This chapter focuses on neodevelopmentalism, perhaps the most distinctively novel form of divergence from neoliberalism to emerge over the years of the commodity boom. Among the three types of post-neoliberal turn included in the typology, neodevelopmentalism is unique in that its practical application is tethered to a relatively comprehensive preexisting theoretical paradigm, standing in contrast to the rather ad hoc evolution of policy orientation and after-the-fact theorization that often seems to characterize the other forms of post-neoliberalism, discussed in chapters 6 and 7.
Following an introductory summary of the main arguments, I provide an outline of the theoretical model of neodevelopmentalism and its associated policy recommendations, noting the various breaks and continuities with the equivalent neoliberal agenda. I then consider the interplay between international market conditions and policy change in the two cases I see as belonging to this type, Argentina and Brazil, demonstrating that the space for their post-neoliberal policy reorientations was created by China-led price movements in global markets for their respective resource exports. I devote particular attention to the case of soy, a major export sector for both Argentina and Brazil, arguing for its inclusion (uniquely, among agricultural goods) alongside minerals and fuels as a commodity for which Chinese demand has fundamentally altered the shape of the global market.
Next, I focus on the domestic political-economic trajectories of the two cases, highlighting correspondences and divergences from the neodevelopmentalist template. Brazil represents the wellspring of neodevelopmentalist thought, but it also is the state most commonly identified as the paradigm’s primary—or sometimes only—proponent (Carrillo 2014). Alongside an increasing tendency toward the practical application of neodevelopmentalist ideas from 2006 until 2016, however, elements of the previous neoliberal settlement were retained (Ban 2013), an uneasy coexistence that tended to partially undermine the neodevelopmentalist project (and, after the boom, would contribute to its downfall).
Perhaps surprisingly, given the relative lack of discussion of Argentina as a neodevelopmentalist case (though see Wylde 2011, 2016; Feliz 2011), it is the Argentinian governments of Nestor Kirchner (2003–2007) and his successor and wife, Cristina Fernandez de Kirchner (2007–2015), that most fully and unambiguously implemented a neodevelopmentalist strategy. For this reason, I use Argentina as the exemplar case for the type, accordingly providing a longer treatment of its post-neoliberal turn than that given over to the Brazilian case.
Viewed from one angle, neodevelopmentalism as a notional policy orientation represents a middle path between classic Latin American structuralism and the neoliberalism that held sway over the region during the 1980s and 1990s (Morais and Saad-Filho 2011, 2012).1 Another perspective is that neodevelopmentalism is an attempt to adapt old structuralist goals to the demands of a liberalized global economy (Bresser-Pereira 2012). In so doing, its proponents seek to apply the lessons of the successful developmental experiences of the newly industrialized East Asian countries, replacing pre-neoliberal domestic-focused import substitution industrialization strategies with a stress on competitiveness at home and abroad (Kröger 2012; Hochstetler and Montero 2013).
Although market mechanisms are viewed as often highly efficient arbiters of distribution, the neodevelopmentalist state is expected to intervene in a variety of ways to nudge markets toward favorable developmental outcomes. Without resorting to ISI-style protectionism, neodevelopmentalists advocate an active industrial policy, focusing on directed credit, subsidies, and infrastructural development as well as support for consumption (via, for example, wage increases) in an effort to build the domestic market. Local productive capital, of course, benefits from state-supported consumption, but it is also pushed to internationalize where possible, as occurred in the Asian Tiger cases. Perhaps scarred from the fiscal crises that marked the end of the ISI period and much of the neoliberal era, the need to deliver primary surpluses is often emphasized (Boschi and Gaitan 2009).
The neodevelopmentalist approach is posited as a general development strategy, meaning that its principles are not intended to apply solely or in particular to the conditions of the commodity boom.2 As will become clear in discussion of the two cases belonging to this type, however, any attempt to roll out a neodevelopmentalist program under neoliberal conditions would have faced grave difficulties, at least in the context of a highly indebted resource-exporting state.3 This is, first, because the neodevelopmentalist stress on fiscal restraint seems impossible to balance with the need to support firms and consumers via industrial policy and subsidies while simultaneously meeting high debt service requirements. Second, any need to engage with the international financial institutions to manage these debts would entail adherence to a set of conditionalities that would tend to rule out most of the signature neodevelopmentalist policies. With the onset of the commodity boom, though, any natural resource–exporting state potentially had access to a revenue stream that might be turned toward easing fiscal problems sufficiently to deliver a primary or even a net budget surplus while paying for the interventionist elements of a neodevelopmentalist program. Achieving this feat would then reduce or eliminate the need for IFI support, freeing the state in question from policy conditionalities.
Argentina and Brazil both utilized the benefits of the commodity boom as a foundation for policy autonomy, though in ways that certainly have differed—as, relatedly, have the forms of their experiments with neodevelopmentalism. Some accounts concur with the link between the boom and political-economic shifts in Brazil and Argentina, but essentially characterize these as instances of “institutional erosion” and “reform backsliding,” reflected in declining scores on World Bank Worldwide Governance Indicators (Wise and Chonn Ching 2018, 10). Such a framing effectively ignores the possibility that there was any purposive strategy behind the patterns of policy change seen in Argentina and Brazil over the period, beyond mere graft and populist expediency.4
It is also the case that many of the indicators on which several of the Worldwide Governance Indicators are based present particular forms of political and economic policy—the absence of price controls or subsidies, for example—as though they were apolitical matters of best practice. Further, they rely on subjective judgments along these lines. For instance, the indicator for regulatory quality draws in part on the Institute for Management and Development’s World Competitiveness ranking, which asks businesspeople to score countries on the extent to which labor regulations impede business and corporate taxes discourage entrepreneurship (World Bank Group n.d.). That the Worldwide Governance Indicators seem to show Argentina and Brazil as both failing in governance terms, then, is in fact consistent with an argument that both were breaking with neoliberalism during this period. Here, I do not begin from the assumption that such breaks are inherently negative but instead aim to understand specifics of the two countries’ trajectories, in a manner that parses commodity boom–era changes as more than just a linear reversing away from reform.
Argentina, emerging from International Monetary Fund tutelage, economic depression, and then debt default in 2002, used a subsequent currency devaluation to kick-start an export revival. This move happened to coincide with the beginnings of a boom in Chinese demand for soy (including soybeans, meal, and oil), Argentina’s main export. Profitability levels in the Argentinian soy sector were thus massively enhanced, resulting in rising foreign currency earnings and also opening space for the government to access soy revenues directly by imposing substantial export taxes (an effort that would eventually meet with pushback from agro-exporter groups). Taken together, these new current account and fiscal inflows allowed the Argentinian governments of Nestor Kirchner and then Cristina Fernandez de Kirchner to avoid any reengagement with the IMF and global capital markets, eliminating impediments to the implementation of neodevelopmentalist policies.
Neoliberalization in Brazil had not advanced as far as in many of its neighbors prior to the boom, and the country had hung on to substantial portions of its industrial base throughout. Some elements of developmentalist thought and policy were also preserved in the economic bureaucracy (Hochstetler and Montero 2013). The neoliberal turn therefore contained elements of continuity from the previous era, but the shift toward neodevelopmentalism during the commodity boom years was also rather more gradual than that seen in Argentina. Persistent neoliberal influence in policy-making circles meant a continued focus on inflation targeting. The principal tool employed to manage inflation—an overvalued currency—ran against neodevelopmentalist prescriptions and reduced the benefits accruing to Brazil from the boom in prices and demand for its resource exports (soybeans, iron ore, and oil, among others).
Nevertheless, the much-improved external position for the country, which developed during Luiz Inácio Lula da Silva’s first term, beginning in 2003, allowed the government to clear its debts with the IMF and thus to end the fund’s influence on policy formation by 2005. Though Lula would largely continue to maintain an orthodox macroeconomic framework (with some partial departures under his successor, Dilma Rousseff), this should not obscure the significance of the developmentalist industrial policy implemented after 2006, encompassing directed credit, production subsidies, and a revival of public infrastructure spending (Weisbrot, Johnston, and Lefebvre 2014; Doctor 2015; Kröger 2012). Without a devaluation-induced boost to export competitiveness, it was the China-driven boom in Brazil’s resource exports that both insulated the country from the need to listen to IFI advice and paid for its neodevelopmentalist strategy.
If the conditions of the resource boom opened the space for the two states to pursue their variations upon the neodevelopmentalist project, the question remains why these paths were taken, as opposed to another form of post-neoliberal turn or even the maintenance of a neoliberal orientation. At the beginning of the commodity boom, maintaining a neoliberal orientation was certainly a possibility in both cases. On the eve of the 2002 elections in Brazil, Lula had pledged support, in writing, for a neoliberal agenda. Even in Argentina, where anger with the socioeconomic impact of an IMF-sponsored austerity program had led to government ouster and default, two of the three leading (though eventually losing) candidates in the 2003 election advocated a free market program.5 As with the other cases across the typology, I ascribe the fact of Brazil and Argentina’s departures from neoliberalism, as well as their particular form, to domestic factors, particularly the changing relations among class fractions under commodity boom conditions.
The 2000s in Argentina and Brazil saw a resurgence of the political power of a domestic productive bourgeoisie, primarily at the expense of foreign transnational and domestic finance capital, though via somewhat different routes in each case. The neodevelopmentalist stress on support for domestic producers does, of course, correspond with this shift. In ways that hark back to the institutional arrangements of the Getúlio Vargas and Juan Perón eras, class compromise and corporatism led to formal labor taking a subordinate but relatively favored role in the new ruling coalition.
Neodevelopmentalism displays certain obvious similarities with neoliberalism. First, as policy paradigms, both have drawn upon distinct intellectual programs grown from fundamental beliefs about how individuals, markets, and states interact and function within capitalism. This makes neodevelopmentalism unique among my post-neoliberal regime types as being substantially based on an existing canon of literature and a fully formed, off-the-shelf theoretical model. In Argentina and Brazil, these ideas and assumptions were picked up, elaborated, and partially implemented by governments, serving as suitable vehicles for particular kinds of development projects. Although a simple translation of neodevelopmentalist principles into policy did not take hold in either case, it is still instructive to begin by briefly surveying neodevelopmentalism as an intellectual program.
The most prominent research surrounding neodevelopmentalism is primarily Brazilian, concentrated especially within the Getulio Vargas Foundation in São Paolo and the State University of Rio de Janeiro. There are clear similarities between the lines of thought found in these Brazilian schools and a wider reinvigoration of the debate over the proper role of the state in development. This debate has included a renewed focus on industrial policy (Chang 2002; Wade 2010, 2012), growing interest in the application of developmental state concepts in new contexts (de Waal 2013; Ashman, Fine, and Newman 2010), and, in mainstream circles, the “new structural economics” promoted by, among others, Justin Lin (2011, 2012). While there is insufficient scope within the present research to do justice to any of these arguments, it is worth noting that cross-fertilization between Brazilian authors and broader trends in developmentalism has certainly occurred. The culmination of this exchange is embodied in the 2010 manifesto entitled “Ten Theses on New Developmentalism,” composed in São Paolo and signed by a host of prominent scholars from around the world (Bresser-Pereira 2012).
However, building on Latin American developmental experiences, and those of larger, earlier urbanizing and industrializing states of the region in particular, Brazilian neodevelopmentalist thought has a dynamic of its own.6 Ebenau and Liberatore (2013) give a useful and concise synthesis of the platform, which encompasses a capable bureaucracy with relative policy and fiscal independence; state support for firms in improving competitiveness and pushing toward internationalization; a broad concept of macroeconomic stability, encompassing “competitiveness,” essentially meaning the maintenance of an exchange rate conducive to export growth; a concern for inclusivity in development, in the sense of ensuring relatively equitable distribution of gains secured as competitiveness improves; and a major stress on neodevelopmentalism as a national(ist) project, with broad support needed from across domestic society.
Perhaps the most important and obvious departure from neoliberalism here is a de-emphasis on inflation in favor of a more encompassing idea of macroeconomic stability to the advantage of productive rather than finance capital (Morais and Saad-Filho 2011). Though inflation is not ignored, maintaining a competitive and stable exchange rate is more highly valued, along with great concern for the state of the balance of payments. Inherited from neoliberalism is a relatively conservative approach to fiscal policy: though leeway for infrastructure and some social spending is expected, a primary surplus is considered necessary for the effective functioning of the model. The design of social programs associated with neodevelopmentalism has come to mesh with second-generation World Bank models, mostly a system of conditional cash transfers, which tend to cost a fraction of traditional welfare payments and thus are helpful in maintaining fiscal discipline while pushing often rather large numbers of recipients above the absolute poverty line.
At the same time, increased competitiveness (stemming from government support and macroeconomic policy) is meant to create a virtuous circle of formal job growth, pulling workers out of the less productive informal sector and further increasing competitiveness. Both sectoral and firm-specific industrial policy is advocated, particularly with a view to technological upgrading, though the extent to which this is meant to conform to or defy existing comparative advantage is sometimes unclear. Ebenau and Liberatore’s (2013) final point, regarding the building of a broad consensus around a common national development project, echoes the structuralist era and certainly represents an appeal to nationalism as a reaction against the transnationalization of the neoliberal era (with particular resonance in Argentina) (see also Bresser-Pereira 2015). Nevertheless, this nationalism clearly has been informed by oft-made comparisons between pre-neoliberal development strategies, contrasting successful export-oriented industrialization programs (such as that of South Korea) with the more ambivalent ISI experiences typical of Latin America (see, for example, Kohli 2004, chap. 4; Gereffi 1989; Jenkins 1991). For this reason, in neodevelopmentalism, the import substitution of the old structuralism is transformed, particularly in the context of a liberalized global economy, into a kind of mercantilism, led by the national champions of domestic productive capital, at home and abroad. As in former experiences of structuralism, particularly in Brazil and Argentina, the mass political base for this project is sustained by wage policies that favor the urban formal working class, allowing for class compromise premised on “growth with equity” as well as driving effective domestic demand (Boito and Saad-Filho 2016).
I include Argentina and Brazil in the typology of resource exporters partly on the basis of both countries’ important soybean sector. Soy is, of course, not an obvious product to bracket with the minerals, fuels, and metals otherwise examined in this research, and I do not count any other agricultural goods as natural resource exports for the purposes of the typology. Since the beginning of the commodity boom, however, soy has exhibited certain characteristics that merit its consideration alongside nonrenewable natural resource exports as a possible source of leverage for post-neoliberal turns. Most importantly, the global soy market has been affected by Chinese demand to an extent which is unique among agricultural products and is far more reminiscent of the observed trend for metals such as copper. Figure 5.1 shows the rapid growth in Chinese import demand for soybeans over the 2000–2016 period, particularly coinciding with the boom in prices from 2006 on.
Although soy is consumed as a human foodstuff in China, the vast majority of import demand growth seen since the early 2000s stems from meat consumption trends, which have risen in tandem with Chinese incomes. Changes in livestock-raising techniques, beginning in the 1980s, meant an increasing use of soy as an animal feedstock. This, combined with a shift of Chinese farmers away from soy toward higher-yield corn, has left an increasing shortfall in domestic soy supply as more chicken, beef, and especially pork is added to Chinese diets (Hansen and Gale 2014). By contrast, demand for major grains such as rice has been largely met through domestic supply in recent years.7
Figure 5.1 China compared to the rest of the world: soybean imports and soybean index prices, 2000–2016. Calculated from Chatham House Resourcetrade.earth database and World Bank, Commodity Price Data—Pink Sheet Data.
On the producer side, since the 1990s, shifts in the soy industries of Brazil and Argentina (the second- and third-largest producers after the United States) make these countries’ sectors particularly comparable to natural resource extraction in other cases. The adoption of genetic modification and biotechnology in seeds and fertilizers, no-tillage production techniques, and the use of satellite data have given the Brazilian and Argentinian soy industries a capital- and technology-intensive character that is out of step with the majority of the labor-intensive, low-tech agriculture in the global South (McFarlane and O’Connor 2014).
Growing economies of scale have seen an increasing concentration of capital and ownership in both countries. Large Northern transnational corporations, such as Cargill and Bunge, have joined domestic groups like Maggi (in Brazil) and Lucci (in Argentina) in displacing smaller farmers, with the result that the top 3 percent of producers own 50 percent of the land planted with soy in Argentina (GRAIN 2013). (In Brazil, the top 5 percent of producers own 59 percent of the land planted with soy.) Rather than dealing with a large number of household or small-scale producers, then, the Argentinian and Brazilian governments are faced with a small number of dominant large producers—similar to, though less extreme than, the enclave nature of a typical extractive industry.8 Combined with the scale of price and demand effects from China, this allowed the Argentinian state, in particular, to effectively act in a rentier capacity, appropriating and allocating a share of the soy surplus in a manner that mirrored the behavior of other governments with regard to extractive industry rents. Although the upper limit to the state’s take from soy appears to be relatively smaller than that seen in, say, equivalent oil or gas sectors, Argentina’s export taxes yielded 20 to 25 percent of tax receipts between 2008 and 2011, with soy accounting for around two-thirds of the total (Richardson 2012, 27, 74).
Successively higher levels of soy export taxes were a key source of the greater revenue streams that allowed increased subsidies and social spending in Argentina after 2003. In 2010, for example, 10 percent of spending was allocated to energy and transport subsidies, which had the dual effect of lowering domestic production costs and supporting consumption (Bril-Mascarenhas and Post 2015). A portion of the soy export tax was, in fact, specifically allocated to food producers selling on the domestic market, again in an effort to free up wages for consumption, as well as to dampen inflationary pressure (Richardson 2009).
Brazilian governments generally eschewed these tactics, instead seeking to maximize soy production, minimize costs, and seek market access through diplomatic initiatives at the WTO (see, for instance, Financial Times 2013). Brazilian neodevelopmentalism did encompass state support of the agricultural sector to some extent, however, with $10 billion in farm support allocated in 2010 and a system of directed credit meant to encourage expansion and support smaller farmers (Korves 2013; Organisation for Economic Co-operation and Development 2015). Combined with new farming techniques and massive infrastructure expenditure, these measures enabled soy production to move beyond its original heartland in the South and Southeast regions and into the Central-West and even Amazonia (with the consequence of accelerating deforestation) (Garrett, Lambin, and Naylor 2013).
Brazil is unusual among those typology cases deemed to have departed from a neoliberal path. Outside the country’s oil industry, moves to directly capture commodity revenue through either state participation or upping tax and royalty payments—which tended to provide the most fundamental first step toward realizing post-neoliberal ambitions elsewhere—were entirely absent. As a result, both import and export taxes, across all sectors, accounted for less than 5 percent of Brazilian government revenue (Kaplan 2014).
In Brazil (and Argentina), however, the effect of Chinese demand on global markets for their resource exports had another important effect. External commodity boom conditions beginning in 2003, magnified via previous devaluations in both Brazil (in 1999) and Argentina (in 2002), stimulated resource export volumes and values, significantly adding to hard currency earnings. Coming immediately after the 2002 crisis in Argentina (and its major spillover effects on Brazilian creditworthiness), the resource boom’s overwhelmingly positive impact on the health of the current account supplied the requisite room for maneuver in breaking with neoliberal policies, even if this manifested somewhat differently in the two cases. Figure 5.2 gives some indication of the scale of this change, with export purchasing power in both states following the familiar path of commodity market movements—substantial increases beginning in 2002–2003, continuing until a downturn with the global financial crisis in 2008, but then rebounding more strongly and quickly than would be plausible if driven by still-stagnating Northern markets.
Figure 5.2 Brazil and Argentina export purchasing power index, 1995–2013.
Source: United Nations Conference on Trade and Development, UNCTADStat data center.
As a result of this strong export performance, Brazil moved from a current account deficit equivalent to 100 percent of exports in 1999 into surplus by late 2003 (Serrano and Summa 2011). Along with substantial levels of capital inflows (partially a consequence of high interest rates), this external turnaround was a prerequisite for Lula’s decision to clear all of Brazil’s debts to the IMF in 2005. In freeing Brazil from formal policy conditionality, this move opened the way for the turn toward neodevelopmentalism produced by the political realignments that accompanied Lula’s reelection in 2006 (Loureiro and Saad-Filho 2019).
Even during Lula’s second term, as well as under his Partido dos Trabalhadores (Workers’ Party, or PT) successor, Rousseff, Brazil’s macroeconomic orientation remained for the most part orthodox. An appreciating currency seems likely to have been at least partially the result of the boom in iron ore and soybean exports, producing “Dutch disease” effects, which undermined any efforts at development of more technologically sophisticated industry (Jenkins 2012). Persistent overvaluation of the real chimed with the PT governments’ continuing preoccupation with inflation, resulting in an absence of policy measures to tackle the problem.
For commodity export sectors, lack of devaluation after 1999, and thus relative lack of competitiveness, left no room for Argentinian-style export taxes on the soy sector. Nevertheless, the impact of the commodity boom, in compensating for the overvalued real and driving export expansion in soy, iron ore, and other minerals, allowed for a fourfold increase in international reserves from 2004 to 2009 (International Monetary Fund n.d.). Brazil’s markedly improved solvency from the dark days of the 1999 currency crisis led to falling debt spreads and a decline in debt service requirements. The key role that the export boom played in this process is highlighted in figure 5.3, as debt service, both as a percentage of exports and of gross national income (GNI), continued to fall since the beginning of the boom in 2002–2003.
The PT governments, then, adopted a cautious set of policies that effectively ruled out the possibility of direct appropriation and distribution of large shares of resource export revenues, the mechanism which was the main wellspring of the ability to transcend neoliberal constraints in other cases. Instead, though, Brazil depended upon the commodity boom in order to simultaneously pursue two otherwise contradictory agendas: an orthodox neoliberal macro framework combined with neodevelopmentalist industrial and social policies. In 2002, Lula’s likely victory in the upcoming presidential elections precipitated a wave of anxiety both domestically and abroad, with concerns that the Workers’ Party candidate planned debt default and sweeping nationalizations (Mollo and Saad-Filho 2006; Anderson 2011). After a bout of capital flight, stock market turbulence, and currency depreciation, Lula made a written public commitment to continue with the neoliberal orientation of the Fernando Henrique Cardoso government and with IMF-mandated reforms, including central bank independence.
Figure 5.3 Brazil’s debt service, 2000–2011.
Source: World Bank, Commodity Price Data—Pink Sheet Data.
In 2006, by contrast, the fruits of an export-led (and particularly commodity-led) recovery—rising reserves, a positive current account balance, and improved tax receipts—could be parlayed into a more ambitious domestic developmental agenda. Even at this point, elements inside and outside the government pushed for a policy of generating ever-higher primary surpluses, with the goal of aggressively reducing debt-to-GDP ratios further (Serrano and Summa 2011). Nevertheless, since IMF obligations could no longer magnify the force of these voices, Lula now possessed the leeway to embark upon a neodevelopmentalist agenda. Increased social spending, successive minimum wage hikes, public investment initiatives, and a doubling of lending from development bank Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Economic and Social Development, or BNDES), to 4 percent of GDP, helped the domestic market take over as the main economic engine. GDP grew by an average of 4.5 percent per year during Lula’s second term, despite the impact of the global financial crisis (World Bank n.d.; Doctor 2015).
In comparison to Argentina’s policies over the same period, Brazil’s record suggests that the PT’s continuing preoccupation with inflation (and maintenance of an overvalued real through high interest rates) may have closed off avenues for revenue and export maximization, which otherwise might have allowed for a much more comprehensive realization of neodevelopmentalist goals. By the time interest rates were tentatively reduced under Rousseff, the boat had perhaps been missed on these opportunities, as I discuss further in the following section. In Argentina, pursuit of export competitiveness via an undervalued peso was, initially at least, more survival strategy than development model, given the country’s isolation from capital markets following the 2002 debt default. However, given devaluation and advances in productivity, it quickly became apparent that, under commodity boom conditions, soy could be taxed at rates akin to rates in natural resource industries, without excessively damaging profitability or competitiveness. The fiscal benefits to the government may have been proportionately smaller than those accruing to a typical oil exporter, but, when seen in context, this should not lead to the conclusion reached in some quarters (for example, Weisbrot et al. 2011) that the importance of soy for Argentina’s economic recovery has been exaggerated.
Export tax revenues from soybeans and their products, in fact, appear to have been more crucial than their simple weight in fiscal accounts would suggest. Indeed, they were a key source of the subsidies that helped to revive the domestic market following devaluation and drive a consumer boom (Richardson 2009; Kaplan 2014). This redistribution from exporters to domestic producers was the cornerstone of the evolving Argentinian economic model under the Kirchners. These also are exactly the kinds of policies that would not have been permissible within an IMF program. The independent fiscal resource provided by soy exports, therefore, played an important role in deferring the need for a postdefault rapprochement with creditors, which would have threatened the government’s ability to pursue its particular variation on neodevelopmentalism. Had the commodity boom not begun shortly following default and devaluation, then, it seems extremely unlikely that anything like the policy orientation initiated under Nestor Kirchner and deepened under Cristina Fernandez de Kirchner could have been constructed.
Brazil’s turn toward neodevelopmentalism during the commodity boom essentially entailed a gradual shift in influence at the level of policy, in favor of more nationally inclined segments of capital, along with their allies in popular sectors and within the arms of the state. Brazil never experienced a process of neoliberalization as extreme as that seen in most of its neighbors, and it inherited a rather ragged but still substantive legacy from the ISI era in the form of a significant industrial base, a relatively large number of state-owned enterprises, and a persistence of developmentalist thinking among elements of the bureaucracy (Hochstetler and Montero 2013).
Over the commodity boom years, large domestic capital can be broadly categorized into two (partially overlapping and partially contingent) blocs. A more internationally integrated fraction, consisting of much of the services sector (especially finance), media, and some manufacturing, tended to favor a neoliberal policy orientation, which in the Brazilian context meant inflation targeting, high interest rates, free capital movement, a floating exchange rate (with an overvalued currency), privatizations, and central bank independence (Morais and Saad-Filho 2011). Another fraction was made up of state-owned enterprises, elements of manufacturing (especially those with a domestic base of accumulation, such as in food processing), construction, and agribusiness. These sectors tended to support more interventionist measures via active industrial policies as well as, in many cases, the extension of domestic demand through wage increases (Loureiro and Saad-Filho 2019; Bresser-Pereira 2015).
Boom conditions essentially allowed for a compromise between these two blocs. For example, high interest rates (on average, the fifth highest in the world over the period 2003 to 2015, according to Weisbrot et al. [2017]) combined with a floating exchange rate targeted inflation while resulting in an overvalued real. Meanwhile, negative effects of such a regime on investment and competitiveness could be compensated for, to some extent, by the extension of cheap credit via BNDES, subsidies, industrial policy, and wage hikes. In fiscal policy, too, tax revenue from the export boom helped the Lula presidency (2002–2010) to maintain a primary surplus while increasing public spending. Lula and his successor, Rousseff, successively deepened the developmentalist elements of the policy mix, in an effort to wring faster growth from the economy, but Rousseff would eventually run into the limits of this strategy and see her political coalition collapse along with it, as the commodity boom petered out.
Lula’s first administration (2002–2006) is perhaps better characterized as fundamentally neoliberal in orientation, rather than neodevelopmentalist, even if some important changes during this period laid the groundwork for more full-fledged reorientation, from 2006 on. Nevertheless, Lula’s first government essentially continued in the same vein as his predecessor, Cardoso, with contractionary monetary and fiscal policies targeted primarily at price stability. While no new privatizations occurred, none of the previous sell-offs, such as the unpopular sale of mining giant Vale in the late 1990s, were reversed. Some rather pioneering social programs, such as Fome Zero (Zero Hunger) and Bolsa Familia (Family Allowance), did originate during this period, and these formed the flagship of the international promotion of Brazil as a potential developmental model in the rest of the global South, part of a campaign initially aimed at gaining a permanent UN Security Council seat (Muggah and Hamann 2012; Dauvergne and Farias 2012).
Lula’s perhaps reluctant embrace of neoliberalism had, in fact, occurred in several stages. Following each of his three unsuccessful presidential campaigns (in 1989, 1994, and 1998), Lula successively dropped numerous elements of what originally had been a rather radical socialist platform, in an effort to broaden his electoral appeal. Even so, the 2002 campaign, with Lula emerging as the front-runner, was widely seen as a referendum on Cardoso’s unpopular experiment with neoliberalism (Hunter and Power 2005). Although elements of the previous ISI model had been dismantled during the 1980s, Cardoso’s 1994 Real Plan was the first time that a comprehensive set of neoliberal-inspired policies had been applied in Brazil (Mollo and Saad-Filho 2006). The program contained the usual roll call of measures, including liberalization of trade and of markets for capital and labor, a slew of privatizations, and shrinking of the state apparatus. Hyperinflation was successfully curbed, but at the expense of an overvalued currency (pegged to the U.S. dollar), and interest rates remained above 30 percent from 1995 to 1999 (Amann and Baer 2000). This combination was initially relatively successful, though it depended upon massive capital inflows to compensate for the persistent current account deficits produced by the new exchange rate.
As the enthusiasm felt among capital markets for developing economies soured in the wake of the 1997 Asian crisis, the real came under sustained pressure, and devaluation ensued in 1999, though not before the agreement with the IMF of a $40 billion structural adjustment package (Ferrari-Filho and De Paula 2003). A postdevaluation revival was short-lived, as Brazil was caught up in the fallout from a not-dissimilar crisis in neighboring Argentina. At this point, the economic record of Cardoso’s plan seemed mixed at best, certainly when placed alongside the austerity measures, which had been an integral part of the strategy and which only intensified as the government sought to placate nervous creditors.
Given this backdrop, Lula, as the most prominent opposition candidate, seemed to be in a promising position in the run-up to the 2002 election. However, despite having substantially moderated his platform over the years, speculation was rife, particularly among a fiercely anti-PT media, that Lula would suspend public debt repayments if elected. Both the Brazilian stock market and international investors responded poorly to the prospect of a PT victory, putting Lula under pressure to affirm his commitment to repaying creditors and respecting agreements with the IFIs.9 The resulting “letter to the Brazilian people,” in which Lula acceded to the demands, stands as something of an irony: a candidate who looked likely to win in large part because of the unpopularity of his predecessor’s economic policies was now required to endorse exactly these measures.
The incident serves as a useful illustration of the difficulties of successfully adopting and implementing a policy platform running counter to neoliberal orthodoxy prior to the effects of the commodity boom being felt. As described previously, it was only after the boom revived export markets, from 2004 on, that Brazil found itself with a sufficiently strong external position for post-neoliberal divergence to become feasible. The decision by Lula (and continued by Rousseff) to take this path as it opened up, however, depended upon a domestic political realignment, which occurred over the course of the PT’s first term and came to a head with Lula’s reelection in 2006.
Lula’s acceptance of IMF terms and his enthusiasm for maintaining growing primary budget surpluses tended to alienate the traditional leftist base of the PT, which increasingly became attracted to the alternative paradigm offered by neodevelopmentalist ideas. In 2005, opposition parties, still suspicious of Lula, even given a degree of policy convergence, revealed a scandal involving cash for congressional votes in support of the PT (Boito and Berringer 2014). This was almost successful in toppling the government and did result in the resignation of several senior figures, including finance minister Antonio Palocci.
Eroding trust in a party that had always attempted to set itself apart from the pervasive corruption of Brazilian politics, the scandal left Lula relying for reelection upon segments of the population more likely to favor a neodevelopmentalist agenda. Principally, this meant new PT supporters, especially in the Northeast and peri-urban zones, who had benefited from conditional cash transfers (Hunter and Power 2007; Bresser-Pereira 2012), as well as nationally inclined segments of capital, who were as disappointed with the fruits of neoliberalism as Lula himself appeared to be and were seeking more governmental support. After paying off the total outstanding debt to the IMF in 2005—just as happened in Argentina—Lula won the 2006 election easily, reconfigured his administration by placing heterodox economists in key posts, and announced a shift toward a policy of “national economic development.”
Many important interventions were undertaken during this second term, which departed from neoliberal orthodoxy and which were continued by Lula’s successor, Dilma Rousseff. Perhaps most ambitious of these was the Programa de Aceleração do Crescimento (Growth Acceleration Program, or PAC), a $236 billion package of public infrastructure investment, followed up with PAC II, under Rousseff, worth another $525 billion (Morais and Saad-Filho 2012). The state-owned BNDES was not new, having been created under Cardoso, a reminder of the continuing weight of developmentalist voices even during the Brazilian neoliberal era. Nevertheless, it came to prominence during Lula’s second term, when BNDES massively expanded its credit lines to the point that, by 2012, it was lending more annually than the World Bank (Doctor 2015; Cameron and Stanley 2017). This went some way to compensating for a lack of private investment as interest rates remained high.
The minimum wage was raised several times, helping to reintegrate organized labor into the PT coalition while simultaneously expanding domestic markets (Seidman 2010). Significant sections of informal labor were regularized and brought into the formal sphere, also entailing wage increases. Along with subsidizing national capital in the domestic sphere, a mix of support for state enterprises and encouragement of the concentration of private capital, combined with Brasilia’s diplomatic backing, led to the emergence of transnationalized Brazilian “national champions” such as Petrobras (oil), Odebrecht (construction), Gerdau (steel), and AmBev (beverages).10 Meanwhile, conditional cash transfers were hugely expanded, with Bolsa Familia reaching 11.4 million households by 2010 (Morais and Saad-Filho 2012). While overvaluation of the real under both Lula and Rousseff never presented the same advantages to commodity exporters as devaluation had in Argentina, neither did PT governments ever attempt to impose the kinds of export taxes seen in Brazil’s southern neighbor, and Lula’s facilitation of an expanding agricultural frontier allowed for a continuing concentration of landownership in the hands of large agribusiness (Anderson 2011).
Rousseff, Lula’s former chief of staff and handpicked successor, entered office in 2011, committed to a more ambitious developmentalist program. The next two years brought a reduction in interest rates, from 12.5 percent to a record low of 7.5 percent by the beginning of 2013 (prompting depreciation of the real), tax rebates for industry, a quadrupling of BNDES outlays, public–private partnership opportunities offered on generous terms, and price controls on energy (Singer 2017). These measures were so strongly tied to the interests of industrialists that they were often referred to as the “FIESP agenda,” after the Federação das Indústrias do Estado de São Paulo (Industrial Federation of the State of Sao Paulo). Nevertheless, it was during this period that “despite the evident convergence between the government’s program and the interests of the industrial sector, the industrialists … gradually moved away from Rousseff, and slowly and steadily aligned with the rent-seeking opposition bloc. It was as if, with every gesture made by the government to favor them, there grew among the industrialists the vision that it was all about ‘interventionism’ ” (Singer 2017, 361).
Disappointing results of Rousseff’s agenda in the face of a worsening external environment likely helped to push key segments of capital away from the PT and back behind a return to more conventional neoliberalism. A wave of mass protests began in 2013, triggered initially by increases in public transport prices but soon growing and tilting toward an anticorruption agenda fueled by the lava jato (car wash) scandal. Though lava jato implicated a range of businesspeople and senior figures from across the political landscape, media coverage, popular anger, and the efforts of prosecutors were especially directed toward the PT government, just as prices for key commodity exports started to plateau and then decline. Alhough Rousseff was reelected in 2014, she would be impeached and ousted from power two years later (on the basis of a relatively minor budget reporting offense) and replaced by an interim government committed to neoliberalization and redoubled austerity.
After unsuccessful heterodox experiments in the immediate postdictatorship era of the 1980s, Carlos Menem, a populist right-wing Peronist, was elected in 1989, under conditions of hyperinflation, and Argentina adopted an ambitious and radical neoliberal restructuring program throughout the 1990s (Riggirozzi 2009, 94–96; Azpiazu, Basualdo, and Nochteff 1998). This included sweeping privatizations (including of the pensions system), unilateral liberalization of trade and capital movements, and the flexibilization of labor markets. A key variant on the standard structural adjustment package negotiated with the IMF was the convertibility plan, which stopped just short of dollarization by pegging the peso to the U.S. dollar at 1:1 and mandating an 80 percent reserve requirement in U.S. dollars. The plan met its primary goal by reducing inflation from 200 percent to 5 percent in two years, and GDP growth in the Menem years was robust, save for one year of recession, in 1995.
With an artificially strong peso, cheap imports of consumer goods flooded in, leading to the closure of many small and medium-size domestic companies. Large enterprises, however, tended to benefit enormously in terms of productivity, a result of new imported capital goods and falling labor costs as a result of flexibilization (Feliz 2012). This is important in the sense that, although the 1990s certainly saw an increasing penetration of foreign capital (both productive and financial) in the Argentinian economy, the domestic productive sphere, even if now relatively subordinate, had in nominal terms increased its unity and capacity, allowing it to begin to play a much more influential role when conjunctural circumstances swung in its favor during the early 2000s.11
One of the predictable impacts of neoliberalization in Argentina was a huge increase in unemployment. Privatized and newly concentrated industries laid off workers, adding to the large numbers left jobless as their employers were forced out by cheap imports and larger firms. Compounding this, decentralization had shifted to the provinces the burden of many aspects of public provision of health, education, and social programs, with this restructuring resulting in the shedding of two hundred thousand jobs (Grugel and Riggirozzi 2007). Repeated rioting had been the consequence, even from the early years of menemismo, with this unrest eventually solidifying into the piquetero movement of the unemployed, which organized a sustained bout of social conflict over eight months of 1997. The piqueteros had become powerful actors by the time of the 2001 debt default, meaning that postcrisis strategies had to work at containing or co-opting the more radical demands for change present in some of the various organizations falling under this broad label (Dinerstein 2003).
The Mexican crisis of 1994 had already shown the fragility of Argentinian neoliberalism before the impact of the linked East Asian, Russian, and Brazilian crises, between 1997 and 1999, signaled the beginning of the end. Menem’s fiscal policies were hardly expansive, as is occasionally claimed (Mussa 2002). In fact, Argentina ran a primary surplus in every year of the 1990s. Nevertheless, in conditions of apparent macroeconomic stability under a neoliberal regime, Paris Club investors and IFIs were eager to sustain an increasing spiral of debt, engendered by an overvalued peso, the racking up of ever-wider trade deficits, and the lack of policy instruments available to combat successive crisis-driven rounds of capital flight. When Brazil, Argentina’s biggest export market, devalued the real in 1999, Argentinian exports became even less competitive and the convertibility regime appeared increasingly unsustainable.
Unsurprisingly, the 1999 elections saw victory for the opposition candidate, Fernando de la Rua. Despite promising reforms, de la Rua was unable to resist policy pressure, principally from the IMF, which had funneled substantial sums into propping up the convertibility regime and would not at this stage countenance its abandonment. By 2001, recession had turned to depression as de la Rua cut public sector wages by 13 percent as part of a “zero deficit plan.” In November of the same year, the IMF abandoned the government, which at this point imposed a daily cash withdrawal limit (the corralito) as it worried about runs on the banks. Unrest had already been widespread, especially among the unemployed and newly impoverished, but this restriction brought the middle classes out to the streets en masse, prompting the declaration of a state of emergency, which ended with thirty-six killed by the police, including seven children, and de la Rua then fleeing in the presidential helicopter. The next two weeks saw a succession of five different presidents, until eventually the leader of the National Chamber of Deputies, Eduardo Duhalde, was able to restore a semblance of order (Munck 2001, 2003; MacEwan 2002).
In contrast to the gradual change seen in Brazil, Argentina’s debt default signaled a sudden loss of power for financial capital—both domestic and transnational—within the domestic sphere, meaning that these groups had little influence on how policy evolved in the postdefault environment. In the immediate aftermath, caretaker president Duhalde (a Peronist) enacted a series of emergency measures designed to contain the social impact of the economic catastrophe and to limit political instability. Though seemingly rather ad hoc and designed to address temporary, specific problems, these policies would form the basis for a rather more programmatic neodevelopmentalist orientation under the Kirchners.
The transitional period under Duhalde is thus of great significance as the genesis of a new political coalition that would set the terms of Argentina’s political-economic path for the next decade or more. Initially important were a heterodox group of economists from the University of Buenos Aires, the Grupo Fenix, together with the Grupo Productivo, a lobbying organization of powerful industrialists set up in the 1990s to influence the privatization process (now thoroughly disillusioned with the neoliberal creed), and the piquetero movements, which carried the threat of widespread unrest (Riggirozzi 2009 103; Gak 2011). All agreed with Duhalde that resolving the crisis required rebooting domestic production—far above any need to placate investors and creditors, whose voices were at this point greatly diminished.
Absolutely key to all subsequent policy was the abandonment of convertibility, in January 2002. The newly floating peso settled quickly to a rate of approximately 3:1 against the U.S. dollar. Default was declared on a large proportion of the public debt and much private domestic debt converted to the public sphere. “Pesification” of dollar-denominated paper at the old 1:1 rate meant 66 percent haircuts for creditors, and this, together with partial default and the state’s assumption of private debt, significantly reduced the power of financial capital in Argentina, at the cost of access to international credit markets.
Meanwhile, devaluation brought both a slump in imports (and, initially, in consumption in general) and the emergence of newly competitive exports, setting up conditions for renewed accumulation as all sectors entered trade surplus. This formed the hinge upon which the fundamental reorientation of the Argentinian economy, from debt-driven to export-driven, turned. It seems doubtful, though, that the ensuing loosening of the balance of payments constraint would have been sustained without the commodities boom of the 2000s. Certainly, the neodevelopmentalist project, which was essentially paid for with commodity export rents, seems unlikely to have emerged without the boom.
This becomes obvious upon considering the evolving role of soy in both economic recovery and policy reorientation. Following devaluation, rents from the export commodity sector were leveraged as a major source of revenues with which to maintain fiscal solvency. With these industries now highly competitive internationally (soy being the largest and most profitable), Duhalde was able to impose a 10 percent export tax without threatening producer profitability (Fairfield 2011). Though ostensibly a temporary emergency measure, this taxing of, essentially, elements of the rural bourgeoisie by a Peronist president recreated a central historical fault line in the Argentinian political economy, one that had endured from Perón’s first administration up until the return of democracy in 1983 (Richardson 2009). Here, as in O’Donnell’s (1978) classic analysis, an urban-populist coalition of workers and national bourgeoisie, joined by transnationally oriented capital, backs a government that restricts exports of agricultural goods to the detriment of the large Pampean landowners. These goods would have been mostly beef and wheat, both classified as wage goods, owing to the substantial share of workers’ incomes taken up by their consumption. By restricting exports, increasing domestic supply, and depressing prices, real wages were effectively increased while nominal wages were contained, serving the interests of both workers and industrialists.
Generally, such an arrangement would eventually run into a balance of payments crisis, given lost export earnings, at which point a new grouping of the rural landlords and export-oriented capital would take over, devaluing the currency, cutting back on support for the domestic market, and moving strongly toward the maximization of agricultural production for export. When this resulted in stagflation, a new crisis would ensue, and groups resembling the first coalition would resume power.
In Richardson’s (2009) view, the rise of soy as a monocrop over the 1990s and 2000s, to a large extent displacing wheat and beef production, allowed a reconfigured populist coalition to break the cycle, in the early 2000s. Very little soy is consumed domestically in Argentina; therefore, provided the sector remains profitable, it is possible to impose export taxes (known as retenciones) not with the goal of reducing exports but to directly capture a portion of the surplus for the state, without harming export earnings, thus avoiding the usual balance of payments constraint.12 A portion of the retenciones could then be redeployed into production and consumption subsidies, with outcomes analogous to the earlier grain and meat export restrictions, effectively boosting real wages while reducing pressure on employers to raise nominal wage levels. Soaring Chinese demand and ever-increasing soy prices gave Duhalde’s successors great leeway to up the level of the retenciones without threatening the industry’s profitability, allowing for the redistributive arrangement to continue and expand in scope.
With the election of Nestor Kirchner, in 2003, the populist coalition solidified and Duhalde’s emergency taxes became permanent fixtures, repeatedly increased as exporters’ profits rose—to 20 percent in 2003, and twice in 2007, to 27.5 percent and then to 35 percent, as the most intensive phase of the boom kicked in.13 At first glance, the overall inability of large agribusiness to resist these measures is surprising, given their enduring centrality to the Argentinian economy and the growth of the sector across the decade. Fairfield (2011) convincingly argues, though, that the rural bourgeoisie lacked both the instrumental and the structural power to substantially influence government under the Kirchners. Rural exporters had few if any ties to government and had in fact been relatively isolated from politics even under Menem and de la Rua. Compounding this was a lack of unity and homogeneity within the sector, which was divided into four representative associations based on size of holding. Structurally, and perhaps counterintuitively, Argentinian agribusiness was fatally weakened by its continued ability to reap often record profits in spite of repeated tax increases, given the devalued peso14 and high international prices; policy makers had few reasons to believe that further taxes might threaten investment levels, whether domestic or transnational.15
In spite of benefiting greatly from devaluation, Argentinian agribusiness resented what they correctly saw as redistribution from the rural export-oriented motor of the economy to the government’s urban constituencies under kirchnerismo. This is true in several senses, to the extent that this process really represents the foundation stone upon which the Argentinian form of neodevelopmentalism was built. Export orientation and the taxing of agro-industrial sectors provided the main source of foreign exchange; allowed for sustained primary surpluses in spite of expanding spending; funded investment, subsidies, and social programs; and facilitated management of the exchange rate.
One such piece of the neodevelopmentalist project—and, like export taxes, one which had its genesis in the emergency measures of 2002—was post-neoliberal social policy. Concerned by the militancy of some piquetero groups in conditions of double-digit negative GDP growth and continuing social instability, Duhalde created the Plan Jefes y Jefas de Hogares Desempleados (Unemployed Heads of Household Plan, or PJJHD) (Feliz 2012; Dinerstein et al. 2008). This provided an income transfer of $40 a month, on the condition that the beneficiary engage in some kind of community work, such as small-scale public works or artisanal food production.16 The complementary Plan Manos a la Obra (Hands to Work Plan) provided access to the equipment necessary for the PJJHD schemes.
While these schemes to some extent undoubtedly descended into clientelism, with the unemployed often essentially working for local politicians in exchange for a stipend, the goal of the PJJHD was seemingly simply to draw the sting from the movements of the unemployed.17 This was successful in the sense of temporarily diffusing some of the worst unrest, though Duhalde was in fact forced to call new elections early, after the shooting of two piquetero protesters by police during a protest in June 2003. Just as Duhalde’s emergency economic policies had, without any great strategic intent, shaped the conditions under which capital would come to be reintegrated into the emerging neodevelopmentalist regime, so too had Duhalde’s social interventions set the tone for a Nestor Kirchner’s neocorporatist approach to labor and social policy in the subsequent years.
The PJJHD was gradually replaced by two schemes, the Plan Familias Para la Inclusión Social (Family Social Inclusion Plan) and the Plan de Capacitación y Empleo (Training and Employment Plan). Despite the declining participation of the World Bank in funding the programs, a post–Washington Consensus influence is obvious, particularly for the first of the two (Feliz 2012; Wylde 2011). Plan Familias, designed for those unable to work, includes the kinds of stipulations common to most conditional cash transfer programs—medical checkups and regular school attendance for dependents. The Training and Employment Plan, in contrast, required attendance at training programs and evidence that the recipient was searching for work. More important in containing the social threat posed by the unemployed (combined with stimulating jobs growth) was the transformation of the Hands to Work Plan into new schemes meant to address inadequate housing and utility provision, under which beneficiaries would work as cheap construction labor, with the government providing tools and building materials. Workers were required to form cooperatives to secure these supplies, channeling groups of potentially disruptive unemployed into bureaucratic channels, where local authorities could favor those groups and individuals that proved more pliable (Feliz 2012).
With respect to formal labor, both Kirchners deployed a classically corporatist–Peronist strategy, similar in orientation to their social policy. Formal workers, the core base of popular support for the government, saw benefits, but they were increasingly demobilized and directed through bureaucratic channels to access these benefits. Nevertheless, concessions to influential private sector unions such as the Confederación General de Trabajo (General Confederation of Labor), led by the powerful truckers’ union, saw considerable increases in both minimum and real average wages (Cook and Bazler 2013).18 Much of Menem’s flexibilization package was repealed, and a return to collective bargaining allowed advancements for labor while largely removing the threat of radicalism and unrest. In dollar terms, however, wages remained low, facilitating the continuing profitability of even structurally uncompetitive firms (particularly manufacturers). Informal workers arguably did better than under the original Peronist coalitions, given the new provision of social programs, though workers’ pay in the public sector rose consistently slower than inflation, a consequence of the priority placed on the need to maintain a primary budget surplus, at least under Nestor Kirchner.
This concern for primary surplus is very much in keeping with a neodevelopmentalist approach, in which a broad macroeconomic stability is prized above a concern with narrow monetary policy. In the Argentinian case, although the government was not attempting to win the approval of international credit markets—given that these were effectively closed off after the 2002 default—a primary fiscal surplus was necessary to permit the settling of the remaining debt on advantageous terms. This was a key policy priority and a source of political legitimacy for Nestor Kirchner, who had come to power mainly on a platform of rejection of the IMF and a promise of “serious capitalism,” in contrast to the “speculative capitalism” of the 1990s (Wylde 2011).
With the economy booming by 2005, and with a concurrent rise in international reserves, Nestor Kirchner was in a strong position vis-à-vis international creditors. He succeeded in securing a deal for payment of thirty-five cents on the dollar for most of the Paris Club debt and paid off all outstanding IMF debt, enabling Argentina to leave the fund, at least in de facto terms (Stiglitz 2006; Dieter 2006). While settling the IMF debt may have been of mostly symbolic importance, it is still the case that the commodity boom had provided a means for the economy to operate successfully, independently of transnational financial capital, allowing for the setting of a thoroughly non-neoliberal development strategy.19
Following devaluation, the main instrument of this strategy was the maintenance of a stable and competitive exchange rate. The stimulation this afforded to exports helped to build up international reserves, allowing for control of the exchange rate and, absent the possibility of deficit financing, providing a hedge against possible decreases in commodity prices. These factors, combined with the ability to tax export commodities heavily and thus allow for fiscal stability despite a relatively expansive stance, facilitated the macroeconomic stability sought by neodevelopmentalists, at least during the Nestor Kirchner administration. Moreover, in keeping with neodevelopmentalist doctrine, and unlike Brazil, interest rates were kept low in order to stimulate investment (Ebenau and Liberatore 2013).20
Against this backdrop, the government was able to roll out what amounted to an industrial policy, essentially consisting of a redistribution from the most profitable fraction of capital (agro-exporters) to the least (industrial manufacturing), further supporting the competitiveness of manufacturing, on top of the already hugely positive impact of the exchange rate regime. In contrast to Brazil, however, these interventions were less direct and explicit, meaning that they often have not been understood as industrial policy as such.21
Once again, some of these policies originated in immediate postcrisis measures, which were later adapted to more programmatic use under the Kirchners. For example, price controls on privatized (mostly foreign-owned) utilities and transport were initially meant to simply alleviate suffering and slow the inevitable round of postdevaluation inflation. Under Nestor Kirchner, however, these became instruments for the recuperation of domestic markets by freeing up income for consumption.22
While it was by no means as ambitious as the Brazilian PAC, Argentinian infrastructure spending increased fivefold by 2008, fueling a boom in construction (Wylde 2011). In the absence of a development bank, the government worked informally with the central bank to encourage an emphasis on credit for long-term productive purposes (Hornbeck 2013).23 As we have seen, taxes on the export of wheat and beef—and even temporary export bans, as in previous eras—effectively functioned as wage subsidies. In this sense, informal government pressure on banks to ease credit, or negotiations with supermarkets to voluntarily control the price of basic goods, also may be thought of as forms of industrial policy. In almost all cases, the central goal was to support the profitability of a structurally uncompetitive domestic industrial sector, with the corollary of maintaining sufficient popular class support to ensure political legitimacy for this project, presented in nationalist-developmentalist terms.
This aim, in fact, is somewhat distinct from the ideotypical neodevelopmentalist strategy, whereby domestic industry is promoted and supported in order that technological upgrading and higher-value-added production may be achieved. The only area in which such policies were attempted in earnest was in the agro-industrial sector. Differentials in tariff rates on primary products (for example, soy) compared to their processed derivatives (such as soy oil or pellets) acted to equalize profit rates for exports in these categories and thus to encourage greater exports of lightly processed agricultural manufactures (Peine 2013). As a consequence, Argentina, the third-largest exporter of soy products overall, became the world’s number one in both soy oil and meal (Hansen and Gale 2014).
Any technology-intensive manufacturing that exists in Argentina, such as the important auto industry, which mostly exports to Brazil, is part of a highly integrated global supply chain and is heavily dependent upon imports. This is part of the generally weak integration of the Argentinian productive structure (Ebenau and Liberatore 2013). With imported industrial inputs becoming expensive following devaluation, it is perhaps unsurprising that the auto sector was once again in trade deficit by 2011.
Manufacturing generally seems to have run into contradictions during the presidency of Cristina Fernandez de Kirchner (2007–2015).24 As productivity began to stagnate, profits were gradually undermined by continuing formal sector wage increases (Feliz 2015). In order to placate industrial capital and maintain profitability, the prices of consumer goods from this sector were allowed to rise, fueling inflation, which was hidden by manipulation of official statistics. Inflation began to eat into the real exchange rate and the government increasingly struggled to balance wage demands, domestic firms’ profitability, and exporters’ international competitiveness, primarily by extending subsidies. Subsidy spending moved from $1.6 billion to $18.1 billion (or 4 percent of GDP) from 2006 to 2011 (Hornbeck 2013).
In 2008, the defeat of the proposed move to a variable windfall tax on agricultural exports denied the government extra resources with which to fund increased spending and hold down utility prices in the context of rising inflation. A partial substitute for these revenues was found through the renationalization of pension funds in the same year, until, in 2010, the government turned to the unusual solution of earmarking a portion of the central bank’s dollar reserves for the repayment of outstanding international debt (Kaplan 2014). The bank’s governor was removed after objecting, marking another step in a process of eroding separation between the bank and the government during the postcrisis years. Even if the return of the bank to political control remained tacit, a 2012 charter made its policy orientation explicit, with its mandate being to “promote monetary stability, financial stability, employment, and economic development with social equity” (cited in Hornbeck 2013, 7), in contrast to the narrow inflation-targeting mandate of the typical neoliberal central bank. This is perhaps the clearest statement of the extent to which Argentina’s policy trajectory moved from a neoliberal path under the Kirchners. It is also revealing in that these priorities self-consciously reflect those of the neodevelopmentalist model.
By 2014, there were indications that the government was considering a return to borrowing on the international market (Schiipani and Rodrigues 2014), simply out of necessity; dwindling foreign reserves, by this point, were being depleted by the twin tasks of covering fiscal deficits and maintaining the stability of the peso. The government agreed on $5 billion in compensation to former owner Repsol for the expropriation of oil company Yacimientos Petrolíferos Fiscales (Treasury Oil Fields, or YPF) and began negotiations with the IMF regarding compliance with its norms on data reporting. These moves may well have been intended to start the process of regaining investor confidence, though repeated threats to strip Argentina of its G20 membership also may have been a factor. In any case, later in 2014, a New York court ruled in favor of a so-called vulture fund, which had bought up a portion of debt owed to the holdout creditors—those who had rejected the broadly successful 2005 renegotiation of bonds that followed the 2002 default.25 Since the ruling prohibited the government from meeting payments on the rescheduled debt unless the vulture funds were also repaid, Argentina then entered its second, though far less consequential, default in twelve years (Mander 2014). This cut off the possibility of renewed borrowing on international markets.
In this regard, it is interesting that the Kirchner government, over time, seems to have become increasingly interested in direct Chinese assistance as a means of preventing the neodevelopmentalist project from stalling. In 2010, a $10 billion loan was obtained from China Development Bank for a renovation of Argentina’s mostly defunct rail network, and further infrastructure deals with Chinese policy banks followed, including three loans totaling $7 billion, signed immediately after the vulture fund ruling (Gallagher and Myers 2018). Perhaps even more significant was the concurrent announcement of an $11 billion currency swap with China, providing a much-needed source of foreign exchange (Kaplan 2014). Nevertheless, with the economy entering recession in 2014, kirchnerista candidate Daniel Scioli lost the 2015 presidential election to Buenos Aires mayor Mauricio Macri, who would return Argentina to a neoliberal agenda—and also to the IMF, agreeing to a $50 billion loan in 2018 (Gillespie 2018).
Neodevelopmentalism as an intellectual agenda is a significant addition to the important tradition of Latin American development thought, reflecting its geographic roots through a preoccupation with correcting for the historical failures of the ISI strategies pursued across the region. In another sense, though, neodevelopmentalist proposals seek to manage the difficult task of implementing a somewhat interventionist model of development, while simultaneously maintaining trade and fiscal surpluses, in an effort to avoid ruffling transnational feathers within the reality of a neoliberal global regime. Both the Brazilian and Argentinian varieties of neodevelopmentalism, however, emerged during the particular circumstances of the commodity boom, which provided a boost both to government revenue and to the current account, substantially lessening the difficulties of combining a conservative fiscal policy with an expanding public role in the economy.
Empirically, at least, this leaves unanswered the question of whether sustaining such a balancing act would have been possible under the trickier neoliberal conditions that, after all, the model had been specifically crafted to navigate. We do, though, have the evidence of what happened after the end of the boom, when, in both cases, neoliberal governments retook control of the state in the midst of decaying economic conditions. Counterfactually, too, there is good reason to suppose that, in the Brazilian and Argentinian cases, the successful rollout of any program that departed from neoliberal norms in any substantive way would have remained infeasible without the onset of the commodity boom.
This is true even in the case of the less radical plan instituted in Brazil. The lack of an export boom would have prevented Lula from clearing the IMF debt in 2005, leaving the PT government still committed to the deal between the fund and Cardoso in 2002 (as, indeed, was the intention behind this agreement). The takeoff in exports during Lula’s first term is generally held as being responsible for the return to growth in Brazil (Bacha and Fishlow 2011; Anderson 2011), meaning that its absence may well have resulted in continuing stagnation and perhaps even a worsening of the debt situation and IFI dependence. Had the PT managed to win a second term under such circumstances, there likely would have been scope for expansion of the relatively cheap Bolsa Familia program, which remains an important part of Lula’s legacy. However, any of the more ambitious initiatives that marked 2006 as a major turning point in Brazil’s divergence from neoliberalism—the expansion of BNDES and Petrobras, the PAC, or continued wage increases—would seem to be highly unlikely.
Postdefault governments in Argentina, cut adrift from the capital markets, had less of a need to maintain macroeconomic credibility in the eyes of external investors.26 The simple fact of this isolation, however, does not, on its own, account for an ability to set policy autonomously. Without the boom in soy exports, in particular, it is hard to see how any postcrisis administration in Argentina would have managed default without returning to further borrowing. This most likely would have taken the form of some kind of IMF-sponsored restructuring package, requiring further rounds of austerity and offering zero scope for the consumption and production subsidies seen under Nestor Kirchner, let alone for the more ambitious policy moves of his successor.
Instead, in terms of the direct fiscal contribution from the retenciones, the buildup of international reserves, and the more generalized economic impact of the takeoff in exports, soy was the crucial factor. Soy both paid for a sizable proportion of the new social and industrial policies and insulated the Kirchners from the need to turn back to the IFIs and capital markets. In later years, kirchnerismo ran into contradictions, as ever-greater subsidies were instituted to balance rising inflationary pressures, wage demands, and profitability, presenting particular challenges after the failed attempt to further increase agricultural export taxes in 2008.
It requires no great insight to suggest that the combination of measures implemented to bridge these gaps and maintain the economic model—the nationalization of pension funds and the expropriation of YPF shares, or the diversion of central bank reserves to plug budget holes—would not have been feasible under IFI supervision or for a state looking to return to the bond markets. Indeed, return to the bond markets is exactly the outcome that these policies were designed to avoid. Without the commodity boom, though, there would have been no neodevelopmentalist settlement to protect.
The main purpose of these typological chapters is to understand the form, character, and objectives of each political-economic type, as well as the internal and external dynamics that have produced these trajectories. Passing judgment on the relative success or failure of each state’s development strategy, or the validity of the models upon which they are based, is therefore largely outside the scope of this research. However, it is worth commenting upon a basic irony, encountered in both the Argentinian and Brazilian cases, which illustrates the gap between the neodevelopmentalist ideal and their actual development paths, as well as the paramount importance of commodity boom conditions in papering over the resulting cracks—which were then brutally exposed after the end of the boom.
Neodevelopmentalist theory retains the structuralist belief in achieving development via industrial upgrading, moving up the production chain via improvements in technology, skills, and labor productivity. The irony for both Argentina and Brazil is that the policy autonomy and fiscal resources required to pursue this development strategy became available not through the initiation of some self-sustaining virtuous circle of growing competitiveness in industry but because of a major turnaround in the fortunes of their commodity exports. A historic inability to move beyond these sectors, which lie at the very bottom of their respective production chains, was, of course, a major component of the structuralist diagnosis of underdevelopment, something which is echoed in neodevelopmentalist accounts.
It may be that, eventually, the industrial policies that were enabled by commodity boom conditions in both countries will prove to have laid the groundwork for the kind of transformation of the productive structure at which such policies purport to aim. For now, though, a more reasonable assessment seems to be that the commodity boom, for the most part, simply allowed the Brazilian and Argentinian governments to keep uncompetitive manufacturing industries on life support (Carrillo 2014; Feliz 2015). Such concerns have not gone unnoticed, particularly in Brazil, where the worry is about “reprimarization,” a regression to a previous role within the global division of labor as a primary commodity exporter—with China driving this process as it devours resources and sends back cheap manufactures (Curado 2015; Gallagher and Porzecanski 2010, chap. 3).27
The dependence on commodity exports, which for decades (or even centuries) has often been identified as the main obstacle to Latin American development, clearly continues for Brazil and Argentina, and has even deepened in recent years. When commodity prices began to drop significantly, the vulnerabilities of both Brazil and Argentina to such volatility was once again exposed, threatening to undo any social and economic gains made over the boom years. Political and economic turbulence has brought an end to the two states’ emergent neodevelopmentalism, at least for now—and, in the Brazilian case, it led to a major political crisis, which set the table for a resurgent far right. Whether the neodevelopmentalist experiments were inherently flawed or might have proved more resilient, had they been better implemented, remains an open question. Nevertheless, as this chapter has shown, had Chinese import demand not sparked the commodity boom, neither Argentina nor Brazil would have had the economic strength to resist the demands of creditors and begin these experiments in the first place.