Institutions and Policy Choices: The New Left in Brazil

In the early 2000s Brazil, under the leadership of socialist administrations, embarked on an ambitious project to recapture the commanding heights of the economy, reverting the pro-market approach of the 1990s. However, in contrast to other Latin American countries that opted for re-nationalization of former state-owned enterprises (SOEs), Brazil did not, opting instead to rely on existing SOEs to implement the government’s objectives. Why was this the case? We answer this question by arguing that the institutional framework faced by Brazil’s Partido dos Trabalhadores (PT) governments, together with the PT’s ideological inclinations and public opinion pressures, shaped their strategy of reliance on SOEs. Specifically, the PT governments in Brazil faced significant institutional limitations, which, together with a sympathetic public opinion, made the use of existing SOEs, rather than re-nationalizations, the best available vehicle for the pursuit of ideological goals.