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The Economic Model of Brazil during the Military Dictatorship

Seminararbeit 2007 13 Seiten

BWL - Sonstiges

Leseprobe

Table of Contents

1. Introduction

2. Period of Reforms

3. Rise and fall of Economic Miracle
3.1 The Economic Miracle
3.2 Investment in huge Projects

4. The World Economy Crises
4.2 Oil Crises
4.3 Social Crises
4.4 Searching for Solutions
4.5 The End of the Economic Miracle - the End of the Military Dictatorship?

5. The Lost Decade

6. Back to Democracy

7. Conclusion

Bibliography

1. Introduction

The long discussed plans of the military to deprive the Brazilian President João Goulart of power were finally realized on 1 April 1964. The military justified this step with the argumentation, that Goulart was a populist. His policy was marked by hyperinflation and the polarization between the right and the left wings.[1] The coup d'état was also necessary to fight the major enemy: the communism.[2] The dictators of the military saw themselves as guarantors for a moral, political and economical reconstruction of Brazil[3] and furthermore as an elitist leadership that connected military values with the strong belief in progress. In the following 21 years they established a new generation of regime-dependent technocrats and bureaucrats. The preconditions for this progressive concept were lying within the fields of national security, elimination of political opposition and communist complots. Brazil found a reliable ally against the ‘communist threat’ in the USA.On 11 April 1964 Humberto de Alencar Castelo Branco was elected to become the first president of the military dictatorship that was going to last until 1985.[4]

This paper is supposed to give an overview about the economic model that the military pursued during their dictatorship. Among that it will show the rise and fall of this model and the consequences for the population.

2. Period of Reforms

With a new economic model the government aimed on becoming a modern, industrialized country and a superpower, if necessary against the will of the people.[5] On 13 August 1964 the Minister for Economic Affairs, Roberto de Oliveira Campos, presented the major items of the new Brazilian economy plan:

- Essential increase of power generation
- Increase of investments
- Generous road making program (15,850 km in 5 years)
- Extension of the agricultural and animal husbandry production to improve the food supply (double the recent production until 1970)
- Promotion of industrial growth by increasing the iron and steel production, extension of the chemical and petrochemical industry, supply the textile industry with new machinery
- Better allocation of the national income
- Annual growth rate of 7%.[6]

To realize these plans, the military dictatorship changed the Brazilian Constitution fundamentally. Extensive additional amendments to the Constitution served the government self-legitimation and the authority needed to re-build the country. Personal basic rights were deleted, mandates for the congress deprived, judges and executives got terminated. New strict measurements influenced the economical and political life significantly. Collective bargaining, strikes and unions were forbidden.[7] Thus the leaders promised the national agricultural and financial bourgeoisie as well as the foreign investors a good investment climate.[8]

3. Rise and Fall of the Economic Model

3.1 The Economic Miracle

During the incumbency of President Arthur da Costa e Silva the economic model seemed to achieve success. The inflation rate was under control. More foreign companies invested in Brazil because they trusted in stability of government. As a reaction of continuous civil commotions the government became political repressive. In 1969 Emílio Garrastazu Medici became the new President.[9]

Between 1967 and 1974 Brazil had one of the highest growth rates in the world.[10] In 1970 the economical growth rate climbed up to 8.3%, in 1973 it even reached 14.0%. Imports of machinery and consumer goods increased. Agricultural goods were still the major export goods and were sold for over 6 billion $. The process of industrialization proceeded fast and the world became witness to the so called ‘economic miracle’ or ‘milagre brasileiro‘, which was, on the one hand, based on a close collaboration of state, companies and foreign investors in over-dimensioned projects. On the other hand it was a result of strong state interventionism: dependent public and private companies were supported by cheap long-term credits, subsidies and orders from the state. Especially the telecommunication and agricultural sector as well as the chemical, steel and automobile industry benefited.[11]

Only with the help of foreign exchange loans the government was able to finance these high cost.[12] The economic policy became more expansive because of large orders, which boosted the growth rate immediately. But simultaneously the national debt increased from 5.2 billion $ in 1970 up to 49.9 billion $ in 1979. For the international banks the lending was risk free, because the government guaranteed repayment, even in the case of loans made to private companies.[13]

The metamorphosis to an industrialized and urban country happened appreciably. Millions moved to the city.[14] Over 500 production sites and 200 service companies worked with German capital e.g. VW, Siemens, Bayer, Mercedes and Allianz. Their incentives: good future prospects and a fast growing market that was widely protected against imports.[15]

During the incumbency of Medici the bloodiest persecutions of the political opposition have taken place. Thousands of people disappeared or got tortured. At the same time the ‘economic miracle’ hit its peak, which was one of the reasons why the Brazilian people accepted the political repression.[16]

3.2 Investment in huge Projects

In 1972 a survey showed that scarcity of raw materials could have bee able to limit economical growth.[17] With the help of foreign loans the military dictatorship realized huge projects like the Itaipu-dam, iron ore mining in Carajás or the Transamazônica.[18] More and more projects were started to exploit the natural resources, to stop underdevelopment and to distract the people from necessary social and agricultural reforms. The largest project was the opening of the Amazon region, which brought most of the people few improvement and only for a couple new wealth.[19]

The build up of the Transamazônica, also called the ‘Road of progress’, and the ‘Integration Program for Amazonia became one of the world’s largest projects ever. Since the U.S. Air Force had taken satellite pictures from space in 1962, it had been clear, that huge natural resources could be found in the Amazon region.

But the Brazilian government had several reasons for this project:

- Become a Superpower
- Benefit from the natural resources like gold, coal, oil
- Food production on fertile ground
- New living space for the increasing number of people (within 55 years the population had tripled)
- Balance the regional imbalance (population and industry were settled at the coast)
- Political pressure: to fight the social disaffection the government had to make a token gesture and strengthen the public trust in future. Furthermore revolution movements should be stopped by that.

Settlers and multinational companies came to Amaziona because of incentives, like tax incentives or cheap loans, which the government offered to them. Over 500 companies invested in the region, especially in the agricultural industry and in mineral mining. Within 7 years 15,000 km of roads were built into the green wilderness. But the assumption that the ground in that region would be fertile was wrong. 80% were sandy and only the ground along rivers was fertile. Immense costs for fertilization became necessary. The natives of that region, Indians and Caboclos were displaced. Later the whole settlement program failed, because of tough economic and health circumstances.[20]

4. The World Economy Crises

‘Brazil grew from a developing country to an industrial society. The miracle in the miracle: the architect of this boom was the military. Strikes were frowned upon, workforce is cheap, natural resources are abounding, tax incentives are high and the average growth rate is 10%.’[21] While U.S. Economist Milton Friedman still praised the politics of the military dictatorship in 1974, it became clear how high the cost for this success were actually, when at the end of Medici’s incumbency the economic miracle showed first symptoms of fatigue.[22]

[...]


[1] Prutsch, U. (w/o date, a), http://www.lateinamerika-studien.at/content/geschichtepolitik/brasilien/ Abrasilien-81.html (Last Update: 01/26/07)

[2] W/o Author (w/o date, a), http://www.brasilianische-botschaft.de/land/c03_gesc.html

A(Last Update: 01/26/07)

[3] W/o Author (w/o date, b), http://www.topicos.net/Geschichte.24.0.html (Last Update: 01/26/07)

[4] Prutsch, U. (w/o date, a), http://www.lateinamerika-studien.at/content/geschichtepolitik/brasilien/ Abrasilien-81.html (Last Update: 01/26/07)

[5] Schirm, S. (1990), p. 75

[6] Holtz, U. (1981), p. 151

[7] W/o Author (w/o date, b), http://www.topicos.net/Geschichte.24.0.html (Last Update: 01/26/07)

[8] Kaller-Dietrich, M; Mayer, D. (w/o date), http://www.lateinamerika-studien.at/content/geschichte Apolitik/geschichte/geschichte-185.html#top (Last Update: 01/26/07)

[9] W/o Author (w/o date, b), http://www.topicos.net/Geschichte.24.0.html (Last Update: 01/26/07)

[10] Ibid.

[11] Prutsch, U. (w/o date, b), http://www.lateinamerika-studien.at/content/geschichtepolitik/brasilien/ aabrasilien-84.html (Last Update: 01/26/07)

[12] Ibid.

[13] Rocha, J. (2000), p. 47

[14] Schoen, M.; Herzberg, W. (1990), p. 24

[15] Holtz, U. (1981), p. 221

[16] Pfirter, D. (1990), p. 94

[17] W/o Author (w/o date, c), http://www.uni-tuebingen.de/ffw/Downloads/Wirtschaftspolitik/ aalateinamerika.pdf (Last Update: 01/26/07)

[18] W/o Author (w/o date, a): http://www.brasilianische-botschaft.de/land/c03_gesc.html

aa(Last Update: 01/26/07)

[19] Schoen, M.; Herzberg, W. (1990), p. 24

[20] Holtz, U. (1981), p. 179

[21] Ibid., p. 229

[22] Pfirter, D. (1990), p. 94

Details

Seiten
13
Jahr
2007
ISBN (eBook)
9783638629065
Dateigröße
433 KB
Sprache
Englisch
Katalognummer
v70561
Institution / Hochschule
Duale Hochschule Baden-Württemberg, Stuttgart, früher: Berufsakademie Stuttgart
Note
1,3
Schlagworte
Economic Model Brazil Military Dictatorship

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Titel: The Economic Model of Brazil during the Military Dictatorship