THE MILITARY, THE MULTINATIONALS AND THE "MIRACLE": THE POLITICAL E C O N O M Y OF THE "BRAZILIAN MODEL" OF DEVELOPMENT PETER B. EVANS Brown University

military regime has achieved greater control over the T heeconomy than previous Brazilian governments ever enjoyed. "The military's tight grip on Brazil also extends to her economic policies," commented the N e w York Times (January 28, 1972), "Almost every sector of the economy is under tight control." Under the guidance of finance minister Delfim Neto, the state has become active in the economy in some new ways. In 1968 a new regulation was put into effect whereby only those banks charging less than 2 percent interest per month were allowed to open new branches. This had the effect of not only limiting the cost of financing for industrial firms but also of encouraging mergers among banks (Economist Intelligence Unit, 1968, 1st Quarter). The government has also been encouraging mergers among smaller industrial firms. Intervention in new areas is accompanied by increased effectiveness in more traditional areas of government activity. The income tax rolls are reported to have risen from 350,000 in 1964 to 7 million currently (Wall Street Journal, April 14, 1972). Stringent controls have been placed on wages and the rate of inflation has been cut. Despite the degree to which the state has become, under the military government, an even more formidable economic instrument than it was previously, little or no anxiety has been engendered in the private sector, either foreign or local. Building on the foundation laid by previous nationalists, the military regime has been able to maintain a strong state presence in the economy without appearing to be statist in its orientation. The post-1964 regime could pass laws favoring the private sector and be credited with having a proprivate enterprise ideology while still

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maintaining public institutions of great economic power like Petrobrfis and the BNDE (Banco Nacional de Desenvolvimento Econ6mico). When Medici announced his new four-year plan for social and economic development in 1970, he went out of his way to stress that the government wanted to strengthen private enterprise (New York Times, October 4, 1970). A local Brazilian retailer told the Wall Street Journal (April 14, 1972), "We invested $2 million more last year because we know that Delfim isn't going to do anything without consulting business." The friendly attitude of the government toward business is not just rhetoric. It is reflected in concrete economic policies, among them a willingness to divest some state enterprises. The Economist Intelligence Unit (1970, 1st Quarter) summarized the policy of the Medici government as follows: "The role of the private sector has been stressed and it is intended to hand over state holdings in the productive sectors of the economy to private companies if profitability can be insured." In 1967 a law was passed allowing for selling of state equity in mixed companies when there was an expectation that higher productivity would result. In 1968 the FNM (Fabrica Nacional de Motores) was the first casualty. The sale of the FNM to Alfa Romeo was seen as "precedent setting" by the international business community. As soon as it was sold, rumors started that the government might sell off other enterprises, including the National Steel Company. The military has also limited Petrobrfis' control over petroleum derivatives by allowing foreign firms to go into petrochemicals and by allowing Petroquisa, a subsidiary of Petrobr~is, to form partnerships for foreign firms. One of Castelo Branco's early decrees reversed earlier nationalist restrictions on the exploitation of mineral resources by foreign companies, opening the way for the Cleveland based Hanna Mining Corporation to set itself up as a major exporter of Brazil's high grade iron ore (Black and Goff, 1969). Under the military, the BNDE sold a major portion of its holdings in Usiminas (the state-owned steel company of Minas Gerais) to Japanese interests. Most recently the State of Guanabara sold its steel company to the Thyssen group of West Germany and a local group. Selling equity in state-owned firms to private corporations should not be taken simply as a retreat from public enterprise. Rather it has served to set up an organizational analog to the

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ideological coalition between the new Brazilian state and larger private enterprises. An example is Poliolefinas, a company set up in 1971 to manufacture polyethylene. Sharing in its ownership are Petrobr~is, through Petroquisa, National Distilleries (one of the largest manufacturers of beverages and chemicals in the United States), Petr61eo e Refinaria Uniao (the largest private Brazilian firm in the petroleum industry) and, indirectly, the Hanna Mining Corporation. Another similar case is the Cia. Brasileira de Estireno, which is shared by Petrobr~is and Koppers Co. EMBRAER is a third example. When the company was set up, private investors were not only allowed to purchase equity, they were given special tax credits if they did so (Economist Intelligence Unit, 1970, 2nd Quarter). The ideological position of the regime and tlae concrete coalitions of ownership that have been set up have helped generate support in the business community. As far as the practical question of profitability is concerned, the government's incentiveoriented approach to development has been more important. Increasing stringency of tax collection has been accompanied by an ever-growing list of investments which can be credited against tax payments. Investments in the Northeast, the Amazon or various approved projects are all good for up to one-half credit toward taxes. Tax breaks are also provided to anyone who exports, both on what they export and on their domestic operations. Having a stock that is negotiated on the stock exchange is also good for a substantial reduction (U.S. Dept. of Commerce, I967). A leading Brazilian businessman commented, "you practically get your investments free" (Wall Street Journal, April 14, 1972). The incentive-oriented developmental strategy benefits foreign companies above all. Foreign companies were less likely than local companies to have simply ignored fiscal regulations under earlier governments; consequently they are less hurt by increased effectiveness of taxation and price controls. Foreign companies are most likely to benefit from increased variety of tax incentives. Because they occupy the "commanding heights" of the economy and have international backing, they are most likely to export, to have negotiable stock, and so on. It is not surprising that in 1971 the rate of return on U.S. direct investments was higher in Brazil

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than in any other Latin American country with the exception of Panama. According to the Wall Street Journal (April 14, 1972), "An American manufacturing subsidiary in Sao Paulo says that the tax reductions it obtains on exports allow the concern either to cut its overseas prices by as much as 20% or to boost its profit margins on exports." In a broader vein, the restrictions on profit remittances enacted in the early sixties are gradually being rolled back "so as to offer investors from abroad more stability and easier remittances of profits" (Economist Intelligence Unit, 1970, 1st Quarter). The more nationalist wing within the army, of which General Alburquerque Lima was the best-known leader, has been kept under control. Editor H61io Fernandes was jailed for accusing the military of not "taking the lead in freeing Brazil from foreign economic oppression" (New York Times, August 26, 1971). Nationalism must remain focused on the World Cup, the Transamazonica and visions of Brazil's future greatness. It cannot be allowed to disturb relations with the international business community. The necessity of having good relations with the multinational corporations can be shown most clearly in the area of international finance. So far, the military regime has been very successful in attracting massive inflows of short-term and long-term capital. Not only has the amount of direct investment been increased by foreign firms' confidence that the Brazilian regime will protect their interest, but also loans from private banking groups in Europe and the United States. Delfim Neto, the only civilian in the cabinet, has been extremely successful in his peripatetic quest for loans and grants. The yearly rate of increase of long- and medium-term loans tripled between 1965 and 1969, reaching $780 million by 1969. The rate at which short-term liabilities were being undertaken increased almost eight times over, to a level of $388 million dollars a year (ECLA, 1970:98, 127). By the seventies, Brazil's cumulated foreign debt had surpassed the five billion dollar mark and the cost of servicing her foreign capital had reached almost one billion dollars a year. The total foreign debt is currently estimated to be in the neighborhood of seven billion dollars. Yet such levels of indebtedness create no anxiety among foreign creditors, and Delfim Neto stoutly maintains that foreigr

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financing and direct investment pose no threat to Brazil's control over her economy. Following Brazil's indebtedness a step further illustrates the symbiotic relation between the state and foreign companies. The positive attitude of foreign firms toward the Brazilian government makes it easier for Delfim Neto to get loans from foreign governments and international organizations. The loans received are, in turn, often of direct benefit to the international firms themselves. For example, in 1969 Brazil secured: a $6 million loan from the Import-Export Bank so that General Electric's wholly owned subsidiary in Brazil could build 80 electric locomotives; $5.5 million for the construction of a magnesium pellet plant by ICOMI (which is jointly owned by Bethlehem Steel and the Antunes group); and $18.6 million so that VASP (the airline of the State of Sao Paulo) could purchase six 737s from the Boeing Aircraft Company (Economist Intelligence Unit, 1969, 4th Quarter). Economically, the symbiosis of the military and the multinationals is elegant. It is characterized by a combination of specialization and integrating ties. The state provides entrepreneurship in the public sector and discipline among those who participate in the private sector. But it does not encroach on areas of profitable private investment and they do not threaten the principle of private enterprise on a cultural or ideological level. International firms provide the kind of capital and know-how necessary in the military's ambitions for national prestige and a modern economy. In return, the international firm enjoys a privileged and profitable place in the Brazilian economy. The multinationals enjoy a favorable, stable political environment without having to worry about participation in the political process. So long as they see Brazil as a "favorable investment climate," the multinationals will not question the military's prerogative to make policy. If reports of tortured political prisoners embarrassed the multinational managers, they were careful to keep their embarrassment to themselves. Nor are they likely to desire more direct access to the decision-making process. It is one of the characteristics of absentee owners that, in contrast to local economic elites, they are relatively uninterested in determining detailed day-to-day political decisions. 1 Given the generally favorable investment climate, international corporations have even been

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willing to tolerate certain political reversals. Foreign drug companies were unhappy with the patent law of 1970. Certain food processing companies in the United States were unhappy with Brazil's policy of not taxing instant coffee exports. Other American companies were unhappy with restrictions on their purchases of Amazon lands. None of these were more than minor inconveniences in the context of such a generally favorable set of government politics. Maintaining the stability of the regime is more important than minor increases in political control. Businessmen familiar with Latin America have not forgotten what happened when they failed to support Fulgencio Batista's struggle against what appeared to be a group of idealistic bourgeois reformers with guns. The National Bourgeoisie What about the national bourgeoisie? Denationalization has proceeded to the point where the independent economic power of the national bourgeoisie is extremely limited. But that is not to say that former independent owners and entrepreneurs face economic catastrophe. Brazilian entrepreneurs that are bought out are in a position no worse than an American entrepreneur whose company becomes a subdivision of a giant corporation. He has traded off his opportunity to exercise full entrepreneurial initiative for a diminished probability of bankruptcy. A large number of Brazilians have been absorbed into high level managerial positions within subsidiaries and consequently identify their own interests with those of foreign firms. Certain niches of the Brazilian economy are likely to persist as strongholds of local ownership. These are the same as the areas in which small businesses are found in the United States. As a survey by the Brazilian Association of Directors of Credit Investment and Finance Companies (ADECIF) shows, local ownership still prevails in retail trade and the service sector (Business Latin America, Feb. 18, 1971:50). Local ownership is also likely to prevail among small, marginal firms in manufacturing industries. In addition, the giant foreign-owned firms may find it profitable to have local ownership ancillary industries. In the auto parts industry, for example, 500 new auto parts factories, most of them locally

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owned, were created during the 1955-60 period when foreign manufacturers were getting their assembly operations going. The "economic miracle" has created numerous lucrative opportunities in the interstices of commerce and industry for anyone with capital to invest or highly prized skills to sell. The Rio de Janeiro stock exchange is an obvious example of the kind of opportunities that are available. Despite an 18-month old "bear" market, the share price index on the Rio exchange was still 16 times higher than it had been in mid-1965; with such profitable opportunities available the entrepreneur whose firm has been "denationalized" is unlikely to complain. Another example is consulting firms like Simonsen Associados and Almeida Prado y Ferraz: such firms have recently been doing a brisk business finding good acquisition possibilities in Brazil for foreign firms. The successful symbiosis of the state and foreign firms leaves plenty of room for the national bourgeoisie. They are the essential intermediaries, the lubricant that keeps the gears of the new coalition meshing smoothly, the cadres that staff both subsidiaries and state bureaucracies. The fact that these roles are not the classic entrepreneurial ones associated with the industrial revolution in England does not make them any less profitable or comfortable for the men who fill them. Lack of economic discomfort provides one explanation for the failure of the industrial bourgeoisie to seek political means of counteracting the economic power of the multinational corporation. The political history of industrialization in Brazil reinforces the tendency toward quiescence. Local industrialists never experienced a period of unchallenged political hegemony. Before the ascension of foreign firms, they had to share power with the primary producers of the export sector. The industrial bourgeoisie is also accustomed to looking upon the state as a semiautonomous institution, central to society and more powerful than they themselves. In a survey of a sample of Brazilian industrialists, Luciano Martins found that the state was judged in retrospect to have been the most powerful institution of the Kubitschek era and was still considered the most powerful institution (aside from the military itself) during the military regime. In the same survey, respondents were asked to judge the relative power of various social groups during the Kubitschek era and the

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Table 1 Relative Power of Social Groups as Perceived by Brazilian Industrialists in the Mid-Sixties Kubitschek Period Social Group Military Large industrialist s Bureaucrats Bankers Politicians Workers

Relative Power* t 00 72 51 34 14 12

Military Regime (1964-66) Social Relative Group Power* Military Large industrialist s Bureaucrats Bankers Politicians Workers

100 34 34 33 26 0

Source: Adapted from Martins (1968, Table 21:133).

*"Relative power" is an index number based on the discrepancy between the top ranked group and lower ranked groups. It is based on the extent to which the sample of 50 "large industrialists" ranked a group as powerful. It is more an ordinal scale than an interval one.

initial years of the military regime. The results shown in Table 1 below are interesting mainly because they illustrate the degree to which industrialists perceive their position under the two regimes as similar. In both regimes they saw others as more powerful: first, the politicians, then, the military. It is true that they saw themselves as more powerful in the Kubitschek period, but only because the military has monopolized power more effectively than the politicians were able to. In each case, they have felt unable to defend their interests without the support of a politically more powerful group and it must be remembered that, during the Kubitschek era, their cries that they were being discriminated against in favor of foreign firms fell on deaf ears. For the local industrialist, his feelings of political impotence under the current regime represent a change of degree, not of kind. If the bourgeoisie as an autonomous entrepreneurial class is politically impotent, individual members of the civilian elite are far from it. Brazil is not run from the barracks. Most of those who make the day-to-day decisions are civilians. Even longer-range policy is probably formulated in large part by civilians. These decision-makers must operate within the limits of a military conception of "national order," just as the military must take care

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to maintain a "favorable investment climate." But, within the limits that are defined by the military and the multinational corporations, civilian technocrats formulate the strategy and tactics of the economic miracle. In some ways the technocrats are less constrained than they would be in a "bourgeois democracy." Lewis Beman (1972) commented somewhat wistfully: "Delfim and his colleagues can operate virtually free of the political and institutional constraints that bedevil their counterparts elsewhere . . . any new measures they propose become law automatically on the President's signature." The sector of the elite that has lost most power since the coup is not the urban "middle class," but the parochial powerholders of the smaller towns and rural areas. The new regime has only marginal need for the votes a rural coronel can deliver. As increasing proportions of tax revenues go to the federal government, there is less patronage for local bosses to dispense. Insofar as it has diminished the power of their rural competitors, the military regime might even be counted as something of a political blessing for the urban bourgeoisie. It has virtually eliminated the problem of political pressure from below. The emasculation of electoral politics, centralization of power and suppression of opponents that characterized the revolution from above in both European and dependent versions has been obvious in Brazil's military regime from the very beginning (Blume, 1967-68; Stepan, 1971; Schneider, 1971; Steiner and Tubek, 1971). The disbanding of political parties, cashiering of politicians and revision of the laws to concentrate power in the executive began immediately. Brazilians have had to learn to live with censorship of the news media, imprisonment of dissident journalists, repression of legislators and judges, mass arrests of suspected "subversives," shootings of demonstrators and torture of political prisoners. 2 Repression and the concentration of legal prerogatives have been complemented by a redirection of public revenues toward the center. In 1969 the amount of revenues turned over by the federal government to states and municipalities was reduced from 20 to 12 percent (Economist Intelligence Unit, 1969, 2nd Quarter). Given the relative economic success of the regime and the relatively comfortable position of the national bourgeoisie, such measures might seem excessive and unnecessary. A closer look at

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the position of the mass of the Brazilian population makes the function of repressive measures clearer. The 80 Million For vast numbers of Brazilians, the "economic miracle" might as well be occurring in a foreign country. Brazil is still a country with a per capita GNP of less than $400. The conditions of life for most people in Brazil are more closely tied to this fact than to increases in the output of automobiles. Among the countries of South America, Brazil, as of 1960, had one of the highest rates of illiteracy. While Argentina reported 91 percent literate and Chile 83 percent, Brazil reported only 60 percent. The same kind of discrepancy is found at higher levels of education. Brazil had, in 1967, only 251 students in higher education per 100,000 population compared to 1,135 for Argentina and 625 for Chile (Ruddle and Hamour, 1 9 7 0 : 1 1 9 , 121). A look at aggregate health-related measures produces the same contrast. Brazil has a rate of infant mortality almost double that of Argentina, Cuba or Mexico (America en Cifras, 1970). The number of hospital beds per capita in Brazil is 50 percent less than in Chile and less than one-half the figure for Argentina (Harbison et al., 1970: Appendix A). More disturbing than the average levels of welfare for the country as a whole is the extreme degree of inequality that characterizes Brazil. A study by ECLA (1970:366) based on data from the early sixties showed Brazil to be characterized by a higher degree of inequality than any other Latin American country. The most striking feature of this inequality is the amount of the national income accruing to the most affluent 5 percent of the population. In the United States the top 5 percent of the population received in the neighborhood of 20 percent of the total income, compared to 15 percent in a more egalitarian country like Norway. In less egalitarian Latin American countries like Argentina or Mexico, the top 5 percent receive about 30 percent. But in Brazil, the top 5 percent receive almost 40 percent of the total income. Applying this distribution to current population figures, Brazil's roughly 100 million people can be divided into three groups: a tiny developed country of 5 million people with a level of consumption equal to that of the average European; a surrounding

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society of 15 million, living at the standard of the rich underdeveloped countries; and a vast nation of 80 million people subsisting on a standard of living that is among the lowest in Latin America. The Brazilian social structure joins together a "Belgium" and an "India," with the former nestled comfortably inside of the misery of the latter (ECLA, 1970:258). A little over half the 80 million are engaged in agriculture, yet roughly 38 million of them are poor despite having escaped from agriculture. Of the 5 million, only one in eight remains in agriculture. Almost the entire population (95 percent) of the Northeast are among the 80 million; yet the majority of the 80 million live in the more prosperous regions of the South and East (ECLA, 1970: 389-90). When the picture of inequality drawn for the early sixties is combined with the apparent trends in income distribution under the military, the prospects for the 80 million look bleak. Delfim Neto is reported to believe that "to grow is to concentrate." This has certainly been the direction of Brazil's developmental strategy in practice. ECLA figures show the average real wage in manufacturing dropping 9 percent between 1964 and 1969 and the minimum average real wage dropping by 20 percent. According to ECLA (1970:126) the 1969 minimum wage levels represented "the lowest real level since 1953." The military regime is proud of the "tough" wages policy that brought down the minimum income. 3 It is viewed as successful because of its effectiveness in limiting inflation. As compensation to wage earners, the regime passed the Program of Social Integration, a typical corporatist answer to workers' economic difficulties. It provides funds for recreational facilities, trade union conferences, scholarships and loans to workers. It got support from trade union leadership for whom it provides potential sources of patronage, but it is hardly a cure for declining incomes. The combined effects of incentives for the affluent and restraints for the wage earners can be seen in the changes in income distribution between 1960 and 1970. The main beneficiaries of the "Brazilian model" have been in the uppermost income brackets (Fishlow, 1972, Tables 1, 5; Opiniao, 1972: 12). Policies with respect to landholdings parallel those in the area of wages and incomes. In the mid-sixties the Inter-American Corn-

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mittee for Agricultural Development reported that Brazil had a higher proportion of landless agricultural workers than any other country studied (Barraclough and Domike, 1966:397). There are no obvious barriers to the redistribution o f land. The military extracted the appropriate laws from the legislature long ago; the latifundistas have no basis for substantial political power. Yet redistribution o f land, which could improve rural living standards and productivity at the same time, is given low priority. Instead the regime has concentrated on moving a few selected settlers to populate "colonies" along the Transamazon highway and on providing incentives to large farmers. ECLA (1970:123) reports "Brazil's agricultural policy is basically one of incentives, which include tax exemptions on agricultural inputs, especially sales o f tractors." This may be a boon to would-be agrarian capitalists and to American subsidiaries trying to increase tractor sales. But for landless rural laborers in areas like the Northeast, where joblessness and u n d e r e m p l o y m e n t are estimated to affect 30 percent o f the work force, mechanization is a perverse solution. The fruits of Brazil's progress are for the 5 million. Trends in the area of consumption reflect the increasing concentration o f income. In the automobile industry, for example: There was increased competition between new models when Ford, Chrysler, and General Motors started producing passenger cars in Brazil, the first manufacturing medium-sized models and all three building luxury cars. As a result there was a decline in the production of small cars... (ECLA, 1970:124). Looking at the consumption of the 5 million at the end o f 1971, an American journalist (New York Times, December 3, 1971) discovered "a new consumer's way of life modeled directly on the 'American way.' .... Just this year," he reported, "Brazilian industry, under American patents has introduced such novelties as canned beer, throwaway plastic containers and frozen dinner's aluminum foil plates." The production o f TV dinners can be only an insulting addition to the evidence o f their relative poverty as far as the 80 million are concerned. The local production of 80,000 color television sets costing over $1,000 apiece seems almost macabre. New consumption patterns complement increasing foreign ownership of industry. The greater the success of foreign firms in

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creating a group of elite Brazilians with consumer tastes similar to those found in the United States and Western Europe, the easier it becomes for them to transfer products from their home markets to Brazil and the greater their advantage over local firms. Such products may be wasteful luxuries from the point of view of the 80 million. Their production may use resources that might otherwise be used to provide necessities for the 80 million. But the 80 million are not making decisions. Production of necessities is less likely to involve the new technology that is an increasingly important source of profits to foreign firms. It is more profitable to cater to the needs of the elite. The importation of technology that comes with the domination of the modern sectors of the economy hits also at the earning power of the 80 million. Imported techniques of production, sometimes embodied concretely in the form of used machinery from the parent company, mean levels of capital intensity designed for the high-cost labor markets of the United States or Western Europe. The consequence in Brazil is a swelling of the ranks of the urban marginals and a bloated service sector. The 80 million are excluded from the "miracle" as producers just as they are excluded as consumers. Denationalization also reinforces the political attitudes that justify the exclusion of the 80 million. An interesting reanalysis of the survey discussed earlier (Table 1) showed that entrepreneurs in locally owned firms, even after the advent of the military government, had political attitudes quite different from industrialists tied to international firms (Faria, 1969). Asked what groups must be included in a political coalition in order for society to function, the majority of the local entrepreneurs were in favor of including workers. Internationally linked industrialists favored alliances between different elite groups, excluding workers. If these results can be extrapolated, they suggest that as foreign control of the economy increases, the political participation of the 80 million will be taken less and less seriously. The lack of elite support for a vertical alliance that might unite nationalist industrialists and urban workers is an important obstacle to the organization of opposition to the regime. The collapse of the Goulart regime signified, in part, that the national bourgeoisie had decided that the combination of militarism and imperialism was easier to live with than the specter of socialism

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and redistribution. Since then the 80 million have been left with few allies among the "middle class." The state-sponsored origins and corporatist history of the Brazilian labor movement (Schmitter, 1971:110-31, 178-94) make it an unlikely alternative source of organizational focus. Unreserved and systematic repression of "subversive" political elements makes the spontaneous emergence of new organizational foci unlikely. Such negative strategies, used in combination with substantial efforts to convince the 80 million that they participate spiritually or symbolically if not materially in Brazil's growing national productivity, serve to make the political exclusion of the 80 million as thorough as their economic exclusion. A Modern but Dependent Revolution from Above The Brazilian model provides a good illustration of the requirements of the revolution from above when executed on the periphery. From the point of view of its own elite, it is a very successful example of the collaboration of authoritarian politics and foreign capital. It seems to have several significant advantages over previous attempts, for example Witte's Russia (Von Laue, 1963; Wolf, 1969) or Kuomintang China in the twenties (Moore, 1967). To see clearly the novel elements of the Brazilian model and the features it shares with previous attempts, a point of comparison is needed. The best is Latin America's earliest successful practitioner of the revolution from above, Porfirio Diaz. Such comparative analysis should also help to bring out the strengths and weaknesses of the particular coalition and strategy that have evolved in Brazil. Like the current Brazilian regime, the Porfiriato got a very good press in North America. U.S. Secretary of State Elihu Root said in 1908, "It has seemed to me that of all men now living, General Porfirio Diaz of Mexico was the best worth seeing . . . . If I were a poet, I would write poetic eulogies. If I were a musician I would write triumphal m a r c h e s . . . " (quoted in Rippy, 1969:216). The Porfiriato also performed well by the sort of indicators used to show the success of the current Brazilian regime. By 1910 exports were two and one-half times what they had been in 1890; the increase in the output of Mexico's mines was of a similar

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magnitude. Railroad mileage increased 30 times over during the Porfiriato, and the output of cotton textiles increased by 400 percent (Vernon, 1965:39, 47). Like the Brazilian military, Diaz came to power after attempts to install liberal parliamentary rule had succeeded in producing little but anarchy and stagnation. Repression was used remorselessly wherever Diaz felt it necessary, and the state bureaucracy was expanded under his rule to the point of employing roughly three-fourths of the middle class (Wolf, 1969:15). Diaz relied on foreign capital to a degree which "has very few parallels in the history of modern states" (Vernon, 1965:42). Foreigners owned the mines and built the railroad. By the end of the Porfiriato foreigners owne one-seventh of Mexico's land surface and controlled two-thirds of the gross investment outside of agriculture and handicraft industries (Cockcroft, 1971:48-58; Vernon, 1965:42-45). Diaz even had technocrats: his "scientists" advocated closer ties to Europe and the United States and the obliteration of indigenous Indian culture. If the Porfiriato performed brilliantly by certain indicators, it shares with contemporary Brazil weaknesses in the areas most closely linked to the welfare of the populace. The inequality of land distribution increased dramatically under Diz. By the end of his regime it was estimated that four out of five rural families were without land (Vernon, 1965:49). The production of maize, the staple crop most important to the peasant's diet, dropped by 50 percent on a per capita basis between 1877 and 1907 (Wolf, 1969:19). The price of maize rose steadily but wages did not increase, leaving the average peasant more miserable after 35 years of "order and progress" than he had been under the preceding liberal anarchy. The strong family resemblance between the Porfiriato and the current Brazilian regime should not be allowed to obscure the fact that the Brazilian regime is a significantly more modern version of the revolution from above. Unlike its personalistic and sometimes backward-looking predecessors, the Brazilian version is bureaucratic, efficient and without romantic attachment to the feudal traditions of the past. The minimal role of large, semifeudal landholders in the Brazilian version is an important sign of its modernity. The haeendados were a central pillar of Diaz's political

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coalition; the fazendeiros are very marginal to the Brazilian one. The problems of trying to create a modern industrial structure when your primary allies are reactionary landholders are obvious (Moore, 1967). Excluding rural powerholders allows the Brazilian coalition to be, in some areas, more progressive. The transformation of the nature of foreign investment since the days of the Porfiriato also helps make the Brazilian version more modern. As long as foreign investors were mainly engaged in the production of primary products for export, there were clear contradictions between their interests and those of more nationalist elements within the local coalition. Now that foreign capital has begun to invest in manufacturing, such contradictions have become more subtle. The limits placed on development at the periphery by contemporary imperialism as less constricting: international capital is easier for local elites to coexist with. A third indication of the modernity of the Brazilian version is the impersonal bureaucratic nature of the current ruling elite. Moore (1967:440) has commented that one of the characteristics of the conservative "revolution from above" is the importance of individual political leaders (Louis Bonaparte, Bismarck, Dfaz, etc.). In Brazil princely charisma, as well as feudal agrarianism, has been stripped away from the revolution from above. There were no individual "heroes" in the revolution of 1964. It is the military that rules, rather than an individual general. The military, the ministries and the multinational corporations are all typical bureaucracies. The men making the decisions inside them are aptly described as technocrats. In Brazil diverse elite groups have been welded together around a general interest in keeping redistribution to a minimum and industrial growth at a maximum. The strategy requires authoritarian controls on politics and increased economic integration with the capitalist West. The classic development paradigm of indigenous private entrepreneurship combined with pluralistic parliamentary rule has been sucessfully abandoned. In its place there is a new paradigm: repressive military leadership combined with technocratic decision-making in the political sphere; state entrepreneurship and discipline combined with liberal capitalist incentives in the economic sphere; and emphasis of nationalist symbolism combined with openness to international corporations in the

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sphere of external relations. The apparently contradictory elements mesh well in practice. It is not a regime that will be easily unseated. The attractiveness of the Brazilian model to the elites of other Third World countries is apparent, especially if they are willing to discount negative welfare effects as temporary or of secondary importance. Few are likely to replicate the "economic miracle." The scale of Brazil's domestic market and her vast natural resources have been paramount in enticing the participation of the multinationals. With 100 million people Brazil can muster 5 to 10 million consumers even under conditions of extreme inequality. Bolivia or Greece can offer no such attractions. In addition, a certain minimal level of development is necessary in order to provide the state apparatus and a class of technocrats that can bargain with and service the multinationals. Even for Brazil, with all its advantages, the model contains serious potential contradictions. The single most important element in the economic performance that underlies the political stability of the regime has been Brazil's success in tying its economic growth to the burgeoning strength of international corporations. The very success of its attempts makes it vulnerable to shifts in its external environment. To begin with it must keep turning over its massive external debt. Any weakening of its good credit rating would be disastrous. Brazil must continue to attract new investment and persuade subsidiaries to reinvest sizable proportions of their profits locally. Sharply rising demands for imports must be counterbalanced by rising exports. Since a sizable proportion of the growth in exports can be attributed to the products of multinational firms, Brazil is in the curious position of asking foreign firms to be the instruments of its nationalist, expansionist goals. International firms may well be willing to develop the export capacities of their Brazilian subsidiaries at the expense of their subsisdiaries in Argentina, Uruguay or Columbia. Such "junior partner" or subimperialism kind of economic success is not only plausible but may already be occurring (Marini, 1972). But what about the markets currently served from home bases of the international firms? Markets currently supplied by metropolitan factories are more important both as sources of potential growth and as sources of potential conflict. What will be the

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response of unemployed Detroit autoworkers, or the leadership of the UAW (United Automobile Workers) to the arrival of Ford's projected 200,000 Pinto engines from Brazil? If political pressures make multinationals reluctant to export back into their home markets, what happens to the capacity they have developed in Brazil? Such conflicts will materialize only if the developed countries themselves are faced with trade deficits and unemployment. Nonetheless, they serve to illustrate the potential difficulties that lie in the path of a country trying to use foreign-based organizations to achieve national ends. Could post-Meiji Japan have succeeded if its industry were owned by General Motors and Dupont, rather than Mitsubishi and M,itsui? The current Brazilian coalition derives its strength from the nature of its international connections. Like its strength, future crises of the current regime may have their origins in London or Detroit. When development depends on combining the revolution from above with international capitalism, such vulnerability to external events is unavoidable. Given an external catalyst, internal tensions could easily become explosive.

NOTES 1. The best exposition of the disinterest of absentee owners in the day-to-day conflicts of local politics is Schultze's (1961) study of Ypsilanti, Michigan under local and absentee economic elites. Hirschman (1969) has argued that the same disinterest holds true for internationally absentee owners and Schmitter (1971:371) has commented on the "cautious absence" of powerful foreign firms from the "interest associational structure" in Brazil. 2. Repression was most pronounced and dramatic in the period from 1968-71. One of President Medici's aides commented on this period that "it was a dirty war as every police war is a dirty war" (Beman, 1972:176). Readers interested in the repression as chronicled from a distance by the N e w York Times are referred to the following 28 articles: January 8, 1967:14; March 30, 1968:3; April 4, 1968; June 22, 1968:1; June 24, 1968:29; August 7, 1968:12; August 30, 1968:16; October 4, 1968:12; October 13, 1968:4; October 14, 1968:10; December 19, 1968:12; January 16, 1969:39; February 9, 1969:24; February 27, 1969:5; May 6, 1969:9; June 16, 1969:55; December 8, 1969:18; January 2, 1970:10; March 20, 1970:16; November 4, 1970: 3; November 7, 1970:6; February 2, 1971:4;July 11, 1971:6; August 8, 1971, Section IV:l; August 13, 1971:2, 5; August 14, 1971:22; May 7, 1972:10. 3. The military regime has not been "correcting" for previously excessive increases in wages. Bergsman (1970:59) reports that from 1955 to 1962, real wages rose at only 0.9% a year while productivity was rising at 6.1% a year. ECLA (1964:169) using 1952/100 as a base, found the minimum wage falling from a peak of 146 in 1956 to 120 in 1963. If the trends during the years prior to the military called for a correction, it was in the direction of increased incomes for wage earners.

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COMPARATIVE INTERNATIONAL DEVELOPMENT REFERENCES

BARRACLOUGH, SOLON, and ARTHUR DOMIKE 1966 "Agrarian Structure in Seven Latin American Countries." Land Economics 42 (November): 391-424. BEMAN, LEWIS 1972 "How the Brazilians Manage Their Boom." Fortune 86 (December): 110-14. BERGSMAN, JOEL 1970 Brazil: Industrialization and Trade Policies. New York: Oxford University Press. BLACK, EDIE, and FRED GOFF 1969 'q'he Hanna Industrial Complex." New York: North American Congress on Latin America. BLUME, NORMAN 1967-68 "Pressure Groups and Decision-Making in Brazil." Studies in Comparative International Development 3 (no. 11): 205-23. COCKCROFT, JAMES D. 1971 "Social and Economic Structure of the Porfiriato, 1877-1911." In James Cockcroft et al. (eds.), Dependence and Underdevelopment: Latin America's Political Economy. Garden City, N.Y.: DoubledayAnchor. ECLA (Economic Commission for Latin America) 1964 "Fifteen Years of Economic Policy in Brazil." Economic Bulletin for Latin America 9 (December). 1970 Economic Survey of Latin America, 1969. New York: United Nations. Economist Intelligence Unit, Ltd. 1968-71 Quarterly Economic Review: Brazil. London: 2nd Annual Supplements. FARIA, VILMAR 1969 "Dependencia e Ideologla Empresarial." Mexico City: paper presented at the 9th Latin American Congress of Sociology (November 1969). FISHLOW, ALBERT 1972 "Brazilian Size Distribution of Income." American Economic Review 62 (May):391-402. HARBISON, FREDERICK H., et al. 1970 Quantitative Analyses of Modernization and Development. Princeton, N.J.: Princeton University, Industrial Relations Section. HIRSCHMAN, ALFRED O. 1969 "How to Divest in Latin America and Why?" Essays in International Finance no. 76. Princeton, N.J.: Princeton University Press. MARINI, RUY MAURO 1972 "Brazilian Sub-Imperialism." Monthly Review 23 (February):14-24. MARTINS, LUCIANO 196g~ Industrializa~ao, Burguesia Nacional e Desenvolvimento. Rio de Janeiro: Editora Saga. MOORE, BARRINGTON, Jr. 1967 Social Origins of Dictatorship and Democracy. Boston: Beacon Press. Opiniao 1972 No. 4 (November 24). Original work by J.C. Duarte, cited in Mario Henrique Simonsen, Brasil 2002. Rio de Janeiro: Editora APEC-Bloch. 1972. RIPPY, J. FRED 1969 Latin America: A Modern History. Ann Arbor: University of Michigan Press. RUDDLE, KENNETH, and MUKHAR HAMOUR 1970 Statistical Abstract of Latin America. Los Angeles: University of California at Los Angeles, Latin American Center.

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SCHMITTER, PHILIPPE 1971 Interest Conflict and Political Change In Brazil. Stanford: Stanford University Press. SCHNEIDER, RONALD 1971 The Brazilian Political System. New York: Columbia University Press. SCHULTZE, R.O. 1961 "Tile Bifurcation of Power in a Satellite City." In Morris Janowitz (ed.), Community Political Systems. Glencoe, Ili.: The Free Press. STEINER, HJ., and D.M. TUBEK 1971 "All Power to the Generals." Foreign Affairs 49 (April):464-79. STEPAN, ALFRED 1971 The Military in Politics: Changing Patterns in Brazil. Princeton, N.J.: Princeton University Press. U~S. Department of Commerce 1967 "Brazilian Income Tax Legislation." Washington, D.C.: U.S. Government Printing Office, OBR-67-26. WOLF, ERIC 1969 Peasant Wars of the Twentieth Century. New York: Harper and Row. VERNON, RAYMOND 1965 The Dilemma of Mexico's Development. Cambridge: Harvard University Press. VON LAUE, T.H. 1963 Sergei Witte and the Industrialization of Russia. New York: Columbia University Press.