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Lula’s Achievement: from Neo-Liberalism to ‘Neo-Developmentalism’  (and definitely not Socialism)

Let’s start with the really obvious. The fact that it is Chatham House awarding Lula the prize for statesman of the year gives us a pretty strong clue. The members of this ‘independent’ think tank are as close to the combined wisdom of the British establishment as you can get. Behind the judgement to award this prize what one senses is a collective sigh of relief. Why so?

Again, to state the obvious, but it needs stating, any idea of a transition to socialism through the government of Lula is dead. What is very much alive is a new style of post neoliberal capitalism, capitalism with a human face. Not the Washington consensus but the post-Washington consensus, a project of government to consolidate the huge gains that capital acquired during the neoliberal onslaught whilst creating a safety net of social welfare that does enough to stave off revolt from below. I take this central point from an analysis aligned with the social movement, the study by Centro de Pesquisa e Apoio aos Trabalhadores – CEPAT, published by the IHU Instituto Humanitas Unisinos and distributed by the MST (Brazil’s Landless Movement) last week.

The IHU report gives us a clear framework to orient our discussion. I’ll summarise its main arguments. Lula’s government is performing a second silent revolution, the first being Cardoso’s brutal dismantling of state assets to put them in private hands.  Between these two governments ‘nothing short of a new post-Vargas model has been constructed’.  The presentation of the model is different; Cardoso was frank in his allegiance to neo-liberalism, whereas Lula’s project is presented as a reprise of the national developmental model that had its heyday thirty years ago.

The Lula version of ‘developmentalism’  has two central policies: state investment in key infrastructure projects through the Programme for Accelerated Growth, and the use of state bank BNDES to strengthen private capital in certain strategic sectors. The state does not own the corporations, as it did in the Vargas period, rather it is a lever to foment giant private corporations. The policy is closer to that of Kubitschek (president between 1956 and 1961), with the state providing infrastructure and finance to domestic and foreign capital.

According to the CEPAT analysis the Lula government has become a site for the reconciliation of class struggle, absorbing the representations both of the unions and the employers. The social role of the state is especially in poverty alleviation as exemplified in the Bolsa Familia.  At the same time the ‘second silent revolution’ has its external dimension with the geopolitical repositioning of Brazil. Brazil has clearly stepped beyond being the biggest player in South America to being a global player, an important protagonist in debates about the character of the world system.

The CEPAT report encapsulates these policies in the term ‘neo-developmentalism’. The new development here is that of Brazilian capital becoming an international player. Lula has employed state finance to create Brazilian transnationals, strong economic groups capable of competing in the world market. BNDES encourages Brazilian corporations to merge creating ‘national champions’. In Petrobras, Vale and Embraer Brazil has three conglomerates that have already become internationally competitive corporations. The government has supported other candidates such as Brasil Telecom and Brasil Foods – the biggest exporter of meat products in the world – and is pursuing similar policies in the paper, ethanol (sugar-alcohol) and banking sectors.

BNDES opening a desk in London to attract foreign investment fits entirely with the strategy. Further evidence comes from UNCTAD’s latest world investment report (WIR 2009), according to which foreign direct investment in Brazil has tripled from US$15 billion in 2005 to US$45 billion in 2008, half of all foreign investment in Latin America.  WIR 2009 notes the rise of FDI into Brazil “resulted from an almost trebling of inflows to the primary sector, mainly due to cross-border M&As [Mergers & Acquisitions] in the metals and minerals extractive industry” (p 64). The Brazilian mining sector has been a world hot spot for corporate acquisitions; the biggest deals include the purchase of two Brazilian iron mining corporations, one by UK based Anglo-American and another by Japanese based Investor Group, and of steel conglomerate by the Luxemburg based Arcelor Mittal NV. Moreover, some 80% of all foreign investment in Brazilian manufacturing was in the processing of natural resources (food processing, rubber and the like).

Remarkably, outgoing investment has been rising even more quickly. The figures suggest another back story to Lula’s rise in international standing: Brazilian mega-corporations are investing abroad on an unprecedented scale. The stock of Brazil’s external assets tripled from US$52 billion to US$162 billion between 2000 and 2008. The country’s overseas investments are now far more than those by corporations based in Mexico, or any other Latin American country.  Outgoing investment has surged during the Lula years, from US$2.5 billion in 2005 to US$20.5billion in 2008. The pattern of big capital’s interest in certain sectors is confirmed by WIR 2009: Brazilian enterprises “continued to acquire assets abroad in mining and natural-resource based activities, such as foods and metal and steel” (p65) Again, privatised state enterprises are amongst the principal actors: mining conglomerate Vale holds US$18 billion, oil corporation Petrobras has US$12 billion, and Metalurgica holds US$7 billion in foreign assets. The end of the commodity price boom is however now threatening the stability of these assets; WIR 2009 suggests that the surge of outgoing capital in 2008 was to a large extent internal company loans transferring capital to “financially distressed affiliates abroad” (p65).

Where is this boom in Brazil’s FDI going to? Unfortunately the aggregate figures of the WIR 2009 only go up to 2002. In that year the major host countries of Brazilian investment were, in order, the US, Portugal and Bolivia.  The report does, however, provide an indication of more recent trends, for it shows that Latin America’s top ten corporate acquisitions in 2008 include five acquisitions by Brazilian corporations in the metal and food sectors purchasing companies in the US, Germany and Italy (p69). From anecdotal accounts by friends in Colombia and other countries, I suspect that there is a general influx of Brazilian capital across Latin America, an area for more research.

In the time and space here I have only touched on one, albeit critical, aspect of the political economy. This aspect needs to be combined with analysis of class relations, the environment and Brazil’s international relations.  Yet the preceding analysis and evaluation have already established enough to recall the critical debate that Cardoso and co-author José Serra engaged with Ruy Mauro Marini exactly at that high point of developmentalism in the late 1970s.  If we are to grasp neo-developmentalism we need to refresh and apply this exchange between two trends of thought, that indicate very different political programmes.

Marini made two related arguments. First, that the underdevelopment of Brazil and many other nations rests on the fulcrum of super-exploitation, for oppressive conditions ensure that workers are paid starvation wages, less than the value of replenishing their own labour power. I believe that this mode of analysis, which connects not only society with the economy but also internal class relations with external relations of dependency, remains key to unlocking the riddle of underdevelopment. Secondly, Marini advanced a sub-imperialism thesis, that capitalism in a large dependent country such as Brazil had itself reached a financial, monopoly stage that required repression at home and capital expansion abroad.  Both these arguments have profound resonance today.

The Cardoso – Marini debate puts Lula’s neo-developmentalism in a new light. It shows that one of  two strategic roads can be taken to develop Brazil. Lula is carrying Cardoso’s reformist project to fruition, but the project more than ever rests on the super-exploitation of tens of millions of real wealth producers and the unfettered expansion of the financial monopolies. Marini’s revolutionary thought is yet to be actualised, yet the very existence of the MST and other movements indicates that the debate is not yet over; it will be resolved in the end not by words but in mass actions.

Lula’s achievement? To make the post-Washington Consensus work, for now.


by Andy Higginbottom: Andy Higginbottomi is a lecturer in international politics and human rights at at Kingston  University in London. His email is:  a.higginbottom@kingston.ac.uk


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Brazil: has the sleeping giant awakened?

Brazil is riding high at the moment, with record amounts of foreign investment and the country flexing its muscles in international affairs. Has Brazil’s time finally come?

President Lula of Brazil was in London on Thursday 5th November to receive the Chatham House Prize, which is awarded each year to the person considered by that institution “to have made the most significant contribution to the improvement of international relations in the previous year.”1  It was a high-profile event in the Banqueting Hall in Whitehall in central London, attended by Lord Mandelson,  Secretary of State for Business.  It was widely seen as the culmination of a particularly successful year for Brazil.

Brazil has undoubtedly made real advances at home and abroad in the seven years that the former trade unionist, Luis Inácio Lula da Silva, has been president. Taking advantage of  the fact that the US is caught up in intractable conflicts in other parts of the world, Lula has quietly but firmly been establishing Brazil as the dominant power in South America. Often acting unobtrusively behind the scenes, Lula has constructed his power base by providing key support to other left-of-centre governments in the region.  While his relations with Hugo Chávez can be tense, he none the less repeatedly warned Washington that Brazil would react in the strongest way if the US, in the wake of the failed coup attempt in 2002, were to move again against the hated Venezuelan firebrand.

Bolivian president Evo Morales, another former trade unionist, also has reason to be grateful to Lula. Partly because Brazil’s state-owned oil company, Petrobrás, is the biggest investor in Bolivia, Lula was able to thwart the plan hatched by powerful local business interests, with Israeli support, to get the gas-rich, conservative east of the country to secede from the impoverished, Indian-dominated Andean plateau. Further south in Paraguay Lula intervened personally to renegotiate the iniquitous deal by which Paraguay was paid a pittance for the energy it supplied from the giant Itaipu hydroelectric power station. With Brazil now paying three times as much for the energy it buys, left-leaning President Fernando Lugo, the so-called ‘red bishop’, is duly appreciative.

Consolidating these advances, Brazil was the driving force behind the decision in 2008 to set up Unasur (the Union of South American Nations), a new power bloc composed of all the nations in South America (except French Guiana, still part of France). It aims at wide-ranging political and economic integration, very much seeing itself as a latino European Union, with a common currency and free movement of goods and people. No nation north of the Panama Canal has been included, which consolidates the new geopolitical division of Latin America into a North, including Mexico, which is increasingly part of the US empire, and a South, with greater equality among nations but with Brazil primus inter pares. Unasur  has spawned a military offshoot, the South American Defence Force (CDS), which will give Unasur a military dimension (and incidentally provide a market for Brazil’s thriving defence industry). Rather remarkably, Lula has achieved all this, which undoubtedly amounts to a deliberate challenge to US hegemony in the region, while maintaining the image in Washington of being the ‘good guy’, who wants to defend US interests, in contrast with the ‘bad guys’ Hugo Chávez and Evo Morales.

On the global stage, too, Brazil has made great strides.  It played a key role in the consolidation of G20 as the world’s talking shop, kicking the G8 into the long grass. Although Argentina pretends it is still a runner in the contest to win a permanent seat in an enlarged UN Security Council, it is widely accepted that, when the long-delayed reform is finally implemented, the place will go to Brazil. Brazilian pressure was also fundamental in the little-reported decision to shake up the International Monetary Fund to allow ‘emerging nations’ a greater share of decision-making power. The reform did not go as far as the new pretenders wanted but one can be sure that they will be back for more, with Brazil leading the charge.

Foreign investors are also more than happy with prospects for the Brazilian economy, which was less battered by the global crisis than widely expected. By the end of October, an unprecedented US$60 billion had poured into private Brazilian companies. Investments in government bonds is also running at a very high level. Indeed, in an attempt to slow down the influx of foreign currency, which was pushing up the exchange rate of the Brazilian real and thus making life difficult for Brazilian exporters, the government slapped on a 2% tax on currency operations. Even so, because investors are getting such a low rate of return on their savings in many other parts of the world, most analysts expect the inflow to continue for the foreseeable future.

All this explains why Lula is so popular abroad but his achievements at home have been far less impressive. True enough, Lula’s personal popularity remains incredibly high: after almost seven years in office, 65-70% of voters still say that they are satisfied with his performance. His bedrock of support comes from the 12 million families living in absolute poverty that have benefited from the government’s Bolsa Familia programme, which guarantees a small welfare payment to very poor families provided they put their children in school. Indeed, Brazil was singled out for praise for its efforts to combat hunger in a report issued on World Food Day in October2 — yet another coup pulled off by Lula this year.

Paradoxically, however,  this admirable welfare programme has done nothing to reduce the country’s shockingly skewed distribution of wealth, which means that Brazil is still one of the most socially unjust countries in the world. Exorbitant interest rates on the local money market mean that those with money to   spare (which excludes most of the Brazilian population) have for made a killing for many years. Indeed,  the share of wages in national income has fallen from 50% in 1980 to 39% in 2005: despite two successive PT governments, rentiers are still king in Brazil.

Similar failures are seen in other areas where fundamental structural reforms are needed and, indeed, were widely expected from Lula when he first came to power in January 2002.  Brazil has one of the highest rates of land concentration in the world, with 1.6% of landowners in control of 46.7% of the nation’s privately-owned land. In his election campaign, Lula promised wide-ranging land reform but this never happened. Under Lula agri-business has grown stronger, with Brazil sending abroad huge quantities of beef, soya, sugar, coffee and other commodities. The last agricultural census, released last month (October), shows that land concentration has actually increased under Lula.

A similar failure –  though this should have been predicted, as Lula has never been an environmentalist – can be seen in the Amazon, the world’s largest remaining tropical forest. Lula is pushing ahead with big development projects, particularly roads and hydroelectric power stations, riding roughshod over the interests of hundreds of thousands of small river communities and indigenous groups. While no one would claim it is easy to stop the agricultural frontier pushing deeper into the Amazon basin, Lula has allowed the situation to deteriorate year by year. Indeed, some scientists believe that the tipping point has been reached: so much destruction has now occurred, they fear, that the forest will dry out, become vulnerable to uncontrollable forest fires and die. If this is the case, Brazil’s rich farming lands will suffer from a calamitous decline in rainfall.

Glasses were raised to Lula on Thursday. Many recalled his extraordinary life story, from seller of trinkets on the street as a child to courageous trade unionist during the military dictatorship to winning finally the presidential elections at his fourth attempt. Indeed, it would be churlish to deny Lula’s  achievements at home and abroad. But Lula’s sins of omission – particularly his failure to halt the destruction of the Amazon – may well in the long term render completely insignificant all his dazzling successes.


by Sue Branford: Sue Branford is a journalist, who has written widely on Latin America, particularly Brazil. She is currently chair of the Latin America Bureau.


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