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The Brazilian Economic ‘Miracle’ and Regional Policy: Some Evidence from the Urban Northeast*

Published online by Cambridge University Press:  05 February 2009

D. E. Goodman
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Extract

The so-called Brazilian economic ‘miracle’ has provoked a heated debate on the distribution between different socio-economic groups of the benefits and costs incurred in rapid income growth. This debate has clarified several empirical issues, notably the marked concentration of the personal income distribution and its significant deterioration in the 1960s.

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Articles
Information
Journal of Latin American Studies , Volume 8 , Issue 1 , May 1976 , pp. 1 - 27
Copyright
Copyright © Cambridge University Press 1976

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References

1 Tavares, M. C. and Serra, J., ‘Más Allá del Estancamiento: Una Discusión sobre el Estilo de Desarollo Reciente’, El Trimestre Económico, 33 (11–12 1971);Google ScholarSinger, P. I., ‘O “Milagre Brasileiro”: Causas e Consequências’, Caderno Cebrap, No. 6 (São Paulo, 1972)Google Scholar and ‘Desenvolvimento e Repartição da Renda no Brasil’, Debate e Crítica, 1, 1 (1973), 67–94;Google ScholarHoffman, R. and Duarte, J. C., ‘A Distribuição da Rends no Brasil’, Revista de Administração de Empresas, 12 (06, 1972), 46–66;CrossRefGoogle ScholarFishlow, A., ‘Brazilian Size Distribution of Income’, American Economic Review, 62 (05 1972), 391–402Google Scholar and ‘Brazilian Income Size Distributn – Another Look’ (mimeographed), (1974); Furtado, C., Análise do ‘Modelo’ Brasileiro (Rio de Janeiro, Editora Civilização Brasileira, 1972);Google ScholarLangoni, C., Distribuição da Renda e Desenvolvimento Econômico do Brasil (Rio de Janeiro, Editora Expressão e Cultura, 1973);Google ScholarWells, J., ‘Distribution of Earnings, Growth and the Structure of Demand in Brazil during the 1960s’, World Development, 2 (01 1974), 9–24.CrossRefGoogle Scholar

2 We adopt the administrative definition of the Northeast used by SUDENE, the regional development agency, which includes the states of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco, Alagoas, Sergipe and Bahia. This region had 29 million inhabitants in 1970, 30 per cent of the national population, and accounted for roughly 12 per cent of net domestic product at factor cost.

3 The limitations of historical analyses of Northeastern backwardness are discussed in a recent paper by Roberto, Martins: ‘Cultura Nordestina em Debate: Um Ensaio Preliminar’ (1974),Google Scholar which was presented to the Conference on the Brazilian Northeast in Racine, Wisconsin. See also de Castro, A. B., 7 Ensaios sobre a Economia Brasileira, vol. II (Rio de Janeiro, Editora Forense, 1971);Google ScholarGraham, D. H. and Buarque de Hollanda Filho, S., Regional and Urban Growth and Development in Brazil: A Selective Analysis of the Historical Record, 1872–1970, vol. 1 (São Paulo, Instituto de Pesquisas Econômicas – USP, 1971);Google ScholarLeff, N. H., ‘Economic Development and Regional Inequality: Origins of the Brazilian Case’, Quarterly Journal of Economics, 86 (05 1972), 243–62;CrossRefGoogle ScholarDenslow, D., ‘As Orígens da Desigualdade Regional no Brasil’, Revista de Estudos Económios – IPE–USP, 3, 1 (1973), 65–88.Google Scholar

4 The metropolitan areas of Recife and Salvador attracted 55 per cent of total investment in new industrial projects approved by SUDENE in the period 1962–Apr. 1970. Fortaleza, with the third largest concentration of such projects, absorbed 6 per cent of this total.

5 The 34/18 programme permits registered Brazilian corporations to reduce their annual federal income tax liability by 50 per cent by opting to invest the corre ponding tax savings in projects approved by SUDENE. The basic features of this scheme, which was introduced in 1961, are described in Hirschman, A. O., ‘Industrial Development in the Brazilian Northeast and the Tax Credit Scheme of Article 34/18’, Journal of Developtment Studies, 5 (10 1968), 1–28,Google Scholar and in Goodman, D. E., ‘Industrial Development in the Brazilian Northeast: An Interim Assessment of the Tax Credit Scheme of Article 34/18’, in Roett, R. (ed.), Brazil in the Sixties (Nashville, Vanderbilt University Press, 1972). A similar programme has operated in the Amazon region since. 1966.Google Scholar

6 The special Agro-Industrial Development Programme for the Northeast announced in May 1974 is a good recent example of this approach. This programme concedes heavy credit subsidies to large-scale projects undertaken by Centre-South and multinational corporations. Large-scale private projects also are the principal instrument of land settlement policy in the Amazon basin and the Central-West region.

7 Some recent analyses of the agricultural sector merit attention in this respect. See Paiva, R. M., ‘Modernização e Dualismo Tecnológico na Agricultura’, Pesquisa a Planejamento Económico, 1 (12 1971), 171–234;Google Scholaribid., ‘O Processo de Modernização Agrícola e o Dualismo Tecnológico nos Países em Desenvolvimento: O Caso do Nordeste Seco Brasileiro’ (paper for the Conference of the National Association of Post-Graduate Centres in Economics, Belo Horizonte, Minas Gerais, 1974); Sá Junior, F., ‘O Desenvolvimento da Agricultura Nordestina e a Função das Atividades de Subsistência’, Estudos Cebrap, 3 (01 1973), 90–147.Google Scholar

8 Frank, A. G., Capitalism and Underdevelopment in Latin America (London and New York, Monthly Review Press, 1969).Google Scholar

9 de Castro, A. B., op. cit.Google Scholar

10 Grupo de Trabalho pars o Desenvolvimento do Nordeste, Uma Poiltica de Desenvolvimento Econômico para o Nordeste (Rio de Janeiro, Presidência da República, 1959).Google Scholar

11 Baer, W., ‘Regional Inequality and Economic Growth in Brazil’, Economic Development and Cultural Change, 12 (07 1964), 262–85.CrossRefGoogle Scholar

12 de Oliveira, F., ‘A Economia Brasileira: Crítica à Razão Dualista’, Estudos Cebrap, 2 (10 1972), 3–82.Google Scholar

13 Ibid., p. 29.

14 Frank, A. G., op. cit.Google Scholar

15 GTDN, op. cit.Google Scholar

16 Baer, W., op. cit.Google Scholar

17 Fishlow, A., op. cit. (1972); Langoni, C., op. cit.Google Scholar

18 Regional supply coefficients of projects in the intermediate goods sector, which has attracted roughly 50 per cent of total 34/18 investment, are 40 per cent for total inputs and 30 per cent for manufactured inputs. Regional supply coefficients for manufactured inputs in newly-established two-digit industries are as follows: metallurgy (10.3 per cent); machinery (29.3 per cent); electrical equipment (16.7 per cent) and transport equipment (7.3 per cent). For more detailed estimates, see Goodman, D. E. and Cavalcanti, R., Incentivos à Industrialização e Desenvolvimento do Nordeste (Rio de Janeiro, IPEA-INPES, Relatório de Pesquisa No. 20, 1974).Google Scholar

19 SUDENE, Formação Bruta de Capital Fixo do Setor Público no Nordeste (Recife, Ministéio do Interior, 1973).Google Scholar

20 Spatial inequahties in the distribution of total tax revenues, which are more pronounced than those in income per head, increased in the period 1965–70. Approximately 73 per cent of total federal transfers to state governments were earmarked for specific Sectors in 1970.

21 Barboza de Arauo, A., et al., Transferências de Impostos aos Estados e Municípios (Rio de Janeiro, Relatório de Pesquisa No. 16, 1973).Google Scholar

22 The PROTERRA legislation applies only to those farm units of 1,000 hectares or more which were classified by the 1966 cadastral survey as ‘latifundio por exploração’, that is, as having idle or under-utilized land. Such farms are required to transfer land to INCRA in accordance with a sliding scale, which varies from 20 per cent of the land on holdings of 1,000 hectares to 50 per cent on those of over 5,000 hectares. INCRA supervises the distribution and sale of this land to beneficiaries, whose purchases are financed by a Land Redistribution Fund. Landowners may adhere voluntarily to the PROTERRA scheme and transfer land in return for cash payment or face compulsory expropriation and compensation in unindexed government bonds. However, the authorities have repeatedly extended the term permitted for voluntary adherence and so postponed expropriation. Landowners have profited from this delay by dividing their property between relatives and nominees and by oranizing their holdings into formal commercial enterprises (empresas rurais) which are exempt from the provisions of PROTERRA.

23 Alonso, W., ‘Urban and Regional Balances in Economic Development’, Economic Development and Cultural Change, 17 (10 1969), 1–14.CrossRefGoogle Scholar

24 GTDN, op. cit.Google Scholar

25 i.e. Il Plano Nacional de Desenvolvimento, 1975–79 (1974).Google Scholar

26 Ibid., pp. 53–54.

27 Ibid., p. 62.

28 This qualified statement is imposed by the varying estimates of real product growth for the Northeast and the difficulty of reconciling these differences. See Cavalcanti, C., ‘A Renda Familiar e por Habitante na Cidade do Recife’, Pesquisa e Planejamento Econômico, 2 (06 1972), 81–104. For example, for the years 1960–8, product data estimated by the Getúlio Vargas Foundation (FGV) gave an annual growth rate of 4.2 per cent, significantly lower than the SUDENE estimate of 6.4 per cent. These two official sources also present conflicting estimates of the sectoral composition of regional product. SUDENE indicates that secondary activities accounted for 22 per cent of regional output in 1965–8 whereas the FGV estimate is 10 per cent.Google Scholar

29 Cavalcanti, C., ‘Uma Avaliação das Estimativas de Renda e Produto do Brasil’, Pesquisa e Planejamento Econômico, 2 (12 1972), 381–98.Google Scholar

30 Criteria for distinguishing between formal and informal labour markets in the Brazilian case are considered by Machado da Silva, L. A. in Mercados Metropolitanos de Trabalho Manual e Marginalidade (Rio de Janeiro, unpublished Master's thesis, Post-graduate Programme in Social Anthropology, Museu Nacional, 1971)Google Scholar and T. W. Merrick and F. A. Brito, ‘Informal Sector Employment in Brazil: A Case Study of Belo Horizonte’ (mimeographed paper, CEDEPLAR/UFMG, 1974). For a recent analysis of low income groups in urban areas of the Northeast, see Gondim Silva, J. H., ‘Sub-utilização de Recursos Humanos em Areas Urbano-Marginais Selecionadas do Nordeste’ (paper presented to the Conference of the National Association of Post-Graduate Centres in Economics in Belo Horizontc. Minas Gerais, 1974).Google Scholar

31 Cavalcanti, C., op. cit. (06 1972), p. 93.Google Scholar

32 Turnham, D., The Employment Problem in Less Developed Countries: A Review of the Evidence (Paris, OECD, 1971).Google Scholar

33 Banco do Nordeste do Brasil, Perspectives de Desenvolvimento do Nordeste até 1980 – Crescimento Demográfico e Emprego (Fortaleza, 1971).Google Scholar

34 See Pellerin, G., Oferta e Demanda de Mãa-de-Obra no Nordeste (Recife, SUDENE, Ministério do Interior, 1971)Google Scholar and Hume, I. M., Problems and Prospects in Employment and Incomes in Northeast Brazil (Washington, D.C., mimeographed report, IBRD, 1972).Google Scholar

35 Turnham, D., op. cit.;Google ScholarInternational Labour Office, Towards Fall Employment (Geneva, 1970);Google ScholarWeeks, J., ‘Does Employment Matter?’, in Jolly, R., de Kadt, E., Singer, H. and Wilson, F. (eds.), Third World Employment (London, Penguin Books Ltd., 1971).Google Scholar

36 Unless otherwise stated, the official minimum wage referred to in the text is that established for urban centres in the Northeast other than Recife and Salvador.

37 The legal minimum wage was re-defined in 1950 to include the basic requirements of a family of 4.3 persons rather than only those of a single adult worker. However, the minimum wage continues to be popularly regarded in terms of the previous definition. We recognize that the conceptual difficulties of assessing poverty and minimum standards of nutrition are ignored here. See Seers, D., ‘What Are We Trying to Measure?’, in Baster, N. (ed.), Measuring Development: The Role and Adequacy of Development indicators (London, Cass, 1972).Google Scholar

38 These figures refer to the total employed labour force in non-agricultural activities, although two small groups are excluded for obvious reasons: unpaid family workers (175 thousand) and workers remunerated wholly in kind (8 thousand).

39 The monthly minimum wage established in May 1972 was Cr.$206 for Recife and Salvador and Cr.$182 for other urban areas of the Northeast. The average exchange, rate (selling) in 1972 was U.S. $1.00 – Cr.$5.94.

40 These individuals may belong to households with additional sources of monetary income.

41 The figure of 1.3 million workers rather than 1.6 million in this earnings category arises from the fact that the sectoral data exclude 326 thousand employees who receive part of their earnings in kind.

42 Salm, C., ‘Evolução do Mercado de Trabalho, 1969–72’, Estudos Cebrap, 8 (04–06, 1974), 105–19.Google Scholar

43 Cavalcanti, C., op. cit. (06 1972), p. 89.Google Scholar

44 In view of the controversy surrounding real income estimates, it is difficult to decide whether Recife is atypical. Goodman, and Cavalcanti, , op. cit., calculate that urban real income per head in the Northeast increased at an annual rate of 0.3 per cent in 1960–7. On the other hand, Langoni, , op. cit., obtains a rate of 4.6 per cent for the period 1960–70.Google Scholar

45 Cavalcanti, C., op. cit. (06 1972), pp. 91–2.Google Scholar

46 Langoni, C., op. cit.Google Scholar

47 Hume, I. M., op. cit.; Goodman, D. E. and Cavalcanti, R., op. cit.Google Scholar

48 Cavalcanti, R., ‘Desenvolvimento Industrial e Distribuição de Renda: A Experiência Brasileira’, Revista da Secretaria da Fazenda de Pernambuco, 1, 1 (1970), 4–20;Google ScholarBanco do Nordeste do Brasil – ETENE, Distribuição e Nlveis do Renda Familiar no Nordeste Urbano (Fortaleza, 1969).Google Scholar

49 Langoni, C., op. cit., p. 166.Google Scholar

50 BNB-ETENE, op. cit.

51 Of the ten Census regions defined by the 1970 Brazilian Demographic Census, two Northeastern regions (CE-AL and SE-BA) present the highest levels of income concentration, as measured by the Gini and Theil coefficients. Langoni, , op. cit. CE-AL includes the States of Ceará Rio Grande do Norte, Pairaíba, Pernambuco and Alagoas; SE-BA refers to the states of Sergipe and Bahia.Google Scholar

52 SUDENE, Sudene Dez Anos (Recife, Ministério do Interior, 1969).Google Scholar On the relationship between equality and welfare, see Atkinson, A. B., ‘On the Measurement of Inequality’, Journal of Economic Theory, 2 (09 1970), 24–63CrossRefGoogle Scholar and Sen, A. K., On Economic Inequality (Oxford, The Clarendon Press, 1974).Google Scholar

53 It is more conventional to interpret ‘trickle down’ as a long-term process. However, this ignores the absolute dimension of poverty and the inestimable social costs borne by the present and future generations which remain trapped in the cycle of deprivation. Furthermore, as Elliott, C. observes in ‘Income Distribution and Social Stratification: Some Notes on Theory and Practice’, in Baster, N. (ed.), Measuring Development: The Role and Adequacy of Development indicators (London, Cass, 1972), the possibility of successful countervailing action by the rich and politically-entrenched elites to disrupt the operation of ‘trickle down’ mechanisms and redistributive measures which threaten their interests is neglected entirely.Google Scholar

54 IBRD, Northeast Brazil: Food Production and Nutrition Project (Washington, D.C., mimeographed report, 1974).Google Scholar

55 Ibid.The difference between these groups exceeds 50 per cent in rural areas.Google Scholar

56 Ibid., p. 11.

57 Scrimshaw, N. S. and Gordon, J. E. (eds.), Malnutrition, Learning and Behaviour (Cambridge, Mass., M.I.T. Press, 1968).Google Scholar

58 Coutinho, A. B., Dobbin, J. E. and Pereira da Costa, D. P., ‘Ecologia Urbana dos Caramujos do Gênero Biomphalaria’, Revista Pernambucana de Desenvolvimento, 1, 1 (1974), 29–44.Google Scholar

59 SUDENE, Seminário Sobre a Problemática da Saúde no Nordeste (Recife, Ministério do Interior, 1967).Google Scholar

60 This region comprises the states of Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

61 Carvalho, J A. M., ‘Evolução Demográfica do Nordeste Brasileiro Comparada com a Evolução Demográfica do Brasil, 1940–70 ’ (paper for the Conference on the Brazilian Northeast, Racine, Wisconsin, 1974).Google Scholar

62 The distribution by earnings class is as follows: Up to Cr.$50 Cr.$51–100 Cr.$101–150 Greater Recife 61,675 50,259 87,697 Salvador 36,139 35,363 71,253 Fortaleza 35,508 35,401 62,108

63 The most recently published PNAD earnings data for the Northeast in the last quarter of 1972 show that, of the region's 2.5 million urban ‘consumer units’, 22 per cent received one-half or less of the minimum salary, 26.6 per cent from one-half to one and 25.1 per cent between one and two minimum salaries. A ‘consumer unit is defined as those family members who are subject to and benefit from the same domestic budget. IBGE-PNAD, Pesquisa de Rendimentos PNAD – 2, 4° Trimestre de 1972, vol. III (Rio de Janeiro, 1972).Google Scholar

64 Cavacanti, C., op. cit, 06 1972, p. 93.Google Scholar

65 There is little doubt that the smaller interior municipios include families engaged in agriculture and other exclusively rural activities. This obviously complicates the interpretation of income data based solely on declared monetary sources. The fact that the Demographic Census follows the usual Brazilian procedure of relying upon juridical criteria to classify population centres as urban or rural is one major reason for these difficulties.

66 Many factors, including adverse land tenure conditions, dire primary poverty, excess rural supply and rural-urban income differentials, can be cited to explain the rural exodus to the labour towns. However, we have no firm empirical evidence on the determinants of Northeastern migratory flows nor the attributes of migrants in terms of socio-economic origin, skills, formal education, age, etc. There is great scope here for the application of survey techniques in specific areas and towns, which would complement aggregative studies based on Census data. da Mata, M., Carvalho, E. W. and Castro e Silva, M. T., Migraçāes Internas no Brasil (Rio de Janeiro, INPES-IPEA, Relatório de Pesquisa No. 19, 1973).Google Scholar

67 Singer, P. I., op. cit. (1973).Google Scholar

68 Nicholls, W. H., ‘Changes in the Agricultural Economy of the Brazilian Northeast, 1963–73’ (paper for the Conference on the Brazilian Northeast, Racine, Wisconsin, 1974);Google ScholarSampaio, Y., ‘Sharecropping Agriculture in Northeastern Brazil: A Transition Phase’ (paper for the Conference on the Brazilian Northeast, Racine, Wisconsin, 1974).Google Scholar