What Cues Can South America Take From Europe?

Over the past few years Greece has probably made the news more than ever before. Whether it be protesters in the streets, election results, or the announcement of some new government policy, whatever happens in Greece seems to be written about in all corners of the world. Just recently the fierce rhetoric of a relatively obscure populist left-wing party made international headlines and fueled new speculations about the future of one of the world’s major currencies, if not the world economy and financial markets. The eventual ascent of that same party, Syriza, to Parliament has all eyes both on the Old Continent and across the world focused on its plan of action. Mind you, we are talking here about a country whose GDP represents less than 0.4% of the world economy. In the meantime, incessant government intervention into the economy has caused major upheaval in several countries in South America. Venezuela is currently experiencing the worst depression in decades, Argentina’s economy is in shambles once again on the heels of its most recent default, and since the World Cup bubble popped Brazil has equally dipped into recession. These countries dwarf Greece in terms of population as well as contribution to world GDP, and some of their resources make them important players in global commodity markets. Yet aside from some news outlets reporting on Venezuelans having to stand in line for hours for even the most rudimentary items or the mysterious death of a federal prosecutor in Argentina, major media are hardly paying attention. The latter, far from being the result of a massive media cover-up, reflects a general sentiment in South America. Here in Chile, for instance, nobody in their right mind would dream up some theory about the aforementioned woes causing a spillover effect that might bring the entire …

Lessons Unlearned From Brazil’s Recession

As she was sworn in for her second term last week Dilma Rousseff publicly stated government spending would have to be cut. Yes, you read that right; the leader of the Workers’ Party just said her own administration is spending too much taxpayer money. It might be a day late and a few billion dollars short, but could it be Brazil’s president just had her Eureka moment? Years of spending billions of dollars on stadiums and infrastructure for a 4-week event has left the Brazilian government with little to brag about. While the world has moved on to other things the World Cup’s relics lie mostly unoccupied in a land of poverty, police corruption and gang violence. After the artificial boom created by said event the bubble has definitively burst. Yet to hear one of South America’s most adamant cheerleaders of government intervention admit to it is remarkable to say the least. Government figures show Brazil’s economy had already fallen into a recession before the World Cup even got underway. This year the central bank expects the economy to grow by a dismal 0.38 percent while inflation hovers north of 6.5 percent, well above the 4.5 percent target rate. Industrial production is forecast to expand by no more than 0.7 percent, with the country’s current account deficit widening to $78 billion. Predictable though the downturn may be, its sheer magnitude is forcing the Dilma administration to consider some rather uncharacteristic measures. Or is it? The budgets of a few dozen ministries and some secretariats may be cut by one-third, reportedly amounting to some $700 million in savings, the new Finance Minister Joaquim Levy was quick to add expenses listed in the constitution will be unaffected – a constitution about as thick as Ayn Rand’s novel Atlas Shrugged, by the way. …

Saving the Amazon From Socialism

As reported by the BBC last week, Brazilian authorities have dismantled a criminal organization believed to be the “biggest destroyer” of the Amazon rainforest. The gang stands accused of invading, logging and burning large areas of public land to put up for sale for farming and grazing. Their crimes, said to be worth more than $220 million, could land them up to 50 years of jail time if found guilty on all charges of invading public land, theft, environmental crimes, forgery, conspiracy, tax evasion and money laundering. Representing more than half of the world’s rainforests the Amazon is the largest and most biologically diverse tropical rainforest on the planet. Its millions of square miles are home to the largest collection of living plants and animal species in the world. While the Amazon is largely contained within Brazil, its 2.1 million miles span a total of nine countries from Peru on the Pacific side of the continent to French Guiana on the east coast. Given the vast size of the area it is little wonder that some (illicit) activity goes unnoticed. In the case of the Amazon, however, there is a major contributing factor. One of the aforementioned charges likely to catch a libertarian’s eye is invasion of public land. The real underlying problem, then, becomes readily apparent: no one owns the Amazon! Even the BBC’s correspondent in Brazil is quick to point out that political and police corruption coupled with the federal government’s ineptitude allows loggers and illegal miners “to operate with impunity”. So here we have a situation in which a lack of real ownership of land predictably leads to poor conservation of the area and its natural beauty. The solution, then, should be equally obvious. And it is. Contrary to mainstream environmentalist thinking examples of successful private management …

Brazil: Time For a Property Rights Revolution

During the Language of Liberty Institute’s Liberty Seminars in the south of Brazil last May, the attendees were treated to a talk about freedom and human prosperity. Using the Economic Freedom of the World report CATO’s Latin America expert Juan Carlos Hidalgo made a convincing case for (economic) freedom as a prerequisite for human progress. One of the points he made about underdeveloped countries relates to how poor protection of property rights stifles economic growth. In Brazil this lack of recognition of property rights is most pronounced in the infamous favelas. In the years and months leading up to the World Cup the evictions generated some press, but now that the international spotlight has shifted elsewhere it is business as usual. While major sporting events in third world countries have become somewhat notorious for leading to these practices, they certainly are not a requirement. One state over from Rio de Janeiro is Minas Gerais, epicenter of Brazilian coffee and milk production. Its capital and largest city Belo Horizonte boasts the third largest metropolitan area in the country after Rio and São Paulo and is a major financial hub in South America. Consequently it has attracted swaths of lower-class jobseekers who, lacking the financial resources necessary to buy a home in the city, opted to build their own communities on the outskirts of town. Now, local authorities are threatening to forcibly evict the 8,000 families who have taken up residence there. Leaflets spread over the region announced military police would – absent a court decision – follow their orders to repossess the land “in accordance with the constitution and the fundamental principles of human rights”. Residents of the three communities, however, have unanimously decided to stay in their homes after the state government pulled the plug on negotiations with them. The …

Privatize Water!

In recent days reports have been coming out about authorities’ struggle to battle a water shortage in Brazil’s two major cities of Rio de Janeiro and São Paulo. Ostensibly caused by a severe drought, the crisis has even sparked fears of an impending “water war”. Measures taken earlier this month to reduce the water flow at a major dam were unsuccessful to say the least, cutting off running water to families in some neighborhoods for as long as 12 hours a day. Unsurprisingly, the vast majority of the water system is government-run without much debate. After all, for all its ubiquity, government incompetence does not always overtly affect people’s daily lives. Now that it does, it might be an opportune time for Brazilian freedom advocates to voice their opinions. While some market reform has taken place in recent years, the process has been severely stifled by jurisdictional conflicts fueled by Constitutional as well as other regulations. Besides establishing a national system of water resources management the Constitution also defines criteria for granting rights of use, and it regards surface water and groundwater as property of the states. The National Water Resources Policy even specifies many uses of water that require government permission. A World Bank publication analyzing market reform in urban water supplies in Santiago de Chile found “surprisingly large” net benefits in economic welfare despite significant price hikes. After years of losses largely imposed by regulatory obstacles the Santiago Metropolitan Works Enterprise had become so underfunded it could no longer perform basic maintenance on its systems. Some of the positive results included almost 100 percent coverage of expanding demand, better water pressure, fewer interruptions of service and higher wages for employees. The outcomes were so positive, in fact, that full privatization of the entire urban water supply and sanitation …

The State of Firearm Freedom in Brazil

Walking down the street here in Brazil it quickly becomes apparent political campaigns are in full swing. Signs displaying the slick smiles and hollow rhetoric of (would-be) politicians abound, and the same rhetoric emanates from megaphones on small vans driving around town. But besides the more high-profile presidential elections there will also be state elections injecting more specific issues into the public debate. Recently one such sign immediately caught my eye. With an image of a firearm and the text “contra o desarmamento” (against disarmament) it was impossible to miss. A firm believer in the right to self-defense, I felt compelled to find out more about a gun debate I was unaware even existed here. Having found out that gun laws are very much like the ones in my native country of the Netherlands I figured the issue would not even be on the table. Fortunately I was wrong. In 2003 the Brazilian government passed a law dramatically restricting gun sales while all but outlawing their carrying by civilians. Termed the Disarmament Statute it forces potential legal gun owners to go through a litany of paperwork, checks, and tests just to own a firearm and keep it at home. A carry permit can still be denied if it authorities determine “genuine reason” was not provided. Yet in terms of bringing down crime rates the Statute has been a dismal failure; a decade after its adoption Brazil has 50 percent more gun deaths than the United States despite having110 million fewer citizens. Undeterred, Brasilia put forth another initiative to further clamp down on civilian gun ownership in 2005. Luckily this time lawmakers at least had the decency to call a referendum – the first of its kind in the world. The proposed law was meant to entirely ban the sale of …

Pacification and Brazil’s War on Drugs

For decades, Brazilian favelas (slums) have been under the control of highly organized, well armed gangs. Financed by the drug trade and armed with weapons often bought from the police the gangs rule their territory, rivaled only by other gangs trying to win turf. Up until a few years ago even law enforcement officers dared not enter. But spurred by the pleas of a large voting bloc and especially this year’s World Cup and the 2016 Olympic Games a change in policy was deemed necessary. In an effort to polish up Brazil’s image abroad a new policy of pacification of the favelas was adopted in 2008. Aimed at eliminating the gangs’ control the policy can be divided into three phases: (1) reclaim territory formerly lost to drug gangs, (2) expel them from those areas and (3) integrate resident communities with the rest of the city. This last phase theoretically includes long-term government initiatives to improve quality of life in pacified favelas, although this has been called into question by residents. Besides, when being a bureaucrat becomes as lucrative as it is in Brazil, one should not be surprised to hear would-be politicians make any and all campaign promises necessary to win political office. As mentioned in a previous article Brazilian police is notoriously corrupt and consequently distrusted by many people, particularly in the states and cities of São Paulo and Rio de Janeiro. Perhaps that is why two special police departments were set up to establish closer ties between them and local residents: the Batalhão de Operações Policiais Especiais (BOPE) and Unidades de Polícia Pacificadora (UPP). Although often referred to as “community police” these forces can call for military support – as they did most recently in 2010 and 2011. In select slums gang members were successfully chased out and …

Brazil’s Most Controversial Government Program

A common characteristic of developing nations is the high rate of urbanization and subsequent disparate development between regions. Brazil being no exception to this rule, the effect is quite far-reaching in the healthcare industry. More than 90 percent of medical professionals are concentrated in areas that cover less than 10 percent of the country. A program launched by the federal government in 2011 to address this problem failed to attract but one third of the required number of doctors to address this problem. Consequently, it was replaced with a new program: Mais Médicos (more doctors). Overseen by the World Health Organization, this three-year program aims to alleviate the unequal geographical distribution of healthcare professionals by bringing them in from abroad. Fifteen thousand doctors from Cuba, Portugal, Argentina, and Spain were to work in these remote areas. Yet while government initiatives with such laudable goals generally tend to garner plenty of popular support among Brazilians, Mais Médicos has been shrouded in controversy from its inception. Industry representatives, students and the Ministry of Labor have taken aim at the program, A conservative magazine even went so far as to accuse Cuban doctors of being “communist spies” infiltrating the country. In a mere 12 months (Mais Médicos went into effect in July 2013) the program has become arguably the most controversial one implemented by the Dilma administration. While the Cuban healthcare system has a relatively good reputation the fact that a significant chunk of Brazilian tax money directly funds the communist Cuban state makes some feel quite uncomfortable. The Brazilian Medical Association and the Federal Council of Medicine have been encouraging healthcare professionals to voice their opposition in the form of protests and strikes. They even went to the Supreme Court last August in an attempt to roll back the program, stating foreign …

A Critical Look At a World Famous Welfare Program

Hailed by The Economist as a “much admired and emulated anti-poverty program”, the signature legislation of Brazil’s last president Lula da Silva was the Bolsa Família (Family Allowance) program. Aimed at alleviating the misery of the poorest segments of the population, the program provides financial aid to families and free education for children whose parents cannot afford to send them to school. The largest conditional cash transfer in the developing world comes with strings attached, though. The eleven million families receiving the financial aid – on average $35 per month – commit to keeping their children in school, adhering to the government’s vaccination schedule, and taking them for regular health checkups. In a country plagued by persistent inequality and poverty widely blamed on an unjust system, the popularity of a program of direct wealth transfers to the least privileged should be no surprise. Still, might the superlatives expressed by the likes of The Economist have been a little overdone? At first glance the numbers seem impressive; extreme poverty has been halved from nearly 10 percent to just over 4 percent, income inequality has fallen, and about one fourth of the population has benefited from the program. In addition, the initiative has been touted for its decentralized nature and target accuracy in reaching those in the most dire of circumstances. As Henry Hazlitt might have pointed out, however, there is more than meets the eye. It does not take a genius to understand that since the government has no money to spend it has to fund its operations through taxation, the printing press, or by going into debt. In the long term, therefore, the Bolsa Família program cannot be said to contribute to real wealth creation. Worse yet, regardless of the preferred means of funding itself these government programs necessarily extract …

The Self-Regulating Power of the Market

A common objection to a libertarian society is the “without the government corporations would rule the planet” argument. The theory goes something like this: having few or no laws would give business free reign to run roughshod over our rights since the people have no recourse if they are violated. By extension the idea of limited (let alone no) government is quickly dismissed as a utopian illusion thought up by naïve dreamers who think corporations are run solely by selfless do-gooders. Fortunately those that have taken a more than slight interest in the message of liberty know better. The majority of libertarians are not corporate apologists but rather critical thinkers who understand that while no system is perfect, centralizing power into the hands of a relative few is least likely to genuinely protect people’s rights. Besides, while government can – and routinely does – secure your compliance with the threat of “legitimate” violence, a business that fails to live up to its promises can either step up its game or watch while its customers take their business to a competitor. Libertarian theory basically holds that built-in market mechanisms reward good business practices and penalize bad ones, thereby removing any need for government intervention. After all, a free market knows no barriers to entry that would stop an entrepreneur from filling the void left by competitors. In many cases however, one does not need to go that far at all. Since reputation is key to the survival of any business the free flow of information protects customers from mistreatment. In this information age that has become truer than ever. Here in Brazil a good example is a website and mobile application called ReclameAqui (“complain here”). Dissatisfied customers use such websites to post their grievances about a product, service or poor customer …