Blog Exclusive, Political Report #1959 - The Washington Consensus Arrives In Brasília

by Marc Castillo and Sírio Sapper

Abstract

John Williamson´s renown paper "The Washington Consensus" while causing controversy is nothing more than basic capitalist tenants.  Brazil has been undergoing a "Washington Consensus" transformation for decades now.  During the last several years this evolution has progressed at a more ambitious pace.  This paper examines the actions and mechanisms that the Bolsonaro administration has undertaken to make free market principles more concrete in Brazil.

Keywords:  Free Market Principles, Brazil Economy, Bolsonaro Administration, Brazil, Brazilian Politics

THE WASHINGTON CONSENSUS AND BRAZIL: CONTEXTUALIZATION

The ‘Washington Consensus’ has arrived in Brazil and it is there to stay.  In 1989, US Treasury Secretary Nicholas F. Brady came out with a solution to the immediate debt crisis faced by countries such as Brazil, Argentina, Panama, and Peru among others at the time.  Shaped as a debt refinancing agreement, the initiative proposed extended terms between creditors and debtors under specific requirements to be fulfilled.  Though it is not thought of, several of the economic initiatives used by various Brazilian governments throughout the last several decades have heralded from the famous work of John Williamson called "A Short History Of The Washington Consensus, " these reforms haven given way to privatization and in a way more civil liberties, a Westernization or Americanization process is occurring in Brazil.  

To understand how Brazil got to this consensus it is imperative to comprehend the initial backdrop of the so-called "Washington Consensus."  One of the underlying precepts of the Washington Consensus is a process called "securitization,”  this process allowed debt to be exchanged for national government bonds, which were backed by U.S. bonds.  One of the main mechanisms of monetary stability adopted in Latin American economies during the late 1980s was the fixed exchange rate.  

In order for Brazil to adhere to the fixed exchange rate program, which it finally did in 1993, a series of reforms and compromises had to be undertaken.  In the spring of 1989, British economist John Williamson testified before a Congressional committee in favor of the Brady Plan, a plan where Latin American countries received credit from the United States to not default on debt (Williams  2004: 1).  He argued that it would be good policy to help the debtor countries overcome their debt burden, since Latin American countries were slightly shifting their economic practices (Williams, 2004: 1).  Those adjustments did not represent staunch radical Austrian laissez-faire changes, given that they were even advocated by mainstream economists such as Mário Simonsen and Béla Belassa (Williams, 2004: 1).

John Williamson writing in his acclaimed work, "A Short History Of The Washington Consensus," included social reforms as a means of enhanced social cohesion, opining on the merits of social stability which would in time be fundamental to the free market development process in Brazil.

Williamson´s infamous 1989 Washington Consensus paper highlights 10 points: (1) Fiscal discipline; (2) Reordering Public Expenditure Priorities; (3) Tax Reform; (4) Liberalizing Interest Rates; (5) A Competitive Exchange Rate; (6) Trade Liberalization; (7) Liberalization of Inward Foreign Direct Investment; (8) Privatization; (9) Deregulation; (10) Property Rights.
The term "Washington Consensus" became undoubtedly cliché and controversial. It belies the simple practicality of what it really is. Detractors and others who wish to criticize, enliven or even embellish the term fail to grasp that in reality it is just mainstream policy in developed nations.  They constitute well-established practices shared by wealthy and successful nations. 

The “Washington Consensus guidelines are only general principles, whose implementation can also vary from country to country.  The manner of which such directives are going to be carried out is still dependent on national factors and cultural norms: it is not an absolute standardized top-down solution applied indiscriminately.  Brazil in one way or another has been undergoing these reforms since the mid 1980s and now in the early 2020s the process of moving toward a free market directed society is more evolved and established.

Williamson´s points opposed the abolition of the market economy, which was tried in the communist countries for 70 years and proved a disastrous dead end, but to give the poor access to assets that will enable them to make and sell things that others will pay to buy. That means nation states need to develop and further four key paradigms to ensure success in a market-oriented economy: Education;  Titling programs;  Land reform;  Microcredit (Williams, 2004: 13).  These attributes of an open market economy are what Brazil has been developing and furthering during the Bolsonaro administration.  

ONGOING FREE MARKET REFORMS 

Federal Tax Reduction 

Tax reform is one of the most crucial aspects of free market liberalization.  The current Brazilian Tax Code dates from 1966, when the isolationist and ISI military dictatorship was in power. Little has happened regarding point three, which is tax reform,  of Williamson´s paper . There are different proposals, but no ultimate deadline for Congress to act on it.  Currently there are a few changes regarding federal taxation.  One such alteration on industrialised products (IPI) are no longer applied to roughly 300 different capital goods, among them are diesel engines, forklifts, crane machines, printer and biometric systems’ subparts.

There are four major transformations which already took place during the Bolsonaro administration: pension reform, central bank autonomy, economic freedom law and the new regulatory framework on basic sanitation. Each one is a case study in itself.  All these innovations are hallmarks of Williamson´s pragmatic approach.  The four measures cover nearly all of the 10 points in the Washington Consensus points paper. 

Normative Instruction 85/2020I

A very relevant initiative, but somewhat unnoticed, is the Normative Instruction 85/2020 from the National Department of Business Registration and Integration (DREI).  André Santa Cruz Ramos, a renowned professor and author, known as an avid Ayn Rand supporter, is in charge of the office.  This instruction promotes and cultivates deregulation.  To mention a few of these new changes: (1) associations or cooperatives can freely be converted into a business without any type of new registration; (2) there is no requirement for signature authentication or authenticated copy; (3) considerable extension of automatic business registration (Art. 43); (4) any business constitutive act registration is independent from any form of government authorization; (5) any business is permitted to extend the term for the payment of capital stock; (6) acts, documents and declarations that contain mere cadastral records (for example, changes in marital status, changes in addresses) do not require contractual alterations, being presented as a simple administrative measure.  These articles emphasize the swift pace at which deregulation has become a priority in Brazil as the country is moving toward being more business friendly. 

PRONAMPE

As stipulated, the Washington Consensus lays down social reforms as a means of neoliberal economic improvement.  One of them is microcredit access.  This subject matter is targeted by Law 13.999/20, which extended the term limits of the National Support Program for Micro and Small Enterprises (PRONAMPE).  Microcredit access lines have been extended by the Bolsonaro administration which provide small businesses the opportunity to continue to operate. 

The New Franchise Law 

The federal law nº 13.966/20 renews the franchise opportunities in Brazil.  Following in the steps of federal law nº 13.874/19 (Lei da Liberdade Econômica), the pacta sunt servanda principle shall be applied as the general rule among private contractors.  Unlike what has been done so far, any business contract now is taken primarily as a symmetric (Art. 421-A, Law of Economic Freedom). Thus, there can be no government intervention within the commerce sphere, until proven otherwise (Art. 421, § 4º, Law of Economic Freedom).

The prior franchise law was silent concerning the nature of the franchisor-franchisee relationships.  So the Brazilian Judiciary went back and forth on the idea of franchisor-franchisee bonds being protected by consumer rights.  That would represent a propitious environment for continuous government intervention, since consumer law presupposes an asymmetrical and uneven settlement.  With the renewed franchise law, the parties can freely express private autonomy regarding which contract clauses should be applied or not (Art. 1, Franchise Law/2020).

State companies and non-profit organizations are also able to sign franchise contracts (Art. 1, § 2º, Franchise Law/2020).  In order to be implemented, the franchisor must provide a Circular de Oferta de Franquia, similar to the American Franchise Disclosure Document (FDD) or Uniform Franchise Offering Circular (Art. 2).  This document must be handed over at least ten days before the contract signature (Art. 2, § 1º).  If the deadline is not duly fulfilled, the franchisee has the right to argue for a void or voidable contract (Art. 2, § 2º).  Under such circumstances, the franchisee holds the right to receive all its expenditures back (Art. 2, § 2º).

The parties may also elect an arbitral tribunal to resolve disputes related to the franchise agreement (Art. 7, Franchise Law/2020).  As seen, the arbitration clause is expressly guaranteed by the law.  This new law does not require the presence of any witness during the contract signature, unlike its predecessor.  This new law simplifies the franchise business on the whole, the franchisor-franchisee relationship and its practices.   

Rule of Law

As indicated previously, rule of law represents one of the main pillars of the “Washington Consensus.”  Rule of law is a basic institution that is also a pillar of Williamson´s work.  As rule of law is a basic pillar of functioning democracies it is unreasonable that the Washington Consensus point of private property guarantee should be characterized as "evil machinery."  According to John Williamson (Williams, 1990: 1):

"In the United States property rights are so well entrenched that their fundamental importance for the satisfactory operation of the capitalist system is easily overlooked. I suspect, however, that when Washington brings itself to think about the subject, there is general acceptance that property rights do indeed matter. There is also a general perception that property rights are highly insecure in Latin America."

As Williamson continued to elucidate regarding point 10 of his trademark piece: “This was primarily about providing the informal sector with the ability to gain property rights at acceptable cost (inspired by the Peruvian economist Hernando de Soto’s analysis)” (Williams 2004: 4).  Brazil suffered from a drastic property crimes increase between the end of the 80’s until mid 2010’s.

Property rights are inextricably linked to public safety.  For several years, public safety was not viewed as a first tier subject matter.  Public safety was viewed as a consequence of inequality. Violence was perceived by the authorities as a result of economic inequality.  In order for Brazil to become a safer place, the income gap between the rich and the poor had to be reduced.  Naturally, this view was definitely not shared by the overwhelming majority of the population, rather by a fringe minority in power.  The reason is quite simple: traditionally Brazil is a High Gini coefficient economy. Reducing inequality in Brazil is an extremely complicated task (Brzezisnki 2012: 49-50). Therefore, waiting for this problem to be solved would take much time.  Brazil's population is exhausted from the high crime rate.  Wanting to arrest the out of control crime rate Michel Temer´s administration was noticeably successful in containing crimes in general and specifically property crimes.  

The Temer administration undertook several measures that included: (1) reactivated the Institutional Security Cabinet (GSI) and hand it out to Four-Star General Etchegoyen; (2) instituted the Single Public Security System (Sistema Único de Segurança Pública), the National Plan for Public Security and Social Defense (Plano Nacional para Segurança Pública e Defesa Social) and the National Council for Public Security and Social Defense (Conselho Nacional de Segurança Pública e Defesa Social); (3) authorized direct military intervention through the Law and Order Guarantee Operation (GLO) in Rio de Janeiro state and Roraima state; (4) increased security forces funding, by enabling private investment and by redirecting sports lottery resources; (5) the Federal Military Justice now holds military personnel responsible for intentionally violent crimes committed by military personnel against civilians within the GLO framework.  Michel Temer adhered to rule of law fundamentals that militarized public safety and laid the groundwork for Bolsonaro´s administration.  

Bolsonaro’s election victory was partially related to public safety concerns.  The mercurial Brazilian president has campaigned and continues to campaign on public safety as an ongoing concern.  Through his presidency Jari Bolsonaro has pushed forth many new initiatives to deal with the grave issue of security in Brazil.  Property crimes are still drastically in decline (Kadanus, 2020).  His actions included: (1) passing Anti-Crime Package legislation promoted by Ex-Minister of Justice Sérgio Moro; (2) transferring various criminal organization leaders to federal facilities; (3) apprehending drugs in record numbers; (4)  expreding the National Force towards many states; (5) creating the Secretary of Integrated Operations (Seop); (6) implementing the Portuguese-inspired program Em Frente Brasil, which select key-cities to receive special law enforcement treatment as role models; (7) authorizing military interventions through GLO operations in the Amazon region; (8) piling up intelligence and military agents throughout several government bodies; (9) extending the scope of action of the Institutional Security Cabinet (GSI), the Brazilian Intelligence Agency (ABIN) and the head of the Federal Police, compounding them; (10) facilitating private gun ownership.  

All these measures were aimed to shore up public safety in the face of calamitous crime and insecurity that have been and continue to be prevalent in Brazil.  Comparing year to year crime statistics published by the National Security Information System (Sinesp) from the Ministry of Justice and Public Security for the years 2019 and 2018 crime fell across the board with homicides experiencing a 20.3% decline, homicides involving robbery fell by 23.8% and robberies of financial institutions fell by 41.5% (March 17, 2021).  However, there is still improvement needed as homicide rates have climbed during the pandemic year of 2020 with an uptick of 7% in comparison to the first six months of 2019 (Kadanus, 2020).  Another attribute of public safety that coalesces with civil liberties and even manifests an air of "Americanization" is gun access policy, which the Bolsonaro administration is bolstering. Bolsonaro’s approval rating is largely attributed to Public Safety measures (Venagilia, 2019). 

Regarding to Moro’s Anti-Crime Package, it is fair to briefly point out some of the legal modifications introduced: (1) extending maximum jail time from 30 to 40 years; (2) making parole opportunities stricter; (3) instituting the plea bargain; (4) judicial supervision during criminal investigations. However, this extolled new criminal legislation is partially and temporarily suspended by a Supreme Court decision.  It is not clear exactly how this will come to fruition.  

PRIVATIZATION

In 1988 a group of international economists formed a “National Forum,” in Brazil whose aim was to point out “ideas for the modernization of Brazil.”  The forum was coordinated by João Paulo dos Reis Velloso, a former minister of the military regime and a close friend of Mário Simonsen.  Although it was not the central theme of the forum, privatization appeared strongly in Velloso's speech.  When discussing the “state conglomerates (Eletrobras, Petrobras, Telebras etc.)”, the former minister defended strict control of government spending, however, regarding other state-owned companies, Velloso defended the immediate sale of shares on stock exchanges.  For all his talk concerning privatization, Velloso pointed out areas that should not be sold that included electricity, oil, communication and transportation (Valente, 2013). Years later several of these industries would eventually go through privatization or go bankrupt. Between 1990 and 2015 privatizations resulted in over $100 billion in sales both at the federal and state level (Romero, 2021).

A Contemporary Privatizations 

Petrobrás follows the privatization example of state ownership where the state is a majority investor.  Through this style of state ownership the state accepts to follow certain rules to attract private investors as minority shareholders (Romero, 2021).  If Petrobrás were to be privatized, it would follow Embraer’s golden share clause model. That means the government holds a subsidiary veto power.  Even though these companies are private there is still a level of government influence and a minor opportunity for government intervention.  This level of government involvement in these companies also suffices as a possible vehicle for government exertion of foreign policy.  

On February 23, 2021 a provisional measure was brought to the Brazilian congress by the Minister of Mines and Energy Bento Albuquerque along with the Minister of Economy Paulo Guedes to start the process of privatizing Eletrobrás, the behemoth company of Brazilian Electricity.   This move has been anticipated by many as an inevitable part of the privatization process.  The government stake in Eletrobrás will drop from 61% to 45% and the government is expected to generate $11 billion through the share price rise.  Eletrobrás will likely follow Embraer´s privatization process and will adopt the golden share model.  

In a brazen effort to stave off any impression that he is not serious about economic liberalization, Bolsonaro submitted a proposal to congress to privatize the Brazilian postal service.  Whether the privatization is accomplished by direct sale, sale of majority control or sale of part of the company is yet to be determined (Miazzo, 2021).  The proposal for privatization of the Brazilian postal service mandates that the Empresas de Telégrafos e Correios continue to send mail throughout the country; private companies would not be obliged to deliver to the entire country.  Since there is no economic demand to establish mail service in remote places the government will continue to fulfill its public mandate.    

THE POLITICAL DIATRIBES OF THE BOLSONARO ADMINISTRATION

Despite the political frantics of Jair Bolsonaro there has been an underlying motion in his administration to privatize business and develop the private sector of the country which is perennially named "the country of the future." These reforms have taken place in Brazil at a time when perhaps few are noting the significance of it.  The political mayhem and polarization that has gripped Brazil distracts from some prominent yet slow developments in Brazilian economic liberalization.  

Bolsonaro´s rhetoric is mainly of his own doing firstly to rouse up populist sentiment and gain popularity as this is a staple of power perseverance in Brazil, secondly this sends mixed political signals that leaves opponents and pundits off-balance that can further agendas.  To popular media Bolsonaro´s presidency seems to be in a perpetual state of balance regarding his governance, however, there is no better even keel to the tumultuous president´s rhetoric than his agenda for free-market reform that serves to counter any notion of dictatorial perceptions.   

Brazil's government is attempting to greatly reduce the footprint of the state in the economy whether it be through asset sales, privatizations or  concessions across a range of sectors, all of which it hopes will attract foreign investment into the country (Ayers, 2019).  The fact that the Bolsonaro administration exceeded its 2019 target of $20 billion in divestiture is an accolade in itself.  The government of Brazil set a goal of privatizing state assets worth at least $20 billion and in the first nine months of 2019 it privatized $23.5 billion which the government tallied as revenue $19.25 billion (Ayers, 2019).  

The recent firing of the CEO of Petrobras is an example of the "interesting" character of Bolsonaro, while Bolsonaro does not share the same values as Venezuela's Chavez or Maduro there has been marked concern in the media.  The Brazilian president likely understands the maxim coined by LBJ "there is no such thing as bad press."  Where this recent demission has caused controversy this is merely a blip in the screen of his economic liberalization program that Paulo Guedes leads.  The firing of the CEO of Petrobras was quickly countered by the official start in the process of privatizing Eletrobras as well as the proposal to privatize the national mail service.  These rapid initiatives contrast with Bolsonaro´s recent decision involving Petrobras which demonstrates that after all the hype the Brazilian president is still keen on privatizing state-owned enterprises.  

Brazil´s complex political system has inhibited Paulo Guedes and his economic team from making the progress that some expected;  nevertheless there has been pension reform, the recent autonomy of the Brazilian Central Bank and the Law of Economic Liberty.  

The coronavirus pandemic has been costly to the free-market minded economy minister confiscating hope for fiscal rectitude that he hoped to push through (Pulice, 2020). Reforms on privatization have been slower than desired in 2020.  The mere presence and continuation of Paulo Guedes in Bolsonaro´s cabinet portends vast credibility and political capital to ease investor worries.  The Economist forecasts that even though GDP fell 4.4% in 2020, and is expected to recover in 2021 by growing 3.2% (Economist Intelligence Unit Report, 2021).

CONCLUSION

Irrespective of who wins the presidency in 2022 the neoliberal economic groundwork has been laid and it is extremely doubtful that there will be any regression as the largest South American country attempts to become a more open and less protectionist.  The ideas furthered by John Williamson´s work "The Washington Consensus" seems profoundly entrenched in Brazil and there are many reasons to think so. 

Plan Execution 

The historical implementation of Williamson´s points has a consistent past in Brazil.  At the end of the military regime, the liberalization process slowly took its first steps.  However, the acceleration only began with the Itamar Franco administration, through the Plano Real implementation, an important anchor for monetary stability.  In terms of privatizations, Embraer became a role model of how to proceed.  With the lessons of Embraer in mind FHC privatized Telebrás and Vale do Rio Doce and pushed through a Fiscal Responsibility Law.  The empowerment of Federal Agencies could be understood as another example of FHC´s commitment to the Washington Consensus paper, but it's praxis demonstrated to be more of a push-back than an effective accomplishment. 

FINAL CONSIDERATIONS 

A robust transformational process has taken hold in Brazil in terms of economic and financial progress with a distinct capitalist bent.  Irrespective of who wins the presidency in 2022 the neoliberal economic groundwork has been laid and it is extremely doubtful that there will be any regression as the largest South American country attempts to become a more open and less protectionist. The ideas furthered by John Williamson´s work "The Washington Consensus" seems profoundly entrenched in Brazil and there are many reasons to think so. 

BIBLIOGRAPHY

Ayres, Marcela and McGeever, Jamie. "Brazil Surpasses 2019 target of $20 billion in privatizations." Reuters.  October 3, 2019. https://www.reuters.com/article/us-brazil-economy-privatization-idUKKBN1WI2HY

Bronzatto, Thiago.  “Luiz Eduardo Ramos: É ultrajante dizer que o Exército vai dar golpe.” Veja. June 12, 2020. https://veja.abril.com.br/paginas-amarelas/luiz-eduardo-ramos-e-ultrajante-dizer-que-o-exercito-vai-dar-golpe/

Brzezisnki, Zbigniew. Part 2: The Warning of the American Dream. In: Strategic Vision. Basic books, 2012 (New York)

Cavalcanti, Leonardo.  “8.450 militares da reserva trabalham em ministérios, comandos e tribunais.” Poder 360. July 17, 2020.https://www.poder360.com.br/brasil/8-450-militares-da-reserva-trabalham-em-ministerios-comandos-e-tribunais/

Genro, Tarso.  “O culpado da mortandade não é o Exército. É Bolsonaro e seus políticos liberais e fascistas.” Sul 21. January 21, 2021. https://www.sul21.com.br/colunas/tarso-genro/2021/01/o-culpado-da-mortandade-nao-e-o-exercito-e-bolsonaro-e-seus-politicos-liberais-e-fascistas/

Maretti, Eduardo.  “Para Celso Amorim, Forças Armadas tendem a não apoiar um golpe.” RBA. June 05, 2020. https://www.redebrasilatual.com.br/politica/2020/06/para-celso-amorim-forcas-armadas-tendem-a-nao-apoiar-um-golpe/

Miazzo, Leonardo.  "Bolsonaro leva ao Congresso projeto que abre caminho para privatizar os Correios.” Carta Capital.  February 24, 2021. https://www.cartacapital.com.br/economia/bolsonaro-leva-ao-congresso-projeto-que-abre-caminho-para-privatizar-os-correios/

Pinheiro, Armando Castelar. 2011. “Two Decades of Privatization in Brazil.” In The Economies of Argentina and Brazil: A Comparative Perspective, edited by Werner Baer and David  Fleischer, 252–78. Cheltenham: Edward Elgar.

Pulice, Carolina.  Paulo Guedes’ star fades as Brazil reform agenda stalls. Financial Times. December 22, 2020. https://www.ft.com/content/34e7b7ea-dd69-4665-a4eb-5a42a374d7f0

Ricz, Judith.  "Strong State Influence in the Brazilian Economy: Continuity or Change?" In Seeking the Best Master, ed. Miklós Szanyi. Central European University Press 2019, Budapest-New York: Central European University Press, 2019.

Romero, Cristiano.  "Privatizações geraram US $150 billion em 30 anos." Valor Econômico.  February 17, 2021. https://valor.globo.com/brasil/coluna/privatizacoes-geraram-us-150-bi-em-30-anos.ghtml

Segurança.  "País registra queda de 20.3% nos homicídios." March 17, 2020. Accessed Feb. 13, 2021. www.gov.br

The Economist Intelligence Unit. "EIU Country Report Brazil." Accessed February 23, 2021. http://country.eiu.com/Brazil.

Venaglia, Guilherme. Segurança pública é a área do governo Bolsonaro com maior aprovação.  Veja. April 24, 2019. https://veja.abril.com.br/politica/com-57-seguranca-publica-e-a-area-mais-aprovada-do-governo-bolsonaro/

Williamson, John. A Short History on the Washington Consensus. In Conference “From the Washington Consensus towards a new Global Governance”, Fundación CIDOB, Barcelona, September 24–25, 2004.

Willianson, John. Chapter 2: What Washington Means by Policy Reform. In Latin American Adjustment: How Much Has Happened?. Institute of International Economics. Washington, D.C., April 1990.

About the Authors:

Marc Castillo is a Master in Latin American International Affairs from The George Washington University in Washington D.C.  Marc has written several articles related to Brazil and the Mercosul region.  He has lived, worked, traveled, and studied in Latin America.  Marc is a federal civil servant and a consultant. 

 

Sírio Sapper is a graduate of the Federal University of Rio Grande Do Sul in Porto Alegre, Brazil.  He is a lawyer who focuses on military law as well as general law.  He has written several articles related to Brazil and the Mercosul region. Sirio is an alumni from  Justus-Liebig-Universität Giessen in Germany.  He practices law in Porto Alegre, Brazil.

Blog Exclusive - On the threshold of a Latin American and Caribbean tie-breaker?

written by Félix Pablo Friggeri y Angélica Remache López

    The description of the regional situation and its integration process has gone through a series of conceptualizations with diverse political intentions. We propose a characterization based on the concept of “catastrophic tie,” seeking to highlight elements that may be studied prospectively, considering recent events. These include aspects of the electoral processes and popular demonstrations that have taken place in recent times. We raise the question of whether we are moving towards the possibility of a resumption of the predominance of popular governments and regional integration processes.

Regional catastrophic tie

    We understand that there are two mistakes in the interpretation of the Latin American-Caribbean regional reality, it is, therefore, important to overcome those in order to understand the current situation and generate an analysis that serves as the source of the political debate oriented to respond the popular needs and popular struggles of our region. 

    In the face of the relative predominance of popular governments in at least part of the first two decades of this century, the idea that we had entered a “post-neoliberal era” resonated throughout the continent. Some studies used this term, which had accurate elements of the analysis of reality, but its reading in the sense that the neoliberal conformation had been fundamentally overcome was not in line with what was predominating in the economic world and, in a good part, of the social imaginary of our countries.  Latin America and the Caribbean was the only region on the planet that, as such, formed a regional bloc to contestation to neoliberal hegemony. The neoliberal hegemony, however, continued to define the fundamentals of the economic dynamics and social imaginary, especially those related to socio-economic mobility. The predominance of popular governments represented a strong and relatively sustained challenge to the hegemony of global capital, but never its definitive defeat. Neoliberalism continued to define the fundamentals of labor relations, capital accumulation processes, the people-nature relationship and the rural and urban property system. This explains why popular governments achieved significant advances in income distribution but did not achieve a considerable modification in the distribution of wealth, which is what modifies the correlation of social forces (Schuldt 2013). The core of the explanation of the regional crisis in the face of emerging progressive governments with popular characteristics suffers, therefore, opens a way to a relative predominance of the forces of the neoliberal right.

    The second mistake was to understand the advance of the forces of wild capitalism as the “end of the populist cycle.” An interpretation clearly organized by the right, but which was accompanied by some versions of the intellectual left, generally conditioned by the economic view. The right-wing achieved a relative hegemony based on several coups d’état (Honduras 2009; Paraguay 2013; Brazil 2016; Bolivia 2019), on the pressure and encirclement of governments and peoples (Cuba and Venezuela), on some electoral processes that represented defeats for popular forces, but, above all and fundamentally, by multiple forms of u.s. interventionism. At the internal level, they played in favor of what Álvaro García Linera (2016) called “declassification” processes. Because of this process, part of the same population that benefited by the so-called “inclusion policies” of the popular governments ended up voting against them. This phenomenon has happened in several countries of the region and should be analyzed rigorously: people who were poor and who began to have access to some goods they had never had and who were identified -with more or less reason- as people who came out of poverty and began to be part of what was identified as “middle class,” adopted the discourse and political options of the bosses, stopped voting “as poor” and voted as “middle class” and adopted criteria against the working majorities to which they still belonged. This was a partial phenomenon, perhaps conjunctural, but it influenced the advance of the right wing in the popular spheres. This is what we would call the “mercantilization of social mobility.” Another mercantilizing process that collaborated in this “right-wing” of a part of the popular sectors was that of spirituality, driven, above all, by the so-called “Theology of Prosperity” that orients a good part of what is called the Neo-Pentecostal movement.

    We understand that the situation that has been developed in the region for several years may be described as a “catastrophic tie.” The political concept of “tie” arises from the work of Antonio Gramsci, but was developed, especially, by two Latin American authors to describe the conjunctural realities of their countries. One was the Argentine Juan Carlos Portantiero (2003) in the 1970s. He described the reality of his country as a “hegemonic tie” because the groups fighting for power were not strong enough to lead the country, but they did have the strength to veto opposing projects. The other approach, with which Álvaro García Linera (2008) described the reality of Bolivia, opted for the expression “catastrophic tie,” highlighting the existence of two political projects with the capacity to attract and mobilize social forces with an extended scope, but whose confrontation resulted in a “paralysis of the state command.” For him, the way out of this situation was the election of Evo Morales. This theoretical approach, which the authors use to describe the reality of their countries, can also be used to analyze the current regional situation.

On a regional tie-breaker?

    The victories of Andrés López Obrador in Mexico in 2018 and Alfredo Fernández in Argentina in 2019 were key to the advance of a change in the regional landscape. Both countries have a population and economic weight, behind Brazil, among the most important in the region. Their articulation, given in the Community of Latin American and Caribbean States (CELAC), in the Puebla Group and in joint actions among which the action to save the lives of Evo Morales, García Linera and other Bolivian officials at the time of the coup d'etat in that country, highlights the possibility of an “Argentina / Mexico Axis” that can promote policies different from the purely neoliberal ones and a resumption of the process of regional articulation.

Exclusive, New York Times Hails Nicolas Maduro’s Economic Pragmatism by Steve Ellner, LAP Editor

New York Times Hails Nicolas Maduro’s Economic Pragmatism commentary written by Steve Ellner The New York Times on February 8 published an article titled “To Survive, Venezuela’s Leader Gives Up Decades of Control Over Oil.” This is the second article in two weeks to describe Nicolás Maduro’s pragmatic economic policies which includes privatization and an opening up to foreign capital in the oil industry. The articles attribute the recent modest pickup of the Venezuelan economy to these pragmatic policies and are quick to point out that they go counter to Hugo Chávez’s strategy of asserting greater state control of the economy in the name of achieving socialism by gradual means. Actually, the articles aren’t bad, if you compare them with the coverage of the rest of the commercial media (including the New York Times in general) on Venezuela. But the authors fail to connect the dots. They talk about how Washington’s secondary boycott has made it difficult for Venezuela’s PDVSA to enter into commercial relations with intermediaries (insurance companies, shipping companies, etc.) to export crude and then they wonder why Maduro is privatizing exports. They also talk about Trump’s special permission to Chevron and 4 oil service companies (Halliburton, Baker Hughes, Schlumberger and Weatherfield) without pointing to the obvious favoritism toward U.S. capital in the name of fighting for democracy. In fact, it is a throwback to the inter-imperialist rivalry of the pre-World War I era given the fact that these are U.S. companies (Schlumberger is half U.S.) and that Washington is closing the doors on companies (such as the Spain’s Repsol) which are being threatened with a secondary boycott. There is opposition to Maduro’s pragmatism from within the pro-government Chavista movement (as opposed to those leftists such as Marea Socialista who make no distinction between Maduro and Juan Guaidó). This dissidence is heavily represented in the Chavista peasant movement that has opposed the privatization of state land (such as rice production) and has received backing from one of the top Chavista historical leaders, Elias Jaua. In this conflict between Maduro’s pragmatism and Madurista critics on the left, there may not be any “correct” answer as to who is correct. This conflict may be a manifestation of the “creative tensions” that Alvaro Garcia Linera alludes to in reference to the popular protests in Bolivia under Evo Morales or Mao’s “contradictions among the people.” A comparison may also be made with Lenin’s New Economic Policy in the Soviet Union in the 20s that gave rise to the Kulak class, which ended up resisting socialism. Thus a “correct” strategy at a given moment may lead to undesirable consequences. In any case, these developments have to be understood in the context of a crippling economic, political and cultural war on Venezuela led from Washington, which has limited the options for the Chavista government. New York Times' article: To Survive, Venezuela’s Leader Gives Up Decades of Control Over Oil By Anatoly Kurmanaev and Clifford Krauss Faced with a severe economic crisis, the country’s leader, Nicolás Maduro, is letting foreign firms take over daily operations of its oil fields. It’s a break with core tenets of his socialist revolution. CARACAS, Venezuela - After decades of dominating its oil industry, the Venezuelan government is quietly surrendering control to foreign companies in a desperate bid to keep the economy afloat and hold on to power. The opening is a startling reversal for Venezuela, breaking decades of state command over its crude reserves, the world’s biggest. The government’s power and legitimacy have always rested on its ability to control its oil fields - the backbone of the country’s economy - and use their profits for the benefit of its people. But the nation’s authoritarian leader, Nicolás Maduro, in his struggle to retain his grip over a country in its seventh year of a crippling economic crisis, is giving up policies that once were central to its socialist-inspired revolution. Under Venezuelan law, the state-run oil company must be the principal stakeholder in all major oil projects. But as that company, Petróleos de Venezuela, or Pdvsa, unravels - under the weight of American sanctions, years of gross mismanagement and corruption - the work is unofficially being picked up by its foreign partners. Private companies are pumping crude, arranging exports, paying workers, buying equipment and even hiring security squads to protect their operations in a collapsing countryside, according to managers and oil consultants working on the country’s energy projects. In effect, a stealth privatization is taking place, said Rafael Ramírez, who ran Venezuela’s oil industry for more than a decade before breaking with Mr. Maduro in 2017, in a video address this week. “Today, Pdvsa doesn’t manage our oil industry, Venezuelans don’t manage it,” said Mr. Ramírez. “In the middle of the chaos generated by the worst economic crisis suffered by the country in its history, Maduro is taking actions to cede, transfer and hand over oil operations to private capital.” Pdvsa did not respond to requests for comment on its recent concessions to private partners. The haphazard changes to the oil sector, which have accelerated in recent months, are remaking the oil industry in a nation whose assertive energy policies had, since the 1950s, served as an example to developing countries of how to take control of natural resources. And they are a stark retreat from the vision of Hugo Chávez, who was Mr. Maduro’s mentor and predecessor. Mr. Chávez nationalized in 2007 the giant holdings of Exxon Mobil and ConocoPhillips and packed Pdvsa’s leadership ranks with political allies dedicated to his socialist-inspired “Bolivarian revolution.” But Mr. Maduro’s transformation of Venezuela’s oil industry has stemmed the collapse triggered by an American embargo. Sanctions imposed in January 2019 had wiped out about a third of Venezuela’s oil production, bringing it down at one point to the lowest level since the 1940s, according to data from the Organization of the Petroleum Exporting Countries. Oil production now is still less than a third of the total in 1998, when Mr. Chávez took power. By late 2019, Venezuela had stabilized exports at about a million barrels per day, according to Bloomberg’s tanker tracking data. The dribble of oil exports has provided Mr. Maduro with foreign revenue at the most critical moment of the country’s economic crisis, allowing him to adjust to sanctions and consolidate his rule. In the country’s main oil export hub, José, key processing plants and piers are slowly coming to life after near total paralysis in the summer, when Pdvsa was cut off from the global financial system and struggling to cope without its biggest market, the United States, according to shipping agents and oil managers. The unofficial, partial privatizations of the past year have been led by an unlikely reformer: Manuel Quevedo, a National Guard general with no known oil experience who was appointed by Mr. Maduro to head Pdvsa. General Quevedo broke with the nationalist rhetoric of his predecessors to hand over operational control of joint oil projects to partners that include Chevron, Russia’s state-run company, Rosneft, some European and Chinese companies and groups of Venezuelan magnates. “With Pdvsa in crisis mode, they are increasingly handing operational responsibilities and decisions over to the partners,” said Lisa Viscidi, a specialist in Latin American energy issues at Inter-American Dialogue, a Washington-based research group. The concessions are gradually reducing Pdvsa to little more than a holding company collecting the state’s share of oil field revenues, with most of financial and strategic decisions taken by private partners. This is a startling decline from just a decade ago, when Pdvsa was the pride of Venezuela and the cornerstone of its economy. Until the start of the economic crisis in 2013, the company was the source of virtually all of Venezuela’s hard currency. It was also its biggest employer and penetrated all aspects of life in the country, running everything from supermarkets to parks. Today, oil fields wholly owned by Pdvsa account for less than half of the nation’s remaining oil production, and their output continues to plummet. Chevron has become the single largest foreign producer of oil in Venezuela, and a crucial part of the country’s stabilization over the past few months. Its four joint ventures in the country are pumping a gross total of about 160,000 barrels per day, according to two industry sources familiar with the company’s projects, who spoke on condition of anonymity because they weren’t authorized to speak publicly. Chevron quickly responded to the impact of American sanctions - such as the loss of American light oil that was used to blend with heavy Venezuelan crude to help it move through pipelines - by switching to Venezuelan light oil. By September, the company was able to restart its Petropiar heavy oil processing plant, which has formed the backbone of Venezuela’s oil export recovery. A senior official with the Trump administration said the activities of Chevron and other foreign oil companies in Venezuela “are clearly of concern.” But the U.S. government has given Chevron exemptions from sanctions, as recently as last month. “If Chevron is forced to leave Venezuela, non-United States companies will fill the void and oil production will continue,” said Ray Fohr, a company spokesman. On the export side, Pdvsa’s biggest ally has been Russia’s Rosneft, which over the past year has grown to sell about two-thirds of Venezuela’s oil. Rosneft has quickly replaced Pdvsa’s American sales routes by diverting its oil to Asia, often obscuring the cargo’s source and destination to bypass sanctions, according to companies that monitor tanker traffic. Barred from the global financial system, Pdvsa has also been forced to cede control to foreign partners in organizing exports, which goes against the country’s energy laws. Over the past few months, Chevron, Rosneft and Italy’s Eni have all directly exported Venezuelan crude. Pdvsa’s opening of exports - oil cargoes worth millions of dollars - to anyone who can bypass sanctions to line up a vessel, insurance and a customer for the crude has even created a small cottage industry among Venezuela’s elite. Now, the only thing that matters is that oil continues to flow, said one partner at a joint oil venture, as he scanned his phone, viewing the state company’s cargo offers. “The historical struggle for resource sovereignty is being sacrificed for operational expediency,” said Antero Alvarado, an energy consultant in Caracas. Venezuela’s new oil production has allowed the country to import essentials like food, medicine and fuel to keep the country running. And there are indications that Mr. Maduro’s government wants to take the underhand liberalization further, even rolling back the watershed nationalization of the oil industry that took place in the 1970s. A group of lawmakers installed at the head of the National Assembly by Mr. Maduro in January - amid an international outcry - has proposed changing energy laws to allow greater private investment. “In these times of declining output, we have to give space to a national proposal that, first of all, shall give private capital greater participation in exploration, production and marketing of oil,” Leandro Domínguez, a lawmaker, said in a statement. Mr. Domínguez’s proposal is not recognized by the United States and most European and Latin American countries, who continue to support a rival, opposition-led congressional leadership. The opposition lawmakers oppose any changes to energy laws under Mr. Maduro, creating a legal limbo for foreign oil companies. Despite the recent changes, there are many reasons to believe Venezuela’s best days as an oil superpower are over, according to Amy Myers Jaffe, an oil expert at the Council on Foreign Relations, and other experts. Venezuela could gradually recover production to 2.6 million barrels a day over 10 years, but only with investments of over $200 billion, according to projections by IPD Latin America, a consulting firm. At a time when many oil companies are struggling with declining profits, executives are looking for cheaper and cleaner sources of oil. Even if a political settlement eventually lifts sanctions, Venezuela’s dirty oil, laden with sulfur and other impurities, may find far fewer investors. Published in LAP website (here). URL: https://www.nytimes.com/2020/02/08/world/americas/venezuela-oil-maduro.html

Exclusive, Oaxaca in Crisis: An Interview with Victoria Tenopala Juárez

As the school year starts, teachers in the highly indigenous Mexican state of Oaxaca are revving up their struggle against neoliberal education reform – two months after federal police massacred protesters near the town of Noxichtlán. The radical National Coordination of Education Workers (CNTE) has recently called for continuing road blockades and has pledged to continue its strike, and the freeing of political prisoners has been one aspect of their continuing negotiations with the Mexican Secretary of the Interior.

The following is an Aug. 4 interview with Victoria Tenopala Juárez, a member of the Council of Oaxacan Autonomous Organizations [COOA], who discusses the state of the movement as well as the case of her husband, the indigenous political prisoner César León Mendoza.

On June 19, eight Oaxacans were killed when federal police attempted to dislodge protesters’ highway blockade at Noxichtán, which they had maintained to pressure the government to undo the federal education reform, first fully enacted in Oaxaca in 2015. The independent journalist León Mendoza had long worked to support and document the movements against this and other neoliberal reforms, and was arrested in late 2015. He currently faces four charges, including attempted homicide. He was originally held at a state prison in Miahuatlán, Oaxaca, 2.5 hours from his family. Direct action campaigns in February 2016 in Oaxaca led to his transfer to the Ixcotel prison, in Oaxaca City, Oaxaca, which is closer to his family and support networks.

This interview was conducted in Spanish by Eric Larson*, who translated it and edited it for length.