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The beauty that puts food on the table

Pioneering research shows culture as one of the great Brazilian economic activities

In 1999, the cultural activities of Rio de Janeiro generated for the public coffers of the State earnings that were greater than those of such strategic sectors as metalworking and the chemical industry. In sixth place in the ranking of economic activities, the cultural production of the state of Rio de Janeiro stood on an equal footing with the beverages industry, and below public service utilities, in the area of telephony, wholesale and retail trade, and the oil industry.

This data, which at the first moment are startling for contradicting the maxim according to which culture does not make any money, was presented in the book Economia da Cultura? A Força da Indústria Cultural no Rio de Janeiro [Economics of Culture? The Strength of the Cultural Industry in Brazil] (e-papers, 176 pages, R$ 18), launched last year, after being given assistance for publishing from the Carlos Chagas Filho Research Support Foundation of Rio de Janeiro (Faperj). Gathering together texts by people who took part in the seminar of the same name, which took place in 2001, the publication gives access to the results of a new methodology, the first to create a database to analyze how culture is included amongst the major economic activities.

“We isolated cultural production as being amongst the most dynamic sectors of the economy of the state of Rio de Janeiro when we created the methodology called Economic Value of Tax”, explains Luiz Carlos Prestes Filho, the coordinator of the work, carried out in conjunction with economist Sérgio Cidade de Rezende, with statistician Antônio Carlos Alkmin, with tax expert Moacyr de Oliveira Araújo and copyright lawyer Sydney Sanches. “With this methodology, we identified the tax collection generated by cultural activities, using the data from the Treasury secretariats of the municipality and the state of Rio de Janeiro. Accordingly, we worked strictly with formal cultural activities, like shows, carnival, theatrical productions, television, radios and record companies”, Prestes Filho goes on.

The book and the seminar enjoyed the collaboration of representatives from the three main productive areas of culture – the audiovisual, publishing and musical sectors. Roberto Medina, for example, wrote about his experiences with Rock in Rio (international rock festival in Rio de Janeiro), as a pioneer in the promotion of megaspectacles in the country – with the generation of thousands of jobs. Then the current president of the BNDES, Carlos Lessa, at the time a director of the Economics Institute of the Federal University of Rio de Janeiro (UFRJ), wrote about the economics of leisure and the birth of the mass cultural industry.

This multidisciplinary work was recognized at severaluniversities, and, in 2001, Prestes Filho, a filmmaker trained in Moscow, was invited to give the inaugural talk at the Genesis Institute, the first incubator of cultural companies, formed at the Pontifical Catholic University of Rio de Janeiro (PUC-Rio). “The data impressed the rector, who invited me to carry out a study into the economics of culture at the Genesis Institute”, says Prestes Filho.

From then onwards, a team coordinated by him started to carry out the Study of the Productive Chain of the Economy of Music, whose third report is being concluded at the moment. The work will be launched in a work with the same name in July, with the support of the Central Office for the Collection of Copyright (Ecad), one of the various financiers of the study. “Our sponsors represent various areas of musical production, which ensures that this is not an official survey, hand in hand with sectorial interests”, Prestes Filho notes. “The financiers are already a productive chain”, he jokes.

Besides Ecad, the Study of the Productive Chain of the Economy of Music enjoys instrumental and academic support from PUC-Rio – several professors are involved – and the financial support of the Brazilian Support Service to Small Business of Rio de Janeiro (Sebrae-RJ), the Brazilian Association of Disc Producers (ABPD), of Rock in Rio (a corporate body) and also of the Federation of the Commerce of the State of Rio de Janeiro (Fecomércio).

Prestes Filho explains that Brazilian music was picked from among the areas of culture, because it is the only one at the moment to have a pro-active agenda. “In the movies sector, we don’t have any profit coming from the national cinematographic production, besides which there are several bottlenecks in the open and cable TVs”, the coordinator explains. “The agenda of cinematographic production is one of complaints, changes in the law, etc.”, he adds. Also the books industry, in his opinion, is not showing results that could be promptly analyzed. “In a country with 170 million inhabitants, a book that sells well gets away with 3,000 copies”, he comments. “Were it not for the orders from the Ministry of Education, (for textbooks and the like), the book industry would not support itself”, he explains.

Then there is the phonographic industry, which although being broadly based on the activities of multinational companies, has managed to make Brazilian music the basis for its business. “In the last 15 years, by various mechanisms, the recording companies have succeeded in making Brazilian music occupy from 80% to 86% of the market. This is the percentage of Brazilian music that occupies the spaces on radio and television, as well as the sale of discs”, he says. For Prestes Filho, this is a result of a strategy drawn up by the recording companies and by the music publishers.

As it is known, however, this expansion has not freed the area of music from enormous difficulties, piracy of the physical means being the most prominent of them, affecting almost 50% of the market, according to data from the sector. These difficulties are felt, on the one hand, by composers and interpreters fighting for space, and on the other by independent recording companies that cannot manage to impose themselves on the market as much as the larger ones. The goal of the Study of the Productive Chain of the Economy of Music is precisely to identify at which points there are bottlenecks in the micro- and macrostructural processes of musical production. “The information is useful for those that are excluded from the productive chain”, Prestes Fillho finds.

His work is based on the definition of a productive chain as a network of interrelations between several players in an industrial system, which makes it possible to identify the flow of goods and services through the sectors directly involved, all the way from the raw material to the end consumer. It stems from the idea that every chain has four links: production, distribution, sales and consumption.

Besides the recording company and the musicians, the music halls, and the media outlets through which music can be consumed: radio, TV, the Internet, bars. Besides the issues of production, also in play are those that concern copyright, piracy, commercial exchanges and others.

The researcher explains that there are great similarities between the productive chain of a composer and that of a recording company. Accordingly, it is not so difficult to identify the points of conflict between one and the other. “Without the work of the composer, there is no chain. But it also has its phases of distribution, sales and consumption”, he says. “From their point of view, the phonographic business, the end purpose of which is the consumer, depends on the composer”, he goes on. According to Prestes Filho, the productive chain of the economy of music suffers from the same problem as the whole economy of the underdeveloped countries: there are many incomplete links and others that do not interconnect.

To illustrate the problem, he uses the historical examples of Van Gogh and Shakespeare. The Dutch painter produces works contemporaneous with the innovations in the plastic arts of his day, but had only one painting sold while he lived. “The productive chain of the economy of his time did not have any intersection with the productive chain of the artist Van Gogh”, is Prestes Filho’s analysis. The opposite happened with the English playwright, who grew rich from his plays and saw much business done on the basis of his texts.

For the researcher, there are many Van Goghs and many Shakespeares in the Brazilian music market. “We want to make information available for the fragile links of this chain to strengthen themselves more and more. We thus intend to identify the bottlenecks and the opportunities for the sector to carry out measures of action and to seek an equilibrium in the system”, says the coordinator.

The third report of the Study of the Chain, done by Prestes Filho and his team, also enjoyed the collaboration of physicist José Nicodemos Rabelo, from the Federal University of Goiás. He broadens the analysis of the productive chains, comparing them with the complex systems of nature. These systems, which comprise atoms, molecules, the solar system and all the elements of nature, can be identified in the productive chains.

“With this work, we are innovating, since it is the first time that issues of theoretical physics are taken to culture”, says Prestes Filho. Two basic graphs were drawn up to represent the productive chains of music. The first represents the process in linear form (a fordist chain). But it is the second that makes it possible to visualize the complexity of the systems and their interrelation, getting closer to reality (see the diagram above). “These diagrams demonstrate that both the linear productive chain and the diffuse one form fractals that make it possible for any one of the players in the productive chain of music (publisher, recording company, composer) to make mathematical modelings of their activity”, Prestes Filho explains. According to him, this would allow this agent to get solutions rapidly for solutions that are usually part of their day to day.

“The most interesting of all this is that, by demonstrating that the economic productive chains are similar to the complex systems of nature, Rabelo made it clear that is possible for there to be foreseeability”, Prestes Filho analyzes. The filmmaker thereby intends not only to simplify the paths of the professionals who work with music, but also to supply information for the creation of public policies that value musical activity as an agent of the economy. “The hypothesis of a productive chain makes it possible to create an innovative model for studying other productive chains of Brazilian culture”, concludes physicist José Rabelo.

A different war

The tax war waged between the states to attract productive investments in their territories has always existed in Brazil. With the 1988 Constitution and the opening up of the country’s economy, though, the war acquired extra ammunition in the hands of the governors. “The Constitution mistook decentralization for democratization, giving greater autonomy to the state governments”, says Carlos Eduardo G. Cavalcanti, who wrote the book A Guerra Fiscal no Brasil [The Tax War in Brazil] (Edições Fundap, 145 pages, R$ 20), in partnership with Sérgio Prado and with support from FAPESP.

For Cavalcanti, the 1988 Constitution permitted the states a greater autonomy to legislate on matters of the Sales and Services Tax (ICMS), the main instrument for the tax war between the state units. “At that instant, there started to be a loosening of the Tax Policy Council (Confaz), a body that deliberated on all the fiscal issues by means of the votes of all the Treasury secretaries of the Brazilian states”, the author explains. “Under the military government, it was a body that had a preponderant role in inhibiting the fiscal war. As the president of the body was the Minister of the Treasury, any action in the direction of a tax war would be vetoed by the ‘czar’ of the economy of the time”, he goes on.

In spite of the push from the constitution, what stirred up the contest between states for greater investment was the opening up of the market and the stability of the economy, conquered with the Real Plan, in 1994. The protagonists of this war were the automobile manufacturers, responsible for a major part of the foreign direct investments (FDI) in the country up to 1998. It was through packages of fiscal benefits offered by the states that Renault, Chrysler and Audi set themselves up in Paraná; Volkswagen’s truck factory and Peugeot, in Rio; and General Motors, in Rio Grande do Sul.

The case that most called attention, though, was Ford, installed in Bahia. “The contracts were secret, and when there was the fight over the automobile factory between Rio Grande do Sul and Bahia, the amounts came to the surface. In order to attract the industry to the domains of its territory, it is possible that the government of Bahia may have granted over 60% of the total investment, some R$ 1 billion, in tax breaks”, says Cavalcanti.

According to the author, artifices like these breach the country’s federative pact, the principle of which is one of harmonious work between municipalities, states and the federation. “It is constitutional, but when the states join the fray, what starts to prevail is the isolated thinking of each unit, without there being a nationwide project”, the author believes.

With the fall in foreign direct investment in the country – US$ 16.6 billion in 2002, against US$ 22.5 billion in the previous year -, the fiscal war between states played a supporting role on the national stage. Even so, the discussions on the tax reform between the federal and state governments are amongst the main subjects on the agenda of Luiz Inácio Lula da Silva. “What is being proposed is a federal law that lays down rules common to all the states, by means of an equalized rate. In theory, this tax reduces the power of the states for a fiscal war”, he notes.

The great debate is concentrated on the fact of whether the new tax will be charged at the origin or at the destination of the product. Should it be at the destination, São Paulo, which is a state regarded as a “net exporter” of merchandise, will be badly affected and lose some 17% of its tax income. “The proposal is still an incipient one, and the interests are diverse. But I regard the debate as rather misplaced”, is Cavalcanti’s criticism.

For him, tax reform is just one of the aspects of the problem of the country’s economic development. “Industry in Brazil is concentrated in the southeastern region, as there is no regional development policy. In this scenario, the states use the only weapons at their disposal to attract investment from abroad”, he reckons. “Accordingly, there is no point in discussing just tax issues. The meetings between the governors and Lula have to include a development program, the thinking being as a nation and not as isolated and enemy states”, Cavalcanti concludes.