Volume 43, Number 171,
October-December 2012
Structural Limits on Economic Development:
Brazil (1950-2005)
Bibiana Medialdea

Figure 4. Personal Distribution of Income: 1976 — 2005 (% of total income)

Source: ipea Data (Social Studies Directory) calculated based on the Pesquisa Nacional por Amostra de Domicílios prepared by the ibge. Can be consulted at the portal: http://www.ipeadata.gov.br/.

First, landholders, who hegemonized the primary export model, were relegated as a capitalist faction as industrialization driven by the isi strategy advanced. Some families of landowners kept some presence in the Agriculture-Food sector (soy, red meat, coffee, sugar cane, cotton) and natural resources. In any event, these industrial activities, oriented towards exporting, maintained a weak connection with the whole of the industrial fabric.

National companies, the so-called “weak leg of the tripod,” have always played a subsidiary role in the country’s industrial dynamics, focusing on traditional productive and commercial activities and in activities to supply foreign companies. Since the end of the 1970s, with a high level of foreign penetration in the industrial sector, control of national capital has been concentrated in the branches of clothing and footwear, food and drinks, editing and graphics activities and furnishings (Gonçalves, 1999: 116-118). This type of massive consumer good is the only profitable productive segment that Brazilian capital has been able to access. The more sophisticated market of consumer goods is controlled by foreign companies, while the precarious nature of the productive structure means that there is an inexistence of sufficient profitability in the production of capital goods. Likewise, the production of intermediate goods and basic services is mainly carried out through state enterprises, and later passes into the hands of foreign capital through privatizations. As a consequence, their specialization in a segment with low levels of capitalization and technological dynamism, and whose growth potential is limited by the meager purchasing power of the majority of the population, results in limited levels of investment and generates scarce demand for production goods.

Thirdly, national financial capital does not play a main role until the 1980s. Until then, the State, through productive state enterprises and the state bank, assumes the main role in the industrialization process. Starting with the external debt crisis in a context of adjustment policies, the private banking sector begins to form. This sector is born with a high propensity for profits that feed the financial business and make possible indexed debt bonds issued by the state. In the 1990s, in a context of financial liberalization, a monetary policy favorable to creditors, privatizations and a massive injection of foreign capital, this capitalist faction is definitively consolidated, and its contribution to business financing and private consumption is rather low (Medialdea, 2010).

Finally, international capital has participated more and more in the country’s economic dynamics over time. Since the 1970s, it has controlled the production of a large part of durable consumer goods, that is, the products for which there is the highest demand, which allows for important profits and stimulates investing dynamics. In this way, although foreign capital expatriated a large amount of profits earned, it also made considerable reinvestments and with this, favored growth in investment and production, up through the end of the 1970s. However, following the collapse of the isi strategy, reinvestment of the profits obtained by foreign capital in the country notably fell. Motivation to invest once again improved in the 1990s, thanks to the new context of liberalization, external opening and large privatizations in attractive sectors.

To summarize, the position that different types of businesses have in economic activity became an unfavorable factor for sustained investment growth, and, as such, for the transformation of productive specialization, greater technological progress, an increase in productivity and other features that require the accumulation dynamics of a more developed economy. That is why when the State (which sustained the growth recorded between 1950 and 1980) was removed from economic activity, different groups of foreign and national capital ended up holding, to various degrees, the economic power and maintaining a weak investment dynamic.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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