- 1 The label of commercial and financial globalization as used in this article refers to a set of ins (...)
1The paper’s objective is to investigate the causes of the deep economic crisis that Brazil has faced since 2014 and the consequences of the liberal institutional reforms carried out since 2016. The primary hypothesis is that the most severe economic crisis in the country’s history is, on the one hand, a political reaction to the introduction of institutional changes in the Brazilian accumulation regime by the centre-left governments, especially the wage relation advance and the social policies strengthening. On the other hand, it is the result of commercial and financial globalization1 adverse effects.
2One of the main lessons French regulation theorists drew from Labrousse and Braudel’s Annales school is that “every society has the crises and conjunctures which correspond to its structure” (Boyer, 1990, p. 21-22). The regulation approach emerged in the 1970s seeking to understand the origins of the “golden age of capitalism” and its crisis. The hypothesis adopted to solve the stagflation puzzle was that it resulted not from price shocks but from the institutional features of the capitalist system at the time (Benassy, Boyer & Lipietz, 1978, p. 12).
3The shift in capitalist economies is rooted in the historical forms that the key social relations of capitalism appear. The concept of institutional forms made possible the mediation between Marx’s analysis of the basic social relations of capitalism (capital-labour relation, capitalist competition and monetary relation) and its concrete manifestations (Aglietta, 1979; Boyer, 1990). The institutional forms also provide mediation between microeconomic behaviour and macroeconomic patterns (Boyer, 2015). Five institutional forms are highlighted by the French regulation school: the wage relation, the monetary pattern, the forms of competition, the type of State and the pattern of international insertion. Such a set of institutions builds a mode of regulation: the institutional framework that guarantees the viability of a particular growth pattern (an accumulation regime) in a specific space and for a certain period. When the accumulation regime or the mode of regulation goes into crisis, a period of institutional change begins, giving rise to a new pattern of capitalist growth. Recently, Boyer (2015), based on Gramsci (1971) and Poulantzas (1973) concepts, emphasized the role that political coalitions and hegemonic blocs play in the formation and dissolution of institutionalized compromises, therefore, in the construction and crisis of modes of regulation.
4Regulationist authors argue that the Fordist virtuous cycle between productivity gains, wage increases, consumption, economic growth, and investment was interrupted by the increasing competition and the productivity slowdown, which caused distribution conflicts, inflation, public deficits, and slow economic growth (Benassy, Boyer & Lipietz, 1978; Lipietz, 1987, p. 41-46; Coriat, 2002; Boyer & Juillard, 2002; Boyer, 2015). The persistence of these problems marked the decline of Keynesian economic policies. The crisis of Fordism initiated a period of institutional experiments that gave rise, at least in some countries like the United States and the United Kingdom, to finance-led accumulation regimes.
5Although Brazil had a completely different accumulation regime in the post-war capitalism golden age, the Brazilian Government, between 2004 and 2011, sought to build a growth model that has significant parallels with some features of the Fordist model, as it is based on mass consumption and the establishment of social policies. However, these reforms were neither deep nor lasting enough to give rise to a new regime of accumulation. Also, national industrial mass production, typical of Fordism, cannot be assumed as a characteristic of the Brazilian economy in the 2000s.
- 2 Serrano and Summa (2018) identified several similarities between the current Brazilian economic cr (...)
- 3 The similarities between current Brazilian economic crisis and the crisis of Fordism include stagf (...)
6The crisis affecting the Brazilian economy has similarities with the so-called golden age crisis.2 However, it has other characteristics typical of the turbulences of global financial capitalism.3 Thus, to understand the challenges and economic policies adopted in Brazil currently, it is necessary to understand the historical and structural characteristics of the Brazilian economy.
7The work is organized as follows. The first part summarizes relevant Brazilian economy features during the golden age of capitalism, the subsequent period of crisis and world instability of the 1970s and 1980s, and the era that consolidated commercial and financial globalization, the 1990s and early 2000s. The second section presents the main institutional reforms of the centre-left governments period that were not cemented to configure a cohesive regulation mode and were interrupted by the reconfiguration of the accumulation regime that started in 2016. The third section discusses the significant adverse impacts of the global financial crises over Brazil. The fourth section presents the main reforms and measures carried out by liberal governments since mid-2016 and seeks to demonstrate how these reforms imply a reconfiguration of the accumulation regime and changes in the bloc in power that governs the country. The conclusion summarizes the main contributions.
8During most of the 20th century, Brazil was one of the countries with the highest average annual growth of GDP. From 1947 until 1980, the average real GDP growth was 7,3%. But, since the 1980s, growth rates have been falling. From 1981 until 2019, the average real growth was just 2,2%, and from 2014 to 2019, GDP decreased at an annual rate of 2,5 percent.
9During the golden age of capitalism, while the major capitalist countries built Keynesian or welfare states, Brazil and other countries of the periphery of capitalism raised developmentalist states, prioritizing economic growth and industrialization instead of full employment and social policies. Conservative sectors of society have blocked attempts to reform Brazilian society.
10Unlike the United States and western Europe, Brazil never had a Fordist mode of regulation. Some of the main features of Fordism were never fully established in the country (Coriat & Saboia, 1989; Aboites, Miotti & Quenan, 2002; Lavinas, Araújo & Bruno, 2019). The Fordist wage relation, for example, was experienced by only a tiny fraction of the Brazilian working class. Also, only a few features of a welfare state were timidly introduced after the democratic 1988 Constitution and are currently threatened by liberal reforms.
11As in Fordist countries, the concentration of income decreased during the democratic Brazilian Second Republic, 1946-1964 (Graph 1; Souza, 2016). However, fractions of the bourgeoisie, the military, and the middle classes organized themselves against João Goulart’s Government (1961-1964), a popular leader advocating social reforms and promoting wage increases. The 1964 military coup overthrew the Goulart government and started a period of authoritarian developmentalism.
Graph 1. Top 1% income share, selected countries (1929-2015)
Sources: World inequality database; Souza, 2016; graph: M. Bandeira & D. Santos
12The developmentalist State during the military dictatorship (1964-1985) promoted protectionism, state-owned enterprises, and massive infrastructure investments. The Government used the wage crunch to try to contain inflation. As a result, income concentration increased significantly between the 1960s and the mid-1980s, whereas income deconcentration took place in Fordist countries (Graph 1).
13Brazilian economic miracle occurred from 1968 to 1973, when the average annual growth rate was above 11%. Over the period, several mechanisms for indexing contracts were created, which sustained inertial inflation. Public investment was one of the primary sources of economic growth, especially between 1974 and 1980. The late period was characterized by high economic growth rates when developed countries no longer grew at that rate due to the Oil Shocks and Fordism crisis. This Brazilian economic history phase was characterized by Castro and Souza (1985) as a time of “forced march”, referring to both the economic strategy and the regime’s authoritarianism.
14After Paul Volcker’s shock in the USA interest rate in October 1979, the debt of several Third World countries became unsustainable. This context provoked economic depression and extremely high inflation rates in Brazil and marked the end of the military dictatorship and the authoritarian developmentalist mode of regulation. The subsequent years were marked by attempts to fight inflation and the search for new insertion strategies in the international economy.
15The current process of globalization of capital and commercial markets can be explained at different levels of abstraction and structural causality. At the deepest level of the historical movement of the capitalist mode of production, globalization is associated with the innovative and expansive pressures from capitalist competition, the system tendency to increase capital centralization and concentration, the rise of financial and fictitious capital (Marx, 2017 [1894]; Chesnais, 2016). Although these general tendencies at the level of the mode of production explain some of the main characteristics of contemporary global and financial capitalism, a more precise explanation of the phenomenon requires understanding of the institutions specific of the last decades.
16French regulation school, social structures of accumulation approach, post-Keynesian authors explain, respectively, the “finance-led growth regime”, the “global neoliberal social structure of accumulation”, or the “finance-dominated capitalism” mainly in institutional basis (Boyer, 2000, 2011; Lordon, 2008; Kotz & McDonough, 2010; Hein, Dodig & Budyldina, 2014). According to these historical and institutional approaches to neoliberalism, or financialization, it resulted from the crisis of the post-war institutional structure.
17The historical and institutional approaches argue that contemporary capitalism, at least in some central countries, like the United States and Great Britain, is characterized by markets liberalization, weakening of the trade unions, industrial plants relocation to Southeast Asia, increase in income concentration and consumption rise based on household debt (Boyer, 2000, 2011; Lordon, 2008; Kotz & McDonough, 2010; Hein, Dodig & Budyldina, 2014).
- 4 The post-war accumulation regime, known as Fordism, was itself the unintended consequence of sever (...)
18It is important to remember that commercial and financial globalization was not a planned process. At the level of the perceptions, choices, and actions made by the key actors of the society, the process can be understood as the non-planned outcome of the business people and policymakers’ strategies to solve some of the main troubles of the 1960s and 1970s, especially the stagflation crisis (Krippner, 2012; McNally, 2009; Varoufakis, 2011).4
19Thus, the commercial and financial globalization consolidation in the 1980s must be understood as an unintended result of economic and political strategies adopted by actors positioned in command places, especially in the United States, conditioned by the crisis of the institutional structure of the post-war growth regime, and by the systemic pressures of the capitalist mode of production. These economic and political strategies created the institutional design of contemporary international economic relations.
20In the specific case of the Brazilian economy, commercial and financial globalization has implied in:
- Reprimarization of the export basket and subordinate insertion in international trade. Dependence on Chinese demand for primary goods;
- Deindustrialization and increase in imports of industrialized goods;
- Use of the overvalued exchange rate to control inflation;
- Interconnection between relations and interests of the financial sector and those of industrial and agricultural sectors;
- Most of the workforce employed in the service sector, which has low productivity, reduced technological sophistication, and a high degree of informality;
- Economic policy that does not aim to promote high growth rates and generate full employment, but to control inflation and increase the profitability of the stock market;
- Public companies prioritizing shareholder remuneration instead of the quality and access of public service;
- Banking and financial sectors with low competition, and high interest rates;
- Restrict social welfare programs and the reproduction of precarious working conditions.
21In Brazil, institutions typical of the financialization process have added to the traditional practices of an agrarian and extractive economy, which exports raw materials and low complexity goods as primary sources of demand. Radhuber (2015, p. 19) argues that an “extractivist accumulation regime” is a growth pattern “oriented towards primary commodity export rather than internal processing and consumption”. This commodity-dependent growth pattern is a return, in the new context of commercial and financial globalization, to the historical forms of accumulation prevalent in Latin America, especially before the import substitution process, and already described in the literature associated with the ECLAC (Prebisch, 2001 [1949]; Furtado, 2007 [1959], 1999). In this article, the financial and extractivist accumulation regime label is applied to characterize the centrality and the articulation of agrarian, extractive, and financial practices, ideologies, and political influence determining key economic features related to international trade, sectoral dynamics, government spending, and economic growth. To understand the building of the regulation mode that supports the financial and extractivist accumulation regime is necessary to highlight some of the central choices made by the Brazilian political coalitions to face the main economic problems of the 1980s and early 1990s, which include inflation, income concentration, poverty, and the external constraint.
22In the current Brazilian democratic period, which started in 1985, economic policy priority shifted from promoting growth to controlling extremely high inflation. In the Sarney government, at the beginning of the Third Republic, there was no major structural rupture concerning the income-concentrating economy of the authoritarian regime, but instead, modest institutional reforms stimulated by the 1988 Constitution.
23The Collor (1990-1992) and Fernando Henrique Cardoso (1995-2002) governments introduced neoliberal reforms, continuously expanded country’s exposure to the international flows of capital and trade, and built a pro-financialization macroeconomic institutionality. On the one hand, these measures contributed to control inflation, but, on the other hand, also to the continuity of the external fragility of the economy, to the decrease in the State’s capacity to promote policies towards economic growth and triggered a process of industrial structure regression. In the 1990s, the financial and extractivist accumulation regime was cemented.
24During a few years, the Brazilian Workers’ Party (Partido dos Trabalhadores, PT) tried to reform some of the most excluding characteristics of the Brazilian society. Lula and Dilma (2003-2016) governments reinforced the policy of minimum wage increase, established racial quotas in the public universities, strengthened the income transfer programs (creating the “Bolsa Família”), increased public investment in healthcare and education systems, among other social policies. However, these governments did not change the country’s economic insertion in the global neoliberal order. Concerning the accumulation regime, this combination of contradictory characteristics resulted in a partial flexibilization of the financial and extractive regime, improving income distribution, but simultaneously contributing to the continuity of the regression of the productive structure. The deterioration of that contradiction is at the origins of the economic and political crisis of the 2010s, as argued in the following section.
25Ex-ante, it is impossible to state that the institutional changes introduced in Lula’s Government would continue the financial and extractivist accumulation regime or overcome it. A new regulation mode is related to a long process of political struggles towards the building and sedimentation of key institutions (Lipietz, 1987; McDonough, 1994; André, 2002; Boyer & Saillard, 2002). The building of the Fordist institutionalized compromises in center countries, for example, was a process that began in the 1930s, but the Fordist accumulation regime was consolidated only in the 1950s. The institutional changes introduced by PT’s governments contributed to economic growth and social indicators improvement, but they did not manage to change the accumulation regime.
26Singer (2012), a political scientist and Lula’s spokesperson from 2002 to 2007, coined the word “Lulism” to describe this political model of compromise between the left sectors and the Brazilian conservative class fractions. Lulism replaces mass mobilization and confrontation by a broad political coalition with conservative sectors that accepted, for a few years, the plan of weak reformism. Lula’s Government maintained Fernando Henrique Cardoso’s (FHC) macroeconomic policy based on three pillars: inflation control, floating exchange rate, and budgetary surplus.
27After Lula’s Government first year, which had relevant continuity concerning the FHC period, the Government began, in 2004, to introduce more substantive changes in economic policy. These political changes, combined with the great valorization of the international commodities prices, originated the period of high economic growth between 2004 and 2011 that was labelled by Serrano and Summa (2018) as the “brief golden age” and was called the “little miracle” by Edmar Bacha (Carvalho, 2018).
28The main pillars that sustained economic growth between 2004 and 2011 were income distribution, expansion of credit access, exports demand, and public investment (Carvalho, 2018; Serrano & Summa, 2018; Bastos, 2017). Public federal investment grew around 27,6% per year between 2006 and 2010. The legal minimum wage, which impacts a considerable portion of the Brazilian working class, raised, in real terms, 6,6% per year, on average, between 2004 and 2010, while the accumulated balance of credit operations, which represented 25,5% of GDP in 2002, reached 49,2% of GDP in 2012 (Carvalho, 2018). The percentage of wages as a proportion of the total value added (wage share) after a downward trajectory followed by stagnation between 1995 and 2004 grew from 36.1% in 2005 to 41.3% in 2015 (Saramago, Freitas & Medeiros, 2018). The population living in extreme poverty dropped from 15.2% in 2001 to 4.2% in 2014 (Figure 1). The infant mortality rate per 1,000 live births was reduced from 29 in 2000 to 13.8 in 2015 (Figure 1). Contrary to conventional conceptions about labour market, the minimum wage increase was accompanied by unemployment reduction between 2002 and 2014.
Figure 1. Selected social indicators – Brazil (2000-2015)
Sources: Brazilian Institute of Geography and Statistics; Institute for Applied Economic Research; graph: M. Bandeira & D. Santos
29Despite many positive results, this period also brought out significant contradictions, which reinforced extractivist and financial institutions. First of all, there has been a reprimarization of Brazilian exports, increasing the share of commodities – such as soybean, oil, meat, and minerals – in total exports (Graph 2). The top five primary products share in total Brazilian exports, which dropped since the 1960s, increased again in the 21st-century. Deindustrialization deepened due to the Government’s utilization of high-interest rates and overvalued exchange rate to control inflation. In 1980, the Brazilian manufacturing industry value added was equivalent to China, Korea, Malaysia, and Thailand, jointly. In 2010, it corresponded to only 7.3% of these countries industrial output (Arend, Singh & Bicharra, 2016).
Graph 2. Share of the five main primary products in total exports – Brazil (1951-2015)
Sources: Lopes V., 2017; graph: M. Bandeira & D. Santos
30Between 1999 and 2011, exports grew about five times and, since then, have been reduced. The sharp decline in exports was one of the factors that started the recession (Graph 3).
Graph 3. Evolution of exports and imports – Brazil (1995-2019) (billion US$)
Source: Centro de Altos Estudos Brasil Século XXI; graph: M. Bandeira & D. Santos
31Between 2004 and 2011, the “commodities supercycle” caused a sharp increase in low-technology industrial goods and non-industrial goods exports, while the deficit in the trade balance of sophisticated goods grew. Soybeans, meat, crude oil and minerals have become some of the main Brazilian exports (Graph 4).
Graph 4. Result of the industrial trade balance by technological intensity – Brazil (1995-2019) (free on board [FOB], billion US$)
Source: Centro de Altos Estudos Brasil Século XXI; graph: M. Bandeira & D. Santos
32The “commodities supercycle” intensified some of the financial and extractivist accumulation regime’s key features. The first factor in the interaction between the commodities boom and the commercial and financial globalization concerns the influence of financial speculation on international commodity markets (UNCTAD, 2011, p. 24; Chiliatto-Leite, 2017, p. 168). Graph 5 shows that the phase of most remarkable growth in the international price index for the most traded commodities in Brazil coincides with the period of high global liquidity between 2004 and the outbreak of the international financial crisis in 2008.
Graph 5. Commodities prices index (2016 = 100)
Source: International Monetary Fund (IMF); graph: M. Bandeira & D. Santos
33The commodity boom also reinforced financial dominance over the Brazilian economy by making possible an internal macroeconomic environment that made Brazil an important country for the valuation of international financial capital. First, the rapid growth in export earnings in dollars and other convertible currencies has allowed Brazil to accumulate large volumes of international reserves, that are used by the Central Bank to stabilize the exchange rate and serve as a guarantee for international financial agents that their operations with Brazilian currency can be converted into dollars at any time.
- 5 On the search by the Brazilian stock exchange for a more diversified portfolio composition, see: h (...)
34Another effect of the commodities boom on the strengthening of financial and extractivist institutions in Brazil is the increase in the main index of the local financial market, the Bovespa index. According to the official stock exchange in Brazil, B3, the average annual growth rate of the Bovespa index between 2002 and 2007 was 41.48%. In 2010, still in the phase of rising commodity prices, companies in the sectors that include mineral commodities, oil, gas, and biofuels held a 50% share in the composition of the Bovespa index. In 2020, these sectors accounted for 27% of the index. The financial sector share in the index composition rose from 19% to 36% in this period. In comparison, it is noteworthy that the participation of the industrial goods sector remained stable over the decade, accounting for 5% of the index composition.5
- 6 This policy of containing the price of goods offered by companies controlled by the state aroused, (...)
35Another fundamental macroeconomic element in guaranteeing national and especially international financial agents to allocate their resources to contracts denominated in Brazilian currency is the stability of domestic prices. In the Brazilian case, the variable that most strongly affects the trajectory of domestic prices is the exchange rate (Braga & Summa, 2016; Stockl, Moreira & Giuberti, 2017). Between 2000 and 2014, the simple correlation index between the exchange rate and the broad consumer price index was 0.83, and between 2017 and 2020, it was 0.86 (Graph 6). Therefore, even though it is not the only factor determining the exchange rate’s trajectory, the strong inflow of dollars through export earnings contributes to keeping the exchange rate at an overvalued level. Another policy that helped control inflation was the low rate of price increase of goods offered by state-controlled companies, including electricity, fuel, and cooking gas.6
Graph 6. Exchange rate (R$/US$) and Broad consumer price index
Sources: Central Bank of Brazil; Brazilian Institute of Geography and Statistics; graph: M. Bandeira & D. Santos
36The four factors presented lead to the conclusion that there are essential mutually reinforcing interactions between the export of primary goods and the deepening of financialization. As Araújo, Bruno and Pimentel (2012) state, in Brazil “the finance and its structural interdependence with agribusiness was consolidated as a privileged locus of financial capital accumulation and asset-based rentier”. These interactions contribute to understanding the hegemonic bloc in power since mid-2016.
37Table 1, below, summarizes the main aspects of the periodization of the Brazilian economy suggested in this paper. After the developmentalist period, 1964-1979, the Brazilian economy entered a crisis that lasted more than a decade. The implementation of neoliberal reforms characterized the 1990s, when the main institutions of the financial and extractivist accumulation regime were built. Between 2003 and 2014, some institutional changes modified key aspects of the accumulation regime. However, these reforms have not been consolidated to set up a welfare State or promote economic structural change. The new period started in 2015, which will be dealt with in the next section, characterized by dismantling social and environmental policies and labor laws. It is a period of reinforcement of the financial and extractivist accumulation regime.
Period |
Accumulation regime |
Main institutions |
Main contradictions |
1964-1979 |
Developmentalist |
Authoritarian Government. Import substitution industrialisation. Reinforcement of State-owned enterprises. Wage crunch |
High economic growth but increase of poverty and inequality. Increase of external debt. |
1980-1989 |
Crisis of developmentalism |
Inertial inflation. End of the dictatorship and reintroduction of democracy. New constitution. |
Inflation rates extremely high. Shortage of international currency. Political instability. |
1990-2002 |
Financial and extractivist accumulation regime (introduction) |
Privatization. Liberalization of international trade and capital flows. Currency reform. |
Low economic growth. Increasing unemployment. External vulnerability. Deindustrialization. |
2003-2014 |
Financial and extractivist accumulation regime (reform) |
Increase of the minimum wage. Income transfer programs. Increase of public investment. Freedom of international trade and capital flows. |
Regression of the productive structure. Low productivity growth. Deindustrialization. |
2016- |
Financial and extractivist accumulation regime (reinforcement) |
Fiscal austerity. Privatization. Freedom of international trade and capital flows. Flexibilization of labour and environmental laws. |
Economic stagnation. Regression of the productive structure. Increase of poverty and unemployment. Deindustrialization. |
Source: M. Bandeira & D. Santos
38Since 2017, the Brazilian economy has been stagnant, after a severe recession (2015-2016). The crisis came from a confluence of internal and external factors, and intensified the central contradictions of the Brazilian financial and extractivist accumulation regime. A broad expression of difficulties faced by the Brazilian economy since the beginning of the global financial crisis is that, according to the Centre for Foreign Trade Studies Foundation (Funcex), the terms of trade index, which had risen from 93.4 in 2003 to 119.7 in 2010, quickly drops to 93.6 in 2015.
39Three among the various global financial crisis effects, which manifest capitalist system crisis in its current configuration (Filgueiras & Oliveira, 2013; Boyer, 2011; Lordon, 2008), will be presented. These effects are crucial to press for substantial reforms in the relations between the bourgeoisie and the working class and between the State and the private sector, causing an actual reconfiguration of the accumulation regime.
40The first effect was a drop in national manufacturing production market share to foreign competitors, resulting from a twofold reason. First, the import increase of intermediate and final industrial goods. The average import penetration coefficient in the manufacturing industry grew from 13.9% in the first quarter of 2007 to 19.1% in the last quarter of 2010. Also, GDP grew by 3.1% annually and imports by 8.4%, between 2008 and 2014. The second reason was the exports stagnation of Brazilian manufacturing goods to countries in Latin America. Between 2008 and 2012, exports from Brazil to the countries that make up Mercosur (Southern Common Market), ALADI (Latin American Integration Association) and NAFTA (North American Free Trade Agreement) grew 1.1%, -0.2%, and 1.1%, respectively. In the same period, Chinese exports to these regions grew 15%, 9%, and 21.2%, respectively (Baltar & Prates, 2014).
Graph 7. Product of the manufacturing industries and imports (2007 = 100)
Source: Brazilian Institute of Geography and Statistics; Foreign Trade Office; graph: M. Bandeira & D. Santos
41Thus, while imports continue to grow strongly in the years immediately after the most acute phase of the international financial crises, domestic industrial production, after recovering from the abrupt fall of 2009, stagnates from 2010 onwards. This point can be seen in Graph 7. The imports index, measured on the left vertical axis, drops sharply between the 2008 third quarter (172) and the 2009 second quarter (92), but begins to rise rapidly until the third quarter of 2011 (204) and remain at this level throughout 2014. On the other hand, the manufacturing industry production index, measured on the right vertical axis, grew slowly between 2004 (91) and 2009 (106) but turned back to this level already from the third quarter of 2010, after recovering from the fall of 2009.
- 7 This debate, which will not be dealt with in depth here, may shed light on possible causes for the (...)
42The second effect of the global financial crisis on the manufacturing industry was the negative productivity growth and the compression of corporate profitability. Several factors explain these problems. Financial expenses grew hugely after the expressive local currency devaluation in 2011 (almost 13% between 2010 and 2011). Excluding the big companies Petrobras and Vale, the manufacturing sector experienced a 221.3% increase in net financial cost between 2010 and 2011. This same sample reached a profit on net revenue of 16.1% in 2008, dropping to 11.2% in 2009, and recovering to 14.4% in 2010 (2007 level). However, in 2011 it fell sharply to 11,7% (Almeida & Novais, 2012). Since Brazilian industries were becoming more dependent on international suppliers during the most appreciated exchange rate period, when the currency devaluation occurred, industrial costs increased without a counterpart to keep profit margins (Bastos, 2017; Morceiro, 2016; Santos, 2019). There is a debate about the influence of wage increases on the profit squeeze. During the “brief golden age”, the rising wages contributed to the growth of credit purchases, the reduction of idle capacity, the rising of aggregate demand, and thus, the increase of investment. Some authors (Marquetti, Hoff & Miebach, 2020; Martins & Rugitsky, 2018) argue that, due to wage growth above productivity and slower economic growth, especially after 2010, firms markups were squeezed. However, other authors disagree with this cause-effect relationship. They argue that profit squeeze results from fiscal austerity, tradable and non-tradable goods relative price changes, rising financial costs, exchange rate devaluation, and intense global competition (Serrano & Summa, 2018; Carneiro, 2018; Santos, 2019).7 Bastos (2017) adds that the business reaction against the wage increase is an attempt to modify a more easily changeable pattern in the short term than the patterns of funding and international insertion of the Brazilian economy, for example. It is also worth noting the evidence found by Almeida and Catela (2019), with data on Brazil from 1996 to 2017, that the movement of commodity prices has a relevant impact on the country’s private investment path. Beyond this evidence, Almeida (2020) demonstrates how commodities export revenues growth positively affects the profitability of the other economic sectors. These factors indicate that the commodities cycle’s end, in the wake of the global financial crisis, also contributed to production stagnation and the shrinking profitability of domestic manufacturing companies.
- 8 Regarding the trajectory of the primary result of the Brazilian government in the years immediatel (...)
43The third and last effect of the global crises is the Government’s primary fiscal surplus reduction (revenues minus expenses except for interest payments and public debt amortizations) from 2012 onwards. It became negative from 2014 onwards (Graph 8), that is, even before the recessive austerity policy applied by the Government in 2015, which reinforced this trend. This effect can be understood as a corollary, not a direct cause, of Brazil’s economic instability occurred after the global financial crisis, marked by commodities boom exhaustion, industrial production stagnation, GDP growth reduction, and Rousseff’s government promotion of a broad tax relief program, aiming to expand industry investment, which did not happen.8
Graph 8. Central government annual primary result as a proportion of GDP – Brazil (2000-2019)
Source: Central Bank of Brazil; graph: M. Bandeira & D. Santos
44To financial agents’ concerns, the primary fiscal surplus is a crucial indicator of the Government’s ability to conduct an acceptable public debt path, that is, the Government’s ability to keep interest payments. Due to the high interest rates historically paid by the Brazilian Government, the primary fiscal surplus is a highly relevant income source for sustaining the financial institution’s profitability. According to Bruno, Diawara, Araújo, Reis and Rubens (2011), between 1995 and 2006, 50% of the total operating income of the Brazilian banking-financial system came from investments in fixed income and its derivatives, and only 20% came from credit operations.
45The three effects of the financial crises on Brazil demonstrate that the pillars that support the profitability of capital invested in Industry and the agents who carry government bonds safety would demand actions to stop the negative trajectories triggered by the global financial crises.
46In summary, the global financial crisis and its impacts on the Brazilian economy made the continuity of the strategy of the centre-left governments, which consisted of making changes within the extractive financial regime without altering its fundamental contours, unsustainable. Next, the measures adopted to tackle these problems will be assessed to demonstrate that they mean a reconfiguration of the accumulation regime.
47Throughout 2013 and 2014, a vast wave of protests demanding cheaper public transportation costs and better social services gave rise to demonstrations led by conservative middle-class sectors, which called for the president’s resignation. Opposition to the Government grew due to investigations carried out by the “Car Wash Operation”. In the last trimesters of 2014, Dilma’s Government introduced austerity measures, seeking in vain to increase private sector confidence in Government and then, to raise private investments. The effects of the restrictive fiscal policy, as indicated in Figure 2, below, were disastrous: the reduction in public spending provoked a cumulative effect of decreasing aggregate demand and, therefore, tax collection. In 2015, the increase in unemployment and inflation, caused by the devaluation of the currency and the readjustment of prices controlled by the Government, dramatically reduced the Government’s approval.
Figure 2. Selected economic variables – Brazil (2008-2020)
Source: Brazilian Institute of Geography and Statistics; graph: M. Bandeira & D. Santos
48Business people and financial market agents have begun to defend that the public sector must make a substantial fiscal adjustment and approve reforms to reduce government spending and deregulate labour relations. The outcome of this intense political fight occurred in August 2016 with the Brazilian president impeachment, and the opening of a radically liberal economic agenda.
49Liberal institutional reforms carried out by Brazilian governments since mid-2016 are generating a profound reconfiguration both of the interaction between the State and society and of the regulation of capital-labour relations. There is a drastic shrinking in the social policies provided after the 1988 Constitution in the first case. In the second case, there is a substantial increase in capitalists’ control over the wages and working time determination.
50The first significant reform carried out by the new Government was the approval of Constitutional Amendment 95 that created the New Fiscal Regime, known as the “spending ceiling” in December 2016. According to the available research, no other country has adopted a fiscal rule as rigid as Brazil (Cordes et al., 2015). In summary, the Federal Government has been prohibited from increasing real spending on aggregate primary expenditures, like healthcare and public investment, for twenty years. The priority destination of the new revenues becomes the generation of growing primary fiscal surplus for the payment of public debt interest and amortization.
51To illustrate the profound impact of this fiscal rule, one can report that in its first years of application, the new fiscal regime has already generated a reduction in expenses with Public Health Services between 2018 and 2019 of more than R$17 billion. The share of these Services as a proportion of the Federal Government’s Net Current Revenue fell from 15.8% to 13.5% between 2017 and 2019 (Moretti, Funcia & Ocké, 2020).
52Most important, however, the new fiscal regime means a suspension for twenty years of the sovereign decision-making power of the Brazilian population over the elected Government’s priorities in terms of public revenues allocation. The financial oligarchy thus achieves a level of direct access to public funds unparalleled in the world.
53Another relevant recent change was the approval in February 2021 of Central Bank autonomy (Complementary Law Project 19 of 2019). This autonomy mainly refers to the bank’s management term of office change. The bank’s board mandate is no longer coincident with the country’s presidential mandate. Private financial agents expand their influence over the interest rate determination (Oreiro & Passos, 2005; Bresser-Pereira, Paula & Bruno, 2020). Based on the characterization made by Araújo, Bruno, and Pimentel (2012) regarding the hierarchy of institutional forms in Brazil, it is possible to conclude that the New Fiscal Regime and the autonomy of the Central Bank mean a deeper level of subordination of the institutional form of the State to the financial market.
54The second set of changes made from mid-2016 concerns the legislation that regulates the wage relation, the so-called labour laws. The set of rules in force until then, known as the Consolidation of Labour Laws, had as general characteristic the public regulation of relations between workers and capitalists to reduce the margin of capitalists’ private power concerning issues such as hiring modes, working day extension, remuneration and paid vacations and time off.
55Two measures approved in 2017 impact deeply the labour relation. The first is Law 13,429/2017, which legalized unrestricted outsourcing of the workforce, which was previously limited to the auxiliary activities of companies. The second is Law 13,467/2017, known as labour reform, altering a large set of previous rules. The new law authorizes: the negotiation of wage adjustments without the trade unions’ participation, employment contracts in intermittent and part-time modalities, negotiations between employers and workers to be at odds with the law. In addition, the policy of real increases in the minimum wage has been abandoned.
56This set of changes has at least two impacts on the accumulation regime. The first is to increase the private control of the bourgeoisie over the wage relation. The labour laws in force in the country were passed in 1943. Since then, they have shaped the forms of struggle of the working class, particularly by guaranteeing unions a legally constituted bargaining power that constrained employers to negotiate. Lula’s election in 2002 to the Republic’s presidency is related to this institutional arrangement, as he was a famous trade union leader (Singer, 2012, p. 90). The second impact will be to make domestic mass consumption more strongly pro-cyclical.
57Although these changes in the wage relation cannot be directly pointed out as causing the reduction in the recent wage bill, Graph 9 is quite indicative of what occurs in the country. From 2011 to 2014, the real wage bill index paid by the Industrial sector, measured on the left vertical axis, increased in real terms while the Industrial GDP index annual variation, measured on the right vertical axis became increasingly negative.
Graph 9. Real GDP and wage bill in industry – Brazil (2006 = 100)
Sources: National Confederation of Industry; Brazilian Institute of Geography and Statistics; graph: M. Bandeira & D. Santos
58However, when industrial production started to recover, since 2016, after the severe recession of 2015, the wage bill, which fell in 2014 and 2015 following industrial production, did not recover. On the contrary, it continues to fall. Since 2018, with the new labour laws in force, the wage bill has maintained a downward trend. Therefore, by facilitating workers’ dismissal, labour market reforms will contribute to widening the recessionary phases of the economic cycle, thus making it difficult to carry out counter-cyclical policies.
59The financial and extractivist accumulation regime in Brazil, that deepened the country’s insertion in world trade mainly as a supplier of primary goods, also caused a change in the correlation of the political forces between the bourgeoisie elements that make up the power bloc in the country (Poulantzas, 1973; Boyer, 2015).
- 9 In an effort to reduce corruption, the Supreme Court, in 2015, ruled that private legal entities w (...)
60At least since the 2002 election, the major donors of political campaigns had been corporations associated with extractive, financial, and construction sectors. Construction sector companies, banking, brewing, metallurgy, meat processing, sugar, mining, and pulp and paper were among the ten most significant donors of every election from 2002 to 2014 (Santos, 2018).9 The conservative offensive, that intensified after the 2010’s election, can be noted in the changing composition of parliament (Table 2). The number of parliamentarians defending corporate, rural, religious, and militarist agendas has grown, while those linked to union interests have decreased.
|
2003-06 |
2007-10 |
2011-14 |
2015-18 |
2019-22 |
Corporate |
102 |
120 |
273 |
221 |
242 |
Agrarian |
111 |
104 |
160 |
109 |
107 |
Evangelical |
50 |
36 |
73 |
75 |
92 |
Security |
- |
- |
- |
22 |
70 |
Trade unions |
60 |
60 |
72 |
51 |
40 |
Source: Inter-Union Parliamentary Advisory Department; table: M. Bandeira & D. Santos
61Let us now assess the political weight of the industrial bourgeoisie in recent governments in more detail. The industrial bourgeoisie has lost ground since the current extreme right-wing president, Jair Bolsonaro, victory in 2018. Three items are indicative of this influence loss. The first is the extinction of the Ministry of Development, Industry and Foreign Trade, despite the opposition of business entities.
62The second item is the decrease in funds allocated to the National Bank for Economic and Social Development (BNDES). Between 2018 and 2020, public bank total loans fell by R$24 billion, a reduction of 35%. The fall in loans to the manufacturing industry was slightly higher, at 38% (Graph 10).
Graph 10. Loans granted by the BNDES system
Source: National Bank for Economic and Social Development (BNDES); graph: M. Bandeira & D. Santos
63It is also noted that loans granted to the manufacturing industry follow the downward trend of total loans, demonstrating the loss of political influence of the industrial bourgeoisie over one of its primary external sources of funds for financing its activities. However, the picture becomes even more evident when observing the manufacturing industry and agribusiness share in total loans granted by the bank (Graph 11).
Graph 11. Sectorial participation in total BNDES loans (%)
Source: National Bank for Economic and Social Development (BNDES); graph: M. Bandeira & D. Santos
- 10 It is important to highlight that Banco do Brasil is the main source of public funding for agricul (...)
64Between 2015 and 2020, loans to the manufacturing industry, in current values, fell from R$35.1 billion to R$7.5 billion, a reduction of 79% (Graph 11). In the same years, agribusiness loans were, respectively, R$13.7 billion and R$10.4 billion, a decrease of 24%. The number of loans granted to agribusiness in 2020 was even slightly higher than in 2010 (R$10.1 billion). Therefore, especially in the Bolsonaro Government, even with the decision to reduce BNDES’s share in the business loans market, the agrarian bourgeoisie managed to preserve almost the same level of loans as in previous years. On the other hand, the industrial bourgeoisie has seen lending decline drastically.10
- 11 The success or failure of these initiatives is not within the scope of this work. For a critical a (...)
65The third item to indicate the industrial bourgeoisie political power loss is the Bolsonaro Government’s refusal to carry out any relevant industrial policy. During the centre-left governments, a series of articulated measures were carried out, forming an active industrial policy.11 In Bolsonaro’s Government, sectoral and vertical policies for Manufacturing Industry were abandoned. Additionally, the Government assigned agreements that remove industrial policy instruments from the State and increase the competition with foreign companies.
- 12 Brazil submits application to join government procurement pact. URL: https://www.wto.org/english/n (...)
- 13 Among the Bolsonaro government ministers there are military personnel, career politicians, former (...)
66This is the “Government Procurement Agreement” case under the World Trade Organization (WTO).12 This agreement prevents the Brazilian Government from favoring local companies in their purchases, a mechanism that was one of the pillars of the industrial policies of previous governments. The other action was the resignation of Brazil to the status of developing country with the WTO in 2020. As a result, Brazil abdicates the power to make some modality of subsidies to domestic companies. In 2019, a free trade agreement was also signed, which has not yet been ratified, between Mercosur and European Union. A relevant aspect of this vast agreement is that the tariff reductions provided in the contract will reinforce the penetration of imports from industrial goods in the Brazilian market (Sarti & Castilho, 2021). Jointly, these measures attest that the industrial bourgeoisie is outside the current bloc in power.13
67The liberal measures and reforms presented earlier indicate: 1) increasing control of the financial agents over the public budget and monetary and exchange rate policies; 2) increasing bourgeoisie control over the wage relation and 3) decreasing political power of the industrial bourgeoisie.
68But this does not exhaust the reconfiguration of the accumulation regime that Brazil is going through. It is necessary to consider the rise of the agrarian bourgeoisie to the top of the state political power.
69As Perpetua, Heck and Júnior (2020) argue, given the broad political coalitions of the Lula and Dilma governments, antagonistic interests concerning the agrarian policy were partially met. In those governments, the agrarian bourgeoisie had to accept concessions to small producers, the rural social movement, and indigenous and quilombolas (descendants of enslaved people) peoples, such as growing financing policies for small farmers and demarcation of indigenous lands and expropriations, albeit decreasing, for the agrarian reform. And they still had to accept restrictions on land invasion and their pesticide release agenda and regulate labour relations. The picture is reversed in the current ultraliberal governments.
70These governments’ agrarian policy can be classified into two sets, related to property relations and environmental policies. Regarding property relations, the main interests of the agrarian bourgeoisie are the invaded lands legalization, mainly in the Amazon region, and the end of the centre-left Governments’ policy to demarcate indigenous lands. Governments meet both demands after 2016.
- 14 The consequences of this agenda of total convergence with the interests of the agrarian bourgeoisi (...)
71Law 13,465 of 2017, called the National Plan for Land Regularization, among other changes, legalizes the lands invaded until 2011 in the Legal Amazon region and makes it difficult to create small farmers’ settlements under the agrarian reform program (Porto-Gonçalves et al., 2018; Leite, Tubino & Sauer, 2019). In the Bolsonaro government, Laws 13,715 and 13,870 were passed, both of 2019, which extend the permission to own firearms in the entire rural property and not only in the area of residence, facilitate access to weapons and increase the purchase limit of ammunition (Sauer, Leite & Tubino, 2020). This was an old demand by sectors of the agrarian bourgeoisie.14
72The second set of agrarian policies is environmental policy. In addition to the significant increase in deforestation in the Amazon region (Carvalho et al., 2019), the new Government is marked by records for the release of the use of pesticides previously prohibited. The number of pesticide registration concessions in 2019 was 503 products (Souza et al., 2020). The level change of authorization of pesticides in Brazil began in 2016, under the Temer government. From 139 records in 2015, this number rose to 277 in 2016 and 405 in 2017. These policies point to a more predatory form of competition. The measures listed here, entirely in line with the agrarian bourgeoisie interests, point to higher private control over land in Brazil and over social and environmental relations, including an increase in the private power of the bourgeoisie in the use of armed violence. The political hegemony of the agrarian bourgeoisie and other sectors privileged by the extractivist and financial accumulation regime was achieved due to the 2016’s parliamentary coup and the rise of ultraliberal governments.
73The paper’s objective was to demonstrate that Brazil has been undergoing a reconfiguration of the financial and extractivist accumulation regime. Lula and Dilma (2003-2016) governments tried to reform key institutions of the Brazilian regulation mode, establishing rising wages and reinforcing welfare policies but sought to change neither the country’s commodity-dependence nor the increasing economic and political power of the financial sector. From the onset of the global financial crisis and its effects on Brazil, the accumulation regime contradictions caused severe problems, particularly the drop in corporate profitability. Current institutional reconfiguration, started in 2016, is a liberal and conservative strategy to face these problems and indicates that the financial and extractivist accumulation regime reaches a new level.
74Politically speaking, Brazil came to be led by a power bloc hegemonized by financial-rentier and agrarian fractions of the bourgeoisie class. The financial bourgeoisie achieves unprecedented control over public revenues and monetary and exchange rate policy, and the agrarian bourgeoisie gains total control of the country’s agrarian policy. On the other hand, the industrial bourgeoisie is outside the power bloc, and the State loses instruments to foster domestic industrial production. Table 3 outlines the paper’s main conclusions regarding the financial and extractivist accumulation regime reconfiguration and the power bloc changes since 2016.
75Whether in the import substitution industrialization phase, in Rangel’s words (2012 [1981], p. 681), Brazil “began to perform its own economic cycles”, or “internalized the dynamic centre of the economic system”, in Furtado’s words (2007 [1959], p. 203), currently the opposite process is happening. The current reconfiguration leads to a worsening of the country’s dependence on international commercial and financial cycles. This is due to 1) relevant economic policy instruments withdrawn from the State, 2) national Industry’s sovereignty loss over the national economic space, and 3) mass consumption’s higher volatility.
76The longevity of the accumulation regime’s new reconfiguration is an open topic. It is more than a matter of logical sustainability among the institutional forms and requires the appearance of new political coalitions capable of challenging the current power bloc.
Government action and Approval date |
Description |
The major consequence on the accumulation regime |
The main impact over the power bloc configuration |
New Fiscal Regime (Dec. 2016) |
It prohibits any increase in primary public spending as a proportion of GDP for twenty years. It makes the payment of the public debt the leading destination for the highest government revenues |
Extends the subordination of the State institutional form to the monetary and financial regime led by financial agents; decreases the State’s capacity to carry out expansionary fiscal policy |
The financial bourgeoisie achieves a level of control over public revenues unparalleled in the world |
Central Bank Autonomy (Feb. 2021) |
It makes the mandates of central bank directors do not coincide with the president of the republic mandate |
Extends the subordination of monetary policy to the expectations of private agents, expanding the financialization of the monetary regime |
The financial bourgeoisie expands the hegemony over the conduct of policies linked to capital appreciation in the financial sphere |
Labour market Reform (March and July 2017) |
Wage relation changes. Removes bargaining power from unions and authorizes precarious forms of labour contract |
Increases the pro-cyclical nature of mass consumption |
Extends bourgeoisie control over the social relations of production |
Replacement of long-term public financing for the private financial sector (2016 onwards) |
A radical decrease in BNDES’ participation in the corporate credit market |
The dependence of the investment rate on the liquidity preference of the banking system. Increasing of the subordination of companies to the profitability of financial investments |
Weakens the position of the industrial bourgeoisie in accessing public finance and increases its subordination to the financial bourgeoisie |
Commercial policy (2019 and 2020) |
Adherence to the WTO government procurement agreement. Free trade agreement between Mercosur and European Union |
It removes an important industrial policy instrument from the State, increases competition with foreign companies and reinforces the country’s primary export specialization |
Weakens the control of the industrial bourgeoisie over the conditions of competition in the national territory |
Land conflict resolution policy (July 2017 and Sept. 2019) |
Abandonment of agrarian reform policies and demarcation of indigenous lands |
Expands the private control of the agrarian bourgeoisie over land and environmental relations, reinforcing the export dynamics of primary goods of the Brazilian economy. Points to a predatory form of competition. |
The agrarian bourgeoisie rises to the top of political power and achieves hegemony in the conduct of agrarian policy |
|
Legalization of invaded areas in the Amazon region |
|
|
|
Expansion of the right to carry arms and ammunition for rural landowners |
|
|
Environmental policy (2016 onwards) |
Authorization to use hundreds of pesticides |
|
|
Source: M. Bandeira & D. Santos