On Sept. 2, 2022, Irene Vélez, Colombia’s minister of mines and energy, set off a media firestorm by asserting the need for “degrowth.” In characteristically stilted jargon, the academic-turned-cabinet-officer stated: “In the current geopolitical context, we must demand of other countries that they begin to degrow in their economic models—because on that degrowth also depends our achieving greater equilibrium and being less affected by the impact of climate change.” In the end, the inexperienced Vélez was forced to resign after 11 months due to a string of controversies, but her statements, along with President Gustavo Petro’s ongoing ban against new oil exploration, point to the increasing prevalence of anti-developmentalism in Latin America’s progressive politics. Indeed, degrowth has found fervent acolytes in a region well-known for its environmental activism and critiques of resource extractivism.
Perhaps Latin-American degrowth advocates can claim some success already: Since 2000, the region’s total CO2 emissions have remained essentially unchanged at around 1.5 billion tons a year. It’s a remarkable feat, considering that the region’s population has jumped to more than 665 million people, up from a little more than 500 million, during the same period. Per person, Latin Americans’ carbon footprint has decreased drastically relative to inhabitants of other world regions. Of course, degrowthers will continue to be unsatisfied. Overall consumption and environmental degradation have increased in many cases, the Amazon being a frequent point of contention. Under the administrations of Jair Bolsonaro in Brazil and Nicolas Maduro in Venezuela, environmental crime in the form of illegal mining and land grabs led to high rates of deforestation and devastation among indigenous communities in the Amazon.
Still, even the most committed climate hawks should find it hard to ignore what—from their perspective—amounts to impressive progress on the energy front across the region. Whether measured by terajoules or terawatts per hour, oil and even natural-gas consumption have either declined year on year or stagnated since 2014, from the Rio Grande to the Strait of Magellan. In Brazil, low-emission energy sources like hydropower account for almost as much energy consumption as fossil fuels. What’s more, even under Bolsonaro, year-on-year deforestation was still around half the rate prior to when Luiz Inácio Lula da Silva, popularly known as Lula, first took office in 2003.
But far from a success of “sustainable development,” Latin-American degrowth is the inevitable result of decades of neoliberal policy: underdevelopment via deindustrialization. Starting in the 1990s, a generation of mostly right-wing leaders throughout the Americas embraced the idea that development would come not through industrialization, but free trade. The invisible hand of the market, in all its wisdom, would deliver the most efficient macroeconomic result. This meant the collapse of what high-value industry the region had managed to develop during the 20th century. Carbon-intensive industries died out, and consumption stalled due to lack of development. Degrowth is the logical, if unintended, outcome of decades of market dogmatism.
To this day, neoliberal true believers insist on the inevitability of “end-of-history” prescriptions taken up across the developing world in the 1990s—never mind the fact that the same measures would have brought ruin to the highly protectionist steel or textile sectors of the United States during the 1870s or Britain during the 1700s. Protectionist policies succeeded where they took market pressures seriously. Whether it was in the United States, Britain, Japan, Germany, or South Korea, industrial development almost always meant conditioning state support—be it protective tariffs, local content requirements, subsidies, and/or tax cuts—on firm performance. Free trade eventually became imperative for further growth—if and when protected firms could compete with foreign rivals.
In Latin America, by contrast, a wave of privatizations, deregulation, and free-trade deals gutted immature industries. The most illustrative case is Brazil’s automotive sector, for a time the linchpin of the country’s economy. Brazil was once a major exporter of car components and finished vehicles, and the national automaker Gurgel was worth close to $1 billion in today’s currency during its peak in the 1980s. Multinationals active in the country were heavily regulated and forced to produce models that were both designed and manufactured in Brazil, such as the Toyota Bandeirante. Following the end of the military dictatorship, however, successive right-wing governments liberalized Brazil’s domestic car market, allowing for competition with imports from multinationals during the 1990s.
Practically overnight, the South-American titan of manufacturing saw dozens of firms sunk into insolvency or acquired by non-Brazilian competitors. Gurgel went bankrupt in 1996, along with around half of Brazil’s firms specializing in the manufacture of car components. Between 1989 and 1998, Brazil lost more than 123,000 jobs in its auto sector, around a third of the entire industry’s peak employment. In 1991, stable, well-paid automotive-industry jobs employed around a third of São Paulo’s workforce. By 2001, that share had shrunk to just over 10 percent in one of the most catastrophic cases of deindustrialization of any economy in the world.
In some cases, market fundamentalism even decimated the otherwise robust oil industry. In Mexico, neoliberals of the PRI and PAN parties sabotaged the nation’s oil sector and its state firm, Pemex. Following a series of market “reforms” starting in the 1990s, oil production declined from a peak of 4 million barrels per day in 2004 to under 2 million by the mid-2010s. This ballooned Pemex’s debt and starved the government of much needed cash.
In response, the administration of Enrique Peña Nieto doubled down and privatized Mexico’s oil market in 2014, arguing that competition would boost production and investment. For the first time in more than 70 years, Pemex would compete with multinationals such as Exxon and BP. Contrary to the forecasts of the Boston Consulting Group, investment cratered by 30 percent and production fell further to 1.7 million barrels per day in 2019—a development that, naturally, led to lower emissions.
The Pemex case is especially instructive when compared to that of its more successful Brazilian counterpart, Petrobras. Brazil had privatized its oil sector during the 1990s. But unlike Pemex in 2014, Petrobras was experiencing a boom in oil production at the time. As a result, competition with multinationals ended up benefiting Petrobras. Today, the firm has branches and partnerships around the world. Petrobras likely would have suffered the same fate as Pemex had reforms come at a time when the firm was struggling, as it was during the 1970s.
“Market fundamentalism, then, has delivered degrowth of a sort.”
Market fundamentalism, then, has delivered degrowth of a sort—or at least, stunted growth. Since the 1980s, annual GDP growth in Latin America has stagnated at around 1 percent to 2 percent on average, down from around 5 percent during previous decades. Latin America’s per-capita GDP is 25 percent that of the United States; in 1960, the figure was 40 percent.
When presented with the apparent failure of their prescriptions, market fundamentalists resort to predictable arguments. They say: Liberalizing “reforms” either didn’t go far enough or were foiled by external factors like corruption. More honest neoliberals argue that negative outcomes are preferable to a larger state and the “inherent cronyism” of protectionist market distortions.
For decades, leftists have been the main opponents of market utopianism in Latin America— with mixed results. Once in office, the left has preferred redistribution of resource wealth, rather than developing a high-wage economy based on long-term production. More recently, overt anti-developmentalism increasingly animates much of the Latin-American left, leading to internal conflicts between environmentalist, extractivist, and developmental elements. This dynamic came to the fore last month at the Amazon Treaty Cooperation Organization Summit in Belém, Brazil. The conference, meant to chart a course for the defense of the Amazon rainforest, featured leaders from Brazil, Colombia, Ecuador, Peru, Bolivia, Venezuela, and the Guianas.
“Anti-developmentalism increasingly animates much of the Latin American left.”
A rupture emerged when Colombian President Gustavo Petro proclaimed that progressive leaders who “believe in science have a conflict of ethics in authorizing oil exploration in the Amazon region.” This was a not-so-veiled attack against his Brazilian counterpart, Lula, for authorizing oil drilling near the mouth of the Amazon River. Lula retorted: “The Amazon is more than just tree tops and rivers—[it is a region] full of millions of Amazonians who want to live well, work, and reap what they produce—not just preserve a sanctuary.”
Despite the jabs, both Petro and Lula have flexed their environmentalist credentials since assuming office. During Lula’s first eight months in office, deforestation has fallen an astonishing 48 percent relative to the same period in 2022, as the administration reinvigorated Brazil’s once-renowned environmental agencies, such as IBAMA, which were gutted under Bolsonaro. Lula went as far as to deploy the military within days of assuming office to suppress illegal mining that had fed a humanitarian crisis in Brazil’s northern state of Roraima.
Similarly, deforestation fell close to 30 percent during Petro’s first six months as the administration enacted numerous environmental restrictions. As part of the Paz Total (Total Peace) initiative to negotiate terms of peace with armed groups such as the ELN and Gulf Clan, the government also secured concessions from participating actors to limit deforestation in their areas of influence.
Even so, as the summit fracas demonstrated, intra-progressive differences over green issues endure. Those differences are logical when we compare the two countries’ human geographies in the Amazon. Comprising more than half of each country’s total surface area, in Colombia and Brazil alike the Amazon is still the least populated region of each state. The total population of the Colombian Amazon is a little more than 1.1 million, and most of Colombia’s Amazonian cities, such as the regional capital of Leticia, aren’t connected by road to the rest of the country
Conversely, Brazil’s Amazonian states have a total population of more than 28 million. As Lula said, there are more than just isolated tribes and small settlements littered throughout Brazil’s north. Cities like Manaus, Belém, and São Luis are each small metropolises of more than 1 million souls, with a string of smaller cities such as Porto Velho with just under 600,000 residents. Similarly, the Brazilian backwater of Tabatinga has more than twice the population of Leticia, its Colombian counterpart just across the border.
As president, Lula has authorized numerous developmental projects in the Amazon that have further infuriated environmentalists. The administration is set to construct a highway between the states of Rondônia, Amazonas, and Roraima, a rail line connecting the states of Mato Grosso and Pará, as well as cables intended to deliver internet to more than 3 million Amazonians. While in Colombia, development may not be as pressing a priority, it is an imperative in Brazil. To Petro’s chagrin, Lula’s environmental transgressions serve the very real needs of multitudes.
The irony is that, like Lula, Petro should be a man of the old left. A former guerrilla and decades-long critic of neoliberal trade policy, Colombia’s first left-wing president actively campaigned on a platform of reindustrialization in 2022. Both he and his populist opponent, Rodolfo Hernández, campaigned on renegotiating the United States-Colombia Free Trade Agreement. A product of Washington Consensus-era free-market fanaticism, the trade deal is on course to annihilate Colombia’s domestic rice production as a result of unequal competition with subsidized US agricultural exports. There is even reason to believe that it has already contributed to Colombia’s record rates of coca cultivation, as small farmers who previously subsisted on local staples increasingly turn to the illicit crop for lack of a better livelihood.
Petro has offered apt diagnoses of Colombia’s challenges. He has argued that the nation is in need not of socialism, but a transition away from a landowning oligarchy into democratic capitalism. Indeed, Colombia is often described as the most unequal country on the planet, where 41 percent of the land is owned by just 100 families. The Colombian president also offers a compelling critique of Colombia’s crisis-stricken neighbor, Venezuela. In his view, Venezuela’s spectacular collapse is the product of an economic regime that staked its development entirely on the exploitation of a single, volatile commodity: oil. For him, if Colombia is to avoid the same fate, it must reduce its dependence on oil and diversify its economy. To that end, the president has defied free-trade orthodoxy and levied tariffs to protect Colombia’s textile industry and a handful of others.
All good. The problem is that, like his market-fundamentalist predecessors, Petro is a doctrinaire ideologue, but the doctrine in question worships neither the self-correcting market nor the dictatorship of the proletariat—but the wrathful god of climate apocalypse. The Colombian president takes at face value that by 2070, his country will be composed “solely of deserts.” For this reason, he has terminated all novel oil exploration in the country, even though Colombia produces negligible carbon emissions, and close to 50 percent of government revenues stem from the sale of oil.
Petro’s aim to wean Colombia off its dependence on oil might be sensible were it not for what he hopes to replace it with. The same man who at times has referred to industrial South Korea as a model for development now views Costa Rica and tourism as the way of the future. You read that right: Petro wants to replace the volatile resource commodity of petroleum with the volatile service commodity of tourism.
The popularity of the Petro and Lula administrations speaks to their performances in office thus far. Initially, Petro achieved a handful of victories, launching long-delayed land reform mandated by the 2016 peace deal with the FARC, securing a higher minimum wage, and hiking taxes on higher earners and corporations. More recently, however, the president has been mired in a series of telenovela-like scandals including accusations that his son solicited contributions from drug traffickers to help finance his father’s presidential campaign. The administration’s legislative agenda has now stalled in congress, prompting optimism from financial markets that his left-wing reforms don’t stand a chance of becoming law.
Amid some of the highest inflation in the Americas, at around 10 percent, Petro has sought to discourage the use of gasoline. The government has gradually removed gasoline subsidies—admittedly to the benefit of the country’s fiscal solvency—thereby doubling the price of fuel since the president’s inauguration. Oblivious to the aspirations of the working class—as so many progressives are—Petro has denounced car usage as a privilege of the middle and upper classes. Not surprisingly, his approval rating has declined steadily since he took office, settling around the mid-30s in recent months.
Lula, conversely, has accomplished the unusual feat of boosting his approval since coming into office, to around 60 percent in August, up from 52 percent in January. This, at a time when visceral hatred towards incumbents—even recently elected ones—is the norm in Latin America and around the world. His government has executed a series of popular measures, including raising the minimum wage and lowering gas prices by cajoling Petrobras to set its rates based on Brazil’s domestic, rather than the international, market—a standard set by the previous administration. Via key nominations, the government has also managed to pressure Brazil’s central bank into lowering its astronomical interest rates as inflation continues to fall.
Hardly the “communist” caricatured by Jair Bolsonaro, Lula understands that for Brazil to succeed, both its businesses and workers must prosper. International investors and Brazil’s business sector were thus pleasantly surprised when the finance ministry unveiled an exceptionally responsible new fiscal rule and budget for 2023. The government earned more plaudits with an overhaul of Brazil’s unwieldy tax code following negotiations with congress—a long sought business priority that had eluded every president since redemocratization. Having initially harbored deep suspicions, investors are now reportedly smitten with finance minister Fernando Haddad’s handling of the economy.
“Lula appears to have learned the right lessons from his previous terms in office.”
Lula appears to have learned the right lessons from his previous terms in office. Rather than boost unproductive small business, commodities, and the construction sector, as he did in the 2000s, he has taken pains to boost domestic industry and manufacturing. In June, the government announced a series of measures for Brazil’s ailing automotive sector. including incentives for local production and tax breaks that reduced the cost of low-price vehicles by as much as 11 percent. Moreover, the president has leveraged his leadership among the BRICS (Brazil, Russia, India, China and South Africa) nations to secure foreign investment, mostly from the Middle Kingdom. As of this writing, Midea, Nice, BYD, and Great Wall Motors have all begun construction of electric-vehicle and appliance factories in Brazil, with China also signing a cooperation agreement on semiconductor manufacturing.
Of course, none of this has stopped environmental activists from decrying Lula for the crime of wanting to uplift the living standards of Amazonians. Never mind the electoral reality that the state of Amazonas—once a stronghold of Lula’s Workers’ Party—is now a swing state. A similar dynamic also haunts President Biden as he wavers on energy policy, pulled between the priorities of working-class voters and the demands of progressive activists pushing boutique, upper-middle-class causes. But at least for now, Brazil’s left seems less confused on the developmental front than Colombia’s, thanks in large part to Lula’s leadership.
In the coming years, Latin America’s second “pink tide”—which has seen the rise of a new generation of left-wing leaders like Petro, Argentina’s Alberto Fernández, Peru’s Pedro Castillo, and Chile’s Gabriel Boric—seems all-but certain to recede. Castillo has already been forced out, and outside of Brazil and Mexico, the left is deeply unpopular across most of the region.
For at least the rest of the 2020s, market fundamentalism on the right will remain a far more serious threat to industrial development than climate Malthusianism on the left. For Latin-American conservatives, industrial policy is still tantamount to communism. As of this writing, the only non-leftist presidents or presidential candidates in the Americas who have dared to explicitly critique existing trade deals are Donald Trump and the Colombian populist Rodolfo Hernández. For all the talk of the “Trump of the Tropics” or the “Trump of the Pampas,” both Bolsonaro and Argentina’s Javier Milei fetishize free-trade orthodoxies; Milei has gone so far as to declare that “tariffs should not exist.”
On the left, the prevalence of resource nationalism in countries like Bolivia, Mexico, Ecuador, Honduras, and Peru has thus far belied the influence of degrowth, anti-developmentalists. Sadly, in each of these countries, as well as in socialist tyrannies such as Cuba, Nicaragua, and Venezuela, a tendency toward excessive extractivism has delivered either stunted development or economic collapse.
It is, however, heartening to hear at least a handful of leftists including Lula and the Mexican presidential candidate Claudia Sheinbaum advocate for industrial development. But translating rhetoric into action is another matter. If Lula is truly serious about national development, his government’s actions are still insufficient. Not only must Brazil restore its lost industrial base, but also promote would-be national champions in emerging sectors such as EVs, chips, and biopharmaceuticals. Reindustrialization will take decades, not months or years.
As for the environment, progressives routinely ignore the reality that development will necessarily entail increased carbon emissions. It was, after all, Socialism with Chinese Characteristics, not the unobstructed Invisible Hand, that is responsible for around 75 percent of the decline in global poverty since 1980; likewise, approximately 60 percent of the total growth in emissions since 2000 is a byproduct of the increased consumption and industrial production of the People’s Republic of China.
None of this is to say that we should ignore climate change. It is, moreover, a mistake to presume that environmental preservation and development are entirely zero-sum. As Leigh Phillips and Brazilian environment minister Marina Silva have both noted, Brazil’s Workers’ Party decreased deforestation by 80 percent during the 2000s and 2010s while also increasing agricultural rents by 500 percent through the pragmatic regulation of land use via agencies such as IBAMA and INCRA.
Efforts to mitigate the effects of climate change will require the implementation of long-term industrial policies that subsidize, invest in, and promote economies of scale in technologies such as EVs, nuclear power, battery storage, and yes, renewables. At the same time, so long as drastic energy transitions remain unfeasible, fossil-fuel production, particularly in natural gas, will continue to be a necessary source of energy for the well-being and prosperity of billions around the world.
“Industrial prowess now faces a two-pronged assault.”
In Latin America, industrial prowess now faces a two-pronged assault from commodity- and service-oriented market fundamentalism on the right, as well as climate fundamentalism and extractive redistrubitionism on the left. In the end, both factions condemn national development. The result is stagnation—or worse, degrowth. As voters from throughout the Americas await the rebirth of a pro-worker, developmentalist conservatism, we can only hope the next pink tide will learn from past mistakes and follow in Lula’s footsteps, rather than Petro’s.