States, Markets, and Elections: the Political Aspects of Industrial Policy in 2000s Latin America

After the neoliberal-reforming decade of the 1990s, Brazil and Chile went through comparable experiences in the 2000s, characterized by the rise of centre-left political parties and an easing in their external economic constraints. More to the point, Industrial Policy was back into the discourse of governing parties after years of liberal dominance on the theme, as vastly demonstrated by manifesto data for both the Socialist Party of Chile and the Workers’ Party of Brazil. Although this created expectations (and results) of the ‘Return of Industrial Policy’ to the region, these countries diverged quite dramatically on the level of ambition and state involvement in productive development. This gives rise to an opportunity of studying variation in Industrial Policy-Making in democratic settings. A survey of the literature shows important gaps in the explanation of developmental policies in peripheral democracies: firstly, the static explanations of institutionalists and the developmental state literature are ill-equipped to understand the constant policy and institutional changes verified in the region. Secondly, by overlooking elections, current literature misses the choice of the political leadership that will deal with ever-important interest groups and decide much of the path taken in Industrial Policy strategies. As such, this paper suggests a different avenue for research about the political aspects of Industrial Policy. By taking into account the interplay between electoral outcomes and instrumental power considerations of interest group politics in the encompassing policy field of Industrial Policy, it can hopefully make a contribution to Political Economy research and fill a gap in the existing literature. Although the field is definitely permeated by business-state relations, elections are moments in which there is uncertainty about the ideological commitments and policy priorities of the incoming government. This provides an opening for a re-shuffling of political representation which can change the resources available to organized groups (mainly businesses and labour). With this in mind, this paper will be based on interviews conducted with business representatives, labour leaders, and bureaucrats, which will then be triangulated with official documents and data from governmental subsidies with the aim of assessing the political underpinnings of the diverging industrial policy paths taken by Brazil and Chile and providing a more dynamic explanation of policy-making in Latin America.