Varieties of Neoliberalism in Brazil (2003-2019)*

Alfredo Saad Filho

Department of Development Studies
SOAS University of London
as59@soas.ac.uk

ABSTRACT

This article describes neoliberalism as a system of accumulation (SoA), that is, a phase (stage) of
global capitalism. It subsequently examines the process of accumulation in Brazil during the
administrations led by Luís Inácio Lula da Silva and Dilma Rousseff, of the Brazilian Workers’ Party
(Partido dos Trabalhadores, PT). It is shown that the main feature of capital accumulation under the
PT is the continuity of neoliberalism, in two varieties: inclusive neoliberalism (2003-06) and
developmental neoliberalism (2006-13). The PT’s attachment to neoliberalism was mitigated by the
Party’s (shifting) commitment to (mild) developmental outcomes, redistribution of income (at the
margin), social inclusion (within narrow limits), and democratisation of the state (bounded by the 1988
Constitution). Achievements in these areas were further constrained by the inability or unwillingness of
the PT to confront the institutionalisation of neoliberalism in the fields of economics, politics, ideology,
media and class relations. The political crisis unfolding in Brazil since 2013, and the imposition of
authoritarian neoliberalism after Rousseff’s impeachment, can be examined from the perspective of
the contradictions in the dominant varieties of neoliberalism under the PT, and the limitations of the
Party’s political ambitions.

Keywords: Brazil, democracy, Dilma Rousseff, Lula, neoliberalism, Workers’ Party.

*
I am grateful to Ana Paula Colombi, Aylin Topal, Ben Fine, Bruno Höfig, Daniela Prates, Juan
Grigera, Lena Lavinas, Lucas Bertholdi-Saad, Luiz Fernando de Paula, Marco Boffo, Maria de Lourdes
Mollo, Pedro Loureiro and the referees of Latin American Perspectives for their helpful comments and
suggestions. The usual disclaimers apply.
1
 1 – Introduction

On 31 August 2016, a judicial-parliamentary coup removed the fourth democratically elected federal
administration led by the Brazilian Workers’ Party (PT).1 This article examines the achievements,
limitations and collapse of the administrations led by Presidents Luís Inácio Lula da Silva (2003-06,
2007-10) and Dilma Rousseff (2011-14, 2015-16), from the point of view of the tensions and
contradictions in the dominant system of accumulation (SoA) in Brazil: neoliberalism. This SoA had
two varieties during the period in office of the PT, inclusive neoliberalism (2003-06) and
developmental neoliberalism (2006-13) (the years 2013-16 are undefined, because economic policy
became incoherent and output and employment collapsed). They were followed by authoritarian
neoliberalism after Rousseff’s impeachment.

Identification of the SoA and its varieties is a complex exercise, for three reasons. First, SoAs are
determined by the (historically specific) form of production of the material conditions of social
reproduction and, at a more concrete level, by the constraints imposed by the balance of payments,
labour, finance, institutions and the political system, which are managed by economic, industrial and
social policies. These overlapping, shifting, and potentially contradictory determinations can make it
difficult to identify the SoA and its varieties. Second, the PT governments had to rely on unwieldy and
unstable political alliances that limited the scope for coherent policymaking. Third, the social base of
support for the PT changed during their period in office, expressing the development of important
contradictions in the Party’s programme and its implementation.

Despite these limitations, examination of the social relations and patterns of accumulation, political
representation and policymaking between 2003 and 2016 and in the subsequent period suggests that the
main (systemic) feature of this period is the continuity of neoliberalism.2 This is demonstrated by the
enduring grip of the macroeconomic ‘policy tripod’ during the PT administrations and beyond. The
tripod was introduced in 1999 by the (unquestionably) neoliberal administration led by Fernando
Henrique Cardoso, of the Brazilian Social Democratic Party (Partido da Social Democracia Brasileira,
PSDB), traditionally the PT’s main rival. The tripod enforced typically neoliberal policies: inflation
targeting and the operational independence of the Central Bank; floating exchange rates with largely
unregulated international flows of capital; and contractionary monetary and fiscal policies, buttressed
by the Fiscal Responsibility Law of May 2000.3

Even though the PT administrations implemented the tripod with incremental flexibility, those
neoliberal policies and institutions – grounded in law – heavily constrained the formulation,

2
implementation and monitoring of economic policy. In addition, the ideological hegemony of
neoliberalism ensured that the tripod itself was rarely the subject of debate in the media or in Congress;
dissenting voices were systematically marginalised. In this way, the PT governments accepted that their
industrial, financial, wage and welfare policies would be bounded by the reproduction of neoliberalism,
which limited the potential gains in redistribution, output and employment. Finally, the PT neither
sought nor achieved significant changes in the patterns of ownership or control of property, finance,
production, technology, employment or international integration. Consequently, the PT administrations
were neoliberal, because they were passively constrained by neoliberalism, and because they actively
supported its reproduction.

Neoliberalism is both historically specific and inherently variegated.4 The specificity of neoliberalism
under the PT derives from the Party’s tepid commitment to social inclusion and developmental
outcomes: economic growth (within the limits imposed by the tripod), industrial policy (without
compulsion, targets or monitoring of private capital), redistribution (at the margin, because of the
imperatives to preserve the distribution of assets and secure large fiscal surpluses), employment
creation (limited by continuing deindustrialisation and reprimarisation of the economy), and the
promotion of citizenship (accommodating staggering inequalities). It follows that social inclusion and
developmental outcomes were secondary features of the essentially neoliberal administrations led by
the PT.

This article includes four sections. This introduction is the first. The second describes the concept of
SoA, describes the main SoAs in Brazil, and outlines the distinguishing features of neoliberalism and
neodevelopmentalism. The third reviews the transition to neoliberalism in Brazil, the varieties of
neoliberalism during the PT administrations (inclusive neoliberalism and developmental
neoliberalism), and the imposition of authoritarian neoliberalism after Rousseff’s impeachment. The
fourth section concludes.

2 – Systems of Accumulation

2.1 – Concepts

The capitalist mode of production is a concrete universal distinguished by a set of abstract features,
including the commodification of social exchanges, generalisation of production of commodities for
profit, and transformation of waged work into the social form of labour.5 The SoA is the instantiation,
configuration or mode of existence of capitalism in a particular country and historical context; thus,

3
SoAs are intrinsically variegated. They are determined by, first, the manner in which class relations are
embedded in the mode of extraction, accumulation and distribution of (surplus) value. Second, the
material structures through which those classes reproduce themselves, including the state, law, forms of
property, technology, money, credit, labour and commodity markets, and the relationships between
accumulation, the natural environment and the rest of the world. Third, the ideologies legitimising
those social relations and institutional forms, and the forms of representation of conflicting interests.

Accumulation is bounded by constraints expressing the contradictions of the mode of production, as

they appear in the SoA, and the ensuing limitations to the expanded reproduction of capital. The
constraints are contingent and historically specific, rather than permanent or logically necessary; they
must be identified empirically, and are normally addressed by public policy. Identification of the
constraints to accumulation can start from the circuit of industrial capital, M −C < MP '
LP … P …C −M ' ,

where M is money, MP is means of production (land, buildings, machines, material inputs, and so on),
LP is labour power, …P… is production, and M’ > M. Typical constraints might include the
availability and discipline of the workforce, the cost of finance, the allocation of resources, the balance
of payments, and the institutional setting, for example, the property structure, the mode of competition,
and the role of the state. That is, the constraints encapsulate the key features and limitations of the SoA.

Although it is widely accepted that accumulation is subject to constraints, these are often examined in
isolation, as if they were assorted hindrances to the (otherwise unproblematic) expansion of the
capitalist economy. This is misguided, since the constraints are embedded within, and help to define,
the SoA and its varieties. Finally, the accumulation strategy is the spectrum of policies and strategies
securing the reproduction of the SoA, regulating the restructuring of capital, and managing, dislocating
or transforming the constraints.

2.2 – Systems of Accumulation in Brazil

Brazil has experienced three SoAs since independence, in 1822. First, primary export-driven growth
with an oligarchic state, lasting until 1930. Second, import-substituting industrialisation (ISI) with a
developmental state and a wide variety of political regimes, between 1930 and 1980.6 Third, after a
decade-long transition, neoliberalism with political democracy.

In general, the economic and political shifts within these SoAs were driven by domestic imperatives; in
contrast, transitions between SoAs tended to follow transformations in global capitalism. The latter
would tighten up the constraints to the SoA, usually starting from the balance of payments, reducing
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policymaking capacity (which, in Brazil, was rarely cohesive, see below), and undermining economic
performance. The ensuing crisis would spread across the political-economy divide, rendering the
traditional modalities of economic and social reproduction unviable.

Across these SoAs, the Brazilian state has had two contradictory roles. Its conservative role derives
from the imperative to maintain social order to secure the mode of exploitation and reproduce the
inequalities of income, wealth and privilege in the country, regardless of economic performance.
Attempts to challenge this role have invariably triggered political instability, for example, in 1922-30,
1953-55, 1961-64, and 2013-16. The transformative role of the state is due to the need to deploy public
policy in order to drive the expansion of capital(ism), steer accumulation and hothouse a capitalist class
drawing, in succession, upon commodity exports, manufacturing, and finance, and the links between
Brazilian and international capital. In doing this, the Brazilian state has influenced decisively the class
structure, social reproduction, labour markets, wages, the distribution of income and wealth, the
patterns of consumption, and the scope for social mobility; that is, it has both shaped the SoA and,
within limits, addressed its constraints.

Tensions between these conservative and transformative roles help to explain why the Brazilian state
has normally been strong ‘vertically’, vigorously enforcing the subordination of native populations,
slaves, poor immigrants, peasants, wage workers and the ‘unruly masses’. In contrast, because of its
fragmented social and political composition, the state has tended to be weak ‘horizontally’, always
finding it difficult to manage conflicts between elite groups. They include foreign capital, the
internationalised (local) bourgeoisie, large and medium-sized internal capital (especially in
manufacturing and finance, as well as agricultural exporters and traders), large landlords, regional and
local political chiefs, the technocracy, top civil servants, military officers, the Catholic church (and,
more recently, large evangelical sects), the media, and their intellectual and political hangers-on. 7 Their
interests have generally been accommodated through deal-making, the deployment of public funds,
patronage, corruption, manipulation of the law, fraud, targeted violence, and the occasional
redistribution of power at the margin.

Because of these tensions and the imperative to maintain political stability, the institutions of the
Brazilian state have tended to develop unsystematically, and to pursue policies determined by
minimum common denominators. Despite these limitations, the Brazilian economy has thrived for long
periods, largely through the appropriation and plunder of natural resources, and the ruthless
exploitation of the working population.

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 2.3 – Neoliberalism as a System of Accumulation

Neoliberalism is the current phase, stage, or mode of existence of capitalism.8 This SoA has five key
features. First, the financialisation of production, exchange and social reproduction, that is, the
penetration of interest-bearing capital into ever more areas of economic and social life. Second, the
international integration of production (‘globalisation’) at the level of individual firms and circuits of
accumulation. Third, under neoliberalism, transnationalised and financialised capital has gained a
central role in accumulation and balance of payments stability. This has facilitated the introduction of
new technologies, patterns of production and modes of international specialisation, which have
transformed the economy and the society and delivered higher rates of exploitation than were possible
under previous SoAs (Keynesianism, different forms of developmentalism, and Soviet-style socialism).
Fourth, in legal, institutional and policy terms, neoliberalism includes widespread privatisations,
capital-friendly forms of regulation of profitability, and the diffusion of managerialism. Fifth,
neoliberalism demands contractionary (‘prudent’, ‘austere’) fiscal and monetary policies, central bank
independence, inflation targeting, (distinct modalities of) trade and financial liberalisation, and
neoliberal social policies.9 They are enforced by a nominally independent Judiciary, and buttressed by
political, academic and media discourses stressing the imperatives of ‘competition’, ‘efficiency’,
‘productivity growth’ and ‘inflation control’.10

The first (transition or shock) phase of neoliberalism generally includes forceful state intervention to
change laws and reform institutions, promote the transnational integration of capital and finance,
privatise public property, contain labour and disorganise the left. This is normally followed by a second
(mature) phase which aims to stabilise the social relations imposed in the earlier period, consolidate the
new role of finance in economic and social reproduction, manage the new mode of international
integration, and introduce specifically neoliberal social policies to manage the deprivation created in
the previous phase. This has been followed by a third phase, after the Global Financial Crisis, driven by
the imposition of an uncompromising variety of neoliberalism, presumably justified by the imperative
of ‘fiscal austerity’, buttressed by political authoritarianism. Inevitably, these phases of neoliberalism
are more logical than chronological, as they can be sequenced, delayed, accelerated, or even overlain in
specific ways depending on country, region and economic and political circumstances.11

Across its specific configurations, the neoliberal SoA is limited, first, by class conflict, although in
most circumstances this can be contained by ideological hegemony, consumerism, unemployment and
different forms of repression. Second, accumulation is constrained by the instabilities created by an
enlarged, transnationalised and ideologically hegemonic finance, that can move capital in and out of the

6
economy, into competing circuits of production, and into purely financial speculation increasingly
easily, often undermining or destabilising productive activity. Third, the neoliberal SoA is limited by
the (financialised) balance of payments constraint that neoliberalism itself has imposed. For example,
in Brazil, the contractionary monetary policies typical of neoliberalism have tended to overvalue the
currency, hollow out manufacturing, induce current account deficits and foster the reprimarisation of
the economy; all of them require regular inflows of foreign capital. In sum, because of its key features
and constraints, and the ways in which they have been addressed by public policy, neoliberalism has
both expanded the power of capital and created an income-concentrating dynamics of accumulation
that can be limited, but not reversed, by marginal interventions. Here, too, the Brazilian experience
provides a good example.

2.4 – The Promise of Neodevelopmentalism

Neodevelopmentalism emerged in Latin America in the 2000s, presumably as an alternative to

neoliberalism. There are multiple versions of neodevelopmentalism, drawing upon different
combinations of Latin American structuralism, Keynesianism, evolutionary political economy and
other heterodox schools of thought. They argue that traditional Latin American developmentalism,
associated with ISI, failed because it unwittingly concentrated income and wealth and failed to
internalise new technologies and the sources of productivity growth. The neodevelopmentalists aimed
to build a new SoA drawing upon strong linkages between the state and the private sector, and between
investment and consumption. The goals of this proposed SoA include enhanced national economic
independence by rebuilding the production chains hollowed out by neoliberalism, the revitalisation of
manufacturing, export diversification and the rollback of financialisation, plus redistribution of income
and greater social mobility.

To achieve these goals, the state should reduce uncertainty, secure macroeconomic stability and support
private investment. This requires intertemporal fiscal balance, low inflation, low interest rates and a
sustainable balance of payments, through an appropriate (relatively undervalued) exchange rate and
controls on international flows of capital. In some versions of neodevelopmentalism, the state should
also implement industrial policies, promote competition and employment creation and nurture domestic
firms (‘national champions’).12 These policies can be supported by higher lending for consumption and
investment, and the redistribution of income. The outcome should be a self-sustaining growth process
based on the expansion of domestic demand.

7
A neodevelopmentalist SoA would need to address economic vulnerabilities due to the (initial) lack of
‘credibility’ of its policies with domestic and international capital; it would also have to manage
conflicts between rival fractions of capital. These limitations could become severe if the
neodevelopmentalist policies were based on political ‘deals’ between the state and elite groups,
unsupported by mass mobilisations. These arrangements could become even more fragile if the
(potential) mass base of support for neodevelopmentalism were demobilised in order to ‘reassure’
capital that its political hegemony will remain unchallenged. In this case, neodevelopmentalist policies
could become hostage to the political humour and short-term interests of competing capital(ists). Once
again, events in Brazil can provide useful illustrations.

3 – Neoliberalism in Brazil

3.1 – Transition

The political transition from military dictatorship to democracy in Brazil took place between the mid-
1970s and the late 1980s. It was followed by an economic transition from an increasingly dysfunctional
ISI into neoliberalism, between the late 1980s and the mid-1990s.13 The Brazilian transition to
neoliberalism came relatively late and advanced slowly when compared with other countries. This was
due, in part, to the vigorous resistance offered by the political left that had emerged during the
democratic transition.

In the 1980s, most analysts came to accept that Brazilian ISI faced irresolvable challenges, which
explained the country’s disappointing economic performance, rising inflation and external
vulnerability. They included a shallow and inefficient financial system; insufficient access to foreign
savings, investment, technology and markets; a weak national system of innovation; excessive
diversification and lack of scale in the manufacturing sector; lack of foreign competition due to
protectionism; and chronic fiscal deficits due to ‘economic populism’, distributive conflicts and the
indexation of wages and prices. Supposedly, these obstacles could be overcome by neoliberalism. This
view was supported by the US government, international financial institutions, the mainstream media,
foreign capital and the Brazilian internationalised bourgeoisie, and validated by claims of success
elsewhere.14

These views were deceptive at three levels. First, ISI was intrinsically limited, structurally fragile and
socially and distributionally regressive, but the crisis of the 1980s was only partly due to its
shortcomings; it also derived from external processes that peripheral countries could not realistically

8
influence. Second, it would soon become clear that neoliberalism could neither address the flaws of ISI,
nor match the country’s growth performance under the previous SoA. Third, the examples of successful
‘reforms’ were both partial and misleading.15

In 1988, the Sarney administration relaxed controls on the exchange rate and international capital
flows. The transition to neoliberalism was validated politically by the 1989 presidential election, when
Fernando Collor’s neoliberal programme narrowly defeated Lula’s left-wing campaign. 16 The domestic
financial system was reformed, and the country started a unilateral process of import liberalisation.
Average tariffs fell from 58 per cent in 1987, to 14 per cent in 1993, and 11 per cent in 2004, and non-
tariff barriers were slashed.17 Since this was not accompanied by a devaluation of the currency, support
for domestic producers or anti-dumping measures, the country’s import bill shot up, while the
manufacturing sector contracted sharply. Finally, Brazil renegotiated its foreign debt through the Brady
Plan in 1994, as part of a strategy of financial internationalisation. The emerging SoA was secured by
the 1994 Real inflation stabilisation plan, implemented by Presidents Itamar Franco (1992-94) and
Fernando Henrique Cardoso (1995-98, 1999-2002).18

The transition to neoliberalism imposed a stabilisation-speculation trap on the economy, including

chronic loss of competitivity, continuing deindustrialisation, falling rates of savings, investment and
GDP growth, intractable infrastructure and productivity gaps vis-à-vis the OECD, and a tight balance
of payments constraint that required continuing inflows of foreign capital which, in turn, integrated
Brazilian production and finance increasingly tightly into global circuits of accumulation. However,
when those inflows were insufficient the economy was paralysed. Neoliberalism also created a pattern
of employment centred on low productivity, informal and low-paid jobs in urban services, while
manufacturing and the public sector lost millions of posts.19 As a result, under neoliberalism Brazil has
remained an unequal, dependent and poverty-generating economy, but it also became an
internationalised and financialised low growth economy, where economic performance is tightly
constrained by balance of payments and exchange rate instability.20 The exchange rate crisis in January
1999 closed the ‘shock’ phase of transition to neoliberalism, and inaugurated the mature phase of the
SoA. This shift was marked by the macroconomic policy tripod.21

3.2 – Inclusive Neoliberalism

The currency crisis, in 1999, demoralised Cardoso’s administration and sapped the political hegemony
of neoliberalism, opening the space for Lula’s election to the Presidency, in 2002, after three defeats.
Lula’s election was, partly, a reaction against the perceived insufficiencies of the neoliberal SoA;

9
Lula’s PT also offered a fresh image, seemingly uncontaminated by the corruption, incompetence and
self-serving policies and practices of Cardoso’s PSDB and its allies.

In order to secure Lula’s election and maintain political stability within the ‘rules of the game’, the PT
committed itself to neoliberalism in general, and the policy tripod specifically. The administration’s
attachment to neoliberalism was tempered, first, by a shift in the social composition of the state, as the
PT appointed hundreds of trade unionists and left activists to positions of power, 22 and, second, by the
expansion of the government’s social programmes across health, education, pensions and benefits,
improvements in the minimum wage, and the expansion of personal credit.23 The variety of the SoA in
Lula’s first administration can be termed inclusive neoliberalism. While this is an oxymoron, since the
dominant tendency in neoliberalism is the production of inequality, poverty, precarious employment
and social exclusion, Lula’s first administration introduced important countertendencies to these
neoliberal trends.24

Inclusive neoliberalism in Brazil was underpinned by global economic prosperity, the beginnings of the
so-called ‘commodity supercycle’, and abundant inflows of capital. They relaxed the balance of
payments and fiscal constraints, boosted aggregate demand and employment, and induced a growth
dynamic under neoliberalism. Simultaneously, the government expanded its social programmes and
promoted the formalisation of employment, which protected millions of workers, at the same time as it
raised the intake of taxes and social security contributions. Public spending and GDP growth picked up,
while inflation fell and the government met stringent fiscal targets.

This virtuous arrangement was both limited and unstable, because it never sought transformative
outcomes, and it was conditional on a relaxed balance of payments constraint (which Brazil influenced
only marginally), and on political alliances predicated on Lula’s political acumen. While these
conditions lasted, it became possible to achieve slightly higher growth rates, redistribution at the
margin, limited social integration, and political stability, depite the hegemony of neoliberalism.

However, Lula’s administration found itself in a cul-de-sac after only two years. GDP growth and the
social and employment indicators were improving slowly, and the administration was criticised both
for what it did (‘packing the state with acolytes’ and ‘taxing producers to fund sloth’), and for what it
did not do (deliver rapid growth and significant social improvements). Realising Lula’s vulnerability,
the neoliberal elite, including the financial bourgeoisie, the mainstream media and most of the upper
middle class launched a vicious attack, in 2005, focusing on allegations that the PT was buying votes in
Congress with monthly cash payments (the grotesque mensalão scandal).25 The scandal almost brought

10
down Lula, and it claimed the scalps of his likely successor, Finance Minister Antonio Palocci, Lula’s
Chief of Staff (and the PT’s leading strategist) José Dirceu, the president and the treasurer of the PT,
and others.

Lula realised that he could not count on the support of the radical left or the formal-sector workers, who
were disappointed with his attachment to neoliberalism and the slow turnaround of the economy, nor
could he rely on most of the elite for his political survival. He retreated to the urban peripheries and the
poorest regions in Brazil, where his social programmes made him popular. He also strengthened his
commitment to the internal bourgeoisie that, by and large, continued to support his administration. 26

3.3 – Developmental Neoliberalism under Lula

Neodevelopmentalist ideas gained influence in academic, NGO and policy circles during Lula’s first
administration, driven by the strength of heterodox economics in Brazil, disappointment with the
government’s attachment to neoliberalism, and perceptions of economic underperformance. The
neodevelopmentalists had limited ambitions, merely hoping that activist fiscal, monetary, credit and
industrial policies could nudge GDP growth ‘one or two per centage points above the rates expected by
the supporters of the neoliberal view’.27 This suggests that they were willing to compromise with
neoliberalism in order to secure political stability.

After Lula’s re-election, in 2006, neodevelopmentalist policymakers were brought into the Ministries
of Finance, Planning, and Strategic Affairs, but the staunchly neoliberal Central Bank was left
untouched. The administration introduced several neodevelopmentalist policies, which would later be
strengthened by Dilma Rousseff (see section 3.4). These policies did not replace the neoliberal policy
framework; instead, they were juxtaposed to it, creating a variety of the SoA that can be called
developmental neoliberalism.

Given the relaxation of the balance of payments constraint (at least until the global economic crisis),
and the extraordinary support for Lula,28 developmental neoliberalism could achieve positive outcomes
in terms of GDP growth, the expansion of state and private enterprises, redistribution and poverty
reduction. The country could also implement an independent foreign policy that would have been
unthinkable only a few years previously. State activism centred on public investment and the reduction
of inequality at two levels. First, through a Growth Acceleration Programme (Programa de Aceleração
do Crescimento, PAC) based on state-led investments in infrastructure, energy and transport. Second,
the expansion of consumption through transfer programmes, personal loans and faster growth of the

11
minimum wage, that rose 70 per cent between 2003 and 2010, triggering automatic increases in federal
transfers to pensioners and the unemployed and disabled.29 Finally, the government promoted the
expansion of large domestic companies (‘national champions’).

These measures drove a virtuous circle of growth based on domestic investment and mass
consumption. Employment growth in the metropolitan areas increased from 150,000 jobs per year
under Cardoso, to 500,000 per year under Lula. In the 2000s, 21 million jobs were created, in contrast
with 11 million during the 1990s. Around 80 per cent of those new jobs were in the formal sector.30
Significantly, 90 per cent paid less than 1.5 times the minimum wage (in contrast with 51 per cent in
the 1990s). Unemployment declined steadily, especially in the lower segments of the labour market.
The Gini coefficient fell from 0.57 in 1995 to 0.52 in 2008, and absolute poverty declined from 35.8
per cent of households in 2003, to 21.4 per cent in 2009.31

The strengths of developmental neoliberalism were further demonstrated after the global crisis.
Similarly to other developing countries, the Brazilian government confronted the downturn with
aggressive fiscal and monetary policies. They raised the nominal fiscal deficit from 1.9 per cent of
GDP, at the end of 2008, to 4.1 per cent, in 2009, while the domestic public debt rose from 40.5 per
cent of GDP to 43.0 per cent. However, the economy rebounded rapidly, and GDP expanded by 7.5 per
cent in 2010 – faster than at any time since the mid-1980s – with further gains in income distribution,
despite the continuing overvaluation of the real.

3.4 – Developmental Neoliberalism under Dilma Rousseff

Dilma Rousseff’s administration was even more deeply committed to developmental neoliberalism than
Lula’s. Her government expanded further the federal programmes of social assistance, and it was
determined to tackle Brazil’s lagging productivity, creeping deindustrialisation and rising current
account deficit. In order to address these challenges, the government designed a ‘new economic matrix’
(NEM), which was so closely aligned with the demands of the internal bourgeoisie that it became
known as the ‘FIESP programme’, after the country’s most powerful business organisation.32 NEM
aimed to reduce production costs across finance (through lower interest rates and subsidised loans),
imported inputs (via controls on capital inflows and the devaluation of the real exchange rate), energy
(lower tariffs and better infrastructure) and transport (cheaper tolls and an improved road network), and
a tax reform.33

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In August 2011, the Central Bank started reducing base (SELIC) rates, marking a significant departure
from the contractionary policies in the previous two decades. The base rate fell from 12.4 per cent to
7.16 per cent, in early 2013, when real interest rates reached only 2 per cent. However, it soon became
clear that lower interest rates and the devaluation of the currency would not induce a growth cycle
driven by private investment. In 2011 the global economy entered another downturn, commodity prices
fell, and global trade slowed down. The devaluation of the real was undermined by the inflows of
capital driven by the second wave of quantitative easing (QE2) in the advanced economies, launched
after the Eurozone crisis. Brazil’s GDP growth rates plummeted from 7.5 per cent, in 2010, to only 3.8
per cent.

The government responded with more aggressive credit policies, in line with neodevelopmentalism. In
2012, the state-owned banks expanded their loans by 20 per cent, and the Brazilian Development Bank
(BNDES) by 16 per cent. In order to compensate the expansionary impact of these policies, the
government tightened up fiscal policy, reducing and postponing expenditures. The administration also
introduced controls on capital inflows, but they were too marginal and came too late. In the meantime,
the earlier devaluation of the real pushed inflation above the ceiling of the Central Bank’s target range
(6.5 per cent per annum). GDP growth fell to only 1.9 per cent, because of the government’s mildly
contractionary fiscal policy and the stagnation of investment.

QE2, rising inflation and declining GDP growth rates changed business expectations: it became widely
accepted that they required contractionary fiscal and monetary policies. Under intense pressure from
finance, the media and the opposition, the Central Bank abandoned its developmental experiment in
March 2013. Interest rates started rising, signalling the renewed policy dominance of the tripod. In the
meantime, the administration continued to stress its developmental and social policy ambitions, and
refused to align fiscal policy with the new monetary policy stance. The disconnect between the
Ministry of Finance and the Central Bank damaged the reputation of the government, and triggered a
further deterioration of expectations.34 The consequence was another round of contraction of
investment and output, and a spiralling current account deficit, peaking at 4.3 per cent of GDP, in 2014.

The economic strategy reached an impasse. Attempts to control inflation through high interest rates and
an overvalued exchange rate worsened the current account deficit and reduced GDP growth; however,
trying to control inflation by containing wages, transfers and public investment would stall the
improvements in competitivity and distribution and, again, undermine economic growth.

13
Having failed to improve competitivity through the relaxation of fiscal as well as monetary policy, the
government shifted its focus to infrastructure and the costs of energy and transport. However, in these
areas too Rousseff’s policies were rejected by large segments of capital, and could never be
implemented.35 Foreign capital and the Brazilian elite increasingly claimed that the government’s
neodevelopmentalist inclinations made it ‘populist’, interventionist, and unsympathetic to business. 36

Finally, the administration attempted an ambitious tax reform. However, by 2013 this had become
politically impossible, and the reform fizzled out into subsidies and tax rebates, initially targeting the
export industries but, later, sprawling into all manner of sectors because the government was too weak
to resist special pleading. Those transfers to capital were provided without conditions: they were simply
incorporated into profits, and brought no macroeconomic gains. Alarmingly, many beneficiaries would
soon forget the government’s generosity and join the plot to overthrow Dilma Rousseff.

The economic slowdown and the subsidies and tax rebates triggered a steep deterioration of the fiscal
balance. In the meantime, the ideological shift of the internal bourgeoisie, and their economic losses
due to the recession and foreign competition pushed this group towards the opposition. The government
was confronted by a perfect storm, across deteriorating terms of trade, rising inflation, plummeting
demand, falling investment, political paralysis and even water scarcity, because of an untimely drought.
Then, in 2014, the Federal Police and the Attorney General’s Office launched the lava jato anti-
corruption investigation, targeting the PT and its allies both in the state and in the ‘business
community’.37

Dilma Rousseff was re-elected in late 2014, after a bitter campaign that pitted her own strikingly left-
wing programme against the overtly neoliberal programme of her main opponent, from the PSDB. She
won in the second round by 52-48 per cent, despite media hostility, the lava jato investigations, and the
collapse of her parliamentary base with the election of the most right-wing Congress in decades.

Politically isolated and with the economy in freefall, Rousseff attempted to buy policy space by
abandoning her developmental aspirations and electoral commitments, and turning towards
neoliberalism. She dismissed the neodevelopmentalist Guido Mantega, and appointed to the Ministry of
Finance a banker chosen by Bradesco, one of Brazil’s largest financial conglomerates. Joaquim Levy
was tasked with implementing a contractionary adjustment while, at the same time, preserving most
social rights, entitlements and programmes. However, it was impossible for the government to cut its
way to growth, and its policies were insufficient to gain any major constituency.38 Every policy was

14
rejected by the media and the neoliberal elite, and every initiative was either blocked in Congress or
undermined by the resistance of the PT and the left.

The political base of support of Rousseff’s government fragmented until its remnants were
overwhelmed by the opposition. The government alienated the organised workers because of the
worsening economic situation, corruption scandals, policy turn to neoliberalism, and failure to address
key demands of the working class: the reduction of the working week, limitation of subcontracting, and
improved pensions. Although Rousseff’s support held better among the informal workers, many were
alienated for the same reasons. The government was never supported by the internationalised
bourgeoisie, finance and the media, especially after its attempt to reduce interest rates and lead the
recovery of GDP growth. The administration lost the internal bourgeoisie because of the economic
slowdown, perceptions that the President was excessively autonomous, disagreements over public
policy, and the pressure of lava jato. The upper middle class was alienated by its own relative losses,
given the gains of the rich as well as the poor,39 and perceptions of generalised corruption. The
administration also earned the hostility of Congress because of its unwillingness or inability to dish out
targeted favours. These groups coalesced around claims that the state was ‘out of control’, the economy
was in irreversible decline, the fiscal deficit was ballooning, inflation would soon explode, and the PT
was corrupt.40

Despite these converging threats, the PT and the left reacted only weakly. Most social movements had
long been captured by the PT administrations or demobilised as part of the PT’s effort to win elections
and govern by the established rules, and the party was crippled by fear, shame and confusion. The far
left remained small and scattered. Finally, the media had campaigned implacably against the
government since 2013, making it hard to mobilise the population in support of Rousseff’s mandate.
She lost an impeachment vote in the Chamber of Deputies by 367-137 votes, on 17 April 2016, and had
to step down ‘provisionally’. She lost in the Senate by 61-20 votes, on 31 August, and was removed
from office.

3.5 – Authoritarian Neoliberalism

The impeachment of Dilma Rousseff was not merely the tortured end of a flawed administration or the
outcome of a savage attack on the PT, although the party was largely disabled: its base of support has
dissolved and, in the local elections in October 2016, the PT suffered severe losses.

15
The mediocrity, incompetence and mendacity of the coup plotters was soon revealed; but the
administration led by former Vice-President Michel Temer could always count on the support of the
elite and most of the Legislature, the party system, the Judiciary, and other state institutions, which
allowed it to disconnect its capacity to rule from its own staggering unpopularity.41 Under the pretence
of fighting corruption, Temer undermined the Constitution, normalised a state of exception, brought the
Armed Forces back into politics, protected gangster-politicians, and imposed an accumulation strategy
based on an unprecedentedly exclusionary, authoritarian and internationalised variety of neoliberalism.

Key initiatives included, first, the change in oil exploration contracts to benefit transnational capital at
the expense of state-owned Petrobras, and the partial break-up and denationalisation of the company
(October 2016). Second, a constitutional amendment freezing primary fiscal spending (excluding
interest payments on the domestic public debt) in real terms for 20 years (December 2016). Third, a
legal reform drastically liberalising the labour market (July 2017). Fourth, a determined attempt to
reform pensions and social security, that remains pending at the time of writing (mid-2019). In the
meantime, Lula was found guilty of corruption under the flimsiest pretext, and jailed for 12 years.

Many of the income and employment gains achieved under the PT evaporated. Output contracted
between 2014 and 2016, and subsequently stagnated. The fiscal deficit remained large, and the
domestic public debt continued to grow. Several ‘national champions’ were weakened or sold off to the
highest (foreign) bidder. Petrobras and the oil chain are being dismantled, and there is escalating
repression against the social movements and the left. The far right recovered a mass base among the
upper middle class for the first time since the early 1960s. To cap it all, former Captain Jair Bolsonaro,
a coarse ultra-right-winger, was elected President in October 2018.

Bolsonaro was supported by an assortment of small parties and neophyte politicians. His campaign was
based on four themes. First, denunciations of ‘corruption’ against everyone else, drawing upon
Bolsonaro’s purported status as a political outsider. Second, conservative moral values and the rollback
of citizenship. The candidate attacked social movements and the left because they are ‘corrupt’,
‘communist’ and ‘godless’, and advocated the restoration of ‘lost’ cultural values by deathly violence.
Third, public security and easier access to weapons, which has a strong appeal in a country enduring
over 60,000 murders per year, and where crime is a common topic of conversation. Fourth, a neoliberal
economic programme, drawing upon the intuitively appealing notion of reducing bureaucracy and the
deadweight of a corrupt state.

16
While the political side of Bolsonaro’s administration has been marked by staggering confusion, the
economic side was dominated by Finance Minister Paulo Guedes, a minor ‘Chicago Boy’ in General
Pinochet’s Chile, and a banker and occasional academic in Brazil. His priorities include, first,
dismantling Brazil’s progressive pensions system in order to introduce another one, based on individual
accounts, minimal redistribution between generations or classes and tough restrictions upon drawing up
pension income. His proposal is so restrictive that most low earners with unstable jobs will never
achieve the contributions threshold required to claim benefits, while the rich will tend to choose private
pensions offering more flexible conditions and uncapped returns. Second, the privatisation ‘of
everything’ (starting with the country’s airports and parts of Petrobras), and, third, a tax reform
introducing a less progressive system.

Under authoritarian neoliberalism, Brazil’s economy, society and political system are a perillous state;
the democratic 1988 Constitution is frayed if not mortally wounded, and there is no clear path back to
economic growth and political stability.

4 – Conclusion

This article reviewed the varieties of the neoliberal system of accumulation under the PT
administrations led by Luís Inácio Lula da Silva and Dilma Rousseff, in order to identify and classify
the stagese of the SoA, and the drivers of its evolution over time. In doing this, it offers an original
interpretation not only of the structure and dynamics of neoliberalism in Brazil, but also a framework to
examine its phases, vulnerabilities and evolution, culminating with the growing incompatibility
between neoliberalism and democracy, through the imposition of an authoritarian variety of
neoliberalism in the country.

When examining the administrations led by the PT, it was shown, above, that under favourable external
circumstances, these administrations could deliver rising GDP growth, political stability, incremental
democratisation of the state and social integration through inclusive and, later, developmental
neoliberalism. It appeared that, the more the accumulation strategy moved away from neoliberalism,
the faster was the economy’s growth rate and the greater were the economic and social gains for the
majority.

However, these achievements were bounded by the stability of the neoliberal SoA, including the tripod
as the foundation of macroeconomic policy. They enforced high interest rates, an overvalued currency
and a low investment rate, the deindustrialisation and reprimarisation of the economy, current account

17
deficits, and the creeping privatisation of public services, justified by the limits on public spending.
Neoliberalism externalised the drivers of growth through the integration of accumulation into
transnational circuits, and made the balance of payments increasingly dependent on foreign capital
flows; it also created a regressive pattern of employment with adverse implications for Brazil’s social
structure and political dynamic.

The PT governments were unable or unwilling to confront these constraints through the transformation
of the fields of politics, media or class relations. The Party accepted the laws and institutions of
neoliberalism, and introduced only minimalist reforms. Despite their achievements, the social policies
of the PT governments were bound by neoliberalism, and fostered the marketisation and
financialisation of daily life, instead of limiting the commodification of social reproduction. 42

Since the PT was committed to the ‘rules of the game’ in order to stabilise a fragmented and
decentralised political system, its governments had to rely on unwieldy alliances and case-by-case
negotiations. They could deliver the PT’s goals only if the party had a mobilised base of support
outside Congress – but the PT to disarm itself instead. It became impossible to implement a systemic
alternative to neoliberalism. The PT also behaved as if the accretion of incremental changes would
eventually weaken the foundations of neoliberalism; instead, it merely exposed the roots of the elite’s
power: the patterns of ownership and economic reproduction, the structure of the political system, the
monopoly of the media, and so on.

The collapse of the PT’s transformative project was due to its attachment to neoliberalism, rather than
its reforms. The party’s administrations collapsed because of their attachment to pragmatism even
when it had become counterproductive, and the PT’s dogged triangulation towards a political centre
that was collapsing into the far right.

The political crisis in Brazil and the impeachment of Dilma Rousseff expressed the limitations of
developmental neoliberalism and the contradictions of the political project of the PT. They show, in
particular, that what was lasting in the experience of the federal administrations led by the PT was their
neoliberal economic base, and what was untenable was the distributional policy superimposed upon the
SoA. In the end, the PT’s dalliance with neoliberalism opened political space for the far right, propelled
Rousseff’s impeachment, and supported the reversal of the economic, distributive and social advances
of the 2000s.

18
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Endnotes:

22
1
For detailed accounts, see, inter alia, Gentili (2016), Rousseff (2017), Saad-Filho and Boito (2017),
Saad-Filho and Morais (2018, chs.7-9), Souza (2017) and Snider (2017).
2
For a similar approach with a distinct focus, see Ban (2013).
3
For an overview of typically neoliberal policies, see Dardot and Laval (2013), Lemke (2001),
Mirowski and Plehwe (2009) and Saad-Filho (2018). The ‘tripod’ is examined in section 3.1 below.
4
See Brenner, Peck and Theodore (2010) and Fine and Saad-Filho (2017).
5
Ilyenkov (1982); Saad-Filho (2002, chs.1-4).
6
See Saes (2001).
7
See Saad-Filho and Boito (2016).
8
Saad-Filho (2017).
9
The social policies typical of neoliberalism are examined by Saad-Filho (2015).
10
Ayers and Saad-Filho (2014), Fine and Saad Filho (2017), Saad-Filho (2018).
11
Fine and Saad-Filho (2014).
12
See, for example, Bresser-Pereira (2003, 2005) and Sicsú, Paula and Michel (2005). For a review of
diverse interpretations of neodevelopmentalism (new, post-Keynesian, and social developmentalism),
see Amado and Mollo (2015), Fritz, Paula and Prates (2017) and Mollo and Fonseca (2013).
13
See Saad-Filho and Morais (2018, chs.2-4).
14
See Bresser-Pereira (1996), Franco (1995) and Kormann (2015, part III). For a critique, see Bianchi
(2004) and Machado (2002).
15
See, for example, Chang and Yoo (2000) for the case of South Korea, Felder (2013) for Argentina,
and Valle Baeza and Martínez González (2011) for Mexico.
16
See Valença (2002).
17
See Kume, Piani and Souza (2000), Paula (2011) and Squeff (2015).
18
See Saad-Filho and Morais (2018, chs.3-4).
19
See Saad-Filho and Morais (2018, ch.4).
20
The average rate of GDP growth in the 1990s was only 1.8 per cent per annum, the lowest in the
century. In contrast, between 1933 and 1980 the economy expanded, on average, 6.4 per cent per
annum. GDP growth in the first decade of neoliberalism was even lower than in the so-called ‘lost
decade’ of the 1980s (2.6 per cent per annum) (all macroeconomic data are from www.ipeadata.gov.br,
unless stated otherwise).
21
For an overview, see Arestis, Paula and Ferrari-Filho (2009), Paula and Saraiva (2015) and Saad-
Filho and Morais (2018, ch.3).
22
The President, a former metalworker, appointed five working-class ministers; over 100 trade
unionists took high-level posts in the administration and the SOEs, and they appointed hundreds of
lower-level colleagues; Marcelino (2017, p.11) suggests that 1,300 trade unionists were appointed to
government posts.
23
For a detailed analysis of Lula’s first administration, see Saad-Filho and Morais (2018, ch.5).
24
Lula’s second administration intensified the inclusive counter-tendencies introduced in this period
(see below), as part of a fuller neodevelopmentalist inflection in the neoliberal SoA. Nevertheless, the
first administration can be aptly described through its policies limiting the adverse social implications
of neoliberalism.
25
See Martuscelli (2015, pp.214-6), Saad-Filho and Morais (2018, chs.5-6) and Singer (2009).
26
For a detailed analysis, see Boito (2012).
27
Barbosa and Souza (2010, p.11).
28
Lula’s approval ratings rose from around 40 per cent, during the mensalão, to 50 per cent at the start
of his second administration, and over 80 per cent in 2010 (see CNT/MDA 2018, pp.43-44).
29
The Constitution of 1988 determines that social security and unemployment benefits cannot be lower
than the minimum wage.
30
See Pomar (2013, p.42) and www.ibge.gov.br, monthly employment survey.
31
Source: Pesquisa Nacional por Amostra de Domicílios,
http://www.ibge.gov.br/home/estatistica/populacao/trabalhoerendimento/pnad2004/default.shtm
32
See FIESP et al (2011) and Singer (2015, pp.43-5, 55-6).
33
For an overview, see Barbosa (2013) and Souza (2015).
34
See Singer (2015, pp.39-49).
35
For a detailed analysis, see Saad-Filho and Morais (2018, ch.7).
36
See Rovai (2013).
37
See Lassance (2017) and Saad-Filho (2018, ch.9).
For a review of economic policy during this period, see Belluzzo and Bastos (2016) and Rossi and
38

Mello (2016, 2017a).

39
See Loureiro and Saad-Filho (2018).
40
See Boito and Saad-Filho (2016).
41
Temer’s approval ratings rarely exceeded 10 per cent, and often went as low as 3 per cent, while
negative perceptions of his administration exceeded 80 per cent; see, for example, CNT-MDA (2018,
pp.4-7).
42
For a detailed analysis, see Lavinas (2017) and Saad-Filho (2015).