Brazil, History and "Imperial" States

April 19, 2014
July 2, 2016

On the surface, yesterday's impeachment vote of Brazilian President Dilma Rouseff is the result of a corruption investigation which has spread from the national oil producer Petrobas to encompass virtually the entire political class. Of course, quite a large number of her critics are also linked to the scandal, as is the man who would succeed her, Vice President Michael Temer. In contrast to Rouseff, who is a member of the leftist Workers Party, Temer is a member of the centrist, read, non-ideological, Brazilian Democratic Movement, which has not had a clear platform since Democracy was restored in 1984. That may be way despite suggestions that Temer also be impeached, such efforts appear to have been abandoned. The votes of the PMDB are needed for any successful impeachment vote.

But it would also be a mistake to view the impeachment crisis solely in terms of partisan politics, or at least as merely another skirmish between left and right in Latin America. Far more important is the economic situation. Once hailed as a rising power and included in the now-forgotten acronym BRICS, Brazil has been the single greatest victim of the global collapse in commodity prices. This is hardly surprising. Whereas Oil producers have been secondary victims, hit by the general rise in the dollar and fall in Oil prices, Brazil was hit directly by the primary cause, namely the slowdown in Chinese economic growth. And whereas the global crisis was caused by the puncturing of a commodity price bubble created by over-blown expectations of future Chinese growth, Brazil's entire economy over the last 15 years was reconfigured to directly cater to the Chinese market. As such, rather than being harmed by a bubble bursting, Brazil's economy was itself a bubble.

At the heart of this collapse is the agricultural sector. Brazil is the world's second largest producer of Soy products, a product for which China is the largest importer. Furthermore, not only is China the largest importer, but Chinese demand grew so rapidly since 2000 that it in effect accounted for more than 100% of growth in the global market.

As might be noted, the above chart produced by the US Department of Agriculture extends beyond the present day, and the projections for growth are exponential. This was clearly a risky assumption, but it was one many natural resource producers made. Namely to assume not just that China would continue to grow, but that for the foreseeable future it would continue to grow at its then-current rate of 12-13% a year. In fairness, many producers, especially of oil, did not have a choice. Many were kleptocracy regimes in the Middle East, Africa, Venezuela or Russia, and oil not only was a source of hard currency that did not require the support or at least the continued existence of a middle class, but which allowed them for a few years to play superpower on the global stage. Brazil got in on the action as well, and Petrobas was a particular victim. It is unclear whether the anger directed at Rouseff is actually over the corruption at Petrobas, which in any event began under her predecessors and implicates virtually the entire elite, or rather over the fact that Petrobas has 75% of its market capitalization in the last two years and more than 90% since Rouseff took office.

Brazil would be in enough trouble if they were simply dealing with oil, but as noted above, the collapse was triggered by a fall in agricultural prices, which hit Brazil singularly. Unlike Oil, where increasing output is time consuming and politically delicate, it is relatively easy to expand agricultural production in a nation like Brazil. All one has to do is clear-cut rainforest, then flood the land in order to cultivate soy. Yes it will exhaust the top soil rapidly, but  in the meantime you can rapidly increase production, and there is always more rain forest to clear cut. Something that should stand as a warning to those vegans in the West who fancy themselves environmentalists while consuming a largely Soy-based diet.

The relative dependence of this industry on exports to China is illustrated below.

That said, if anything the chart underestimates the impact of the fall in demand. Normally under the laws of economics, a surplus would result in a fall in prices until new buyers entered the market, meaning that the product in question could still be sold, albeit at a lower price at which it might not be profitable. But here Brazil's poor infrastructure enters the picture. Most Soya production is located in the state of Mato Grasso, deep in the interior of Brazil, and inaccessibly by rail despite numerous plans since the 1970s to remedy that situation. As a consequence, transportation is highly dependent on trucking which transports the product to the ports. Both the trucking industry and port capacity were already suffering from bottlenecks in the late 2000s which resulted in waits of several days to load goods onto ships. Storage capacity, requiring a much greater capital and time investment than production, had already been outstripped by the growth in latter. As a result, when the market collapsed, Brazil was left with massive surpluses of goods that could not be sold, could not be stored, and could not be transported.

Such a crisis would have become political in any case. But in Brazil, unions have long been politicized as is typical in much of Latin America. That is especially true of the trucking unions, which played a key role in the overthrow of Chilean President Salvador Allende in 1973. This brings up another point. Whereas most politically active unions are left-leaning, and in the case of Brazil, largely affiliated with the ruling Workers Party, the transport unions are traditionally much more mercenary. Heavily young, male and single, and dependent on major economic interests for work, they have historically been happy to serve as rent-a-mobs, especially when government economic policies favored by other unions or left-leaning interests have threatened to undermine the export oriented interests on which their livelihoods depend. Hence the large number of now underemployed truckers have been more than happy to spearhead the political campaign against Dilma, contributing to the environment of unrest.

This is not to say the anger at Rouseff is not justified. Rather it is to note that the economic crisis developed in such a way that some of the most politically potent interests were hardest hit, something that was also true of the elite, where signs that the investigation was headed in the direction of Rouseff's predecessor and prospective Workers Party leader Lula de Silva cost Rouseff the support of her mentor, while the failure to pursue that line of inquiry to its natural conclusion damned her in the eyes of the opposition as a political partisan. That she has been reduced to effectively restoring him to power almost as some sort of regent has only motivated her opponents further.

Not that any of this likely to solve Brazil's economic or political problems, or even put much of a dent into corruption. For all the efforts to throw around the terms "left" and "right" Brazilian politics is fragmented at the federal level. Part of this is due to the system of proportional representation that creates an unwieldy party system, and part due to the decentralized nature of the Brazilian state, whose geographically extent has always had more to do with the geopolitical reach of the Portuguese crown during the colonial era than with any sort of internal coherence. The result has been an almost entirely feudal system, where power not only derives upwards from the state level, but where national political bosses are themselves dependent on their state level equivalents. The result is that while the Brazilian state can appear sturdy when not asked to do much of anything by its leaders, it tends to fragment rapidly. This is evident in the speed with which the Empire of Brazil - the Portuguese heir to the throne Dom Pedro fled to Brazil during the Napoleonic wars and declined to return afterward, abandoned the throne  in 1830 to return to Portugal to fight for his daughter Maria's right to the throne. A noble cause which obscured the fact that Dom Pedro's flight came in response to his political failure to make Brazilians pay for his military efforts to secure control of Uruguay, and that his departure likely preceded a full-scale revolution. In the event, his departure left his minor son Pedro II nominally on the throne as states and local authorities fragmented. In the end, Brazil survived because linguistic barriers prevented the loss of territory to Spanish American states, but Pedro II's efforts, or more accurately those of his heir apparent Isabella to abolish slavery triggered a revolution which overthrew the monarchy and replaced it with a republic which until 1930 functioned by trading the Presidency between the states of Sao Paulo and Minas Gereis. 

A 1930 coup ushered in a dictatorship under Getullio Vargas(1930-1945), who nevertheless had to fight three civil wars against state governments unhappy at his efforts to rule "unconstitutionally", ie. without congress, which in turn meant without their participation. The fact that Vargas had to fight three such conflicts, in 1932, 1934, and 1937 is instructive. Installing his own proteges as governors of Sao Paulo did nothing to undermine separatism. They rapidly became co-opted by local interests such that within two years they were championing the causes they had been installed to suppress. Vargas therefore failed to govern effectively either as a dictator or as a democrat after he was elected again in 1950, eventually committing suicide in 1954 in despair. A military coup in 1964 ushered in an effort to resolve the problem through an enforced two-party system. Rather than dissolving congress, the military forced Brazilian parties to merge into two, the National Renewal Alliance and the Brazilian Democratic Movement. The intention was to fight fragmentation by re-orientating politics around national issues. By forcing every candidate for office down to a local town alderman to affiliate with one or the other national party, the intention was to subordinate local interests to national ones, and thereby end the situation in which state governments were dominated by autonomists. In a sense the system worked too well. It succeeded in polarizing Brazilian politics around national issues, but only by making support or opposition to military rule the key issue. This in turn prevented a stable functioning of the two-party system, as it meant that the Brazilian Democratic Movement, as a disloyal opposition party standing for the overthrow of the system, could not be trusted with power, either at the federal or state level, which in turn forced the military into ever more oppressive flagrant violations of electoral fairness to maintain electoral power.

The current system is in many ways a reaction to the military's efforts. The system of proportional representation is mandated by the constitution in entrenched clauses which explicitly cannot be altered by amendment. Hence Brazil is stuck with half a dozen major parties, which because they are more often than not orientated around local rather than national concerns, determine their national allegiances more through self-interest and bribery than ideological commitment. As a President is unlikely to ever win a majority - the localist nature of politics makes winning 50% for a left-wing alliance as in Bolivia impractible - any President needs to form alliances to build a majority. And as the parties are mercanary rather than ideological, so too are the alliances. Leftwingers internationally have criticized the Workers Party for not being more stringently leftist. But this ignores the fact that the Worker's Party does not have a majority, and its alliance which does is not an ideologically left-wing one, but rather one constructed ad hoc where parties supported Lula and then Rouseff not because they wanted either of them to be President but because they were.  Nowhere is this more obvious then to compare the impeachment vote with the results of the 2014 general elections, when the Pro-Rouseff coalition won 303 seats on paper, only to have that majority melt away the first moment adversity hit. Combined with the fact that at the local level parties often do not run candidates against coalition partners - the Brazilian Democratic Movement has not run a Presidential candidate in 15 years, backing Lula and then Rouseff, the ability of voters to influence partisan alignments is almost nil. Presidents, not voters, are the only ones who can make and break majorities.

For more than a decade, the easiest way of securing the support of such parties was through patronage, and the easiest vehicle for that was Petrobas. Hence why over 150 members of Congress would otherwise be facing prosecution themselves. The collapse in Rouseff's position as a result of the collapse of Petrobas is therefore less about the corruption itself as it is about the loss of one of the pillars of the Presidency's power. Without Petrobas, the President no longer has enough patronage to win over members of Congress, while congressman whose loyalty was purchased with Petrobas patronage now feel cheated. 

The Guardian then is right to blame the electoral system but wrong about the solution.

Finally, Brazil’s constitution, which pairs a popularly elected president with an open-list PR vote for members of Congress, is a recipe for conflict at the best of times. A theoretically powerful leader is as a result confronted with an array of parties that he or she must woo with jobs, ministries and policy commitments if a coalition supporting the president is to be put together in Congress. The result can be an executive that has lost half its room for manoeuvre before it has even begun to attempt to rule. Lula was a master at managing these contradictions. President Rousseff, ineffective and inconsistent, lacked his skills.

The system cannot as noted be amended. And if the analysis above is correct it is only likely to become worse as future President's lack the power to form a parliamentary majority. Furthermore the other obvious reform, stripping congressman of immunity would also violate an entrenched clause in the constitution, owing to the memory of an incident in 1967 when the military's pet congress bravely refused to strip immunity from one of its members who had "insulted" the Army, prompting its own dissolution and making the principle of such immunity sacrosanct through martyrdom.

Furthermore, the other alternative, the replacement of "interest group" politics with ideological politics as is present elsewhere in Latin America, even assuming it did not lead to the sort of scorched earth conflict present in Venezuela, is hard to imagine. Lula's own victory in 2002 was heralded as precisely that, only to see him forced to implement neoliberal policies. Ultimately his union base was too dependent on the export industry and Brazil too decentralized for mass politics to function the way it has in much more urbanized Venezuela or Argentina. The decision to move the capital to the isolated interior city of Brasilia, another legacy of military rule, seems almost prescient in that respect, and has had longer lasting impacts than their other efforts.

Some of these problems will be resolved as commodity prices recover. But what is needed in reality is less a change in electoral or criminal laws, or even the professionalization of state appointments, which in the current climate would only weaken the executive further. Rather, what is needed is a sea change in perspective. Like India, Brazil is a state united by history rather than geography or ethnicity. Again like India, for most of its history, the achievement of the Brazilian political class has been that Brazil has survived when an overwhelming number of factors argued for its collapse. But as with India, survival is not enough if Brazil wants to move beyond avoiding becoming another example of failure in the developing world to becoming a success. That means a political class which has placed a premium on unity and hence avoided hard choices which might produce winners and losers in favor of buying off or conciliating everyone has to accept that it will need to make choices. What the current crisis has revealed is that as much as Brazilians prided themselves and bragged about the concept of BRICS, ultimately the Brazilian elite is not ready for major world role. When things became difficult, they fell back into all of their old bad habits of the last century with nary a whimper of protest.  Ultimately Brazilian parties themselves have to no longer nominate criminals, and Brazilian voters need to refuse to support parties to do. As long as both Brazilian parties and voters are willing to be bought the players can be changed, but the game will remain the same. And Brazil will continue its periodic descent into chaos on its almost clock-work like schedule of 30 years.


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