Brazil - Brasil - BRAZZIL - President Fernando Henrique Cardoso: Eight Years of Government - Brazilian Politics - June/July 2002


Brazzil
Politics
June/July 2002

The Bottom Line

Cardoso was elected because of his success, as Finance
Minister in the previous administration, in ending Brazil's
hyperinflation. Eight years later, this remains
his most remarkable accomplishment.

Ted Goertzel

Fernando Henrique Cardoso entered his eighth and final year as President of Brazil in remarkably good shape. According to an interview with the Financial Times, life was serene in the Alvorada Palace. Warm breezes wafted through the corridors and Cardoso emerged refreshed each morning from his swim in the Olympic sized pool. Of course, there were political crises, but he took these with a grain of salt, telling the interviewer that "since I've been in office there have been only two years when there wasn't a crisis."1 Certainly Brazil's crises paled into insignificance when compared to Argentina's disintegrating economy, Venezuela's coups and counter-coups, and Colombia's escalating civil war.

As his presidential term approached its end, even the intellectual and journalistic communities were coming to a new appreciation of his virtues. On March 9, 2002, one of Brazil's most respected economic columnists, Luís Nassif, published a remarkable tribute to Cardoso's leadership in the Folha de São Paulo:2

"In 1995, we still had a backward political society. The impeachment campaign had placed new politicians on the scene. But even the fall of Fernando Collor, as his entire political history, was much more the result of his incapacity to ally himself with the regional political chiefs.

"Almost eight years later, the political chiefs are disappearing one by one. There are those who see behind each of these disappearances the direct involvement of Fernando Henrique Cardoso. And there are those who believe that everything has happened despite him, as part of the spontaneous maturing of the country's political institutions.

"What happened in this period was something more subtle that can be traced back to the beginning of the first FHC administration, as I stated in a column called "A Work of Political Art" that I wrote on July 3, 1995. The strategy consisted in building an alliance with the old political machines, conceding to their philosophy of government by distributing favors, so long as it could be done without compromising the administration's project of definitive political reform.

"At the same time, FHC, the intellectual, played his best role, that of professor. In these almost eight years, he did away with the personalism that always transformed the President of the Republic into a father figure for everyone. At times he even exaggerated his professorial role, not even assuming responsibilities that really were his. But, day after day, this depersonalization of power and social policy, and non-interference with state government and the other branches of the federal government, enriched the institutional life of the country. Everything else was consequence."

Cardoso had accomplished his life's major goal: the reestablishment of political democracy in Brazil. There was no question that he would finish his term in office and be succeeded by the winner of legitimate, democratic elections. Of course, this maturing of the country's political institutions was not his personal achievement, but Brazil's. If it had depended on a single individual, it would not have been real or lasting. The essence of democratic leadership is helping the system to act effectively instead of depending on a charismatic leader or on ideological gimmicks. Cardoso had worked on that project all his professional life, in a variety of roles and through many crises, and his work was bearing fruit.

The general public, also, had become more appreciative of his efforts, despite his limitations as a communicator. His standing in the public opinion polls, which had dipped sharply after the 1999 devaluation, had recovered. In a March, 2001, Sensus poll his positives exceeded his negatives for the first time since December, 1998, with 33.3 percent giving him a positive rating, and 26.5 percent a negative rating. The percentages vary according to how the questions are phrased; other polls available to Cardoso's office at the same time showed him at 30 percent "excellent or good," 50 percent "regular" and 19 percent "bad or awful."3

Of course, maintaining democratic continuity was not his only responsibility. Brazilians wanted economic growth, a lessening of poverty and inequality, better health and education, safety from crime, environmental protection, cultural development, and all of the good things that people everywhere want for the taxes they pay. Cardoso stated that "liberty is fundamental, but democracy is not limited to party or electoral institutions—it is extended to society. It requires a more agile and competent state. It is possible within the limits of democracy, to carry out social policies that lessen the amount of poverty."4

As a sociologist, Fernando Henrique had always believed gathering the best objective, statistical data to evaluate any social program. As a pragmatist, he asked to be judged by the results of his programs, not by ideological principles. Brazilian government agencies have long gathered excellent statistics on economic and social trends, and at the end of his term of office, Cardoso and his staff began to gather the data for an assessment of their accomplishments and of the challenges that remained. Cardoso's annual messages to Congress read like a social science report, full of statistical data and scholarly explanations of the forces behind the social trends. His report to Congress on February 15, 2002, was titled "Eight Years of Stability, Development, and Social Conquests."5 It was his report to the nation on his presidency.

He frankly acknowledged that there had been problems in the previous year, the most serious of which was a sustained drought that forced electricity rationing because of the country's very heavy reliance on hydroelectric power. Economic growth had been only 2 percent for the year, instead of the 4 percent to 5 percent that had been anticipated. Nevertheless, Cardoso was convinced that Brazilians should "feel confident when they think about the last seven years and remember how much Brazil has advanced…it is impossible to deny, in light of the facts, that the reforms have been profound and that they made life better for Brazilians."6

But in a democracy there are always those who deny and disagree. Leftist critics James Petras and Henry Veltmeyer argue that "from the point of view of national economic development, there is very little doubt that FHC will be the worst Brazilian president of the twentieth century."7 They accuse Cardoso of leaving the country in a state of "regression and stagnation."8 Their book, Brasil de Cardoso: A desapropriação do país, was published in 2001, and their criticisms reflect the mood caused by the exchange rate crisis of 1999. Their arguments provide a useful counterbalance to Cardoso's optimistic account. A more balanced appraisal can be found in the book Brazil in the 1990s: An Economy in Transition, edited by Renato Baumann, the head of the United Nations/Economic Commission for Latin America office in Brazil. We will make use of Cardoso's annual report and these two independent sources in our evaluation of the social and economic record of Cardoso's presidency. Our argument is supported with statistical data and graphs, many of which are from a presentation by Eduardo Graeff of President Cardoso's office that is available for download from this author's WEB site at http://crab.rutgers.edu/~goertzel/fhc.htm. 9 (Editor's note: for technical reasons, Brazzil had to omit the graphs.) These statistics are from standard sources available to anyone. The disagreements are not about the statistics, but about their interpretation.

Economic Indicators

Cardoso was elected because of his success, as Finance Minister in the previous administration, in ending Brazil's hyperinflation. Eight years later, this remains his most remarkable accomplishment. Even his severest critics, Petras and Veltmeyer, acknowledge that "one of the greatest errors committed by Lula and by the PT [the Workers Party and its leader], in 1994…was to grossly underestimate the social and political impact of hyperinflation and of Cardoso's plan to stabilize the value of the Real."10 Maintaining a stable currency was absolutely central to Cardoso's credibility, and he kept this commitment to the Brazilian people, as Chart One11 shows.

The remarkable oscillations in this graph recall many dramatic events in Brazil's recent history: the failure of the Cruzado plan in 1987, the Bresser plan in 1988, the summer plan in 1989, the Collor Plans in 1991 and 1992, and finally the success of Cardoso's Real plan in 1994. The graph's stability since 1994 disguises the drama of the near failure of the Real plan in 1999 when speculative pressures forced Cardoso to allow the Real to float against the dollar. At that time, Brazilians were fearful that everything Cardoso had accomplished was lost and that the country would return to hyperinflation and economic recession. Petras and Veltmeyer were writing in the aftermath of that crisis when they accused Cardoso of leading the country into regression and stagnation. But Cardoso and his team brought the country through the crisis of 1999 without reverting to hyperinflation.

This economic stabilization was not without cost. In the first three quarters of 1999, Brazil was in a mild recession with declines in the Gross Domestic Product of _0.21 percent, _0.65 percent and _0.41 percent. In the fourth quarter of 1999, however, there was a positive growth rate of 0.79 percent and growth resumed to over 4 percent by the last two quarters of 2000 and the first quarter of 2001.12 The remainder of 2001 was disappointing because of the electricity crisis, the crash of "dot.com" stocks in the United States, and contagion from the collapse of the Argentine economy. Fortunately for Brazil, the United States recovered quickly and the relationship with Argentina had already been minimized because of the incompatibility of Brazilian and Argentine exchange rate policies. The Brazilian economy ended 2001 with a growth rate of about 2 percent, and was expected to resume better than 4 percent growth in 2002.13

For the eight years of Cardoso's presidency, Brazil's per capita economic growth has been moderate, with significant variations from year to year, as shown in Chart Two.14 There was a period of rapid growth beginning in 1993, as the economic stabilization plan took hold. The first few years were ones of great enthusiasm, sustained by an artificially high valuation for the Real. Imports were cheap, wages were up, everyone seemed to be doing well with no bill to pay. But the country was living above its means, depending on borrowing at high interest rates. Cardoso warned that there were problems, and kept trying to get Congress to raise taxes and cut spending, but it was hard to create a sense of urgency when everything seemed to be going so well. Economists advised that it was necessary to lower the value of the Real, but Cardoso and his advisors were reluctant to do so for fear of re-igniting inflation and hurting Cardoso's chances for reelection in 1998. Economic pressures kept building until the Russian crash in 1998 forced a devaluation in 1999. After the devaluation, growth resumed.

Cardoso's economic policies have imposed significant hardships, most especially on state employees and on relatively well paid workers in state industries. Privatization of state industries has generally meant downsizing and the loss of jobs by workers who enjoyed job security under the statist system. As Chart Three15 shows, unemployment in Brazil's metropolitan regions increased sharply in 1998 and 1999, due in large part to the exchange rate crisis. This high unemployment, among relatively well paid and politically vocal workers, contributed greatly to Cardoso's low ratings in opinion polls during this period. Unemployment has begun to come down with the revival of the economy after the 1999 devaluation, but it remains a source of significant distress.

This distress, however, has not been felt primarily by the poor, but by relatively advantaged workers. As critics never cease to repeat, Brazil has a great deal of poverty and a higher index of inequality than most nations. Cardoso is acutely aware of this, and just as committed as anyone to improving the lives of the poor. The question is, what impact have his policies had? A comprehensive study released in 2002 by two of Brazil's top specialists on measures of inequality—Marcelo Neri, Chief of the Center for Social Policies of the Fundação Getúlio Vargas and José Márcio Camargo, Professor of Economics at the Pontifícia Universidade Católica in Rio de Janeiro, concluded that "1990-1997 is the most interesting period, owing to the implementation of economic reforms. Our benchmark inequality measure falls from 0.748 to 0.699. This downward movement is followed by almost all inequality measures."16

By the best measures the United Nations Economic Commission for Latin America has, Cardoso's reforms have lessened inequality in Brazil. But inequality is not the most important measure of a society's accomplishments. What is more important is the absolute level of poverty and misery, not how the poor compare with others. There are a number of measures of this, including the poverty index shown in Chart Four.17

As Chart Four shows, Brazil's poverty index declined significantly in the immediate aftermath of the Real Plan, although not as sharply as it did in 1985 and 1986 under the Cruzado plan. This is understandable because inflation is most burdensome for the poor who have little ability to shelter their incomes. Since 1995, poverty has remained stable at about 30 percent of the population, with a little less than half of these severely poor or "indigent." It has not returned to previous levels as it did after the failure of the Cruzado plan. Another useful measure is the ratio between the minimum wage and the cost of a standard market basket of commodities, as shown in Chart Five.18 This chart shows a sharp increase in the purchasing power of the minimum wage in 1995, and a slow improvement since then.

Social Indicators

The United Nations Human Development Index19 was created because many people thought that too much attention was being paid to economics and not enough to human factors such as health, literacy and education. The methodology for computing the index is complex and has changed slightly over the years, but it does provide a good balanced measure of how well a country is providing for its people. As Chart Six20 shows, Brazil's Human Development Index has improved steadily over the years since 1980 with a slight increase in the rate of improvement during the Cardoso years.

This chart may be surprising to many readers, since one hears a great deal more about Brazil's problems than about its progress. But Brazil is not exceptional in this respect. The United Nations Human Development Report shows substantial progress in most regions of the world, with important exceptions in sub-Saharan Africa and the countries of the former Soviet Union. Brazil's record of steady progress is more convincing when one looks at specific indicators. Infant mortality is usually considered to be the single best measure of the welfare of a society's most vulnerable members. As Chart Seven21 shows, infant mortality in Brazil has declined steadily since the 1980s in each of Brazil's regions. The decline has been greatest in the Northeast, which is the poorest region.

These statistics reveal some facts which are not widely appreciated. First of all, Brazil has been much more stable and consistent in its social development than in its economic development. The 1980s are often referred to as a "lost decade" in Brazil because of the lack of economic growth. But it was not a lost decade in terms of social welfare, the social indicators continued to improve steadily. Second, the social indicators do not fluctuate in response to short-term changes in economic policies or inflation rates. Social conditions change much more slowly than economic conditions. Of course, human welfare is not what it should be, especially in the Northeast. But this cannot be blamed on Fernando Henrique Cardoso or on "neoliberalism" or any other relatively short-term phenomenon. Nor can we credit Cardoso for any dramatic improvement in social indicators. Under his administration, Brazil continued to make slow but steady progress, just as it did under the preceding governments.

Educational Policy

Despite the progress that has been made, Brazil continues to be one of the most unequal societies on the planet. This fact is well established. The more difficult questions are: why this is the case and what should be done about it? All market societies have considerable inequality, but why is Brazil worse than many others? The most important variable that effects the amount of economic inequality in a society is educational inequality. This is especially true as an economy modernizes, because more and more of the better paying jobs require literacy and other skills people learn in schools. In their study of the causes of inequality in Brazil, Neri and Camargo found that "the marginal explanatory power of schooling—by far the most important variable—rises from 25.7 percent in 1976 to 26 percent in 1990 and to 26.4 percent in 1997."22 The marginal explanatory power of the two next most important variables—the age distribution and the proportion in the working class—were 5.9 percent and 8.7 percent in 1997. This means that by far the most important step a government can take to lessen inequality is to raise educational levels.

And educational policy has improved significantly during the Cardoso years. Even Petris and Veltmeyer concede that "basic education is widely recognized as one area where the federal government has had success in the planning and implementation of social policy."23 One of the most important reforms has been to force local and state governments to spend at least $300 per student per year, which has provided a guaranteed base salary for all school teachers. Petris and Veltmeyer acknowledge that "this certainly was a conquest."24

Brazil had been making slow but steady progress in school attendance rates throughout the 1970s and 1980s, and the trend continued during the Cardoso years, as shown in Chart Eight.25 The rate of improvement for primary school slowed slightly, but this is because Brazil was approaching full enrollment for this group. The rate of increase accelerated most for the college age group, an area that has caused much conflict because of the shift in emphasis from state to private institutions. Brazil's state and federal universities are free of tuition, and serve primarily students from affluent families who are able to afford expensive private secondary schools.

Cardoso would like to charge tuition from students who can afford to pay and make the public universities more accessible to students from lower income groups. These reform efforts have been bitterly resisted by students and faculty at the public universities who have often gone on strike. The propensity for striking is encouraged by remarkable legal provisions that often allow faculty to receive their regular paychecks while on strike. The government has responded to this conflict by channeling more and more resources to the private universities, which generally serve students from less affluent families. As Chart Nine shows, enrollment has increased in both public and private sector higher education, but much more rapidly in the private sector.

With primary school enrollments approaching 100 percent, the next step is to improve the quality of education once students get there. The Cardoso government made improving primary education a top priority because the need is so great. Under new federal legislation, which began to be implemented in 1998, states have been required to concentrate their spending, and their use of federal monies, on primary education. Funds are pooled and distributed to schools in proportion to the number of primary schoolchildren actually attending. At least sixty percent of the total resources of the fund must be spent on improving the pay of primary school teachers, a critically important profession that has been woefully underpaid in Brazil.

Despite their obvious importance, these measures were strongly opposed by many state and local governments, including some controlled by supposedly "leftist" parties, because they penalized states that were not focusing enough of their efforts on elementary education. But this resistance was overcome because of the strong public support for the issue. Sônia Draibe reports that within one year the increase in per capita spending on schoolchildren was about 22.7 percent nationwide, and that it was higher in the poorest regions—47 percent in the North and 90 percent in the Northeast.26

Organizationally, the emphasis has been on decentralization, with each school given increased autonomy. The rules encourage increased parental involvement in the schools, and some funds are sent directly to parent-teacher associations in each school.

A distance education program, with satellite television reaching to remote areas, helps to cut regional inequities, a computerization program brings schools into the digital age, and a school book and school library program helps schools to catch up on traditional printed media. Substantial funding is made available for school meals. Studies have shown that decentralization has led to improvements in efficiency and effectiveness, but improvements in the quality of teaching are slower and more difficult to measure.27 The government is also devoting resources to teacher training, improvement of curricula and materials, and national assessment schemes.

There has been a substantial lessening of social and racial inequities in education. In 1992, one of every four children from a poor family was not in school. By 1999, this proportion fell to 7 percent. The percentage gap in school attendance between the richest children and the poorest children fell from 22 percent to less than 6 percent. The gap between white and black children diminished from 19 percent to 6 percent. Few can disagree with Cardoso's statement that "this is social inclusion of the most unequivocal and lasting kind. It signifies, in the last analysis, more citizenship and a more just society."28

Health

Health is another area where Cardoso administration continued and developed reform policies that were begun by previous governments. Prior to the 1980s, the Brazilian health care system was fragmented and focused more on treatment than on prevention. Health care was especially poor in the rural areas, and in urban slums. Lack of sewers and sanitary water supply was a major problem, and there were powerful pressures for reform as democracy was restored. Many of these reforms were included in the 1988 Constitution which called for a Unified Health System, but implementation was slow.

The Cardoso administration's greatest accomplishment has not been in changing the model of health care, but in making it more of a reality. Implementing legislation was passed in 1995 and 1996 to diversify and expand the sources of funding for health care, redistribute resources to basic services, and decentralize public health management. Programs have been targeted on the poor, including family doctor programs, basic pharmacy programs, vaccination programs, women's health programs and programs combating infant mortality.29

The effectiveness of these policies can be seen in the continuing decline in infant mortality rates, as shown in Chart Seven, and the continuing improvement in life expectancy in all regions of Brazil, as shown in Chart Ten.30 In these cases, Brazil under Cardoso has continued the steady progress achieved under the preceding administrations. Progress on health and sanitation was maintained during the "lost decade" of the 1980s, despite the economic crises.

One area in which improvement has been much more rapid under Cardoso is Brazil's response to the global AIDS epidemic. Brazil was one of the first countries in the world to challenge the high prices charged for AIDS drugs by American drug companies and to produce generic AIDS medications. Brazil has provided free health care for people with AIDS.31 As Chart Eleven32 shows, there has been a sharp decline in deaths since 1995, primarily due to the free distribution of AIDS medications through the public health networks. Brazil has an AIDS problem similar to that in the United States instead of one similar to that in South Africa, an outcome that was by no means certain.

To be continued in the next issue.

Notes:

Raymond Colitt and Richard Lapper, "Cardoso keeps a cool head," Financial Times, April 19, 2002. http://globalarchive.ft.com.

2 Luís Nassif, "Uma obra de arte política," Folha de São Paulo, 9 March 2002. "Em 1995 ainda se tinha um país politicamente anacrônico. A campanha do impeachment havia colocado novos atores políticos em cena. Mas mesmo a queda de Fernando Collor, com todo seu histórico, foi muito mais fruto de sua incapacidade de se aliar aos coronéis políticos regionais.
Quase oito anos depois, os coronéis estão desaparecendo um a um. Há quem veja por trás de cada operação dessas a interferência direta de Fernando Henrique Cardoso. E há quem considere que tudo ocorreu apesar dele, pelo amadurecimento espontâneo das instituições.
O que aconteceu neste período foi algo muito mais sofisticado e que estava delineado desde o começo do primeiro governo FHC, conforme se poderá conferir na coluna "Uma obra de arte política," que escrevi em 3 de julho de 1995.
A estratégia consistia em montar uma aliança com as forças fisiológicas e se valer do imediatismo da fisiologia para distribuir favores em um nível que não comprometesse a gestão, visando as reformas que mudassem definitivamente o modelo.
Paralelamente, o intelectual FHC cumpriu seu melhor papel, o de professor. Nestes quase oito anos, acabou com o personalismo que sempre transformava o presidente da República em espécie de pai de todos. Às vezes exagerou no papel, eximindo-se até de responsabilidades que eram suas. Mas, dia após dia, essa despersonalização do poder, a impessoalidade das ações sociais e a não-interferência nos Estados e nos demais poderes foram gradativamente liberando as instituições, garantindo a autonomia dos poderes, oxigenando a vida institucional. O resto foi consequência."

3 Sílvia Faria, "Popularidade de FHC é a Maior Desde 98," O Estado de S. Paulo, 28 March, 2001. http://www.estado.com.br  "ótima, boa, regular, ruim e péssima".

4 Demétrio Weber e Lu Aiko Otta , "FHC prega Estado ágil e competente," Agência Estado, March 10, 2002. http://www.estado.com.br  A liberdade é fundamental, a democracia não se restringe à institucionalidade partidária e eleitoral—se estende à sociedade, requer um Estado mais ágil e mais competente. E é possível sim, dentro da democracia, levar políticas sociais que diminuam o nível de pobreza."

5 Fernando Henrique Cardoso, Mensagem ao Congresso Nacional, Brasília: Presidência da República, 2002. Downloaded from: http://www.planalto.gov.br/publica.htm  'Oito Anos de Estabilidade, Desenvolvimento e Conquistas Sociais"

6 Ibid, p. vii. "Temos ainda mais razão para nos sentirmos confiantes quando passamos em revista os últimos sete anos e verificamos quanto o Brasil avançou…não é possível negar, diante dos fatos, que as reformas realizadas são profundas e que mudaram para melhor a vida dos brasileiros."

7 James Petras e Henry Veltmeyer, Brasil de Cardoso: A Desapropriação do País. Petrópolis, RJ: Vozes, 2001, p. 14.

8 Ibid. "retrocesso e estagnaçao"

9 "Oito Anos" a Powerpoint presentation by Eduardo Graeff of the Office of the President in Brasília, is available, with interpretative notes, in both English and Portuguese versions at http://crab.rutgers.edu/~goertzel/fhc.htm.

10 Petras and Veltmeyer, Brasil de Cardoso, pp 56-57. "Um dos maiores erros cometidos por Lula e pelo PT, em 1994…foi subestimar grosseiramente o impacto social e político da hiperinflação e o plano de Cardoso para estabilizar o valor do Real."

11 This chart is from Graeff, op. cit.

12 Fernando Henrique Cardoso, Sete Anos do Real: Estabilidade, Crescimento e Desenvolvimento Nacional. Brasília: Presidência da República, 2001, p. 19.

13 Mensagem ao Congresso Nacional, p. vii

14 This chart was prepared with data from http://www.ibge.net/home/estatistica/economia/contasnacionais/tabela5.shtm The figure for 2001 was estimated based on data from the Mensagem ao Congresso Nacional.

15 This Chart is from Graeff, op. cit.

16 Marcelo Neri and José Márcio Negri, "Distributive Effects of Brazilian Structural Reforms," in Renato Baumann, ed., Brazil in the 1990s: An Economy in Transition, New York: Palgrave, 2002, p. 307.

17 This chart is from Graeff, op. cit.

18 This chart is from Graeff, op. cit.

19 United Nations, Human Development Report 2001, at http://www.undp.org/hdr2001/  

20 This chart is from Graeff, op. cit.

21 This chart is from Graeff, op. cit.

22 Neri and Camargo, op. cit., p. 308.

23 Petras and Veltmeyer, op. cit., p. 100. "a educação básica é amplamente reconhecida como uma área onde o governo federal teve êxito no planejamento e implementação da política social."

24 Petras and Veltmeyer, op cit., p. 100. "o que foi certamente uma conquista."

25 This chart is from Graeff, op. cit.

26 Draibe, op cit., p. 126.

27 Núcleo de Estudos de Políticas Públicas, Avaliação da Descentralização de Recursos do FNDE e da Merenda Escolar. Unicamp, Campinas, 1998.

28 Fernando Henrique Cardoso, Mensagem ao Congresso Nacional, op. cit., p. 57. "Isto é inclusão social da forma mais inequívoca e duradoura. Significa, em última análise, mais cidadania e um País mais justo."

29 Sônia Draibe, op. cit, pp. 104-113.

30 This chart is from Graeff, op. cit.

31 Cardoso, Mensagem ao Congresso Nacional, op. cit, pp. 113-114.

32 This chart is from Graeff, op. cit.

This is the first part of the concluding chapter of the Brazilian edition of Fernando Henrique Cardoso: Reinventing Democracy in Brazil to be soon published in Portuguese by Editora Saraiva. The chapter is called "Eight Years of Pragmatic Leadership in Brazil." The book's author, Ted Goertzel, Ph.D., is a professor of sociology at Rutgers University, in Camden, New Jersey. He can be reached at goertzel@crab.rutgers.edu 


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