Forging alliances: political competition and industrial policy in democratic Brazil

Abstract

Most of the literature on the politics of industrial policy describes a policy realm that is dominated by business–state relations. This paper goes beyond this and proposes that, in democratic settings, political competition and civil society actors also play a vital role in industrial policy. Through a lens focused on Brazil during the 2000s, the study delves into the dynamics between the election of a centre-left party and the subsequent industrial policy, highlighting the interplay of democratic mandates, entrenched economic interests, and supportive developmental alliances. Notably, the continuation of a centre-left coalition and consistent institutional frameworks witnessed considerable shifts in industrial policy outcomes, which allows for an in-depth evaluation of interest group influence on policy formation and implementation. By triangulating data from 23 interviews with actors in the industrial policy process, data from the Brazilian National Development Bank (BNDES), and an analysis of industrial policy plans, this paper posits that the prevalence of economic issues in the electoral debate and the participation of societal actors in the policymaking process are enablers of innovation-focused industrial policies; this allows governments to countervail the power of incumbent sectors and undertake policies that are not favoured by the prevailing business interest.

Keywords:

• Industrial policy
• interest groups
• economic development
• business power
• labour unions
• Brazil

Acknowledgements

I thank Laszlo Bruszt, Béla Greskovits, Evelyne Hübscher, Alfredo Saad-Filho, Luís Felipe Giesteira, Pedro Perfeito da Silva, Marina Zucker-Marques and Erez Maggor for commenting on earlier versions of this paper. All mistakes are my own.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Incumbent sectors are here broadly defined as those traditionally responsible for employment and value added in Brazil (mostly low-tech services and the primary sector).

2 Dilma Rousseff’s second term was about avoiding impeachment. The last developmental plan of the Workers’ Party governments (the Greater Brazil Plan) was de facto in effect until 2014.

3 See full list of interviews in the Supplementary material.

4 See the Supplementary material for full list.

5 A good example of this happened during the second Cardoso government (1999–2002). When the specific issue of pharmaceuticals was brought forth by a parliamentary inquiry commission, shedding light on low-quality and abusive profits, the government was pressured to pursue a fairly developmentalist sectoral policy even under a neoliberal government (Fonseca 2014).

6 This dilemma between incumbents and challengers is also verified in central countries going through sustainability transitions (Hess 2018).

7 See Galindo-Rueda and Verger (2016) for an explanation of their classification. The OECD’s classification focuses only on R&D and is not a full picture of technological intensity, although it has been used as a proxy by the United Nations Industrial Delopment Organisation (UNIDO) (n.d.).

8 For a primer on the modern intellectual and ideological formation of Brazilian agribusiness see Pompeia (2021).

9 This can be either for fears of elite replacement or simply to avoid paying the bill of economic diversification via over-taxation of primary products (see Giraudo 2021).

10 For an application of the idea of countervailing power (this time for the re-regulation of capital flows against prevailing interests), see Gallagher (2015).

11 The macro-sectoral data from the bank spans from 1995 to 2022.

12 Morceiro (2016) shows that all sectors grew in their production (with the exception of three low-tech sectors), but that this was not sufficient to deal with rising domestic demand, leading to demand leakage and a rise in imports.

13 Frontrunners were defined as those that had more than 10% of the vote in the first round.

14 The predilection for national content clauses appeared in almost all interviews with union leaders and policymakers, especially those involved in automotive sector programmes (Interviews 8, 12, 16 and 18).

15 Historically, the CUT is the peak labour confederation with the closest relationship with the Workers’ Party (Galvão 2014).

16 The DIEESE is responsible for aiding the largest Peak Labour Confederations in Brazil in negotiations with businesspeople and policymakers.

17 A prime example of this was the Investment Sustainability Programme, which created subsidised BNDES credit lines for a number of activities. Although the main focus of the programme firstly was about the acquisition of machinery, this was broadened quickly. The programme only ceased to exist in 2015 (Brazil 2009).

18 Selected indicators were incentives, market regulation, economic planning, protectionism, corporatism, growth, and tech and infrastructure. I have also calculated this same average with all economic indicators at the Manifesto Project (MARP OR) (per 401–415) and obtained similar results.

Additional information

Notes on contributors

Renato H. de Gaspi

Renato Henrique de Gaspi is a PhD Candidate at the Central European University. His research focuses on the political economy of development strategies and industrial policies in Latin American democracies. He was a visiting doctoral researcher at the Department of International Development of King’s College London and at Universidad Diego Portales (Santiago, Chile).