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Neo-Developmentalism and the Challenges of Economic Policy-Making under Dilma Rousseff



This article reviews the emergence of neo-developmentalist economic policies in Brazil, in the early 2000s, as a heterodox alternative to neoliberalism. These policies were implemented in the second Lula administration (2006–10), and continued under Dilma Rousseff. However, neo-developmentalism has not simply replaced neoliberalism; rather, these prima facie incompatible policy frameworks have been combined, and the ensuing policies have achieved significant successes despite the intrinsic fragilities and limitations of this hybrid structure. The article examines the achievements and limitations of these policies, and the (limited) scope for their continuation in Dilma’s Rousseff’s administration.
Critical Sociology
38(6) 789 –798
© The Author(s) 2012
Reprints and permission:
DOI: 10.1177/0896920512441635
Neo-Developmentalism and
the Challenges of Economic
Policy-Making under
Dilma Rousseff
Lecio Morais
Câmara dos Deputados, Brazil
Alfredo Saad-Filho
School of Oriental and African Studies, UK
This article reviews the emergence of neo-developmentalist economic policies in Brazil, in the
early 2000s, as a heterodox alternative to neoliberalism. These policies were implemented in
the second Lula administration (2006–10), and continued under Dilma Rousseff. However, neo-
developmentalism has not simply replaced neoliberalism; rather, these prima facie incompatible
policy frameworks have been combined, and the ensuing policies have achieved significant successes
despite the intrinsic fragilities and limitations of this hybrid structure. The article examines the
achievements and limitations of these policies, and the (limited) scope for their continuation in
Dilma’s Rousseff’s administration.
Brazilian macroeconomy, Dilma Rousseff, Lula, neo-developmentalism
Luiz Inácio Lula da Silva was elected President in October 2002, and re-elected in 2006. The eco-
nomic policies implemented by Lula’s first administration badly disappointed the traditional left-
wing supporters of the Workers’ Party, because of his government’s rigorous implementation of the
neoliberal policies introduced by Lula’s predecessor, Fernando Henrique Cardoso, after the crisis
of the real in early 1999. These policies were based on an inflation-targeting monetary policy
framework, floating exchange rates and tight fiscal policies to secure a primary surplus sufficient
to compensate the nominal deficit of the public sector. These macroeconomic policies were closely
Corresponding author:
Alfredo Saad-Filho, Department of Development Studies, School of Oriental and African Studies, University of London,
Thornhaugh Street, Russell Square, London WC1H 0XG, UK
441635CRS0010.1177/0896920512441635Morais and Saad-FilhoCritical Sociology
790 Critical Sociology 38(6)
associated with the neoliberal reforms introduced in Brazil since the late 1980s, including the
liberalization of trade, finance and the capital account of the balance of payments, large-scale
privatizations, and other policy shifts consistent with the neoliberal claim that the markets are
efficient while state intervention is almost invariably wasteful (see Morais and Saad-Filho, 2005).
This article reviews the critiques against these neoliberal policies during Lula’s first administra-
tion and the emergence, during this period, of the neo-developmentalist alternative. This policy
framework includes contributions from a wide range of heterodox schools of thought, ranging
from the (post-)Keynesian to the Marxist, and they focus on constructive interactions between a
strong state and the private sector, with the former providing macroeconomic stability, supporting
distributive outcomes directly, and nurturing large domestic firms (‘national champions’). These
policies were introduced in late 2005 after a political crisis, the escândalo do mensalão, which
engulfed Lula’s administration just before his (eventually strikingly successful) bid for re-election.
However, the neo-developmentalist policies did not simply displace their neoliberal rivals; they
were introduced in parallel with the latter. This uneasy compromise has been surprisingly smooth,
and this hybrid framework continues to drive the macroeconomic policies implemented by Dilma
Rousseff’s administration. This article examines the scope for their continuing implementation, the
reasons for their success, and the tensions which may lead to their displacement, in five sections.
This introduction is the first. The second reviews the emergence of the neo-developmentalist
paradigm and explains its intellectual pedigree. The third considers the circumstances surrounding
the implementation of neo-developmentalism in Brazil, especially its ‘hybridity’ with the neoliberal
policy framework that has been in place for several years. The fourth evaluates the impact of neo-
developmentalism, highlighting its contribution to the new cycle of growth and distribution in the
country. The fifth section concludes this article with an examination of the potential contradictions
emerging within this hybrid framework, and their possible implications.
The Emergence of Neo-Developmentalism
Neo-developmentalism emerged in two strands, represented by Bresser-Pereira (2004, 2006) and
by Sicsú et al. (2005) (see Morais and Saad-Filho, 2011a). L.C. Bresser-Pereira and his long-term
collaborator, Y. Nakano (see Bresser-Pereira, 2001, 2009; Bresser-Pereira and Nakano, 2002,
2003) draw upon the structuralist tradition associated with ECLAC to develop a critique of
neoliberalism (‘conventional orthodoxy’) and support the emergence of a neo-developmentalist
policy framework. Bresser-Pereira (2006) summarizes the differences between these two policy
paradigms (Table 1).
Table 1 indicates that the neo-developmentalist policies are not limited to the narrow neolib-
eral goal of monetary stability. Their broader aims are summarized by the umbrella term ‘macro-
economic stability’, which includes inflation control, exchange rate and balance of payments
stability supported by capital controls, fiscal sustainability, low interest rates and the reduction of
uncertainties related to future demand, which should provide a more stable environment for pri-
vate investment decisions (see Sicsú, 2006). Achievement of these goals will require complemen-
tary monetary, fiscal, exchange rate and wage policies (Bresser-Pereira, 2003: 281), aiming to
restore the power of the state to control the currency, facilitate the implementation of industrial
policies, promote competition, and support improvements in the distribution of income (see
Bresser-Pereira, 2005).
In support of this strategy, Bresser-Pereira advocates fiscal spending controls in order to secure
public sector savings to finance public sector investment, and the elimination of the current account
deficit to reduce the vulnerability of the balance of payments. FDI inflows should either be used to
Morais and Saad-Filho 791
build up the country’s foreign exchange reserves, or to finance domestic investment abroad (see
also Bresser-Pereira and Gala, 2007). Finally, the central bank should have a double mandate
including inflation control and balance of payments equilibrium, and it should deploy two instru-
ments to achieve them, the interest rates and the exchange rate. The latter should aim to secure
export competitivity and limit imports, and it may be assisted by capital controls when this becomes
necessary. Surprisingly, Bresser-Pereira has little to say about the expansion of the domestic mar-
ket, which was prominent in the structuralist literature associated with ECLAC. Instead, he focuses
on the importance of foreign trade and international competitivity which, in turn, relates this strand
of the neo-developmentalist literature with ECLAC contributions in the 1990s (see, for example,
Rodríguez, 2006: 377).
Sicsú et al. (2005) focus upon the complementarity between states and markets drawing upon
J.M. Keynes, Paul Davidson and Joseph Stiglitz, and upon the ‘new’ Latin American structuralism
associated with Fajnzylber (1989) and Cepal (1990) (see also de Paula, 2003a, b). They aim to
offer an alternative to neoliberalism and to the ‘old’ Latin American developmentalism (or ‘national
developmentalism’) traditionally associated with ECLAC and with policies of import-substituting
For Sicsú et al., international competitiveness and domestic equity are equally important goals,
and ‘old developmentalism’ and import-substitution failed on both counts. They were based on
extensive state intervention in the provision of infrastructure and the production of basic inputs,
and on the protection of the domestic markets. However, these policies nurtured a backward men-
tality among the entrepreneurs because tariffs provided a generalized and unconditional shelter for
domestic producers; for similar reasons, there was insufficient absorption of new technologies,
which impaired competitivity and sapped the sources of long-term growth in Latin America. Low
and unstable growth rates and insufficient technological upgrading helped to perpetuate a ‘low’
road to development based on slow productivity growth and persistent social inequalities.
Neo-developmentalism can be synthesized in four theses:
(1) Strong markets can exist only with a strong state; (2) Sustainable growth is impossible … without
strengthening … the state and the market, and without the implementation of adequate macroeconomic
policies; (3) strong markets and states can be built only through a national development project which
makes growth compatible … with equity; and (4) it is impossible [to reduce] inequality without rapid and
sustained growth. (Sicsú et al., 2005: xxxv)
Table 1. Conventional orthodoxy, neo-developmentalism and market forces
Conventional orthodoxy Neo-developmentalism
Countries can develop through market
forces, as long as:
Countries can develop using market forces, as
long as:
(1) Inflation and the fiscal deficit are kept
under control;
(1) Macroeconomic stability is preserved;
(2) Market-oriented microeconomic
reforms are completed;
(2) Their institutions strengthen the state and the
market, and their economic policies reflect a
national development strategy;
(3) Foreign savings help to finance
development, given the scarcity of
domestic savings.
(3) They promote domestic savings, investment,
and innovation.
Source: Bresser-Pereira, 2006: 19.
792 Critical Sociology 38(6)
For Sicsú et al., a ‘strong state’ can regulate the markets, while ‘strong markets’ include large as
well as small firms, are open to new entrants, and guarantee equality of opportunity, which cannot
be achieved by the market alone but only through state regulation. These outcomes are essential to
secure technological dynamism, innovation and market competitivity. These features of neo-
developmentalism stand in sharp contrast with the basic characteristics of neoliberalism, which, at
least rhetorically, aims to dilute (‘roll back’) state intervention because states are naturally inef-
ficient if not perverse. In contrast, neoliberalism postulates that rational individuals operating
within free market institutions always achieve the best social outcomes. Their outline is also
sharply different from conventional presentations of ECLAC-style old developmentalism, which is
allegedly blind to the imperatives of competitivity.
In sum, both presentations of neo-developmentalism insist that mainstream or neoliberal policies
systematically reduce the economy’s growth potential. In contrast, for the neo-developmentalists
there was significant underutilized potential in Brazil due to unrealized productivity gains that could
be captured through economic growth, including economies of scale, higher employment in the
formal sector (dislocating lower-productivity workers), state support to private investment and rapid
expansion into external markets. In sum, activist fiscal and credit policies could shift GDP growth
rates ‘one or two percentage points above the rates expected by the supporters of the neoliberal
view’ (Barbosa and Souza, 2010: 11).
Implementing Neo-Developmentalist Policies
Neo-developmentalist views evolved rapidly and gained influence during Lula’s first administra-
tion. This was in part because of the strengths of the heterodox economics tradition in Brazil, and
partly because of the persistent underperformance of the economy and the widespread disappoint-
ment with the dogged (and, to many of its supporters, inexplicable) attachment of Lula’s first admin-
istration to Cardoso’s neoliberal policies and the ensuing microeconomic reforms. In 2005, there
was an increasingly loud debate between the neoliberals and their neo-developmentalist critics, who
were shooting from the outside as well as starting to make their presence felt within the public
administration through the appointments made by the governing coalition. This debate was eventu-
ally won by the neo-developmentalists. The neoliberal economic team was largely dislocated from
positions of power in the Ministries of Finance, Planning, and Strategic Affairs, after a succession
of corruption scandals that culminated in a political crisis engulfing Finance Minister (and likely
presidential candidate) Antonio Palocci, other key members of the administration and leading fig-
ures of the Workers’ Party, and that nearly brought down President Lula (for additional details, see
Morais and Saad-Filho, 2011b). However, the (neoliberal) central bank was not touched.
Several neo-developmentalist policies were adopted by the second Lula administration (2006–
10), and have continued under Dilma Rousseff. Remarkably, they did not replace the previous
neoliberal policy framework based on inflation targeting, floating exchange rates and low fiscal
deficits. These two sets of policies were merely juxtaposed, and the (neoliberal) central bank, for
example, has remained largely unaffected by the policy changes, although it has shown some
willingness to accommodate neo-developmentalist initiatives, for example, as part of the govern-
ment’s coordinated countercyclical policies implemented in the aftermath of the global financial
crisis (see below).
The introduction of elements of neo-developmentalism in parallel with the prevailing neoliberal
policies was correctly described by Barbosa and Souza (2010) as a policy inflection rather than a
policy shift. This inflection has introduced a hybrid economic policy framework including, on the
one hand, policies aiming primarily at a narrow concept of monetary stability which, implicitly,
Morais and Saad-Filho 793
presumes that markets will spontaneously tend towards an optimum equilibrium and, on the other
hand, interventionist policies to foster economic growth and social equity. Somewhat surprisingly,
the macroeconomic outcomes of this policy inflection have been highly positive in terms of growth,
expansion of state and private enterprises, poverty reduction and distributional improvements. The
most important assessment of this experience is offered by Barbosa and Souza (2010). This work
is especially valuable because Nelson Barbosa was (and remains, under Dilma) one of the most
prominent economic policy-makers in Brazil.
Despite significant conceptual differences, the new economic team shared the conviction that
much stronger state activism was necessary for theoretical as well as pragmatic reasons. This
renewed activism included: [1] ‘the adoption of temporary measures of fiscal and monetary
expansion to accelerate growth and raise the productive potential of the economy; [2] the accel-
eration of social development through the expansion of the income transfer programmes and a
rising minimum wage; and [3] an increase in public investment and the recovery of the role of
the state in long-term planning’ (Barbosa and Souza, 2010: 69–70). These goals were achieved
during the second Lula administration, and under Dilma.
State activism should focus on the expansion of public sector investment and the reduction of
entrenched inequalities at two levels. First, through a ‘growth acceleration programme’ (PAC)
focusing on investments in energy and transport and the renewal of the country’s infrastructure,
which had suffered from 30 years of underinvestment. PAC articulated public sector outlays with
investments by state-owned and private enterprises and it was supplemented by a significant
expansion of credit by the state-owned financial institutions and tax rebates ‘to stimulate private
investment and production for the mass market’ (Barbosa and Souza, 2010: 73). Regulatory
changes allowed state investments to be financed either by tax revenues or through new debt,
which had not been permitted since the 1986 budget reforms. In addition, the government’s primary
surplus targets were redefined to exclude public sector investment and some of the country’s largest
state-owned enterprises, Petrobrás and Eletrobrás. These regulatory shifts released significant
resources available for investment by the public sector.
Second, the administration pushed the boundaries of the domestic market through the extension
of social provision, especially the Bolsa Família programme, which reached 11.4 million house-
holds, and social security coverage, which increased from 45 percent of the workforce in 2002 to 51
percent in 2010. The minimum wage rose by 67 percent between 2003 and 2010, while real GDP
rose by ‘only’ 37 percent in this period. Higher minimum wages raised the floor of the labour market
and triggered a simultaneous increase of federal transfers to pensioners, the unemployed and the
disabled.1 In addition, regulatory shifts supported the rapid expansion of consumer credit. Finally,
the government supported the emergence of large domestic enterprises (‘national champions’)
and their global expansion, to compete against transnational companies in domestic and external
markets. These Brazilian firms include Odebrecht (construction), Ambev (beverages), Gerdau
(steel) and Friboi (processed foods). Their expansion was facilitated by credit and regulatory incen-
tives to mergers and acquisitions and through diplomatic support, especially in Latin America as
well as elsewhere in the ‘global South’.
Most neoliberal critics of the government argued that these interventionist policies would prove
either useless or counter-productive, and their views were widely and insistently reported by the
national press.2 However, larger public-sector investment and expanded social provision had no
adverse macroeconomic effects and did not even destabilize the public finances. The expansion of
public-sector activity was almost entirely funded by the additional tax revenues and social security
contributions resulting from faster growth and the increasing formalization of the labour market,
and the primary fiscal surplus fell only by 0.2 percent of GDP, to 2.3 percent, between 2003–5 and
794 Critical Sociology 38(6)
2006–8. Fiscal activism, higher minimum wages and the expansion of credit and social provision
helped to create a virtuous circle of growth supported by domestic investment and mass consumption.
Employment growth in the metropolitan areas increased from 156,000 jobs per year during the
Cardoso administration to 499,000 per year since the mid-2000s. The Gini coefficient fell from
0.57 in 1995 to 0.52 in 2008, and absolute poverty has declined from 35.8 percent of households
in 2003, to 21.4 percent in 2009 (Pesquisa Nacional por Amostra de Domicílios, 2004), while 32
million individuals (in a population of 193 million) entered the so-called ‘middle class’. These
gains have been concentrated in the poorer regions, with average real wages in the Northeast rising
by 24 percent, twice the national figure. There has also been a striking convergence of incomes in
the South and Centre-West towards the higher levels in the Southeast, which includes São Paulo
and Rio de Janeiro (for a more detailed analysis, see Morais and Saad-Filho, 2011a).
The Impact of Neo-Developmentalism
Despite their apparent incompatibility, the hybrid economic policies have achieved strongly
positive outcomes. It was shown above that there has been a significant improvement in the main
macroeconomic indicators since 2006, and some of these changes suggest an ongoing structural
transformation in the Brazilian economy. For example, Brazilian foreign assets have increased
sharply, especially FDI and commercial credits, showing that the country now finances a large
part of its exports (Brazilian FDI stocks have risen from US$55 billion in 2003 to US$175 bil-
lion in 2010, and commercial credit has grown explosively, from only US$100 million in 2007,
to US$71 billion in 2010). At the same time, Brazil’s net external liabilities have stabilized
below 40 percent of GDP, despite the global crisis unfolding since 2008 (Central Bank of Brazil,
various dates). Three more easily reversible indicators of success are, first, rising tax revenues
(that are conditional upon faster economic growth), which have helped to reduce the ratio
between domestic public debt and GDP. In other words, the fiscal policy indicators have
improved despite higher public sector spending and the continuing overvaluation of the real.3
Second, the growth of the country’s international reserves, which broadly corresponds to the
inflows of foreign portfolio investment (which are highly volatile). Third, Brazil’s new position
as a net foreign creditor, which depends on the exchange rate, macroeconomic stability, and the
credit provided by the Brazilian financial system. This has been expanding rapidly, from 24.6
percent of GDP in 2003 to 46.6 percent in 2010 (credit by private banks has increased from 14.8
to 27.1 percent of GDP, and by state-owned banks from 9.8 to 19.5 percent of GDP).
Despite these achievements, the lingering influence of neoliberalism has continued to impose
economic policy limitations along the lines suggested by the earlier neo-developmentalist litera-
ture. These limitations include high domestic interest rates, which lower investment and foster
financial speculation, the continuing overvaluation of the real, which has reduced the competi-
tivity and diversity of Brazil’s exports and fuelled a rising current account deficit since 2008, and
the fiscal pressures due to the combination of inflation targeting and an open capital account of
the balance of payments. These policy-induced limitations were exposed by the recent deteriora-
tion of the fiscal balance, which was largely due to the tensions of – simultaneously – having to
absorb rising foreign currency reserves because of short-term capital inflows, managing tight
fiscal and monetary policies, and delivering growing public sector investment and income trans-
fer programmes.
The continuing success of the government’s hybrid economic policies has generated perplexity
because both mainstream and heterodox commentators had reasonable expectations that this com-
bination of policies is unsustainable. In response, it may be argued that the incompatibility between
Morais and Saad-Filho 795
the neoliberal and neo-developmentalist aspects of government policy has been temporarily
suspended because of the exceptionally high global liquidity between 2003 and 2008. This
conjunctural factor may have facilitated the financing of the heterodox policies and prevented the
onset of a crisis of confidence due to the (supposedly) ‘unavoidable’ impact of strongly expansionary
policies upon inflation and the fiscal balance, leading to falling investment and potentially explosive
capital flight. In this case, the incompatibility between neoliberal and neo-developmentalist poli-
cies would be imposed at a later stage, to the advantage of the former, when the global environment
becomes more averse to deficit financing.
Barbosa and Souza (2010: 22–3) rightly claim that this explanation is untenable, because the
hybrid policies continued to deliver positive outcomes even after the onset of the most severe
economic crisis in living memory, in September 2008. The government responded to the crisis
with aggressive countercyclical policies, including higher spending (public sector and Petrobrás
investment peaked at 2.6 percent of GDP in 2009, and a mass housing program was introduced,
costing 1.2 percent of GDP) and with tax rebates worth 0.3 percent of GDP. The state-owned
banks increased the availability of credit to offset the contraction of loans by the private institu-
tions (BNDES lending alone expanded by 3.3 percent of GDP in 2009), while the Central Bank
cut interest rates, deployed US$72 billion to provide export credit and stabilize the exchange
rate, and injected another 3.3 percent of GDP into the financial institutions. These policies were
supported by the further expansion of the social programmes, which grew from 6.9 percent of
GDP in 2002 to 8.6 percent in 2008 and 9.3 percent in 2009. The stabilization of aggregate
demand under adverse global circumstances raised the nominal fiscal deficit from 1.9 percent of
GDP at the end of 2008 to 4.1 percent in 2009, while the domestic public debt rose from 40.5
percent of GDP to 43.0 percent. However, after an initial slowdown, the economy rebounded,
and GDP expanded by 7.5 percent in 2010 – faster than at any time since the mid-1980s – with
continuing gains in distribution and despite the creeping overvaluation of the currency.
An alternative explanation, which can only be sketched here, is that the incompatibility at the
core of the Brazilian macroeconomic policies was temporarily suspended by a peculiar concur-
rence of political and economic factors. First, heterodox economists have demonstrated their abil-
ity to mount a theoretical and political offensive, backed up by sizable social forces, despite the
long-established hegemony of neoliberalism in Brazil. Their ability to do so was facilitated by a
domestic political crisis (in 2005), and sustained by the economy’s strongly positive response to
the incremental economic policy changes, the external economic crisis, and the unfolding hege-
monic transition at the global level. Second, the government could count on Lula’s considerable
political skills and his remarkable ability to bridge divergences, mend disputes and bring together
disparate political and economic agendas (see Sallum and Kugelmas, 2004).
The singularities highlighted by this explanation of the 2005–6 economic policy inflection sug-
gest that its success is nested within a fragile historical conjuncture, which can be destabilized by
domestic events or by the economic fluctuations which regularly buffet the peripheral countries.
This fragility is partly tempered by the ongoing changes in the global economy, which can benefit
the larger ‘emerging’ economies (including Brazil) in the long term. In particular, the dislocation
of the dynamic centre of capitalism towards East and South Asia could – potentially – permanently
relax Brazil’s balance of payments constraint and, consequently, dislocate for longer the funda-
mental incompatibility between neoliberal and neo-developmentalist policies. In this case, there
could also be a renewed appetite in wide social circles for a structural change bypassing the neo-
liberal policy framework permanently, and permitting the consolidation of the considerable gains
achieved since 2006. The scope for a more significant break with neoliberalism depends critically
on staffing and policy changes in the Central Bank, perhaps building upon the recent changes in the
796 Critical Sociology 38(6)
Bank’s leadership. Dilma Rousseff must evaluate the costs and potential benefits of facing up to
this challenge, and decide if and when to strike.4
In sum, despite the considerable successes achieved by the hybrid economic policies pursued
by Lula and Dilma, the suspension of the incompatibility between their two component parts is
likely to be provisional. The challenges faced by Dilma’s administration because of the rising
current account deficit and the fiscal cost of the interventions to moderate the overvaluation of
the real can create unsustainable tensions as the economy continues to expand. The gains
achieved since 2006 are more likely to be consolidated if the institutional changes and the mac-
roeconomic policies suggested by the neo-developmentalist literature are pursued with greater
energy. This could be achieved if neo-developmentalism becomes the core of a new economic
policy consensus in Brazil, involving a redistribution of power including part of the elites and
large sections of the popular strata supporting the government around the goals of economic
development and social equity. The scope for the emergence of this new consensus does not
depend entirely on negotiations at the federal level, or even on the strength of Brazilian social
movements. It also depends heavily on the ongoing structural changes at the level of the global
economy, which have brought significant gains to the large emerging economies.
This article has traced the emergence of neo-developmentalist economic policies in Brazil, and
examined how this policy framework confronted the hegemony of neoliberalism and provided het-
erodox responses to the country’s economic development challenges. Neo-structuralism grants a
central role to state action with a view to the implementation of a national development strategy to
eliminate the economic and social gaps between Brazil and the centres of developed capitalism. The
neo-developmentalists claim that this cannot be achieved only through market processes. It requires
a ‘strong state’, understood as a state that can regulate the market to secure macroeconomic (rather
than merely monetary) stability and greater economic equality while, simultaneously, strengthening
the market as a key producer of wealth.
Neo-developmentalist policies were implemented in the second Lula administration in conjunc-
tion with the prevailing neoliberal paradigm. The juxtaposition between ultimately incompatible
policies (the ‘policy inflection’ examined above) created a hybrid economic policy paradigm
which, surprisingly, has delivered significant successes in terms of economic growth, income dis-
tribution and poverty reduction, and helped to support the rapid recovery of the Brazilian economy
after the 2008 global crisis. These successes are due, partly, to a favourable external environment,
and partly to the capture of unexplored productivity gains through policy-driven economic,
employment and demand growth. In turn, these were largely the outcome of the neo-developmen-
talist contributions, while the neoliberal policies have continued to destabilize Brazil’s external
accounts and to induce adverse fiscal pressures because of the pressures due to high interest rates,
the overvaluation of the real and, more generally, the fiscal costs of inflation targeting with an open
capital account of the balance of payments.
The favourable outcomes described above have challenged the widely-held view that the ‘core’
neoliberal macroeconomic framework is fundamentally incompatible with the neo-developmentalist
policies introduced in 2006. This incompatibility is amply recognized, because one set of policies
relies upon the primacy of the (financial) markets, while the other depends upon state activism and
state-led regulation of economic activity supporting rapid development. This article has suggested
that the ongoing success of these hybrid policies cannot be explained solely by the favourable global
conditions present in 2003–8, because they did not collapse after the 2008 global crisis. Despite their
Morais and Saad-Filho 797
fundamental differences, the two component parts of the Brazilian government’s economic policies
have been operating together successfully partly because of the space provided by high global
liquidity and favourable commodity prices and, partly, because of the political imagination of the
economic authorities in Lula’s and Dilma’s administrations. They have managed to exploit the
emerging gaps in the orthodoxy due to the decline of neoliberalism, the improvement of the domestic
macroeconomic indicators and the popularity of the federal administration which, in turn, is partly
sustained by the achievements of the neo-developmentalist policy-makers. The continuing success
of these policies, supported by apt changes in the ranks of the country’s key economic policy-
makers, is an essential condition for the consolidation of a neo-developmentalist policy hegemony
in Brazil. Nevertheless, even if this condition is satisfied, this hegemony is likely to prove fragile
because of Brazil’s heavy and continuing exposure to external economic developments.
1. The constitution of 1988 determines that social security and unemployment benefits cannot be lower
than the minimum wage.
2. See, for example, comments by Edmar Bacha and Gustavo Franco, two prominent commentators closely
associated with the Cardoso administration.
3. The nominal dollar/real exchange rate rose from 0.3460, at the end of 2003, to 0.5988 in 2010, suggesting
that the real rose by 73 percent in seven years.
4. It is plausible that recent shifts in the Central Bank’s interest rate policy could herald a policy shift
precisely along these lines. However, this transition is likely to be gradual and uneven.
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... Thus, depending on the position of the political pendulum, Petrobras, the country's largest state-owned company, may assume a set of diametrically opposite behaviors. During the Workers' Party governments, there was a signi¯cant increase in its investment portfolio, and its purchasing power was used as an instrument for inducing the oil¯eld equipment and service industry development [Morais and Saad-Filho (2012); Mendonça and de Oliveira (2013)]. However, with the deposition of President Dilma Rousse®, the intervention of the Brazilian state in the economic domain through this NOC has been replaced by a new logic marked by divestments and the abandonment of the local content policy [Ribeiro and In acio Júnior (2019) The Brazilian Ministry of Aeronautics created EMBRAER in 1969 as a mixed company (partially public, partially private). ...
... Currently, the company is one of the major airplane manufacturers in the world with leadership in regional°ights. Nevertheless, the defense market is still relevant and highly connected to the demands of FAB. e Neo-developmentalism, also called new-developmentalism, represents a development agenda that combines the focus on economic stability with traces of developmentalism that characterized the strategy of import substitution industrialization (model adopted in the country during much of the twentieth century) as state interventionism, which justi¯es the use of the pre¯x \neo" or \new" [Morais and Saad-Filho (2012)]. ...
... Another obstacle to the practice of PCP and PPI identi¯ed in the Brazilian case concerns the fact that for more than a decade, the country's macroeconomic policy has been based on instruments such as primary surplus and an in°ation targeting regime [Morais and Saad-Filho (2012)]. Eminently orthodox¯scal and in°ationary objectives are positioned ahead of other objectives, such as the country's industrial and technological development. ...
This paper sets out to understand the use of public procurement as a policy instrument for catching up. Brazil and China, who have explicitly linked procurement to innovation, are used as empirical cases. We review their respective institutional settings, policy approaches, and micro-level processes related to the public procurement of innovation (PPI). We have discovered that they share similarities concerning issues encountered during PPI implementation. Although both countries have made some achievements in promoting innovation through procurement, this paper highlights some of the obstacles they have experienced when implementing this policy, such as institutional problems, changes in the political landscape, and macroeconomic constraints. Such obstacles, more prominent in the case of Brazil, may have acted as an obstruction to achieving the pursued objectives, thereby restricting the full potential of PPI in driving technological catching up. The article then offers managerial and policy implications for the implementation of PPI, such as the importance of choosing relevant procurement procedures, critical roles played by policy champions, and demonstrating effects of leading firms and regions. While in China PPI was once an instrumental part of its technology development agenda, in Brazil it has been sporadic and unconnected to a given national strategy.
... This pattern shows an expansion of the typical state dominance in emerging economies' energy markets (see De Graaff 2012), from oil to renewable fuels and now also in the agribusiness sector. Such an expanded role is in tune with the perceived prominence of a "neo-developmentalist"-as opposed to neoliberalstate in those countries (Morais and Saad-Filho 2012;Van Apeldoorn et al. 2012), and with its similar strides in other strategic areas such as mining. However, this in itself has not (yet) meant a challenge to the neoliberal global order Van Apeldoorn et al. 2012). ...
This book addresses the underexposed political dimensions of bioeconomy promotion. Who wins and who loses? How are institutions being shaped, and by whom? Drawing from experiences since the earlier days of biofuels promotion, it explores in unprecedented detail the global drive away from fossil fuels and towards a biomass-based economy. Multipurpose agriculture gains ever more traction as countries create new bio-based value chains – or, rather, value webs. Governance, in this regard, proves to be key for steering developments towards inclusive agri-food-biomass systems instead of fueling just a handful of “flex crops” ridden with social equity and other environmental issues. Based on a rich global-level analysis of bioeconomy promotion and three in-depth case studies of key emerging economies (Brazil, India and Indonesia), the book also innovatively examines sustainability politics in Global South democracies. Ultimately, this book is about finding the politics for a fairer bioeconomy in the years and decades to come.
... This pattern shows an expansion of the typical state dominance in emerging economies' energy markets (see De Graaff 2012), from oil to renewable fuels and now also in the agribusiness sector. Such an expanded role is in tune with the perceived prominence of a "neo-developmentalist"-as opposed to neoliberalstate in those countries (Morais and Saad-Filho 2012;Schmalz and Ebenau 2012;Van Apeldoorn et al. 2012), and with its similar strides in other strategic areas such as mining. However, this in itself has not (yet) meant a challenge to the neoliberal global order (Schmalz and Ebenau 2012;Van Apeldoorn et al. 2012). ...
Bioeconomies are yet to meet their sustainable development potentials. Thus far, mostly unsustainable production has prevailed, due to reasons on four different levels. First, domestic regulatory and economic incentives have favored conventional, input-intensive monocultures and big agribusiness-controlled systems. Second, some norms have been crucial in underlying those policies: (i) the economic but not political inclusion of smallholders and low-income countries; (ii) the pre-eminence of climate and wild biodiversity conservation over other sustainability issues, assuming “renewable” to mean “sustainable” and disregarding the performance of bio-based production on other social and environmental criteria; and (iii) an implicit urban bias that limits rural development strategies and prioritizes the provision of resources to cities. Third, state and private agroindustry agents who espouse those norms have formed winning coalitions to concretize policy beliefs held in common. Ultimately, there are feedback loops between agency, governance architectures, and allocation and access patterns. Therefore, the prevailing production patterns’ very distributive outcomes can be identified as a cause underlying their dominance. As such, social equity reveals to be not just a normative goal but also a key determinant of governance. To not aggravate inequalities and be more sustainable, bioeconomy promotion needs policies that reconfigure allocation patterns and promote structural change.
... Urban development and the provision of public services in Curitiba often occur in close collaboration with businesses (Abrucio & Grin, 2015;Galvani, 2018;Lobato, 2016) to "customfit to the logic of financial capitalism" (Lavinas, Gentil, & Cobo, 2017). However, there are also scholars who feel that Brazil does not fit into the classical neoliberal mould but see it as a case of "neodevelopmentalism" (Morais & Saad-Filho, 2012) or "left neoliberalism" (Saad-Filho, 2013) -a state that implements both free-market policies and social programs. ...
Smart governance varies considerably across cities, allegedly due to the influence of the institutional setting. Nevertheless, the institutional factors influencing smart governance have yet to be systematically examined. This research proposes to remedy this by exploring the role of the institutional context in shaping the configuration of smart governance. For this purpose, this study, drawing on insights from institutional theory, zooms in on three cities with dissimilar institutional contexts — Curitiba (Brazil), Glasgow (UK), and Utrecht (the Netherlands). The findings suggest that institutional context does indeed affect how smart governance actualizes in cities. These empirical insights result in a heuristic framework for understanding smart governance in diverse urban environments. The framework exhibits a multi-layered influencing mechanism: institutions co-existing on multiple spatial scales interact and modify – reinforce or dissolve – each other's impact on smart governance. This study opens the door to a different approach to understanding smart governance and sheds new light on how this is interrelated with the institutional context.
Argentina’s right-wing shift in the 2015 presidential election concluded twelve years of center-left rule. The elected president, Mauricio Macri, claimed that the economy would experience normalization of existing imbalances and recover its strength in a “new political era.” However, the new administration quickly restored the dominance of neoliberal economic policies through a comprehensive set of initiatives, which centrally included the return to international financial debt and equity markets and submission to the International Monetary Fund’s (IMF) rules. This article analyzes Argentina’s external-debt-growth process and discusses its objectives and long-term effects. This paper posits that the indebtedness process carried out by the Macri administration—and its modality—not only increased the relevance of financial capital in the Argentine economy but also structurally conditioned any future nonorthodox alternative path of development. This outcome cannot be understood without taking into account the deliberate role of the United States, the IMF, and the top companies that operate in Argentina, as well as the complicity of many political sectors. JEL Classification: H63, F34, F63
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A relação entre políticas sociais e governos progressistas na América Latina caracteriza o neoextrativismo. Com o golpe de 2016, uma só agricultura passa a ter espaço no Estado brasileiro – o monocultivo de larga escala para exportação. O agricultor camponês e familiar deixa de fazer parte do processo de construção de políticas públicas e, igualmente, não é mais atendido por elas. O extrativismo dos governos de direita demanda uma nova agenda de pesquisa. Como construir sentido da violência, do ódio aos povos do campo e apoio irrestrito ao agronegócio no governo Bolsonaro? A análise das relações Estado-sociedade evidência quais atores e interesses são beneficiados e quais são ‘deixados de fora’ ao restringir a participação política. Bolsonaro consolida um extrativismo sem limite: um ‘extrativismo total’ que ataca movimentos sociais do campo, extingue espaços institucionais, paralisa a reforma agrária e impossibilita a soberania alimentar. // The relationship between social policies and progressive governments in Latin America characterizes neoextractivism. After the 2016 coup, a single form of agriculture has had space within the Brazilian State – large-scale monoculture for export. Peasant and family farmers are no longer part of the public policy process and, likewise, no longer benefit from them. The extractivism of right-wing governments demands a new research agenda. How can we understand the Bolsonaro administration’s violence, hatred towards rural peoples, and unrestricted support for agribusiness? The analysis of state-society relations reveals which actors and interests benefit and which are ‘left out’ by restricting political participation. Bolsonaro consolidates extractivism without limits: ‘total extractivism’ which attacks rural social movements, extinguishes institutional spaces, paralyzes agrarian reform, and inhibits food sovereignty.
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This paper appraises Pastoral Land Commission's (CPT) practice of documenting the violence and conflict that has taken place in the Brazilian countryside since 1975. Based on 10 interviews with CPT National members and other primary sources, the paper conceptually explores the organisations' subversive practice of compiling and publishing data on this type of violence, hence producing emancipatory knowledge that supports progressive agrarian change. Although the state benefits from having such knowledge obscured, CPT's efforts shine a light on conflicts in the countryside and frame them as such. Documenting as a technology of resistance has been crucial for Brazilian social movements and scholar‐activists and has significant potential for reproduction elsewhere.
Residents of Brazilian low-income communities have long called actions of the state “corrupt,” rhetoric that has arguably intensified in the wake of large-scale infrastructural upgrading decisions. Inspired by a new wave of critical corruption studies, in this paper I ask: how is infrastructural upgrading a key site of politics and political understandings of the state for residents in Complexo do Alemão, Rio de Janeiro? How do discourses about corrupt decision-making mechanisms and money appropriation produce common sense notions of how the political system operates? And what work do these narratives do for demonstrating agency of the people living in Complexo? In answering these questions I contribute to an emerging conjunctural research agenda in global urban and corruption studies. I draw on the dual notion of articulation as central to the conjuncture: how the conjoining of political forces alongside discursive enunciations are crucial to crafting hegemonies of corruption and understandings of political and civil society. I add to this Gramscian understanding of the conjuncture a focus on how residents constitute themselves as agential subjects through discourses of corruption. By focusing on the brewing frustrations of Complexo residents, the paper argues that articulations of corruption materialized an articulated political bloc against which community members could express frustration but also, importantly, constituted a civil society demonstrating a constrained agency.
This article uses an urban upgrading programme (PAC Favela) as a lens for examining the contextual dynamics and forms of neoliberal urban development in pre-Olympic Rio de Janeiro. Critical scholarship has contended that Rio’s entrepreneurial governance and mega-event induced state of exception pushed forward a neoliberal urban agenda. While not rejecting this overarching narrative, the present article argues that this tendency was shaped by contextual politics at different scales, producing variegated forms of urban development. At the federal level, urban policy and practice under lulismo – the political ideology characterizing the 2002–2016 Workers’ Party governments – was marked by an ambition to achieve both social and economic transformation. The PAC Growth Acceleration Programme’s investments in favela upgrading were emblematic of this ambition. Through a multi-scalar case study of the social and economic interests and actors at the community, state and federal levels that engaged with PAC in the Rocinha favela in Rio, the article shows that PAC’s interventions were the outcome of contentions and confluences between citizen- and market-centred urban agendas. While the balance gradually shifted in favour of the market-centred, neoliberal agenda, outcomes should still be seen as inherently hybrid. On the one hand, the case of PAC in Rocinha presents a perspective ‘from below’ and important insights into the contested and contradictory nature of urban transformation in pre-Olympic Rio de Janeiro. Furthermore, it illustrates the necessity for contextual analyses of perceived de-politicized neoliberal entrepreneurial urban governance and development.
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RESUMO A retomada do crescimento econômico após 20 anos de quase estagnação depende de uma estratégia de crescimento que combine estabilidade macroeconômica com políticas orientadas para o crescimento. O Plano Real estabilizou os preços, mas, como contrapartida, a taxa de juros disparou enquanto a taxa de câmbio permanece artificialmente apreciada. O principal desafio é reduzir a taxa básica de juros, que é consideravelmente mais alta que a dos países com classificação de risco-país semelhante. Existem várias razões para isso, incluindo pouca preocupação das autoridades monetárias em reduzir a taxa de juros, e a relação inversa entre a taxa de juros e o risco de default: a alta taxa de juros definida pelo Banco Central influencia em alta o risco-Brasil.
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RESUMO Os países altamente endividados, particularmente os latino-americanos, apresentaram resultados econômicos negativos na década de 1990, que são a consequência da “estratégia de crescimento com poupança externa”, ou o Segundo Consenso de Washington. Juntamente com a liberalização dos fluxos financeiros internacionais, tal estratégia, que não fez parte do primeiro consenso, levou os países, na onda de um novo ciclo mundial de fluxos de capital, a déficits elevados em conta corrente e aumento da dívida externa, ignorando a restrição da solidez e o limiar da dívida. Em termos práticos, envolvia moedas supervalorizadas (baixas taxas de câmbio) e altas taxas de juros; em termos políticos, a tentativa de controlar o déficit orçamentário enquanto o déficit em conta corrente foi ignorado. A consequência paradoxal foi a adoção, pelos países altamente endividados, do “populismo cambial”, uma forma menos óbvia, mas mais perigosa, de populismo econômico.
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From political economy to economic policy: The neo-developmentalism and the Lula administration. This article critically reviews the design of neo-developmentalist economic policies in Brazil, in the first half of the last decade, and their relationship with the economic policies of the Lula administration after 2006. Paradoxically, the neo-developmentalist policies were implemented jointly with the main (neoliberal) macroeconomic policies which had been introduced earlier. The article reviews the relevant literature, and examines the contradictory nature of this 'inflection' of economic policy. So far, this combination of policies has achieved an unquestionable - though provisional - success, despite the persistence of the structural macroeconomic problems due to the continuity of the neoliberal policies.
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A review of the achievements of the Lula administration and an examination of the contrasting political and social programs that disputed the Brazilian presidential elections in October 2010 reveal that there has been significant progress toward the consolidation of a social democratic welfare state in Brazil and that further progress is possible but far from guaranteed under the new administration.
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The two methods and the hard core of economics. While methodological sci- ences have no object and are supposed to adopt a hypothetical-deductive method, substantive sciences including economics should use an empirical or historical- deductive method. The great classical economists and Keynes did that and were able to develop open models explaining how equally open economic systems work. Thus, the hard core of relevant economics is formed by the classical microeconomics and the classical theory of capitalist economic growth, and by Keynesian macroeco- nomics. In contrast, neoclassical economist aiming to build a mathematical science wrongly adopted the hypothetical-deductive method, and came to macroeconomic and growth models that do not have practical use in policymaking. The exception is Marshall's microeconomics that does not provide a model of real economic systems, but is useful to the analysis of markets.
The failure of the neo-liberal policies in promoting macroeconomic stabilization and economic growth in Latin America opened room in each country for the rise of new developmentalism. Differently from the conventional orthodoxy, it rejects the growth strategy with foreign savings and the opening of capital accounts. Over there, it says that the exchange rate should be administered and believes that a strategy is required to overcome the high interest rate/appreciated currency which maintains the Brazilian economy unstable.