Neoliberalism Unchained

Jair Bolsonaro and the Rise of the Extreme Right in Brazil

By James M. Cypher| January/February 2019

This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org


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The year of 2019 marks a consolidation of the steady slither into extreme right-wing rule in Brazil, as long-time congressman Jair Bolsonaro assumed the presidency on January 1. This slide into the vortex of far right la-la land began when the less-than-charismatic, but steady and solidly left, President Dilma Rousseff, of the Workers’ Party (Partido dos Trabalhadores, or PT) was impeached in a slow-motion coup in 2016, supported by not a shred of evidence. She had led the giant nation of 209 million after Luiz Inácio “Lula” da Silva, also of the PT, completed two highly successful presidential terms in 2011. When Rousseff was ousted in 2016, the economy was undergoing its worst recession in decades. The economy shrank by 7% in 2015 and 2016. By the end of 2018, per capita income was no more than it was in 2013, thanks in part to austerity programs deployed by the conservative power bloc that toppled Rousseff.

Both Lula and Rousseff were “neo-developmentalist” leaders who attempted to realign Brazil’s society through programs of income redistribution and industrial policies designed to address deindustrialization (see James M. Cypher, “Brazil’s ‘Big Push,’” D&S, March/April 2013). For a while there were good indications that Lula and the Workers’ Party leaders had initiated a successful program of realignment. The administration was lauded worldwide for its “Zero Hunger” program which sought to address extreme poverty both in highly visible large urban areas and in Brazil’s vast poverty encrusted outback, particularly the heavily Afro-Brazilian Northeast. An array of programs brought the poverty level down from 60 million in 2004 to 26.6 million in 2014. Still, Brazil’s coddled 1%, the oligarchs, walked away with 27.8% of the national income in 2015—the highest level of wealth concentration of any nation.

There’s No Business Like Agribusiness

Had the Workers’ Party been content with some commendable programs of redistribution, Brazil’s powerful right wing—long led by giant and agile agribusiness corporations whose smothering weight in the congress is ever-present through its rural caucus (or Bancada Ruralista)—might have quietly sulked. After all, the Workers’ Party was unwilling, for the most part, to help the relatively powerful landless movement (or Movimento Sim Terra) as it variously sought to occupy “unused” agricultural land, or, occasionally, promote buyouts of these lands (see Chris Tilly, Marie Kennedy, and Tarso Luís Ramos, “Land Reform Under Lula: One Step Forward, One Step Back,” D&S, September/October 2010).

The Ruralistas were quite profitably occupied throughout most of the years when the Workers’ Party was in power (20032016) as they became the main beneficiaries of the commodity boom that began hesitantly in Latin America as the 21st century began. Indeed, by 2018 Brazil passed the United States as the world’s number-one soybean producer, as agribusiness continues its massive shift into Brazil’s central-west frontier and beyond. In Brazil’s vast “Soylandia”—with some 55 million hectares cultivated in 2014—massive use of chemical-based cultivation has taken an environmental toll, while income distribution has skewed ever-more heavily toward the agrarian oligarchy. But soy was only the most visible aspect of the commodity boom; cotton production soared, while meat production jumped as did citrus output. The Workers’ Party devoted a respectable amount of the public-sector budget to the expansion of ports, roads, and the rail system—but China’s seemingly insatiable need for these commodities meant that the transportation system was perpetually clogged—until, of course, the inevitable occurred. The commodity boom ended, in general, in 2012, with the oil and gas industry able to escape its own bust until roughly 2014. Commodity booms always end in bouts of overproduction, the hangover effect lasting for years or decades—after which Latin American nations dutifully forget their long-cursed past and crank up commodity production, with mining often being a leading component, as it was from roughly 2000 to 2012.

While I was working as a researcher in Brazil for stints in 2010 and 2011, and most recently in 2016, well-regarded economists expressed their doubts to me regarding this (well-documented) view of boom-and-bust commodity cycles. “This time is different,” I was informed again and again, for one big reason: China. They seemed, particularly to other Brazilians, to have a point. After all, China’s economic trajectory was without precedent, particularly after its entry into the World Trade Organization in 2001, which gave its export sector carte blanche to ramp up production of an array of consumer goods exported everywhere, but particularly to the United States. In went the commodities and out went the transformed, manufactured, products—thanks to what appeared until recently to be an unending supply of cheap, but responsive, labor. According to many Brazilian economists, policymakers, and business people, China was on a long, steep, and smooth upward path. For a long time to come—went the conventional wisdom—China’s need for commodities would not abate. In fact, Brazil, they claimed, was well situated to produce just those commodities that were destined to enjoy what economists term “a high-income elasticity of demand.” Translated, this means that as the standard of living rises, dietary consumption shifts to preferable goods (or luxury goods). Beef and related items crowd out basic foods. High-end food consumption—just the items that Brazil could endlessly provide—would rise more than proportionately as China moved ever upward. So, why not enjoy the ride, and worry about the rest, if need be, decades down the road? Furthermore, it was argued—to some degree with good reason—Brazil was not “just” a commodity producer. Agribusiness was different—it was mechanized, it was scientifically advanced, it was innovative in finding new (non-traditional) products such as citrus and wine, and it yielded cross-benefits in terms of promoting manufacturing inputs (agricultural machinery) and technological spin-offs.

One dark component of this rosy picture had to do not with the future when the Brazilian agribusiness export machine crashed if China slowed down, as it has, but with the simple fact that China accepted ever-rising Brazilian commodities on the condition that Brazil did the same with manufactured products. Brazil was, and is, caught in a downward spiral of deindustrialization, although debate has raged for over a decade as to its extent and consequences.

The Workers’ Party under Lula’s dynamic leadership pushed for an industrial policy that would not only stop the slide into deindustrialization but would push Brazil up the technological ladder into high value-added, complex, and advanced industrial production. The project was one of state-led development—it echoed and built upon a once dominant school of thought known as Latin American Structuralism. The structuralists—most notably in Brazil those who followed the creative ideas of economist Celso Furtado (19202004)—were increasingly influential in guiding national development policy until the military coup of 1964. Furtado advocated social development—industrialization not based on social exclusion, but rather on attending to the necessities of poor workers, impoverished farmers, and all marginalized people.

Coups in Brazil: Past and Present

Bolsonaro often lauds the military for its accomplishments from 1964 until the return of civilian rule in 1985. Economic growth was generally strong—until it was not, leading to the lasting contempt that the average Brazilian holds for that shattering period. The military leaders were developmentalists. They exercised great latitude in their pursuit of state-led development. They abhorred the “let the market work its magic” approach advocated by Milton Friedman and his Chicago Boys when they took power in Chile after the coup of 1973. Developmentalists they were, but not in the least were they concerned with social developmentalism as advocated by Furtado and the Workers’ Party which followed his guidance, sometimes more in spirit than in fact, from 2004 to 2016. The military’s lasting legacy was the reconsolidation of the oligarchy: most particularly the power of landowners who greatly benefited from various programs to “develop” the vast Amazon region.

It is worth recalling that the United States was extensively involved in the coup and in deep alliance with the oligarchs: at its core the disputed policies were those that challenged the autonomy of U.S. corporations to set the terms in Brazil. The government had the temerity to propose that the amount of repatriated corporate profits flowing back into the United States be capped. Even worse, perhaps, was the Furtado-inspired policy of land reform in the lower Amazon region—a dagger point right to the heart of the Bancada Ruralista. And the more oily aspect of the coup had to do with the effrontery of the government’s intentions to buyout a sizeable number of oil refineries (overwhelmingly owned by U.S.-based corporations), turning them over to be run by the state-owned oil company Petrobras.

Within weeks after the coup U.S. foreign direct investment—which had dropped to a trickle as social development gained momentum—soared. The U.S. government immediately responded with largesse—$650 million in aid funds plus arranging for $450 million in needed loans. The military was off and running—it had friends in high places, not least Nelson Rockefeller. In their book Thy Will be Done, Gerard Colby and Charlotte Dennett document the deep linkages between the Bancada Ruralista and the Standard Oil scion as Rockefeller set up a vast chain of Brazilian companies to transform its subsistence agricultural practices to agribusiness in 1948—just after a controversial, but largely progressive, government was forced out in 1945 by the long-embedded oligarchy.

A crypto-coup in 1945, a coup in 1964, and yet another in 2016: so it has long gone in Brazil—any shift to a progressive stance seems to get a run for a while and then down comes the curtain. Here is what Le Monde Diplomatique noted in September 2018:

The Bancada Ruralista has amassed the power to overthrow or maintain presidents. Both the impeachment of President Dilma Rousseff in 2016, as well as the preservation of President Michel Temer, on two occasions in 2017, were the result of the votes cast by the Parliamentary Front for Agriculture and Livestock [known as the FPA, the formal title of the Bancada Rural]. In 2016, in the House of Deputies, 182 (50%) of the 367 votes for impeachment were from this Front. In August of the next year, the first round of votes to initiate the same process against Temer, the tendency was inverted: 134 (51%) of the 263 votes against [impeachment]—in favor of preserving the president in the face of charges of corruption—were cast by members of the FPA.

The author goes on to further document the power of the Bancada Ruralista to dominate the legislative process, bend the executive branch to its will, influence the judiciary, and operate as the principal force in turning back environmental and human rights legislation. The agrarian oligarchs and their representatives in Congress were the leading edge of the right-wing juggernaut, but they were ably abetted by 1) the money-bags magnates of the highly concentrated private financial sector, who wielded their autonomous power over monetary policy throughout the years of Workers’ Party rule (in 2018 the top four banks controlled 73% of the assets and issued 80% of the loans); 2) a large portion of industrialists able to amass quick wealth through monopoly power; 3) most evangelicals—over 20% of the population—who espouse a rightist ideology; 4) a sizeable middle class intent on assuring their personal security; and 5) a small number of giant media conglomerates that dominate the press and television and radio news, run by highly politicized members of the oligarchy who were determined to break the political hegemony of the Workers’ Party. (Just nine family-owned corporate media groups control the lion’s share of all media outlets—led by the Marinho family’s Grupo Globo empire, now owned by three billionaire brothers, followed by the Bandeirantes group.)

Neoliberalism Takes Hold

While many Brazilian economists, policymakers, and business people were willing to gamble that somehow—against all of Latin America’s long history—it would be viable to passively jump on the China bandwagon and export the gigantic agribusiness surplus, on the theory that “this time is different,” the government of Lula generally advocated for a structuralist transformation wherein Brazil would broaden and deepen its industrial base primarily in order to develop its internal market. Pushing exports made sense in this approach—but only as a means of creating a quick surplus that could be plowed back into developing the national industrial base. Thus, the popular progressive government that took power in 2004 envisaged a series of government programs that would put Brazil on a sustainable path to social development. The linchpin of the strategy was to lead the reindustrialization process via the combined powers of the vast state development bank BNDES and the rapidly growing capacities of Petrobras, the national oil company. Serendipity seemed to provide the way forward—Petrobras began to move into the big leagues of oil production due to unexpected and large deep-water oil fields. Petrobras had the technological capacity to assemble and control much of the production process—including the tricky business of developing the offshore production and producing the giant perforation/production platforms that one could see taking shape on a vast bay just outside beautiful Rio de Janeiro. Petrobras sought to harness the vast sums proffered by BNDES to operate the vertical and horizontal linkages between the oil industry and many other sectors including shipbuilding, refining, chemicals, metal fabricating, and machine tools.

Into the mix, predictably, the end of the commodity boom arrived—for most commodities (as mentioned) around 2012 and for oil and gas by 2014. Lula had passed the baton to President Rousseff in 2011. She lacked Lula’s charisma, his sense of political timing, his oratorical powers, his willingness to face his many challengers, his popular base, and the commodity boom that allowed him to go in two directions at once—let the agriculture sector have its way and vigorously promote social development. By 2012, with Rousseff in power for a little over a year, Brazil’s export boom began to stall. Worse, China’s growth slowed: by 2012 it was half what it had been in 2007, and its growth was relatively slow throughout 2018. Rousseff was faced with mounting economic problems—economic growth fell from nearly 8% in 2010 to 0% in 2014 and -4% in 2015, the budget deficit jumped from roughly 2% in 2012 to nearly 10% in 2015, and her political rating fell off the charts with nearly 75% of Brazilians giving her a “terrible” rating, all while evidence of sizeable corruption emerged within Petrobras.

Rousseff’s successor, President Michel Temer, was clearly a way for Brazil to mark time. As Bolsonaro takes power, he will turn economic policy over to a genuine Chicago Boy, Paulo Guedes, an economist with the full backing of the business oligarchs. Guedes is slated to run not only the finance ministry but also the ministries of trade, planning, and the secretariat for public investment. Guedes claims he has a mandate to privatize the public sector, meaning in particular that Petrobras will be gutted, with the U.S. oil transnationals likely to carve out their sizeable share. The public-sector pension program, which is extremely generous, will be pared back as far as possible, and Guedes claims he will change Brazil’s economic model—meaning that neoliberalism will be on the agenda. Neoliberalism, as practiced throughout Latin America from the 1980s in accordance with the dictates of the Washington Consensus, never caught on in Brazil. It is worth mentioning again that the military dictatorship was run by developmentalists who held state-led development (but not social development) in high regard. The Washington Consensus lauded the “magic” of the market and pushed for unrestrained globalization (giving transnational corporations access to all niches of the national economy). In contrast, the military promoted state-run national corporations such as Embraer—a policy that promoted some autonomous technological advancement, including in aeronautics.

Where Guedes stands ideologically—where Brazil will be forced to go under Bolsonaro—is where the Free Brazil Movement exists. This organization has received grants from the U.S.-based Atlas Network, a below-the-radar right-wing entity. Free Brazil emerged in 2014 and was known to be behind libertarian demonstrations that led to the toppling of the Rousseff presidency. Guedes is also linked to the recently formed Millennium Institute, which has received funding from Atlas, with Bloomberg News listing him as a founder.

Even worse, perhaps, will be the absolute free hand given to the Bancada Ruralista, which will take the lead in despoiling the vast tracts of land still untouched, or somewhat regulated, in the Amazon region. Any and all forms of extraction will be the order of the day as the lumber, water, oil, minerals, and biodiversity are plundered as fast as possible. That, at least, is what Bolsonaro has stated will be his policy. It brings to mind, now with a vengeance as never before, the old cliché once again: “Brazil is the land of tomorrow, and always will be.”

is a professor of economics in the doctoral program in development studies at the Universidad Autónoma de Zacatecas, in Mexico.

Rodolfo Borges, “Brazil Has the Highest Concentration of Income in the World Among the Richest 1%,” El País, Dec. 14, 2017 (brasil.elpais.com); Ana Campoy, “Dilma Rousseff’s Demise in Five Charts,” Quartz, August 31, 2016 (qz.com); Luís Castilho, “Agro is Lobby: The Ruralist Group in the Congress,” Le Monde Diplomatique Brasil, Sept. 4, 2018 (diplomatique.org.br); Gerard Colby and Charlotte Dennett, Thy Will Be Done: The Conquest of the Amazon : Nelson Rockefeller and Evangelism in the Age of Oil, Harper Collins, 1996; Lee Fang, “Sphere of Influence: How American Libertarians are Remaking Latin American Politics,” The Intercept, August 9, 2017 (theintercept.com); Rachel Gamarski, Simone Iglesias, and Jackie Gu, “Bolsonaro’s Men in Brazil: A Look at His Inner Circle,” Bloomberg News, Oct. 26, 2018 (bloomberg.com); Instituto Millenium (institutomillenium.org.br); “Generals, ‘Chicago Boy’ Loom Large in Brazil’s Next Government,” teleSUR, Oct. 29, 2018 (tlesurenglish.net).

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