by Michael Roberts
The news that Brazil’s right-wing President Temer has been caught
trying to bribe politicians to keep quiet about corruption allegations
increases the likelihood that he will be impeached by Brazil’s Congress
this year. Temer is already the most unpopular president in Brazil’s
democratic history. He only got into office by organising a
‘constitutional coup’ that ousted elected centre-left President Dilma
Rousseff on the grounds of so-called ‘budgetary violations’. An
alliance of parties in favour of pro-capitalist measures to cut wages,
social benefits and pensions took over Congress to back Temer. Brazil’s
stock markets and currency boomed and international capital returned to
But now all these ‘reforms’ in the interests of profitability are in
jeopardy. Even though the neo-liberal policies adopted by the previous
Workers Party presidents Lula and Dilma led to a loss of support among
Brazil’s working class and their eventual demise, the Temer-led alliance
has never commanded majority support and the latest scandal could see
Where this will leave Brazilian economy and its people is difficult
to judge – I look to my Brazilian readers to explain. But here I can
add that the Temer administration’s aim has been clear: to drive up the
low profitability of Brazilian industry and capital by reducing the
share going to labour; destroying trade union and other opposition
trends; and turning to foreign capital for support.
The big reason that the Dilma government fell was the economy. After the collapse of commodity prices from about 2011, Brazil’s economy dived into a delayed but deep slump. And it is still in this economic recession.
But Temer and Brazilian capital, after ousting Dilma, were hoping
that a general recovery in the world economy would spread to Brazil.
Things would turn around and enable them to cement their rule. And
there have been some signs of such a recovery. Brazilian business has
shown signs of more confidence.
Although commodity prices have not returned to the heady heights of
before 2010, they have at least reversed a little from their deep
collapse in the period up to the end of 2015. Moreover, in the last
year, it seems that the prognosis of a collapse in China and a slowdown
in the US has not materialised. And China and the US are by far
Brazil’s biggest export markets.
Also, the economic recession has led to a large drop in imports of foreign goods. So Brazil’s trade balance has improved.
And after significant ‘capital flight’ by rich Brazilians under
Dilma, foreign investment has started to return to Brazil, given its
One of the results of the deep depression was sharply falling
inflation. So, although wages for the average Brazilian family have
stagnated or even fallen, in real terms (after inflation) they have
risen, if only to the level of two years ago.
But unemployment continues to spiral as Brazil’s companies cut back on staff and public sector jobs are decimated.
The medium-term future for Brazil’s economy does not look bright,
despite the recent optimism of mainstream economists and pro-capitalist
politicians in Brazil. It was a commodities boom that fuelled much of
Brazil’s GDP growth prior to 2010. The country’s share of global
non-oil resource exports rose from 5 percent in 2002 to 9 percent in
2012. Today commodity prices remain high compared with their historic
averages, but the exceptional surge in both demand and prices has
At the same time, both households and corporations remained burdened
with significant debt. Household debt has grown from 20 percent of
income in 2005 to 43 percent of income in 2012, and high real interest
rates (averaging 145 percent on credit cards) make this a heavy burden
for consumers. On the government side, federal expenses increased from
15.7 percent of GDP in 2002 to 18.9 percent in 2013, mainly due to
interest payments on debt. As a result, taxes have already climbed from
29 percent of GDP in 1995 to 36 percent in 2013, the highest level among
Brazil’s emerging market peers. As a share of GDP, Brazil’s gross
public sector debt is less than a third that of Japan, but its debt
service costs are almost 15 times as high.
Above all, there is little sign that Brazilian capital can really
develop the productive forces of the economy and its people. Resource
exports and credit-fuelled consumption have not translated into higher
investment or productivity. Between 2000 and 2011, Brazil’s overall
investment rate averaged 18 percent of GDP, below that of other
developing economies such as Chile (23 percent) or Mexico (25 percent),
and much below those of China (42 percent) and India (31 percent).
Brazil’s productivity has been almost stagnant since 2000; today it is just over half the level achieved in Mexico.
According to McKinsey, the global management consultants, more than
half of Brazil’s population remain below a monthly income per head of
R$560. To cut this level of poverty to under 25% would require
productivity four times as fast as the current rate. And there is no
prospect of that under capitalism in Brazil. That’s because the
profitability of Brazilian capital is low and continues to stay low.
The profitability of Brazil’s dominant capitalist sector had been in
secular decline, imposing continual downward pressure on investment and
growth. Sure, the overthrow of the military regimes and the rise in
commodity prices turned round the fall in profitability for a while. But
profitability now is still well below its best years in the early
The graph below shows three indexed (1963=100) measures (M= Maito;
Mar = Marquetti; P = mine based on Penn World tables and poly = smoothed
Even if Temer survives, Brazil’s ruling elite face a difficult task
in imposing control over its working class and cutting public spending
and wages, and thus attracting significant foreign capital. The ruling
elite is more likely to flee with its capital at every sign of
difficulty. So Brazil capitalism will be stuck in a low growth, low
profitability future with continuing political and economic paralysis.
And that is without a new global recession coming over the horizon.
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