A Brief Synthesis of Brazil's Insertion in Globalization

RICARDO GOMES RODRIGUES
26 de fev. de 2021
7 min de leitura

The Formation of the Brazilian Commodities Market

Historically, Brazilians have had difficulties in the formation and improving for their incomes and consumption levels, and not even the vertiginous industrial growth of the 1960s and 1970s has managed to change that.

The reason is simple; the processes of economic development in Brazil have always been excessively dependent on their performance in the foreign market in order to generate more foreign exchange, and not aiming the formation of a solid domestic market through the consolidation of production and consumption.

When during the 1960s and 1970s, we did not have yet the wonders of todays’ agribusiness, the objective was to export industrial commodities, much like the policies in force throughout Asia; with the difference that we have not moved forward to the next stage in the formation of a solid consumer market, as it has happened for Communist China and South Korea for example.

Then, the Brazilian industrialization process became stuck of an external market just to serve industrial Yankees trinkets, unable to compete with its similar competitors from Communist China, South Korea or Japan during the 60s and 70s.

While Asian countries have moved on to the next phase towards a solid domestic market, investing consequently in a coherent process of technological development of their own; here in Brazil we remained prisoners of imported substitution policies; focused on a low-income domestic market and, therefore, of low technological development, as well as, playing on an external market where we could not compete with Asians for those same reasons.

The Differences Between the Development of Communist China and Brazil

The question that remains is this: how come Asians moved on to a next phase of technological development of their own with the formation of a high-income domestic market, and we here in Brazil did not. The answer lies in the policies of our insertion into this present globalization, which indeed have started all the way back to the late 1970s and early 1980s.

The elaboration of a Brazilian road plan defined what would be this gigantic area of todays’ wonderful world of agribusiness. The consequent and formidable march to the Midwest that began in the late 1950s, with the help of this plan to occupy the national territory, added an enormous amount of assets into the economy of Brazil, which turn to be cities, farms, production gas stations and supermarkets, among other things.

These assets created a huge boost in the Brazilian economy in the following decades, which was largely accompanied by the industrialization processes propelled through the import substitution policies. In the late 1980s, Brazil's economy reached a level of development and industrialization much higher than that of South Korea and Communist China at that time; placing us then among the top 5 economies in the world.

Since 1980, Yankees' forced insertion policies, in what would become today's globalization, have taken a different direction, favoring industrial and technological development, as well as, the formation of a strong consumer market only and just only in Asia.

At the same time, Yankees interests in our region began to contain the Brazilian economy within the limits of the agribusiness; not only as an agricultural supplier, but also for minerals through Vale do Rio Doce Company, defining joint strategies for the global insertion of these commodities together with multinationals Bunge and Cargill. In Asia, at the same time, Toyota, Samsung, Hyundai, Kia and others have appeared as typical characteristics of industrial consumer products market.

Characteristics of the Brazilian Consumer Market

From 1980 onwards, the process of industrialization in Brazil decayed rapidly along with the formation of Brazilians’ income, leading us to this stagnation in the consumer market which has been carrying on until today.

The impressive inflationary surge that followed not only in Brazil, but also in Mexico and Argentina, was due to these Yankees' processes of insertion of these countries in the formation of this current globalization.

While all across Asia, the printing of fiduciary money (Fiat Money) was widely spread on order to increase employment, wages and income. Here in our Subcontinent, Wall Street financiers imposed tremendous restrictions on local fiduciary issuance policies, using exchange rate speculation to provoke hyperinflation, thereby, forcing the containing the printing of currency by all countries in our region.

They made it quite clear, then, that our insertion in the globalization would be focused only, and just only, on the production of commodities. And that any other currency acquisition process would take place only through the accumulation of foreign reserves, destined for the stabilization and appreciation of the national exchange in order to increase the consumption of products imported from Asia. Otherwise, the processes of financial speculation and consequent hyperinflation would return; thereby threatening the economic and the financial stability of countries that would dare to disassociate themselves from these general Yankees globalization policies dictated from Boston, New York and Wall Street.

The case of Argentina is exemplary; showing how much the Yankees' actions through these speculations policies since Wall Street would impose on them; on the one hand, an eternal inflationary process; and by another, an accelerated deindustrialization. In Asia, however, large-scale printing of fiduciary money (Fiat Money) was widely used to create in less than 30 years an economy about of $ 18 trillion as in Communist China.

In Argentina, that same use of Fiat Money was largely suppressed by financial speculation from Wall Street, always making it appear that everything was due to the lack of “certain” neoliberal economic reforms, which were never used in Asia, fostering there a solid market of production and consumption, and here this immense stagnation and social decay.

The Wizard of Agro-Óz and the Flight of the Chicken

In Brazil, the case was similar with one exception. After the national currency monetary stabilization Plan, in the late 1990s and early 2000s, the immense areas reserved for agribusiness began to bear fruit, generating huge amounts of foreign exchange reserves; to the same extent that the processes of forced industrialization and increases in wages and incomes began in Communist China and throughout Asia; which ended up producing a dizzying increase in the consumption of agricultural commodities for food production.

The result was the progressive stabilization of Brazil's national currency until we reached the current 350 billion dollars in foreign exchange reserves, consequently starting a process of overvaluation of the national currency, artificially placing us as the 4th or 5th economy in the world, giving a false impression of increased income for Brazilians.

This sudden appreciation of the Brazil’s currency was obviously not enough to increase, or even modify, the historical formation of the Brazilian income structure, but only to give us a false impression of an increase in the real purchasing power of the national currency through greater consumption of imported goods.

These artificial exchange rate variations; coupled with continuous and persistent historical precariousness in the formation of jobs in Brazil, led us to an unstable market, which was driven sometimes by abundant credit and sometimes by overvalued exchange rate, but quickly running out due to the low levels of job productivity, creating instability in the formation of wages and income; leading to persistent cycles of ups and downs for both the consumption and production levels. This process became well known as the development of the chicken flight.

The Wizard of Agro-Óz andThe Deindustrialization

This process of stopping and going in the development of Brazilian economy accelerated deindustrialization; as Brazilian consumer market runs out of breath quickly; local industries are not able to acquire economies of scale for the production of more competitive goods, or increasing productivity of their industrial processes. Likewise, the import consumption process rapidly decays for the same reasons, favoring thus the accumulation of foreign exchange reserves, inhibiting resources available for imports.

The background to this issue of a difficult formation of a solid consumer market in Brazil is closely linked; on the one hand, to the policies of forced insertion of Brazil in the globalization; and on another, to the persistent anachronisms of low productivity jobs. And the main reasons for that are:

First, to the extent that the use of Fiat Money was severely inhibited by the Yankees of Wall Street, the growth of jobs, wages and incomes became stagnant in Brazil when compared to that of Asia, depending only upon artificial exchange variations. As a consequence, we turn to be stuck in this vicious development cycle of the famous chicken flight, repeating a poor historical record of forming low productivity jobs.

Second, the exaggerated focus of the Brazilian economy on the production of commodities through Bunge, Cargill and Vale do Rio Doce, for example; imposed a disqualification in the formation of jobs and consumption market in Brazil, which, for this reason, became deficient for both: the development of local industries and for the consumption of imported goods; causing wages and incomes to wane, as well as, the levels of consumption of Brazilians; thereby affecting the amount of the whole jobs available in the economy.

Third, insofar as wages and incomes, consumption and, consequently the size of the Brazilian national market have languished; just through the accumulation of foreign exchange reserves, it was not enough to inject money on a large scale much needed by the economy in order to generate more jobs and to increase wages and incomes all together, maintaining these well-known bad records of low productivity jobs and income, reinforcing the chicken flight process described before. So, in the end there were no gains for the promotion of a virtuous national economic development with effective productivity gains for the work of Brazilians.

On the other hand, the printing of fiat money was widely spread in Communist China and in Asia in general. In conjunction with the high surplus obtained through foreign trade, these immense monetary resources injected into local Asian economies more jobs with higher productivity, better wages and higher incomes, creating thus this huge market of production and consumption of today.

The final conclusion that remains from this brief analysis of the international insertion of Brazil's economy is that, in the end, what really made the difference between the development of Brazil and Communist China and the rest of Asia was the widespread use of printing money or better known as “Fiat Money”.

There in Asia, Fiat Money was used on a large scale and here in Brazil, it was largely suppressed by the neoliberal elites from Boston, New York and Wall Street in order to define these current policies of our insertions in globalization; whether Asia has acquired a high level of economic and industrial development; we in Brazil are in this progressive diminishing unemployment and deindustrialization process.

These negative effects of globalization did not occur only in Brazil, but spread throughout the American Continent, including the United States, reducing all of us, necessarily, to mere producers of the wonders of the Wizard of Agro-Óz, and its consequent social underdevelopment.