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How liberalization paved the way for populists in Brazil

A new study shows how economic shocks caused by import tariff cuts in the 1990s is linked to the rise of populism in Brazil

While the rise of populist politicians in the U.S. and Europe attracts significant attention from the media and researchers alike, the drivers of populism taking hold in emerging and developing economies still receive relatively little scrutiny.

But a new working paper, called “Roots of dissent: Trade liberalization and the rise of populism in Brazil,” provides new evidence tracing the rise of populism in Brazil — through both the victory of presidents Luiz Inácio Lula da Silva, in 2002, and Jair Bolsonaro, in 2018 – to regional economic shocks caused by a process of trade liberalization that began in the early 1990s.[restricted]

Both Lula and Mr. Bolsonaro were able to mobilize voters by amplifying divisions caused by these trade shocks and subsequent periods of austerity. However, the two leaders were elected on very different platforms and at diametrically opposed points of the political spectrum.

Economic shocks of the 1990s

In 1990, the government of Fernando Collor de Mello began implementing a vast program of trade liberalization in an attempt to modernize the Brazilian economy. Between 1990 and 1995, import tariffs were reduced from an average of 30.5 to just 12.8 percent. 

This reduction was not equally distributed across regions and sectors, however. For instance, while the level of tariff changes in the agriculture and mining sectors was relatively small, import tariffs for clothing and rubber were cut by over 30 percent — and local producers had to deal with an influx of cheaper foreign products that drove many out of business.

Indeed, with different sectors being more prevalent in certain parts of the country, the impact of tariff changes varied from region to region. Those which saw significant cuts were left more vulnerable to international competition, affecting the labor market and the very structure of their economy. 

This shock led to long-lasting declines in formal employment and wages relative to other regions. The map below shows, for example, that some of Brazil’s largest cities — including Belo Horizonte, São Paulo, and Rio de Janeiro — were highly affected by tariff changes.


Tariff reductions by Brazilian microregion

import tariffs
Regions with darker units faced the largest reductions in the level of tariffs

As our analysis shows, these effects persisted for decades and affected the political preferences of Brazilians. We found that the microregions which experienced the largest tariff cuts in the early 1990s were more prone to vote both for Lula in 2002 and Mr. Bolsonaro in 2018 — despite their profound political differences.


Presidential votes by microregion

Regions with darker colours show the largest shares of votes for Lula (2002) and for Bolsonaro (2018).
Regions with darker colors show the largest shares of votes for Lula (2002) and for Bolsonaro (2018)

The effects of trade reforms were further amplified by periods of austerity that hit Brazil just before the 2002 and 2018 elections. Both Lula and Jair Bolsonaro exploited the effects of austerity and previous effects of the trade shocks by building political agendas that appealed to voters who had lost out either economically or socially from the interaction between these economic shocks.

From left-wing to right-wing populism

But while these economic factors are directly linked to the rise of populism, they don’t explain its different guises. Lula’s left-wing platform was very different from Mr. Bolsonaro’s far-right agenda. This dramatic swing to the left in 2002, and to the right in 2018 can be explained by the different political strategies Lula and Mr. Bolsonaro used to capture sufficiently large constituencies.

On the left, Lula took advantage of the austerity policies of his predecessors in the early 2000s — which led to dramatic rises in inequality — to amplify economic cleavages in society. Lula’s brand of populism resulted in one of the largest social protection programs in the world, and significant reductions in poverty and inequality. 

But these achievements were marred by accusations of corruption and economic mismanagement, for which Lula was convicted and imprisoned between 2018 and 2019.


Populism follows austerity

GDP growth rate (left axis) and social spending (right axis) between 1995 and 2018
GDP growth rate (left axis) and social spending (right axis) between 1995 and 2018

On the right, Bolsonaro took advantage of the austerity policies implemented between 2015 and 2018 by the governments of Dilma Rousseff — Lula’s successor — and Michel Temer, who took office after Ms. Rousseff’s 2016 impeachment. 

Mr. Bolsonaro also played on voters’ feelings of insecurity by promoting a strongman image, strengthening social and cultural divisions, and anti-migration sentiment. His variety of populism has resulted in the reversal of decades of economic development and climate adaptation and one of the world’s largest Covid-19 death rates.

Across the world, the shortcomings of populist agendas in Mexico, the U.S., the United Kingdom, and India, among others, have been laid bare by their failures to contain the spread of infections and death rates caused by the pandemic. 

Yet, the success of populist politicians lies in appealing to existing economic and social divisions. 

Given Brazil’s experience, there are now fears that the entrenchment of populism could reverse decades of development and threaten democracy itself across many other parts of the world.


the conversation brazil article
Originally published on
The Conversation
The Conversation

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By Patricia Justino

Professor and Senior Research Fellow, World Institute for Development Economics Research (UNU-WIDER), United Nations University