indirect taxes
that are imposed on production.
And what is income taxes?
Income tax in Brazil is super simple, very sophisticated,
it is much easier to make an income tax return in Brazil than in the United States, for example.
It is much easier, you download the program on the Internet, it is easy to do.
We are doing great on this.
So, what is the problem with the complexity of the indirect tax structure?
What are we talking about?
We are talking about the service tax, in general, a municipal tax.
We are talking about the tax on the circulation of goods,
which is actually a tax on the manufacturing industry and goes to the state government.
The point is:
we have these taxes, and we have a lot of special regimes.
So we have a conflict to check if Crocs are shoes or clogs, because a shoe has one tax, a clog has another one.
And this complexity first generates a huge administrative cost.
It is not that we need to increase the tax burden,
we need to redistribute the tax burden in Brazil.
It is totally disproportionate to our income distribution.
Tax reform will greatly improve the life of society at the bottom of the pyramid.
It will reduce regressive taxation that generates inequality,
it will simplify the way of doing business,
it will allow you to increase productivity and employment.
As there is a lot of complexity, in addition to having this high cost of compliance
- which is this administrative cost of processing taxes -
we also have a huge number of disputes
Why?
Because there is a misleading interpretation.
Sometimes a company's accounting department interprets
a standard different than the IRS or State Revenue Services, generating litigation.
Therefore, I think the biggest bottleneck for the operation of businesses in Brazil today is
perhaps the very high level of compliance cost, the enormous complexity of the country's tax structure.
But we must, the Brazilian State must deliver more
with the number of resources it absorbs from society and the private sector.
And that's where an administrative law agenda comes in.
We must think about how we can make reforms that improve the efficiency of the state.
If you take the three basic areas the State deals with:
safety, health, and education, compare these three areas with international indicators.
According to what Brazil spends, there is no doubt that health is the area in which we are better.
The best area of the Brazilian state, the most efficient one is health.
And why is that?
Because health is the area of the basic public services that has more public-private partnerships,
in which the private sector shares more obligations and contributes together with the public sector to offer the service.
So, there are some divisions, there are things the public sector does better,
activities the private sector does better, then you distribute the obligations.
A Charter School means taking a public school,
making a contract for the management of that public school with some third-sector institution
- it may even be a religious institution or not, it does not matter -
and that institution manages a public school by private efficiency parameters,
but meeting a contract for the management of performance goals.
And evidently, performance goals are kids' learning.
I think a Charter School is a little bit about us walking in the educational sector for more public-private partnerships, and it is an option.
Look, I have been working with changes in management of soccer clubs
since I left BNDES (National Development Bank) because I compared soccer teams with state-owned companies.
When I saw what privatization has changed in terms of governance, management, quality, and so on,
I said: “It is possible to do this in soccer".
We want a State that gives conditions, quality of life to the entire population.
And when we take it out of economic activities, it has more resources and more time to devote to what is, in fact, its job.
Although complemented by the private sector, it is the last resort provider.
I think Brazil has to face its priorities at the moment, in the very short term.
Which is, let's say, the pandemic outcome.
The pandemic outcome is very tragic if we look at the numbers.
Increased poverty, food insecurity, inequality, education, and everything.
But the pandemic also showed us that when civil society organizes itself
– I had the experience with the Maré slum, or Heliópolis, or any of these slums –
if you look, they survived despite the State.
The State has completely failed in its presence,
in low-income communities, in these conflicted territories.
It was the people who put a water faucet in the middle of the streets,
they came up with the DIY mask idea, because eight people were living in the same room,
so they developed new hygiene habits all by themselves.
So, we have to have a short-term attack on this subject in the future.
But in the long run, we have to prepare Brazil for a different future
which for me is to invest in children.
Early childhood, which starts from 0 to 6, then basic education for children.
When I say investing in children, it means investing
in the family, the environment, safety, nutrition.
This has to be a focus of public policies.