Brazil’s external economic policy: a long lasting paradigm Pedro da Motta Veiga (CINDES)

1. Brazil’s external economic policy: a long lasting paradigm Pedro da Motta Veiga (CINDES) 13rd General Conference of EADI and DSA University of York, 19-22 September 2011

2. A stylized historical background: from IS to globalization • Brazil as an unique case of successful industrialization in LA based on IS until the late 70s. 2) The lost decade: macroeconomic deterioration in the 80s. 3) 90s / post-Cold War: economic liberalization 4) 00s: the emergence /globalization as an opportunity 5) 10s: globalization as a threat ?

3. A long lasting policy paradigm of EEP Against this historical background, which implied deep changes in the economic relationships of Brazil with its international environment... … continuity has prevailed over ruptures (e.g. Chile) or volatility (e.g. Argentina) as far as the paradigm of external economic policy is concerned.

4. The hegemonic paradigm at a glance • Main objective of EEP: to preserve space for “autonomous” development policies. • The world economic order and international regimes are perceived (i) as expressions of the Northern interests and (ii) as threats to the “autonomous” industrialization project. • Small room, if any, for global governance concerns. EEP focuses rather on domestic risks arising from the international sphere.

5. The domestic drivers of EEP • Domestic drivers have played a major role in shaping Brazil’s EEP and in explaining its stability over time Main domestic drivers of the EEP: • Dominance of import-competing industrial sectors in the political economy of the trade and industrial policies. • More broadly, identification of the industrialization process to the “national project”, broadly shared by politicians, academics, business and trade unions.

6. A paradigm resilient to crisis & policy shifts • The “industrialist” policy paradigm has dominated the political arena in Brazil despite the long lasting economic crisis in the 80s and the economic liberalization in the 90s. • This hegemony explains why Brazil’s adherence to “neoliberalism” has been moderated and negotiated with the import-competing sectors (in sharp contrast with other LA countries) => “pragmatic liberalization”.

7. The emergence of Brazil: a new test for the paradigm • This paradigm has also been tested in the last decade, under Lula, when Brazil emerged in the international arena as a relevant player. • For the first time in decades, the international economy was perceived as a source of opportunity: an optimistic view of Brazil’s international prospects.

8. Behind optimism: new drivers at work - 1 • Behind this optimism, the diversification of offensive and outward-oriented private sector’s interests: • exports (China-driven commodity boom) • investments abroad: Brazilian transnational emerge. • Brazil benefits (through commodities exports) from China’s rise without any cost: import-competition sectors not challenged by foreign suppliers in the domestic market.

9. Behind optimism: new drivers at work - 2 • The “global risks agenda” gets a larger place in the EEP, specially issues related to climate change and food security. • But perception of global risks does not jeopardize the “opportunity-led” agenda under Lula. • Brazil’s aspiration to become a relevant international player and a “shaper” of a multipolar world goes beyond the economic agenda and acquires a political dimension: efforts to mediate the Iran crisis in 2010.

10. But the old drivers are still there… • However, even in a scenario where new drivers emerge, the “industrialist coalition” remains hegemonic in the setting of the EEP. • The «North-South divide» still plays a central role in the narrative (and the legitimacy) of the EEP and it shapes Brazil’s perception of global governance issues. • The focus of the global governance agenda is on the redistribution of power between DdCs and DgCs in the international fora.

11. ... and they are getting stronger again • To sum up, under Lula, domestic and international evolutions backed a larger autonomy of the foreign policy vis à vis its domestic conditioning factors, but… … Brazil keeps its preference for a Westphalian multilateralism, based exclusively on National States actors. • This profile has been strengthened by the recent evolution of the Brazilian and international economies.

12. Brazil is introduced to the dark side of globalization • From 2008 on: international crisis + strong appreciation of the exchange rate + growth of industrial imports (mainly from China)=> the dark side of globalization hits Brazil. • The debate on Dutch disease and deindustrialization => what future, if any, for the Brazilian industry?

13. The end of optimism • Main consequence of this new scenario: exit optimism + an EEP tightly conditioned by the domestic economic concerns. • Defensiveness of Brazil’s EEP is back to the driver seat => no assumption of new international commitments + more protectionist industrial and trade policies. • Perception of global macroeconomic risks – and its costs to Brazil – grows and dominates the global risks agenda as seen from Brazil.

14. Some questions to conclude - 1 • How much of the “Lula’s era” changes in the dynamics of Brazil’s foreign policy was due to conjunctural – more than structural - domestic and international factors ? • What impact the new international and domestic scenario will have on Brazil’s stance towards global governance and global risks issues?

15. Some questions to conclude - 2 • Will Brazil’s EEP come back to its “pre-emergence pattern” (making small room to global governance issues)? … or the convergence of external and domestic difficulties will lead Brazil to integrate the challenges of global governance and risks to its EEP?