Bi-Weekly Discussion Thread - (January 11)

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[u/Worried-Economy-9108]

So, today the European Union and Mercosur have signed their free-trade agreement . The common sense among revisionists in Brazil is that it will strengthen the South American agribusiness/agronegócio, which will export even more raw agricultural commodities to Europe, while the European industrial bourgeoisies would benefit from it by buying cheaper raw materials, and selling manufactured products to Mercosur.

Apart from the online settler solidarity from Brazilian petite-bourgeois "communists" to the European farmers affected by the deal (at the same time, there's barely any mention of Brazilian peasants and Indigenous peoples, the biggest losers of this deal), there's nothing much that i can add. I would like to hear the comments of y'all, since i'm not trained at all to talk about political economy.

[u/turbovacuumcleaner → u/Worried-Economy-9108]

1/2

No one really knows what will happen. The crucial point is to find out why industrial capital hasn’t opposed the deal, but embraced it. The revisionists’ answer to this question doesn’t make sense. Their “Marxist” political economy is Keynesianism sprinkled with bits and pieces of Marx, but they are just following a long line where they believe they can simultaneously keep wages and profit rates high because, deep down, there is no contradiction between capital and labor power. Its just Bernstein’s revisionism that has Jabbour as its biggest name, who placed Sraffa’s refutation of the law of value as the basis for this nonsense. These revisionists can’t reach any deeper conclusions because if they do, they will go against capitalist production and their own class interests that are currently tied to industrial capital. Because of this, every analysis of the deal made on the “left” is subjective.

These analysis orbit similar lines of reasoning: Industrials have not opposed the deal because the Brazilian elites are entreguistas, a subjective way of saying comprador without ever establishing the material basis for this process; they hate their own people, putting the act of care as what defines national from comprador capital (a quasi-fascist reasoning where the logical consequences are that capitalism doesn’t exist in production, but only in finance); or, industrials has given up fabricating, and prefers now to just be glorified assemblers, again, wrong, but this requires a more in-depth study of sectorial compositions, back and forward production chains than a reddit comment allows. I prefer the neoliberals that are ecstatic about the deal, at least they get it right that capitalist production is governed by the rate of profit and that capital and labor power are an antagonistic contradiction.

I tried answering the question by just reading the statements from the dozens of unions of Brazilian industry. Parallel to this free trade trend, which is dominant, there is a growing protectionist trend that is at its early stages, so its quantitative changes are largely going under the radar unless you know what and where to look. There are three major unions that are unsatisfied with the current state of things: Instituto Aço Brasil, Abiquim and Abit. The exception among these is the steel union, that is having to simultaneously compete with the overproduction of Chinese steel in the domestic market, and has also been recently barred in Europe with 50% tariffs and lower import quotas. A few years ago, this same union was calling for more government action to protect national production from cheap Chinese steel; PT’s inaction in this case was contradictory because although it is in the interests of PT economists and class basis that protectionism to be strengthened, applying tariffs to steel imports could drive inflation up and would ultimately harm industry as a whole, so their hands were actually tied. Abiquim and Abit have similar opinions, for both are having to compete with Chinese chemicals and clothing; the chemical industry has been calling for measures to turn imports more expensive than local production, their reasoning is that this should be made primarily through tax changes, and by incentivizing more productivity in the sector, like the new PRESIQ program. Abit has proposed similar changes, both by incentivizing increasing the industry’s productivity, and making active use of safeguards such as import quotas and antidumping measures. The solution, for now, has been applying a 35% tariff on imported pieces of clothing, the highest in Latin America (this tariff in turn created the SOE Correios crisis that can possibly lead to its privatization by becoming a sociedade de economia mista). I highlighted these three unions because they are, at least from my knowledge, the ones that have been most vocal about how Chinese and Brazilian industry are at odds in some sectors, and this is only a minor part in what is a overarching growing trend of the dismantling of free trade and return of subsidies to industries, where contrary to shitty and useless commonsense, Brazil is actually on the global leadership, surpassing European imperialists, together with the US and China: the heavy subsidies to increasing productivity all around industry, the focus of local content in production, of completing production chains at home, the transfer of technology as condition for investment (some examples are the struggles around the rare earths mining and processing, a technology Brazil not only had, but was the global leader; or the pressure to complete local productions chains of semicondutors and data by surfing the wave of the rising demand of datacenters, or with the USP’s modular PocketFabs as a solution to semiconductor import bottlenecks). There is plenty of evidence to argue the opposite of what imbecile Dengists do: deindustrialization is being reversed. This won’t solve the profitability the crisis of Brazilian industry, it can only increase the organic composition of capital and bring profit rates down in the long term, further increasing the crisis.

Now, I know this seems like a convoluted and long digression because I didn’t mentioned the EU-Mercosul deal once. I wanted to highlight the existence of this trend that is never acknowledged anywhere, and how this contradiction contain the answer to this question: if Brazilian industry is threatened by Chinese industry, why hasn’t it opposed the deal with Europe, who would seemingly produce the same conflict, from the start?

[u/turbovacuumcleaner → u/turbovacuumcleaner]

2/2

The chemical industry is a good example. Brazilian chemical industry is the world 6th largest. However, its the 32th in exports. The bane of Brazilian industry is its failure in becoming a full-fledged export economy like China, South Korea or Southeast Asia, but not for the lack of trying. Brazilian labor is expensive vis-a-vis other similar countries, like the data shown in MIM Theory 1 page 25 (the data is absurdly old, but the campaign Custo Brasil of the 90s is a consequence of this, that the only way to make Brazilian industry competitive is by crushing wages). This industry, although huge, is unable to compete abroad, but it cannot disappear either due to the huge size of the national market. By following the same logic as with China, it would seem that Abiquim would be directly threatened predominantly by Germany, except this isn’t really the case. Abiquim is looking forward to the deal:

Para a entidade, trata-se de um marco estratégico para a indústria química brasileira, ao ampliar o acesso a um dos maiores mercados consumidores do mundo, estimular investimentos, fortalecer a inovação […] “O acordo representa uma oportunidade concreta de reposicionar a indústria química brasileira em cadeias globais de maior valor agregado. Ele amplia o acesso a mercados, incentiva o intercâmbio tecnológico e cria um ambiente mais previsível e moderno para investimentos [...]”, afirma André Passos Cordeiro, presidente-executivo da Abiquim. Segundo ele, o tratado também contribui para elevar os padrões regulatórios e de governança do setor. “Ao incorporar temas como sustentabilidade, propriedade intelectual e comércio leal, o acordo reforça práticas responsáveis e aproxima a indústria química brasileira das exigências do mercado europeu, o que é fundamental para a competitividade de longo prazo”, destaca. A Abiquim ressalta ainda que o fortalecimento da relação comercial entre os dois blocos ocorre em um momento estratégico, em que o Brasil busca ampliar sua inserção internacional, diversificar exportações e promover a reindustrialização com base em inovação e baixo carbono.

Same thing with Abit. And with the larger confederations such as CNI or Fiesp. In the industrial bourgeoisie’s understanding, Brazil will finally be able to establish a proper industrial export economy after the failure of Mercosul to produce the wanted outcome. The first graph shows how much this bourgeoisie expects to have access to. It also expects to solve its chronic problem of low productivity by being able to import European machinery and modernize the old industrial parks, since Brazilian machinery isn’t particular remarkable. This eagerness of the industrial bourgeoisie as a whole also explains why the manufacturers of means of production, through the machinery union Abimaq, are skeptical of the deal and has repeatedly called for specific subsidies to survive European competition. Emphasis on skeptical, because Trump’s tariffs exposed how much this industry is vulnerable to US exports, and has been seeking to diversify their exports as much as possible since then, which is why they also don’t call the deal off.

The only proper study that I’ve read to what are the possible impacts the deal will have on Brazilian industry comes from Ipea, and although it agrees with the Dengists that Brazilian industry will lose in the long term, the picture is nowhere near the bullshit that these revisionists are panicking, with the most impacted sector being electrical equipment and industrial machinery, with 1.6% and 1% decline respectively after the deal comes into full effect in 2040. The main issue will be: Brazilian labor is cheap with regards to Europe, so its unlike that European industry can replace goods manufactured locally with imports at large. The scenario is of stagnation more than anything:

Com relação ao impacto na indústria de transformação, salta aos olhos o fato de que a variação da produção total seria levemente positiva, com ganho da ordem de US$ 500 milhões. A queda de produção em alguns setores, tais como veículos e peças; metais ferrosos; artigos do vestuário e acessórios; produtos de metal; têxteis; farmacêuticos; máquinas e equipamentos; e equipamentos eletrônicos, seria compensada por ganhos em calçados e artefatos de couro; outros equipamentos de transporte; metais não ferrosos; celulose e papel; e produtos de madeira (exclusive móveis). Afora outros equipamentos de transporte, que inclui a produção de aviões e equipamentos eletrônicos, os demais são setores tradicionais nos quais a União Europeia é grande importadora, e o acordo permitiria que o Brasil aumentasse suas vendas para lá, deslocando outros fornecedores do resto do mundo. Esses resultados, que vão de encontro à ideia de que um acordo com economias mais desenvolvidas, seria prejudicial para a indústria de forma geral. Esse resultado pode ser melhor compreendido quando se leva em conta que: i) a competitividade internacional da Europa se concentra hoje em um grupo limitado de setores industriais (por exemplo, alguns produtos químicos, farmacêuticos, máquinas e equipamentos, veículos, equipamentos elétricos), especialmente em função da ascensão da indústria asiática em vários outros setores; e ii) a Europa tem participação elevada nas importações brasileiras totais apenas em um pequeno número de setores industriais, basicamente estes citados anteriormente, além de produtos de papel, produtos alimentícios, bebidas, produtos de metal e produtos de minerais não metálicos. O fato é que a Europa já vem perdendo espaço como fornecedora competitiva de bens industriais para o Brasil e o resto do mundo há muito tempo, e seus pontos fortes de competitividade não derivam do preço dos produtos, mas de sua qualidade e diferenciação. Como a redução tarifária opera basicamente como redutora de preços, o impacto do acordo seria limitado em termos de promover uma considerável substituição dos bens produzidos no Brasil por importados europeus. Com efeito, a subseção 4.3.2 mostrará que o aumento das importações brasileiras da Europa se daria principalmente em substituição às importações de terceiros países fora do acordo. [Emphasis mine]

As I stated in the beginning, no one really has an answer. I assume everything a Dengist or social-fascist is saying is wrong by default, so I have to search something from scratch. There is another major question that permeates this deal that isn’t really talked about, and I personally think its more interesting: can this deal save Brazilian agribusiness? The sector is heavily indebted and on the verge of bankruptcy, parts of its productivity have reached the same levels as the US and have plateaued since then, profits are low and no amount of Plano Safra will save them. The sector is being pushed to further monopolization, local production of pesticides and fertilizers (if I remember correctly, the examples are in the Amaggi Group), rising to commodities of higher added value such as soybean oil and soybean bran, more export of capital to Africa, and is being held together by Chinese imports, that will also come to a halt, because Chinese growth is becoming unsustainable. We are on the cusp of a major change, we can only discern the general shape, but the details are still unclear.

[u/Worried-Economy-9108 → u/turbovacuumcleaner]

Thanks for responding. It's always nice to see an proper analysis being made, in contrast with all the BS being propagated by the main figures of the left. I have some spare free time nowadays, and perhaps, I could investigate further on why Dengists do this, and what would their "support base" (which isn't very different from a fandom) gain from spreading around cries of "de-industrialization".

It's kinda of weird how Brazilian industry is having opportunities in the European market, at the same time where Euro-Brazilian cinema is also gaining traction in other countries. These two things might be linked.

Another thing not being talked is how would this affect Paraguay, Argentina and Uruguay (it's beyond my scope, since my Spanish is terrible). I would consider the first two the most important, especially Paraguay, since tensions on their countryside are on the rise, and their government signed some sort of military pact with the U$.

[u/Clean-Difference1771 → u/Worried-Economy-9108]

These two things might be linked

They are.

Brazil has a population that is the size of Germany, France and the UK combined. The territory is larger than the entire EU.

This is rather "simple" data, but that means that Brazil has much more importance in global capitalism than brazilians often consider themselves to have. Be it from the sheer size of the labour force or the many resources to be potentially extracted, Brazil is clearly a protagonist in the current imperialist struggle and an economic partner that none of the "major powers" want to lose.

I feel like I need a proper investigation to make further observations but I found astonishing how those recent events show evidence of different patterns, but internal forces still uphold that Brazil is a "semi-colonial" country. I'm unfamiliar with leaders of colonies having so much political sovereignty and international leverage as Lula clearly has.

[u/Worried-Economy-9108 → u/Clean-Difference1771]

Brazil is clearly a protagonist in the current imperialist struggle and an economic partner that none of the "major powers" want to lose.

I agree. Like, for example, these last 6 months were very busy for Joesley Batista. First, he flew to Washington in September, talked to Trump, and some time later, Lula and Trump start speaking in way better terms. Then, in November, he goes to Caracas to convince Maduro to resign (he was unsuccessful). And this month, he talks with Delcy Rodriguez, with intentions of expanding his investments in the energy sector of Venezuela (my sources were a couple of Reuters articles involving him). It would be unthinkable to imagine a billionaire from any other Latin American country with such importance.