When the president gets tied down
RIO GRANDE DO SUL: Riding with the gaúcho
MINAS GERAIS: Franco the noisy populist
Brazil's federal government cannot afford to let the states off lightly because of its own financial problems.
These days Brasília likes to talk about the primary surplus target of 3% for 1999 which it is likely to meet. The primary surplus is the budget position before taking account of debt interest and repayments. The more important number is the overall fiscal deficit, which is running at 8%.
A lot of Brazil's financial problems are caused by inefficient tax and social-security systems. With tax there is widespread evasion with estimates that for every $1 collected $1.50 is lost. As direct tax collection produces a poor take the government has focused on indirect taxation such as producer taxes, with a proportion levied at different steps in the production process. The complication of this infuriates companies and makes them less competitive overseas. The latest tax, the CPMF on financial transactions, turns the banks into tax collectors.
With social security, the major problem is the generous pensions given to Brazil's civil servants.