Globalization and Recent Political Transitions in Brazil PDF

International Political Science Review (2003), Vol 24, No.
4, 465490
Globalization and Recent Political Transitions in

Brazil
MARCUS FARO DE CASTRO AND MARIA IZABEL VALLADO DE CARVALHO
ABSTRACT. This article discusses political transitions in Brazil in the

context of globalization. It focuses on the political legacies that offered
resistance to external processes and on the emergence of new checks
and balances that constituted the relevant conditions for processes of
political decision-making from the 1980s to 2002. It also shows that the
management of economic policies, combined with the broader political
process, was an important dimension of these political transitions. The
article concludes by emphasizing the challenges that exist in the
treatment of social issues and the connections between the domestic and
the international agendas.
Keywords: Brazil Democracy Economic policy Globalization Social
policy
(I) Introduction
In a trip to Uruguay, in early March 2000, the Brazilian President, Fernando
Henrique Cardoso,1 declared to newspapers that the tariffs imposed by the
American government on imports of steel and orange juice from Brazil were
directly connected to poor social conditions in his country. Cardoso asked: What
is the responsibility that American or European markets have in keeping
economies closed, in keeping a situation of hunger here? (Folha de So Paulo,
2000: 1).2 The president also declared that American trade policies had a direct
impact on employment here [in Brazil] and on Brazilians life conditions.3
The declarations by President Cardoso are an example of how transformations
in world politics and world economic conditions in recent years, known as
globalization, have had an impact on the political and economic processes of
different societies in the world. Capital-account liberalizations (which have
occurred in many countries, often under the guidance of the International
0192-5121 (2003/10) 24:4, 465490; 035232 2003 International Political Science Association
SAGE Publications (London, Thousand Oaks, CA and New Delhi)
Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

466 International Political Science Review 24(4)
Monetary Fund), the push toward trade liberalization since the first General
Agreement on Tariffs and Trade (GATT) negotiations, and the spread of democracy
in the world have all contributed to an increase in the interaction of both political
and economic interests, not only inside territorially referenced polities, but
among all such polities around the world. However, the impact of developments
occurring in the international environment has not been the same in all societies.
The differences may be explained by the presence of distinct local conditions
which act upon external influences and may modify the nature and timing of
outcomes. Such local conditions include values or ideas relevant to policy-making
and institutional organization, local economic and political interests, local
institutions, and institutional historiesall of which interact with external
economic constraints.
Historical neo-institutionalist approaches to contemporary politics (as opposed
to neo-institutionalist approaches based on rational choice) have offered
enlightening analyses of political change and transitions in policy-making in
different nations. A well-known example is the account of how the shift from pre-
Keynesian to Keynesian modes of policy-making took place in the USA, Sweden,
and Britain in the wake of the Great Depression of the 1930s (Weir and Skocpol,
1985). The relevant point in this kind of analysis (which will also be employed in
our article) lies in the emphasis given to the constraints imposed by existing
policies and state capacities on the action of social and political groups, as well as
on the decisions of politicians and governments.
Our article will focus on political and economic transitions occurring in Brazil
in the context of globalization. It will consider the policy legacies and the
innovations in ideological or value orientations taking place in the policy-making
process in Brazil since the 1980s in the context of exogenous (supranational or
international) constraints. The article will therefore discuss recent transitions in
Brazil from the point of view of the impact of globalization on Brazilian
democratic politics and liberalization policies, and also from the point of view of
domestic political conditions which have modified the timing and nature of
outcomes.
Our analysis will start with the transition from oligarchic politics to populist
politics in the 1930s. Then we will focus on the transition from populist politics to
recent events in the 1990s.
(II) Resistances Emerge from Old Transitions

Economic globalization was largely a result of the decline of the world economic
conditions which prevailed during the cold-war era. During this era, efforts were
made to maintain peace, as well as to liberalize trade through GATT negotiations,
though with limited results, and to sustain a regime of virtually fixed exchange
rates worldwide, buttressed by financial assistance provided by the International
Monetary Fund (IMF) to governments facing balance-of-payments difficulties. The
refusal of Europe and Japan to buy dollar-denominated securities as a way of
balking at American deficits growing out of the inflationary financing of American
social welfare expenditures and of the American war in Vietnam in the 1960s
(Cox, 1994) created tensions in the world economic system, leading to the demise
of the Bretton Woods regime. The suspension of the convertibility of the dollar
into gold by US President Richard Nixon in 1971 was a major blow to the
international economic system. Deregulation of financial markets prepared the

FARO DE CASTRO & VALLADO DE CARVALHO: Globalization and Political Transitions 467
ground for the internationalization of the banking industry in the 1980s, while
capital-account liberalization combined with the risks inherent in exchange-rate
fluctuation increased the vulnerability of national economies due to enhanced
volatility of financial markets. Furthermore, the attempt at cartelization by the oil-
producing countries (Organization of Petroleum Exporting Countries) and the
American interest rate hike under Paul Volcker placed many developing
countries, including Brazil, under severe economic strain.
Many countries in the world have adjusted to these new world economic
conditions. In Brazil, however, transitions were slow, and matters came to a
breakpoint with the onset of three-digit inflation in the 1980s (see Figure 1).
Indeed, while most Latin American countries had adopted pro-market reforms by
the early 1990s, Brazil was considered, alongside Cuba, as one of the two late
reformers in the hemisphere (Almeida, 1996: 214). The sluggishness of the
Brazilian reaction to globalization has been largely attributed to the stickiness of
existing state structures and the historically embedded ideas and practices prevalent
in the policy-making process. Why was this so? In order to provide an answer to
this question we need to take a few steps back, and to proceed from the 1930s.
The year 1930 was indeed a landmark in Brazilian history, for it brought a
radical shift from local-oligarchic to national-populist politics when President
Getlio Vargas came to power. It was under Vargas and subsequent governments
that the so-called developmentalist model of policy-making was instituted in
Brazil. This model lasted for many decades and facilitated economic growth led by
industrial production boosted by import substitution. With some simplifications,
the duration of this model can be divided into five broad periods:
The period of transition from decentralized oligarchy to political centralization
(193037)
The period of civil dictatorship (193745)
3000
2500
2000
1500
1000
500
0
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
FIGURE 1. Year-end annual inflation as measured by the consumer price index (IPCA) (19811999)
Source: (IBGE Brazilian Institute of Geography and Statistics) <ftp://ftp.ibge.gov.br>

The populist-democratic period (194664)

The period of military dictatorship (196485), and
The period of transitional reforms (1986 to the present).
With respect to economic policy orientations, the developmentalist model was
characterized by: (1) the active role of the state in the promotion of economic
growth through rapid industrialization; (2) a protectionist trade policy; (3) the
creation of regulatory and financial (official credit) state structures; and (4) by the
direct participation of the state in production through the creation of public-
sector enterprises.
Developmentalist policies won active support from industrial groups, labor
unions, and a growing middle class, which were a product of the new economic
and social conditions brought by the crushing of the older oligarchic politics. The
political prevalence of the new model was expressed in the dominant power
exerted in the Brazilian Congress by the coalition of the Partido Social Democrata
(PSD) and the Partido Trabalhista Brasileiro (PTB) in the democratic-populist phase.
These were, respectively, the rural and the urban party organizations that from
1946 to 1964 provided channels for political negotiation for the presidency. But
the development of this party structure only poured old wine into new bottles: it
absorbed and adapted previous extensions of presidential power which operated
largely through appointed intendants as state governors (Vargass interventores)
and through a wide-ranging corporatist framework whose main components were
created during the 1930s and 1940s. The development of such a corporatist
framework placed economic production and social services under the clientelistic
control of the head of the federal executive (Souza, 1990: 1345). The economic
portion of this corporatist framework comprised four kinds of instruments: a)
bodies designed to balance agricultural and commodity production and
consumption or to regulate imports and exports; b) bodies designed to provide
incentives to private industry; c) bodies designed to implement, extend or reform
basic infrastructure for industrialization; [and] d) bodies that were meant to
engage directly in economic production (Souza, 1990: 99). Alongside these there
was the administrative-political segment of the framework. This segment was
centered on the Administrative Department of the Civil Service (Departamento
Administrativo do Servio Pblico or DASP), a super ministry whose regional
offices often functioned virtually as political back offices for presidential politics
(Souza, 1990: 968). Lastly, the social portion of the framework was a diversified
array of group-focused pension and social insurance funds supervised by the
Ministry of Labor (Malloy, 1979). This social portion of the corporatist
framework together with the operation of the labor law commissions also
instituted by Vargas in 19324 were the means by which a form of political tutelage
was exerted on the mass of the population, under what was later described as
regulated citizenship (Santos, 1979).
In sum, the populist politics which developed from the 1930s relied on the
plebiscitarian legitimation of the centralizing power of the president,
complemented by the pre-emption or suppression of party life (from 1930 to 1946
and from 1964 to 1985) and by the control of congressional politics under the
PSDPTB coalition from 1946 to 1964. Moreover, the power of the president was
also complemented by the clientelistic distribution of subsidies, rents, and benefits
to economic and social groups by means of the corporatist framework
orchestrated by the federal executive (see Table 1 for selected corporate bodies).

TABLE 1. Selected corporate bodies (19301940)
(1931) National Coffee Council

(1932) Institute for the Protection of Cocoa
(1933) Institute for Sugar and Alcohol
Pension Fund for Maritime Workers
(1934) Pension Fund for Bank Clerks
(1935) Pension Fund for Commercial Employees
(1937) Industrial and Agricultural Credit Program of the Banco do Brasil (CREAI)
(1938) Pension Fund for Public Sector Workers (IPASE)
Pension Fund for Cargo Transportation Workers (IAPTEC)
Pension Fund for Industrial Workers (IAPI)
(1940) Institute for the Defense of Salt
Commission for the Steel Industry
Source: Nunes (1997) and Malloy (1979)
Another institutional feature also developed and grew in importance after the
1960s. This was the political use by the federal executive of macroeconomic
management and its distributive impacts. This can be called the political use of
economic policy, which in the Brazilian case took the form of economic
populism.5 The political use of economic policy is in a sense the result of the
policy-induced social experience of variations in economic production and
consumption, which may be combined with the plebiscitarian legitimation of the
power of the president. Economic populism is a political use of economic policy in
which the emphases on growth and income redistribution are given preference
over concerns with inflationary trends and external constraints.
The introduction of economic populism in Brazil changed the way in which
governments were able to operate in managing political conflicts. Indeed, prior to
the 1930s, the disruptive energies of potential conflicts were subjected to
oligarchic domination. Subsequently, they were entangled in the practices of
patronage, clientelism, and co-optation of the presidential intendancies and of
the corporatist framework characteristic of the developmentalist state. Lastly,
during the military regime of 196485, the disruptive potential of political conflict
was largely absorbed into the interplay between macroeconomic policy, private
economic action, and the formation of economic expectations and their
interaction with shifts in public opinion. This interplay is, of course, intensified
with the extension of the right to vote to ever-larger portions of the population
(see Table 2 ).
The political use of economic policy and the development of economic
populism were favored by the professional and academic internationalization of
economics and by its growth as a distinct area of expertise and training in Brazil.6
The transformation of multilayered adversarial procedures into secluded technical
decisions of macroeconomic policy-making (which drastically concentrated
administrative discretion by focusing on precisely quantified, value-neutral,
depersonalized regulation of money flows) was expanded by the gradual
implementation of statistical services and standardization of the accounting and
bookkeeping methods employed in the management of public finance. In the case

TABLE 2. Number of voters as percentage of total population in Brazil (19451990)
Year Percentage of voters
1945 16
1960 22
1966 27
1970 31
1974 35
1978 41
1982 47
1986 52
1988 54
1990 55
Source: Souza (1992), p. 197
of social welfare expenditures in Brazil, this included, for example, the unification
of the social insurance system in a single National Institute of Social Assistance
(INPS) in 1967 (Malloy, 1979: 83145) (see Table 3). The creation of the
Superintendence of Money and Credit (SUMOC) in 1948 and of the Central Bank
of Brazil in 1964 are other examples of reforms that made possible the
development of the political use of economic policy and of economic
populism in Brazil.
During the military regime (196484) economic populism employed three
major policy mechanisms: monetary correction from 1964, small exchange-rate
devaluations from 1967, and tax exemptions. These were automatic devices in
economic policy-making that were able to avert political crises during the period
of military dictatorship by suppressing the direct adversarial procedures typical of
political competition (see Skidmore, 1973: 2831). The operation of monetary
correction (adjustments in the value of contracts authorized by the publication of
an officially certified index of past inflation) was perhaps the best example of such
automatic economic devices.
It is against this background that one should understand the Brazilian
transition to democracy in the 1980s. Indeed, during the late 1970s period of
military dictatorship, international economic conditions, in particular the rise in
the price of oil imports, were already highly unfavorable to developmentalist
policy-making which relied on public expenditure to foster growth. Nonetheless,
President Ernesto Geisel (197479) decided to adopt the Second National
TABLE 3. Evolution of the social insurance system in Brazil (19231970)
Year Number of institutions Active insured Retired insured
1923 24 22,991
1930 47 142,464 8,009
1940 95 1,912,972 34,837
1950 35 3,030,708 181,267
1960 6 4,222,470 518,088
1970 1 9,545,000 890,000
Source: Malloy (1979), p. 102

Development Plan, which insisted on import substitution even under external

economic restrictions stemming from the emergence of globalization. The
strategy also included obtaining foreign commercial loans, which was initially
acceptable given the willingness of the international banking industry to recycle
petrodollars (Kapstein, 1994). But this later resulted in greater economic
difficulties deriving from the balance-of-payments and fiscal impacts of the
American interest rate hike on foreign debt servicing.
In spite of the efforts of pro-democracy leaders in the 1980s, it could have
happened that the comeback of democracy in 1985 could have been just another
turn of the wheel, another moment in a cyclical pattern in which civilian and
military governments alternated in power while essentially keeping the same
policy-making model (the developmentalist model). A second experience of
democratic populism in line with the developmentalist model could have been
(and in the late 1980s, under the Sarney administration, it certainly seemed to be)
yet another turn in the cycle of Brazilian politics. This time, however, the cycle was
broken. The difference came as a result of the combination of: (1) institutional
reforms introduced in the process of rebuilding the Brazilian democratic regime,
especially a revitalized federalism which reinstituted adversarial procedures as part
of the decision-making process, thus rendering economic populism less
manageable; (2) the emergence of a richer interest pluralism in Brazilian
society, given the massive growth of the urban population during the decades of
rapid industrialization; and (3) the shift from economic populism to economic
pragmatism under Cardosos Plano Real, with the brief, but decisive interregnum
of Fernando Collor de Mellos plebiscitarian liberalism.
(III) The Rise of the New Checks and Balances

The democratic transition in Brazil has indeed been described as a comparatively
long one, involving protracted negotiations, and resulting in a rather conservative
compromise. However, it has also been a process in which power was distributed
widely to different groups irrespective of their position in the corporatist
framework. This was a break with a tradition of political centralization in the
federal executive, a tradition which accompanied the adoption of the
developmentalist model from the 1930s. It was this legacy, with its adjuncts of the
corporatist framework, which began to be modified during the transition to
democracy in the 1980s. Three crucial events have been instrumental in creating a
new institutional environment. The first was the direct election of state governors
in 1982. The second was the adoption of a new constitution in 1988. The third was
hyperinflation, which thwarted economic populism. A fourth element which
added momentum to the changes was the multiplication of a wide-ranging variety
of interest groups.
The elections of 1982 were a first step in decentralizing the power of the federal
executive and provided more leeway for subsequent negotiations with respect to
the transition to democracy. As two analysts have indicated: The fact that in 1982
the first direct gubernatorial elections occurred and the expectation that the
political transition to democracy would proceed without backlashes had an impact
on the hierarchy prevailing among the centers of power (Sallum and Kugelmas,
1993: 290). Thus, since 1983 the power of the opposition parties has grown and
the power of the federal government to influence local politics has declined. The
elections were in fact a break away from the structure of control [exercised] by

the central power upon the federation (Sallum and Kugelmas, 1993: 290). This
also affected the relationship between the Brazilian Congress and the no-longer-
monolithic federal executive. In sum, Institutional centers of power which were
once subordinated [to the federal executive], such as political parties, the
National Congress, local governments, etc., gradually won autonomy vis-a-vis the
central power and became more broadly representative of the people (Sallum
and Kugelmas, 1993: 291).
A second step which consolidated the decentralizing tendency of the transition
to democracy in Brazil was the adoption of the 1988 Constitution. After 1985,
under civilian rule, democratic leaders decided that the constitution then in force
(the 1967 Constitution, as amended in 1969), which had been the child of
authoritarianism, should be replaced by a new, truly democratic charter. Thus, the
1988 Constitution incorporated a number of provisions designed to act as
safeguards against a possible return to authoritarianism. Three of the new
constitutional features must be singled out for their subsequent political and
economic effects. The first was the reinforcement of the power of the National
Congress vis-a-vis the federal executive. A second was the decentralization of
federally collected funds to state governments (fiscal federalism). A third feature
was the adoption of a detailed bill of rights, together with provisions that gave
autonomy to the judicial branch and to public prosecutors. A more robust
federalism, a reinvigorated political life in the legislature, and the so-called
judicialization of politics (Castro, 1997a, 1997b; Vianna et al., 1999) were
relevant consequences of these developments.
The multiplication of interest groups outside the more traditional party and
corporatist structures of the developmentalist state was also an important
change, beginning with the emergence of the so-called new unionism (novo
sindicalismo) which also developed in the process of the transition to democracy.
The new unionism was a labor movement that grew as a spin-off from workers
associations originally controlled from the top down by the corporatist framework
of the developmentalist state (Alves, 1984). Benefiting from grassroots activism
strongly supported by the so-called church base communities (comunidades
eclesiais de base) of catholic priests inspired by the liberation theology movement,
labor-union leaders, most notably Luiz Incio da Silva (popularly known as
Lula), became a strong catalyst of pro-democracy social forces in the late 1970s.
Subsequently, civic mobilization grew increasingly plural and was translated into
an impressive multiplication of interest groups and social movements outside the
control of the developmentalist corporate framework.
The diversification and growth of interest mobilization can be visualized in the
number of social movements through which new issues and forms of social action
were articulated. According to Gohn (1997), three broad cycles of politically
relevant social movements can be described as occurring in Brazil from 1972 to
1997. The first cycle features the sprouting of civil society associations and social
movements under which groups were politically mobilized either nationally or
locally to demand the return of democracy from 1972 to 1984.7 During the second
cycle associations and movements organized to fight for a growing plurality of
interests and issues in the period from 1985 to 1989.8 The third cycle spans
199097 and is characterized by a relative decline in urban movements and a rise
in rural movements as well as by the articulation between national and
international groups. This third cycle nonetheless includes a still-growing diversity
of interests and issues.9 Furthermore, there was also a diversification of

economically oriented organizations of workers and producers (Almeida, 1996:

224).
Thus, the 1982 gubernatorial elections, the adoption of the democratic 1988
Constitution, and the growth of civic as well as economic interest pluralism
introduced unprecedented transformations in Brazilian politics. The power of the
National Congress was enlarged vis-a-vis the executive;10 the party system became
reinvigorated and diversified; the press and public opinion grew increasingly
influential in politics; the political culture of Brazilians began to change and to
uphold democratic elections as a political value (Moiss, 1995); the corporatist
structure inherited from the developmentalist state gradually declined as a
major conduit for patronage and began to compete with a host of newer
associational bodies linked to a more pluralistic pattern of interest representation,
including unions, grassroots social movements, non-governmental organizations
(Diniz and Boschi, 1997; Gohn, 1997), and municipalities (Abrucio and Costa,
1998); judges and public prosecutors became more active in challenging public
policies and in protecting citizens rights (Arantes, 1999; Castro, 1997a; Vianna
and Burgos, 2002); and mayoral and gubernatorial elections and local politics
acquired more importance in peoples lives in determining the outcomes of the
national political process in the context of a reinvigorated federalism (Silva,
1997). In short, at the level of politics, one could say that a Brazilian version of
checks and balances was under construction from the late 1980s and throughout
the 1990s, a period in which interest pluralism also developed.
(IV) Effects on Public Policies

The new checks and balances developed in ways that created novel procedures
and also brought new challenges for dealing politically with issues ranging from
social policy to economic policy (Silva, 1997). This happened primarily as a
consequence of the adoption of the 1988 Constitution. Thus, besides the
development of disputes among state governors and mayors regarding the
appropriation of public funds collected by the central government (see Abrucio
and Costa, 1998), state governors have also engaged in horizontal conflict,
through which they have attempted to attract more federal funds or to attract
investors by offering tax breaks in the so-called fiscal war.
One of the recent challenges in Brazil in this field has been that of finding ways
of transforming non-cooperative federalism into a cooperative kind of federal
system (Abrucio and Costa, 1998). Moreover, given the provision in the 1988
Constitution concerning the distribution to municipalities of funds collected by
the government of the union, many local political groups have attempted to create
new municipal jurisdictions in order to become recipients of such funds under the
constitution. In many cases they have succeeded, leading to a substantial increase
in the number of municipalities in Brazil. In the state of Piau, for example, the
number of municipalities has grown from 48 to 221 in the period from 1988 to
1997, having thus more than quadrupled in nine years. The total variation in the
number of municipalities in Brazil from 1988 to 1997 has been more than 31
percent. This increase in the number of municipalities became an additional
element in the complex political game of new checks and balances in Brazil.
The more robust federalism has also affected social policy-making. The
influence of renewed federalism on social policy can be seen, for example, in
experiments in the decentralization of policy implementation (Arretche, 2002). In

fact, local control of social policy was a hallmark of Brazilian politics even during
the developmentalist era. As has been stressed by scholars (Abrucio and Costa,
1998: 11112), Even in the case of highly centralized and bureaucratized policies,
such as social security under the INPS [National Institute of Social Assistance], and
later by the INSS [National Institute of Social Security], the paternalistic character
[of policy implementation] was maintained by the patrimonialistic control, at the
regional and local levels, of bureaucratic posts that were strategic to the
management of services. In the 1990s, this condition has been subject to change,
given the experiments with and proposals for cooperative arrangements among
municipal, state, and central administrations. Thus, for example, several
Metropolitan Health Consortia have been established in Brazil since the
implementation of the so-called Universal Health System (Sistema nico de
Sade) created by the 1988 Constitution (Abrucio and Costa, 1998: 11542). Also,
in the areas of both public health and primary education several bodies
representative of local communities have been established in connection with the
transference of funds collected by the central government (Abrucio and Costa,
1998: 1445).
Lastly, revitalized checks and balances have affected economic policy-making as
well. The new checks and balances which have grown since 1982 reinstituted
direct adversarial procedures that hinge on local, regional, and national electoral
politics, with consequences for economic policy-making. The new checks and
balances became in this sense a novel political ingredient of existing economic
populism, since they added institutionalized sub-national pressures for fiscal and
monetary expansion. On the side of fiscal policy, the populist dynamics of the new
checks and balances are exemplified in the chain of political interactions between
local and national authorities. As one author has put it:
The mayor [who has to satisfy constituencies] complains and asks for money
[from] the governor. The state government, in turn, whose resources are also
insufficient, complains and asks for money from the President of the Republic.
The latter, who is in no position to satisfy everyones demands, blames the
international financial system, the IMF, the National Congress, the Constitution,
the political parties, etc. (Montoro Filho, 1994; quoted in Castro, 1997c: 634)
On the monetary side of economic policy similar tendencies occurred. According
to a report published by the president of the Brazilian Central Bank in 1993,
outgoing governors in 1982 used the public banks of state governments to finance
the campaigns of those candidates they wished to support (Castro, 1997c). The
report indicated this political fact as being at the origin of subsequent difficulties
in implementing centralized economic policy in Brazil. Subsequent governors
often carried on the public finance practices of their predecessors. Moreover, state
constitutions provided for the existence and operation of state banks independent
from the central authority (Castro, 1997c). The capacity of state banks to finance
politically motivated expenses by trading state treasury bonds in financial markets
added to inflationary pressure on the Brazilian currency. Thus, centralization of
monetary policy also became a problem of federalist politics under the new checks
and balances, which gave new impetus to a now politically fragmented economic
populism.

(V) The InternalExternal Link and the Collor Divide

The significance of these transitions in terms of internal political and economic
conditions cannot be fully understood without reference to their articulation with
foreign policy. In this connection, it must be noted that one of the main
characteristics of the Brazilian transitions has been the lack of an appropriate
internalexternal link, that is, the lack of a coherent and proactive foreign policy
that would negotiate and craft international arrangements suitable to ongoing
internal political and economic changes.
Brazilian foreign policy was dominated by the legacy of Baro do Rio Branco
from the early decades of the 20th century to the 1970s. Rio Branco was the
Brazilian Minister of Foreign Relations from 1902 to 1912. As the main diplomatic
authority, he exerted an important and long-lasting influence on Brazilian foreign
policy. Indeed, Rio Branco reoriented Brazils international relations by shifting
the focus of foreign policy from Europe and England to the USA (Storrs, 1973:
10269). Thus, he built a foreign policy tradition of a Special Relationship with
the USA. Rio Brancos Special Relationship policy paradigm remained the gist of
Brazils international relations until the so-called globalist paradigm emerged
from its roots in the Independent Foreign Policy of the Quadros and Goulart
administrations (196164). Although the 1964 military coup brought internal
political and ideological factors that abruptly pushed Brazils foreign policy back
into the tracks of the older Americanist paradigm set by Rio Branco, the
competing globalist paradigm continued to develop after 1967 into an
alternative policy framework. This framework gradually came to be clearly
articulated and strongly supported by prominent members of the Brazilian
diplomatic community (Lima, 1994: 3440). The globalist paradigm embodied
both a critique of the Americanist, Special Relationship foreign policy legacy
and also the critique developed by the Economic Commission for Latin America
and the Caribbean (ECLAC), especially by Ral Prebisch, which argued that
prevailing international economic practices were detrimental to the Latin
American economies. The globalist paradigm therefore emerged as a
comprehensively articulated external-sector counterpart to the internal policies of
the developmentalist state in time to buttress President Geisels Second
National Development Plan. This plan included as a central objective the pursuit
of firm diplomatic action in multilateral bodies in order to craft international
conditions favorable to national industrial growth (Lima, 1994: 367).
Given this orientation in foreign policy, efforts were made in the area of
international trade policy to secure special treatment for less developed countries
(LDCs) in the GATT negotiations, as well as through the United Nations Conference
on Trade and Development (UNCTAD) arrangements (Abreu, 1996). The globalist
paradigm also insisted that the prevailing world order tended to freeze
asymmetric power relations and that Brazil should resist international policy that
placed restrictions on access to sensitive technologies. Lastly, the globalist
paradigm also emphasized the need for Brazil to build ties and partnerships with
a wide range of countries. Frozen international power asymmetries and the
comparative political isolation of Brazil demanded agile diplomatic action in the
forging of new partnerships with third world countries in Africa and the Middle
East, and especially with neighboring nations. The globalist paradigm also called
for diplomatic efforts to reject international regimes that would institute control
over technologies (Lima, 1994).

In the 1970s and 1980s, the international economic environment underwent

profound changes: the oil shocks; the American interest rate increase; the Latin
American debt crisis; the internationalization of the banking industry; the
adoption by less developed countries of the practices of new protectionism; the
emergence of new themes in multilateral trade policy as an American-led
response to tackle free-rider problems in world trade; and the rise of concern
with strategic trade policy (which is based on nontariff barriers such as technical
regulations and indirect state incentives to production and commerce). Thus, just
as the Brazilian foreign policy framework gained consistency and enough
momentum to complement effectively the internal policy of national industrial
growth, world economic and political conditions changed dramatically.
Indeed, by 1989 Brazils internal and external political and economic
conditions were as follows. At the internal level, Brazilians were experiencing:
A recently completed transition to democracy
A new constitution that was adopted in 1988
An emergence of new checks and balances
A growing civic and economic interest pluralism
A legacy of developmentalist policies geared toward import substitution
A globalist foreign policy
A subjecting of economic populism to political fragmentation, and
Growing rates of inflation.
Meanwhile, important transitions were taking place in a changing international
environment characterized by:
The end of the cold war
The change of emphasis in multilateral trade policy, pushed by the USA and
reflected in the GATT agreements in the new areas of Trade-Related Aspects of
Intellectual Property Rights (TRIPS), Trade-Related Investment Measures (TRIMs),
and so on, in an attempt to override the practices of new protectionism
undertaken by several countries, and
The introduction, under American guidance and as a reaction to imbalances
brought by recession and the debt crisis among LDCs, of the use of structural
adjustment conditionalities in the provision of international financial aid, with
distressing social and political consequences in recipient countries.
It was under these conditions that a strongly plebiscitarian election took place in
1989 and Fernando Collor de Mello (199092) was chosen as the second civilian
president (and the first chosen by direct popular vote) since the transition to
democracy in 1985. Collor de Mello was elected as a leader with strong popular
appeal and weak historical links to established political groups. As an outsider with
regard to all the major political parties, he opposed the left-wing candidate, Lula,
who was perceived as a threat by the middle class.
It remains a crucial fact that Collor shunned both economic populism and the
new checks and balances. Collor, therefore, did not engage in negotiations and
did not seek to introduce reforms by means of adversarial political procedures. In
adopting an imperial presidential style, he boldly promised to kill the tiger of
inflation with a single bullet. His stabilization plan was extremely daring and
included freezing the bank deposits of all Brazilians for a protracted period.
Collor made no important attempts to work through adversarial political
procedures, nor to develop a consistently structured and novel way to make

political use of economic policy. Instead, he tried to rely solely on his charismatic
appeal to the people, through what can be called liberal plebiscitarianism. This
political strategy, however, would cost him dear. In less than two years Collor was
accused of participating in corrupt practices and was subjected to impeachment
procedures. In 1992, he was forced to resign because of the likely impeachment he
would suffer.
Notwithstanding his resignation, Collor still had the time to adopt reforms that
would prepare the ground for the emergence of economic pragmatism under
Fernando Henrique Cardoso. In a self-assured and imperial style, Collor opened
important rifts in the institutional structure by introducing reforms that would
change the way in which the state and the economy interacted. As Almeida (1996:
217) put it, Collors agenda for the first time associated the fight against inflation
with reforms aimed at changing the patterns of state intervention in the
economy. These reforms, with their longer-term consequences, concentrated
mainly on two areas: trade liberalization and the privatization of public-sector
enterprises (Almeida, 1996: 217). Moreover, important changes were also
introduced in the conduct of foreign policy, by accelerating and broadening
regional diplomatic initiatives.
The inflationary impacts of the expenditures of state-sector enterprises had
already been a matter of official concern during the last years of the military
regime. Under President Joo Batista Figueiredo (197985) modest initiatives had
been adopted in order to privatize state-owned enterprises. Collor established a
much more ambitious privatization program, which was intended to reduce the
public deficit, increase the efficiency of the state, and to promote the
democratization of capital, as well as the modernization and competitiveness of
the economy (Almeida, 1996: 218). By means of his reforms, Collor broadened
and accelerated privatization of the state sector and established a privatization
schedule that was not discontinued by his successor, President Itamar Franco
(199294).
In the area of trade policy, Collor also introduced drastic changes. He
discarded the whole protectionist orientation of globalist foreign policy by
introducing sudden and sweeping liberalization of foreign trade. This
liberalization was intended to curb inflation, as well as to improve the
competitiveness of Brazilian industry. On the multilateral and bilateral fronts,
the pursuit of less contentious lines of action was expected to ease the way for the
attainment of better deals in the negotiation of the foreign debt (see Abreu, 1997:
348). The trade liberalization reforms were adopted without internal political
negotiations with the Brazilian Congress or interest groups, and also without
external political negotiation in multilateral bodies that could have provided
needed economic opportunities for Brazilian interests. Collors strategy was seen
as a radical move that instituted broad liberalization but without gaining a
corresponding tangible advantage from foreign competitors, including the USA.
The presidents sweeping commercial liberalization was indeed severely criticized
by Brazilian diplomats who were aligned with the globalist view of foreign policy
(see, for example, Batista, 1993).
Collor also accelerated and expanded the regional integration policy. The
building of closer ties with neighboring economies was a point stressed by the
globalist stance on foreign policy. Under President Jos Sarney (198589) the
development of a regional foreign policy took the form of the Iguau
Declaration and the Treaty for Integration, Cooperation and Development, both

jointly signed by Brazil and Argentina in 1985 and 1988 respectively. At that point
in time, however, regional integration was still regarded as a cautious move, a
limited and long-term undertaking. Integration between the two countries was
scheduled to take place over a 10-year time-span, and only later would the creation
of a common market be considered. Collor dramatically accelerated and
expanded this process. Integration and the development of a common market
were rescheduled to occur within four years and were expanded to include
Uruguay and Paraguay. The aim of Collors administration in accelerating
regional integration was to use this mechanism to reinforce liberalizing policies.
Thus, in these three areas (privatization, trade liberalization, and regional
integration) Collors reforms were fast enough and radical enough to make deep
changes which could not be easily or quickly reversed in the future. However,
Collor did not attempt to negotiate his reforms internally through adversarial
political procedures. He did not heed the emergence of the new checks and
balances, nor did he develop an internal policy mechanism that would replace
economic populism. Moreover, Collor failed to control inflation and to
articulate a comprehensive foreign policy that would craft a position in
international relations which would favor sustained national growth and secure
significant internal popular support. This is what Fernando Henrique Cardoso
(199598 and 19992002) sought to accomplish.
(VI) Politics and Policy-Making Under Cardoso

Cardoso was elected in 1995 as the fourth civilian president since the end of the
military regime. But he benefited from the fact that he had been appointed to the
key position of Minister of the Economy under President Itamar Franco
(199294). He was able to adopt a clever stabilization plan which became the
cornerstone of policy-making and political strategies under his government.
As indicated by Almeida (1996: 2201), during the military regime (196485)
there was a broad consensus among all political groups, including the pro-
democracy leaders, with respect to the policy-making model. All relevant political
forces favored state-led strategies of development. The opposition, however,
criticized economic policies adopted by the military governments because they
were premised on wage repression as a precondition for growth. Pro-democracy
groups therefore strongly insisted that economic policy should be able to Fight
inflation without penalizing the poor, reactivate economic growth, renegotiate the
external debt, and establish democratic institutions (Almeida, 1996: 220). These
were the essential claims of the Democratic Alliance, a center-left coalition that
negotiated the 1985 transition to democracy with the authoritarian leaders.
This broad consensus, however, was eroded in the mid-1980s in the face of
repeated failures by governments to control inflation. In particular, the
spectacular fiasco of the so-called Cruzado Plan under President Jos Sarney
(198589) contributed to the emergence of a professedly new perspective on
economic policy-making. This was called the pragmatic approach to economic
policy-making (Almeida, 1996: 222). This pragmatic approach criticized
economic populism and the inability of governments to address the so-called
inertial component of inflation.
Indeed, economic populism had fueled inflation which, in the Brazilian case,
had acquired a strong psychological dimension. This was the inertial
component of inflation, that is, the generalized propensity of economic actors

TABLE 4. Brazilian stabilization plans, 19791991
1) First Delfim Plan (1979)

2) Second Delfim Plan (1981)
3) Third Delfim Plan (1983)
4) Dornelles Plan (1985)
5) Cruzado Plan (1986)
6) Bresser Plan (1987)
7) Summer Plan (1987)
8) Rice and Beans Plan (1988)
9) First Collor Plan (1990)
10) Second Collor Plan (1991)
Source: Pereira (1992), pp. 141144
constantly and automatically to adjust prices in anticipation of future inflation on

the basis of past inflation. The inertial component of inflation was a direct legacy
of economic populism and its use of monetary correction. The idea was that the
Brazilian middle class had become accustomed to playing the inflationary game
(Oliveira, 1996: 268) by reaping the benefits of monetary correction, while the
much larger, poor underclass had to experience heavy losses through what was
called the inflationary tax: the poor almost literally had to eat up their meager
incomes in immediate consumption and were thus unable to benefit from
monetary correction.
Since 1979 the Brazilian authorities had attempted to control inflationary
trends through several stabilization plans. From Defim Netos first plan in 1979
until the ousting in 1992 of the second civilian president after the military regime
(Collor de Mello) there were 10 plans for monetary stabilization (Pereira, 1992).
A list of such plans is provided in Table 4. Yet, all such plans were remarkably
unsuccessful in dealing with the inertial component of Brazilian inflation. Thus,
after the experience of 10 unsuccessful stabilization plans, it seemed that no
remedies were available to overcome the detrimental impact of hyperinflation on
society and politics, which affected all social groups.
While left-wing politicians such as Lula still clung to old populist formulas,
Cardoso cleared the political front by working out compromises with the
conservative political groups of the Partido da Frente Liberal (PFL) and the Partido
Trabalhista Brasileiro (PTB) and adopted his Plano Real. This plan comprised
emergency reforms in areas of fiscal and monetary policy and several other long-
term reforms. The emergency reforms had the aim of eliminating the inertial
component of inflation, without outside help and without the use of repressive
measures such as price controls, while the longer-term reforms were meant to
introduce changes in the structure of policy-making that could render monetary
stabilization more lasting. In the description offered by Oliveira (1996), Cardosos
stabilization plan was organized in four major phases, as indicated in Table 5.
From a political point of view, the main characteristic of Cardosos Plano Real
was the establishment of a two-level policy-making structure. Thus, in Cardosos
plan, monetary and exchange-rate policy remained insulated from political

TABLE 5. Plano Realimplementation phases
Phase 1 Emergency fiscal adjustment (1993):

a) Immediate Action Program [Programa de Ao ImediataPAI]emergency
cuts in expenses; rescheduling of debts of states and municipalities;
enhancement of administrative control on state-owned banks;
reorganization of the privatization program.
b) Emergency Social Fund [Fundo Social de EmergnciaFSE]discretionary
spending power over a portion of budgetary resources was obtained from
Congress.
Phase 2 Emergency monetary reforms (1994):
a) Referential Value Index [Unidade Referencial de Valor] (Feb., 1994)
unification of monetary correction in a single superindex for
synchronization of price adjustments.
b) Real as new currency (Jul., 1994)change of the national currency from
Cruzeiro Real to Real.
Phase 3 Longer-term monetary reforms (as of Jul., 1994):
a) Tight monetary policystern control of monetary expansion.
b) Exchange rate alignmentexchange rate flexible parity with the USD.
Phase 4 Structural reforms (as of Jul., 1994):
a) Trade liberalization and regional integrationcontinued from past governments
and used to curb internal price increases.
b) Privatizationcontinued from past governments.
c) Deregulationcut back in red tape regulations.
d) Constitutional reformsallow for private investment in utility and service
sectors (energy, telecommunications etc.) hitherto legally characterized as
requiring national capital or as state monopolies.
Source: adapted from Oliveira (1996).
negotiation, whereas non-monetary reforms would be widely open to adversarial

political procedures, including revitalized federalism. Insulation and a
streamlined staff were secured to core bureaucratic areas, such as in the
National Monetary Council, and in areas of policy-making that were deemed
crucial to the success of monetary stability.
In the past, the National Monetary Council had had a comparatively large
membership, including representatives from several bureaucracies and from the
private sector. In 1994, shortly after Cardosos inauguration, the membership of
the National Monetary Council was reduced to the smallest size in its history: from
1994 until 2002 only the Minister of the Economy, the Minister of Planing and the
President of the Central Bank had seats in the council (Souza and Castro, 1995).
The variation in the size of the membership of the National Monetary Council is
shown in Table 6.
The political power of the core economic staff was also greatly enhanced by
the centralization of budget-management procedures (Loureiro and Abrucio,
1999). Using extensive negotiation as a means of incorporating the new checks
and balances into the politics conducted by the federal executive was thus
counterbalanced by insulating key areas of economic policy-making and by
subordinating the policy-making ability of cabinet politicians to the discretion of
the core economic staff, who wielded the power of the purse (Loureiro and
Abrucio, 1999).

TABLE 6. Membership in the National Monetary Council of Brazil (19641994)
Year Number of Members
1964 11
1967 10
1969 14
1972 15
1990 17
1994present 3
Source: Souza & Castro (1995)
Thus, Cardoso was able to make political use of economic policy that was
distinguished by the enlarged ability it offered to defend monetary stability
derived from colossal increases in the interest rate. In this respect, Cardosos
strategy was therefore:
To pre-empt the veto power of conservative groups in congressional politics by
setting up an alliance with them after the elections (specifically between
Cardosos party, the Partido Social Democrtico Brasileiro (PSDB), and the PFL
and the PTB)11
To take advantage of the increase in popularity brought by the dramatic drop in
the inflation rate that was attained through the ingenious emergency reforms
and the consequent suppression of the inflationary tax
To sustain low rates of inflation by coordinating a flexible exchange-rate-
alignment policy with a commercial liberalization policy that allowed for the
entrenchment of some special interests, such as those of the automobile
industry
To trade exploding inflation rates for steep interest rates, notwithstanding
the resultant astronomical swelling of the public debt, and
To incorporate extensive and protracted negotiations for the non-monetary
portions of the plan under the auspices of the electoral and governing coalition.
Cardoso thus actually abandoned economic populism, which had characterized
much policy-making in the past, and developed economic pragmatism. In
contrast to economic populism, economic pragmatism gives emphasis to
monetary stability and external constraints, even at the expense of growth,
increased employment, and the redistribution of income. In sum, Cardoso took
advantage of the rifts that had been opened by Collor in the policy legacies of the
developmentalist state and proceeded with the expansion of pro-market
reforms. Yet, unlike Collor, Cardoso (1) did develop a manageable policy-making
structure by which he could pursue economic pragmatism and (2) did
incorporate the new checks and balances in his political strategy. While Collor
had used only the stick of his imperial politics, Cardoso used both the carrot of
extensive wheelings and dealings in the context of the new checks and balances
and also the stick of skyrocketing interest rates and a gigantic public debt. Thus,
a crucial portion of the disruptive energies that were once entangled in the
practices of patronage, clientelism, and co-optation of the old corporatist
framework and that were partially captured in economic populism and its
inflationary side effects were now steered into the management of the public
debt. This was compounded at the external level with enhanced credibility before

the international financial community, including the IMF and the World Bank, and
at the internal level by negotiations (under the watchful eye of the electoral and
governing coalition) with interest groups for the approval of the reforms of phase
four of the plan. These reforms included privatization and the opening of
markets in the utility and service sectors (energy, telecommunications, and so on),
which were previously closed to private or foreign investment. Periodic renewal
with the congress of a discretionary spending power over a portion of the budget
(the Fundo Social de Emergncia or FSE, later called Fundo de Estabilizao Fiscal
or FEF) and extensive negotiations with parties, politicians, state governors, and
interest groups, combined with firm handling of fiscal and monetary policy
through the core economic staff in a manner concerted with international aid
agencies, above all the IMF and the World Bank, allowed Cardoso to stay the course
and even be re-elected in 1998.
(VII) Lula in Power: Economic Pragmatism with a Human Face

Despite Cardosos noticeable achievement of monetary stabilization during his
first term in office from 1995 to 1998, as demonstrated by the sharp drop in
inflation after 1994 (see Figure 1), by the end of his second term (19992002) it
had become apparent that his main policy initiatives were ineffective in four major
respects. First, Cardosos policies failed to foster enough economic growth. In the
period from 1995 to 2002, average annual growth was 2.3 percent. Second,
unemployment remained relatively high, rising above 7 percent during 2002 (see
Figure 2). Third, under extremely high interest rates,12 the public debt grew to
unprecedented magnitudes, approaching 60 percent of gross domestic product
(GDP) by late 2002 (see Figure 3). This meant that huge amounts of valuable
resources had to be constantly allocated to debt servicing. Lastly, notwithstanding
improvements in health and education, Cardosos policies were unable to reduce
extreme poverty in Brazil (see Barros et al., 2000).
7,5
7
6,5
6
5,5
%
4,5
4
3,5
3
94 65 96 97 98 99 00 01 02
FIGURE 2. Year-end unemployment rate (19942002)

Source: Boletim do Banco Central do Brasil, January, 2003<http://www.bacen.gov.br> visited 15
January 2003

70,0
60,0
50,0
40,0
%
30,0
20,0
10,0
0,0
02
l
l
Ja v
v
p
p
ar
ar
ay
ay
01
Ju
Ju
No
No
Se
Se
n-
M
M
M
M
n-
Ja
FIGURE 3. Brazilian public sector debt as a percentage of the GDP (20012002)

Source: Boletim do Banco Central do Brasil, January, 2003<http://www.bacen.gov.br> visited 15
January 2003
Taking advantage of these vulnerabilities in Cardosos policy record, Luiz Incio

Lula da Silva13 of the Partido dos Trabalhadores (PT) campaigned strongly during
the elections of 2002. In his campaign, Lula stressed the continuing state of
poverty and destitution of the Brazilian people and criticized Cardosos policies as
neoliberal and unfair to the great majority of citizens. Lula also argued that
Cardosos policies were bad for economic growth and thus for economic and
social development. Lula was therefore able to exploit what was perhaps the
centerpiece and most successful motto of his campaign rhetoric: his promise to
eliminate hunger from Brazilian society under his proposed Zero Hunger
program.
However, as compared to previous campaigns in which he had participated,
Lula significantly rounded off his discourse in order to make it more widely
appealing to the middle class and to local and international business. Thus,
during his campaign in 2002, Lula strongly insisted that his policies would
definitely not undermine monetary stability. Moreover, with an eye on international
investors, Lula also stated emphatically that his government would not violate
existing contracts. Lastly, building on the tradition of the PT in fostering grassroots
activism, Lula stressed that he would lead the formation of an inclusive Social
Contract, which would bring together groups from the business community and
the labor unions, in order to hammer out plans capable of accommodating
diverse interests in areas such as tax policy and social security that would be
conducive to social development and economic growth. In fact, in 2002, Lula was
able to project an image of himself as an able politician of popular extraction with
a heartfelt moral concern for the have-nots. But he was also able to avoid being
perceived as a left-wing radical. This campaign strategy won him a massive victory
in which he rounded up more than 52 million votes, some 61.27 percent of more
than 86 million votes (Tribunal Superior Eleitoral, 2003).

Lulas new rhetoric also reflected the decisive political leadership of a faction
known as Articulao within the PT. Articulao, which had acquired a
hegemonic role in the PT since 1995, was distinguished by its comparatively
moderate positions on ideological and policy issues.14 This faction upheld the view
that, at the ideological level, the PT should evolve from its original radicalism and
move closer to society as a whole. This more moderate orientation of Articulao,
combined with poor economic growth under Cardosos government, also paved
the way for the development of an alliance of the PT with business sectors. This
alliance resulted in the choice of a business leader in the textile industry
(significantly, a sector which experienced economic hardship under Cardoso) as a
candidate for the vice-presidency.15
Lula was quick to reform the government machinery as soon as he took office.
Under the banner of the Zero Hunger program, and holding fast to his
campaign promises of correcting social injustice, Lula created several first-rank,
high-profile administrative posts in social policy areas, such as the Extraordinary
Ministry of Food Security and the Fight Against Hunger, the Special Secretary of
the Social and Economic Development Council, the Special Secretary for
Womens Rights, the Special Secretary for Human Rights, and the Ministry of
Social Assistance and Promotion.16
Yet, despite his clear drive to fight hunger and poverty, Lula also appointed an
economic staff that had left behind all ideological commitment to old populist
ideas and that now followed the moderate view of Articulao. Thus, Lulas
Minister of the Economy, Antnio Palocci, could stress in his inaugural speech
that for many decades we have been unmistakably one of the most unequal
countries in the world (O Estado de So Paulo, 2003). But he also insisted that,
although there had been much recent speculation as to the possible adoption of
unconventional measures by the new government, the president and the
economic staff held the firm conviction that it would be necessary to maintain
sound principles of economic policy, including fiscal restraint, the control of
inflation and a free exchange market (O Estado de So Paulo, 2003). This meant
that, under Lula, economic policy would essentially follow the model of
economic pragmatism adopted under Cardoso, but adding to it a renewed effort
to correct social injustice by adopting a strategy of extensive negotiations with
political parties and social groups. Thus, the PTs evolution, Lulas campaign, and
the beginning of his government all pointed in the direction of the emergence of
a modified version of economic pragmatism, resulting in a policy style that can be
described as economic pragmatism with a human face.
This humanized version of economic pragmatism was also distinguished from
the policies adopted under Cardoso with respect to the internalexternal link.
Thus, Lulas political strategy also pursued a renewal of foreign policy.
Indeed, on the international front, three main events may be indicated as signs
of innovation. First, given the failure of structural adjustment policies in
Argentina, Lula was favored by the relative loss of credibility of the kinds of
reforms advocated by agencies such as the IMF and the World Bank. He benefited
from the fact that these agencies promptly offered to support what seemed to be
Lulas creative policy plans, including the Zero Hunger program.
Second, Lula moved to become a leading figure in the formation of the so-
called Friends for Venezuela mediation group, which provided a springboard
from which Brazilian presidential diplomacy could try to acquire a protagonist
role in South American politics. Third, by appointing Celso Amorim as Minister of

Foreign Policy, a diplomat who shared his concerns about social development,
Lula embraced the chance of a general change in Brazilian diplomatic strategies.
Cardosos foreign policy had been in part characterized by a loose fit between
several of the presidents official speeches, which were often critical of
globalization, and practices at the concrete policy level. Concrete policies generally
conformed to globalization, since they combined (1) a pragmatic loyalty to
structural adjustment policies under the core economic staff coordinated by the
Ministry of the Economy and (2) a diplomatic stance that placed great emphasis
on technocratically oriented, multilateral trade negotiations and conflict
resolution conducted under the World Trade Organization (WTO), while allowing
the institution building of Mercosur to lose some of its steam.17
The diplomatic strategy of placing special emphasis on multilateral negotiations
under the WTO was stressed by Celso Lafer, who was appointed Brazilian Minister
of Foreign Relations in January 2001. Under Lafers predecessor, Ambassador Luiz
Felipe Lampreia (19952000), it had already become clear that the old globalist
perspective was no longer believed to generate an effective foreign policy
framework. It was recognized that The times of isolationism and of self-sufficiency
are bygone[s] (Lampreia, 1998: 8). But there was no clear and decisive focus on a
new direction for foreign policy that could be articulated under a new policy
paradigm.
According to Lafer, multilateralism was the only hope and the best guarantee
that globalization will promote the common good (2002: 239). Lafer upheld the
notion that it was imperative to inject renewed vigor in the WTO and that with
the aim of strengthening the multilateral system of trade, we need, first, to secure
due implementation to the agreements of the Uruguay Round (2002: 239).
Amorims views on international relations differ from those characteristic of
Lafer. In his inaugural speech, Amorim stated that Under the government of
Lula, South America will be our priority (MRE, 2003). He also declared that
Brazilian foreign policy would be oriented to recover the vitality and dynamism
of Mercosur (MRE, 2003). Amorim also called for more flexibility for investments
and social and environmental policies in the WTO (O Estado de So Paulo, 2002).
The insistence on concentrating efforts on arid technocratic negotiations and
conflict resolution under the WTO without a clear commitment to values linked to
social and economic development was, therefore, largely abandoned. In sum, the
shift to economic pragmatism with a human face seems to be accompanied by
an effort to renew foreign policy so that it may become an adequate external
support for domestic aspirations of social and economic development.
(VIII) Concluding Remarks

Our article has discussed political transitions in Brazil in the context of
globalization. We have focused on transformations in state structures and policy
legacies that have, in our view, influenced internal responses to a changing
international environment. We have stressed that the legacy of the developmentalist
model of policy-making was important to shoring up resistance to change in the
1970s and 1980s. We have also indicated that the management of macroeconomic
policy combined with the broader political process was an important dimension of
the transitions. While economic populism developed from the 1960s onward
and provided new instruments to governments under the military regime, the
growth of inflation determined the rise of economic pragmatism. However,

persistently slow growth and a relatively poor record in social policies prepared
the ground for the emergence of economic pragmatism with a human face. We
have also focused on the role of foreign policy and its initial failures to afford
timely articulation of the internalexternal link, a situation that seems to have
changed at the beginning of the 21st century.
Our conclusion is that the transitions in Brazil had a double character. On the
one hand, they were characterized by the development of resistances to the swift
adaptation of domestic policies to changing economic conditions in the
international environment. On the other hand, in the long run such resistances
have led to the establishment of institutional structures and policy changes that
have opened up new possibilities for the construction of a more pluralistic
democratic order that may aspire to overcome extreme social injustice at the local
level and to adopt a more active role in hemispheric and international affairs.
Notes
1. Cardoso was elected president of Brazil in 1994 and was re-elected in 1998. He
remained in office from 1995 to 2002.
2. The translations appearing in the present article are by Marcus Faro de Castro.
3. Cardosos statements came as a response to the publication by the American
government of a report which pointed to insufficient achievements by the Brazilian
government with respect to the protection of human rights, which included, in
Washingtons view, poor performance in the promotion of social justice (US Department
of State, 2000).
4. These were administrative panels functioning under the supervision of the Ministry of
Labor. Such administrative panels evolved to become incorporated as a division of the
judicial branch in the 1940s.
5. Some authors have described the impact of expansionary monetary and fiscal policies in
Latin America, referring to this as economic populism (see Dornbush and Edwards,
1991). Generally speaking, this literature highlights the fact that economic populism
hinders redistribution aimed at overcoming poverty (see, for example, Cardoso and
Helwege, 1991). However, the connections between politics and economic policy in
contemporary societies have also been addressed from other perspectives. Hirschman
(1985), for example, points to the positive political uses of inflation.
6. On the internationalization of economics and its emergence as a distinct field of
expertise in Brazil, see Loureiro (1997).
7. Some examples are the Movement for Amnesty (197778), the Feminist Movement
(197582), the Movement Against the High Cost of Living (Custo de VidaCarestia,
197480), the National Confederation of Neighborhood Residents (1982), and the
National Union of High-School Students (Unio Nacional de Estudantes
Secundaristas). Several of these have remained active and developed links with political
parties, as in the case of the Movement of Landless Peasants (Movimento dos Sem-
Terra) which was formed in 1979.
8. Examples include the National Movement of Homeless Children (Movimento Nacional
dos Meninos e Meninas de Rua), the Natives Movement (Movimento dos ndios), the
Movement of Persons Indebted to the National Housing System, the National
Movement for the Reform of Education, and so forth.
9. For example, the movements known as I Love Rio (Viva Rio) and I Love So Paulo (Viva
So Paulo) were concerned with urban development, security, and the quality of life in
those metropolitan regions and the movement called Ethics in Politics organized
against President Collor de Mello in 1992, while there also existed the so-called
Movement Against Urban Development in Historical Districts, the National Movement
Against State Reforms, as well as Citizens Action for Life and Against Hunger and
Destitution (Ao da Cidadania contra a Fome, a Misria, pela Vida) in 199396.

10. Although the formal powers of the congress were expanded under the 1988
Constitution, the empirical verification of the consequences of this constitutional
change has been a subject of debate (see Figueiredo and Limongi, 1995; Santos, 1997).
11. The PFL and the PTB are conservative parties, while the PSDB is a center party.
12. Per annum short-term interest rates averaged 18 percent in 2001 and 2002 (Banco
Central do Brasil, 2003).
13. The nickname Lula was legally added to his original name (Luiz Incio da Silva).
14. The leadership of Articulao became prominent at the tenth general meeting of the
PT, convened in August 1995. This meeting elected Jos Dirceu as president of the party.
Jos Dirceu became secretary to the president in Lulas government. See Velasquez and
Costa (2001).
15. This was Senator Jos de Alencar of the Partido Liberal (PL). The alliance was approved
by the PT in March 2002.
16. These administrative posts were introduced in addition to the more traditional social
policy ministries in the areas of culture, health, education, sports, and so on.
17. According to Vaz, from 199697 onward Mercosur was made to become distant from
the goal of construction of a common project of development and transformation of
production that guided the process by which it emerged and the first years of its
evolution (2001: 48).
References
Abreu, Marcelo de Paiva (1996). O Brasil e o GATT: 19471990, in Jos Augusto Guilhon
Albuquerque (ed.) Diplomacia para o Desenvolvimento, 20118. So Paulo: Cultura
Editores Associados.
Abreu, Marcelo de Paiva (1997). O Brasil na Rodada do Uruguai do GATT: 19821993, in
Gelson Fonseca Jnior and Srgio Henrique Nabuco de Castro (eds) Temas de Poltica
Externa Brasileira II, 2nd edn, Vol. 1, 32552. Braslia and So Paulo: Fundao Alexandre
de Gusmo and Editora Paz e Terra.
Abrucio, Fernando Luiz and Costa, Valeriano Mendes Ferreira (1998). Reforma do Estado e o
Contexto Federativo Brasileiro. So Paulo: Fundao Konrad-Adenauer-Stiftung e. V.
Representao no Brasil.
Almeida, Maria Hermnia Tavares de (1996). Pragmatismo por Necessidade, Dados:
Revista de Cincias Sociais 39(2): 21334.
Alves, Maria Helena Moreira (1984). Estado e Oposio no Brasil (19641984). Petrpolis:
Vozes.
Arantes, Rogrio Bastos (1999). Direito e Poltica: O Ministrio Pblico e a Defesa dos
Direitos Coletivos, Revista Brasileira de Cincias Sociais 14(39): 83102.
Arretche, Marta (2002). Federalismo e Relaes Intergovernamentais no Brasil: A Reforma
de Programas Sociais, Dados: Revista de Cincias Sociais 45(3): 43158.
Banco Central do Brasil (2003). Boletim do Banco Central do Brasil, URLs (published online
January 2003, consulted 15 January 2003): http://www.bacen.gov.br or http://www.
bcb.gov.br.
Barros, Ricardo Paes de, Henriques, Ricardo and Mendona, Rosane (2000). Evoluo
Recente da Pobreza e da Desigualdade: Marcos Preliminares para a Poltica Social no
Brasil, in Cadernos Adenauer 1: Pobreza e Poltica Social. So Paulo: Fundao Konrad-
Adenauer-Stiftung.
Batista, Paulo Nogueira (1993). A Poltica Externa de Collor: Modernizao ou
Retrocesso? Poltica Externa 1(14): 10635.
Cardoso, Eliana and Helwege, Ann (1991). Populism, Profligacy and Redistribution, in
Rudiger Dornbush and Sebastian Edwards (eds) The Macroeconomics of Populism in Latin
America, 4570. Chicago: The University of Chicago Press.
Castro, Marcus Faro de (1997a). O Supremo Tribunal Federal e a Judicializao da
Poltica, Revista Brasileira de Cincias Sociais 12(34): 14756.

Castro, Marcus Faro de (1997b). The Courts, Law and Democracy in Brazil, International
Social Science Journal 152: 24152.
Castro, Marcus Faro de (1997c). Consideraes Preliminares sobre o Federalismo e a
Poltica Econmica no Brasil aps 1980, in Conselho Brasileiro de Relaes
Internacionais (CBRI), O Federalismo Mundial e Perspectivas do Federalismo no Brasil, 6171.
So Paulo: CBRI.
Cox, Robert (1994). Global Restructuring: Making Sense of the Changing International
Political Economy, in Richard Stubbs and Geoffrey Underhill (eds) Political Economy and
the Changing Global Order, 4559. New York: St. Martins Press.
Diniz, Eli and Boschi, Renato (1997). Estabilizao e Reformas Econmicas no Brasil: A
Viso das Elites Empresariais e Sindicais, Teoria e Sociedade 1: 10525.
Dornbush, Rudiger and Edwards, Sebastian, eds (1991). The Macroeconomics of Populism in
Latin America. Chicago, IL: The University of Chicago Press.
Figueiredo, Argelina Cheibub and Limongi, Fernando (1995). Mudana Constitucional,
Desempenho do Legislativo e Consolidao Institucional, Revista Brasileira de Cincias
Sociais 29: 175200.
Folha de So Paulo (2000). FHC Liga EUA Pobreza no Brasil. 2 March: 1.
Gohn, Maria da Glria (1997). Teorias dos Movimentos Sociais. So Paulo: Edies Loyola.
Hirschman, Albert O. (1985). Reflections on the Latin American Experience, in Leon N.
Lindberg and Charles S. Maier (eds) The Politics of Inflation and Economic Stagnation,
5377. Washington, DC: The Brookings Institution.
IBGE (Brazilian Institute of Geography and Statistics) (2001). Indice de Preos ao
ConsumidorSrie Histrica. URL (consulted 11 May 2001): http://www2.
ibge.gov.br/pub/Precos_Indices_de_Precos_ao_Consumidor/IPCA/Series_Historicas.
Kapstein, Ethan B. (1994). Governing the Global Economy. Cambridge, MA: Harvard University
Press.
Lafer, Celso (2002). Multilateralismo: A nica Esperana, in Mudam-se os Tempos:
Diplomacia Brasileira20012002. Braslia: FUNAG/IPRI. Speech given at the Fourth
Ministerial Conference of the WTO, Doha, Qatar, 9 November 2001.
Lampreia, Luiz Felipe (1998). A Poltica Externa do Governo FHC: Continuidade e
Renovao, Revista Brasileira de Poltica Internacional 42(2): 517.
Lima, Maria Regina Soares de (1994). Ejes Analticos y Conflicto de Paradigmas en la
Poltica Exterior Brasilea, America Latina/Internacional 1(2): 2746.
Loureiro, Maria Rita (1997). Os Economistas no Governo. Rio de Janeiro: Editora Fundao
Gettlio Vargas.
Loureiro, Maria Rita and Abrucio, Fernando Luiz (1999). Poltica e Burocracia no
Presidencialismo Brasileiro: O Papel do Ministrio da Fazenda no Primeiro Governo
Fernando Henrique Cardoso, Revista Brasileira de Cincias Sociais 14(41): 6989.
Malloy, James M. (1979). The Politics of Social Security in Brazil. Pittsburgh, PA: University of
Pittsburgh Press.
Moiss, Jos lvaro (1995). Os Brasileiros e a Democracia. So Paulo: Editora tica.
Montoro Filho, Andr Franco (1994). Federalismo e Reforma Fiscal, Revista de Economia
Poltica 14(3): 2030.
MRE (Ministrio das Relaes Exteriores) (2003). Discurso proferido pelo Embaixador
Celso Amorim por ocasio da Transmisso do Cargo de Ministro de Estado das Relaes
Exteriores, Braslia, 1 January 2003, URL (consulted 15 January 2003) http://www.
mre.gov.br/sei/amorim-posse.htm.
Nunes, Edson (1997). A Gramtica Poltica do Brasil. Rio de Janeiro, Zahar, and Braslia:
ENAP.
O Estado de So Paulo (2002). O Papel Comercial das Embaixadas Ser Ampliado. 18
December: 17.
O Estado de So Paulo (2003). E Preciso Trilhar o Caminho das Reformas. 3 January: B4.
Oliveira, Gesner (1996). Brasil Real: Desafios da Ps-Estabilizao na Virada do Milnio. So
Paulo: Editora Mandarim.
Pereira, Luiz Carlos Bresser (1992). O Dcimo Primeiro Plano de Estabilizao, in Joo

Paulo dos Reis Velloso (ed.) Combate Inflao e Reforma Fiscal, 13150. Rio de Janeiro:
Jos Olympio Editora.
Sallum Jr., Braslio and Kugelmas, Eduardo (1993). O Leviat Acorrentado: A Crise
Brasileira dos Anos 80, in Lourdes Sola (ed.) Estado, Mercado e Democracia, 28099. So
Paulo: Editora Paz e Terra.
Santos, Maria Helena de Castro (1997). Governabilidade, Governana e Democracia:
Criao de Capcidade Governativa e Relaes Executivo-Legislativo no Brasil Ps-
Constituinte, Dados: Revista de Cincias Sociais 40(3): 33576.
Santos, Wanderley Guilherme dos (1979). Cidadania e Justia: A Poltica Social na Ordem
Brasileira. Rio de Janeiro: Editora Campus.
Silva, Pedro Luiz Barros (1997). A Natureza do Conflito Federativo no Brasil, in Eli Diniz
and Srgio Azevedo (eds) A Reforma do Estado e Democracia no Brasil, 35163. Braslia:
Editora Universidade de Braslia and ENAP.
Skidmore, Thomas (1973). Politics and Economic Policy-Making in Authoritarian Brazil,
193771, in Alfred Stepan (ed.) Authoritarian Brazil, 346. New Haven, CT: Yale
University Press.
Souza, Amaury de (1992). O Sistema Poltico-Partidrio, in Hlio Jaguaribe (ed.)
Sociedade, Estado e Partidos na Atualidade Brasileira, 15798. So Paulo: Editora Paz e Terra.
Souza, Marcelo de Lima and Castro, Marcus Faro de (1995). Independncia Poltica e
Econmica do Banco Central do Brasil, Cadernos de Cincia Poltica 17. Braslia:
Departamento de Cincia Poltica, Universidade de Braslia.
Souza, Maria do Carmo Campello de (1990). Estado e Partidos Polticos no Brasil (19301964),
3rd edn. So Paulo: Editora Alfa-mega.
Storrs, Keith Larry (1973). Brazils Independent Foreign Policy, 19611964, PhD thesis.
Cornell University, Latin American Program.
Tribunal Superior Eleitoral (2003). Eleioes 2002. URL: http://www.tse.gov.br/eleicoes/
eleicoes2002/.
US Department of State (2000). 1999 Country Reports on Human Rights Practices. Washington,
DC: Bureau of Democracy, Human Rights, and Labor, US Department of State. URL:
http://www.state.gov/www/global/human_rights/1999_hrp_report/brazil.html.
Vaz, Alcides Costa (2001). Mercosul aos Dez Anos: Crise de Crescimento ou Perda de
Identidade? Revista Brasileira de Politica International 44(1): 4354.
Velasquez, Musa Clara and Costa, Marcelo (2001). Jos Dirceu, in Alzira Alves de Abreu et
al. (eds) Dicionrio Histrico-Biogrfico Brasileiro Ps-1930, Vol. 2, 18779. Rio de Janeiro:
Editora FGV.
Vianna, Luiz Werneck and Burgos, Marcelo (2002). Revoluo Processual do Direito e
Democracia Progressiva, in Luiz Werneck Vianna (ed.) A Democracia e os Trs Poderes no
Brasil, 337491. Belo Horizonte and Rio de Janeiro: Editora UFMG and IUPERJ/FAPERJ.
Vianna, Luiz Werneck et al. (1999). A Judicializao da Poltica e das Relaes Sociais no Brasil.
Rio de Janeiro: Editora Revan.
Weir, Margaret and Skocpol, Theda (1985). State Structures and the Possibilities of
Keynesian Responses to the Great Depression in Sweden, Britain, and the United
States, in Oeter Evans, Dietrich Rueschemeyer and Theda Skocpol (eds) Bringing the
State Back In. Cambridge: Cambridge University Press.
Biographical Notes
MARCUS FARO DE CASTRO is Professor of Law and International Relations at the
University of Braslia, Brazil. He is the author of De Westphalia a Seattle: A Teoria das
Relaes Internacionais em Transio (From Westphalia to Seattle: International
Relations Theory in Transition) and Latin America and the Future of International
Development Assistance. ADDRESS: Universidade de Braslia, Faculdade de Direito,

Campus Universitrio Darcy Ribeiro, Asa Norte, 70910-900, Braslia-DF, Brasil

[email: mfcastro@unb.br].
MARIA IZABEL VALLADO DE CARVALHO is Professor of International Relations at the
Department of International Relations of the University of Braslia. She has
published on political parties and Brazilian foreign policy, including Crise ou
Falncia: os Partidos Polticos Ontem e Hoje (Crisis or Failure?: Political Parties,
Yesterday and Today) and O Itamaraty, a Politica Externa e os Empresrios (Itamaraty,
Foreign Policy, and Brazilian Business). ADDRESS: Universidade de Braslia,
Departamento de Relaes Internacionais, Campus Universitrio Darcy Ribeiro,
Asa Norte, 70910-900, Braslia-DF, Brasil [email: mabel@unb.br].

Globalization and Recent Political Transitions in Brazil PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Globalization and Recent Political Transitions in Brazil PDF

Uploaded by

Copyright:

Available Formats

International Political Science Review (2003), Vol 24, No.

Globalization and Recent Political Transitions in

MARCUS FARO DE CASTRO AND MARIA IZABEL VALLADO DE CARVALHO

ABSTRACT. This article discusses political transitions in Brazil in the

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

(II) Resistances Emerge from Old Transitions

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

The populist-democratic period (194664)

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

TABLE 1. Selected corporate bodies (19301940)

(1931) National Coffee Council

Source: Nunes (1997) and Malloy (1979)

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

TABLE 2. Number of voters as percentage of total population in Brazil (19451990)

Year Percentage of voters

Source: Souza (1992), p. 197

TABLE 3. Evolution of the social insurance system in Brazil (19231970)

Year Number of institutions Active insured Retired insured

Source: Malloy (1979), p. 102

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Development Plan, which insisted on import substitution even under external

(III) The Rise of the New Checks and Balances

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

economically oriented organizations of workers and producers (Almeida, 1996:

(IV) Effects on Public Policies

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

(V) The InternalExternal Link and the Collor Divide

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

In the 1970s and 1980s, the international economic environment underwent

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

(VI) Politics and Policy-Making Under Cardoso

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

TABLE 4. Brazilian stabilization plans, 19791991

1) First Delfim Plan (1979)

Source: Pereira (1992), pp. 141144

constantly and automatically to adjust prices in anticipation of future inflation on

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

TABLE 5. Plano Realimplementation phases

Phase 1 Emergency fiscal adjustment (1993):

Source: adapted from Oliveira (1996).

negotiation, whereas non-monetary reforms would be widely open to adversarial

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

TABLE 6. Membership in the National Monetary Council of Brazil (19641994)

Year Number of Members

Source: Souza & Castro (1995)

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

(VII) Lula in Power: Economic Pragmatism with a Human Face

FIGURE 2. Year-end unemployment rate (19942002)

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

FIGURE 3. Brazilian public sector debt as a percentage of the GDP (20012002)

Taking advantage of these vulnerabilities in Cardosos policy record, Luiz Incio

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

(VIII) Concluding Remarks

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015

Downloaded from ips.sagepub.com at GEORGIAN COURT UNIV on March 10, 2015