The Quarterly Review of Economics and Finance 42 (2002) 825826

Focus

Introduction Sovereignty and economic neo-liberalism: the case of Brazil

Werner Baer
University of Illinois at Urbana-Champaign, 218 DKH, M/C 706, 1407 W. Gregory, Urbana, IL 61801, USA

The 1990s were characterized by the spread of neo-liberal economic policies throughout Latin America. Such policies included the drastic reduction of tariffs and non-tariff barriers to imports, massive privatization of state-owned enterprises and banks, and the opening of many sectors of the economy to foreign investors. In fact, during this period the economies of Latin American countries turned from being relatively closed to being open in their relations with the outside world. These neo-liberal policies were partially imposed by multilateral institutions and by the major creditor countries, i.e., they were the result of the conditionality attached to the restructuring of old loans and the availability of new credits. As these policies were adopted, there was increasing concern among various analysts about their impact on the economic sovereignty of these countries. In September 2001 a panel session at the congress of the Latin American Studies Association was devoted to an examination of the impact of such policies on the sovereignty of the regions largest economy: Brazil. The four papers presented at these panels are reproduced in this section. They examine the sovereignty issue from various points of view. Though based mainly on the Brazilian experience, the rst paper by Makler and Ness presents a general view of how more open nancial institutions and markets have been profoundly affected by the forces of globalization and thus have challenged national sovereignty over policymaking. The challenges result from the freeing of capital inows and outows, foreign control of nancial service institutions, regional and supranational economic integration, and the possible abandonment of national currencies in the region. Baer and Coes argue that Brazils greater openness has weakened the exercise of national sovereignty in determining economic objectives. However, they nd that consumer sovereignty

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has been correspondingly increased. They show that there are costs and benets from both kinds of sovereignty. Increasing constraints on macroeconomic policymaking have been accompanied by an increase in the choices open to consumers. The latter increase, however, have been limited by a highly concentrated income distribution, which has persisted despite changes in economic policy. Nazmi studies the impact of globalized nancial markets on domestic policymaking, and thus on economic sovereignty. He shows how the globalization of Brazils nancial markets has increased the vulnerability of Brazils economy to contagion from nancial crises in other troubled markets. Amann approaches the sovereignty theme by concentrating on the impact of globalization of Brazils industrial sector. He examines the impact on productive efciency, industrial restructuring and technological sovereignty. He nds that while efciency has increased in terms of productivity and cost competitiveness, the reliance of the Brazilian industrial sector on foreign sources of technology has increased and its capacity for domestic technological innovation has been weakened.