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Inefficient and costly: Brazil’s public service in need of reform

. Oct 24, 2019
Inefficient and costly: Brazil's public service in need of reform bureaucracy Photo: Geraldo Magela/Senado

Brazil is a country that suffers from significant income inequality, which should come as news to no-one. A recent study from the Brazilian Institute of Geography and Statistics (IBGE) showed that this disparity of wealth has hit new records in 2019

Beyond the simple matter of income, there is an underlying inequality that directly contributes to this abyss in welfare between the rich and poor. The discrepancy of opportunities in the country is tremendous, an imbalance understood as the lack of access to basic resources which allow everyone to have the same chances in life—essentially, for everyone to start the race at the same place.

</p> <p>This inequality of opportunities is multifaceted and may be seen in a variety of places. It resides in the low quality of basic education, the limited and often poor treatment from the public health service, and the impotence of the state in protecting young people from the world of crime. </p> <p>The inequality of opportunities is the result of a country that is committed to the well-being of its population—as is written in the <a href="https://brazilian.report/podcast/2018/10/05/podcast-brazilian-constitution/">1988 Constitution</a>—but is structurally still disorganized, historically dominated by the interests of corporate groups, and inefficient from a public administration point of view. Brazil is a country with many good intentions but which is held hostage by the gigantic distortions in its operation.</p> <h2>A need for reform</h2> <p>One of the largest discrepancies, finally being corrected this year, is the social security system. Unworkable, the pension regime run by the Brazilian government is now being reformed. The hope is that the current primary spending of the government—largely allocated to paying pensions—will now change. </p> <p>Another sensitive facet of government spending is linked to expenditure on active servants on public service, which is currently the second-largest culprit on primary expenses. <a href="https://brazilian.report/guide-to-brazil/2018/08/12/understand-brazilian-bureaucracy/">Public bureaucracy</a>, created in the time of Getúlio Vargas, reformed in 1988 and modernized in the 2000s, is now giving clear signs of being obsolete.</p> <p>Brazilian public administration doesn&#8217;t provide enough of a return to the population when the matter is basic services. Furthermore, it is riddled with low productivity—a struggle faced by the country as a whole—and inefficiency. In personnel terms, the state isn&#8217;t that big, but it is very costly.</p> <hr class="wp-block-separator"/> <script type="text/javascript" src="https://dataviz.worldbank.org/javascripts/api/viz_v1.js"></script><div class="tableauPlaceholder" style="width: 1000px; height: 850px;"><object class="tableauViz" width="1000" height="850" style="display:none;"><param name="host_url" value="https%3A%2F%2Fdataviz.worldbank.org%2F"> <param name="embed_code_version" value="3"> <param name="site_root" value="/t/DECDG"><param name="name" value="wwbiTABLEAU-2/Dashboard1"><param name="tabs" value="yes"><param name="toolbar" value="yes"><param name="filter" value="iframeSizedToWindow=true"><param name="showAppBanner" value="false"><param name="display_count" value="no"></object></div> <hr class="wp-block-separator"/> <p>According to a World Bank study from this year, the Brazilian state spends around 10 percent of its GDP paying salaries of active public servants. From 2007 to 2017, this expenditure increased by around 48 percent in real terms and, though the number of public servants did increase, the total wage bill is high compared to international standards.</p> <p>This elevated spending is unjustifiable, as the population&#8217;s perception of public services remains very negative. According to a study held by consultancy Oliver Wyman, the average rating of the quality of public services in Brazil is low. The country is comparatively lower than its South American neighbors (Chile, Colombia, etc.) and far from the standards of developed countries.</p> <hr class="wp-block-separator"/> <script type="text/javascript" src="https://dataviz.worldbank.org/javascripts/api/viz_v1.js"></script><div class="tableauPlaceholder" style="width: 1000px; height: 850px;"><object class="tableauViz" width="1000" height="850" style="display:none;"><param name="host_url" value="https%3A%2F%2Fdataviz.worldbank.org%2F"> <param name="embed_code_version" value="3"> <param name="site_root" value="/t/DECDG"><param name="name" value="wwbiTABLEAU-2/Dashboard2"><param name="tabs" value="yes"><param name="toolbar" value="yes"><param name="filter" value="iframeSizedToWindow=true"><param name="showAppBanner" value="false"><param name="display_count" value="no"></object></div> <hr class="wp-block-separator"/> <h2>How did we get here?</h2> <p>Therefore, public administration is expensive and does not correspond to the expectations of the population. Why and how have we reached this point? Beyond the large increase in civil servants over the last 20 years, there are other factors that hinder the proper functioning of performance and personnel management, making the running of the state more and more expensive. For instance, the federal executive branch has over 300 different careers, which are often similar but formally different, making it difficult for public servants to move between them.</p> <p>Also, as a way of attracting the best professionals by way of civil-service examinations, starting salaries of public servants are highly distorted when compared to the private sector. This isn&#8217;t a problem in itself, but in reality, civil servants begin with high salaries, many are promoted without any solid performance criteria and end up reaching the top of their career ladders at an early age. In other words, the public sector attracts the best employees by way of extremely distorted salaries but quickly makes them overly comfortable and demotivated.</p> <div class="flourish-embed" data-src="visualisation/811557"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p>As was well explained by Oliver Wyman&#8217;s study on the government&#8217;s administrative reform, led by Carlos Ari Sundfeld and Armínio Fraga, &#8220;the state opens vacancies without planning and selects [people] without testing skills related to the job. Then it promotes them by way of formal criteria, automatically, and pays them without any link to productivity.&#8221;</p> <p>In this scenario, Brazilian public administration fails to differentiate good and bad civil servants and is unable to punish those who are not committed to their post, showing poor performance. The reason for the low level of punishment—and consequently, dismissals—is also legal, as the judicial framework is very broad and administrative proceedings largely end up expiring due to the statute of limitations.</p> <p>Therefore, administrative reform in Brazil goes beyond the question of stability. While this is an important factor, it is clear that the extent of guarantees offered by public service must be reviewed.&nbsp;</p> <p>A solid reform is one that would allow flexibility in the public sector, proposing new forms of hiring and performance analysis, restructuring career plans, reducing starting salaries and implementing meritocracy as a base for salaries and promotions. In line with the pension reform, a good overhaul of the public sector must correct distortions and create significant financial savings over the middle and long term. Efficient and productive civil administration may deliver better services to the population and reduce the inequality in opportunities that affects our country.</p> <p>The government has not yet submitted an official proposal, but some members of the Economy Ministry have signaled that a bill will be delivered before the end of the year. This is an issue that is just as important as tax reform. After 30 years of the current Constitution, Brazil is facing different challenges and the public administration is no longer doing the same job. A reform is crucial in order to grow.</p> <hr class="wp-block-separator"/> <div class="wp-block-image"><figure class="alignleft"><a href="https://levanteideias.com.br"><img loading="lazy" width="300" height="37" src="https://brazilian.report/wp-content/uploads/2019/06/02_levante_logo_A-300x37.png" alt="" class="wp-image-18346" srcset="https://brazilian.report/wp-content/uploads/2019/06/02_levante_logo_A-300x37.png 300w, https://brazilian.report/wp-content/uploads/2019/06/02_levante_logo_A-768x94.png 768w, https://brazilian.report/wp-content/uploads/2019/06/02_levante_logo_A-1024x125.png 1024w, https://brazilian.report/wp-content/uploads/2019/06/02_levante_logo_A-610x74.png 610w" sizes="(max-width: 300px) 100vw, 300px" /></a></figure></div> <h6 style="text-align:right">Written by<br><a href="mailto:atendimento@levante.com.br"><strong>Levante Ideias de Investimentos</strong></a></h6> <p>

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Felipe Berenguer

Felipe Berenguer is a political analyst at Levante Ideias de Investimentos

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