The Unchanging Core of Brazilian State Capitalism, 1985-2015

Amidst the current economic crisis in Brazil, it is often forgotten that the structure of the Brazilian economy, and especially the strong role of the state as an economic actor, predates the Workers’ Party administrations (2003-present) and has been a fixture of the democratic regime. This paper describes the basic mechanics of state capitalism under democracy in Brazil, and the powerful tools that it offers to policymakers, as well as the equally important constraints that inhibit change. The paper advances two central arguments. The first is that state capitalism in Brazil is much broader than the state’s role in business alone. State capitalism is not merely, or even centrally, about the degree to which the state owns firms. Indeed, it is the very breadth of the state’s role across multiple dimensions of the economy that has helped to sustain state capitalism against challengers. The second argument is that the interlocking aspects of these dimensions help to explain their continuity overall, even under democracy: linkages and mutually supporting ties between macro level policies, between fiscally oblique instruments in micro policies, and between taxation, labor, pension and social policies.