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The Brazilian Borrowing Experience: From Miracle to Debacle and Back

Published online by Cambridge University Press:  12 October 2022

Jeffry A. Frieden
Jeffry A. Frieden*
Affiliation:
University of California, Los Angeles
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Since 1981 the Brazilian economic and political system has passed through a period of crisis and upheaval. The country's foreign debt has been at the center of its economic problems, and the debt crisis has defined many of the contours of the political crisis. This article will examine Brazil's accumulation of the Third World's largest foreign debt and the consequences of both the debt and the debt crisis for the Brazilian pattern of economic and political development. The article will focus on the role of economic interests, specifically the role of different sectors of the Brazilian business community, in the borrowing boom and bust.

Type
Research Article
Information
Latin American Research Review , Volume 22 , Issue 1 , 1987 , pp. 95 - 131
Copyright
Copyright © 1987 by the University of Texas Press

Footnotes

∗

I would like to thank Mônica Baer, Werner Baer, Al Fishlow, John Freeman, Barbara Geddes, David Lake, Marcelo de Moura Lara Resende, Paulo Nogueira Batista Junior, Kurt von Mettenheim, and several anonymous LARR reviewers for their suggestions and assistance. I also acknowledge gratefully the hospitality of the Instituto de Planejamento Econômico e Social and the Instituto de Pesquisas (IPEA/INPES) in Rio de Janeiro, the partial funding of the Institute for the Study of World Politics, and the research assistance of Olga Kilinsky Ramos and Cynthia Tournat. Throughout the research, I was privileged to have the guidance and encouragement of the late Carlos Díaz Alejandro.

References

Notes

1. The reliability of statistics on the Brazilian economy is somewhat questionable. Figures used here are derived from a variety of sources, and while they may not be ironclad, they are reasonably accurate. The single finest source on the Brazilian economy is Werner Baer, The Brazilian Economy: Growth and Development, 2d ed. (New York: Praeger, 1983). Other statistical sources include the Fundação Getúlio Vargas, as published monthly in Conjuntura Econômica; the Banco Central do Brasil, as published in its Boletim Mensal; and statistical series culled from various sources and divulged by the government think tank IPEA/INPES and by the Instituto de Economia Industrial of the Universidade Federal do Rio de Janiero in its Boletim de Conjuntura Industrial. Unless the data in question are particularly controversial, or they are drawn from a source other than those listed above, all basic economic data used in this chapter are the consensus figures from the above-mentioned sources.

2. Baer, Brazilian Economy, 84–86.

3. André Franco Montoro Filho, Moeda e Sistema Financeiro no Brasil (Rio de Janeiro: IPEA/INPES, 1982), 79.

4. For one survey and point of view, see Michael Wallerstein, “The Collapse of Democracy in Brazil,” LARR 15, no. 3 (1980):3–40.

5. André Lara Resende, “A Política Brasileira de Estabilização, 1963/1968,” Pesquisa e Planejamento Econômico 12, no. 3 (Dec. 1982):779–80.

6. For details of the financial reforms of the 1960s and the resulting new financial system, see Montoro Filho, Moeda e Sistema Financeiro, 93; Adroaldo Moura da Silva, “Intermediação Financeira” (mimeo, 1981), 9–28; Ernane Galveas, Evolução do Sistema Financeiro (Brasília: Ministério da Fazenda, 1981), 25–68; and Introdução ao Mercado de Capitais, edited by Hélio O. Portocarrero de Castro (Rio de Janeiro: Instituto Brasileiro de Mercado de Capitais, 1979).

7. Andrea Sandro Calabi, Gerald Dinu Reiss, and Paulo Mansur Levy, Geração de Poupanças e Estrutura de Capital das Empresas no Brasil (São Paulo: Instituto de Pesquisas Econômicas, Universidade de São Paulo, 1981), 166: Galveas, Evolução do Sistema Financeiro, tables 8 and 24; Moura da Silva, “Intermediação Financeira,” 29–43. Montoro Filho, Moeda e Sistema Financeiro, 104–8, presents two alternate series for the financing system's role in the financing of investment in the private sector between 1970 and 1974. The low series averages 28 percent of the total, the high series, 72 percent. If, as Montoro indicates, the true figures are somewhere in the middle, the average for the period would be 50 percent.

8. José Eduardo de Carvalho Pereira, Financiamento Externo e Crescimento Económico no Brasil, 1966/73 (Rio de Janeiro: IPEA/INPES, 1974), 93.

9. Figures on foreign and domestic savings supplied by IPEA, Grupo de Acompanhamento Conjuntural.

10. Philippe Reichstul and Luciano G. Coutinho, “Investimento Estatal, 1974–1980,” in Desenvolvimento Capitalista no Brasil 2, edited by Luiz Gonzaga M. Belluzzo and Renata Coutinho (São Paulo: Brasiliense, 1983), 45; and Secretaria de Controle de Empresas Estatais, Empresas Estatais no Brasil e o Controle da SEST (Brasília: Secretaria de Controle de Empresas Estatais, 1981), 8–9, 61.

11. Baer, Brazilian Economy, 180–81. The classic study of foreign direct investment in Brazil is Peter Evans's Dependent Development (Princeton: Princeton University Press, 1979). For an in-depth, if somewhat dated, study see Carlos von Doellinger and Leonardo C. Cavalcanti, Empresas Multinacionais na Indústria Brasileira (Rio de Janeiro: IPEA/INPES, 1974).

12. See, for example, Luiz A. Correa do Lago, Fernando Lopes de Almeida, and Beatriz M. F. de Lima, A Indústria Brasileira de Bens de Capital (Rio de Janeiro: Instituto Brasileiro de Economia, Fundação Getúlio Vargas, 1979), 233.

13. Indeed, major foreign borrowing began earlier: foreign debt rose from $3.3 billion in 1967 to $5.3 billion in 1970, while debt to foreign banks increased from $671 million to $2.3 billion. See Carvalho Pereira, Financiamento Externo, 96.

14. On Law 4131, see minutes of the Superintendência de Moeda y Crédito, 1043a Ata, 24 Oct. 1962, pp. 4–6; 1095a Ata, 11 Oct. 1963, pp. 57–150; and 1170a Ata, 8 Feb. 1965, pp. 22–36.

15. See Conselho Monetário Nacional minutes, 81a Ata, 17 Aug. 1967, pp. 7–8. For a good summary of the basic legislation, see Carvalho Pereira, Financiamento Externo, 17–44; and Eduardo A. Guimarães and Pedro Malán, A Opção entre Capital de Empréstimo e Capital de Risco, IPEA working paper no. 46, 54–74. An exhaustive work on various aspects of Brazil's financial internationalization is Mônica Baer's La internacionalización financiera en Brasil (Mexico City: ILET, 1983). The fourth part focuses on foreign borrowing.

16. See, for example, Edésio Fernandes Ferreira, “Administração da Dívida Pública e a Política Monetária no Brasil” (mimeo, 1974).

17. Mônica Baer, La internacionalización financiera, 48. For a detailed description of the process, see Elisa Muller, “A Saída dos Bancos Brasileiros para o Exterior” (mimeo, 1983).

18. Interview with Nuclebras officials, Rio de Janeiro, 31 Aug. 1982.

19. For figures on the parastatals, see Secretaria de Controle de Empreses Estatais (SEST), Relatório SEST 1981 (Brasília: SEST, 1982). Complementary information was provided in interviews with SEST officials in Brasilia, 10 Sept. 1982.

20. On the early years of Brazil's electric power industry, see Judith Tendler, Electric Power in Brazil (Cambridge, Mass.: Harvard University Press, 1968).

21. Except where otherwise noted, figures on the parastatals in this section come from SEST, Relatório SEST 1981; Reichstul and Coutinho, “Investimento Estatal”; Maria da Conceição Silva, A Dívida do Setor Público Brasileiro (Rio de Janeiro: IPEA/INPES, 1973), 88–98; José Carlos de Souza Braga, “Os Orçamentos Estatais e a Política Econômica,” in Desenvolvimento Capitalista no Brasil 1, edited by Luis Gonzaga de Mello Belluzzo and Renata Coutinho (São Paulo: Brasiliense, 1980); Thomas J. Trebat, “Uma Avaliação do Desempenho Económico de Grandes Empresas Estatais no Brasil, 1965/75,” Pesquisa e Planejamento Econômico 10, no. 3 (Dec. 1980):813–50; Thomas J. Trebat, Brazil's State-Owned Enterprises (Cambridge: Cambridge University Press, 1983); and information supplied by SEST For 1982 Eletrobras figures, see their annual report; on capital goods orders, see Correa do Lago et al., A Indústria Brasileira, 220–39; also my interview with officials in Eletrobras's Departamento de Recursos in Rio de Janeiro, 4 Oct. 1982.

22. The 1982 figures come from the group's annual report.

23. Luiz C. Bresser Pereira, Economia Brasileira (São Paulo: Brasiliense, 1982), 123; and Montoro Filho, Moeda y Sistema Financeira, 100–103, 170–75.

24. On the BNDES, see Annibal Villela and Werner Baer, O Setor Privado Nacional (Rio de Janeiro: IPEA/INPES, 1980), 51–107 and 133–37; Correa do Lago et al., A Indústria Brasileira, 389–405; Paulo Davidoff Cruz, “Notas sobre o Endividamento Externo Brasileiro nos Anos Setenta,” in Desenvolvimento Capitalista no Brasil 2, ed. by Belluzzo and Coutinho, 105; Revista do BNDE 1 (Jan.–June 1978); BNDES, Area de Planejamento, Boletim de Informação 1 (1981); and BNDES annual reports.

25. Wilson Suzigan, “Políticas de Promoção Industrial,” (mimeo, 1980), 15.

26. The private Banco Real has a foreign network much the same size as Banespa's, but it is found almost entirely in Latin America and focuses on trade finance.

27. Alvaro Antônio Zini Junior, “Características Qualitativas e Avaliação do Funcionamento do Setor Financeiro no Brasil” (mimeo, 1982), 6–11. See also Moura da Silva, “Intermediação Financeira,” and Galveas, Evolução do Sistema Financeiro.

28. Calculated from Calabi et al., Geração de Poupanças, 199–204.

29. Veja, 27 July 1983, 86. Other information on the financial sector came from the Banco Central do Brasil, the Associação Nacional dos Bancos de Investimento (ANBID), and interviews with officials of the following organizations: Banerj, Rio de Janeiro, 17 Sept. 1982; Banco de Investimento Garantia, Rio de Janeiro, 27 Aug. 1982; Unibanco, Rio de Janeiro, 30 Aug. 1982; Banco Lar Brasileiro, Rio de Janeiro, 2 Sept. 1982; Banco Finasa, Rio de Janeiro, 4 Oct. 1982; Banco Boavista, Rio de Janeiro, 5 Oct. 1982; and Banespa, São Paulo, 4 Aug. 1983.

30. Maria de Conceição Tavares and Luiz Gonzaga de Mello Belluzzo, “Notas sobre o Processo de Industrialização Recente no Brasil,” in Desenvolvimento Capitalista no Brasil 1, 128.

31. Correa do Lago et al., A Indústria Brasileira, 306–9.

32. Montoro Filho, Moeda e Sistema Financeiro, 197–203.

33. Visão, various issues, 1973–1985. For more on the question, see Villela and Baer, O Setor Privado Nacional; Mônica Baer, La internacionalización financeira, 173–237; and Maria Lucia Rangel Filardo, Fontes de Financiamento das Empresas no Brasil (Rio de Janeiro: BNDES, 1980).

34. On this subject, see Correa do Lago et al., A Indústria Brasileira, 220–33, 405–11.

35. For an analytical survey of the events, see Carlos Díaz Alejandro, “Some Aspects of the 1982–83 Brazilian Payments Crisis,” Brookings Papers on Economic Activity 2 (1983):515–42.

36. For details on this period, see Paulo Nogueira Batista Junior, Mito e Realidade na Dívida Externa Brasileira (Rio de Janeiro: Paz e Terra, 1983); Ernane Galveas, A Política Econômica-Financeira do Brasil (Brasilia: Banco Central do Brasil, 1982); Luciano Coutinho e Luiz Gonzaga de Mello Belluzzo, “Política Econômica: Infleções e Crise, 1974–1981,” in Desenvolvimento Capitalista no Brasil 1; and Antônio Carlos Lemgruber, “Política Cambial,” in Paulo Nogueira Batista Junior, Antônio Carlos B. Lemgruber, Roberto de Rezende Rocha, and José Maria Gouvéa Vieira, Ensaios sobre o Setor Externo da Economia Brasileira (Rio de Janeiro: Fundação Getúlio Vargas, 1981), 95–98. For a set of critical essays, see Dívida Externa, Recessão, e Ajuste Estrutural, edited by Pérsio Arida (Rio de Janeiro: Paz e Terra, 1982).

37. Galveas, A Política Econômico-Financeira, 38; Díaz Alejandro, “The 1982–83 Brazilian Payments Crisis,”; and Nogueira Batista Junior, Mito e Realidade, 102.

38. Galveas, A Política Econômico-Financeira, 30.

39. As cited in Senhor, 17 Aug. 1983, 25.

40. Ibid., 28.

41. Survey data taken from Exame, 10 Aug. 1983, 18–21.

42. Interview with official of Bardella-Indústria Mecánica, São Paulo, 22 Sept. 1982. On the interest-rate problem, see Nogueira Batista Junior, Mito e Realidade, 172–79; and Luiz Correa do Lago, “Taxa de Juros: Características e Opções,” Conjuntura Econômica 36, no. 2 (Feb. 1982):219–25.

43. Exame, 9 Mar. 1983, 16–20.

44. Senhor, 17 Aug. 1983.

45. It is sometimes asserted that had Neves lived, he would have been a far more conservative president than Sarney because Neves had a strong personal and party-machine base as well as fundamentally conservative political tendencies. Sarney's lack of personal political strength forced him to be especially responsive to the opposition's social bases. Although there may be some truth to this argument, it is hard to believe that Neves also would not have eventually distanced himself from the previous regime's international and domestic economic policies.

46. Angelo Jorge de Souza et al., “As Empresas e a Crise no Brasil,” Conjuntura Econômica 39, no. 2 (Feb. 1985):105–8.