The Minas medicine
IN 2002, when Aécio Neves was elected governor of Minas Gerais, Brazil’s second-most-populous state was close to bankruptcy. It had an annual deficit of 940m reais ($270m at the time); three years earlier it had briefly defaulted on its debt, a move which inadvertently triggered a devaluation of Brazil’s currency.
Mr Neves set a team of public-management experts under Antonio Anastasia, an academic, to work. They boosted tax revenues, streamlined procurement and cut costs in what they called a “management shock”. The state government’s 21 secretariats were merged into 15 (they have since crept back up to 19). Mr Neves took a 45% cut in salary, capped public-sector pay and left 3,000 jobs unfilled, rather than using them in the traditional way to reward political allies.
With the deficit gone, Mr Neves won a second term before stepping down in 2010 to run for Brazil’s Senate. Such was his electoral pulling-power in his state that his stand-in, Mr Anastasia, was elected governor that year with almost twice as many votes as the runner-up, who had been in politics for a quarter of a century.
Businessmen rate Minas as the country’s best-managed state, according to a recent poll by Macroplan, a consultancy. The state spends over 8% of its budget on public investment, down from 13.2% before the world financial crisis in 2008 but up from 5.1% in 2003. Poverty has fallen faster than in Brazil as a whole. Minas has the best-performing schools and comes fourth in health care. Its performance-related pay system for state employees, which rewards teams rather than individuals, is held up as a model by the World Bank.
Over the past decade mineiros, as residents of Minas are known, have become used to the notion that they deserve good services in return for their taxes. All the state’s schools must display their results in national tests by the front door and hold open days to tell parents how they intend to improve.
Thanks partly to his success in governing Minas, Mr Neves is close to becoming the candidate of the Party of Brazilian Social Democracy (PSDB), the main opposition, in next year’s presidential election. The PSDB’s Minas branch sums up the management shock as “spending less on government and more on citizens”. That message could appeal at a national level. Greater prosperity means that non-economic issues, such as poor public schools and health care, have moved to the top of the list of Brazilians’ concerns.
The slimming of Minas under Mr Neves stands in contrast to the bloating of the federal government since the centre-left Workers’ Party (PT) dislodged the PSDB from power in 2002. Since then, the number of federal ministries has risen from 26 to 40. The federal payroll grew relentlessly until Dilma Rousseff, the president since 2011, called a halt last year.
But the PSDB has failed to put across the message from Minas effectively. That has allowed the PT to misrepresent it. Last year Luiz Inácio Lula da Silva, Ms Rousseff’s predecessor, said that a “management shock” meant lay-offs, pay cuts and neglecting the poor. It put him in mind of torture and military dictatorship, he added.
Mr Neves is likely to struggle against Ms Rousseff, who is preparing to run for a second term. In opposition the PSDB has often sounded petulant and elitist. It complained this month when the government lifted federal taxes from staple foods, on the grounds that it had the idea first. Mr Neves argued against slashing electricity bills, saying it would stifle investment. That is true, but it allowed Ms Rousseff to reply that her party cared more for ordinary voters than for business interests.
When she increased federal handouts for the poorest Brazilians last month, Mr Neves said she was merely “administering poverty”, not working to end it. That looked like a misstep. The lives of tens of millions of poorer Brazilians have improved under the PT, and they are grateful. On the national stage, Mr Neves has shown little sign of being the leader whom Mr Anastasia describes as “revolutionary, extraordinary, heroic”. Mr Neves’s allies say he is waiting for the right moment to start campaigning flat-out (he did not respond to The Economist’s requests for an interview).
In 2002, with their state in a mess, mineiros welcomed Mr Neves’s strong medicine. Brazil’s economy has also looked frail recently. GDP grew by just 0.9% last year, after 2.7% in 2011. Inflation hovers around 6% a year. Although Ms Rousseff promised to boost growth by squeezing current spending and increasing public investment, she has managed neither. At present, though, wages are rising and unemployment is low. Household spending remains robust. The president is very popular: a poll this month found that 78% approved of her. A dose of the Minas medicine might do Brazil good. But unless the symptoms worsen fast, Mr Neves will struggle to convince the patient to give it a try.
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