Post-neoliberalism: lessons from South America

After a period of rapid liberalisation South America undertook a programme of renationalisations, while still bearing the marks of the neoliberal phase - what might be termed 'post-neoliberalism'. Español.

Javier Lewkowicz
9 February 2015

Flickr/CM Ortega. Some rights reserved.

For much of South America, the last decade can be defined as “post-neoliberal.” This means two things: the neoliberal period left its imprint—much of it structural in nature—and, at the same time, many of its core principles were cast aside. Despite some inevitable historical continuity, there has been noteworthy divergence, as evidenced by changes not just in the content of public policy but also in its formulation. These began in the wake of the Washington Consensus, which produced economic prescriptions eagerly promoted by international lending agencies, and were maintained through a series of neo-developmental programs that, in recent years, were not the product of a set plan but rather undertaken on the fly, generating their own attendant popular demands.

Neoliberalism left indelible marks: disintegrating societies, deteriorating industrial frameworks, neglected public sectors, and political systems in crisis. It also impeded the State’s ability to manage development by enabling legislation that benefitted corporate interests, undermining fiscal, monetary and commercial mechanisms as well as regulatory capacities, eliminating entities able to intervene in markets, and privatising public companies.

The privatisation wave swept through the region between 1990 and 1995. In that brief period, according to figures from ECLAC, direct foreign investment in Latin America and the Caribbean surged from $126bn to $278bn USD (an increase of 120 percent). An estimated 1,500 public companies were either sold to the private sector, closed, or declared bankrupt.[1] This affected utility companies as well as other key sectors such as industry, transportation, logistics, and communications. Privatisation was part of a regional plan to seek political alignment with the United States, the motivation for which was a reaction to the debt crisis of the '80s and a concomitant impulse to integrate the countries of the region into the Brady Plan and, by extension, into international credit markets.

During the era of developmentalism that characterized the '50s and '60s, public companies played a pivotal role in the exploitation of non-renewable resources, utilities, and manufacturing. They were at the heart of state power, which is why a privatisation backlash would come to define the subsequent neoliberal period - along with licensing contracts that favoured big business and the coopting of public companies by an executive with close ties to multinationals. It was a way of declawing the state.

The neoliberal model of capital accumulation succumbed under its own weight at the end of the 20th century, giving way to widespread economic, social and political crises and leading to a change in the political orientation of many countries in the region. The shift was confirmed in foreign relations, in particular by a more integrationist posture within the region and less willingness to tow the North American line. For the first time, governments initiated important social assistance and employment protection programs.

Political change led to greater state intervention in the economy. In addition to making use of fiscal, monetary, and trade mechanisms, progress was made through governmental participation in private companies, with both formerly privatised enterprises and privately owned firms being nationalised. In some cases government presence increased on company boards, businesses were expropriated, and contracts governing the exploitation of natural resources were modified to benefit national interests. The cases of Brazil, Argentina, Venezuela, Bolivia, and Ecuador, which are detailed below, illustrate how different strategies were used to encroach on the private sector and areas of economic profitability that had been its preserve.


In Brazil, the privatisation process was spearheaded by the ambitious statesman Fernando Henrique Cardoso, who occupied in turn the position of Minister of Foreign Affairs (1992-1993), Finance Minister (1993-1994), and President (1995-2002). “The position taken by the liberal factions in Brazil was that deregulation was essential. So they opened up their financial and commercial markets to the outside. It was a clear attempt at ‘turning the page on the developmental era’ during which massive state enterprises such as Petrobras, Banco Nacional do Desenvolvimento Economico e Social (BNDES), and Vale do Rio Doce had been created - which controlled the oil and gas, development banking, and mining sectors respectively,” explains Javier Ghibaudi, a researcher at the Fluminense Federal University and the Federal University of Rio de Janeiro. The most emblematic examples of the privatization process are Vale do Rio Doc (mining, metals and logistics), the electricity, telephone, steel, rail, metals and petrochemical industries as well as the provincial banking sector. Petrobras continued to be state controlled while the larger national banks such as BNDS, the Caixa Economica and Banco do Brasil maintained their corporate structure.

The privatisations were financed by foreign capital and private domestic sources. But the lion’s share came from the public coffers through BNDS and pension funds. That afforded the Brazilian government a relatively large shareholder stake in numerous industrial companies, an initiative that increased in recent years through direct share purchasing. The clearest evidence of the new relationship between the state and the private sector is the construction company Odebretch.

After the famous blackout of 2001, the federal government also extended its influence in the electricity sector through increased regulatory control. In the case of oil, changes were made to the regulatory framework for exploiting new wells, requiring greater participation by local industries.

“Brazil did not go back on its privatisation laws of the 90s; nor did it establish new public enterprises. Instead, the government funded private industry and in so doing formed a kind of association, one that is economic as well as political,” Ghibaudi concludes.


On August 17, 1989, on the occasion of the passage of Argentina’s law 23.696, the Act Respecting State Reform, Roberto Dromi, then Secretary of Public Works under President Carlos Menem (1989-1999), delivered an historic speech, “Tonight the Government of Argentina has completed seven privatisations in strategic sectors. We look forward to the privatisation of television, telephones, the toll system, road and railway licensing, radio and, of course, the state-owned airline. We have devised a decalogue for reform, the first commandment of which reads: ‘Nothing that should be state-owned shall remain in the hands of the State’.” It was a revealing slip of the tongue because in addition to the above, during the decade of his mandate, President Menem privatised other key industries such as steel, petrochemicals, shipbuilding and oil, electricity and gas, ports, power plants, mortgage lending, and social security. It is no coincidence that for many years Argentina was considered the IMF’s top student.

The neoliberal surge brought about the worst economic, social, and political crisis in Argentina’s history. During the successive governments of Nestor and Cristina Kirchner (2003-2015), many renationalisations were undertaken as a last resort in the face of asset stripping and non-compliance, although some of these decisions were also strategically motivated. Nevertheless, in many economic sectors, privatisation remained intact.

The first case of renationalisation involved the bankrupted postal service in 2003. The next year, the government recovered Argentina’s radio spectrum, which had been managed by the French company Thales Spectrum, who failed to honour a $300m investment. In 2006, water distribution and sewage were taken out of the private hands of France’s Suez S.A. and Spain’s Aguas de Barcelona, following a water contamination incident in a major industrial area of the province of Buenos Aires. In 2008, the airline Aerolineas Argentinas was nationalised after flagrant asset stripping by Spanish Grupo Marsans.

But the two most significant cases of renationalisation were yet to come. In late 2008, the social security system went from an individually funded scheme managed by the banks to one of intergenerational liability. This measure gave the government access to liquid assets and a shareholder stake in one of the country’s most important enterprises. The biggest controversy occurred in 2012, when Kirchner’s government expropriated the oil company YPF, which had been controlled by Spain’s Repsol, after a precipitous drop in hydrocarbon production and reserves. Most recently, the country’s trains came under scrutiny when 51 people were killed in an accident that could only be explained by shoddy maintenance on the part of rail owners and the absence of adequate government supervision; the railway has now been almost fully nationalised.

The only financial compensation paid out in this period was in the nationalization of YPF, which involved some five billion dollars and a joint agreement. All the other measures were undertaken by terminating licensing contracts or nationalising private companies that faced bankruptcy.


As the renowned Venezuelan journalist Modesto Guerrero explains, “Venezuela is an exceptional case because the privatisation process was almost completely halted by the 1989 popular uprising, known as the Caracazo, against the government of Carlos Andrés Pérez (1989-1993). Up until 1999 and the end of Rafael Caldera’s mandate, a handful of hotels, the aluminum company Venalum, and a few other firms had been privatized but the measures stopped short of the liberal faction’s goals. In particular, the national oil company PDVSA kept its state-owned status, although its board enjoyed membership by both government appointed directors and those designated by the multinationals of the energy sector.”

From the first days of the new century, the government of Hugo Chávez (1999-2013) put forward an ambitious nationalisation plan - one that did not target previously privatised companies but wholly private firms. More than a thousand signatures attest to the changing of hands. These include Venezuela’s largest enterprises: the Sidor steel mill; the power companies Seneca and Electricidad de Caracas, for which the government paid the U.S. firm AES Corp $740 million for an 82 percent stake in the company; Compania Anonima Nacional Telefonos de Venezuela (CANTV), which required a $572 million purchase from Verizon Communications of a 28.5 percent stake; and the Bank of Venezuela, an erstwhile subsidiary of Spanish Santander, which involved a $1.05bn deal; and many other major transactions in the banking sector. Chavez also nationalised the cement companies Cemex (Mexico), Lafarge (France), and Holcim (Switzerland) as well as the largest fertilizer producer and hundreds of small businesses, and it renationalized Venalum.

In regard to the oil sector, the official policy was to nationalize new wells in the Orinoco belt and expand state presence in PDVSA. Chinese and Russian investment also increased in the form of joint ventures with PDVSA. Operating in a more precarious political context, the government of Nicolas Maduro has decided to reverse its policy of nationalization, particularly in relation to smaller companies, which have been returned to the private sector.


Current president Evo Morales took office in 2006 promising to accede to popular demand and nationalize the oil and gas industry. This forced petroleum companies to renegotiate contracts. As a result, the state inverted the traditional benefits ratio, tapping 82 percent of the profits, with only the balance going to the private sector. The Bolivian government also acquired shares in Chaco (formerly controlled by British Petroleum), Andina (a subsidiary of Repsol) and Transredes (Ahsmore and Shell). Oil and gas nationalization was the focal point of Bolivia’s economic policy, and it enabled state-owned YPFB to quintuple its assets in a handful of years.

With the nationalization of ENTEL in 2007, Morales reversed the privatization of the telecommunications sector. It took a year of negotiating with Euro Telecom International (ETI), a subsidiary of Telecom Italia, which had enjoyed a 50 percent equity and management stake in ENTEL since 1996. Morales in turn nationalized four foreign-owned power companies and a metalworking business.


"In Ecuador, the privatisation process was weak because private capital penetration in various economic sectors was already implicitly secured through contractual arrangements or licensing. The formal appearance of state ownership was thereby maintained, but in reality foreign investors appropriated a huge portion of the income generated. That is why it cannot be said that renationalisation occurred in recent years in Ecuador,” explains Diego Borja, former Finance Minister (2005-2006). Nevertheless, the government modified its contracts in 2006 so as to increase its share of oil revenues.

The visible hand

Brazil, Argentina, Venezuela, Bolivia, and Ecuador are the South American countries that experienced the most marked political changes in the last decade. In each case, state presence in the economy increased, although it took different forms, depending on the country’s recent history of privatisation, the government’s readiness to break with tradition, and the conditions imposed from outside. Moreover, the commitment to grant more power to the state was bolstered by a particular economic context. The countries of the region grew steadily, benefitted from strong commodity prices, significantly improved fiscal policy, and reduced their debt.

Political will and economic viability enabled governments to boost the power of the state, through expropriations—some of which were compensate and others not—and share buyouts in the private sector, loan capitalization, and new licensing contract terms. In any event, many of the structural changes brought about by neoliberalism endured, of which the decision not to reverse certain privatisations is just one example. Together these elements make up a political, economic, and social framework that is still evolving and can be called post-neoliberalism. 


This article is part of our Modernise: de-privatise series, looking at different forms of public ownership and the methods by which people have democratised the assets.

[1] Estache, Antonio y Trujillo, Lourdes. “La privatización en América latina en la década de los años 90: aciertos y errores”. Revista Asturiana de Economía, No. 31, 2004.

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