TOP INTERVIEWS Interview with H.E. FERNANDO HENRIQUE CARDOSO President of the Republic of Brazil July, 2002 The project of "e-government" is providing through the Internet open access to government activities, public information and services to the Brazilian society. How are you ensuring full access to the services provided by the "digital inclusion" projects? How would you say "e-government" adds transparency to the activities of a government? There are many important initiatives aimed at providing electronic access to Government information and services. Our greatest success story is perhaps the filing of tax returns through the Internet. Nowadays, an overwhelming majority of Brazilian taxpayers present their tax returns to the Government by means of a computer program that anyone can download at home and that makes it very easy to organize the data and to send it directly to the Revenue Service - no need for long lines in front of a counter, no bureaucracy, no paperwork. The data show that every day around 400.000 people use the Revenue Service's site on the Internet to ask questions, to solve problems and get guidance on administrative procedures. Also, the voting and the processing of the results of our national elections are almost completely done with electronic media, which has made it possible to have the results on the next day and to eliminate any uncertainty involved in the process. There is a general Government site, called "Rede Governo" (Government-Net), through which Brazilians can get all kind of information on public services and on their rights as citizens. Moreover, most of the data related to the planning and implementation of all federal expenditures is available on line, which makes it easier for members of Congress and the press to monitor the use of public funds. All in all, e-government is a huge step toward greater transparency and accountability by public authorities. If democracy is to work well, than it is essential that the citizens be fully informed of what the Government does, and why, and also of what the Government is planning. In Brazil, the use of electronic media is proving to be a major asset in this effort. The Brazilian energy sector has been through rough time this past year. In a country with the largest Hydroelectric Plant in the world and large oil reserves, how do you explain what happened and what has been done to guarantee security in the electricity supply? Are foreigners investing in this sector? Most of Brazil's electric power is generated from hydraulic sources. This brings us huge advantages. Firstly, it is a renewable source. Secondly, it is environmentally cleaner that other alternatives, such as coal-generated electricity. The down side is that hydroelectric power makes us dependent on the weather. If precipitation falls under a certain level, there is the risk of a shortage. This is precisely what happened, as a result of a protracted drought in several regions in Brazil. Faced with the electricity shortage, Brazilians responded decisively and effectively, by cutting energy consumption by some 20%. This made it possible for us to overcome the problem, and now, after a good rainy season, the situation is back to normal. The question now is: how can we prevent this kind of problem from happening again? The answer is quite clear: investment, and some diversification, in order to reduce contingency risks linked to weather fluctuations. In 2001, we have increased our electricity generation capacity by 3,000 MW. We are putting in operation 30 more thermoelectric energy plants, using as fuel mainly the natural gas imported from Bolivia. All in all, from 2002 to 2004 some 20,000 MW will be added to our electrical system. Apart from that, in order to guarantee security an early-warning system was introduced, so that the threat of any shortage will be detected at least two years in advance, giving us time to adopt the necessary measures. Privatization has been central to your mandate. What has been your strategy to ensure that companies sold to foreign investors will contribute effectively to the improvement of the national economy in the long run? The whole process of privatization must be envisaged within the context of a reconfiguration of the regulatory activities of the state in Brazil. Over the last several years, we have created new, semi-autonomous regulatory agencies, that are responsible, each in its own sector, for ensuring the quality of service provided to the population. Thus our concern has not been restricted to privatizing, but we have designed a regulatory structure aimed at overseeing market forces and with powers to enforce quality standards based on objective and transparent criteria. As a result, the public has a double benefit. First, because the private companies can mobilize the funds required to ensure investment at the appropriate levels, something the Government could hardly afford. Secondly, because the public interest is safeguarded by a new and modernized structure of regulation and oversight. Increasing exports has been a priority since you took over as president. "Export or die" was your motto. How is the administration supporting the private sector in order to diversify exports? What has been your government's recipe to improve commerce? In the long run, the only recipe for increasing exports is to promote competitiveness of Brazilian products. This has been achieved in many significant ways. From 1993 to 1998, the growth of Brazil's foreign trade has been driven mainly by the opening of the market to imports. The amount of trade (exports plus imports) increased from US$ 60 billion annually in the early 90's to US$ 106 billion in 2001. Since the adoption of a floating exchange rate, in January 1999, Brazil has moved from deficit to surplus in foreign trade. Last year, we had a surplus of US$ 2.6 billion. And the studies show that the growth of exports has not been led by traditional labor-intensive products, but by technology-intensive industries. Brazil today is one of the world's leading exporters of regional jets. The fact is that Brazilian manufacturing industries and agriculture is today fully competitive in several key areas. The government has supported this effort by ensuring economic stability, by improving finance mechanisms and by working to develop Brazil's infrastructure in crucial sectors such as ports, waterways, roads and telecommunications. As a result, Brazil's firms are able to compete in the most demanding markets. Exports still represent 10% of the Gross National Product. What do you expect from FTAA (Free Trade Area of the Americas) and other international agreements to improve exports? What is the role that Brazil must have in the FTAA? As I just said, Brazil's exports are increasingly competitive, both in price and in quality. This is why the effort to promote free trade is so important to us. Protectionist measures such as tariffs and subsidies in the US and Europe are among the greatest obstacles to the growth of our exports. Thus, our main expectation in the FTAA negotiations is that we obtain greater access to North American markets. To accomplish that, we need to make significant progress in reducing agricultural subsidies, limiting the use of anti-dumping measures and removing obstacles that prevent us from reaping the benefits of our comparative advantages. In the early 90's, Brazil has significantly opened its markets to imports. Nonetheless, we still face huge protectionist barriers in other countries. The FTAA will make sense if it contributes to reducing such barriers and to promote a balance distribution of costs and benefits among all countries in the Americas, great or small, rich or poor. Mr. Cardoso, you are a sociologist and have studied, analyzed and written about the Brazilian society. As President and sociologist what is your advice to foreign investors when they come to invest in Brazil? My advice is probable superfluous, because the strength of the Brazilian economy speaks for itself. But I will say this: those who bet on Brazil's future stand to gain a lot, because the country has all it takes to continue in the path of social and economic development. For too long has Brazil suffered in stagnation and backwardness. This chapter is now closed. With democracy, economic stability and greater social justice, there is nothing that can stop Brazil in its progress. Our economic environment is business-friendly. Our people is hard-working, creative and eager to learn more. The country is not affected by any sort of ethnic rivalries or civil strife. We have world-class universities and world-class scientists. Investors who come to Brazil will be partners in our development and they will get the very significant returns of operating in a market of over 160 million people, or even more if you consider the integration with our neighbors in Mercosul. Note: WINNE cannot be held responsible for the content of unedited transcriptions.