Populism in Brazil: how liberalisation and austerity led to the rise of Lula and Bolsonaro
While the rise of populist politicians in the Europe and the US gets a lot of attention from the media and researchers alike, the drivers of the populism taking hold in emerging and developing economies still receives relatively little scrutiny.
In a new working paper we provide new evidence tracing the rise of populism in Brazil – through both the victory of presidents Luiz Inácio Lula da Silva in 2002 and Jair Bolsonaro in 2018 – to regional economic shocks caused by a process of trade liberalisation that began in the early 1990s.
Both Lula and Bolsonaro were able to mobilise voters by amplifying divisions caused by trade shocks and subsequent periods of austerity. But the two leaders were elected on very different platforms and narratives.
In 1990, the government of Fernando Collor de Mello started to implement a large programme of trade liberalisation in an attempt to modernise the economy. Between 1990 and 1995, import tariffs were reduced from an average of 30.5% to 12.8%. This reduction was uneven across regions and sectors. For instance, while the level of tariff changes in the agriculture and mining sectors were relatively small, in sectors such as clothing and rubber, import tariffs reduced by more than 30%. This meant that local industries faced larger increases in competition from cheaper imports with adverse consequences for some local economies.
The impact of these new tariffs varied across Brazil’s microregions – groups of economically integrated municipalities – depending on the concentration of different sectors in each area. Microregions that experienced the largest tariff cuts became more vulnerable to international competition, affecting the labour market and the structure of Brazil’s economy. This shock led to long-lasting declines in formal employment and in wages relative to other regions. The map below shows, for example that some of Brazil’s largest cities, including Belo Horizonte, São Paulo and Rio de Janeiro were highly affected by the tariff changes.