Neoliberal extractivism: Brazil in the twenty-first century

ABSTRACT

Neo-extractivism in Latin America increased state revenues and expanded its capacity for income redistribution while leaving a trail of socioecological devastation. The ambiguity of twenty-first-century extractivism reflects the lack of consensus about its role in the successes and failures of the Pink Tide. Theorization about the main phenomenon, extractivism, could lead to a more assertive examination of both. This paper offers an analysis of Brazil during this period, departing from an understanding that the key to depicting extractivism is not the link between resource extraction and the dynamics of profit or revenue generation, but rather, the link of both to a porous and externally dependent pattern of domestic accumulation. As such, neoliberal extractivism describes empirically and theoretically the recent form of extractivism in Brazil. The expansion and reproduction of resource-based accumulation reflected and reinforced the reliance on a systematic spoliation of state and society to remunerate the owners of rent- and interest-bearing assets – the most perverse and aggressive form of extractivism in its history.

KEYWORDS:

• Brazil
• extractivism
• pattern of accumulation
• neoliberalism
• Pink Tide
• external dependence
• porosity

Introduction

Gudynas (2009, 2010) was the main precursor of a relevant body of literature analyzing one of the most outstanding economic trends in Latin America during the Pink Tide: the renewed reliance on the extraction of natural resources and the export of primary commodities (Loureiro 2018). Gudynas used the term neo-extractivism to describe and interpret such a trend. Neo-extractivism refers to a twenty-first-century form of extractivism, which is marked by a new state-led system of management of the extractive sector. Left-leaning governments were able to promote economic dynamism through a resource-centered, export-led development model during a window of opportunity in the global commodity market (Gudynas 2010). Reverting neoliberal policies, they managed to capture a larger share of resource revenues and redistribute it through the provision of public services, investments, and social policies. Therefore, neo-extractivism was closely associated with the return of economic growth, an increase in public investment, an expansion of income redistribution programs, and ultimately, an unprecedented improvement in poverty and inequality. These economic and social changes have justified or reinforced other hallmarks of the Pink Tide that were directly implicated in, and constitutive of, neo-extractivism: the neo-developmentalism and post-neoliberalism of the state – in addition to (despite its controversy) left-populism (Andrade 2020). In brief, neo-extractivism was a style of resource management considered to be neo-developmentalist and post-neoliberal in character. But what about the central and enduring phenomenon, extractivism? What does it describe and explain?

In Gudynas (2010), extractivism narrowly refers to the activities that appropriate and extract natural resources in great quantities, representing in the context of Latin America a long-standing alternative for economic development, particularly through the export of primary commodities. This empirical notion inspired a diversity of studies, but it might have left the phenomenon unanalyzed. So much so that, twenty-first-century extractivism is ambiguous. On the one hand, it has a progressive dimension attributed to the resumption of state control over public resources and ensuing protagonism in meeting legitimate and pressing social needs. And, on the other, it has an unsustainable and regrettable socio-environmental dimension. Gudynas (2010, 2012) acknowledges this ambiguity, which is reflected in a lack of consensus about the role of extractivism in the successes and failures of the Pink Tide.

The lack of a broader and systemic theorization may have restricted the opportunity to contribute more emphatically not only to understanding and critically questioning extractivism in the region, but also the development models implemented by the different governments of the Pink Tide (and earlier periods). The recurrence of resource extraction across Latin America's economic history, including across contrasting political regimes and state developmental projects, has reinforced the perception that extractivism is a strict empirical phenomenon that can be understood almost autonomously from state politics or social relations (as a curse, disease, or blessing). The reasons for economic reliance on resources (and whose reliance), for example, were rarely questioned, explained, or characterized. It is noteworthy that a significant part of the literature has privileged the rural character of extractivism, focusing on its agrarian and environmental aspects, mainly observed at the site of extractive projects.

This paper offers an analysis of extractivism in Brazil during the early 2000s from a perspective that has largely escaped the contemporary debate. The analysis departs from the understanding that extractivism is a phenomenon constituted and simultaneously conditioned within the totality of the social organization of production and the dynamics of capital accumulation, social, and power relations at the country level (which does not exclude its international dimension). Extractivism, therefore, cannot be depicted in isolation from the historical pattern of capitalist development within which it is formed, evolves, and manifests as a social and historical phenomenon. Taking this approach requires a more careful and integrated examination of the development pattern¹, and as such, a more careful consideration of neoliberalism.

It is important to bear in mind that the left ascension to power in different Latin American countries happened approximately a decade and a half after the end of several dictatorial regimes, followed by an almost simultaneous democratization process and implementation of neoliberal reforms. Neoliberalism was not only the historical period succeeding developmentalism; it was the pattern of development that replaced it in Latin America. Being the continent’s largest economy, and supposedly, the “largest ‘extractivist’ in the region and leader in agricultural extractivism” (Gudynas 2013, author’s translation), Brazil experienced the Pink Tide period as a paradigmatic figure, albeit with several particularities, one of which being the continuity of neoliberalism as the dominant pattern of capital accumulation and development.

In the extractive debate, the subject neoliberalism was set aside either by a swift acceptance of the Pink Tide’s neo-developmentalist and post-neoliberal character, or by considering extractivism as a discrete field of analysis and struggles, with unclear ties to politics and the broader dynamics of development. When neoliberalism was not dismissed before being analyzed, it was discussed based on criteria of questionable relevance. Likewise, the idea of post-neoliberalism gained space, having equally questionable arguments (e.g. anti-neoliberal discourse, ideology, state protagonism, regional commercial agreements, neoliberal failures, state-society relations).

The concept of neoliberalism is notoriously controversial, and as expected, so would be post-neoliberalism (Katz 2015). Bebbington and Humphreys Bebbington (2011) were critical about the use of such terminology. They point out that the politics and economics surrounding extraction in Peru (neoliberal), Ecuador, and Bolivia (anything but neoliberal) did not differ, complicating “distinctions between neoliberalism and post-neoliberalism, [and] raising questions as to what the prefix ‘post’ refers to” (Bebbington and Humphreys Bebbington 2011, 142). Indeed, it is the substance of state politics and economics that needs to be carefully examined.

Katz (2015) observes that post-neoliberalism was commonly used to identify the period after the Washington Consensus, when a supposed political turn to autonomy took place. Although the prefix ‘post’ suggests the demise of neoliberalism entirely, post-neoliberalism meant only a partial rejection of it, implying ruptures but also continuities (Svampa 2012; Brand, Dietz, and Lang 2016). That should be expected, says Katz (2015), after all, changes in presidents and sets of economic and social policies are insufficient to alter an economic model. What are the ruptures and continuities of neoliberalism that matter for an analysis of extractivism?

Brand, Dietz, and Lang (2016) surveyed some of these. They suggest that continuities of neoliberalism are reflected in the subordinated form of Latin America’s integration into the world market. But, since when does this imply neoliberalism? Post-neoliberalism, on the other hand, breaks the neoliberal forms of capital valorization of previous decades, which were ‘carried out via privatization, liberalization, the promotion of foreign direct investment, and structural adjustment programs’. Rather, in the 2000s, capital valorization was carried out “via resource extractivism at relatively high world market prices. This is at the core of the frequently used term ‘post-neoliberalism’” (Brand, Dietz, and Lang 2016, 144–5). This is confusing because privatization is not a mechanism of capital valorization, and the liberalization of capital flows and the promotion of foreign direct investment (FDI) were not curbed during the Pink Tide. Finally, financialization, indeed the main form of capital valorization reinforced by structural adjustment programs, is not even mentioned.

For Svampa (2012), seizing the economic opportunities of resource extraction marks a point of convergence between neoliberalism and Latin American progressivism. This formed the basis of her notion of a Commodity Consensus (2012), deemed as the paradigm that confronted the Washington Consensus. The dominance of finance over the state and the economy was (placidly?) substituted for the dominance of large-scale, export-oriented extractive projects. But has the dominance of finance been investigated? What is the evidence of its substitution?

Another key idea supporting the notion of the end of neoliberalism regards the return of the state as a key agent of development. Latin America illustrated this clearly during the Pink Tide (Burchardt and Dietz 2014). State protagonism is also embedded in the notion of neo-extractivism. But since when has neoliberalism been about the retreat of the state as a social actor and intervener in the economic model? Despite the ideology of a state promoter of free markets and personal liberties, neoliberalism is more accurately associated with a strong and rather authoritarian state (Fine 2013). The role of the neoliberal state ‘has primarily been to promote the interests and internationalization of capital in general and of finance in particular, an important example being the extent that state finance itself has been financialized’ (Fine 2013 , 58). Fine reinforces this point by recalling the massive state rescue of finance, followed by austerity, after the 2008 financial crisis, which showed the ‘contradictory hegemony of the material of finance interests over its own neoliberal ideology of free markets without state interference’ (Fine 2013, 58).

It turns out that neoliberalism, and the dynamics of production and accumulation it imposes, were perhaps the largest oversight in the extractive debate; yet, it was within its main tenets that extractivism fit best. The first part of this paper expands on the explanation of both, its approach to extractivism as a social and historical phenomenon, and neoliberalism as the prevailing development pattern (supposedly) only until the early 2000s. This lays the foundation for the second part, which develops a preliminary (and certainly incomplete) analysis of Brazil after the turn of the century.

This paper shows that neo-extractivism bears little relation to the country. This is explained, first, by Brazil’s particularities. Neither the main dynamics of economic growth, state budget, nor income redistribution directly relied on the expansion of primary commodities production and exports. The Brazilian state failed to increase control over primary sector revenues. But second and more importantly, neo-extractivism fails to describe Brazil because it does not reflect the fundamental aspects of the phenomenon it is set to describe, extractivism itself. Extractivism cannot be confused with the use of natural resources for profits and revenue (with possible social redistribution). Rather, its distinguishing feature is the centrality of nature in the domestic pattern of surplus value production (thus, key for the accumulation of domestic bourgeoisie), simultaneously creating, reinforcing, and reproducing an economic system that is externally dependent and porous. In other words, extractivism emerges when the use of nature for surplus value production is linked to porosity (Castel-Branco 2015), that is, to a systematic extraction and transfer of a country's social wealth and socially-produced surplus value to national and international capitalists (as profit, interest, or rent). Extractivism, therefore, entails a systemic social loss and spoliation.

The expansion of resource extraction and export responded to, and served, the neoliberal dynamics of capital accumulation in which state revenue, social income, and wealth were seized to remunerate domestic and international owners of rent- and interest-bearing assets. The extractive character of extractivism lies in the social relations attaching the use of nature to domestic patterns of accumulation that are porous and externally dependent (Castel-Branco 2010, 2015), and as such, sapping the possibilities for overcoming the economic and social ills that haunt the country. Neoliberal extractivism is the most perverse and aggressive form of extractivism in Brazilian history.

Part I: Approach from a systemic perspective

Extractivism

The work of Castel-Branco (2010, 2015) has highly inspired the reflections presented in this paper. He does not discuss extractivism, but rather, develops the concept of extractive economy² to describe the pattern of accumulation and development in Mozambique. Implicitly, Castel-Branco makes a twofold reference to extraction: first, it refers to the outstanding presence of extractive industries in that country as an expanding economic core, manifested in growth, investments, or fiscal dynamics; and second, it alludes to porosity.

Porosity refers to the systematic extraction and transfer of the country’s social wealth and socially-produced surplus value to national and international capitalists as profit, interest, or rent (Castel-Branco 2015). It depicts not only the outflow of surplus from a country – thereby favoring foreign capital as opposed to the domestic dynamics of accumulation – but also the state transfer of public resources and income to domestically-owned capital – which may deploy it or not in the domestic economy (Castel-Branco 2015). An extractive economy has a porous economic system, being therefore inefficient to retain the wealth produced and limited to generate broad-based social and economic development (Castel-Branco 2010, 2015).

It is important to highlight that an extractive economy might not have extractive industries or an important resource sector. Similarly, having a robust extractive sector does not imply being an extractive economy (e.g. Canada, USA). That is because porosity, its key characteristic, does not derive from the abundance of natural resources, but rather, from the patterns of production, trade, property, finance, investments, taxation, and so on, all of which are mediated by the state. Porosity is, therefore, an issue of political economy. The economic, political, and social patterns from which it emerges are systemically connected, organized, and structured, constituting a dominant pattern of accumulation over time (Castel-Branco 2010).

Extractivism, in turn, is neither the same as an extractive economy nor equivalent to having a large resource base and strong extractive activities. What distinguishes extractivism is the combination of both, an extractive economy (mutually conditioning, constituting, and contributing to) the reliance on nature for accumulation.

When the exploitation of nature is attached to a porous economic system, it is continuously propelled into expansion without creating proportional economic and social counterparts. Therefore, it is also doomed to reproduce over time. Given the finitude of natural resources, an economic system marked by extractivism is also (and dramatically) unsustainable. ‘Each new generational cycle tends to have fewer natural resources but not less dependence on these natural resources; what you have is fewer options’ (Castel-Branco 2010, 94, author’s translation).

Linking the notion of extractivism to the dynamics of porosity touches upon the considerations of twentieth-century intellectuals, who, even though not discussing or using the term extractivism, were concerned about resource-based and export-led development in Latin America. For them, the pattern of primary resource specialization in the former colonies was considered a distinguishing aspect of capitalism in the periphery. One of the key implications of such was the reduced capacity of surplus value production, as well as the reduced capacity of surplus value retention and reinvestment in the periphery.

Different schools of thought, as well as individual authors, have explained the dynamics of surplus value transfer in several ways, and through different mechanisms. Perhaps the best known is the transfers through the system of unequal exchange in international trade relations elaborated by Prebisch (Kay 1989). The theory of unequal exchange is premised upon the deterioration of terms of trade, which in turn, derives from the technological development differentials (and related rates of economic exploitation) between countries (those specialized in primary commodity production and those able to produce and trade goods with higher technological content). From this account, the extraction of surplus value from the periphery was a combined outcome of primary export specialization with a dependence on technology imports – an aspect altogether disregarded in the current discussion about extractivism.

The developmentalist policy doctrine first devised by Prebisch in the 1950s at the United Nations Economic Commission for Latin America (ECLA) intended to overcome the evils of primary specialization through import substitution industrialization (ISI) and modernization. Developmentalism was, in a sense, the antidote to extractivism.³ In the 2000s, they were considered self-reinforcing, showing that developmentalism had been distorted or subtracted from its original and historical sense (Bebbington and Humphreys Bebbington 2011; Veltmeyer 2013; North and Grinspun 2016; Vergara-Camus and Kay 2017), and the notion of extractivism became confined to the extractive sector, extractive policies, industry, or capital.

Yet, history has shown that developmentalism did not prevent the continuity of extractivism. The policies that prevailed from the 1950s to 1980s, while giving attention to transforming the productive structure, neglected other aspects equally defining the dynamics of surplus extraction or porosity. Until the 1950s, almost all economic cycles of Brazil since colonization were driven by agricultural production and export. Historically, the domestic bourgeoisie has relied, more or less, on its overwhelming control over land, ground rent appropriation⁴, and the performance of the agricultural export sector for accumulation. The unequal distribution of land was not challenged by ISI, and land ownership remained at the base of the domestic bourgeoisie strategy of accumulation and tied to old and new forms of porosity.

The mechanisms of porosity that prevail in a certain historical period might be superseded or reproduced, thus becoming cumulative in the presence of new ones. The second part of this paper discusses the dominant forms of surplus production and transfer in Brazil during the 2000s and their relations with the resource-based economy, the pattern of economic growth, and the politics of the state.

State policies have a direct effect on the mechanisms and magnitude of surplus value transfers domestically or abroad. Castel-Branco (2010) documents how porosity in Mozambique is associated with state transfers of land (and other resource) rights to private individuals or firms, or the transfer of public assets through privatization. These cases represent an analogous process to Marx’s primitive accumulation, which is associated with the formation of the national bourgeoisie. As Castel-Branco (2010) points out, this emerging bourgeoisie has access to land and resources but depends on foreign capital, aid, technology, public and private investments to mobilize its assets into production. Through privileged access to political power, as well as subjection to, and dependence on the global dynamics of accumulation, comes to existence an unproductive (rentier) bourgeoisie that accumulates by offering resources and political influence to multinational capital. Porosity is expanded by generous state fiscal incentives to foreign investments in mega-extractive projects and their practice of profit repatriation.

All of the above translates into a notion of extractivism that cannot be understood, framed, or discussed outside of the totality of economic, social, and political development dynamics. Instead of being an enduring phenomenon in Brazil or Latin America, irrespective of the historical period, economic, and political regime, extractivism is historically determined, historically evolves, and should be historically characterized through its relations with the social organization of production and the pattern of accumulation. This is not simply a truism about the need for context-specific research; rather, this is about the nature of extractivism as a social phenomenon, constituted through history and the political economy of development. And even though extractivism should be studied in a historically specific context, this should not divert attention ‘from systemic global processes that constrain peripheries in similar ways despite their diversity’ (Fischer 2015, 727). I look now at neoliberalism as a worldwide reorganization of production and accumulation pattern.

Neoliberalism

Neoliberalism encompassed a historic and systemic reorganization of the material base for economic, social, and political reproduction globally (Saad-Filho 2015). The control of financial capital over all spheres of production was a defining character of that reorganization (Saad-Filho 2015). In Latin America, neoliberalism is largely associated with the implementation of the Washington Consensus policy package, which had the free-market economy as its guiding principles, and macroeconomic stability (through the control of inflation) as its explicit goal. The measures that were taken, however, reflected the fast-advancing process of the financialization of capitalism on a global scale, a process that has underpinned a ‘worldwide shift towards neoliberalism’ (Saad-Filho 2005, 224).

Free trade policy was one of the pillars of neoliberalism. In conventional economic theory, free trade is premised upon the principle of comparative costs, meaning that countries would tend to specialize in the production and trade of goods for which they enjoyed comparative cost advantages (Shaikh 2007). In practice, a country would ‘export some portion of the goods it could produce comparatively more cheaply at home, in exchange for those it could get comparatively more cheaply abroad’ (Shaikh 2007, 52). Implicit in this rationale is the claim that free trade ensures a balanced result between a country’s imports and exports and an overall balance of international trade. Yet, unlike the theory, persistent trade imbalances are the rule between unequally competitive trade partners. After all, argues Shaikh (2007):

in the world market it is not “nations” which barter some goods for others, but rather myriad firms in different countries who buy and sell goods for money, all with the aim of earning profits on the export and import of a ever shifting variety of commodities. (Shaikh 2007, 52)

If the neo-classic models were correct (and not in conflict with reality), ‘economies that successfully transitioned to more advanced stages of development [as did South Korea] would start by specializing instead of diversifying’ (Castel-Branco 2010, 90, author’s translation).

The free flow of capital was another cornerstone of neoliberalism. The conventional rationale for relaxing the rules for the movements of capital in and out of a country was based on two assumptions: that capital from rich countries should naturally flow to poor countries; and such capital, in turn, would automatically become productive investments, allowing that the contracted debt (and interest on debt) is paid back in the future (Bresser-Pereira and Gala 2007). Yet, Bresser-Pereira and Gala (2007) remark that, in practice, foreign capital was used to finance the consumption of imported goods instead of productive investments,⁵ which not only created a negative effect on the trade balance, but also replaced the possibility of creating future revenues with permanent import expenditures. The latter also substituted the creation of domestic for international jobs and effective demand, undermining the capacity to expand the domestic fiscal base and consolidating the tendency to replace domestic with foreign investment.

Trade and capital liberalization have, therefore, benefited the most technologically advanced firms, belonging to developed countries, while the developing world has largely inclined to fall back on providing foreign access to cheap labor and natural resources (Shaikh 2007). Free trade between unequal trading partners reinforced the tendency in developing countries to increasingly rely on the import of technology and the export of natural resources with little processing. And if this dynamic reproduces and advances persistent trade imbalances, it creates the permanent need for a systematic inflow of foreign capital. In brief, the era of free trade and the free flow of capital – two pillars of neoliberalism – effectively espoused (1) the need to expand primary exports, (2) the dependence upon (volatile) foreign investments, and (3) the consumption of imported consumer goods. Not surprisingly, this resembles the porous productive structure of the past. Yet, the dominant mechanism of porosity was no longer found in trade, but in asset property relations along the entire economic system, allowing the transfer of a portion of the socially-produced surplus value to owners of financial assets in the form of interest.

The reorganization of production and the changes in capital flow dynamics signaled a fast-paced process of financialization, which Fine (2013, 55) defines as the ‘increasing scope and prevalence of [interest-bearing capital (IBC)] in the accumulation of capital’. IBC imposes the need for an expansion of wealth through the production or profitable activities from which surplus value is generated and appropriated in the form of interest by the lender of capital and the remainder, appropriated as profit by the borrower (Fine, 2013). IBC appropriates surplus ‘at the expense of other capitals’ (Fine 2013, 53). The state plays a key role in the competition among these capitals. A series of state policy reforms, such as financial deregulation and labor flexibilization, facilitated the penetration and intensification of finance in all economic activities, private and public, to the point of becoming ‘a lever of ownership and control of productive capital […] as well as of social policy and the like’ (Fine 2013, 58).

Macroeconomic policies, even if following different regimes in each country, have been crucial in defining the rates of return on financial investments, as well as the dynamics between lenders and borrowers within and across countries. Interest and exchange rate regimes are tools of monetary policy. The former directly determines the rates of return on IBC, simultaneously affecting the domestic cost of (and access to) credit, as well as the cost of servicing debts, both of which affect private and public investment capacity. The exchange rate, in turn, affects the export competitiveness, the cost of imports, and the rates of return in transactions between currencies. In neoliberalism, state-sponsored macroeconomic policies have been fundamental mechanisms of financial capital accumulation, showing the pivotal role of finance in policy-making (Andrade 2017). The management of interest and exchange rates has had a structuring impact on patterns of production, investments, trade, financing, public expenses, public and private debt, fiscal dynamics, asset ownership, and so on. In other words, neoliberalism changed the pattern of accumulation. In many developing countries, this has negatively affected the capacity to produce, but also retain wealth, which has translated into a higher level of porosity and external dependence. The next section looks at how these dynamics have played out in Brazil, as well as how extractivism has been revived, reshaped, and enhanced under a new basis.

Part II: Neoliberal extractivism

From the 1980s to the 1990s, Brazil transitioned from dictatorship to democracy, and from developmentalism to neoliberalism (Saad-Filho 2010). The opening of trade and capital borders, privatization, labor reforms, and changes in monetary and fiscal policy were implemented in the 1990s as measures to tackle the decade-long crisis of high inflation and external debt. The overall outcome, however, was a total reorganization of the economy. Since then and throughout the 2000s, the structural core of macroeconomic policies has remained practically unchanged.⁶ It is possible to say, but not without controversy, that neoliberalism, as a mode of accumulation, matured during the political cycle of the Left, which began in 2003 with the election of President Lula from the Workers’ Party (PT), and ended prematurely in 2016, with the impeachment of the elected President Rousseff (PT).

In this period, the Party steered and navigated a cycle of economic growth, fostering ‘material gains for the working class and a decrease of income inequality’ (Loureiro 2018, 27) until 2011, when the economic scheme began to crumble. In 2014, the economy was in full recession, and 2 years later, the PT was ousted from power. These economic and political cycles overlapped with a third and international one, the primary commodity price boom and bust, thus suggesting that the production and trade of primary commodities played a key role in the economic system and the ability of the PT to remain in power (Andrade 2020). All the above resonates with the general Pink Tide trends and the notion of neo-extractivism, whereby the exploitation of resources was interpreted as the key engine of economic growth, the source of state revenue, and for some, the source of government legitimacy to continue in power.

The coming sections reexamine how the resource economy reflected, responded to, and fostered the dominant pattern of accumulation in this period. The analysis proceeds by identifying the main dynamics of production, consumption, trade, investments, government revenue collection, and spending that drove the pattern of growth in Brazil, and how the dynamics of the primary sector were implicated. While answering these questions, I point at how key state policies sponsored the reorganization of production and the circuits of capital accumulation, redefining economic porosity, external dependence, and the role of primary export. This is an ambitious analysis considering the remaining space of this paper and my competence in these matters. What follows is, therefore, preliminary and incomplete.

The growth pattern and forms of porosity through production and international trade

It is well known that, during the 2000s, Brazil had two cycles of growth, the first of which was shorter but directly influenced by the performance of the primary sector. From 2001 to 2005, the volume of exports increased by 63.7% (Loureiro 2018, 90), which mainly accounted for the rise in agricultural exports, reflecting past investments in productivity gains. The prices of exports, in turn, increased by 24.2% (Loureiro 2018, 90), reflecting the early stages of the global commodity price boom. Loureiro (2018, 90) shows that exports accounted for 53.1% of the rise in aggregate demand between 2003–2005, which leads him to assert that Brazil experienced an internationally driven mini-cycle of growth in which agricultural commodity exports were a clear driving force.

However, the ultimate effect of these exports was perhaps balancing the current account and helping to achieve macroeconomic stabilization. This set in motion a series of other positive changes that led to the second and most important growth cycle. Macroeconomic stabilization, together with inflation control, brought back foreign investors and helped recover the average real salary by mid-2004 (Filgueiras 2020). This, in turn, stimulated consumption, production, and trade, leading to an increase in the fiscal budget, the expansion of public investment, employment opportunities, income redistribution programs, and popular credit, all of which boosted consumption, feeding back into the cycle. From 2006 to 2013, Brazil went through an internally driven cycle of growth, with household consumption, household credit, and investments as its propeller (Carvalho 2018; Loureiro 2018). As noted by Loureiro (2018, 91), between 2006 and 2013, ‘exports contributed with a measly 8.0% of total growth, or an average of 0.3 points of real GDP growth per year’. This undermines the idea of state-sponsored primary export expansion as a key growth strategy, which could also bring into question claims about the supposedly socially progressive and legitimate aspect of agricultural and extractive expansion.

Let us look for a moment at how the increase in domestic consumption (of goods and services) affected or related to the dynamics of production and trade. First, the rise of income concentrated at the bottom of the social pyramid engendered a demand for low-productivity services, intensive in low-skilled labor, which boosted the labor market and wages, again, at the bottom (Loureiro 2018). This self-feeding dynamic in services was only partly seen in the dynamics of production and the consumption of goods.

On the one hand, the rise of wage-good consumption had a positive impact on industry and employment because goods were produced domestically. Yet, even though demand was met by domestically produced final goods, that production relied heavily on the import of intermediate and capital goods. Therefore, the rise of wage-good consumption was driving, on the other hand, an increase in the volume of imports. As a logical implication, the continuation of growth would require either an increase in exports or, as argued by Loureiro (2018), the substitution of imports—an option that had been abandoned in the first place.

The composition of the Brazilian import basket reflected the incomplete (and interrupted) process of ISI and the changes in the industrial profile of the country since the implementation of neoliberal reforms in the 1990s. After sudden exposure to international competition, an overvalued exchange rate, followed by industrial policy neglect, industries were dismantled, and production chains became less integrated and more dependent on imports (Carneiro 2010). Furthermore, since 2002, the value of the domestic currency relative to the US dollar started to appreciate. After 2004, it was persistently overvalued, which further fueled the leaning on (cheap) imports. What, then, were the dynamics of exports?

The same policy-sponsored disarticulation of industrial production, together with the currency overvaluation that hampered industrial production, also hampered its export capacity, particularly of medium- and high-technology manufacturers. As a result, consumption-led growth was generating an industrial trade deficit. The trade in services showed a similar dynamic, also reflecting a lack of investment, technological capacity, and workforce qualification. The service deficit in the current account, even though longstanding, escalated after 2005. In other words, ‘the dynamic of consumption and investment increase was, in good part, leaking out of the country’ (Carvalho 2018, author’s translation).

The trade balance of resource-based goods and primary commodities, in turn, was largely positive, giving rise to a regressive dynamic in which the production of primary, low-technology goods⁷ was launched to compensate industrial and service trade deficits. The share of resource-based goods and primary products in the export basket increased steadily throughout this period, demonstrating that Brazil was performing trade reprimarization. And in contrast to the dynamics of imports, which reflected the domestic dynamic of growth, the dynamics of exports mostly reflected the vagaries of international demand for and price of commodities (Loureiro 2018, 112). The total value of exports increased at an average of 22.2% per year from 2003 to 2008, decreased in 2009 after the financial crisis, and again after 2011 with the end of the commodity price boom. The surplus balance in the current account transactions increased only until 2005, and already after 2008, it was progressively in deficit, expressing, beyond external vulnerability and dependence, the inefficiency of primary export specialization.

The more the economy grew, the more the trade and current account deficit increased. And the larger the deficit, the greater was the primary commodity export reliance, instead of import substitution and productive diversification – in a clear manifestation of external dependence, porosity, and extractivism. The policy-created inability to produce value-added goods and conquer markets for higher technology products, together with the policy-created dependence on technology import, led to a regressive repositioning of Brazil in the international division of labor.

None of this, however, was a restriction on domestic accumulation. So much so that structural measures were not put in place to reverse production or trade patterns, quite the contrary. Let us look at the dynamics of investments and capital flows (both foreign and domestic) that constituted the second pillar of economic growth after 2005.

The growth pattern and forms of porosity through investment dynamics

The Growth Acceleration Program (Programa de Aceleração do Crescimento [PAC]) was a major state investment program aimed at encouraging production and promoting national infrastructure, particularly in energy resources, transportation, housing, and sanitation – plus facilities for the 2014 World Cup and 2016 Olympic Games. The PAC was the main investment pillar of economic growth during the 2000s. It was also one of the most important developmentalist signatures of the PT administration. This investment program was integrated into the Productive Development Policy (PDP), launched in 2008. Neither the PAC nor PDP had the ambition of engendering structural changes in the productive structure; instead, both aimed at providing sustainability to the cycle of economic expansion. This policy package included specific support to seven selected sectors to consolidate and expand their leadership, six of which belonged to the resource sector: oil, natural gas, and petrochemicals; bioethanol; meat; cellulose and paper; steel; and mining (Mungioli 2019).

According to Kroger (2012), the government offered an incentive package, known as the ‘National Champions’ policy, of around 120 billion USD to promote dubiously deserving export companies into leading players in their sectors, including internationally. This was the case of JBS-FriBoi, Marfrig, and Brazil Foods, in the livestock and meat sector, Fibria in cellulose pulp, Vale in mining, and Petrobras, in oil and gas, for example. The incentive was operated by the National Development Bank, BNDES, which played a major role as a financing channel to national companies. The main instrument to raise funds for BNDES’s operations was the issuance of treasury bills at interest rates higher than those applied to loans offered by BNDES to these companies. This financing scheme created a social fiscal cost implying the current and future transfer of taxpayer money to large private companies (Gentil and Araújo 2014). This scheme was also representative of another, and dominant, dynamic of investment – and form of porosity – discussed in the next section. First, I look at FDI targeting business and related infrastructure.

In contrast to the 1950s and 1960s, FDI in the mid-2000s was not concentrated in manufacturing, but rather, in the extractive sector and its adjacent infrastructure and services. In 2008, Brazil received half of the FDI inflow of the entire Latin America and Caribbean region, 34% of which was directed to the primary sector (UNCTAD 2009, 64–66). In a study on the evolution of FDI in Brazil, Silva (2018) confirms that it reinforced the trend of primary commodity production and the expansion of the primary export sector. The relative share of the primary sector in the FDI stock went from 2.3% in 2000 to 12% in 2013, at the expense of the industrial stock (Silva 2018, 13). The Brazilian state showed no concern to direct the FDI inflow to priority areas of the economy (Carminati and Fernandes 2013).

Part of these investments have directly targeted the buying and selling of land, fostering two other forms of porosity. A study by Mendonça and Pitta (2017) shows that, after the global financial crisis of 2008, there was a significant increase in international pension funds in the land market in Brazil. This led to the escalation of land value, price speculation, and consequently, the intensification of ground rent appropriation as a strategy of accumulation. Ground rent, in a nutshell, is a portion of the socially-produced surplus value accrued not by those who control or participate in the labor process – the capitalist (in the form of profit) or labor (in the form of salary) – but by the landowner, just for having the property, or a monopoly over a piece of nature (Marx 1999 [1894]). The higher the land price, the larger the ground rent, and in periods of commodity price boom, another extra portion of the surplus is appropriated.

Spadotto et al. (2021) report that the acquisition of land by foreign capital is also often linked to an initial process of land theft involving locals. If the Brazilian state has fiercely protected private land since its constitution, it has been negligent over the control of public land, closing its eyes to an old theft practice called grilagem – an illegal form of land appropriation through the falsification of land titles (Spadotto et al. 2021). That way, the state has allowed the transfer of social wealth to the private domain through an insidious system that has historically defined the agricultural occupation of the Brazilian territory. In 2005, about 20% of the country’s territory was still classified as unregulated public land (terras devolutas), that is, land about which the state has no information. These unregulated public lands, nowadays particularly concentrated in two agricultural frontiers, the Amazon and Matopiba region,⁸ are easy targets for grilagem. Ironically, one of the state’s attempts to control illegal land occupation has been legalization.⁹

Many authors understood the rise of extractivism as the effect of what Veltmeyer (2013), as well as Veltmeyer and Petras (2014), called ‘resource-seeking’ FDI. Extractivism was seen as the outcome of multinational corporations taking advantage of extraordinary profit-making resource exploitation and the state reliance on their technology and investment to reap a portion of their profits as rent. In the case of Brazil, the increase in ‘resource-seeking’ investments only partially captures the dynamics of (and reliance on) investments that were reinforcing the expansion of resource exploitation. And it would be especially doubtful to think that the state was reaping a portion of profits from international corporations. In the situations mentioned so far, the state and society were at the losing end.

Above and beyond resource-seeking capital was an entire system mobilized by the state, banks, and private businesses channeling billions of US dollars seeking advantages from high interest rates, rising asset prices, and the appreciating exchange rate (Kaltenbrunner and Painceira 2015), all of which were affecting the country’s capacity to produce, retain, and redistribute wealth and income – and ultimately reinforcing the centrality of resources (and land in particular) to the production of surplus value and to the forms it interacts with the overall system of accumulation. In other words, extractivism throughout the 2000s reflected a broader set of investments and dynamics of capital, beyond the global commodity market and resource-seeking capital.

State policies, financialization, and porosity

Since the neoliberal reforms of the mid-1990s, the current account in Brazil was positive for only 5 years (2003–2007). Throughout this period, and particularly after the mid-2000s, balance-of-payments solvency could only be maintained by a steady and structural inflow of foreign capital, for which the fundaments of macroeconomic policies, known as the macroeconomic tripod – inflation targets, floating exchange rate, and primary fiscal surpluses – were instrumental. As long foreign capital was available, current account deficits could increase every year and yet, not be a problem (Paulani 2013).

However, the type of policy stimulus in place redefined the prevalent profile of these investments. Long-term investments, deriving profit from production, and thus being committed to productive performance, not only partly migrated from industry to the resource sector, but also were largely replaced by short-term investments, deriving returns from interest, and thus, weakly tied to the quality of the productive process.

Much of these investments targeted domestic currency financial assets and made gains through the substantial interest rate differential relative to their home interest rate (Paulani 2013). Gains were also realized by trading and speculating with these high-yielding assets, such as (domestic currency) sovereign bonds, equities, derivatives, and currency itself (Kaltenbrunner and Painceira 2015). Carvalho (2018) mentions the work of Medeiros et al. (2015), pointing out that, during 2006–2012, the growth of capital income was not the outcome of corporate profits increase, but rather the result of high capital gains obtained on accumulated wealth, that is, the property of financial assets above all, and a strong increase in asset prices.

From 2003 to 2013, the total net FDI inflow was about 412 billion USD, and the total net foreign portfolio investments was 248 billion USD.¹⁰ The stock of foreign investments and external liabilities, which was formed in the 1950s with ISI and expanded in the 1990s with privatizations, peaked in the 2000s with portfolio investments, in a clear display of Brazil’s advanced stage of financial integration. From early-2003 to mid-2008, the Brazilian stock index rose by more than 500% (Kaltenbrunner and Painceira 2015). Presenting data from the Brazilian Central Bank, the authors recall that, in June 2008 (just before the collapse of Lehman Brothers), the country’s total stock of outstanding short-term external liabilities was 679 billion USD, or 46.1% of GDP; in March of 2011, it stood at 883 billion USD, or 39.7% of GDP, one of the highest stocks of short-term external obligations among developing and emerging countries (Kaltenbrunner and Painceira 2015).

As mentioned earlier, foreign owners of financial assets require a portion of the surplus value produced. The volume of external liabilities that the economy carries guarantees the extraction of value from one country to another (Paulani 2013), and the more prominent their presence, the more political power they have to guarantee that extraction. From 2003 to 2013, the total outflow of income, profit, and dividends was around 446 billion USD. In this period, remittances increased by about 128%, while GDP increased by 47%.¹¹ In December of 2013, the stock of short-term external liabilities was 759 billion USD, far exceeding the country’s stock of foreign reserves (359 billion USD) and other external assets.¹²

State-sponsored interest rates have functioned as a mechanism of a massive public income transfer to private financial institutions (national and international). As Paulani (2013) argues, Brazil was integrated in the international dynamics of accumulation and circuits of capital as a platform for financial valorization and private appropriation of value – in other words, as a permanent source of gains for global financial capital. Paulani (2013) notes that the capacity to appropriate a portion of the socially-produced value by interest-bearing capital is a much more efficient, sophisticated, and perverse mechanism for transferring value than the deterioration of the terms of trade, or interest on external loans, as in the time of ‘classic primary-export development’ and national developmentalism.

The increase in foreign investments and external financial liabilities manifested the growing role of foreign capital as a substitute for domestic financing, and an accelerated process of financialization (and internationalization) of all spheres of the domestic economic activity. In agriculture, for example, all stages of production – from land acquisition to the commercialization of yield – are dominated by finance and the increased internationalization of property, by either acquisition or leasing (Delgado 2012; Mendonça and Pitta 2017). Certainly, along the production chains of Brazilian agribusiness, capital harvests more from exchange-traded funds (ETFs), debt securities, investment funds, and stock market speculation than it does from tons of soy.

Maintaining high interest rates, overvalued currency, and limited social spending shows that the state was more committed to attracting the necessary foreign capital than to reverting the regressive productive structure, enlarging, and strengthening the country’s fiscal base and the domestic capacity to invest. The systematic sale of debt bonds became the largest source of financing for the annual budget of the central government (48% in 2010). Servicing the public debt, in turn, became the largest single expense of the annual budget (48.5% that same year) (Andrade 2017). Not surprisingly, one of the pillars of the Brazilian macroeconomic policy ‘tripod’ is meeting the targets for the primary fiscal surplus,¹³ so that payment of interest on public debt could be guaranteed, gaining supremacy over social spending (Morais and Saad-Filho 2011). Therefore, the fundaments of macroeconomic policies expressed the state choice for external dependence as part of the domestic pattern of accumulation.

The state’s monetary and fiscal policies were taken hostage by financiers, the owners of the public debt, and other financial assets. As noted, ‘the main instruments of monetary policy, interest and exchange rates, [became] bargaining assets of financial investors’ (Andrade 2017, 667). Investors can leave the country if their conditions are not met, ‘therefore holding a major leverage power over the government to dictate economic policy’ (Andrade 2017, 667). It is also worth noticing that the conditioning of international finance is independent of domestic economy dynamics (Kaltenbrunner and Painceira 2015).

In the end, the state is not only economically and politically incapacitated, but also disinterested in promoting structural change in the organization of production and property. As Castel-Branco describes, ‘the state becomes a facilitator of private accumulation and a mediator between different groups of capitalists, instead of as the leader of accumulation and social reproduction for the benefit of society as a whole’ (2010, 78, author’s translation). This also implies, in turn, that the capacity of the domestic bourgeoisie to accumulate relies on their power to control the state. The rural caucus in Congress is a clear example of this and telling of the long history of extractivism in Brazil and its strong agrarian component.

The exchange market, currency, and public debt-related porosity

The volume of foreign operations in domestic currency assets had a twofold impact on the dynamics of the foreign exchange market. First, the demand for domestic currency led to its appreciation against the US dollar. From early-2003 to mid-2008, Brazil’s domestic currency, the real (BRL), appreciated from nearly 3.6 BRL to close to 1.5 BRL to the USD (Kaltenbrunner and Painceira 2015, 1287). This, in turn, increased the real return of foreign investments when converted back to hard currency, thus stimulating both profit remittances (outflow) and foreign investment (inflow) in a self-indulging, manipulative scheme. Again, investment decisions tended to be based on speculative exchange rate decisions instead of economic-productive conditions, ‘potentially generating self-fulfilling bubble dynamics’ (Kaltenbrunner and Painceira 2015).

Public and private banks were also stimulated to borrow abroad at a lower interest rate and invest in high-yield treasury bonds domestically. According to Farhi and Borghi (2009), Brazil’s large exporting firms, many of which were from the agribusiness sector, actively operated in the foreign exchange market through privileged access to the derivatives market. The volume of their operations was much higher than that of their exports, which was the reason for their near bankruptcy in the 2008 international financial crisis, when the exchange rate buckled (a plunge accentuated by their own activities, add the authors). This was the case of Sadia, Aracruz, and Votorantin from the food and cellulose sector. Because the activity of those companies, notes Silva Filho (2013), was not monitored, their magnitude in the exchange market, and the extent of their ramifications through the banking system placed them in a pivotal position regarding the systemic stability of the country. Some of these companies, such as Aracruz and Votorantin from the cellulose sector, were bailed out by the government (Kroger 2012). Only in 2011, the taxation of financial transactions involving foreign exchange contracts were implemented, along with other control mechanisms (Silva Filho 2013).

The second important effect of high volume of foreign operations in domestic currency was the massive expansion of the domestic monetary base, creating an inflationary tendency. To avoid this effect, the Central Bank regularly began to buy foreign currency in the exchange market using treasury bonds from its portfolio. This operation, called sterilization, in addition to wiping out the additional liquidity in domestic currency, had a double-sided outcome: on the one hand, it increased the country’s foreign reserves, which is an important asset that can prevent large-scale capital flight and currency shock in times of crisis (as it did in 2008). On the other, the increase of this external asset corresponded to a proportional increase in the country’s internal public debt. For each dollar acquired, a debt in local currency (attached to the national interest rate base) was formed in an equal value multiplied by the exchange rate. In other words, currency transactions and their financialization were compromising the country’s present and future income.

Domestic banks were the main creditors of the public debt, and thus the main beneficiaries of such income transfer, even though the share of the debt owned by foreigners increased ‘from 2.4% in the middle of 2007 to 10.6% at the end of 2011’ (Kaltenbrunner and Painceira 2015, 1289). Kaltenbrunner and Painceira (2018) discuss that, to cover their exposure to short-term liabilities, domestic banks shortened the maturity of their funding and redefined their credit allocation away “from ‘productive’ lending to industry (traditionally more long term) to more short-term consumption and housing funding” (2017, 299). This type of funding goes in the opposite direction of sustainable economic growth but could (temporarily) fuel household consumption-led growth, as it did. In the long run, the expansion of popular credit will function as a vector of family income transfer to the financial sector of the economy (Carvalho 2018).

The growth pattern and forms of porosity through fiscal dynamics

Much of the neo-extractivism debate revolved around the increase of government revenues through primary commodity exports, which allowed them to promote income redistribution and maneuver in other social policies. Government fiscal revenue reflects the characteristics of the economy and society (e.g. level of employment and income, pattern of income distribution, public equity) and the fiscal regime.¹⁴ The latter directly affects the retention of wealth produced in the economy (thus the level of porosity), and consequently, the state’s capacity of financing public expenses and investments – which in turn, affects back the economy and society (the fiscal base) (Castel-Branco 2010).

Fiscal policy, writes Castel-Branco (2010), reflects the state political mediation between private appropriation and social distribution (democratization) of income through public services and social policies. Through the renegotiation of contracts with private corporations or the implementation of new tax and royalty legislation, governments in Ecuador or Bolivia have indeed reduced porosity and increased revenues for social investment. Some authors, however, have pointed to the rise of a rentier state, that is, a state that depends on resource revenues to make politics (Purcell 2017; Vergara-Camus and Kay 2017). Venezuela is a typical case, with oil rent constituting the state’s primary source of revenue (Purcell 2017). The rentier state becomes consolidated and, indeed, problematic when the state does not invest to expand the productive and taxable base, remaining reliant on resource rent.

The rise in commodity prices has increased the public resources available for investments in Brazil, with a particular contribution coming from the state-owned oil company, Petrobras (Carvalho 2018). Revenues from Petrobras have financed part of the PAC investment program, and royalties have been ‘an integral element for financing social policy for decades’ (Pahnke 2018, 1665), from the federal to municipal level of government. The resource sector, however, is not a homogeneous unit, making uneven fiscal contributions and constituting uneven fiscal cost to the state. Certainly, this subject requires a more careful analysis than the present paper can offer. Still, a few notes can be made.

Agriculture, livestock, and related services sectors, for example, contributed only 0.27% of the Federal Government’s revenues in 2019 (Novaes and Jensen 2020, 66). Surprisingly, primary and semi-manufactured products have been exonerated from trade tax since 1996. Land property itself is barely taxed. Perhaps less known, the investment program, PAC, also consisted of a tax reform proposal that included facilitated credits from state-owned financial institutions, tax exemptions, and tax incentives to private investment (Rodrigues and Salvador 2011). Within the scope of the PAC and PDP, the largest fiscal benefits were concentrated in a few sectors and companies, many of which oligopolies, that is, companies that were already the most competitive in their sector. As such, the tax exemptions they received only increased their profitability, without any counterpart being transferred to consumers or taxpayers (Rodrigues and Salvador 2011).

Novaes and Jensen (2020, 64) show that only in the pesticide market, the state gives around 3 billion USD per year of a direct tax subsidy, an amount that corresponds to approximately 30% of sales in the sector (while taxpayers pay about 35% of income tax). These products are used in just four crops: soy, coffee, sugarcane, and corn, the same crops that received 60%–75% of the credit disbursed by the National System of Rural Credit, which amounted to 82.8 billion USD in 2013/2014 productive cycle (Fuhrmann 2021).

Novaes and Jensen (2020) also mention that agribusiness credit securities, for the most part, are exempt from the tax on financial operations (IOF). Also, the sector rolls over billions of Reais in debt every year and has been repeatedly bestowed with facilitated repayment schemes or debt forgiveness, a subject (and a magnitude of porosity) that deserves research on its own. In the end, it can be said that the expansion of agribusiness for export during the 2000s (and beyond) prompted the expropriation and depletion of the state and society at large for private gains, which is in sharp contrast to the notion of neo-extractivism. A recent publication by Mitidiero Junior and Goldfarb (2021) presents plenty of evidence to demonstrate that agribusiness in Brazil is a sinkhole, in addition to leaving a trail of brutal environmental damage, low job creation, and allegations of slave labor. This leads me to conclude that, as far as the state mediation is concerned, agribusiness expansion responded to the primacy of private accumulation within and outside the sector, rather than the pressures and the need for social income redistribution.

Since the first neoliberal reforms, public funds and social spending have been systematically undermined. Already in 1994 (the early period of neoliberalism), a fiscal mechanism was created that allowed the Federal Government to withdraw, every year, practically 20% of the federal fiscal budget linked to social expenditures, such as education, health, and social security, to spend it freely for any other priority – – in practice, interest on government liabilities. Another tax reform sent to the National Congress in 2008 exempted business from the payment of a set of taxes, established by the constitution, tied to the financing of social policies (Rodrigues and Salvador 2011). According to these authors, from 2007 to 2010, more than 131 billion BRL were taken through tax exemptions from the public fund.

Neo(liberal)-extractivism during the Pink Tide in Brazil

As mentioned in the introduction to this paper, extractivism is formed, evolves, and manifests itself as part and parcel of the historical pattern of capitalist development. I have called neoliberal extractivism the phenomenon conditioned by the primacy of finance within the dynamics of accumulation, dependence, and porosity of the early twenty-first century in Brazil. Resource-based exports have made an essential contribution to the endurance of the neoliberal pattern of accumulation as a whole, attracting foreign investment, favoring domestic currency appreciation, offsetting the trade balance, remunerating financial investments, and temporarily (and cyclically) reducing macroeconomic instability. At the same time, neoliberalism itself has eroded the economic, social, and political conditions for land and asset democratization, diversification of the productive structure, technological development, and competitiveness, thus leading to a regressive development dynamism and the reproduction of extractivism.

It was mentioned earlier that, according to several authors, the PT was able to relax the neoliberal macroeconomic policies in the second half of the 2000s, reducing constraints over the businesses of the internal bourgeoisie; this was referred to as state-led policy inflection (Barbosa and Souza 2010) or policy hybridization (Morais and Saad-Filho 2011), which opened the space for developmentalist policies. Filgueiras (2020) and others (e.g. Boito and Berringer 2014) have argued that with the flexibilization of the macroeconomic tripod, finance lost space, while an internal bourgeoisie – agribusiness, commodity-producing, and exporting capital, large contractors, and large groups in retail trade (Filgueiras 2020) – benefited. Not denying the changes and possibilities created, it is important not to conflate the form (neo-developmentalist, perhaps) with the essence (neoliberal) of the pattern of development.

The internal bourgeoisie that constituted the ‘power bloc’ in this period had their strategy of accumulation subordinated to and in consonance with the rules of financial capital. The industries that thrived were those that could adjust to the conditions of macroeconomic constraints, including through its power over the state to acquire benefits and/or become increasingly financialized and internationalized. Like banks, they were able to borrow abroad, invest in domestic currency assets, and take advantage of both high domestic interest and favorable exchange rates (Kaltenbrunner and Painceira 2018). Not surprisingly, much of these industries comprise the regressive productive structure discussed earlier. Finally, all these authors agree that the inflection arrangement was unsustainable and relied upon two contingent and exogenous factors to the national economy (the commodity boom and high international liquidity). It could not accommodate ‘growth, redistribution, monetary stability and balance-of-payments solvency under an ongoing regressive structural change and with an overvalued currency’ (Loureiro 2018, 116; italics in the original), leading to what Loureiro called a conundrum. As the ‘neo-developmentalist’ arrangement collapsed, it also revealed that the dominance of financial capital and neoliberal rule had been there all along.

When analyzing neo-developmentalism in Brazil, Boito and Berringer (2014, 97), stated that ‘neodevelopmentalism is the developmentalism of the era of neoliberal capitalism’. Could the state promote industrial diversification and other elements of the developmentalist agenda under the constraints inflicted by the international free flow of goods and capital, the enduring fundaments of neoliberalism? (North and Grinspun 2016). Neoliberal extractivism clashes with the original idea of developmentalism on several grounds: it is associated with the processes of reprimarization of exports, loss of international competitiveness, de-industrialization, reversal of import substitution, denationalization, technological dependence, and external structural vulnerability (Gonçalves 2012).

If there was a commodity consensus in Brazil during the 2000s, it was characterized first by the tacit agreement between right- and left-wing politics around finance and neoliberal macroeconomic policies, which, in turn, or in consequence, constituted a compromise between neoliberalism and extractivism, and the class interests they represent.

Points for future research

Much of the content presented here, from the conceptualization of extractivism and porosity to the argumentation and supporting data, should be refined, expanded, and discussed further. Certainly, critical insights may derive from the analysis of other countries. In this section, I am limited to point out just a few aspects for further research, considering that the paper gives more attention to agriculture than to other resource sectors.

While agriculture makes possibly the largest social, political, and historical contributions to the dynamics of extractivism in Brazil, the importance of oil, iron ore, and other minerals should not be undermined, but investigated, especially after the discovery of a mega oil reserve, the Pre-Salt layer, in 2007. The Pre-Salt layer created the prospect of turning Brazil into a major world player in the production of energy commodities (Magalhães and Domingues 2014). If agricultural exports unleashed the economic success of the Pink Tide in Brazil, the disputes over the control of the country’s oil company Petrobras were very much associated with the political turmoil that culminated in its demise. Therefore, this is certainly an issue for future research and involves exploring the different systems of ownership across the primary sector and the political economy of ground rent transfer, which I have barely touched upon.

Conclusion

The large-scale exploitation of resources, and primary export specialization are empirical manifestations of extractivism, mentioned in many studies. These empirical manifestations might represent and conceal what is, in essence, the historical forms of the social organization of production and capitalist accumulation marked by porosity and external dependence. Failing to analyze this, the ‘extractivism of the Pink Tide’ was often ambiguous as a state political practice and questionable in terms of its economic and social nature. The present paper has argued that extractivism is not ambiguous, but perhaps paradoxical, imposing a loss of social wealth, income, and developmental opportunities as a condition of domestic accumulation itself. There might be a democratic and progressive use of natural resources, but there is neither democratic nor progressive extractivism.

If during the Pink Tide, states used the revenues of extractive activities to overcome the dependence on nature and foreign capital by investing in a planned and coherent strategy of national development, the state would possibly have a developmentalist project, not a neo-extractivist one. This would require, as Castel-Branco (2010) notes, a strategic and coordinated exploitation of resources according to a broader, long-term, inter-temporal, and inter-generational perspective to maximize revenues to finance the diversification and articulation of the economy – and I would add, to transform unequal property structure and class relations. If resource revenues were used to finance social policies and income redistribution without tackling the porosity and external dependence of the patterns of production, property, finance, and so on, it would constitute a state-sponsored populist extractivism likely to reproduce the crises that has historically haunted Latin America.

However, if the state policies actively promoted a systematic depletion of (current and future) public resources and social income as a condition and a consequence for integrating the country into international circuits of capital accumulation, and if that integration reinforced a regressive productive structure and reflected the primacy of rent- and interest-bearing asset owners to dictate policies and appropriate social income and wealth, then the state promoted neoliberal extractivism. The latter was the case of Brazil during the Pink Tide, reflecting its internal (and international) class struggle.

Acknowledgments

I would like to express my appreciation for Castel-Branco's scholarship, which has greatly influenced my intellectual development. His work inspired and ultimately guided this piece—of course, all mistakes are mine. I would also like to thank the editors of this Special Forum for their interest in this research, their substantial feedback and support, and their patience and kindness. This research did not receive any financial support but counted on different forms of solidarity.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Daniela Andrade

Daniela Andrade is a PhD researcher at the International Institute of Social Studies (ISS) in The Hague, Netherlands. Her research interests include the political economy of agriculture and agrarian change from a macro perspective (especially in Brazil and Mozambique).

Notes

1 Although neo-extractivism has the merit of reflecting historic, economic, and political aspects of development, it leaves the link of these aspects with extractivism untheorized, allowing the phenomenon to be interpreted as a natural dynamic of (a subordinated) capitalism, whether under progressive or conservative governments.

2 Extractive economy only resembles Veltmeyer’s ‘extractive imperialism’ or ‘extractive capitalism’ in name (Veltmeyer 2013; Veltmeyer and Petras 2014). Extractive imperialism refers to the economics and politics of natural resources, specifically regarding the dynamics of what the author calls ‘extractive capital’ and its role in the rise of the post-neoliberal state (Veltmeyer 2013, 80). For the author, extractive capital is ‘resource-seeking’ FDI, and extractive imperialism is the pattern of reliance on foreign investment as a strategy to develop the natural resource industry and the primary export sector. Veltmeyer (2013, 87–8) sees a converging economic interest between foreign extractive companies and governments, in which ‘profits for the former’ meets ‘resource rents for the latter’. Foreign corporations are the protagonists of extractive imperialism.

3 Some may dispute the incongruence between developmentalism and extractivism on the basis that exports in Brazil and Latin America were still heavily dominated by primary products during the decades of ISI. First, it is important to differentiate the developmentalist doctrine from its historical experience. Second, what must be contested is the notion of extractivism, which cannot be taken simply as large volume of primary exports or dismissed after any industrialization process.

4 Grinberg (2013) has studied how different state policies affect ground rent distribution out of the hands of landowners (not without protests) to privately-owned industrial capital.

5 Bresser-Pereira is a prolific author. He centers his explanation for the substitution of productive investments for the consumption of imports on the tendency for currency overvaluation and Dutch Disease. Indeed, currency overvaluation decreases the competitiveness of the manufacturing sector and cheapens imported goods, thereby favoring the expansion of their consumption. The problem with this explanation is the idea that a resource-rich country has an absolute comparative advantage so that the country’s competitive exchange rate would tend to overvalue, favoring the sectors in which it finds a competitive advantage (De Paula 2020). In other words, he puts the cause of overvaluation, or of the Disease, on the abundance of resources and the capacity to produce cheap primary commodities, instead of on state policies, the growth pattern, and the social class interests that lie behind both.

6 Filgueiras (2020) and others identify different phases, inflections, and macroeconomic regimes in this period, which this paper does not ignore, offering comments on its final part.

7 This is a category from the Organization for Economic Co-operation and Development taxonomy for manufacturing industries based on R&D intensities called the International Standard Industrial Classification (ISIC). Low-technology industries encompass most of the extractive industries (wood, pulp, paper products, food products, and so on). The other categories are medium-low, medium-high, and high-technology industries.

8 Matopiba region represents a portion of the states of Maranhão, Tocantins, Piauí, and Bahia.

9 In 2009, President Lula approved a provisional measure (MP 451) that amended legislation on land regularization, thereby establishing space for the Terra Legal program. This was intended to regularize the land titles of 300,000 small-scale homesteaders. Oliveira (2013) discusses the program and its implications in detail. He points out that, in 2012, 8% of the regularization petitions represented 49% of the total area registered for regularization, suggesting that the aim of the program was being socially disfigured. Temer and Bolsonaro’s administrations passed MP 759–2017 and MP 910-2019, respectively, which updated and expanded MP 451. The latest, MP 910, allows up to 2,500 hectares of public land to become the property of those who occupied them irregularly. The rural caucus in Congress is in full support of the project and is pressuring to vote it into law (https://www.bbc.com/portuguese/brasil-51071810).

10 These and all the other estimates referring to the Brazilian Balance of Payments (BoP) are calculated by the author based on data from the Brazilian BoP Series (based on IMF Manual 5, BPM-5) available on the Brazilian Central Bank website (https://www.bcb.gov.br).

11 Calculated by the author, GDP (constant 2010 USD), World Bank Data, https://data.worldbank.org

12 Data from International Investment Position (IIP) Series, available at the Brazilian Central Bank website (https://www.bcb.gov.br).

13 Primary fiscal balance (surplus or deficit) refers to the difference between fiscal revenue (government earning) and fiscal non-interest expenditures, that is, before including interest payments on the public debt.

14 The sum of taxes (individual and corporate income tax, equity income, and others) is called current revenues. When this is insufficient to cover the public fiscal budget, governments resort to non-tax receipts, a second source of revenue consisting of the sum of financial resources. Non-tax receipts entail the constitution of debts (e.g., bonds, credit operations, capital transfers, loans) and future fiscal costs.