Steen Fryba Christensen (Aalborg University ; sfc@cgs.aau.dk)

1. South American Development Strategies and the end of the Commodity Boom: a GPE Perspective Steen Fryba Christensen (Aalborg University; sfc@cgs.aau.dk) Presentation at PUC-Minas seminar – August 25, 2017: ”I SeminarioInternacional PPGRI: Segurança e DesenvolvimentoInternacional em umMundoIncerto”

2. Integrating ”terms of trade” and ”commoditypricevolatility” in GPE theory and analysis. • ”South America is uniquelyexposed to worldcommoditypriceturbulence” (World Bank 2016: 27 – The CommodityCycle in Latin America: Mirages and Dilemmas). • ”Whilethismaybe a well-knownfact, itsoverwhelmingdominance has perhaps beeninsufficientlyappreciated. Fluctuations in South America’skeymacroindicators … have mirrored terms of tradefluctuations to an unsettlingextent.” (World Bank 2016: 5 – The CommodityCycle in Latin America: Mirages and Dilemmas). • Exploring the multiple consequences of South America’s ”CommoditiesSypercycle” (2003-2017)

3. Focus and aim • 1. Focus: South American Development Strategies 2014-2017 (economic and foreign policy strategies). • 2. Aim: To understand South American developmentstrategies and global insertion from af GPE perspectivebased on the comparison of threerepresentativecountry cases: Bolivia, Brazil and Peru. • Aim: To contribute to understanding the current South American ”situation” in the light of GPE theoryintegrating TOT/Volatility.

4. Structure of the presentation • 1. Background: Neoliberalism (1990s). China’s Rise and transformation of the global order. The commodity supercycle and South American development strategies, development and global insertion (2003-2013) • 2. Theory: “Commodity Price Volatility” + “Terms of Trade” (PST) • 3. South American Development Strategies 2014-2017 • 4. Key debates on: the current South American situation in a period of uncertain times.

5. 1. Background • The Global System: From unipolarity and Western/OECD economicdominance. Towards a new economic balance. Diffusion of power in the GPE. Rise of Asia/China and much of the South – Commodity Boom. South-South ”alliances” and North-South ”contest” GEG – ”BRICS” etc. Multipolarity and multilateralism. International financialcrisis. • South American Development Strategies: Neoliberal homogeneity in the 1990s. Heterogeneous national developmentstrategies in the 2000s. ”Commodityconsensus”. Differentapproaches to commodity ”windfall”. Differentforeign policy orientations. Bolivia, Brazil and Peru representthispath and variety (Ven, Arg, Chi)

6. Background: South American Development Strategies 2000-2013 • Bolivia: Anti-imperialism and geopoliticalideologicalfocus. South-South Cooperation. ALBA. Unasur. • Refoundation of the state. • Nationalization. Social orientation. Fiscalprudence. Stable economicgrowth – multiplyereffects from posivive terms of trade. National savingsprudence. (Comparison with Venezuela).

7. Background: South American Development Strategies 2000-2013 • Brazil: ”Brazil’srise” to influence. Informalleader of South America. South-South alliances and SSC. ”Soft power”. Economicstrengthening. Vision: A ”shared global multipolar order” based on multilateralism. • Social orientation. Relative fiscalprudence. Strongmultiplyereffects from positive terms of trade. An apreciatedreal exchangerate, growing currentaccount deficits and externaleconomicvulnerabilityDe-industrialization and re-commodification (Dutch Disease). (Comparisonwith Argentina).

8. Background: South American Development Strategies 2000-2013 • Peru: Commercial orientation, open regionalism and diversification. • Neoliberal strategy. Fiscalprudence. Stable economicgrowth. Multiplyereffects from positive Terms of trade. National Savingsprudence. (Comparisonwith Chile and Colombia).

9. 2. Commodity Price Volatility within Global Political Economy: Theory • The Prebisch-Singer Thesis: Deterioration in terms of trade for countriesspecializing in commodityproduction and exports. • RaúlPrebischseesvolatiligyin commodityprices as the keychallengeprovokinginstability and externalvulnerability. Prebisch’srecommendations: industrialization, diversification of exportstowardsindustry, Southern-led alliances in global economicgovernance arena. • Theoreticaldebates on naturalresourcesbasedeconomicdevelopmentand theirimplications on views on appropriatedevelopmentstrategies • New developments in the global economysince the 1950s (economicmodernization in somedevelopingcountries; global productionnetworks). • Nevertheless, commodityPRICE VOLATILITY and terms of traderemain relevant. Dutch Diseaseand commoditysupercycles: the risks of de-industrialization, externaleconomicvulnerability and very negative sequences of cumulativecausation with significantimpacts on economic and social development as well as politics and socio-politicalinstability. Adjustment problems: economic and politicaleconomyaspects (as well as foreign policy/global politicsimpacts – GPE relevance).

10. 3. Analysis: South American Development Strategies 2014-2017 • Price shockaffects South American economies as a whole. Exportearnings and taxincomesfall – multiplyereffects on domesticdemand. • Actualeffectsvaryacrosscountries and depend on domesticlevel factors and policies. • Cumulativecausation. Risk of a ”viciouscircle” (social and economic) thatinteracts with politics/foreign policy. • Potential long-term structuralconsequences+ impacts on South America’sinsertion in the GPE.

11. Brazil(2014-2017) • Short-term. Major fall in exports (and imports). Severeeconomicdownturn. Harshfiscaladjustment. • Externaladjustmentthroughweakexchange rate and reduction of imports. Hugefiscal deficits in spite of cutsdue to fallingrevenues. Higher public debt/GDP ratio. Continued de-industrialization – continuation of commodityorientation. • Impact on politics. Neoliberal economicstrategy. Impeachment. • A viciouscircle with deep social, economic and politicalimpacts.Brazil’s ”retreat” and weakening in the international system/region.

12. Brazil(2014-2017) • Foreign policy moves towards a ”commercial” strategy with focus on economic openness. Major implications for South-South strategy (Africa; South America). Weakening of Brazil as an ”emerging power”: Image and material capability. Not an informal leader of South America. Weakening of South American regionalism. Greater alignment with US foreign policy. Still unclear what the implications will be for the prioritization of the BRICS-alliance and the ”shared order” diplomacy. • Long-term structural consequences?– perhaps the economic impact will mainly be temporary. But, huge fiscal challenges remain and Brazil’s tendency towards re-commodification continues. A new economic upturn could potentially give new air to industry. Volatility remains relevant. Still an emerging power?

13. Bolivia (2014-2017) • Short-term economiceffects on growth from fallingcommoditypricesneutralized by counter-cyclicalpolicies. • A 6.6 percent fiscal deficit in 2015 + borrowing from China for 11 strategicprojectsincluded in Bolivia´s 2016-2020 National Economic and Social Development Plan. • Continuedeconomicgrowth and social orientation (Vivir bien). Stable socio-political situation. Buffers (prudentfiscal/savings policy) give Bolivia more room of maneuverthanBrazil. The level of reserves falls and foreigndebt rises. • Challenge: external and fiscaladjustment (sustainability). (Comparison to Venezuela)

14. Bolivia (2014-2017) • Foreign policy remains stable: Anti-colonial; anti-hegemonic – anti-US and anti-transnational empire = ”Economicliberation”. South-South Cooperation. China important. China is seen as offeringhelp and cooperation, whereas the US is seen as interventionist and repressive. • Regionally: Weakeningof ALBA and UNASUR (Comparison with Venezuela– China and Maduro/opposition; ”lender of last resort”) (US agenda).

15. Peru (2014-2017) • Peru maintains robust domesticdemand in spite of commoditypricefall. Helps manufacturingproductionpick up steam. Peru is able to maintainreasonableexternaleconomic balance (higherexportvolumes). • Financial buffers built up during the boom yearshelpsmoothadjustment. • Foreign policy basicallyunaltered: Commercial in orientation, neoliberalism and diversification of trade (FTA’s). Substantial FDI in mining (China et al). (Chile harder hit by commoditypricefall. Major fiscal deficits. Low economicgrowth) (similar FP)

16. 4. Final comments and key debates on the current South American situation from a GPE perspective • Long term structuralconsequences of South America’scommoditysupercycle? Global economicinsertion, development models and social and politicalconsequences? (Fragility and instability). • The future of commodityprices?: A new normal of relativelylowprices: Does the Prebisch-Singer thesis still hold? Volatilitywillbe relevant in the future, too! • Whatway forward for national economicdevelopmentstrategies?

17. China’s economic and political impact on South America? Positive? • Economicaspects – short term positive (own policy matters). Long term? A structural blind alley or positive potential? Cumulativecausation: the case of Venezuela is extraordinarilyproblematic. • Politicalaspects: 1. Major politicalweakening of South American left-wing forces and their visions for the region and the world. 2. Autonomy vs. dependency and subordination? (to US and China; foreigncapital). 3. Regional integration: a fragmented region. Lackof Brazilianleadership. US geopolitical position is strengthened in the region. Chineseinfluence on economicgovernance.