Crisis or Collapse?

Brazil’s 10-Year Downward Spiral

By James M. Cypher and Guillermo Foladori | September/October 2021

This article is from Dollars & Sense: Real World Economics, available at

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In 2007, Luis Inácio Lula da Silva, then Brazil’s president, declared that “God is a Brazilian.” He was far from alone in considering his country to be on a new and blessed path. Brazil had celebrated sufficient discoveries of oil to permit it to achieve energy independence, thus ending a long era during which oil imports had burned a hole in Brazil’s trade account. Real GDP growth at an annual average of 4% from 2004 through 2007—surprisingly strong for Brazil, which had long been haunted by stagnation—appeared to vindicate Lula’s innovative, pro-poor policies: Unemployment fell from 13% of the labor force in 2004 to 7.5% in 2007, while average wages, adjusted for inflation, rose roughly 13%. From 2003 to 2007, the poverty rate fell by an astonishing 39% while Lula’s approval rating soared, reaching an unheard-of level of 70% in the following months.

That euphoric moment stands in stark contrast to Brazil in 2021: By June 14, 2021 nearly half a million Brazilians had died from the Covid-19 pandemic; one death for every 434 citizens. The United States, with 600,000 recorded deaths on June 14, had a terrible, but lower, rate of one death per 555 citizens. In 2020 average income per capita was 5.4% less than it had been in 2010, but this measure hid the fact that the top 10% had seen their incomes soar even as the GDP fell from 2014 onward. (For example, in 2018 the incomes of the top 1% rose by 8.2%.) Already, in 2018, one-half of the population struggled to survive on $100 or less per month. By 2020 the unemployment rate had reached 13%—roughly double what it had been only six years earlier. The convulsing path that Brazil traced from 2007 eventually led to the horrors of 2021.

How and why has Brazil fallen so far, so fast?

Yesterday and Today: The Struggle to Defeat Hunger

Officially measured unemployment, which is frequently high in Brazil, reached a record level of 15% in the first quarter of 2021—far above even the previous highest year in the past two decades, 2017. However, this official measure misses a great deal: In July 2020, when the formal unemployment level was near a record high, researchers estimated—by adding in the over 17 million workers that had left the labor force lest they contract Covid-19—that the actual unemployment rate was over 30%. When we add those that left the labor force out of fear, plus those of working age who were cast into the informal sector (estimated at 38 million in 2020) to the unemployed, roughly two-thirds of working age Brazilians in 2020–2021 were condemned to a penurious existence. In 2020 the country’s GDP dropped by 4.1%, one of the worst recessions ever recorded in Brazil. Yet the number of Brazilian billionaires jumped 44% in 2021 as speculative capital flourished. Meanwhile, the bottom 40% of wage earners in metropolitan areas suffered a 34% drop in their wages in 2020, according to the government’s household survey.

Stepping back briefly from the afflictions stalking Brazil today, we should recall that 20 million new jobs materialized between 2003 and 2013—a large portion of them offering some social benefits and labor law protections. Yet, job insecurity/stability remained extremely high, as reflected by the annual labor turnover rate of 43% in 2012. Thus labor “formalization” marched in step with “precarization”: 26% of formal-sector workers toiled under outsourcing schemes with labor schedules and hours subject to wide, unpredictable swings in 2011.

In 2003 the majority (57%) of the rural population suffered from food insecurity, which prompted the Fome Zero (zero hunger) program as instituted by the new Workers’ Party (Partido dos Trabalhadores, PT) government. By 2006, after the PT had struggled to achieve zero hunger through Bolsa Família—the “Family Allowance” conditional cash transfer program, hunger had plummeted. Several other income-targeted programs, including a free meals program for students that dispensed 47 million meals per day, commenced. Still, in 2006, 37.5% of all households remained food insecure. As the PT continued to pour support into public-support programs for the poor, “severe” food insecurity hit a record low of only 4% of households by 2013, while overall food insecurity had been cut to 24%. By 2014 over 30 million Brazilians had been pushed out of poverty as the rate fell from 48% to 21% from 2002 to 2013.

Bolsa Família, always the flagship program of hunger-relief efforts, assisted 14 million families—46 million individuals—during Lula’s second presidential term (2007–2010). Yet, it amounted to only 0.6% of GDP. A rarely mentioned sanitation program connected 48 million people to sewage systems, including 38 million Afro-Brazilians during 13 years of PT rule (2003–2016). The child health and nutrition program reduced chronic malnutrition causing a 50% decline in the incidence of stunting among the 360,000 participating infant children (from 2008 to 2012).

The struggle to defeat hunger was the largest of several components of social expenditures that grew appreciably from 1995 through 2010. Social expenditures leaped from 19.2% of GDP in 1995 to 25.2% in 2010. This included substantial increases in areas including social security, health, education, and of course, the social assistance programs mentioned above. To some degree, then, the economic development that occurred under PT leadership could be considered state-led. But most important was the change in the real minimum wage law, which pushed up the hourly rate by 75% from 2002 to 2013. As wages rose so did strike activity—2011 through 2014 recorded the highest number of strikes since the 1980s.

Taken together, these policies and programs helped reduce the degree of income inequality. Using the household survey method (which fails to adequately measure the incomes of the wealthiest) the Gini Index dropped from 0.60 in 2002 to 0.53 in 2012. (The closer the index is to 1.0—total inequality—the more unequal the spread of income.)

Health Is a Human Right? Not So Fast!

Brazil was once considered to possess a relatively sophisticated health system; an AIDS epidemic was staunched through free and effective treatment from November 1996 onward. That Brazil was able to do so is the result of decades of commitment to public health, culminating in the creation in 1988 of the National Health System (Sistema Único de Saúde, SUS). With its facilities spread across 5,000 municipalities, the SUS extends free, complete medical care to millions every year through its health centers. However, the ravages of the Covid-19 pandemic laid bare the effects of the neoliberal policies of 2016 that gutted the now terribly underfunded public health system. And it certainly did not help matters that in 2018, some 8,500 Cuban physicians who had been serving 30 million of Brazil’s poorest citizens were expelled from the country, as the scope of the capriciousness of Brazil’s president-elect, Jair Bolsonaro (2019–2022), was revealed. Even in 2010, the share of GDP devoted to public health care for over three-quarters of the populace, at 3.8%, was inadequate and far inferior to private-sector health care outlays (4.7% of GDP) received by the affluent. The private-sector programs, which in 2010 covered only 21% of the population, were partially funded through the income tax exemptions they received for private insurance fees. By 2020, private insurance covered only 25% of the population, but they received 56% of all health care funding.

The first cases of Covid-19 hit Brazil in February 2020. President Bolsonaro, instead of confronting the new internal enemy, made matters much worse, thereby adding a health care crisis to the already deeply festering social and economic crisis. He took several measures which undermined SUS:

  • He impeded all steps aimed at a coordinated and efficient national effort to confront the pandemic while appointing and then repeatedly dismissing his Minister of Health, instead choosing totally inept military officers as well as physicians who were facing charges of corruption—including fraudulent activities related to vaccines. By August of 2021, four such ministers had passed through Bolsonaro’s revolving door, leaving SUS directionless.
  • Bolsonaro also rejected the guidance of the World Health Organization (WHO), including the precautionary use of masks to curb the spread of the pandemic, while repeatedly insisting that Brazilians should use drugs known to have zero effect against the pathogen and also discounting or outright rejecting the advice of the most prepared medical specialists in charge of public health as well as that of the WHO.
  • Further, he jumped at the opportunity to confront several state governors who desperately needed federal funds to implement public health measures Bolsonaro deemed unnecessary. He blocked health care funding to such states, as well as to states headed by leaders he politically opposed.

These steps culminated in a perception among the populace that they had been abandoned in their hour of need, even as Bolsonaro continued to dismiss the gravity of the situation and the loss experienced by millions of family members as the death toll climbed relentlessly for one-and-a-half years.

This was the sort of combination of conditions that caught the attention of the 20th-century Polish economist Michal Kalecki, writing in 1943. He concluded that employers grew “boom tired”—even if profits remained high. During periods of sustained growth (as Brazil enjoyed from 2002–2012) workers tended to lose their fear of the “sack”—causing “discipline in the factories” to break down. Employers’ alarm over increasing labor costs became acute, particularly from 2013 onward. Big capital reacted by curbing investments (as Kalecki anticipated), thereby slowing the economy. But, more importantly, the elite used an even more powerful weapon—accelerated capital flight.

But, just as their battle against labor intensified, the all-important commodity sector tumbled: Prices dropped 13% in 2014, and then by a further, massive, 37% between 2015 and 2016. The “scissors effect” of a collapse in commodity prices and a downturn in investment and consumption reduced federal tax revenues and therefore government spending, all of which caused the GDP to drop by a startling 6.9% from 2014 to 2016. The big slump crushed any further increases in minimum wages since they were geared to an increase in the GDP. As unemployment soared, workers’ consumption fell, and the vicious circle widened. As a result, many who had supported the PT became disaffected.

Slipping Backwards:
From Rousseff to Temer to Bolsonaro

A little over two years after the second PT president, Dilma Rousseff (2011–2016) had celebrated the virtual elimination of severe food insecurity in 2013 and then her 2014 reelection, she was fraudulently impeached in August 2016, marking one of the most radical turns in political economy in Brazil’s history. Faced with prosecution as a series of criminal investigations moved forward, neoliberal shills operating the levers of political power opted for a disguised coup d’état. Rousseff helped set the stage for this putsch as she sought compromise after compromise with her ideological and political foes—her many concessions served to weaken public support for the PT which, in turn, emboldened her usurpers. This wiped out any possible further increase in the real minimum wage, since, by law, it was directly tied to the growth rate of GDP. As the PT’s fragility increased, the U.S. government—long anxious to see the end of PT rule—remained silent as Rousseff’s election mandate was destroyed.

As austerity president Michel Temer (August 2016–2018) grasped the reins of power, draconian cuts in public programs became the coin of the realm; unsurprisingly, Rousseff’s corruption investigations targeting the “political mafia” abruptly ended. Most notoriously, Temer facilitated Constitutional Amendment 95, which, from 2017 to 2037, mandated that all federal social expenditures as a share of GDP be frozen: this cut annual per capita spending by at least the rate of growth of the population (and by more if real GDP were to shrink, as it often has since 2011). This combination of neoliberal policies and a backward-slipping economy preordained the results of the 2017 household survey which showed 51% of Brazilians suffering food insecurity (and a record-high 12% of Brazilians suffering “severe” food insecurity).

And then things got much worse. The Bolsa Família program was cut (in inflation-adjusted terms) to 93% of the 2014 level in 2019. In 2020 this vital program was cut by an additional 7.7%! By February 2020, with the Covid-19 crisis devastating the populace, the government watched with folded hands as 55% of households were registered as food insecure. Then 2021 arrived with yet another jolt, as GDP data showed that the economy had shrunk back nearly to the level of 2011, although the population had increased by 7.8%. The 2021 inflation-adjusted GDP remained 3.3% below the peak established in 2014. Thus, average per capita income had fallen drastically over the past 10 years and most of the drop had been experienced by households with incomes in the bottom 50%. In 2013 the bottom 50% received 11.6% of the gross national income, which then fell to 9.8% in 2019 (and certainly fell much more thereafter). Meanwhile, the top 10% received nearly 60% of the gross national income in 2019—substantially more than in 2016, as recorded by the World Inequality Database.

The classic measure of income inequality—the Gini index—fell to its lowest rate in late 2014—a still-high 0.514—and has climbed ever since. But by 2019 it had risen to 0.533 and then to 0.54 by late 2020, according to the authoritative Institute for Applied Research (IPEA). A 2014 analysis of wealth concentration—always higher than income concentration—showed that an estimated 0.2% of the population possessed 47% of all properties and titles.

Commodities as Far as the Eye Can See

Anyone with knowledge of Latin America’s 500-year-old resource-based boom-bust saga would have noted that Lula’s attempt to push Brazil onto a sustainable, inclusive path designed to regenerate domestic manufacturing was sure to encounter big headwinds (see James M. Cypher, “Brazil’s ‘Big Push’” D&S, March/April 2013). Sure enough, beginning roughly in 2011—before industrial policies were consolidated—the commodity boom that had fueled Lula’s optimism and economic growth ground to a halt. Throughout Lula’s presidency (Jan. 1, 2003 to Jan. 1, 2011) a large number of economists argued that “this time is different”—supposedly because of China. They had convinced themselves that China’s growing demand for Brazil’s food and semi-processed raw materials would last for decades, even though a minority of economists pointed to Latin America’s sad history of boom-bust commodity swings that had left all commodity dependent nations, including Brazil, in the lurch. Brazil had seen a sugar boom and collapse, then a gold boom and collapse, then a coffee boom, followed by extreme overproduction and the burning of sacks of coffee as locomotive fuel during the Great Depression of the 1930s. But now, as far as many Brazilian economists were concerned, it was a viable strategy to fill the commodity pipelines that flowed from Brazil’s vast interior to undergird China’s ever-expanding industrial system while simultaneously pursuing programs designed to bolster technological autonomy and innovation policies to rejuvenate the national industrial base. It did not work: Brazil underwent profound deindustrialization; and manufacturing declined from 22% of GDP in 1985 to only 12% in 2016. Meanwhile, from 1995 to 2019, exports to China grew at an annual rate of 17.5%. Even during the slump from 2019 through early 2021, for example, China has taken 28–30% of all exports in each month. Soybeans, oil, and iron ore have accounted for roughly 75% of the total, with Brazil’s exports 43% greater than its imports (all manufacturing products) from China. Yet, the “China centered” interpretation is a distortion—commodities are fungible, and Brazil sends the vast bulk of its output elsewhere.

Commodity production—which includes the vast mining and petroleum sectors—is dominated by agribusiness. By 2018, Brazil was one of the top five producers in the world for an astonishing 36 different agricultural products. Brazil is the largest net food exporter in the world. Yet only 0.62% of all agricultural firms produced 51% of the output in 2006—a power measure that has remained stable since then. A narrow neo-feudal stratum of giant landowners searched out high-technology methods resulting in the loss of 1.5 million jobs to agricultural mechanization between 2006 and 2017. But, importantly, commodity production goes beyond agriculture to include the vast mining and petroleum sectors.

Brazil’s long agribusiness boom (sidelined from 2013 to 2020 as commodity prices plummeted) is not the result of pluck or luck, but rather the accumulation of many forms of massive governmental assistance since the 1960s, including subsidized credits, production quotas, and government price-support programs, as well as the creation of an innovative, cutting-edge research institute, Embrapa, which is devoted to radically altering tropical yields. In the 1990s, when much of this support was withdrawn and this sector was thrown into a neoliberal “free trade” scenario, wave after wave of consolidations occurred—today even the largest financial conglomerates frequently acquire huge landholdings. Fortuitously for landowners, this forced restructuring of the agricultural sector roughly paralleled the decades-long surge of the Chinese economy. Brazil’s agricultural sector has stayed in the front due to its “sophistication” with regard to 1) capital intensive and chemical-biotech techniques (much of it imported from U.S.-owned transnational corporations), 2) its ability to acquire recently deforested, high-yield lands at extremely low cost, and 3) the near-hegemonic power of its lobby—known as the bancada ruralista—which gained control of 44% of the parliamentary seats and 40% of the senate in 2019. In short, the FPA (the Agricultural Parliamentary Front) can effectively block any legislation it opposes and can often formulate the legislation it wants. The FPA is confident that this power will continue to rise—it has more than doubled since Rousseff’s presidency. At an FPA meeting in March 2021 devoted to expanding the scope of permitted pesticides, Bolsonaro stated that the agricultural sector would “continue being the locomotive of our economy.”

It would have been much more accurate to cast the net wider: it is the agro-mineral-financial elite, including the giant, increasingly privatized oil company Petrobras, and the immense mining operations, such as the mining company Vale, which produces nearly one-half of all global iron ore output (Brazil is the world’s second largest ore exporter). Vale was privatized in 1997—essentially given away (for less than one-tenth of its value) to Benjamin Steinbruch’s CSN company (along with some smaller entities). The Steinbruch family has vast holdings, with a reputed net worth of $4.9 billion in 2021, according to Bloomberg. High on the list of the “mineral magnates” one finds the wealthiest family in Brazil—the Moriera Salles, with a net worth of $20 billion—which has played a dominant role in banking and finance. More recently, they have gained a strong presence in the mining sector through their 80% control of a little-known metal, niobium, which is reputed to be one of the key components in a vast range of emerging technologies. President Bolsonaro has embraced niobium, declaring that it is the key component of a yet-to-be-defined “Brazil First” strategy.

The Agribusiness Oligarchs

In the agricultural sector, producing on 568,000 acres, one finds the Maggi family—operating Grupo Amaggi through “precision agriculture.” Grupo Amaggi is well known for its destruction of the Amazon rainforest. It is the smallest of the three biggest agribusinesses in Brazil—surpassed by SLC Agrícola (SLC) and Bom Futuro Group. SLC controls roughly one million acres of excellent land and has nearly 4,000 employees; it is majority owned by the Logemann family, and registered a $33 billion market value in 2021. At the top of the heap is the Bom Futuro Group: It controls 1.3 million acres and is the world’s largest soy producer as well as the largest cotton grower in Brazil. The owner of this titanic operation is Erai Maggi Scheffer (known as the “soy king”), a cousin of Blario Maggi (who runs Grupo Amaggi). But the most prominent example of Brazilian agribusiness clout is JBS, the world’s largest meat processor, with an annual profit of $15.3 billion in 2020 (an amount that nearly equaled the combined net profit of the “Big Three” U.S. automakers in 2018). While Brazilian agro-capital is surging, there are powerful transnational firms situated at crucial intersections between production and distribution, including the secretive commodity-trading giants Cargill ($115 billion in revenue in 2020), Bunge ($41 billion in revenue in 2020), and Dreyfus ($34 billion in revenue in 2020), all noted for their market-dominating abilities. The U.S. firm Cargill, the former Argentine—now U.S.—company Bunge, and French-controlled Dreyfus are profitably buying, storing, shipping, processing, and reselling Brazil’s agricultural output. While such giant transnationals have a large presence in the primary sector they do not dominate: In 2014 only 38% of Brazil’s 504 largest firms were transnationals, whereas 53% were Brazilian-owned private companies—with mining, oil, and agribusiness controlled by Brazilian capital.

One attempt to measure the agribusiness sector, using a technique known as “input-output analysis,” concluded that in 2011 it accounted for 20% of GDP (including food processing). However, this number does not include the mining sector—roughly 4% of GDP—and the oil and gas sector, which generally has weighed in at above 10% of GDP. Thus, the agro-mineral elite may now represent 34% of the total economy, nearly three times greater than the manufacturing sector’s output. It is clearly the leading sector.

Bolsonaro: Fading Fast?

Erratic, incompetent, and impulsive, President Bolsonaro nevertheless can count on the unwavering support of the landholders that dominate the political system. As a former military officer, Bolsonaro’s affinity for militarism is constantly on display. This has built support among well-paid military and police cadres, some of whom have joined “death squad” militias, according to Bruno Paes Manso’s research. Brazil’s very active evangelical churches, alienated by the “secularism” of the PT, voted overwhelmingly for Bolsonaro. As inept as his deadly bungling of the Covid-19 pandemic has been, dismissing Bolsonaro’s chance for a second term in 2022 would be rash. While public opinion polls show his support collapsing, his nationalist/populist, law-and-order stance might regain traction against a progressive candidate. Nonetheless, he has drawn criticism from many “Brazillionaires,” including the Moriera Salles family, for his overt indifference to the Covid-19 pandemic. Yet, others still show support.

Bolsonaro’s appointment of Guedes as his top economic advisor—a true “Chicago Boy”—suggested to most observers that, at last, Brazil would tumble head-over-heels into full-on neoliberalism. Yet, in large part, Bolsonaro has ignored or defied Guedes. Bolsonaro has, as have almost all prior military leaders, presented a “nationalist” vision of Brazil, ruling out a free-for-all wave of privatizations. While verbally indifferent to the victims of Covid-19, Bolsonaro has quietly promoted two rounds of important, if modest, monthly cash payments to the impoverished, the first from May to December 2020, reaching 68 million individuals. The second, making much lower payments, from April through August 2021, will reach 46 million. This improvised safety net has partially blunted the ravages of 2020 and 2021; nonetheless, large tent cities of people who have lost their homes because of the crisis are proliferating. At the same time, commodity prices have once again soared with first quarter 2021 prices up 30% on an annual basis. Thus, just as genocide charges have been repeatedly hurtled, just as the Congress has considered impeachment, and just as the Covid-19 crisis cuts deeper into the soul of Brazil, the consolidating commodities-led model may pull the economy up by nearly 4% in 2021. This might shift the country’s economic outlook and public perceptions as, crucially, Brazil faces the presidential election of 2022. But with inflation now running at an 8% annual rate—with rice prices up by 48% in the past year, and with over 200 of the desperate waiting up to five hours in line three times a week at a butcher’s shop to receive a few donated beef bones in Cuiabá, the agriculture-rich capital of Mato Grosso, the country’s lead livestock production state—public outcry indicates broadening opposition. Over 40 evangelical church groups have recently united to express their dismay about Bolsonaro’s devil-may-care approach to both human life and to democratic governance. Meanwhile, an ever-imponderable Bolsonaro grovels, seeking a power-sharing arrangement, at any price, with the corner-cutting, wheeler-dealer, old-line bosses who control the parliament—exactly the group he ran against in 2018.

is an emeritus professor in the Doctoral Program in Development Studies (UAED) at the Universidad Autónoma de Zacatecas (México).

is a professor in the Doctoral Program in Development Studies (UAED) at the Universidad Autónoma de Zacatecas (México).

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