Brazils external economic policy: a long lasting paradigm Pedro da Motta Veiga (CINDES) 13 rd General Conference of EADI and DSA University of York, September 2011

A stylized historical background: from IS to globalization 1)Brazil as an unique case of successful industrialization in LA based on IS until the late 70s. 2) The lost decade: macroeconomic deterioration in the 80s. 3) 90s / post-Cold War: economic liberalization 4) 00s: the emergence /globalization as an opportunity 5) 10s: globalization as a threat ?

A long lasting policy paradigm of EEP Against this historical background, which implied deep changes in the economic relationships of Brazil with its international environment... … continuity has prevailed over ruptures (e.g. Chile) or volatility (e.g. Argentina) as far as the paradigm of external economic policy is concerned.

The hegemonic paradigm at a glance Main objective of EEP: to preserve space for autonomous development policies. The world economic order and international regimes are perceived (i) as expressions of the Northern interests and (ii) as threats to the autonomous industrialization project. Small room, if any, for global governance concerns. EEP focuses rather on domestic risks arising from the international sphere.

The domestic drivers of EEP Domestic drivers have played a major role in shaping Brazils EEP and in explaining its stability over time Main domestic drivers of the EEP: Dominance of import-competing industrial sectors in the political economy of the trade and industrial policies. More broadly, identification of the industrialization process to the national project, broadly shared by politicians, academics, business and trade unions.

A paradigm resilient to crisis & policy shifts The industrialist policy paradigm has dominated the political arena in Brazil despite the long lasting economic crisis in the 80s and the economic liberalization in the 90s. This hegemony explains why Brazils adherence to neoliberalism has been moderated and negotiated with the import- competing sectors (in sharp contrast with other LA countries) => pragmatic liberalization.

The emergence of Brazil: a new test for the paradigm This paradigm has also been tested in the last decade, under Lula, when Brazil emerged in the international arena as a relevant player. For the first time in decades, the international economy was perceived as a source of opportunity: an optimistic view of Brazils international prospects.

Behind optimism: new drivers at work - 1 Behind this optimism, the diversification of offensive and outward-oriented private sectors interests: exports (China-driven commodity boom) investments abroad: Brazilian transnational emerge. Brazil benefits (through commodities exports) from Chinas rise without any cost: import- competition sectors not challenged by foreign suppliers in the domestic market.

Behind optimism: new drivers at work - 2 The global risks agenda gets a larger place in the EEP, specially issues related to climate change and food security. But perception of global risks does not jeopardize the opportunity-led agenda under Lula. Brazils aspiration to become a relevant international player and a shaper of a multipolar world goes beyond the economic agenda and acquires a political dimension: efforts to mediate the Iran crisis in 2010.

But the old drivers are still there… However, even in a scenario where new drivers emerge, the industrialist coalition remains hegemonic in the setting of the EEP. The «North-South divide» still plays a central role in the narrative (and the legitimacy) of the EEP and it shapes Brazils perception of global governance issues. The focus of the global governance agenda is on the redistribution of power between DdCs and DgCs in the international fora.

... and they are getting stronger again To sum up, under Lula, domestic and international evolutions backed a larger autonomy of the foreign policy vis à vis its domestic conditioning factors, but… … Brazil keeps its preference for a Westphalian multilateralism, based exclusively on National States actors. This profile has been strengthened by the recent evolution of the Brazilian and international economies.

Brazil is introduced to the dark side of globalization From 2008 on: international crisis + strong appreciation of the exchange rate + growth of industrial imports (mainly from China) => the dark side of globalization hits Brazil. The debate on Dutch disease and deindustrialization => what future, if any, for the Brazilian industry?

The end of optimism Main consequence of this new scenario: exit optimism + an EEP tightly conditioned by the domestic economic concerns. Defensiveness of Brazils EEP is back to the driver seat => no assumption of new international commitments + more protectionist industrial and trade policies. Perception of global macroeconomic risks – and its costs to Brazil – grows and dominates the global risks agenda as seen from Brazil.

Some questions to conclude - 1 How much of the Lulas era changes in the dynamics of Brazils foreign policy was due to conjunctural – more than structural - domestic and international factors ? What impact the new international and domestic scenario will have on Brazils stance towards global governance and global risks issues?

Some questions to conclude - 2 Will Brazils EEP come back to its pre- emergence pattern (making small room to global governance issues)? … or the convergence of external and domestic difficulties will lead Brazil to integrate the challenges of global governance and risks to its EEP?