Category Archive: Analysis

1. Global BYD

   April 24, 2025 7:22 am Comments Off on Global BYD

   Tariffs are typically used at one of two key junctures in the development of a national economy: either at the time of industrial infancy, when they are trying to cultivate fledgling national champions, or at the time of financial senility, when a country’s elites are hoping to forestall impending decline. Donald Trump’s chaotically managed trade war is a clear example of the latter. Amid the intensifying retreat of American hegemony, however, an alternative geo-economic and geopolitical arrangement is coming into view: a battery-powered globalization with Chinese characteristics. In this reordering, China is poised to be the leading actor, with green technology the driver. Its most evident manifestation is the massive international expansion of its electric vehicles (EV) industry. 

   The excellence of Chinese EVs, which were until recently derided by the likes of Elon Musk, is now incontrovertible. What is more, China’s tech supremacy is quickly translating into market dominance, so much so that it is now threatening to overtake other leaders not only in the EV market, but in the automotive industry as a whole. This bears seismic consequences for international economic geography. 

   

   The most significant example of this international expansion is provided by the flagship firm BYD. After surprising analysts with its global rise in sales at the end of 2023, BYD has now raced ahead of Tesla—until recently the undisputed front-runner in EVs. As stock value and sales at Musk’s firm dropped last year, BYD has moved from success to success. In 2024, it sold a record of 4.3 million cars, with a 41 percent increase in sales. It now stands comfortably ahead of Tesla in the general category of new energy vehicles (NEVs), which comprises both Battery-Electric Vehicles (BEVs) and Plugin Hybrid Electric Vehicles (PHEVs). According to the latest reports, it is now neck and neck with Tesla on BEV sales; 1,790,000 for Tesla and, just behind, 1,764,000 for BYD—a 12 percent increase from the previous year. With its current rates of year-on-year growth exceeding 50 percent, and with abundant untapped potential still remaining in the EV industry, it is reasonable to expect BYD overtaking Toyota as the world-leading car firm within the next decade. 

   BYD is already behaving like a firm which seeks world dominance in its sector. Until recently, the Chinese automotive and EV sector was largely a domestic phenomenon, with the bulk of vehicles sold at home. Now, Chinese EV firms are expanding their production around the world, at an unprecedented scale and speed. Chinese electric vehicles factories —some of which are able to produce more than 200,000 vehicles a year—have sprung up in Indonesia, Thailand, Pakistan, Turkey, Hungary, and Brazil to satisfy increasing demand for Chinese EVs which, besides their high quality, are also around 20 percent cheaper than their Western counterparts. 

   A key factor in BYD’s expansion is an effort to mitigate against the risk of tariffs and other trade barriers in an increasingly protectionist climate. By assembling their cars in factories abroad, Chinese firms hope to skirt the import duties which would make their merchandise uncompetitive. Setting up overseas plants, however, remains a delicate operation, bound up not only with the company’s complex calculations about future prospects, but also with geopolitics and diplomacy. In charting the international expansion of a firm like BYD, one can also gain important insights about China’s international relations strategy.

   From Shenzhen to the world

   BYD’s official headquarters and the company’s beating industrial heart are located in the now famous city of Shenzhen in the Pearl River Delta, adjoining Hong Kong and Canton—an area of the world bound to be the new Palo Alto. Created in 1979 from swampy fishing village, Shenzhen became China’s first Special Economic Zone, designated by Deng Xiaoping as part of the “Reform and Opening-up” (改革开放, Gaige Kaifeng) policies. The city quickly turned into a global manufacturing center for consumer electronics, with many OEM manufacturers like Foxconn producing for various international brands: Apple, Sony, and Dell among them. Chinese companies—Huawei, Xiaomi, Hisense, and Oppo—also set up manufacturing in the new SEZ, as well as new internet companies like Tencent. 

   BYD opened its first large industrial park in the Kuichong district of Shenzhen in 2000. At the time it was not an automotive firm, but a producer of consumer electronics batteries for Motorola and Nokia. The company was founded by Wang Chuanfu, a scientist-cum-entrepreneur with a PhD in battery chemistry and a current net worth of $23 billion. BYD’s remarkable transformation from a battery company into a car company was in part facilitated by its acquisition of the formerly state-owned Tianjin Qinchuan Auto Manufacturing. The first car produced by BYD was the F3, a traditional compact sedan with an internal combustion engine, which was manufactured in the Changsha plant in Hunan, with lower labor and land costs compared to Shenzhen and easier, cheaper delivery access to the north of the country. Shenzhen remained, however, the real center for electric vehicle production, both in terms of battery manufacturing and in terms of actual assembly. 

   Today BYD counts five different plants in Shenzhen, some of them clustered around “BYD Road” in the Pinghsan district. More than 500,000 cars— BYD Tang, Qin, and Dolphin models—are assembled here every year. Beyond Shenzhen and Changsha, there are major factories in Qinzhou, in Guangxi (producing approximately 100,000 vehicles per year), in Fuzhou in Fujian (150,000 vehicles), in Shanghai (at least 150,000 cars) and in Tianjin (200,000). Together, these Chinese factories are responsible for most of the nearly 2 million electric vehicles produced annually in China.

   Until the early 2020s, BYD’s EV production was largely focused on this Chinese market, while its overseas operations dealt with buses and trucks, which are still the BYD vehicles most readily seen in many countries outside China. As late as 2024, 87 percent of BYD’s New Energy Vehicles were sold in China. The success of BYD is in large part due not only to the size of the Chinese market, but to the ways in which the company has strategically concentrated all of its critical operations—such as research and development, component manufacturing (including batteries and semiconductors), vehicle assembly, and supply-chain logistics—in China. BYD has developed enormous economies of scale through vertical integration. 

   

   China’s high degree of domestic technological diversification and sophistication has been facilitated by state-directed industrial policies—such as those pursued under the auspices of Made in China 2025—with the use of subsidies, investment in research and other inducements aimed at accelerating the country’s technological development. China’s dynamic, innovation-hungry market, where now 50 percent of new vehicle purchases are electric, serves as a powerful launchpad for firms such as BYD, Xiaomi, and Geely, which are now seeking worldwide dominance. Their overseas sales of NEVs grew by 77 percent in 2023, a staggering increase. The resulting enthusiasm has, however, been tempered by 2024 growth rate of just 6.7 percent compared to the previous year. There is a risk that sales may begin to stagnate in 2025. Without a substantial share of overseas sales, these firms risk becoming economically unsustainable. 

   The EV race in South and Southeast Asia

   In addition to the continental “Silk Road” of the Belt and Road Initiative, which cuts across Central Asia, China has also been developing what government officials describe as a “Maritime Silk Road,” which would connect Chinese ports—Shanghai, Fuzhou, Guangzhou, and Shenzhen—to harbors and logistical infrastructure in the Indian subcontinent. From there, access to the Middle East, the Mediterranean, and to European ports like Piraeus and Trieste, Rotterdam and Hamburg is assured.

   This coastal corridor has long been recognized as an important vector of geopolitical power. For China, it is a trade lane that has become all the more vital in the aftermath of the war in Ukraine, which has disrupted many continental trade routes and has led to some Belt and Road projects being delayed or scaled down. The trade axis which goes from the Malacca Strait to the Western Mediterranean and extends from Indonesia, Thailand, India, Pakistan to the Middle East and Northern Africa and the European Union, extends over an area that encompasses almost half the world population, and which will in due course also account for a significant share of the EV market. It is not surprising, therefore, that it is precisely along this corridor—punctuated by some of the most important harbours controlled by Chinese firms like COSCO—that some of the most important Chinese EV production plants are currently being built.

   

   To China’s Southern border, BYD is increasing its footprint in Cambodia where it is chasing competitors Ford, Hyundai, and Toyota, and in Vietnam, where it is building a $250 million plant in the Phu Ha industrial park. The latter is due to produce 150,000 vehicles a year, with the possibility of a second plant to be built to further exploit the country’s low labor costs. In neighboring Thailand—the second-largest car market in Southeast Asia— BYD is investing $500 million in a plant in Rayong’s Eastern Economic Corridor, with an expected annual capacity of 150,000 vehicles. Across the Java Sea, BYD has invested $1 billion in a new plant in Subang, West Java. Operations are set to begin in 2026 with a production target of 150,000 vehicles per year, mainly targeted at the country’s enormous domestic market: 285 million consumers, expected to purchase 2 million EVs a year by 2030. BYD and other Chinese automotive firms are not only investing in assembly plants but also in the supply chain and in logistics. Meanwhile, the Chinese government is spending on regional infrastructure, fostering economic cooperation and promoting cultural diplomacy. These activities highlight that the Chinese government is well aware of the strategic importance of this region at China’s “southern periphery,” which it would like to see become a reliable hub for “friendshoring” and long-term partnerships.

   India is another story. Currently a massive importer of Chinese products, it intends to develop its own technological capability, including an EV industry. To this end, India has already begun to restrict Chinese investments; one significant consequence of this is that BYD currently has only a single factory in all of India. Located in Tamil Nadu, it produces barely 10,000 vehicles a year. In response to India’s aversion to Chinese influence, BYD and its siblings have set their sites on Pakistan, which has enthusiastically opened its doors to Chinese EV investments to become a global EV export hub. BYD plans to build a plant in Karachi in collaboration with the Pakistani firm Mega Motors. The plant, already in construction and due to open in 2026, will initially produce 50,000 cars a year for the Pakistani market, whose car sales are expected to be 50 percent electric by 2030; capacity may soon be expanded. In Pakistan, BYD is already marketing three models—the Atto 3, Seal, and Sealion. Furthermore, it has partnered with HubCo, the country’s largest private utility, to build a network of fast-charging stations. This is testament to BYD’s long-term and infrastructural vision, one very different from the attitude of its Western competitors, both corporate and governmental, which to their detriment tend to focus on a much shorter time frame. 

   The industrial and charm offensive on Europe

   If Chinese EV firms are setting their sights on the expanding markets of Southeast Asia and South Asia, it is the rich car markets of Europe that are the ultimate prize. Europe—comprising the EU and the UK—is the third largest market for automotives and the second largest for EVs after China, with 1.5 million vehicles registered in 2024 (a slight decline compared to the previous year, in part due to the end of German subsidies). China would like to increase sales in Europe, but it would also like to have closer relations with a region which it considers as a possible partner in the development of a multipolar order. EU tariffs on EVs from China, however, make that task more difficult. 

   At the end of 2023, the EU raised tariffs against Chinese EVs. BYD was hit with a 17 percent tariff in addition to the standard 10 percent import duty already in place; other Chinese firms faced higher tariffs: 18.8 percent for Geely and 35 percent for SAIC—a result of the state aid or subsidies deemed to be unfair by Brussels. Perhaps an unintended consequence, these protectionist policies are creating great incentives for Chinese EV firms to open plants in Europe in an effort to circumvent those tariffs. One common tactic already used by car companies is to ship “knock-down kits” to a particular country for assembling and selling domestically. Knock-down kits are classified as components and usually pay a lower tariff than finished goods. This is also more efficient from a supply chain perspective, as it is easier to ship a car disassembled. Yet, local authorities may see this as a circumvention tactic and may demand that to qualify as local a car needs to bring greater value addition and local content. Responding to these issues, BYD and other Chinese EV firms have developed a strategy of engagement and long-term investment, developing research and development centers on the continent, and establishing long-term partnerships with suppliers. Further, BYD is also playing the soft power card, with sponsorship of events and a communication campaign aiming at endearing itself to the European citizens. 

   To date the most significant investment for BYD in Europe is in Hungary, a country known for its robust automotive supply chain and its close relationship with China. A staggering 44 percent of all Chinese foreign direct investment in the European Union goes to Hungary and BYD is completing construction of a large plant in Szeged, close to the border with Serbia and Romania. The billion dollar investment is expected to produce—not simply assemble—between 150,000 and 200,000 cars annually and is set to begin production by the middle of this year. To secure the local value chain, BYD has established a partnership with French firm Forvia, the world’s seventh largest automotive technology supplier, to supply components to the Szeged factory. But this factory is now subject to an EU probe for unfair state aid, which could force the firm to reduce capacity or force it to sell some of its assets. 

   If such probes reveal a degree of vulnerability, they do not restrict BYD’s ambitious plans for expansion. BYD has already begun construction of a second factory intended to increase European production. A new plant in Manisa near Izmir is scheduled to open in mid-2026, and will have an annual capacity of 150,000 cars. Turkey’s position on the edge of Europe is key here. Though it is not part of the EU single market, it is crucially part of its customs area. This means that a car assembled in Turkey is spared hefty tariffs. The “strategic cooperation” enjoyed by Turkey and China, most explicitly in Turkey’s recent participation in the Belt and Road initiative, makes it a natural choice for BYD’s European expansion.

   A third European plant is also under contention. Italy was rumored as a possible location, given its government’s interest in diversifying manufacturers to make up for the decline in production of Stellantis (Fiat’s parent company). Initial meetings with BYD, however, came to little avail, though there are reports that Chery is interested in investing in Italy. More recent reports have indicated that Germany will be the likely site of a third European plant. Volkswagen and other German car factories that are due to close may well be the most attractive site for Chinese firms to invest in. Gaining access to Germany’s productive infrastructure, as well as its position at the heart of the European market, would be a boon for any Chinese company seeking to expand. 

   BYD is not simply looking to build a couple of factories in Europe, but to position BYD as a friendly European partner. BYD executives have often affirmed that the company wants to “become European.” This in practice means investing in comprehensive production (not just assembly), setting up research and development centers, such as the one slated for the UK, and fostering a robust local supply chain in Europe. The meeting earlier this year between BYD representatives and 300 Italian auto component manufacturers in Turin is testament to the way in which BYD engages with local economic actors to present itself as a reliable partner interested in long-term investment.

   The final frontier: Africa and Latin America

   Africa and Latin America may not be the core priority of BYD’s expansion, but they remain a growth area to target. Chinese investment in Asia and Latin America, particularly in ports, logistics infrastructure, and extractive industries, is growing. The EV wave offers China the opportunity to build on the economic and diplomatic relationships already established and build a vast industrial and logistical presence, which could have important geopolitical implications in terms of bringing these regions yet further into the Chinese orbit and yet further away from Washington’s. 

   Plans are still in a nascent phase. So far, the only large manufacturing plant currently mulled by BYD is in South Africa, though it is still stuck in negotiations. BYD has also had exploratory discussions about the construction of manufacturing plants in Egypt and Morocco. An obstacle to the introduction of EVs in Africa is the limited charging and maintenance infrastructure in place, as well as the lack of a supportive regulatory framework and EV incentives from governments. Things are slowly changing, however. The African middle classes in countries like Rwanda and Nigeria have already developed a taste for electric vehicles, while Ethiopia has banned the import of gas-fuelled cars. New car factories are expected to open in the next decade. 

   BYD’s plans are at a more advanced stage in the Americas. Having decided to avoid the US and Canadian markets where Biden and Trudeau already imposed 100 percent tariffs, BYD and other Chinese EV firms are gaining a foothold in Central and South America. In Brazil, BYD has acquired a former Ford plant in Camaçari, Bahia and has invested $1 billion to transform it into a state-of-the-art EV facility—although the construction of the factory has been halted after an investigation revealed that 163 Chinese workers were living in slavery-like conditions. Great Wall Motors and Chery are also establishing plants in Brazil, which is a hub for car production and distribution in South America. Further, BYD is currently in discussion about a new plant in Mexico. The initiative has, unsurprisingly, already raised alarm among US elites who are warning that Mexico is liable to fall victim to Chinese technological supremacy. 

   With plants in Mexico, Chinese manufacturers intending to sell to the US could jump the punitive tariffs placed on Chinese-made goods, and be entitled to the lower 25 percent tariff applied to Mexican cars, thereby increasing competitiveness. The risk however is that a factory so close to the US border could result in a technology leak to China’s greatest strategic adversary. The risk is considered so serious that now Chinese EV firms are reportedly considering delaying their investment plans in Latin America in a reminder that in this region as elsewhere, the automotive sector presents a key battlefield in the geopolitical tug of war between the world’s great powers. 

   A battery-powered globalization with Chinese characteristics

   BYD and its siblings are engaging in one of the largest waves of international expansion in automotive history. Should China overtake the US as the leader in globalization, one can expect that it will do so in line with the Chinese government. For one, it will likely be more concerned with issues of order and long-term stability than Washington has shown itself to be in recent years. BYD’s major plants are located in countries like Pakistan, Indonesia, Turkey, and Brazil—all of which are involved in the Belt and Road Initiative or the BRICS. Under Chinese aegis, economic cooperation goes hand-in-hand with state-to-state partnership, even in spite of major ideological differences. 

   This variety of globalization is driven by a recuperation of “vertical integration” against the system of “flexible production” which dominated the late twentieth century. Greater emphasis is also placed on long-term stability and the forging of consensus in the countries involved. The “localization” practices pursued by firms like BYD position it as a benign actor focused on creating jobs and advancing the green transition. 

   The reality, of course, is more complex. Reports on the condition of workers of the Camaçari plant in Brazil highlight exploitative labor practices that aim to bypass the influence of trade unions on industrial production. While emboldened by its impressive technological leadership in many fields, Chinese CEOs and politicians remain concerned about further protectionist pushbacks amid the growing global trade war and the risk of reverse tech transfers from countries like India and Mexico. For countries receiving Chinese investments, these concerns also provide a useful lesson: demanding that Chinese firms interested in their markets enter in partnership with local companies is the best means to turn foreign investment into a lever for autonomy rather than dependency.

2. Restoring Multilaterism

   April 19, 2025 6:36 am Comments Off on Restoring Multilaterism

   The “rules-based order” is more a confessional community of ardent believers in the benign global influence of American economic and political power than an accurate description of global governance. This is not widely understood. The more common story is that—per, to take a recent example, Paul Krugman—after the Second World War, Pax Americana “chose not to rig the system in its favor,” and instead cultivated a new model of hegemonic governance based on decency, benevolence, and restraint.           

   Donald Trump’s ascendancy to the White House through the murkier worlds of mega real estate deals and reality television means he has never had much time for such values—nor for the internationalist trappings typical of more vaunted members of “the order.” That unique personal history is beginning to hit home.

   A flurry of Presidential decrees since January 17 has taken direct aim at key institutions of international cooperation, both domestic and multilateral. More are expected. There is certainly malice in these actions, and perhaps a little madness. But they embody an underlying belief in the restorative power and technological acumen of American business to make the country great again—and a determination to ensure that it is not obstructed by countervailing forces at home or abroad. 

   Trump’s aggressive use of tariff measures, announced on April 2 with no sense of irony as “Liberation Day,” has been taken as a more direct assault on the prevailing structures of global governance. Economists were quick to ridicule the arithmetic and logic behind the idea that his “reciprocal tariffs” can bring manufacturing jobs back to America, mapping their likely damage to markets, businesses, and households. Much of this is commonsense but the technocratic allure of the response might miss the forest for the trees. What is at stake is not a well-conceived policy mix to tilt the gains from trade, but a political project to reshape American power.

   In the Financial Times, Gillian Tett noted, via Albert Hirschman, that trade policy through the ages has always been linked to economic coercion and national power. If there is one thing President Trump understands, it is the potential of bullying to achieve his desired outcome. 

   Trump’s invective has been directed at everyone who has ostensibly “ripped-off” the country—from erstwhile allies in Western Europe to some of the world’s poorest countries to the penguins of the Heard and McDonald Islands—and also his predecessors in the Oval Office who allowed this to happen. Still, by now there is little doubt that China is the principal target of his assault on the international trading system or in his willingness to use the threat of further tariffs to corral countries into joining an anti-Sino alliance. Whether forced or strategic, the ninety-day tariff pause, excluding China, announced just a week after Liberation Day, points to further disruption ahead.

   The unruly coalition of business interests behind the administration may well struggle to survive the turmoil and uncertainty that has been unleashed, let alone deliver on its promises to working families. That China will be cowed into economic submission seems even more unlikely. What is certain, however, is that the global economic environment will become more challenging, particularly for countries in the developing world. Highly indebted poor countries will suffer sooner rather than later even with the possible offsetting influence of a weaker dollar.

   But the emergence of a more hostile international economic environment pre-dates Trump, beginning with the global financial crisis, if not before. Moreover, a willingness to weaponize its dominant economic position has been a defining feature of the United States’ hegemonic position for longer still, albeit with uneven and perhaps diminishing effect in a world of competing poles of influence. 

   A corrosive combination of economic coercion and asymmetric transactional relations has been undermining trust in multilateral arrangements and weakening international cooperation for years, most recently under cover of free trade agreements and economic partnerships between countries in the global North and South.

   Normalcy?

   What is worrying then, is the call by assorted defenders of the existing international order for a “return to normalcy” and, in particular, for business leaders to help turn back the Trumpian assault on “rules-based capitalism.” To date, that call has fallen on deaf ears. But the response is itself a measure of just how far “the order” has drifted from the principles that launched the post-war multilateral system.

   For those gathered at Bretton Woods in 1944, the financial instability, economic contagion, and political violence of the interwar years had left them deeply suspicious of the unchecked ambitions of private capital and the self-correcting power of market competition. Instead, active public policy, a strong regulatory hand, enhanced cooperation, and a rejection of “economic bullying” would play a foundational role in building a prosperous and peaceful world. Dedicated multilateral institutions were fashioned accordingly. As Jamie Martin has described it, a new interventionist model of organized capitalism based on the New Deal was to be “scaled up to the entire world.” And, as Eric Helleiner has shown, this project was conceived with (now largely forgotten) foundational support from countries of the global South. 

   The eponymous world-making era that unfolded from the Bretton Woods Agreement never lived up to its original ideals. Through its institutions, hegemonic power was used both unilaterally in support of American interests and, when necessary, to bully recalcitrant players into compliance. With the rejection by the US Congress of the Havana Charter for an International Trade Organization, developing country concerns over the biases and asymmetries they faced in the postwar international division of labor were largely ignored. However, it did deliver a degree of economic stability and sufficient policy space to allow more advanced countries to recover from wartime dislocations and achieve unprecedented rates of economic growth, sustained levels of employment, and tangible welfare gains. 

   From the late 1960s, this era faced growing macroeconomic and distributional tensions from a combination of fiscal pressures, trade imbalances, and shop floor discontent. In response, President Nixon’s unilateral decision in 1971 to delink the dollar from the system of fixed exchange rates began a process of unravelling that saw international banks thrive and expand by recycling “petro-dollars” and culminated in a “controlled disintegration” of the postwar regime. This process continued as the decade came to a close under the watchful eye of the Federal Reserve—hiking interest rates and allowing the dollar to strengthen—and with strong political backing from President Reagan. 

   Much like the current moment, the Fed’s decision provoked considerable market turmoil and business discontent; through the end of 1982, the economy was in and out of recession. Still, the combined assault on organized labor and developing country solidarity helped to extinguish any lingering inflationary pressures, restore profitability, and pave the way for newly liberated firms and financiers seeking investment opportunities across the globe. 

   By the end of the 1980s, the result had more clearly taken shape. The international economic regime, fully tuned to the demands and wishes of footloose capital, and backed by a policy toolkit of austerity measures, was intensely relaxed about the sharp rise in inequality, insecurity, and indebtedness that followed. Multilateral institutions duly lent their support to what the IMF’s Managing Director at the time called “an open and liberal system of capital movements” and, through their adoption of policy-based lending programmes, aimed squarely at opening up the Eastern bloc and the global South to private capital flows.

   Although the Fund’s bid to rewrite its Articles of Agreement, which enshrined capital controls, failed in the face of the Asian Financial Crisis, in the following decade the United States was still able to hardwire such requirements into trade and investment treaties.

   Setting private capital free has not, however, delivered on the promise of a strong and inclusive era of productive investment and financial stability. On the contrary, beginning as early as the savings and loans crisis in the mid-1980s, and spreading through Mexico, East Asia, and Russia to the Covid shock and its aftermath, financial turbulence has been a permanent feature of this hyperglobalized world.      

   Crises and reform

   The bursting of the US housing bubble in 2008 and its global aftershocks prompted calls to rebuild buffers against unruly capital flows and to strengthen international cooperation. French President Nicolas Sarkozy and British prime minister Gordon Brown talked of a “new Bretton Woods,” looking to a revamped G20 to deliver on the promise. It didn’t happen. Instead, once the banks at the center of the crisis were saved, business as usual returned, and a new collection of financial movers and shakers—hedge funds, private equity, and asset management—capitalized on a world of easy money.

   With their fiscal space squeezed by austerity and beguiled by the ever-expanding portfolios of these new financial players, governments in rich and poor countries alike signed partnership deals for the delivery of public goods and services. Even more ambitiously, at the 2021 COP26 in Glasgow, a financial alliance led by Michael Bloomberg and Mark Carney hinted that these “public private partnerships” could unlock over $130 trillion to secure the health of the planet. The headline figure marked the peak of a new consensus over how to deliver on sustainable development goals.

   “Pitiful” is the word that the World Bank’s chief economist used to describe this decade-long embrace of private capital mobilization. Neither the resources mobilized nor their value for money has meant transformative change. More of the same will do little to counter Trump’s agenda or deliver the investments needed to keep global temperatures within a zone safe for healthy living, let alone address the suffocating burden of debt facing a growing number of developing countries. Indeed, as Daniela Gabor has suggested, there is every likelihood that an even more damaging strain of such partnerships will emerge from the new administration in Washington.

   What can stand in the way? Calls to defend the architecture of international liberal governance against right-wing populist assault miss on two grounds. They fail to account for how their own programs over the past three decades nurtured the growth of nativist forces, and they ignore their own incapacity to respond to the multiple crises we now face with timely, effective, and coordinated resources and policy action. 

   Multilateralism renewed

   To reach decarbonization targets and make tangible improvements in the lives of the global majority, the required reform agenda will, like the challenge itself, have to be multi-dimensional and yet anchored in a strong public foundation of finance, investment, services and policies. Much like the aftermath of the global financial crisis, the reform impetus from the Covid shock has lost momentum—and in America, at least, has shifted into reverse. Still, some positive movement is discernible. In 2024 the G20, under the Brazilian Presidency, identified the network of development finance institutions (DFIs) as key to spearheading the fight against poverty and climate change. It advocates for the potential of DFIs to boost public investment, strengthen transitional planning, and better coordinate country efforts to meet climate and development goals. Though receiving less attention, an independent report of the G20 TF-Clima Group of Experts on A Green and Just Planet outlined a whole government approach to green industrialization with the public sector, at the national and international levels. In essence, these moves call for a return to the foundational principles of multilateralism. 

   As part of this agenda, the multilateral financial institutions should focus on establishing closer partnerships with other public finance institutions that are clearly aligned with development and climate priorities. A decade of blended finance talk must give way to a new program of institutional collaboration—“blending from the ground up” to raise the prospects of a big public investment push for development and climate. This approach is better placed to mobilize private capital that is both patient and innovative, and reflects a willingness to share the risks and rewards of investments in an enabling but accountable policy environment.

   The DFIs have upwards of $23 trillion in assets. Adding central banks, sovereign wealth funds, and public pension schemes casts the public finance net even wider. But so far there is no effective institutional framework for cooperation among these public bodies to leverage their assets. Particularly important is the possibility of strengthening collaboration between multilateral development banks (MDBs) and national development banks (NDBs). Above all, reducing the cost of capital is crucial if developing country borrowers are to undertake the investment needed to transform their economies in a sustainable manner. 

   The favorable terms on which NDBs can obtain financing from MDBs, which can assist in hedging the risks that NDBs can’t manage on their own,—especially currency risk—is essential for building genuine “public-public partnerships.” Moreover, their chances of affecting the required transformation in key areas, such as the energy transition, would be strengthened by their close alignment with government priorities and backing from a policy environment predisposed to fostering innovation and successful projects.

   More than fifty years after developing countries sought a New International Economic Order through the United Nations process, and seventy years after the Bandung Conference launched the non-aligned movement, there is a coterie of Southern-led institutions positioned to take another leap forward. The New (BRICS) Development Bank is already built on a model of partnering with national development banks for green projects. And the BRICS will convene all their national development banks later this year. The Islamic Development Bank and the Inter-American Development Bank have piloted similar efforts, as has the European Investment Bank, suggesting that a more innovative spirit can still be found in the global North.  

   These efforts are, of course, only part of a larger agenda to rebuild multilateralism on strong public foundations. The required reset will not succeed through backroom diplomacy and grand summitry. As was the case in the 1930s and 1940s, new political coalitions are needed at the global, regional, and national levels, to backstop more systemic reform and to mobilize against the powerful interests that have woven strong political alliances around support for footloose capital, rent-seeking corporations, and a carbonized economy. That, unlike the 1940s, these new coalitions must deal with the overtly hostile agenda of a rogue hegemon is the political challenge of the moment.

3. Green Gold

   April 17, 2025 10:53 am Comments Off on Green Gold

   The European Union is one of the main markets for Indonesian palm oil. While the region’s export value is smaller than that of China and India, it offers a higher value for the crop, making it an essential market for the Indonesian economy. The relationship goes both ways: palm oil is also integral to the production of key European goods, from soaps, to cars, and its expanding biofuel market. 

   This longstanding relationship has recently come under strain thanks to the European Union Deforestation Regulation (EUDR)—a policy to curb deforestation and forest degradation caused by the EU’s consumption (and production) of specific, contentious commodities. The new policy aims for traceability to ensure that palm oil used in the EU market is produced ethically with low carbon emission and zero deforestation. It is one of many international regulations attempting to curb the social and environmental effects of Indonesia’s palm oil plantations by mandating traceability and deforestation-free cash crop production. Failure to comply with these regulations will limit Indonesia’s access to the valuable EU market and hit the country’s Gross Domestic Product (GDP), as palm oil is Indonesia’s main crop export.1Mr. Hartarto’s comment is just one out of many public attempts to smear the EUDR, in addition to accusing the EU for monopoly and filing a lawsuit to the World Trade Organization (WTO). “Imperialism” is a keyword in the GOI’s counter-narrative to defend its palm oil production, and it serves as an argument to fight against transnational sustainability initiatives. The nature of such transnational regulatory bodies invokes the historical memory of Euro-American interests in Indonesia’s cash crop, and this raises the question of imperialism and colonial legacies inherent in oil palm.

   Indonesia’s former Coordinating Minister for Economic Affairs, Airlangga Hartarto, dismissed the policy as a form of “regulatory imperialism.” Even in the face of existential economic threats, the Indonesian government appears steadfast in its commitment to palm oil production. Indeed, even in the aftermath of the government’s Palm Oil Moratorium between 2018–2021, plantations have continued to expand. From 16 million hectares in 2018, Indonesia now has almost 20 million hectares, and experts predict that Indonesia will expand its oil palm plantations to 30 million hectares by 2030. Indonesia is the world’s largest palm oil producer, accounting for 60 percent of the global market. However, even beyond environmental concerns, this “plantation economy” is widely recognized as a developmental dead end.2 Li, Tania Murray, and Pujo Semedi. (<)em(>)Plantation life: corporate occupation in Indonesia’s oil palm zone(<)/em(>). Duke University Press, 2021.

   Within Indonesia, discussions surrounding palm oil are stuck at superficial technological and financial fixes: endless sustainability certifications, carbon credits, and blockchain for traceability. What explains the country’s unwavering reliance on this “green gold”? Indonesia’s palm oil industry is deeply interwoven with a history of imperialism and unequal exchange, but not one Mr. Hartarto would tell. The core-periphery relation entangled in colonial legacies is integral to the country’s palm oil production. But equally responsible are the country’s governing elites, who evaded opportunities to industrialize during the wave of privatization that followed the 1965 Genocide. Instead, Indonesia’s business, military, and political class has progressively consolidated around its agricultural sector. The position that palm oil occupies—in Indonesia and around the world—is a historically forged tale of empire and the rise of an agribusiness class. 

   Shallow roots, deeper thorns

   Palm oil production began more slowly than tobacco or rubber—formerly colonial Indonesia’s primadonna cash crops. Oil palm is not a native plant to Indonesia and was thought to be unsuitable for the country’s climate when Dutch botanists brought it over as a decorative plant in 1848. It wasn’t until 1910, when Belgian planter and philanthropist Adrian Hallet used oil palm trees in Deli (present-day North Sumatra) to produce better and more oil kernels, that Indonesia’s palm oil production took off. The year prior, Hallet had founded Socfin—a giant agribusiness company that continues to be a leader of Indonesia’s palm oil sector today. The historian Jonathan Robins has demonstrated that, like many cash crops in Southeast Asia, oil palm was not born out of mere spirit of entrepreneurship and discovery, but was integrated into the region’s hyper-exploitative colonial cash crop economy. 

   The expansion of palm oil—and monoculture generally—in colonial Indonesia was enabled by the introduction of Staastblad No. 55 1870, commonly called Agrarische Wet (Agrarian Law). The law stipulated draconian state control over the land known as domein verklaring (domain of the state), meaning that the state owned and controlled land unless proven otherwise. Despite state control, this law relaxed land rent for private foreign companies struggling with the limited lease period. Agrarische Wet prolonged land rent from twenty to seventy-five years and introduced Erfpachtrecht (leasehold right) for plantation owners, granting them property rights equal to regular landowners.3This right also supported the colonial Coolie Ordinance ((<)em(>)Coolie Ordonnantie(<)/em(>)) that allowed penal sanction ((<)em(>)poenale sanctie(<)/em(>)), which stipulated that plantation owners could punish their workers however they saw fit. The sanction was only abolished in 1931. See Breman, Jan. (<)em(>)Taming the Coolie Beast(<)/em(>). Oxford University Press, 1989. Following this new policy, the Dutch East Indies (Indonesia’s colonial name) witnessed cash crop booms and an uptick in labor migration coming to the plantation areas. Through this policy, monoculture expansion also tackled two core problems facing the colonial administration: the rising numbers of landless peasants and farm workers in Java that could trigger uprisings, and the major sultanates in Sumatra that could impede the administration’s statebuilding projects.

   Palm oil fueled the Dutch Empire’s colonial market and the needs of the metropole. The establishment of palm oil plantations would beget palm oil mills. Indonesia’s first palm oil mill was established in 1911, less than a year after the first large-scale palm oil plantation in 1910. At least until 2008, any plantations with concessions of more than 6,000 hectares were obligated to have their own mills. In the colonial period, palm oil plantations were operated by the government or private estates and did not involve regional farmers or smallholdings. Farmers would only become the key player in Indonesia’s palm oil production in the 1980s, fundamentally altering the industry’s supply chain governance.

   The palm’s new order

   With these colonial origins, Indonesian palm oil production exploded in the 1980s. The total area of palm oil plantations jumped from 250,000 hectares in 1978 to one million hectares in 1990.4 Indonesia General Directorate of Plantations. 1995. Statistik Perkebunan Indonesia: Kelapa Sawit (1994-1996) [Statistical Estate Crops of Indonesia: Oil Palm (1994-1996]. Jakarta Formerly dominated by state-owned companies, by 1986 domestic private companies accounted for 60 percent of the total concessions. 

   The privatization of the industry was directly linked to the 1965 Anti-Communist Genocide, which decimated the progressive factions in the country’s political spheres, which were dominated by workers and farmers. Backed by the Indonesian Military Force, the Central Intelligence of America, and the British Foreign Office, the genocide is widely regarded as one of the “worst mass murders in the twentieth century.” Before the massacre, the Indonesian rural population had been the main drive for progressive, nationalist, and anti-colonial movements. Many landless peasants and farm laborers organized and became affiliated with the Indonesian Communist Party (PKI). The party and its rural bases supported the 1955 Nationalization Act that nationalized foreign companies and imposed state ownership in plantations (in practice, however, less than 30 percent of foreign plantations were nationalized). They also managed to foreground the populist and anti-colonial Basic Agrarian Law of 1960 that prohibited foreign land ownership and limited the land size rented by corporations.5Fighting against the colonial legacies of plantations, the Indonesia Plantation Workers Union (SARBUPRI/Sarekat Buruh Perkebunan Indonesia) in 1951 also made radical demands for worker-controlled plantations, women leadership in the union’s branches, and liveable wages.

   Economically, the 1965 mass murder reversed the state’s total and direct control of land concessions for plantations, which had been the country’s primary financial resources after independence in 1945. Indonesia was flooded with international and national capitalist interests. In 1967, the Mineral Law and Foreign Capital Investment Act ushered in permits and concessions for mines and plantations that would transform Indonesian forests and rivers. The laws allowed foreign capital to enter and obtain business permits in Indonesian landed resources (forestry, mineral), practically canceling the 1955 Nationalization Act. 

   With the Basic Agrarian Law still in place, however, foreign capital was kept away from land concessions. Palm oil plantations thus continue to be owned and operated by domestic capital. In the aftermath of the genocide, the decision to preserve the law was not born out of anticolonial instinct, but out of a need to secure political stability. In order to open the way for foreign capital, the government needed to secure the support of agribusiness elites. Collusion between state elites and foreign capital enabled Indonesia’s palm oil plantations to persist and expand. 

   Expanding the plantations came at the expense of an earlier strategy for industrialization. This plan, proposed by a group of economists trained in Berkeley and sponsored by the Ford Foundation, was rather simple: incomes from oil and crop booms had to be redirected to boost manufacturing so Indonesia could gradually depend less on its capital-intensive extractive economies. However, following the oil boom of 1973, the authoritarian government of General Suharto halted its industrialization plan and focused on expanding palm oil plantations. There are many possible explanations for the setbacks: political scientist Richard Robison notes the underwhelming gain from manufacturing despite its initial promise. Another political reason, however, might correlate to the militarization of agriculture; after independence, the military became heavily involved in revitalizing colonial plantations and expanding new ones. Given Suharto’s military ties, military personnel were favored to become heavily involved in palm oil plantations and were placed as heads of companies. Alongside domestic private capital, the military’s heavy involvement further ensured Suharto’s political stability.6 Robison, Richard. (<)em(>)Indonesia: The rise of capital(<)/em(>). Equinox Publishing, 2009. After the political turmoil of the 1960s, these patron-client relationships harnessed the power of private capital to advance the state’s developmental goals.  

   1967 would also be the year in which the state’s financial and political elites established a consortium that pooled funds from foreign countries—primarily the US, Western European countries, and Japan—to service the country’s outstanding debt. Alongside the International Bank for Reconstruction and Development, the Inter-Governmental Group for Indonesia was meant to facilitate financial recovery. Yet the decline of oil prices in the 1980s weakened the state’s control over private and international capital, now that the government had to succumb to international funders and aid to make up for the decreased income. The disappointing revenues from manufacturing exports and domestic non-oil revenues deepened Indonesia’s increased reliance on the Bank’s loans for rural development projects, which at that time heavily emphasized producing crash crop smallholders—mainly palm oil.

   Global efforts for smallholders

   International financiers and development agencies had supported the expansion of monoculture and the extraction of Indonesian landed resources throughout the authoritarian regime (1967–1998). The World Bank was the primary funder for the expansion of palm oil plantations through a land resettlement policy called transmigration (transmigrasi), arguably the longest-running policy of its kind since its colonial origin in 1911. As part of a population distribution program, transmigration moves households from populated areas to the countryside to become farmers. While the program cultivated many crops, including rubber, rice, and aquaculture, oil palm was the primary commodity. This program helped produce more concessions and skyrocketed the number of smallholders—a farming household with less than 50 hectares—who have since contributed 40 percent of Indonesia’s palm oil production. The Bank loaned approximately half a billion dollars by the end of the program in 1995. 

   Transmigration operated under a system called Nucleus-Estate Plantations, which established shared concessions between farmers and plantation companies. In the context of the pre-1997 Asian Financial Crisis, transmigration stipulated that palm oil plantation companies had to share 70–80 percent of their land concessions with transmigrant smallholders. For example, if a plantation company obtained rights to the cultivation of 10,000 hectares, it would have to share at least 7,000 hectares with the transmigrants. The share was not free; smallholders would be in debt for approximately seven to ten years, depending on their harvests and production values, before they could fully own their palm oil plots and housing. In this sense, transmigration and palm oil plantations legally served as a land redistribution program. 

   Transmigration atomized the palm oil supply chain by breaking down and externalizing much of the labor necessary for production. After paying off their debts, smallholders could technically sell their fresh fruit bunch (FFB, the crop processed for crude palm oil) to other brokers or mills directly. However, many smallholders’ harvests remain below the national production standard, so not all mills accept their products. Smallholders also often pay for their own distribution, including a transport service and FFB storage, before it can be processed in the mills. Hence, it is easier for smallholders to partner with plantation companies with more capital and resources to process their harvests. While the program claimed to undermine the hold of plantation companies, it ultimately strengthened them. 

   During the program’s peak, Indonesia also received more credits, loans, and in-kinds through bilateral and other international partnerships and agreements—all with so-called developed countries from the global North.7Simpson, Brad. “Indonesian transmigration and the crisis of development, 1968–1985.” (<)em(>)Diplomatic History(<)/em(>) 45, no. 2 (2021): 268-284. Many United Nations organ bodies, such as the UNDP, WFP, ILO, and FAO, were also involved either as evaluators or consultants. The program’s scope was so big that no less than seven ministries—including the Ministry of Defense, the Ministry of Foreign Affairs, and the Indonesian National Armed Forces—were involved between 1978 and 1995. Hence, since its beginning and development, palm oil plantations have never been solely a domestic issue; they were a hub for many global interests in cash crop flows. The program connected the amalgamation of domestic and foreign interests in Indonesia’s land market and cash crop. 

   The financial pipeline for transmigration and oil palm has enabled rural credits and integrated rural livelihoods into the global circuit of cash crop production. State officials of the transmigration program and corporate representatives for palm oil plantation companies often describe how important Indonesia’s palm oil production is to the world and how modern and advanced it has been made by the flow of money from foreign institutions. Even after palm oil plantations no longer receive such aid, the new financial schemes for a green economy that incentivize smallholders’ sustainability or worker’s standard certifications keep them in the global commodity supply chains. With the enforcement of EUDR, for example, many companies have teamed up with international development organizations to help smallholders certify and map their concessions. Smallholders remain the primary certification target for the Roundtable Sustainable Palm Oil. In every annual meeting, the roundtable and other palm oil business platforms alike hold awards for the most sustainable smallholders and their collectives. Smallholders thus become a key player in Indonesia’s palm oil production and transnational efforts to curb the effect of oil palms. 

   However, the complex financial instruments and agreements introduced by transmigration and transnational standardization bodies have furthered the depoliticization of Indonesian farmers and workers and created a political and class rift between them. Most palm oil smallholders agree to join various palm oil partnership schemes and certifications because these instruments have differentiated them from stereotypically poor farmers; they call themselves “farmers with suites and ties” or “farmers with a savings bank [account].” Hence, the financialization of palm oil plantations has formed and sharpened class differentiation between farmers, workers, and the affected indigenous or local communities. Smallholders are not a monolithic category either, while most successful smallholders are transmigrants who received credit support during the peak of the program in the 1980s and the 1990s, others used to be large landowners who reallocated their agricultural capital to palm oil plantations. They are also mostly migrants—many local and indigenous smallholders are not as lucky; they are often hesitant to join the transmigration or palm oil partnership program because that means losing their village or customary forests. The situation is also exacerbated by how state and corporate officials perpetuate the myth of lazy natives on the plantation.

   After the transmigration funding ran out and its budget swelled, the government of Indonesia switched the concession share to 80 percent for plantation companies and the rest for their smallholding share in 2005—this agreement is called the “Partnership” model (Kemitraan). In other words, the new model reversed the previous Nucleus-Estate concession share. The government thus still aims to produce smallholders, but this time, it is the company that will bear the cost. However, smallholders are trapped in indebtedness to start and cultivate their plots. These debts are mostly unjust, too, as plantation companies manipulate the accounting and bookkeeping to force smallholders to pay for the former’s debt instead. After all, palm oil plantations are not the easiest and cheapest business, especially as climate change now frequently interferes with their production. 

   Smallholders’ dependence and political division from other plantation inhabitants complicate the heroic portrayal of small farmers as frontline fighters against climate change. Since smallholders are close to companies and state institutions, the latter often use smallholders’ welfare as a pretext to fight against or disregard many sustainability initiatives. The same goes for workers, although it involves more coercion and fear of retaliation. When standardization auditors came to the plantations, many workers—perpetually casual and precariously temporary—confessed that their managers threatened them and forced them not to share anything that could damage the company’s reputation, or else they would be sanctioned or fired. Due to the spatial isolation of palm oil plantations, organizing and mobilization efforts have proven difficult for advocates and activists, and workers often only hear one-sided stories from the management. In my own fieldwork, I had many workers ask if EUDR is “a black campaign against palm oil.” Any efforts to create sustainability or environmental justice from below in palm oil plantations thus face an enormous problem both from the perpetrators of environmental destruction and their victims.

   Green enough

   Conflicts within Indonesian palm oil plantations have only increased in the last two decades since introducing the “Partnership” model. The Indonesia Consortium for Agrarian Development found that expanding monoculture is the main reason for land conflicts, with palm oil plantations being the primary culprit. The conflicts ranged from land grabbing, outstanding smallholders’ debt, environmental contamination, to labor rights violations; they frequently and progressively took human tolls. On October 5th of last year, an indigenous man named Gijik was gunned down by anti-riot police hired by a palm oil plantation company, HMBP Ltd., during the smallholders’ and workers’ strike and blockade in Central Kalimantan. As more smallholders and workers have been criminalized for organizing debt strikes and protests, palm oil plantations refuse to admit that their production relies on the labor and production of precarious workers and smallholders. Despite the tensions brewing in plantations, the Government of Indonesia continues issuing palm oil plantation permits, even for those who have been found unproductive or illegally encroaching on protected forests.

   The government of Indonesia has redirected many international “green” funds and initiatives to correct the wrongs in palm oil plantations. However, these funds are mostly distributed to companies rather than to smallholders. The initiatives usually cover mapping (geocoding), sustainability certification (particularly the no-deforestation pledge), and streamlining the supply chain, especially with the pressure of EUDR, with which the Indonesian government and private plantation companies begrudgingly comply. Recently, the WTO affirmed the validity of EUDR while demanding some adjustments that are “inconsistent” with WTO rules, thus partially upholding Indonesia and Malaysia’s complaints. Still, early in 2025, the EU officially delayed the implementation of the EUDR, citing complaints from its main trading partners (Brazil, Indonesia, and the USA) as one of the reasons. The fiasco surrounding the sustainability certifications and the recent EUDR development has illuminated a series of legal manipulations, the lack of accountability, and the permissiveness of violations. 

   Beyond failing to achieve their own stated goals, sustainability initiatives obscure the power dynamics contained in the palm oil supply chain by overemphasizing consumer rights and turning a blind eye to the deeply intertwined histories that generated the world’s most sought-after commodities. Indonesia provides cheap labor and commodities to fund sophisticated and expensive sustainable technologies such as biofuel and electric vehicles. Most farmers have to pay for third parties mapping their concessions, and most workers have to pay for their own personal protective equipment to support the plantation companies’ sustainability goals. By pulling financial resources that are mostly available in core countries, the standards consolidate hegemonic interests in maintaining the global division of labor in cash crops and legitimize this new venue of extraction through “sustainable” stamps. The rise of sustainability initiatives in palm oil plantations runs together with the deepening use of cheap and disposable workers. 

   Any new framework aiming to challenge the existing palm oil sustainability must recognize the historical evolution of palm oil production as a relationship between imperial expansion and domestic exploitation. Climate catastrophes are not born simply because struggling postcolonial nations refuse to join decarbonization; rather, they are the result of a predatory coalition between the imperial interest in maintaining cash crop production and the national state-business elites profiting off the $67.3 billion palm oil market. Workers and farmers have demanded a new agreement in palm oil governance that does not abandon them in mitigation and biodiversity efforts. For too long, these workers have paid the price for palm oil’s production.

4. Wages of Citizenship

   April 10, 2025 2:51 pm Comments Off on Wages of Citizenship

   The Trump Administration’s crusade to transform the US immigration system has included sweeping changes to increase the state’s capacity to locate and remove noncitizen residents. The administration has empowered immigration agents to enter formerly “sensitive” spaces like schools and churches, suspended due process for legal noncitizens, and established immigration jails outside national borders. It made a deal with the Internal Revenue Service (IRS) to use once off-limits tax data to locate up to seven million undocumented workers. Dramatic deportation operations are now underway across the country, with the Department of Homeland Security (DHS) boasting 113,000 arrests and “north of” 100,000 deportations since Trump took office in January. The numbers include a rise in “collateral” arrests and deportations and are likely to rise after Immigration and Customs Enforcement’s (ICE) March 25 repeal of work authorization for 530,000 legal migrants of Cuba, Nicaragua, Haiti, and Venezuela, who have thirty days—until April 24—to depart before they too will be targeted for arrests and deportations.  

   Draconian methods were to be expected. Less clear is whether the promised crackdowns threaten the uneasy alliance between the federal government and employers in agriculture, construction, and food and hospitality industries. Despite the “war on terror” redefining the outer limits of executive power to surveil and detain foreign nationals, the workplace has over the past two decades remained largely insulated. The resilience of this arrangement reflects a clear hegemonic interest in cheap and docile labor, which allows for both lower prices and higher profits; a critical supply of health and childcare workers; a vital source of future labor; and close to $100 billion annually in state, local, and federal tax revenues. This is the perspective of US employers, expressed by the notion of “sanctuary businesses,” in which the legal segmentation of the labor market has propelled business growth.1The issue of workforce reproduction is particularly dire. The segment of the labor force comprising US-born workers with US-born parents is (<)a href='https://www.dallasfed.org/~/media/documents/research/papers/2020/wp2005.pdf'(>)projected(<)/a(>) to decrease in size by 8.2 million workers between 2015 and 2035. Immigrants and their native-born children will thus account for nearly all the growth—18.2 million workers on net—in prime working-age adults during this period.

   Reforming this system beyond all but the most punitive bills has become an exercise in futility. The failure of “comprehensive” reform in the Congress has increasingly relegated immigration policy—as with most policy—to the domain of executive action. Yet the US immigration system runs not on the enforcement of immigration laws, but on their selective nonenforcement. Employers have relied on the state to ignore the exploitation of undocumented labor while holding the credible threat of deportation over workers. This has had the effect of strengthening employer bargaining power generally against all workers—lowering wages, weakening unions, and shifting the politics of work away from collective bargaining and wage-and-hour regulation. The interest in labor that is weak and disorganized has driven US politicians, consciously or not, to adopt the role of petty bosses, threatening the deportation of significant portions of the US workforce. But if Trump can afford to blow up this arrangement, it is because the precarity of the undocumented worker represents the future of labor relations in the US, not its past. How has the uneasy alliance behind work verification lasted so long, and how much longer can it last?

   US labor and immigration law

   The consensus view among immigration scholars has long been that economic pull factors—not criminal entrepreneurship or the “welfare magnet”—are the primary drivers of US-Mexico migration. This insight informed 1950s efforts to impose financial penalties on employers, as well as the larger policy drift toward work verification in the 1970s. The thinking was that if employers could be coopted into acting as immigration screeners at the point of hire, would-be migrants would lack incentives to migrate in the first place. Meanwhile, the existing undocumented workforce—faced with declining prospects for employment—would be compelled to “self-deport.” As the restrictionist Kris Kobach provocatively asked in a 2008 paper on “enforcement by attrition”: “what if every illegal alien found it difficult to obtain employment in the United States and the risks of enforcement … were to increase for all?”

   The 1986 Immigration Reform and Control Act (IRCA) marked the beginning of the current federal experiment in controlling immigration using labor market controls. The law’s “employer sanctions” provisions delegated broad immigration screening authority to the discretion of private employers, who were tasked with verifying identity documents and keeping I-9 records on file. Firms would be subject to random audits and complaint-led investigations, with noncompliers facing escalating civil and criminal penalties depending on the frequency and severity of the offense. This statutory shift was both qualitatively and quantitatively significant. To the tens of thousands of official Immigration and Naturalization Services (INS) personnel, the IRCA added millions of new private immigration screeners: the employers themselves.

   As with prior efforts to police unauthorized work in the 1950s and 1970s, business groups intervened to shape the law to their own needs. Lobbyists won key provisions that radically stacked the regulatory deck: the IRCA made an employer’s “good faith” effort to verify documents into an affirmative defense against charges of violating the law, created a signed worker attestation form (effectively shifting the responsibility for illegal employment from employers to workers), and required employers to accept any document appearing reasonably genuine “on its face.” Together, these provisions created an impossibly high burden of proof that an employer “knowingly” violated the law. This legal context, combining functional immunity for employers and self-incrimination for workers, further tilted the workplace balance of power in favor of employers.

   The Congress designed employer sanctions to starve undocumented workers out of the labor market. But the law’s coalition included labor and civil rights advocates who made clear that the goal of improving wages and jobs for natives should not “limit in any way the scope of the term ‘employee’” as defined by the National Labor Relations Act (NLRA), nor “limit the powers of … labor standards agencies, or labor arbitrators to remedy unfair practices committed against undocumented employees.” These remarks reflected more than the messy bargaining of cross-cutting coalitions in Congress. They pointed to a deeper tension within theories of employer behavior. “Adoption of employer sanctions would remove undocumented workers from the protections of the Labor Act,” wrote an SEIU organizer and refugee immigration attorney in 1983, when an earlier employer sanctions bill was moving through the Congress, thus encouraging the growth of a supply of low-paid workers with no ability to unionize or remedy unfair labor practices by employers.” The IRCA’s attempt to square this circle has shaped the past forty years of both US immigration and labor law.  

   The final version of the IRCA thus saw protecting the employment rights of undocumented workers as not only compatible with, but complementary to, screening out those same workers at the point of hire. But this was magical thinking. The IRCA’s plan to permanently solve unauthorized immigration through a one-time mass amnesty and enhanced controls at worksites and the border failed. Unauthorized migration continued unabated, while immigration and labor policies were now fundamentally at odds with one another. Despite legislative intent, the encroachment of immigration politics into the workplace put existing regulatory regimes into conflict. At stake was the meaning and legitimacy of the employment relationship itself. Did the legal identity of undocumented workers include membership in the community of “employees” entitled to wage-and-hour and collective-bargaining rights? Or were undocumented workers noncitizens subject to removal under immigration law?

   Cannibalizing labor law

   Attempts to legally “harmonize” the competing goals of protecting and punishing undocumented workers since the mid-1980s have gradually warped the employment relationship. Throughout the 1970s and 1980s the rights of undocumented workers were “settled” business. The National Labor Relations Board (NLRB) repeatedly affirmed the status of undocumented workers as “employees” entitled to bargaining rights, backpay, and reinstatement under federal labor law. A vast repertoire of retaliatory actions against immigrant workers were found to constitute “unfair labor practices,” including threats to report workers’ immigration status, arranging INS raids, and conditioning payment on the disclosure of identity documents.2Remedies were enforced, including in cases where the discharged workers had (<)a href='https://casetext.com/admin-law/la-mousse-inc'(>)left and re-entered(<)/a(>) the country illegally, and even where (<)a href='https://casetext.com/admin-law/amays-bakery-noodle-co-inchttps://casetext.com/admin-law/amays-bakery-noodle-co-inc'(>)existing(<)/a(>) state-level immigrant employment laws prevailed. Enforcement of the Fair Labor Standards Act (FLSA)—the federal wage-and-hour law in the US—was seen by policymakers as both legally uncontroversial and functionally necessary. The Nixon, Ford, Carter, and Reagan administrations all pursued targeted wage-and-hour enforcement in industries with a high incidence of undocumented workers across the US labor market.

   It was on the question of collective bargaining that the Supreme Court first began the slow cannibalization of labor protections. In 1976, the workers at Sure-Tan Inc., a Chicago leather manufacturer, authorized the Chicago Leather Workers Union to represent them in collective bargaining against their employer. To break the union, the company’s president sent a letter to the INS requesting a worksite check to deport his employees. When the NLRB ordered the company to cease and desist this unfair labor practice and pay backwages to the deported workers, the company appealed the decision through the courts. Eight years later, in 1984, the Supreme Court ruled that the letter to INS was in fact an unfair practice—but that the workers, having been deported, were ineligible for reinstatement and backpay. 

   In effect, the legal identity of a “worker” became subordinate to that of a legal resident. Although Sure-Tan, Inc. v. NLRB did not address whether undocumented workers who remained in the US were eligible for labor remedies, the Reagan administration’s NLRB General Counsel issued new guidelines allowing an employer to make reinstatement conditional on proof of a worker’s legal status. Absent such proof, the NLRB would not seek enforcement for reinstatement or backpay. By the time the IRCA was instituted, the labor protections it supposedly preserved were, in practice, being gutted by the agencies and courts tasked with interpreting and enforcing the law. Unauthorized workers were now obligated to commit identity fraud to gain employment protections. Meanwhile, employers—protected by the law’s extensive loopholes—would continue leveraging the threat of deportation with impunity. 

   In 2002, the Supreme Court weighed in on whether undocumented workers who remained in the United States were entitled to backpay under the NLRA. In Hoffman Plastic Compounds, Inc., the court overturned an NLRB order for backpay against that company, which had been found to have violated labor law by firing Jose Castro for union organizing, arguing that IRCA had altered the “legal landscape” by “‘forcefully’ making the employment of illegal aliens central to ‘[t]he policy of immigration law.’” As a result, any worker who fraudulently obtained employment through false documents was ineligible for backpay.3Michael Wishnie has pointed out that (<)em(>)Hoffman(<)/em(>) created a split in organized capital. Employers testified that exemptions from labor protections would give to lawbreakers an unfair advantage since they would no longer be subjected to the same regulatory burdens. By selectively emphasizing the punitive aspects of the IRCA’s work verification statutes and downplaying its arguments for labor law protections, the Court functionally voided one half of the employment relationship—the employers’ obligations to labor, regardless of immigration status. 

   The upshot of these developments has been to discourage workers from exercising wage-and-hour and collective bargaining rights, while allowing employers to use immigration law as a shield against labor law. These high-profile NLRB and Supreme Court cases are only the tip of the iceberg. A 2004 investigation by the labor lawyer Michael Wishnie, for example, found that 102 of the 184 INS-raided businesses had been subject to a labor agency investigation or proceeding; a 2009 Economic Policy Institute study of 1,004 NLRB elections showed that employers made threats of referral to ICE in 50 percent of cases with a majority of undocumented workers and 41 percent with a majority of recent immigrants.

   The federal enforcement regime

   Bringing unscrupulous employers to justice has been a mainstay of the rhetoric around worksite enforcement. A “return” to worksite enforcement has been a priority of every presidential administration since the 1990s. Militarized raids targeting workers for arrest and deportation became a signature of George W. Bush’s enforcement regime, with an ICE spokesman explaining that “we’re going for a larger breadth of investigations and bigger civil settlements and criminal fines.” Obama DHS head Janet Napolitano lamented that only 135 of the 6,000 arrested in workplace operations in 2009 were employers and vowed “to take aim at employers and supervisors for prosecution through the use of carefully planned criminal investigations.” Once INS became ICE with the creation of the Homeland Security Act of 2002, the agency’s public-facing reports have at times characterized its “criminal” worksite arrests as primarily targeting exploitative employers.

   This rhetoric does not match reality. Civil fines for Form I-9 violations are the principal enforcement mechanism of employer sanctions. Following a long period of decline throughout the 1990s and early 2000s, fines reached a nadir of $0 in 2006 before gradually ramping up during George W. Bush’s second term. Administrative penalties began to surge in the Obama era before reaching a historical peak of $22,597,109.56 in FY 2016. Rising fines, however, belie the relatively small scope of worksite investigations. In any given year, these cover only a fraction of a percent of the over 7 million business establishments in the United States.

   

   

   While annual data on civil fines is incomplete, the general trend is toward an increasingly small pool of employers. Investigations have not come close to the high water mark of over 11,000 in 1989. The nearly $27 million in cumulative fines over the last two years of Biden’s term were collected from only 360 companies. These enforcement patterns reflect a longstanding tradition, going back to the IRCA’s initial rollout, of “cooperative” dealings with employers. A 1989 field report on IRCA enforcement, for example, found “‘general agreement’ that there was a need to proceed cautiously and exercise deference to the business community” since “arbitrary, high-profile enforcement of the law could lead to congressional repeal of the sanctions provisions.” The INS operating instructions recommended slap-on-the-wrist style settlement “strategies” that included routinely negotiated-down fines to focus resources on the most egregious repeat offenders. As one employer remarked: “Prior to [the IRCA,] INS would come in and be belligerent. They are coming in today in a much more conciliatory way.” 

   In contrast to the slim profile of fines on employers, the number of prosecutions has increased dramatically and disproportionately targeted undocumented people. Since the late 1990s, the Clinton-era agenda radically expanded the crimes for which immigrants could be prosecuted and deported. Between 1996 and 2002, the average number of annual prosecutions for immigration-related offenses increased by 87 percent compared to the decade spanning 1987 to 1996. Average yearly prosecutions increased another 182 percent in the period of Bush’s second term, reaching new heights during Obama’s two terms in office. Despite periodic peaks during Trump’s middle two years, these numbers remained roughly consistent before dropping precipitously in 2020 and then during Biden’s first and only term.

   

   This recent drop should be understood within the larger context of changing directives in Trump’s Justice Department, Covid-19 related “turnaways” at the border, and the Biden administration’s decision to “surge resources” to the southern border as the migrant “crisis” became increasingly politicized.

   An increasing number of arrests likewise masks which parties to the employment relationship get targeted by employer sanctions. In every year since 2005, “administrative arrests” and criminal arrests of employees for unlawful presence have overwhelmingly exceeded arrests of owners and employers.4Administrative arrests refers to arrests made by ICE , which are overwhelmingly of workers, under its own authority using an administrative warrant. Both ICE administrators and immigration judges can issue such administrative warrants. During Obama’s two terms, employers represented 39 percent of criminal worksite arrests and 13 percent of total worksite arrests (criminal and administrative). During Trump’s first term, employer arrests plummeted to 11 percent of criminal and 4 percent of total worksite arrests. The most recent data on worksite enforcement is not available, but ICE data from 2021 and 2022 suggests a marked decline of worksite arrests more generally—reflecting the Biden administration’s focus on reducing “mass” worksite arrests.  

   

   

   

   The track record of corporate prosecutions for immigration crimes tell the same story. Data from the Duke and University of Virginia Corporate Prosecution Registry show that corporate prosecutions for immigration crimes have not exceeded 30 cases annually since 2001. While prosecutions saw a relative resurgence in the DHS era, these cases rely on settlement strategies and plea deals resulting in symbolic fees, compliance protocols (e.g. E-Verify), and workforce restructuring (i.e. firings and deportations) that harm workers but do little to deter either the systemic employment or exploitation of undocumented workers in the labor market. Despite highly publicized “wins,” including a much-vaunted $95 million fine levied against a national landscaping company in 2017, the number of corporate immigration prosecutions has continued to decline through both the Trump and Biden administrations.

   E-Verify and the states

   Whereas the work authorization campaigns of the 1950s through 1980s were driven by the organizational strategies of nativist labor unions and the NAACP, these groups had largely abandoned the policy by the late 1990s. Employer sanctions lost credibility among liberal supporters after a 1990 GAO report found evidence of “widespread discrimination,” an inconvenient truth given the AFL-CIO’s increasing reliance on the Latino immigrant community as an organizing base. But the lost cause of work verification has been taken up by states looking to reverse decades of anemic enforcement. This reemergence of “employer sanctions” reflects broader shifts in the coalitional politics of restriction. Since 2007 work verification has principally been the project of ideologically conservative legislators with complex and sometimes contradictory views on the virtues of restrictionism. 

   Arizona’s 2007 Legal Arizona Workers Act (LAWA) became the first state law since 1986 to challenge the federal government’s monopoly over matters of workplace enforcement. Arizona went far beyond IRCA by mandating electronic verification requirements for all private employers and imposing stringent penalties for noncompliance, including the much touted “business death penalty.” Laws empowering states to criminalize and detain undocumented people have previously been rejected by the federal courts as improper preemptions of federal authority. In 2011, however, the Supreme Court ruled (Chamber of Commerce v. Whiting) that state-level work verification mandates like LAWA were constitutional under an obscure IRCA provision permitting state “licensing” exemptions. 

   Since LAWA first came on the scene, over twenty states have launched stringent work verification schemes. The most formally strict of these are geographically clustered among the southern “new destination” immigration states—across the Sunbelt South and West, and along the Gulf Coast—that saw rapid demographic change throughout the 1990s and 2000s. Defined by “right to work” laws, historically segregated labor markets, and rural poverty, these states feature entrenched GOP majorities and state government trifectas reflecting an increasingly disciplined anti-immigrant ideological agenda. 

   As the national mood once again darkens on immigration, new work verification bills in GOP strongholds like Idaho, Nebraska, Ohio and Utah seek to expand or toughen employer penalties under existing work verification laws. The rescaling of workplace enforcement to the states and the local coalitions behind it have produced more punitive state enforcement regimes—for workers. Even the most stringent state laws include generous exemptions for small businesses, agricultural workers, and employers of domestic workers. The laws borrow the same compliance architecture as IRCA that assumes the “good faith” of employers who enroll—even if selectively—in the E-Verify system. But their affirmative defenses are often greater. While IRCA forbids employers from using or seeking out information about an employee’s immigration status for purposes of retaliation, employers who suddenly choose to “verify” their employees are protected by state laws against wrongful termination complaints as a result of E-Verify screening.5These include Arizona, Utah, Alabama, Mississippi, and Tennessee. These shotgun “reverifications” are routinely used as a pretense for mass firings by companies even in non-E-Verify states, upending lives in the process.

   Despite stringent requirements, state agencies have adopted a similar model of “cooperative” nonenforcement of work verification laws. Several states—including Mississippi, Utah, and Arizona—have not made serious efforts to monitor firm compliance and do not even aggregate their own audit data.6Utah’s E-Verify program is contingent upon a state guestworker program that has been (<)a href='https://www.ksl.com/article/38402645/utahs-controversial-guest-worker-program-could-face-repeal'(>)stalled(<)/a(>) by the federal government. The county attorneys tasked with enforcing Arizona’s work verification law, for example, have stopped fielding complaints; and Arizona’s Attorney General has issued only three orders against firms since 2007. Public records show that North Carolina’s Department of Labor has audited only 52 firms since the law’s passage, amounting to nine formal violations and zero penalties issued. Georgia has audited nine firms since 2011 with zero penalties issued.

   The case of South Carolina is particularly instructive. The state boasts one of the most robust state work verification programs in the country, having investigated 30,173 employers since 2012, or 26 percent of businesses operating in the state.7Data obtained from the 2021 U.S. Census Statistics of U.S. Businesses (SUSB) annual data. Noncompliant firms—roughly one-sixth of those investigated as of 2018—are required to submit quarterly reports on new hires for one year. Yet the state’s audit system has favored scale over substantive enforcement. In 2011 Catherine Templeton, then head of South Carolina’s Department of Labor, Licensing, and Regulation, preemptively scaled back the program’s audit department from 22 to three employees and slashed funding from $2 million to $250,000. On-site audits shifted to remote investigations and a “paper audit” system that heavily relied on employers to “self-report” their compliance with the South Carolina Department of Labor. A 2017 investigative report discovered that none of the South Carolina businesses placed on probation for E-Verify violations had their businesses licenses suspended or revoked. 

   This familiar pattern repeated when 2023 Florida Governor Ron DeSantis signed one of the most punitive state immigration laws in the last decade. Alongside draconian provisions instituting immigration checks at hospitals, stricter ID controls, and criminal penalties for transporting an undocumented person across state lines, SB 1718 revamped the state’s E-Verify program extending work verification requirements to private firms employing 25 or more employees. Unsurprisingly, DeSantis has come under fire for a failure to prosecute even a single employer since SB 1718’s passage. In a familiar pattern, DeSantis has taken aim at Florida lawmakers for failing to appropriate adequate funds for enforcement while mounting symbolic enforcement measures against non compliant business owners. While a new hastily signed immigration law imposes even harsher penalties on immigrants—including the death penalty in certain cases—it contains no provisions expanding the funding or scope of workplace enforcement. 

   The politics of nonenforcement and noncompliance have been aided by the technical limitations of E-Verify itself. Even as advances in biometrics and increasingly integrated private and public databases harbor the potential to perfect the panopticon of workplace enforcement, E-Verify has been plagued by selective enrollment, gameable protocols, and widespread “fraudulent compliance” that have led many to discredit the tool as yet another ineffectual and unnecessary burden on employers: a 2009 report found that roughly half of all unauthorized workers used fraudulent identity documents to obtain work authorization under E-Verify. Although a 2012 follow-up study reported that 94 percent of “Final Non-confirmations” were accurately issued to unauthorized workers in 2012, this number elides the high number of individuals mistakenly confirmed as employment-authorized with fraudulent social security numbers. The first Trump administration, meanwhile, moved to cut funding for E-Verify by eight percent.

   The forward march of citizenship

   Despite formally “tough” policies, the persistent absence of meaningful enforcement raises the question of what these laws are really about. As with IRCA, weak enforcement has not spared undocumented workers from the perverse effects of a deepening legal division of labor. State work verification policies have been linked to lower hourly wages, decreased labor market mobility, and greater rates of informalization and self-employment among undocumented workers. While the economics profession has produced research showing that state-level E-Verify mandates reduce employment by undocumented workers, diminished prospects for formal employment in states with E-Verify have predictably driven undocumented workers further into the shadows outside the reach of verification schemes.8A 2020 National Bureau of Economic Research study estimated that state E-Verify mandates (<)a href='https://www.nber.org/papers/w26676'(>)reduced employment(<)/a(>) among likely unauthorized workers by up to 19 percent; and counterfactual (<)a href='https://www.dallasfed.org/-/media/Documents/research/pubs/everify.pdf'(>)modeling(<)/a(>) by the Dallas Federal Reserve showed that the unauthorized working population fell below projections by double digits in five of the nine states enforcing E-Verify mandates on private employers. Alabama (57 percent), Arizona (33 percent), Mississippi (83 percent), and Utah (34 percent); Georgia (14 percent); North Carolina (no change); South Carolina (no significant change). E-Verify laws doubled the self-employment rate in Arizona. Other states experienced declines in the agricultural labor force, likely driven both by the exit of workers from the farm sector and movement to “off-the-books” employment.

   Shifting coalitions have reversed the traditional means-end logic underlying employer sanctions. Rather than seeing labor market restrictions as a means of strengthening the bargaining power of native workers—as was the case leading up to IRCA—recent efforts have positioned anti-immigration reforms and work verification schemes as a substitute for the New Deal model of capital-labor relations. This explains why notoriously anti-labor groups such as ALEC and the Heritage Foundation have supplied policy drafts and support favoring draconian work verification laws. For these organizations, workplace enforcement complements rather than contradicts the larger project of making labor into a malleable and cheap commodity.

   This is the project of the Heritage Foundation’s now-infamous Project 2025 playbook. The extensive policy guide advocates a two-pronged strategy calling for legislative and administrative action to “limit the classes of aliens eligible for work authorization” while replacing the adversarial model of New Deal labor relations with “a more cooperative model run jointly with management that focuses solely on workplace issues.” In addition to supplanting labor unions with a “cooperative” model involving employers, the document advises eliminating “full employment” from the Federal Reserve’s mandate, promoting “experimentation and reform” by enabling states to seek exemptions from federal labor laws, and opening “substantive” employment standards up to negotiation at the shop level. Rollbacks of labor and employment protections are accompanied by plans to phase out the H-2A and H-2B visa programs, institute citizen employment quotas in federal contracts, and relax discrimination safeguards such that “private employers are free to prefer our own countrymen.” The question, then, for the Trump era is not simply whether the state will finally “enforce” its immigration laws. But rather: under what conditions will these laws become enforceable? We can trace the outline of this vision in Trump’s assault on federal workers unions and the NLRB, as well as the ever expanding ambit of deportations. It may be that the undocumented worker is not a relic of the past, but a model for the future in which all workers are expendable, perhaps even deportable, with no protections whatsoever.

   Alternate paths are possible. In 2021, the DHS released a memo announcing a strategic shift in worksite enforcement: the strategy sought to reduce demand for “illegal employment” not only by targeting employers, but by “increasing the willingness of workers to report violations of law.” In 2023, DHS Secretary Alejandro Mayorkas announced a new policy, dubbed Deferred Prosecution for Labor Enforcement (DALE), to use the department’s prosecutorial discretion to protect noncitizen workers involved in labor actions from deportation and removal actions. The program enrolled 7,700 workers as of October 2024. As with other uses of prosecutorial discretion granting amnesty to victims of violent crimes and human trafficking, DALE extended two (and then four) years of amnesty for workers engaged in labor disputes. But this was a small step. Any genuinely pro-worker policy would require at least three things: an end to the brutal political march of administrative arrests and deportations, a generalized amnesty for the 13.7 million undocumented immigrants already in the country, and changing the patterns of American foreign policy and international development that create forced labor migration in the first place. This would mean nothing less than changing the bipartisan common sense of the U.S. political system.

   Employer sanctions, in many ways, embodied the spirit of the times. Signed into law during a moment of high populism and wide ranging deregulation, the workplace-enforcement regime of US immigration law was a symbolically “pro-worker” policy that achieved one amnesty while strengthening employer power over the divided workforce of the future—which is our present. What has been left is an intrusive regulatory provision applied selectively. As much as the business community may have resented being made into immigration screeners, the law has accorded employers a high degree of discretion to gather and weaponize information about their employees’ immigration status with a minimum of consequences for themselves. It has consequently had the perverse effect of cultivating an interest in punitive immigration laws among migrant-dependent employers. For four decades, this weapon has been put to active use. But the unbalanced scales of justice in the labor market—the rights and obligations of employment against the regulation of citizenship—are tilting fast and threatening to topple. 

5. Regimes of Bankruptcy

   5:32 am Comments Off on Regimes of Bankruptcy

   In the Middle Ages, bankruptcy was nothing more than a rudimentary legal mechanism to prevent absconding debtors from fleeing justice. By the nineteenth century, default had come to shape the fate of nations and structure international relations. Faced with the rise of interventionism by the United States, Latin American political thinkers tried to scale up the mechanics of bankruptcy—the civil means to establish the legality of a debt—to a global scene, but they were afforded all of the shame and none of the rights associated with a declaration of insolvency. 

   In the late twentieth century, this trend continued: corporations found forgiveness in default while nations were punished for insolvency. After the 2008 crisis, millions of people targeted their rage at bankers and bonuses—bankruptcy, the mechanism that allowed the board of Lehman Brothers to avoid impunity, survived unscathed. Chapter 11 has enabled corporations to renege on pension plans and the normalization of the use of “strategic bankruptcy” has allowed companies to design, in the past few years, a new dance routine and waltz free from consequences to the rhythm of the Texas Two-Step: corporations that are found guilty and ordered to pay large sums will create a subsidiary entity, make it responsible for repayment, and ensure the new firm declares bankruptcy.1Robert Kuttner, (<)em(>)Debtors’ Prison: The Politics of Austerity Versus Possibility(<)/em(>) (New York, 2013), p. 7. On the concept of strategic bankruptcy see Kevin J. Delaney, (<)em(>)Strategic Bankruptcy How Corporations and Creditors Use Chapter 11 to Their Advantage(<)/em(>) (Berkeley, 1999). On the “Texas Two Step” see Lindsey Simon, ‘Bankruptcy Grifters’, (<)em(>)Yale Law Journal(<)/em(>) 131 (2022), pp. 1154-1216; Jason Jia-Xi Wu, ‘How Do ‘Bankruptcy Grifters’ Destroy Value in Mass Tort Settlements? In re Purdue Pharma as a Bargaining Failure’, (<)em(>)American Bankruptcy Institute Law Review(<)/em(>), 32 (2024, Forthcoming). Harvey Weinstein’s Company, the Boy Scouts of America, and a number of churches have successfully deployed this strategy to avoid compensating victims of sexual violence.2 Mike Spector, Benjamin Lesser, Disha Raychauduri, Dan Levine and Kristina Cooke, ‘How corporate chiefs dodge lawsuits over sexual abuse and deadly products’, (<)em(>)Reuters(<)/em(>), 7 November 2022. At the same time, medical bankruptcy remains the most common form of default and disproportionally affects communities of color.3Jessica Bielenberg, ‘Medical Debt and Homelessness’, (<)em(>)Public Health Post(<)/em(>), 23 August 2021. By virtue of the role of the US economy on the global stage, these visions of bankruptcy are reshaping economic relations across the world.

   The dominance of US bankruptcy law was not an inevitability. US bankruptcy culture was once unique in the world: after the American Revolution, legislators chose to show mercy to debtors at the expense of the creditors. US statesmen dismissed the traditional difference between laws of insolvency and bankruptcy; creditors were largely powerless to stop reckless debtors from initiating bankruptcy proceedings and receiving a discharge from the state.4Peter J. Coleman, (<)em(>)Debtors and Creditors in America: Insolvency, Imprisonment for Debt, and Bankruptcy, 1607-1900(<)/em(>) (Washington, D.C., 1999), pp. 11-13, pp. 238-239. Today, bankruptcy has generated its own international law. Corporations have ensured that bankruptcy is the most frequently instrumentalized form of forgiveness in increasingly unforgiving zero-sum societies, and bankruptcy harms the cash poor and empowers the asset rich. Those who shape bankruptcy rules establish a hierarchy of contracts and promises, and bankruptcy mechanisms have exposed, often with brutal clarity, who had the power to make or break a contract. How insolvency is then resolved on a global scale demonstrates which contracts and agreements were prioritized after the failure to pay.5Katharina Pistor has recently referred to bankruptcy as ‘the acid test for the rights and privileges the parties negotiated or that state law granted them long before default loomed on the horizon. If these rights cannot be enforced in bankruptcy, they are not worth much’. Katharina Pistor, (<)em(>)Code of Capital: How the Law Creates Wealth and Inequality(<)/em(>) (Princeton, 2019), p. 137. Considering these norms in a historical light allows us to recover the mission of Latin American jurists to generate a global bankruptcy regime.

   Bankruptcy and empire

   In establishing what Latin America owed Spain, new Latin American nations sought to resolve what they owed one another. Should Mexico, for instance, pay its debts to the Crown of Spain that had been incurred for the benefits of its people, or should it deny this despotic monarchy any compensation for the colonial system of rule it had imposed on its people? Bankruptcy, argued the Colombian statesman Pedro Gual and the Argentine deputy Julián Segundo de Agüero, would be required to resolve revolutionary debts. This was, they explained, a mechanism to establish a hierarchy of norms, a way to establish what debts ought to be paid, and which ought to be forgotten. It was safe, one Argentine official claimed, as it was frequently used by European merchants to settle their affairs on the basis of the rule of law. But European governments, exploiting the unpaid claims of their merchants, laid violence upon Latin America to settle mercantile affairs. 

   Intervention changed the terms of the debate. When Napoleon III sought to exploit the fratricidal US Civil War to turn a red-haired Habsburg archduke into Emperor Maximilian of Mexico, he saddled this young emperor with debts which would boost French financial interests and deliver nothing for Mexico; Maximilian was to pay for the cost of the expedition, the troops, and his court through French loans. When Mexican revolutionary forces defeated and executed Maximilian years later, the question then was: was Mexico liable for these debts?

   According to the principle of state succession in international law, Mexico had to pay.6State succession states that successor states inherit the debts of the regime that preceded it. On the origins of this norm, and the caveats imposed by its early theorists, see Jones Corredera, (<)em(>)Odious Debt(<)/em(>), pp. 33-54. In response, Mexico formulated the first moral defense of default in modern history, proposing to postpone and renegotiate the repayment of its foreign debt on the basis that Maximilian’s regime, which had been recognized as sovereign by these creditor nations, would have never been able to pay it. Manuel Payno, the leading Mexican jurist charged with handling this crisis, wondered how a few paltry debts had justified the invasion of another nation. 

   Mexico’s vindication of moral bankruptcy did not prevent the intensification of gunboat diplomacy. Latin American officials, in turn, attempted to bend international law in the face of such interventions. The father of Argentina’s constitution, Juan Bautista Alberdi, crafted the basis of the 1853 Constitution, which remains the core of the nation’s constitutional order to this day, through private law. This charter focused on protecting foreign citizens from the chaos of the republic to serve the interests of foreign merchants and investors. The notion that the state ought to be an arm of private interests, an expression of private law, and a representative of merchant interests, would allow later Argentine jurists to find a way to make bankruptcy go global.  

   Economic interests frequently exposed the transactionality of international relations. When the Argentine diplomat Carlos Calvo travelled to Britain to negotiate a peaceful resolution to a diplomatic incident surrounding the claims of a professed British citizen, the British Prime Minister refused to meet him. Eventually, having engineered a lobbying campaign with articles and commentaries on the crisis in newspapers across Europe, a secretary to the Prime Minister curtly told Calvo that the matter “ought to be resolved in Paraguay, and in a manner that would be to the complete satisfaction of Her Majesty’s government.”7 Carlos Calvo, (<)em(>)Una página del derecho internacional o La América del Sur ante la ciencia del derecho internacional(<)/em(>) (Paris: A. Durand, 1864), p. 273.

   Calvo believed that these words signalled the absurdity of the principle of might and in response developed the Calvo Clause, the principle that foreign claims ought to be settled in the country where they were negotiated. This meant that foreign creditors would have to respect local constitutions and domestic laws when settling unpaid debts. Latin American nations would draw on this principle in the face of intervention. A divide emerged, whereby European and North American powers favored the resolution of these disputes through arbitration, and Latin American officials defended instead the principle of the Calvo Clause. Calvo would also develop the Calvo Doctrine, which required granting the same rights to foreigners as citizens in resolving these disputes. In other words, Latin American officials sought to foreclose the intensification of gunboat diplomacy by shoring up respect for their sovereignty in international law.8See Edward Jones Corredera, ‘The Origins of the Calvo Clause: Why Carlos Calvo Supported Napoleon III’s Vision for Latin America’, (<)em(>)Max Planck Institute for Comparative Public Law & International Law (MPIL) Research Papers.(<)/em(>) No. 2025-02, pp. 1-26. This move pitched the principle of consent, a cornerstone of modern democracy, against the sacred principle of private contracts in international law—a problem that continues to haunt the international order today.     

   States as merchants

   The rise of a new financial superpower initially allowed Latin American officials to generate leverage over their creditors. Mexico only resolved its debts with the European powers that financed the rise of Maximilian once the US entered the world seen as a regional creditor—Mexico could finally leverage US lending offers against European nations eager to retain their influence in the nation’s banking industry. 

   Only a few years after the United States established its first unified national bankruptcy law at home, one that mapped out an easy pathway for debtors to seek redemption, it pursued an aggressive policy of intervention over debts in Central and Latin America. In 1906, in response to disputes over foreign debt in Venezuela, Cuba, and Santo Domingo, and in the aftermath of a number of controversial North American interventions in Central America which aimed to strengthen North American control of the Panama Canal, President Theodore Roosevelt established the Roosevelt Corollary to the Monroe Doctrine. The Corollary stated that the United States would mediate the resolution of disputes between European private creditors and American states. Roosevelt hoped this policy would quiet criticisms that his interventions in the region breached international law. The Corollary granted the United States the capacity to intervene, “however reluctantly,” in states where the ties of “civilized society” were weakened, and private contracts were neglected.9Matthias Maass, ‘Catalyst for the Roosevelt Corollary: Arbitrating the 1902– 1903 Venezuela Crisis and Its Impact on the Development of the Roosevelt Corollary to the Monroe Doctrine’, (<)em(>)Diplomacy & Statecraft(<)/em(>) 20:3 (2009), pp. 383-402, p. 397.

   Struggling to finance its foreign debt, the Venezuelan government invoked the Calvo Doctrine to reject arbitration regarding unpaid claims, a doctrine which the United States did not recognize. Tensions rose as Germany and the United States vied for greater influence in Latin America, and Germany, along with Britain and Italy, enforced a blockade on Venezuela over its refusal to accept the settlement through arbitration over un-paid debts to their citizens. This affair overlapped with Venezuela’s ongoing dispute with Britain regarding British Guyana, which was settled when Britain accepted the Monroe Doctrine as a norm. In exchange, the United States promised to exclude from arbitration any lands that had been settled by British subjects for more than fifty years. After referring the matter of these unpaid claims to the Hague Tribunal, the Court favored the claimants of those nations which had participated in the blockade. It was in this context that the Argentinian jurist Luis María Drago, drawing on his nation’s own engagement with foreign debt and the history of interventionism in Latin America, wrote his famous Drago Doctrine where he stated that war could not be used to force the payment of public debt. Drago tried to hold the US to account by pointing to the inconsistency in its punishment of insolvency at home and abroad.

   Drago accepted the idea that a state was a merchant, simply another private actor. War, like homicide, was only just when it was committed in self-defense: the creditor to the state was in fact a better place to recoup their benefits from bankruptcy because while the “bankrupt company” could sometimes disappear without providing relief to its creditors, the state endured.10Luis María Drago, ‘State Loans in Their Relation to International Policy’, (<)em(>)American Journal of International Law(<)/em(>) 1:3 (1907), pp. 692-726, p. 701. The purchaser of bonds took on the same risk that an investor did in buying any stock—the threat of violence to force repayment was as inadequate in the resolution of state debts as it was in the resolution of private insolvency.11Drago, ‘State Loans’, pp. 701-702; Corredera, (<)em(>)Odious Debt(<)/em(>), p. 194. The rule of caveat emptor, or “let the purchaser of bonds beware,” had yet to be scaled up to international law. Building on Calvo’s ideas, he argued that the issuing of public bonds was part of a state’s monetary policy, and any conflict that arose from said bonds had to be settled domestically.12Drago, ‘State Loans’, p. 703, p. 695. 

   Drago, in short, tried to outlaw war over financial failure. But the US refused to accept this effort, arguing that while contract debts did not justify the use of force, the failure to pay public debts did. The most consequential impact of Drago’s writings was felt at the second Hague Convention of 1907, generally known as the Drago-Porter convention. Thanks to the efforts of the North American jurist Elihu Root, these terms prioritized the use of arbitration and permitted the use of force. Still, Article One of this convention established that contract debts—crucially excluding public debts—did not provide a justification for the use of force. In Latin America, the division between private contracts and public debts was blurry, as national banks owned and managed by local governments and domestic financiers were only set up after the 1920s, and in cooperation with local foreign creditors that had dominated the nation’s financial life.13Wolfgang Benedek, ‘Drago- Porter Convention (1907)’ in Max Planck Encyclopaedias of International Law (Oxford: Oxford University Press, 2007) (Online).

   During a visit to Buenos Aires that year, Root endorsed the view that the United States would not use force to demand the repayment of claims from a Latin American government. As he proclaimed this principle, North American armed forces were mobilized in Santo Domingo to enforce the compensation of foreign private claimants, despite the negotiations at the Drago-Porter convention. Seven years later, Root would defend the view that the Monroe Doctrine was not a cover for the United States’ interventionism as US marines reached the Mexican port of Veracruz.14Corredera, (<)em(>)Odious Debt(<)/em(>), p. 195.

   It would take a revolution to force the US to respect the doctrines of Calvo and Drago. In 1910, the civil war that would become known as the Mexican Revolution exploded as a result of the government’s inability to address popular complaints about the unequal and irregular distribution of land and property in the country. The United States intervened twice in the conflict. It was important, according to Woodrow Wilson, who spearheaded the highest number of interventions in this era, to protect North American oil interests and “to teach the South American republics to elect good men.”15Quoted in Lars Schoultz, (<)em(>)Beneath the United States: A History of U.S. Policy Towards Latin America(<)/em(>) (Cambridge: Harvard University Press, 2003), p. 244.

   The 1917 Mexican Constitution established the state’s ownership over all underground minerals, the right of Mexicans to receive land grants for the mining of the subsoil, and the conditional award of these rights to foreign citizens who surrendered their claims to invoke protection from their respective governments. The purpose of this constitutional reform, emboldened by the use of the Calvo Clause, was to prevent foreign intervention. It triggered intense protests from board members of North American oil companies, whose profits had soared on the basis of booming US demand for cars. In the 1920s, Mexican representatives would craft new arguments in favor of the rights of debtor nations in the face of opposition from the United States.16Kathryn Greenman, ‘The Mexican Revolution: Alien Protection and International Economic Order’, in Kathryn Greenman, Anne Orford, Anna Saunders, and Ntina Tzouvala eds., Revolutions in International Law: The Legacies of 1917 (Cambridge University Press, 2021), pp. 339– 364.

   In Cuba, Fidel Castro dedicated several books and a number of lengthy interviews to historical digressions on the need for Latin America to denounce the illegitimacy of its foreign lenders, all while benefiting from the generous aid from the USSR. Castro portrayed the Latin American default on foreign loans as the natural and long-awaited conclusion of the independence process started in the 1820s by Latin American revolutionaries. The Cuban statesman encouraged his readers to imagine meeting the founding fathers of Latin American independence like Bolívar, “and the libertadores of Haiti,” and explaining to them how, after achieving freedom and independence, foreign debt had trapped Latin America back into a state of dependence.17Alfonso Rosa, (<)em(>)Fidel Castro y la deuda externa(<)/em(>) (Editora Política, 1989), p. 9

   A union of bankrupt states

   In the US, bankruptcy grew into a mechanism to punish states abroad, and Latin America in particular. Now, these same stories are being used to absolve the asset-wealthy and justify cuts to the state at home. US President Donald Trump is threatening to use bankruptcy to bend other nations, like Iran, to his will, globalizing a strategy he used throughout his life against his creditors.18Felicia Schwartz and Andrew England, ‘Trump team aims to bankrupt Iran with new ‘maximum pressure’ plan’, Financial Times, 16 November 2024. But an even more insidious casuistic vision of bankruptcy is on the rise: right-wing voices in the US are casting fears about states going bankrupt to justify cuts to state spending and to reconfigure its policies abroad.19Billy Bambrough, ‘‘We Need Change’—Tesla CEO Elon Musk’s U.S. ‘Bankrupt’ Warning Backs Bitcoin Price Bull for Treasury’, Forbes, 16 November 2024.

   As the US descends into an economy of coercion, the establishment of a global bankruptcy law is an opportunity to redeem and reinvent multilateralism anew. In 2014, the UN General Assembly, encouraged in part by Latin American ministers and campaigners, adopted a resolution on a sovereign restructuring scheme that generated a multilateral framework for countries to emerge from financial commitments.20I thank Karina Patricio Ferreira Lima for drawing my attention to this point. Ten years later, the General Secretary acknowledged that existing debt relief mechanisms ought to be more robust.21 Kopano Gumbi, ‘UN chief says debt relief tools far from adequate’, (<)em(>)Reuters(<)/em(>), 11 December 2024. In the UK, discussions are taking place around a Debt Relief (Developing Countries) Bill that builds on an 2010 initiative that curbed the speculative practices of private creditors over distressed national debts. As Karina Patricio Ferreira Lima, one of the authors of the bill, has shown, the need to repay foreign debt is overriding the provision of welfare for citizens in debtor countries.22See Karina Patricio Ferreira Lima’s (<)em(>)Governing Sovereign Debt Crises: The Case for International Sovereign Insolvency Law(<)/em(>) (Forthcoming).

   Generating international agreements on this point would require setting ablaze the veil that typically covers the true power relations of international finance—it would require the Paris Club, which was originally created in order to settle Argentina’s debts, to negotiate a common framework with China. Today, the Inter-American Development Bank’s China-Latin America Commercial Loans Tracker displays how Argentina is the recipient of the highest number of Chinese loans, and no other nation has renegotiated its loans with the IMF and the World Bank more times than the Casa Rosada.23See the China-Latin America Commercial Loans Tracker at (<)a href='https://thedialogue.org/china-latin-america-finance-databases/'(>)https://thedialogue.org/china-latin-america-finance-databases/(<)/a(>).  Echoing Drago’s solutions today could allow Argentina to become a leading mediator in global discussions about debt disputes. 

   How we resolve debt in our financialized world establishes, more than international law, what we owe one another. Ideas of climate and racial reparations and debates about the differences between Chinese government lending practices and the IMF and the World Bank are rarely discussed in the same breath, but they reflect a growing need to reconcile old notions of the global moral economy with the changing world order—a call to establish a new global hierarchy of obligations.

   This text was adapted from Odious Debt: Bankruptcy, International Law, and the Making of Latin America, published by Oxford University Press in 2024.

6. Colombia’s New Right?

   April 4, 2025 4:40 pm Comments Off on Colombia’s New Right?

   In Colombia, a country still reeling from the aftermath of a fifty-two-year armed conflict, the central threat to Gustavo Petro’s presidency is the perception of rising violence and insecurity. With Petro’s “Total Peace” agenda in limbo after the Ejército de la Liberación Nacional (National Liberation Army, ELN) bombing in the eastern region of Catatumbo, the right-wing opposition has sought to mobilize voters on a renewed security agenda. As María Fernanda Cabal, a potential 2026 presidential candidate and current senator from the Centro Democrático (Democratic Center, CD) party tweeted recently, “Today more than ever, Colombia is experiencing one of its deepest crises due to the insecurity that plagues us under the extreme left government of Gustavo Petro. All in the name of Total Peace and misnamed social reform.”  

   The opposition’s message—that Petro’s bet on peace negotiations has worsened security conditions—has revived a militaristic vision of the state, one which advocates for military confrontations with guerrillas such as the ELN and dissidents from the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, FARC) and a restart to the civil war. The main source of this rhetoric has been the right-wing “Uribismo” movement, which came to dominate national politics after Álvaro Uribe Vélez’s presidential victory in 2002. For the Centro Democrático party, which Uribe founded in 2013 after the end of his second term, the promise of security remains central. 

   Uribismo has undoubtedly been the most influential political phenomenon in Colombia in the past three decades. By the start of the century, Uribe consolidated the wide spectrum of the political right through a synthesis of authoritarian security, neoliberal technocracy, and alliances with military and powerful economic sectors. With a combination of urban and rural support, he rode on the promise of a smaller and more efficient state. Security would boost investor confidence, and this in turn would generate employment and development. His diagnosis transformed the political space of the right in Colombia and bears important lessons for the consolidation of right-wing power today.

   Uribe’s discourse of law and order aligned with the global war on terror championed by George W. Bush. The US-led “War on Drugs” was thus closely tied to Uribe’s security project, bringing together a heterogeneous coalition that transcended the traditional parties and became the dominant axis of national politics. But Uribismo is more than a government or party. It is a political narrative that capitalizes on fear and uncertainty in a society marked by violence. As peace became a more viable alternative to endless war, this narrative became increasingly unsustainable. 

   The trajectory of Uribismo was thus upended by the Colombian government’s peace agreement with FARC in 2016, which ultimately reshaped the country’s political structure. Since then, Uribismo has attempted to redefine its political relevance in the midst of a fragmented right and in the aftermath of political protests which facilitated Petro’s rise to power in 2022. Amid triumphs of the right around the globe, Uribismo is now again undergoing a major reinvention, grounded in a promise of security but wrestling with the place of Uribe himself. 

   The capture of the right

   Álvaro Uribe Vélez’s rise to the presidency was the result of a long political career dedicated to championing security and technocratic efficiency. From his first public positions in Medellín in the 1980s until his arrival to the presidency in 2002, Uribe built a coalition that redefined the right-wing space in Colombia. The interests of legal and illegal actors, alongside the repeated failures of a peace process with the FARC and the global war on terror, meant that the discourse of democratic security resonated in diverse sectors of society.

   In 2002, Uribe won the presidency in the first round of elections with an astounding 53 percent of the vote, forgoing a runoff. At the start of the campaign, he polled at 2 percent. Uribe had begun his political career in Antioquia with the Liberal Party in the 1980s. He served as the mayor of Medellín from 1982 to 1986, and later as a senator (1986–94) and governor of Antioquia (1995–97). As a senator, he pushed through Law 100 of 1993, a neoliberal reform to the health system that promoted privatization. But it was when Uribe became governor of Antioquia in 1995 that he sharpened his focus on security. Under the presidency of the liberal Ernesto Samper (1994–1998), Uribe created “security cooperatives,” the so-called Convivir, which served as a base for right-wing paramilitarism to take power in the country’s territories and challenge the guerrillas. The failed peace process with the FARC under the government of Conservative and elite politician Andrés Pastrana, coupled with the military strength of the guerrillas, generated a climate of despair, creating a favorable climate for Uribe’s candidacy. His hard-line discourse contrasted with the historical perception of state weakness. 

   Scholar Gutiérrez Sanín explains the success of Uribismo through its ability to articulate dissimilar interests under a common agenda. Uribe became the “hinge” between formal and informal power, gaining the backing of cattle ranching unions such as Fedegán, which enthusiastically supported his candidacy and still hold prominent positions within Uribismo today (one of the CD’s presidential candidates is the wife of Fedegán’s current president). Key support also came from neoliberal technocrats, who held positions in his first cabinet. Juan Luis Londoño, a star figure of Colombian neoliberalism who pursued reforms of the health and social security system, served as Uribe’s Minister of Health. These figures were joined by high-ranking military officers, businessmen, paramilitaries, and powerful actors in drug trafficking sectors.1 Gutierrez Sanín, Francisco. 2020. Uribe Vélez: Democrat, radical, extremist or all of the above? (<)em(>)Revista Euro Latinoamericana De Análisis Social Y Político (<)/em(>)(RELASP), 1(1), 207-225. The promise of security was the articulating axis of this coalition, guaranteeing stability for economic investment and weakening insurgent actors. Uribe’s alignment with US anti-terrorist strategy after 9/11 secured Washington’s financial and military backing and consolidated Democratic Security as the pillar of Uribe’s government.

   Uribe’s arrival to power marked at least two milestones in Colombian history. For the first time since 1958, the traditional Liberal and Conservative parties failed to capture the presidency. These two main parties, in fact, saw the largest losses in power in their history during the 2002 legislative elections.2 In the 2002 legislative elections, the Liberal Party went from obtaining close to 50% of the votes in 1998 to only 25%. The multiparty system which had been forged since the 1991 Political Constitution reached unprecedented levels of atomization: close to forty parties held seats in the Congress of the Republic.3Botero F; R. Losada & L. Wills-Otero. (2016) Party system in Colombia 1978-2014- The evolution towards multipartisanship?(<)strong(>).(<)/strong(>)(<)em(>) Party systems in Latin America. Southern Cone and Andean Region (ISBN 978-607-8510-09-2) (<)/em(>)pp. 339-400. National Electoral Institute (INE). The Liberal Party and the Conservative Party, which had controlled the electoral arena until the early 1990s, had since their birth represented the interests of the country’s economic elites—landowners, coffee growers, businessmen and bankers.4Archila, Mauricio. 1991. Cultura e Identidad Obrera: Colombia 1910-1945. Santa Fe de Bogotá: Cinep, 1991; Guillén Martínez, Fernando. 1979. El Poder Político En Colombia. Santafé de Bogotá: Punta de Lanza. Uribismo was able to win over these elite sectors as well as average voters, updating traditional conservatism through an insistence on citizen security, economic development, and the efficient management of the state. Electoral analyses show that Uribismo achieved significantly better electoral results in municipalities that traditionally voted for the Conservative Party.5 See: Rodríguez-Raga J.C & L. Wills-Otero (2021). The renewal of traditional conservatism through new parties. The case of the Democratic Center in Colombia, 2014-2018. (<)em(>)Uruguayan Journal of Political Science, (<)/em(>)30 (1). Thus, Uribe and his supporters captured a large portion of the political space of both traditional parties, especially on the right, bringing together a movement tied to a tutelary figure.6“Primero Colombia”; the Social Party of National Unity or “Partido de la U”; and the Democratic Center.  

   The second milestone was Uribe’s position as a leader not only far from the traditional political class, but also one with a programmatic offer centered on the need to confront the insurgent groups that for decades had challenged state sovereignty. Although other governments had tried to resolve the conflict through different mechanisms—both confrontation and dialogue—they failed to achieve a long-lasting resolution. This failure on the part of the traditional political class catapulted Uribe to power as a charismatic leader independent of the traditional parties, campaigning on national security and drawing from a broad and heterogeneous support base.7 Rodríguez-Raga, JC & M. Selligson. 2004. (<)em(>)The political culture of democracy in Colombia, 2004(<)/em(>). Vanderbilt University, University of Pittsburgh, National Consulting Center.  

   Uribe’s social base of support included rural regions marked by historic state neglect and the violence of armed actors, such as the leftist FARC and ELN guerrillas. In these areas, Uribe-led security policies won support because they appeared to weaken the guerrillas. Uribe also attracted middle and upper-middle class voters in urban and rural areas who valued his ability to guarantee social and economic stability. Business and professional sectors were drawn to the promise of investor confidence, stability, and economic growth.8Wills-Otero, L (2014). “Colombia: Analyzing the Strategies for Political Action of Alvaro Uribe ‘s Government, 2002-10.” In (<)em(>)The Resilience of the Latin American Right, (<)/em(>)eds. Juan Pablo Luna and Cristóbal Róvira Kaltwasser. Baltimore, MD: Johns Hopkins University Press, 194-215.

   Uribe’s economic policies sought to attract foreign investment and pursue labor flexibilization. His government implemented a series of liberalization reforms, opening up markets and promoting entrepreneurship in strategic sectors. While these policies spurred economic growth, they also generated inequality and labor precariousness. Growth was sustained by military power, but it did little to reduce social gaps. In addition, Uribe promoted trade agreements with various economic powers, consolidating a foreign policy aimed at integration into global markets. He projected an image of stability in the international arena, while also deepening the country’s dependence on foreign interests in security and trade.

   Internally, tensions soon began to emerge between different factions of Uribismo’s support base. While neoliberal technocrats saw Uribe as a guarantor of economic stability, military sectors demanded a firmer commitment to the counterinsurgency struggle. These differences became more evident in the transition of leadership to a new generation of politicians, who struggled to maintain the Uribista legacy without replicating a centralized and confrontational style of government. Uribismo after Uribe needed to redefine itself in order to remain relevant in national politics.

   Security complex

   Security became the central axis of Álvaro Uribe Vélez’s policies, materializing in the so-called Democratic Security pact. The government pursued violent military confrontation against leftist guerrilla groups, such as the FARC and the ELN, while simultaneously promoting negotiations for the demobilization of paramilitary groups, such as the United Self-Defense Forces of Colombia (Autodefensas Unidas de Colombia, AUC). These policies redefined the dynamics of war and politics in Colombia, marking a profound transformation in the relationship between the state and armed actors and reshaping the electoral landscape as a consequence. The left, which, under a new constitution during the 1990s had managed to gain a share of legitimate political power alongside historic rights, faced increasing stigmatization and threats. Some of these threats came from guerrilla groups that demobilized after peace negotiations with the national government in the late 1980s and early 1990s. After Uribe’s victory, both demobilized guerilleros and the political left were shunned from power.  

   The emphasis on security was not an improvisation. From his time as mayor of Medellín in 1982, Uribe promoted initiatives such as Metroseguridad, a program to fund security forces through local taxes. His obsession with security took a personal turn after the murder of his father in 1983, during a kidnapping attempt attributed to the FARC. This event, according to his own memoirs, marked his life and intensified his conviction that guerrilla violence was the main obstacle to the country’s progress.9 Uribe Vélez, Á. (2012). (<)em(>)No hay causa perdida: memorias(<)/em(>). Celebra.

   Uribe’s arrival to the presidency coincided with a favorable international context. His discourse on the fight against terrorism found support from the Bush administration. Following the logic of the global war on terror, Uribe framed guerrillas as terrorist threats and thus successfully obtained military and financial support from the United States. The Democratic Security pact received a massive injection of resources through Plan Colombia, with a contribution of $7.5 billion in military and strategic assistance. The CIA and the Pentagon actively participated in designing operations to weaken the insurgency. This international support allowed for an unprecedented modernization of the Colombian military forces. At the beginning of his administration in 2002, military spending represented 3.2 percent of GDP, rising to 4 percent by 2010. In absolute terms, this implied an increase in the defense budget from 4.5 trillion pesos to 25 trillion pesos in just eight years, representing a nominal growth of 455 percent.10Ministry of National Defense & National Planning Department. (<)em(>)Historical Analysis of Defense and Security Spending. 1990-2020. Sources and Uses.(<)/em(>)

   The Democratic Security pact positioned war victories as governmental successes. The release of hostages, the death of guerrilla commanders, and the territorial recovery were all presented as irrefutable proof of Uribe’s diagnosis. These advances boosted civilian support, especially in the regions most affected by the conflict, where security conditions were perceived to have improved. The security policy also promoted civilian participation in intelligence work and territorial control, creating networks of informants and cooperators that encouraged citizens to provide information on suspicious activities. In residential neighborhoods, commercial zones, and highways, new civilian surveillance fronts arose, with some operating on a volunteer basis and others offering financial incentives to collaborators. Civilian participation in the war generated massive support for Uribe’s project, while reinforcing the idea that counterinsurgency was a collective responsibility. 

   Uribe also established and visited community councils in remote regions, forming a line of direct communication with the people. Through these spaces, Uribe intervened directly in local decisions, ordering immediate actions to mayors and officials. These events helped his popularity, but they also promoted a model of personalistic and centralized government.

   Although Democratic Security was presented as a success in military terms, it had grave consequences for human rights. Among its controversies was the “false positives,” scandal, in which at least 6,402 civilians were extrajudicially executed by members of the Army and presented as guerrillas killed in combat in order to inflate military effectiveness figures. The weakening of the guerrillas and the demobilization of paramilitaries reconfigured the conflict, but it failed to eradicate violence. New groups emerged in the territories left by the FARC and the AUC, disputing control of illegal economies. By the end of his term, although Uribismo had consolidated its political hegemony, structural challenges persisted in security and social justice that called into question the sustainability of his legacy.

   In and out of power

   Uribe’s second government (2006–2010) was marred by corruption scandals. The Administrative Department of Security illegally intercepted the phones of journalists, opposition politicians, human rights defenders and judges of the High Courts. The revelation of the “false positives” sparked criticism of the government’s security policy, and the Agro Ingreso Seguro scandal revealed that funds intended to support small farmers were diverted to large landowners and businessmen. The scandals led to numerous judicial investigations and convictions, from which Uribe could not escape. 

   Uribe nonetheless sought reelection for a third term, an effort which required a constitutional reform. He advocated for a referendum, but it was declared unconstitutional by the Constitutional Court. Unable to run, Uribe supported the candidacy of Juan Manuel Santos, who ran with the endorsement of the Social Party of National Unity (Partido de la Unión por la Gente, Partido de la U) and won the election with 69 percent of the votes. In the legislative elections, Partido de la U consolidated its position as the leading force, winning 21 percent of the seats. 

   Although Santos won Uribe’s support during the campaign, he broke from the Democratic Security policy in 2012, instead electing to begin rapprochement with the FARC.11Wills L. (2012) (<)a href='http://www.scielo.cl/scielo.php?pid=S0718-090X2012000100005&script=sci_arttext'(>)From Uribe to Santos: Changes and continuities in Colombian politics in 2011. (<)/a(>)(<)em(>)Revista de Ciencia Política (<)/em(>)(ISSN 0716-1417) 32 (1), pp. 87-107. This change in the government’s approach to the armed conflict created an irreconcilable rupture between the two leaders. In 2013, Uribe formed the Centro Democrático, which, while able to consolidate different parts of the party, showed early signs of a fracture within Uribismo.12Ortiz J, Wills L. (2023) (<)a href='https://revistas.uniandes.edu.co/index.php/colombia-int/article/view/618/8511'(>)Dilemmas of the vitality of the Centro Democrático (CD) political party, 2013-2020. (<)/a(>)(<)em(>)Colombia Internacional (<)/em(>)(ISSN 0121-5612) 114 (-), pp. 93-122. The dispute between Democratic Security and a bid for peace fragmented the movement, with a technocratic faction aligning itself with Santos and a more conservative and rural base closing ranks with Uribe.13Gutierrez Sanín, Francisco. 2020. Uribe Vélez: Democrat, radical, extremist or all of the above? (<)em(>)Revista Euro Latinoamericana De Análisis Social Y Político (<)/em(>)(RELASP), 1(1), p. 219. In 2014, the Centro Democrático participated for the first time in Colombia’s national elections, coming in second. Óscar Iván Zuluaga, the CD candidate for president, was defeated by Santos in the second round. The electoral bases of Uribismo from 2002 and 2006—which brought together support from landowners, technocrats, urban and rural constituencies—had clearly begun to erode. Support declined dramatically in Bogotá, Cali, and Medellín. Parties such as Cambio Radical (Radical Change) and the Partido de la U withdrew their support to the Centro Democrático, and the technocratic factions of Uribe’s government exited, replaced by regional politicians.14Gutierrez Sanín, Francisco. 2020. Uribe Vélez: Democrat, radical, extremist or all of the above? (<)em(>)Revista Euro Latinoamericana De Análisis Social Y Político (<)/em(>)(RELASP), 1(1), p. 219.

   In Santos’s second term, from 2014–2018, the Centro Democrático under Uribe’s leadership formed the principal opposition against a national plebiscite to affirm the government’s peace agreement with the FARC in October 2016. In a major shock, the NO vote was victorious with 50.21 percent of the vote, compared to 49.78 percent for YES. The Santos government and the FARC were then forced to return to the negotiating table and signed another agreement in November, and the last years of the Santos administration oversaw the legislative process for the agreement’s implementation.

   Riding on this wave of backlash against the peace deal, in May 2018, CD candidate Iván Duque, supported by Álvaro Uribe, won the presidential election. Uribe was reelected as Senator, and the Centro Democrático obtained 16 percent of seats in the Senate. At the regional level, the Centro Democrático electoral performance faltered, a trend which continued in 2019 and 2023. Some have argued that the party’s focus on national security is unable to meet local demands. Uribe’s centrality in the party may have also prevented the rise of local leadership and organizational structures outside of the main cities.15Albarracín, J; L. Gamboa & J.P., Milanese. 2024. The uneven success of uribismo in Colombia. In Borges, A., R. Lloyd & G. Vommaro (<)em(>)The Recasting of the Latin America Right. Polarization and Conservative Reactions. (<)/em(>)Cambridge: Cambridge University Press. These problems came to a fore in  2022, when the Centro Democrático failed to present a candidate for the presidential elections. The party only obtained 9.5 percent of seats in the legislature. 16Wills L. (2024) The Colombian Party System 1991-2022. Deinstitutionalized but flexible and resilient.(<)em(>) Political Parties and the Crisis of Democracy. Organization, Resilience and Reform (ISBN 9780198888734) (<)/em(>)pp. 310-331. Oxford University Press. This dramatic fall from power precipitated a new electoral wave in Colombia: the triumph of a leftist candidate, Gustavo Petro.

   Uribismo after Uribe?

   Several factors contributed to the rise of Petro. After the signing of the FARC peace accords, former guerrillas were permitted to form a party—eventually named Comunes (Communes)—that participated in national and regional elections. The agreement also established the Opposition Statute, which grants rights and guarantees to political parties outside of the governing coalition. In 2021, the government passed a reform that would guarantee sixteen seats in the legislature to victims from areas most affected by the armed conflict. Together, these changes—the result of a fragile peace negotiation—boosted the performance of the left and promoted the peace agenda overall. 

   Meanwhile, Iván Duque’s fledgling government was struggling to hold onto power. A national strike in opposition to his security and austerity policies wracked the nation in 2019 and 2020. Then, the pandemic exacerbated widespread discontent with the government, which came to a fore in 2021 with a massive outbreak of protests, the largest seen in the nation in decades. Duque also lacked a coalition to support his policies in Congress, and the Centro Democrático leaders had been linked to drug trafficking groups. Facing criminal proceedings for bribery and fraud, Uribe was also detained and resigned from Congress in 2020.  The government’s abandonment of the peace deal, the assassinations of social and labor leaders, and repressive police activity sparked popular mobilizations across the country.

   The Pacto Historico (Historical Pact), led by Petro, offered a left-wing response to this collapse of the right. With Uribismo failing to present a candidate for the elections, Rodolfo Hernandez, a businessman from Bucaramanga, represented a fractured right. While Hernandez attracted support through his opposition to Petro, during the campaign, he made efforts to distance himself from Uribismo, instead presenting a more “populist” and anti-incumbent option.17Botero, S and Jaimes, JM (2023). Ibid. Hernandez favored the Santos peace process, and his campaign utilized social media to mobilize a voter base disenchanted with politics as usual.18 Piñeiro, R; F. Rosenblatt; G. Vommaro & L. Wills-Otero (2024). (<)em(>)Parties and New Technologies in Latin America(<)/em(>). Cambridge: Cambridge Elements. Politics and Society in Latin America.   Without a candidate and in the face of Petro’s triumph, the Centro Democrático became one of several opposition parties in the government. Although the cornerstone of its discourse continues to be security, the party issued a strong warning: the arrival of “Castro-Chavismo” would usher in a socialist government that would be the enemy of private property. But the fact that not all Centro Democrático members voted against the Petro government’s Total Peace plan illustrated major fractures in the party, which extended across social and economic issues.19In the second debate, 2 out of 13 CD senators were absent and did not vote, while in the fourth debate, 6 out of 16 representatives to the Chamber did the same. The Total Peace bill was approved in its fourth debate in the plenary of the House of Representatives. (<)em(>)Congreso a la Mano, (<)/em(>)2022. See: (<)a href='https://congresoalamano.elespectador.com/proyecto-perfil/220004/'(>)Total Peace: what is it, what is its status and how did it vote?(<)/a(>) With the end of the FARC, the natural enemy of the right disappeared. Social demands found greater echo in political institutions, weakening the warlike banner of Uribismo. 

   The future of Uribismo’s relationship to Uribe is also an open question. One faction of “Institutional Uribismo,” represented by leaders such as Duque, has sought to cultivate new leaders while maintaining Uribe’s legacy. Other parts of the party are more critical of a continued dependence on Uribe. Even so, “Uribismo without Uribe” has yet to fully take shape, as the movement continues to be cohered by Uribe himself. Meanwhile, contemporary Uribista figures, such as Cabal, have doubled down on anti-communist rhetoric naming the left as a threat to the established order.20Botero, S., & Jaimes Prada, J. M. (2023). The ultra-right in Colombia: ideas and leaderships in formation. Analysis, FES. Available at (<)a href='https://library.fes.de/'(>)library.fes.de(<)/a(>). The election of Jair Bolsonaro in Brazil has served as a reference for a sharper right-wing discourse, where threats from Venezuela and the defense of private property of landowners and ranchers appear as key points of his 2026 platform.21Halikiopoulou, D., & Vasilopoulou, S. (2016). Breaching the social contract: Crises of democratic representation and patterns of extreme right party support. Government and Opposition, 53(1), 26-50. (<)a href='https://doi.org/10.1017/gov.2015.43'(>)https://doi.org/10.1017/gov.2015.43(<)/a(>) The victory of Donald Trump has also highlighted a global crisis of democratic institutions.  But the issues that made Uribismo relevant in the Uribe era remain present, as the demand for heightened security finds popular resonance amid the partial failure of the Petro government’s Total Peace efforts. Nonetheless, Colombia’s right wing today suffers from an absence of the unifying leadership once held by Uribe. This absence has prevented the consolidation of a European, Brazilian, Argentinean or Salvadoran style ultra-right in the country.

   Uribismo, which once represented the dominant political force in Colombia, today faces a structural crisis calling into question its long-term viability. Its ability to build a broad, security-centric, technocratic coalition around a war of counterinsurgency has lost traction in a political scenario where security is no longer the only priority of the electorate. But a year ahead of the next presidential election, Uribismo’s central ideology remains crucial not only in the mounting opposition to Petro’s government, but also the right-wing turn across the region, which has increasingly touted a militarized approach to crime, migration, and border security. Despite its electoral and programmatic decline, Uribismo continues to be a reference point for these conservative and reactionary sectors. Its ability to survive will depend on if the movement takes on contemporary issues of economic inequality and instability. Almost a quarter century after Uribe’s triumph, will Uribismo manage to consolidate power amid a seismic transformation of the global right? 

7. The Fourth Transformation

   April 3, 2025 6:16 pm Comments Off on The Fourth Transformation

   On January 12, tens of thousands of Mexican citizens packed into the Zócalo to hear President Claudia Sheinbaum deliver her report on the first 100 days of government. Her announcements reflected an agenda both ambitious in scale and comprehensive in scope: sixteen new laws and twelve constitutional reforms ranging from the recognition of Indigenous peoples and the real increase in the minimum wage, to the recovery of Mexico’s national ownership of natural resources and a crackdown on tax evasion. “Let it be heard loud and clear,” Sheinbaum said. “We will not return to the neoliberal model … We will continue with Mexican Humanism and with the maxim of ‘For the good of all, first the poor.’”

   That maxim sits at the heart of the “Fourth Transformation,” the political-economic project inaugurated by Sheinbaum’s predecessor Andrés Manuel López Obrador, or AMLO. Founded during his own campaign for the presidency, AMLO’s National Regeneration Movement (Morena, in its Spanish abbreviation) drew inspiration from the country’s three prior great transformations—the War of Independence (1810–1821), the War of Reform (1857–1861), and the Mexican Revolution (1910–1917). A century on from the Revolution, AMLO claimed to recover its tradition of popular self-determination, proposing “a system of democratic planning of national development” to shape economic growth toward the goals of “independence” and the “political, social, and cultural democratization of the nation.” Sheinbaum now promises to construct a “second storey” atop this political edifice.

   The return of “democratic planning” to Mexican governance would mark a sea change in the country’s prevailing political economy. For decades, Mexico has been characterized by the micro-politics of clientelism, with election periods marked by the distribution of goods, favors, and bribes. If the Partido Revolucionario Institucional (PRI), which held power continuously from 1934 until 2000, was once admired for the developmental vision of its Planes Sexenales (six-year plans), by the 1980s it had embraced radical structural adjustment and reduced its planning process to the backroom selection of presidential candidates by dedazo. The successor administrations of the Partido Acción Nacional (PAN), from 2000 to 2012, neoliberalized the country further still. The Fourth Transformation, by contrast, has set its horizon to the macro-politics of programmatic developmentalism, calling on citizens to hold Morena accountable to the ambitious “100 commitments” set out at the start of its presidencies.

   Six years into its implementation, the project of the Fourth Transformation earned Morena a massive second mandate in the general election of June 2024, securing Sheinbaum the largest share of the popular vote in Mexican history and majorities for her party in both the House and Senate of the Mexican Congress. The interpretation of that mandate, however, has provoked debate from both the left and right, which variously criticize the government as shallowly populist or beholden to perceived special interests. Is Morena, as critics allege, simply a replica of the PRI’s corporate-clientelist machine? Or does Sheinbaum’s electoral margin signal a shift among Mexicans’ perception of their national government—from a “failed state” to an enviable model of post-neoliberal governance? How did Sheinbaum assemble a winning coalition for her vision of popular self-determination, where neighboring incumbents suffered stinging rebukes at the ballot box? And how will the Fourth Transformation fare amid the escalating threats of economic warfare emanating from the Trump administration?

   Inheritance

   Accounts of the Fourth Transformation often start in 2018, making brief mention of AMLO’s prior attempts at the presidency before turning to his period in office and his planning for succession. But these narratives fail to register the crucial political-economic context from which the National Regeneration Movement emerged—both the parasitic mode of capitalism that hollowed out the Mexican economy, and the political despair that it engendered across the population.

   At the time of AMLO’s inauguration in 2018, the presidency, political parties, and local governments recorded the lowest levels of citizen trust in the country’s modern history. Eighty-five percent of the population expressed no trust at all in the president, 84 percent had no trust in political parties, 81 percent distrusted their state government, and 77 percent their municipal government. Federal legislators fared little better: 62 percent of citizens disapproved of their deputies, and 60 percent of their senators. Faith in the judicial system, meanwhile, had eroded through both the quotidian experience of its dysfunction and a series of high-profile scandals; the previous government of Enrique Peña Nieto, for example, spied on its citizens with Pegasus technology, and fired the prosecutor tasked with investigating sources of illicit financing for his presidential campaign.

   Such discontent was the fruit of a failed development model, and the shrinking political space for “democratic planning” that it afforded. The roots of these constraints can be traced back to a single date. On August 12, 1982, the Mexican government announced that it would default on its debt, inaugurating a crisis that would soon spread across the global South. To weather the storm, President Miguel de la Madrid turned to the IMF for a multi-billion dollar loan conditioned on a familiar recipe of aggressive structural adjustment. In the five years that followed the 1983 bailout, Mexico saw a dramatic redistribution of income between capital (48 percent to 64 percent) and labor (42 percent to 29 percent). Real wages for industrial workers fell 29 percent, while the purchasing power of the minimum wage fell 42 percent.

   The 1990s saw Mexico’s immiseration intensify. Kicked off by the so-called Tequila Crisis—in which a peso bid up in anticipation of the North American Free Trade Agreement (NAFTA) rapidly collapsed—the IMF conditioned its new bailout package on further privatizations and the country’s opening up to foreign ownership. On January 1, 1994, as the Zapatistas of the EZLN rose up to defend Indigenous territories in the southern state of Chiapas, incoming President Carlos Salinas de Gortari brought NAFTA into effect, flooding Mexico’s agricultural market with subsidized US American goods and rapidly driving the extreme poverty rate from 16 to 28 percent.

   Even before signing onto NAFTA, the PRI had promoted domestic labor repression through a corporatist system of “employer protection contracts” that saw charro union bosses cut deals with exploitative employers—all with the blessing of the government, which formed the third party in the tripartite model. To compete with China’s manufacturing productivity, Mexican officials kept minimum wage increases just on par with inflation, and sometimes below, hampering productivity and increasing poverty. After the signing of NAFTA, that exploitation only intensified, with a maquiladora industry exploding across the US-Mexico border; between 1984 and 2002, these cheap-labor-intensive factories multiplied from 180,000 to over 1.1 million workers: a quarter of the country’s manufacturing workforce. Against Clinton’s promise of “prosperity and growth,” Mexico’s poverty and unemployment rates had both risen, twenty years on.

   This barrage of structural adjustments acted like a political economic centrifuge. The influx of cheap US agricultural products displaced nearly five million Mexican farmers, while the number of annual migrations across the US-Mexico border rose by 79 percent between 1994 and 2000, as Mexicans sought economic opportunities closed off in their home country. These centrifugal dynamics then played out in Mexico’s political system. The year 2000 brought the end of the PRI’s reign in Mexico—a moment hailed by pundits as the fall of the “perfect dictatorship,” as coined by writer Mario Vargas Llosa. But these political changes not only failed to redress the dynamics of under-development; they intensified them. Far from democratizing the economy, the incoming governments of the National Action Party (PAN) oversaw its plunder, accelerating primitive extraction through foreign mining companies and financial groups alike. The free-for-all set off by the country’s freewheeling neoliberal model, meanwhile, proved fertile ground for the expansion of criminal syndicates that had shifted narcotic trafficking routes out of Colombia and through the Mexican border to the United States. The “War on Drugs” declared by PAN President Felipe Calderón in 2006 only drove the country deeper into despair. In 2007, Mexico’s homicides per capita numbered 9.7 per 100,000 inhabitants. Just three years later, that number reached 22.7.

   The downward spiral of violence, corruption, and displacement ultimately unwound the country’s developmental coalition. The rights of land, labor, and natural resources that the 1917 constitution once secured for the Mexican people were stripped to the bone. And as the PRI’s old corporatist networks deteriorated into multi-party clientelistic machines, electoral competition became a narrowly local division over what remained: a system of caciques and acarreos unwedded to the historical orientation of developmental planning, and hostile to challenger candidates who threatened the entrenched system of political privileges. The result was Mexico’s isolation on the regional stage. While its neighbors across Latin America underwent a pink tide—bringing social democratic governments into power with ambitious plans ranging from redistribution and social protection to nationalization and industrialization—Mexico’s transformation was forestalled.

   Confidence

   Andrés Manuel López Obrador campaigned for the presidency against the “power mafia” responsible for this national decline. His victory in 2018—the third attempt, following scandals of electoral fraud that bedeviled his campaigns in 2006 and 2012—rested on the discredit that the existing parties had brought upon themselves during the decades of PRI-PAN electoral competition. In their place, AMLO and his movement crafted an electoral coalition that spanned geographies, classes, and ideological currents—inviting even the tránsfugas from right-leaning parties in regions where the left was historically weak. The goal was to win a clean majority, while securing the votes for ambitious constitutional amendments. But to bring that ambition to life, the Fourth Transformation would first have to restore public confidence in Mexico’s democracy. “What we desire is to purify public life in Mexico,” AMLO said in his inaugural speech. “I will not lie, I will not steal or betray the people of Mexico.” For AMLO, building trust in Mexico’s institutions was a precondition for transforming them.

   A key channel for sustaining his popularity was the mañenera, a daily press conference hosted at the National Palace. Inviting regular presentations from his cabinet—or simply fielding questions from an audience of journalists—the mañanera sought to communicate AMLO’s ambitions directly into the ears of Mexico’s citizens, cutting out the media middle man that Morena credited, in large part, with the destruction of democratic culture. From the point of view of AMLO’s critics, the mañanera was an attack on the country’s press, given the president’s frequent denigration of their coverage of his administration. From the point of view of the administration, though, the mañanera was not just a soapbox; it was a corrective device to Mexico’s hypertrophied, right-aligned media. Even The Economist, which regularly lambasted AMLO’s government as authoritarian, ignorant, and reckless, admitted to the “marvel” of the mañanera, which has since been adopted by his successor Sheinbaum.

   Along with the mañanera came a slew of political reforms aimed at reviving Mexico’s democratic culture. Popular consultations invited citizens to vote on polarizing government priorities, such as the cancellation of the planned international Mexico City Texcoco Airport, accused of excessive environmental damage; following the vote, the airport was relocated to a disused military base, and the build site was replaced by the Lake Texcoco Ecological Park. A new federal law instituted presidential recall elections to allow citizens to decide whether the leader should continue in office halfway through their term (while only a fifth of registered voters turned out for AMLO’s mid-term mandate referendum, he won with 91.9 percent of the vote). Meanwhile, the government popularized the idea of “republican austerity” as an orientation to government spending—including the largely symbolic reduction of high-ranking public officials’ salaries alongside the elevation of those of low-earning bureaucrats, and the $92 million sale of the luxury presidential plane—with the goal of projecting a sense of responsibility from discredited state authorities. The communication around the project was accordingly sharp: “It’s important that everyone knows how people thought before, how the authorities acted, like little pharaohs,” AMLO said. “Not any more.”

   If AMLO sought to reduce the social privileges afforded to the government’s “little pharaohs,” he also sought to redistribute them to its citizens. AMLO’s sexenio saw a major renovation of the country’s welfare system, and the broader organization of the labor market that underpinned it. The 2019 Labor Reform Law, for example, introduced a package of reforms that limited outsourcing, obligated employers to pay annual profit-sharing bonuses, and broke with the exploitative system of “employer protection contracts” backed by the country’s powerful charro unions. Leadership must now be elected through secret ballots, contracts ratified by membership, and disputes reviewed by an independent arbitration mechanism to replace the tripartite Conciliation and Arbitration Boards traditionally biased against the rank-and-file. For the unorganized majority, the AMLO government not only increased the real minimum wage by 90 percent, but also indexed the new floor to inflation. For the elderly, for students, and for rural farmers, AMLO introduced broad new forms of social insurance: the Pensión para el Bienestar de Adultos Mayores, the Becas Benito Juárez, and Sembrando Vida, respectively.

   The most far-reaching of AMLO’s interventions was his last: the judicial reform, approved by the Senate in the waning days of his presidency. Overhauling the entire system of judicial appointments, the law established popular elections for all federal judges—including the Supreme Court, the terms of which will now be limited to twelve years. The representatives of Mexico’s judicial power would not go gently; in August, 1,400 judges declared an indefinite strike to oppose the reform. Their reaction paled in comparison to that of the international investment community, which warned that the measure would “set Mexico back 50 years.” But the objections of the corporate press were overruled by Congress and Senate—and the general public. By June 2024, between 68 and 75 percent of Mexican citizens agreed with the government that their judges and magistrates should be elected by popular vote. One year later, on June 1, the country will hold its first judicial elections.

   Against apocalyptic predictions for AMLO’s “wild ambitions,” these reforms only served to strengthen the prospects for the democratic planning of national development. The capacities of the state grew through infrastructure projects built around new state-owned enterprises in rail (Maya) and airlines (Mexicana) as well as existing public companies in oil (Pemex) and electricity (CFE), generating a boom in the neglected states of the south, in particular. And the government’s industrial policies took advantage of the nearshoring trend to attract new investment; even in the automotive sector, which critics expected to be hampered by the labor reforms, $13.4 billion was invested during AMLO’s tenure, and the lowering of tariffs on EVs reshaped the Mexican auto fleet. “It is very important that the public sector, the private sector, and the social sector are joining together to promote the growth of our country and achieve well-being,” AMLO said. By 2023, Mexico’s gross fixed capital investment hit its highest level on record.

   Coalition

   In the span of just six years, AMLO’s policies succeeded in restoring the public’s faith in a once-failed state. By 2023, 54 percent of Mexicans had high or moderately high trust in the federal government, a figure significantly higher than that of its OECD partners, which averaged just 39 percent. This has often been dismissed, particularly in the pages of the US’s business press, as the result of mere populism—a superficial appeal to mass anti-elitism in service of the consolidation of power. But for its militants, the Fourth Transformation is a “national popular” project. Though aided at times by symbolic gestures and public theatrics, its foundational strategy is the forging of a durable coalition to carry out a truly transformative program. This has meant not only firing up the masses, but also drawing in other poderes fácticos, from the country’s industrial elites to its armed forces, toward a mutually beneficial vision of national development.

   Critics of the Fourth Transformation have tended to focus here: on the proximity of the project to the same established powers it once accused of corruption, or worse. Despite his frequent critiques of the Mexican ruling class, for example, AMLO maintained a council of business leaders as close advisors, and in his six years in office refused to raise their tax rates. (Accusations of fiscal laxity are, however, overstated. A crackdown on tax evasion led to significantly increased tax intakes: the government took in 4.7 percent more in tax revenue in 2024 than 2023, which was itself already a record-breaking year; the latest numbers indicate even more dramatic tax revenue increases.) Yet it was this working relationship with the country’s industrial elites that allowed AMLO to negotiate an agreement with the private sector to cap prices on a basic basket of essential goods, protecting the country’s poorest citizens from the gales of inflationary pressure that rocked the global economy in recent years—and, according to the predominant account of recent elections in countries like the United States, forced incumbents out of office. Where many critics depict AMLO’s relationship to the national bourgeoisie as a concession, others see it as a pragmatic effort to corral them into the tent of the Fourth Transformation—while not hesitating to confront billionaires who dared to remain outside of it.

   AMLO’s relationship to the armed forces can be considered in the same light. Under his administration, the Army’s budget increased by 22 percent, and the Navy’s by 17, the military was given significant new responsibilities, and the National Guard, which AMLO created, was transferred from civilian to Army control. Yet this “militarization” can also be understood through the logic of the Fourth Transformation’s national popular model. A cursory tour through the recent coups, arrests, and exile of Latin America’s left-wing leaders—Honduras in 2007, Brazil in 2015, Bolivia in 2019—reveals the acute power of the armed forces to shape the political realities of the region. While moving to dismantle the country’s most despised security forces of the Federal Police, AMLO sought to channel the military’s activities directly into the developmental project, putting them to work constructing airports, railways, and hospitals. By 2024, the majority of the military’s budget was earmarked for such infrastructure projects.

   “Republican austerity” also flows from the strategic thinking of the Fourth Transformation. When Mexico declared default in August of 1982, AMLO was a 28-year-old political aspirant in the state of Tabasco, rallying his supporters to reject the structural adjustment program imposed by the International Monetary Fund. The experience of Mexico’s subjugation through its successive sovereign debt crises has thus informed the Fourth Transformation’s approach to fiscal management. Unlike in the global North—where a “balanced budget” more often serves merely as an excuse for the abdication of state provision of public goods—unsustainable levels of sovereign debt present acute threats to Southern development, as to the prospects of “democratic planning” under the diktats of foreign creditors. Where critics have highlighted the costs of frugality—and the government’s stubborn commitment to an appreciating peso as a symbol of the country’s macroeconomic strength—AMLO’s approach to republican austerity was evidently not for austerity’s sake. Such fiscal restraint set as its goal the recovery of the country’s economic sovereignty, and the demonstration of government responsibility to its citizens.

   With these flanks enlisted in “regeneration,” AMLO fought to reverse the erosion of public, sovereign control of the energy sector that had begun under his predecessor. During the last oil boom of the early 2000s, oil revenues were used to fund general expenditures and Pemex was forced into high indebtedness; since 2018, the government has cut taxes and reinstituted subsidies to stabilize the state-owned firm. The reforms were of a piece with the general policy aimed at the re-nationalization of strategic energy resources, including the nationalization of the lithium mining industry—and a reflection of both the 1917 constitution’s claim on natural resources as the common property of the nation, and the 1938 nationalization of oil. In that same spirit, AMLO went toe-to-toe with Spanish energy company Iberdrola, resulting in the state purchasing 55 percent of Iberdrola’s operations in the country. In this context, AMLO’s row with the Spanish monarchy can be understood as more than a cheap nationalist stunt, but as a tactic in the struggle for control over Mexican natural resources.

   AMLO waged a similar battle for sovereignty on the legal front. NAFTA’s introduction in 1994 brought with it a then-novel form of corporate profit protection known as Investor-State Dispute Settlement (ISDS). The ISDS system allows corporations to sue foreign states in an opaque, parallel legal system for any actions that interfere with their projected profits, even if these actions are well within the state’s authority and demonstrably taken in the public interest. Mexico is among the most sued states in the world under ISDS, and has lost hundreds of millions of dollars in such cases as Metalclad v. Mexico, in which a US-based waste management company took Mexico to court, and won, after a Mexican municipality refused to grant it a permit to construct a toxic waste facility due to concerns over water contamination and other health hazards. During the NAFTA renegotiations, AMLO fought successfully to water down—if not entirely eliminate—ISDS, restricting the scenarios that are grounds for a suit and incorporating new requirements that the case first be heard in domestic courts.

   Storeys

   If the June 2024 federal elections were a referendum on AMLO’s project, the results were resounding: the highest vote share in Mexico’s democratic history—a 30+ point margin of victory—for AMLO’s successor, Claudia Sheinbaum; a supermajority coalition in the Chamber of Deputies and nearly the same in the Senate; victories in seven out of nine gubernatorial races; and Mexico City’s mayorship. With such an unprecedented popular mandate came lofty expectations: in her inaugural address, Sheinbaum laid out her 100-point plan for her sexenio, ranging from education programs for a “Reading Republic” to agricultural programs for a “Just & Rural Republic” to digitalization programs for a “Prosperous & Connected Republic.” In her first six months in office Sheinbaum has been able to maneuver her majorities to make significant progress toward those commitments, not merely retaining the policies of her predecessor but building upward from the foundation that he laid. This is the second storey of the Fourth Transformation—its edifice most readily visible across three essential domains: food, fuel, and medicine.

   AMLO came to power vowing to stem the rapid erosion of Mexican food sovereignty that had begun with NAFTA. In a nation that had seen its import dependence on corn quintuple from pre-NAFTA levels, the Morena government ramped up domestic production of fertilizer, promoted agroecology, shifted agricultural subsidies from large to small and medium-scale farmers, and instituted a program of price guarantees for the same, the purchases from which are used to provide lunches for hospitals and public schools. Most controversially to foreign agribusiness, AMLO also attempted to ban the use of genetically modified corn to protect Mexican farmers from US agricultural dumping. Sheinbaum has picked up where AMLO left off, with a plan to promote domestic production of staples like beans, corn for tortillas, and lower-end coffee and chocolate products, while providing consumers access to basic goods at affordable prices via government-run Tiendas del Bienestar. While the US successfully obstructed AMLO’s GMO import restrictions under USMCA, Sheinbaum is now leading the charge to amend the Mexican constitution to ban the planting of genetically modified corn. And in a nation wracked by droughts, Sheinbaum’s five-year water plan will invest in major new infrastructure projects, review concessions to industries, and promote more water-efficient irrigation systems for agriculture.

   So too with energy sovereignty, where Sheinbaum is carrying forward AMLO’s plans for public power generation, down a path soon-to-be cleared of judicial obstruction. Within weeks of the start of Sheinbaum’s administration, the Senate approved reforms to reclassify PEMEX and CFE as fully public entities rather than “productive state companies,” placing them under greater public control unrestricted by profit generation requirements. The reforms also ensure majority public stake in domestic power supply, while maintaining a minority place for private actors. Sheinbaum has further pledged over $23 billion in investment in energy infrastructure, with a stronger emphasis than her predecessor on renewables, and a program to install solar panels in homes across the desert north. Expanding on AMLO’s lithium nationalization, Sheinbaum plans not only to promote new technologies to accelerate lithium extraction, but to move Mexico up the supply chain with, among other things, the development of a domestically produced electric microvehicle.

   AMLO’s approach to medicine prioritized confronting government corruption and monopoly distributors, which, he argued, operated hand-in-hand to overcharge for essential medicines. Shortages, though not new to Mexico, undeniably plagued the AMLO administration — a fact that critics pin on AMLO’s policies and parsimonious health budgets, and defenders attribute to corporate retaliation and Covid-19 induced supply shocks. Toward the end of his sexenio, AMLO inaugurated a Mexico City-based government-run “super pharmacy” intended to alleviate these shortages. Sheinbaum has maintained the same general orientation, but, in recognition of the challenges of her predecessor, took early steps to streamline and transparentize the government acquisition process. At the same time, Sheinbaum has announced new plans for investment in medical research and domestic production of generics and vaccines, seeking to reduce dependency on medical imports. To get these medicines into the hands of those most in need, Sheinbaum has launched a program to send healthcare professionals to the homes of people with disabilities and the elderly across the country, who, once prescribed, will receive their medicines at government-run pharmacies that will operate alongside existing, AMLO-era government banks.

   Prospects

   All of these programs aim to make good on Sheinbaum’s guiding maxim: “For the good of all, first the poor.” While social democratic parties in the OECD have recently shied away from such redistributive ambitions—and suffered a class realignment away from their working class constituencies—Morena’s national popular approach seeks to bind together a broad coalition under the banner of Mexico’s sovereign development. Its success in constructing that coalition is difficult to deny. On March 3, 2025, Sheinbaum’s approval rating hit 85 percent—a record for a sitting Mexican president in at least fifty years. Only three US presidents on record have accomplished such a feat: in the immediate aftermath of the September 11 attacks, at the end of the Gulf War, and after VE Day. Even President Donald Trump has appeared to join the club, calling Sheinbaum a “wonderful woman” and thanking her for educating him about Mexico’s drug prevention policies; he cited his respect for Sheinbaum in explaining the second postponement of a 25 percent tariff on all Mexican goods.

   Yet Trump’s personal admiration for President Sheinbaum has done little to stem the flow of threats issued by his administration against her country: the imposition of punishing tariffs; the prospect of drone strikes on Mexican soil; the forced externalization of border policing; crackdowns on Mexican migrants in the US, and in consequence the remittances on which Mexico’s economy depends. “Poor Mexico,” quipped the old dictator Porfirio Díaz, “so far from God, so close to the United States.” Trump’s trade war now threatens to punish its neighbor for the crime of Mexico’s enduring economic dependency. In 2024, Mexican exports to the US were the equivalent of 30 percent of the country’s GDP—the same figure in reverse is roughly 1 percent. By one estimate, a combination of US and retaliatory Mexican tariffs would shrink Mexico’s economy by up to 3.4 percent from its baseline projection, and send inflation soaring up 4 percent. By another, Trump’s 25 percent tariffs alone could reduce Mexican exports by over $40 billion—or 4 percent of GDP. Escalating economic warfare across the Northern border threatens to derail Morena’s carefully consolidated coalition. While some sectors may, in the spirit of patriotism, push for retaliation and alternative trade partners, others—those most dependent on US investments and trade—would likely press for concession. Growth has already slowed since Trump’s election, with the OECD now predicting that Mexico will slide into recession by year’s end.

   In the first two months of the Trump presidency, Mexico has already been forced to make concessions in order to stave off US aggression, and may be called to make more. Sheinbaum has extradited cartel members to be tried in US courts, sent 10,000 troops to suppress migration at the Northern border, and dispatched hundreds more to combat fentanyl trafficking in Sinaloa state. But backed by her overwhelming popular mandate, Sheinbaum has largely stood her ground. When Trump blamed Mexico for “allowing” migrants, drugs, and violence to cross the border, the Morena government reversed the narrative by suing US gun manufacturers for abetting the flow of weapons into Mexico. Sheinbaum has now threatened to expand the case in response to Trump’s plans to designate Mexican cartels as terrorist organizations, pointed the finger back at the US for the fentanyl trade, and vowed to retaliate against US tariffs.

   On Sunday March 9, Sheinbaum once again called her supporters to the Zócalo. The mood was defiant, and Sheinbaum resolute: “We cannot give up our sovereignty, nor can our people be affected by decisions made by foreign governments or hegemonies.” Throughout Latin America, and across the global South, political movements confront conditions not unlike Mexico’s a decade ago: economies afflicted by acute dependencies, and people who have lost their faith that party politics—and even the state itself—can improve their lives. The Fourth Transformation, seen from the Southern perspective, is already an historic achievement, rejuvenating a democracy once considered to be suffering its terminal decline. “Con el pueblo todo; sin el pueblo, nada,” from this vantage point, is a strategy as much as it is a slogan: building and sustaining popular support, for Morena, is the only way to achieve a true and enduring transformation. As Mexico stares down the barrel of Trump’s bid for pan-American dominance, the strongest test for that strategy may yet lie ahead.

8. Brazil’s Neo-Extractivist Trap

   5:55 am Comments Off on Brazil’s Neo-Extractivist Trap

   The construction of a post-neoliberal order is underway. Given that there is no post-capitalist horizon under discussion, post-neoliberalism will not emerge in the same way that the US New Deal, the European Welfare State, or Latin American national developmentalism—whose agreements were built precisely on the “communist threat”—emerged out of the liberalism of the late nineteenth century. A hundred years ago, there were three possibilities for development: New Deal capitalism, fascist capitalism, and communism. As China is not comparable to what the Soviet Union once was—it is not an “exportable” model—what seems to be left for today’s still-democratic countries is a choice between emergent post-neoliberalisms of the Trumpist type and a liberal-progressive type that has not yet found a model to call its own.

   The new election of Donald Trump has buried the progressive project of a “transition within order.” The Republican’s victory in 2024 suggested that the outliers were elections like Biden’s or Lula da Silva’s, and not the earlier success of Bolsonaro or Trump. Post-neoliberalism in its Trumpist version appears to be dominant. The progressive camp’s chance lies in building a real alternative opposition program in view of this trend: Avoiding widespread wars and achieving something of an energy transition is the pressing task of the next two decades at least.

   As with the rise of liberalism and neoliberalism, the solidification of a post-neoliberal international order will not unfold homogeneously across the globe. Identifying the different dependency patterns among global South countries and their possible development trends requires finding an analytical orientation appropriate for comparative studies of political coalitions from different countries and regions.1See in this regard my text “Peripheral Conditionalities,” published by PW on September 26, 2024. I propose the idea of the “neo-extractivist trap” as such an orientation.

   The notion of a neoextractivist trap offers a particular interpretation of neoextractivism,2An important overview of the collective effort in Latin America to develop the idea of “neoextractivism” can be found in Maristella Svampa’s (<)em(>)Neo-extractivism in Latin America: Socio-environmental Conflicts, the Territorial Turn, and New Political Narratives(<)/em(>) (Cambridge: Cambridge University Press, 2019). to show how it might help us understand Brazil’s recent history—and maybe not only Brazil’s. The idea of a “neoextractivist trap” entails questioning formulations that have used the same notion of a “trap” for other purposes—particularly to delineate groups of countries belonging to the global South, such as the middle-income or low-growth traps. The neoextractivist trap, by contrast, asserts the centrality of dependency and the climate emergency in its understanding of the politics of economic development.  It is analogous to the “low or middle-technology trap.”

   My aim is to demonstrate the connection between neoliberalism and neoextractivism, in the last forty years of Brazilian history and in the contemporary global situation. Just like neoliberalism, neoextractivism should not be understood solely in economic terms, even under the broad notion of “economization” or similar frameworks. Hence, the idea of a neoextractivist trap should be understood in genuinely multidimensional terms, encompassing environmental, economic, cultural, political, social, geopolitical, and technological dimensions. This makes it clear that the very notion of a neoextractivist trap must be approached as an interdisciplinary and collaborative research proposal, oriented towards understanding the set of structural obstacles that hinder the path toward an ecological transition guided by the fight against inequalities.

   This starting point is based on two fundamental diagnostic elements. First, the unprecedented implications for globally unequal relationships of diplomacy and trade posed by environmental emergency: leaving countries behind in the ecological transition means jeopardizing the transition at a planetary level. Furthermore, achieving a successful ecological transition—insofar as the adjective fits—will produce entirely new patterns of dependence, even if they are now shaped and limited by the environmental emergency. Understanding the trends that will shape post-neoliberal dependency currently requires understanding the legacy of neoliberal dependency in all its dimensions.

   The second fundamental diagnostic element is that the current horizon for action in democratic countries consists of a sharp political division between a right wing that is not afraid to ally itself with the extreme right and a new progressivism. This real division—not mere “polarization”—is an integral part of the “trap” itself. 

   When it comes to acting and thinking in the emergency situation in which we find ourselves, we ignore these elements at the risk of militarizing conflicts, democratic backsliding, and rendering the ecological transition unfeasible. At the same time, we must reach beyond the trench warfare of the present, and not allow the lowered horizon of current politics to lower our theoretical horizon as well.

   Redemocratization and neoliberalism in Brazil

   Brazilian neoliberalism’s rise coincided with the country’s redemocratization process in the mid-1980s, after twenty-one years of military dictatorship. In 1985, when presidential power passed to a civilian coalition opposed to Brazil’s military dictatorship, it was progressivism that led the transition to democracy: an alliance of original sectors of the left with sectors of the democratic right—as well as defectors from authoritarianism willing to submit to progressive leadership.3An accurate reconstruction of these developments over the last 40 years can be found in Perry Anderson, (<)em(>)Brazil Apart: 1964-2019(<)/em(>), London: Verso, 2019. Together with the forces of a newly forming left—of which the Workers’ Party (PT), founded in 1980, was the central representative—the 1988 Constitution was created. In addition to establishing democratic institutions, the progressive alliance that led redemocratization established the fight against all types of inequality as its main priority—this is how the creation in 1990 of the Unified Health System (Sistema Único de Saúde, SUS), modeled on the British NHS, should be understood.

   Faced with the hegemony of progressivism, all that remained for the right-wing heirs of the military dictatorship was to build a defensive trench. This is not to say that this defensive tactic did not achieve important victories, starting with the failure to hold the agents of the dictatorship accountable for their crimes. It is simply to emphasize that, in this first moment of redemocratization, the social and political base of the declining dictatorship did not have the strength to control and direct the process.

   The turbulent political, social, and economic process of adapting to the neoliberal order took place simultaneously with a democratic transition away from a military dictatorship that had led to hyperinflation and unpayable levels of foreign debt. The coexistence of these two processes is visible in the text of the 1988 Constitution itself, marked by the traces of national developmentalism that prevailed over the prior half century, as well as the neoliberal modernization that was already underway across the region.

   However, the political arrangement led by progressives was guided by a principle of addition, not confrontation. This was not only because of the systematic guideline of refraining from holding agents of the dictatorship accountable for their crimes, but especially because the fight against inequalities circumvented structural change in, for example, the taxation of income and assets. It was an arrangement that succeeded in making the poor, marginalized, and discriminated strata minimally favored, but under the guideline that the other strata would maintain the dominant positions they had won and preserved during the dictatorial period.

   The government’s counterpart to the accommodating arrangement of redemocratization was a peculiar configuration of the political system. From 1994—in elections marked by the launch of the Real Plan for political and economic stabilization—until at least the re-election of Dilma Rousseff (2011–2016, PT) in 2014, the vast majority of parties formed a relatively indistinct mass of political machines: embedded in the state, they reproduced themselves in it, functioning like companies selling parliamentary support. With rare exceptions, all the parties have always been in government, whatever the government and whichever candidate they supported in the presidential election. What we had during this period was a model of political management based on the formation of super coalitions, limiting the nominal opposition to a parliamentary fringe. This was called coalition presidentialism.4This explanatory paradigm has always considered irrelevant the traits that I point out here as central: the formation of parliamentary and government super coalitions, and adherence to the government on duty, whatever it may be and whichever candidate the adhering party supported in the presidential election. On my alternative proposal for characterizing this model and other important points developed in this text, see Marcos Nobre,(<)a href='https://www.companhiadasletras.com.br/livro/9788535923346/imobilismo-em-movimento?idtag=c7625f0a-7620-45f8-9798-3593f7e505e5&gad_source=1&gclid=CjwKCAiAh6y9BhBREiwApBLHC6Admufy0tNtDAI-HIFhuWOsvsJ5UGKNw81a9CUWVeELK_UmlpNGLhoCAC4QAvD_BwE'(>) (<)em(>)Imobilismo em movimento: da redemocratização ao governo Dilma(<)/em(>)(<)/a(>), São Paulo: Companhia das Letras, 2013 and (<)em(>)Limites da Democracia(<)/em(>), work cited. In conditions of growing party fragmentation, the administration of super coalitions tended to be inefficient when it came to implementing the government program that won the coalition the presidential election.5On party fragmentation between 1991 and 2019, see Andréa Freitas and Glauco Peres da Silva, “Das manifestações de 2013 à eleição de 2018 no Brasil: Buscando uma abordagem institucional”, (<)em(>)Novos Estudos Cebrap(<)/em(>), v. 38, n. 1, jan.-abr. 2019. At the same time, it served the accommodating political arrangement that kept the fight against inequalities and the deepening of democracy at a slow and controlled pace.

   In the adjustment that controlled inflation carried out by the Real Plan, which began in 1993, the solution to this basic limitation of the non-confrontation strategy was the 2002 increase in the tax burden—at the end of eight years of Fernando Henrique Cardoso’s (PSDB) government—from a level of 25 percent to around 31.5 percent of GDP. The number grew by another two percentage points until 2006, under the Lula government (PT, 2003–2010), when the political system established that this would be the limit percentage. With minor variations, this is the tax burden that prevails to this day.6Manoel Pires, “(<)a href='https://observatorio-politica-fiscal.ibre.fgv.br/series-historicas/carga-tributaria/carga-tributaria-bruta-1990-2023'(>)Gross tax burden: 1990-2023(<)/a(>),” May 13, 2024, Fiscal Policy Observatory, IBRE/FGV. Approved in stages between 2023 and 2024, a wide-ranging Tax Reform will be implemented from 2026 onwards, becoming fully effective from 2033. It is still difficult to say precisely what the tax burden will be as a result of this far-reaching change.

   Once the path of increasing the tax burden was closed, the governments led by the PT found in the commodities boom (2003–2011) a new way of tackling inequalities without challenging the accommodating arrangement of redemocratization.7For an analysis of the impacts of the commodities boom and its exhaustion on the Brazilian economic model, see Laura Carvalho,(<)a href='https://todavialivros.com.br/livros/valsa-brasileira'(>) (<)em(>)Valsa Brasileira: do boom ao caos econômico(<)/em(>)(<)/a(>), São Paulo: Todavia, 2018. Over the last forty years, Brazil has experienced a structural change in the correlation of social, economic, and cultural forces. The globalization of the principle of “comparative advantages” has reinforced reprimarization and produced the deindustrialization of several economies in the global south—especially in Latin America—a process that has transformed the countries of the region into commodity-dependent countries.8According to UNCTAD’s criteria, 17 Latin American countries would fall into this category, including Brazil. In the case of Brazil, “(<)em(>)the share of commodity exports increased from 44.3 per cent in 1998-2002 to 62.8 per cent in 2013-2017.(<)/em(>) (<)em(>)While all commodity groups increased their share in total merchandise exports, agricultural exports grew the most, by 390 per cent and accounted for 42.8 per cent of the increase in export value during the period.(<)/em(>) (<)em(>)And even though non-commodity exports grew by 160 per cent, their share in total exports fell, accounting for 29.1 per cent of the growth of exports(<)/em(>)” (Commodity-Dependence: A Twenty-Year Perspective, UNCTAD, 2019, p. 28). A retrospective analysis that covers the entire 20th century and reaches its negative effects up to the present day can be found in José Antonio Ocampo, “Commodity-led Development in Latin America” (in: Gilles Carbonnier; Humberto Campodónico; Sergio Tezanos Vásquez (eds.), Alternative Pathways to Sustainable Development: Lessons From Latin America, Brill Nijhoff: Leiden/Boston, 2027. This is merely an indication of the much broader and more fundamental task of presenting the structural transformation of the Brazilian economy during the neoliberal period. It should also be pointed out that this is just one of the many dimensions of Brazil’s position as a country “in a neo-extractivist trap”, as I have tried to indicate throughout this text. In the case of Brazil, agriculture and mineral extraction have taken up all the space lost by the manufacturing industry—to the point where some authors consider that manufacturing is “on the verge of extinction,” in terms of participation in GDP or productivity and exports.9The share of the manufacturing industry in Brazil’s GDP reached 35.8% in 1985, fell to 13.8 percent in 1998 and dropped to 11.3 percent in 2021, while its share of exports fell from a level close to 80 percent in 1997 to around 50 percent, these percentage points having been taken by agriculture (8.1 p.p.) and mineral extraction (19.7 p.p.). (Claudio Considera and Juliana Trece, “(<)a href='https://portalibre.fgv.br/sites/default/files/2022-10/texto-de-discussao-6-a-beira-da-extincao.pdf'(>)On the verge of extinction(<)/a(>)”, discussion paper #6, IBRE/FGV, October 7, 2022). This is a mere observation and not a proposal for “reindustrialization” to return to a previous moment or something similar. Because the problem with a country like Brazil is rather the neo-extractivist trap it finds itself in. It is a political, economic, social and cultural trap. So it’s not a question of “re-industrialization”, but rather of determining which industrial policies are necessary and appropriate to get out of the neo-extractivist trap. On this subject, see the report by Adriana Mandacaru Guerra, Tim Sahay, Renato H. de Gaspi and Bentley Allan, “New industrial policy for a new world: seizing Brazil’s opportunities in the energy transition”, February 2025.

   Despite the 2008 crisis, the strategy continued to operate until its complete exhaustion in the mid-2010s. That’s when a severe recession, which began at the end of 2014 but whose effects were only really felt in 2015, took hold and lasted two long years, until the end of 2016. Brazil’s GDP fell by 7.2 percent in the period, and GDP per capita by 9.1 percent, surpassing the figures of the 1930–1931 crisis in the country. Simultaneously, from 2015 to the beginning of 2019, an “anti-corruption” judicial operation—inspired by Italy’s Operation Clean Hands of the early 1990s—called Lava Jato, or Operation Car Wash, exposed the illicit practices in government, and installed a state of permanent panic in the political system. Following the brief period between Dilma Rousseff’s re-election in 2014 and her impeachment in 2016, ten years of intense crisis followed.10The Gini coefficient can give an idea of inequality and poverty in Brazil in the 2000s and 2010s: “The first decade of the 21st century was the best the country has ever experienced in distributive terms. Between 2001 and 2011, average household income grew by more than 30 percent, inequality as measured by the Gini coefficient fell by more than 10 percent, and the extreme poverty and poverty rates fell by 4 and 12 percentage points respectively” (Rogério J. Barbosa; Pedro H. G. Ferreira de Souza; Sergei S. D. Soares, ‘(<)a href='https://dados.iesp.uerj.br/desigualdade-brasil/'(>)Income inequality in Brazil from 2012 to 2019(<)/a(>)’, (<)em(>)Dados(<)/em(>), July 16, 2020). This process was reversed in the second half of the 2010s. In 2018, after more than thirty years of the least limited democracy the country has ever had, Brazil saw the return of an uninhibited far right that, by leaps and bounds, led a new social, political, and economic coalition that came to presidential power with Jair Bolsonaro. Since then, the right, unafraid to ally itself with the far right, has taken on the role of representing this new coalition, formed and consolidated over forty years of neoliberalism.11An attempt to reconstruct the formation process of this coalition can be found in Limits of Democracy. In this book, I also try to show that an important basis for the mobilization and engagement of this coalition lies in a non-institutionalized organization that I call the Bolsonaro digital party. The relationship between this organization and formal, institutionalized parties, with all its tensions and conflicts, is actually one of the strengths of the Bolsonaro coalition. On the digitalization of politics since the mid-2000s, see also Limits of Democracy. This is the terrain on which the neo-extractivist trap is being set in the country today—and on which its future is being disputed.

   The end of the accommodating arrangement of redemocratization was reflected in the country’s public budget. Today, 95 percent of the budget is committed to mandatory spending from the outset. Any government has only 5 percent of the budget to carry out the program it was elected to carry out. Since 2015, the National Congress has progressively grabbed a substantial part of that 5 percent of discretionary government use, reaching 20 percent of that total today (or 1 percent of the country’s entire federal budget). This is an outlier in international comparisons. The application of resources is highly nontransparent and inefficient, tending to reproduce the same dominant correlation of parliamentary forces in place since 2018. This change has profoundly affected the previous pattern of government, reducing the dominance of the executive branch.12Raul Bonfim; Joyce Hellen Luz; Vitor Vasquez, “(<)a href='https://www.scielo.br/j/bpsr/a/rFmyNgZBFJgpFWrkWBrXhgQ/'(>)Mandatory Individual Amendments: a Change in the Pattern of Executive Dominance in the Brazilian Budgetary and Financial Cycle(<)/a(>)”, (<)em(>)Brazilian Political Science Review(<)/em(>), 17 (2), 2023. As a result, public investment in Brazil has reached historic lows in the last decade.

   

   It is also worth noting that circumventing the difficulties of this arrangement through household indebtedness has been tried, and in this respect has also reached its strategic limits.13Lena Lavinas, Eliane Araújo, and Pedro Rubin, “(<)a href='https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/2455'(>)Income transfers and household debt. The advancing collateralization of social policy in the midst of restructuring crises(<)/a(>)” ((<)em(>)Revista de Economia Política(<)/em(>), 44 (2), 2024), show that household debt in relation to income practically tripled between 2005 and 2020, rising from a level of 20 percent to close to 60 percent. It is also worth highlighting the effects of the internalization of public debt from the mid-2000s onwards. At this point, Brazil not only practically eliminated its dollar-denominated debt, but also accumulated reserves of around US$330 billion—protecting the country from currency crises like those of the 1990s. At the same time, in 2024, about 16 percent of all public spending went to debt service. The internalization of the debt has its political counterpart in making large holders of bonds decisive players in freezing the balance of forces, forming a bulwark for the anti-redistributive coalition in Brazil.

   Consequently, there is no fiscal space to finance an ecological transition in the country, even in the limited form of a simple energy transition.14Given this state of affairs, it’s not surprising that proposals have emerged to “flexibilize” the budget, i.e. abandon compulsory spending on health, education and social benefits linked to the welfare system, for example. This is a proposal that is consistent with the Bolsonaro coalition’s anti-redistributive stance, in addition to the (little) that has been achieved since the beginning of redemocratization. But the correlation of forces is so restrictive that the proposal still finds an echo in relevant sectors of the new progressivism coalition. Nor is there any prospect of attaining the necessary external funding.15In the aforementioned (<)em(>)Valsa Brasileira(<)/em(>), Laura Carvalho uses the ironic figure of the “confidence fairy”, created by Paul Krugman in 2017, to remind us that austerity policies have not produced the promised rewards in terms of private sector investment and spending. And this is despite the fact that it is hard to imagine a country better positioned in strategic terms to carry out this transition than Brazil: more than 80 percent of its energy system is renewable; it has the second largest area of forest in the world (particularly in the Amazon region); it has the largest renewable reserves of fresh water on the planet; it has enormous potential in terms of solar and wind power generation (which already account for almost a quarter of all electricity produced in the country); and it is rich in other natural resources that can be mobilized for the energy transition.16As shown in the aforementioned report by Adriana Mandacaru Guerra, Tim Sahay, Renato H. de Gaspi and Bentley Allan, “(<)a href='https://www.netzeropolicylab.com/brazil-new-world'(>)New industrial policy for a new world: seizing Brazil’s opportunities in the energy transition(<)/a(>)”: “In the new geopolitical scenario, the most relevant countries will be those with great potential for solar and wind energy, critical mineral reserves, biomass resources, and hydrogen production capacity. Brazil’s size and wealth of natural resources give it the potential to become a leading resource power. Add to this its capabilities in advanced manufacturing and mechanized agriculture, and Brazil can be a first-rate power in the new world energy system, alongside China, the United States and Russia.”

   End of the accommodating arrangement: neo-extractivism and redistributive disputes

   Regardless of the outrageous social situation indexed by statistics on income concentration, inequality, discrimination, and poverty in Brazil, the new and fearless right has managed to construe even the limited pact of redemocratization as excessive and unacceptable. The implicit motto of this coalition is: Brazilian redistribution has gone too far. This is how the political division occurs in Brazil, but perhaps not only in Brazil—in terms of a division between a redistributivist coalition and an anti-redistributivist coalition.17One of the main tasks when it comes to identifying patterns of dependency is to circumscribe as clearly as possible these blocs and coalitions at the national-peripheral level in their internal connections with central societies. Within the limits of this text and this proposal, the most I can do is state the question and try to indicate what I consider to be some of the structuring elements for formulating research hypotheses. A first overview of what specifically concerns foreign investment can be obtained by consulting the graphs compiled in “(<)a href='https://www1.folha.uol.com.br/mercado/2025/01/governo-desenha-programa-para-tentar-impulsionar-investimento-estrangeiro-direto.shtml'(>)Governo desenha janela para atrair investimentos estrangeiros diretos(<)/a(>)”, (<)em(>)Folha de S. Paulo(<)/em(>), January 11, 2025 (<)em(>).(<)/em(>) This table should only be understood in terms of a first illustrative approximation of the argument. It is essential to carry out detailed studies on the evolution of foreign direct investment in Brazil according to the share by host country of the final controller and relate it to exports and the trade flow in order to achieve a comprehensive starting point. And this not only applies to trade between the Global North and South, but also to South-South trade, which also has its own specific dependency chains.

   Yet both coalitions rely on the neo-extractivism inherited from the neoliberal period.18Each in their own way, both representatives of the current divide are legitimate heirs to neoliberalism. The terms in which Gary Gerstle ((<)em(>)The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era(<)/em(>), Oxford: Oxford University Press, 2022) described the configuration of the dispute in the United States clarify the details of the succession process: one side is heir to “neo-Victorianism” (the conservative neoliberalism of Ronald Reagan in the 1980s), the other is heir to “cosmopolitanism” (the progressive neoliberalism consolidated since Bill Clinton’s administration in the 1990s). The difference in the new generation of the divide is that in many places the fearless right, heir to neo-Victorianism, is now explicitly controlled by the extreme right. The new progressivism, for its part, formerly the establishment itself in many of the countries that are still democratic, is still searching for a new configuration in view of the new hegemony of the fearless right. The coalition of the right has no issue with the neoextractivist position, and however decisive Lula’s return to the presidency at the beginning of 2023 was, it does not represent a turn from neo-extractivism.19Synthesizing a collective effort in Latin America to develop the notion of “(<)em(>)neo-extractivism(<)/em(>)”, Maristella Svampa ((<)em(>)Neo-extractivism in Latin America.(<)/em(>) (<)em(>)Socio-environmental Conflicts, the Territorial Turn, and New Political Narratives(<)/em(>), Cambridge: Cambridge University Press, 2019) summarizes this state of affairs in the formulas “neo-extractivism” and “progressive neo-extractivism.” The progressive coalition cannot abandon its position on neo-extractivism without risking elections, and if they are defeated, the opposition coalition will deepen extractivist patterns. At the same time, if progressivism doesn’t break from neo-extractivism, the far right’s preferred economic model for Brazil is already secure.

   The example of oil exploration is all the more emblematic of this state of affairs in the case of Brazil, given its increasingly important role in the country’s economy.20Another emblematic example here is agriculture. On this, see Fernando Rugitsky’s article, “(<)a href='https://www.phenomenalworld.org/pt-br/analises/the-worlds-stockyard/'(>)The corral of the world: agribusiness and ecological transition in Brazil(<)/a(>)”, (<)em(>)Phenomenal World(<)/em(>), August 21, 2024, which also explores other aspects of the contradictions of the new progressive coalition in power in the country. For a complex anthropological-political understanding of the “world of agribusiness”, see Caio Pompeia, (<)em(>)Formação política do agronegócio(<)/em(>), São Paulo: Elefante, 2021. In 2016, Brazil became a net exporter of oil for the first time and, by 2024, the main producer in Latin America. In 2024, oil and its derivatives reached the top position in terms of total exported value. Petrobras, a state-owned company and the leading producer of crude oil in Brazil, “is planning such a rapid increase in oil production that it could become the world’s third largest producer by 2030,” and “already extracts almost as much crude oil per year as ExxonMobil.”21M. Bearak, “Brazil’s Clashing Goals: Protect the Amazon and Pump Lots More Oil”, (<)em(>)The New York Times(<)/em(>), March 13, 2024.

   The contradiction involved in this expansion project can be seen in the dispute within the government over oil exploration near the mouth of the Amazon River. In 2023, Petrobras released a study estimating that there were around 5.6 billion barrels of oil in the Equatorial Margin block, in the state of Amapá. However, the Brazilian environmental regulator, Ibama, denied Petrobras a license to begin any kind of exploration. The Minister for the Environment, Marina Silva, defended Ibama’s opinion and stressed that the agency’s technical point of view should not be subject to political interference. For their part, the Brazilian government, and even Lula, defend exploration and are moving toward its authorization.22As Cibele Vieira (<)a href='https://www.phenomenalworld.org/pt-br/entrevistas-br/cibele-viera/'(>)said(<)/a(>) in an interview with Hugo Fanton: “The Guianas are already exploring around the Equatorial Margin. The dispute with Venezuela is related to this. In today’s world, giving up fossil fuels is not yet a viable option. The Equatorial Margin will be explored, either by Brazil or by another country. Our understanding is that new frontiers have to be explored, in this conception that the gains should be invested in the energy transition,” (<)em(>)Phenomenal World(<)/em(>), March 7, 2024. In a similar vein, see César Loza’s (<)a href='https://www.phenomenalworld.org/pt-br/entrevistas-br/petropolitica/'(>)interview(<)/a(>) with Camilo Andrés Garzón, (<)em(>)Phenomenal World(<)/em(>), September 18, 2024. The Colombian case is all the more interesting because the results of Gustavo Petro’s government’s decision not to sign new gas and oil exploration agreements will most likely be paradigmatic for thinking about the logic of the neo-extractivist trap, given Colombia’s dependence on this commodity. On this subject, see once again (<)em(>)Phenomenal World(<)/em(>), which published Salomón Kalmanovitz’s (<)a href='https://www.phenomenalworld.org/interviews/salomon-kalmanovitz/'(>)interview(<)/a(>) with Camilo Andrés Garzón on August 1, 2024.

   As there is no shortage of contradictions in a neo-extractivist trap, Petrobras is a leading firm responsible for technological innovation, substantial research and development, and technology transfer in Brazil.23“For the third consecutive year, Petrobras has broken the record for filing patents, with 142 applications registered with the National Institute of Industrial Property (INPI), surpassing the marks obtained in the last two years (…). The company also surpassed the mark of 1,200 active patents, maintaining its leadership among national applicants, including companies and universities, and is awaiting confirmation from the INPI as to whether it has achieved the national record. The company’s strategic plan, released recently, foresees investments of US$3.6 billion in research, development and innovation (R&DI), from 2024 to 2028, the largest in the company’s history, with an expected increase in investments in decarbonization and new energies of around 30% in 2028.” “(<)a href='https://pesquisaparainovacao.fapesp.br/petrobras_bate_recorde_de_deposito_de_patentes_em_2023/2990'(>)Petrobras breaks patent filing record in 2023(<)/a(>)”, (<)em(>)Agência Fapesp(<)/em(>), January 16, 2024. Petrobras has far surpassed the impressive achievements of the state-owned agricultural technology production company, Embrapa; its size prevents comparisons with the still very dynamic and competitive Brazilian aeronautics industry, represented by Embraer. Today, it is difficult to imagine a link between company and university that could compete with the one consolidated by Petrobras to lead an energy transition in the country.

   The competitive electoral consolidation of the anti-redistributionist coalition in Brazil shows that the problem goes far beyond simple manipulation, disinformation, and violence. The victory of neoliberalism over previous forms of capitalist regulation was definitive: there is no going back to previous models of society. Much of this is due to the fact that neoliberalism has established deep social roots, making the political voluntarism necessary to restructure capitalist regulation illusory.24I’m thinking here of works such as those by Camila Rocha ((<)em(>)Less Marx, more Mises:(<)/em(>) (<)em(>)Liberalism and the New Right in Brazil(<)/em(>), São Paulo: Todavia, 2021), Rosana Pinheiro-Machado (“The Right to Shine: Poverty, Consumption and (De) Politicization in Neoliberal Brazil,” Journal of Consumer Culture 23, no. 2 (April 22, 2022): 312–30, (<)a href='https://doi.org/10.1177/14695405221086066'(>)https://doi.org/10.1177/14695405221086066(<)/a(>)), Angela Nagle ((<)em(>)Kill All Normies: Online Culture Wars From 4Chan And Tumblr To Trump And The Alt-Right(<)/em(>), Winchester, UK: Zero Books, 2017), Verónica Gago ((<)em(>)La razón neoliberal: Economías barrocas y pragmática popular(<)/em(>), Madrid: Traficantes de Sueños, 2015), Carlos Alba Vega; Gustavo Lins Ribeiro; Gordon Mathews (eds, (<)em(>)La globalización desde abajo, la otra economía mundial(<)/em(>), Mexico City: Fondo de Cultura Económica/El Colegio de México, 2015), as well as the aforementioned book by Arlie R. Hochschild ((<)em(>)Strangers in their Own Land: Anger and Mourning on the American Right(<)/em(>), N. York: The New Press, 2016). The fearless new right fits comfortably with a neo-extractivist model, while the camp of the new progressivism, aware of the blatant contradictions in its own program, is forced to perpetuate this growth regime. It is in the dispute between the neo-extractivist coherence of the right and the contradictions of the new progressivism that the future of the country will be played out—a future that depends less and less on itself, as befits a dependent country.

   This essay takes up, in part, developments present in the texts “A New Dependency Theory Moment” (The Ideas Letter, April 18, 2024), “Why It Is So Hard for Latin America to Move Away from Neoliberalism and Neoextractivism: The Case of Brazil” (Carnegie Endowment for International Peace, July 31, 2024) and “O Centrão sem medo e a encruzilhada do PT” ( piauí magazine , no. 204, September 2023).

9. Molecules of Freedom

   March 28, 2025 7:33 pm Comments Off on Molecules of Freedom

   When Russia invaded Ukraine in February 2022, European, and especially German, industry was left in the lurch. Much of the 150 billion cubic meters of natural gas piped from Russia each year had to be quickly replaced with energy from elsewhere. All the stops were pulled out: nuclear and coal power plants were fired back up, solar and wind project approvals soared, and there was a rapid and massive buildout of LNG import terminals. Under the sign of the REPowerEU plan to phase out the continent’s reliance on Russian gas, almost 80 billion cubic metres of LNG import terminal capacity was built in Europe over the last three years. Another 80 billion is expected by 2030.

   The surge in Europe’s LNG appetite came at the direct expense of poorer countries like Pakistan and Bangladesh, whose contracted LNG shipments in 2022 were diverted to European energy companies willing to pay a much higher price. In hindsight, the pace of this build-out looks frantic: even as capacity is increasing, several projects have been cancelled and the utilization rate of the new terminals is well below half. Analysts estimate that the scale of overinvestment of Europe’s LNG buildout is equal to the combined annual gas demand of Germany, France, and Poland.

   

   In 2019, announcing increased LNG export authorizations from Freeport LNG in Texas, a Trump Department of Energy official declared that the government was proud to export “molecules of US freedom” to the world. Six years later, from Russia’s war in Ukraine to Gulf-EU trade disrupted by the Houthis to the deployment of LNG sales as an American trade war bargaining chip, we are awash in fossil fueled energy security crisis stories. At the center of it all is the hydra-headed global market for liquified natural gas.

   The rise of LNG

   Worldwide use of liquefied natural gas has more than doubled since 2009. This boom has occurred with the help a concerted and effective campaign from its industry boosters. Gas is, to be sure, nimble, flexible, and versatile. Its use can mean a marked reduction in air pollution from coal-fired power and indoor wood burning that together kill millions of people each year. It can be used for electricity generation and for industrial power. Chilled to -162 degrees centigrade, it becomes a dense liquid that is moved around the world in specialized tankers—and then warmed up into a gas to be burnt for fuel.

   Methane gas has long been spoken of as a “bridge fuel.” Cleaner than coal, it was touted as an easy interim step on the way to clean energy, rather than an end in itself. This narrative  was pioneered in the US by the gas industry in the 1980s, and amplified by big environmental groups and Democratic Party officials in the late 2000s and early 2010s as the fracking boom made gas cheaper. Research and monitoring since then has shown the climate advantage of gas over coal is nowhere near as wide as thought. The natural gas industry has recently declared that it’s no longer a “bridge fuel,” but rather a permanent source of “baseload” power—confirming fears that expanding gas infrastructure is likely to simply lock in more planet-boiling fossil-fuel combustion.

   Oil has been the most important energy commodity of the modern era, and probably of all time. The control of reserves and transport routes; the cost of extracting, moving, and refining it; and the (in)elasticity of demand for oil have all played an outsize role in global politics for over a century. Coal’s trajectory has been different. Abundant and relatively easy to transport to industrial centers, it was the first widely used fossil fuel. While it did become a mass commodity like oil, it is for the most part consumed domestically in the country where it is extracted; less than a sixth of coal is traded on the international market. And at a value of less than a tenth of the trillion dollar plus oil market, it is far less central to the global economy.

   A complex oil shipping industry was well established before the Second World War but it took until the mid 1960s for the LNG trade to kick off, beginning with exports to the UK from a newly-discovered Algerian gas field. The cost of specialized equipment to freeze, ship, and reliquify LNG into burnable gas originally limited its appeal against coal or gas pipelines. Cheaper Chinese and Korean equipment and technological advances in the 2000s brought costs down, although they continued to fluctuate dramatically in typical commodities infrastructure cycles, where equipment and skilled labor squeezes can quickly become bottlenecks.

   Floating LNG terminals, pioneered in the early 2010s, made it easier and quicker to turn gas from undersea fields into transportable liquid. They also facilitated import and storage. When Germany sought to urgently cut its reliance on Russian gas in 2022, then Chancellor Scholz boasted that the new floating terminals—at the Wilhelmshaven, Brunsbüttel, and Lubmin ports—were built in record time; the first took less than ten months. Incoming Chancellor Friedrich Merz, has since vowed “to build fifty gas-fired power plants in Germany as quickly as possible, which will be connected to the grid immediately.” (Germany continues to import Russian LNG on shadow fleets.)

   With oil now undeniably past its growth phase, the LNG market—now worth about a quarter of a trillion dollars a year—has the aura of a new geopolitical currency. In early 2025, it briefly looked as though committing to buying American LNG might be a way to appease the Trump administration—but tentative overtures from the European Commission, India, and Japan have faded since it became clear in February that American international relations is as erratic and obstreperous as it is transactional.

   

   LNG’s rapid rise has prompted analogies with the trajectory of oil, but while there are some similarities—it’s become increasingly critical to energy systems and geopolitics—there are at least as many differences. Although the proliferation of LNG has made natural gas globally tradable and fungible, for entire countries to invest in the infrastructure required to use it (and the opportunity cost, in terms of neglecting other options), requires the willingness and ability to ride out inevitable volatility—ranging from investment cycles to wars to shipping interruptions. If coal and oil were the only real alternatives to gas, such bumps in the road might be a reasonable price to pay for building dependence on it.

   But LNG’s emergence has coincided with the rise of renewable energy and storage, a convergence that fundamentally changes what the scholar Liz Thurborn has called energy statecraft. Solar power in particular is becoming cheap enough that firming the supply with batteries (which are also becoming cheaper) is increasingly attractive on price alone; and more so for reducing dependence on imported commodities like gas. This means that LNG’s pathway to an oil-like role, or even to industry projections of continued growth through the 2040s, is far from assured.

   

   Japan’s energy statecraft

   Australia, the US, and Qatar are the world’s greatest LNG producers and exporters. Energy-poor Japan, though, is something of a whale in the LNG industry—bringing in $14 billion in profits in 2023. Lacking gas resources itself, it is the home of the most profitable gas turbine firms and the biggest trading firms. It owns more LNG ships than any other country, and its companies have invested in every stage of the LNG industry from extraction to liquefaction to regasification to gas-fired power turbines. Japanese companies are major investors in foreign gas fields as well as LNG export and import terminals all over the world, from the US and Australia to Southeast Asia. Public finance institutions in Japan invested $56 billion in foreign gas in the decade before 2023. Australia, for example, which produces 20 percent of the world’s LNG, sells the vast majority of its supply to Japan, where more than half of it is then sold on to other countries. (Having failed to allocate adequate LNG for its own domestic use, however, Australia’s populous Southeast now faces the embarrassing prospect of having to import its own gas back from Japan—purchased at market rates.)

   

   Japan’s state-owned Organization for Minerals and Energy Security “now hosts regular retreats for government officials from emerging economies,” reports Bloomberg. “The itinerary features a crash-course in the fundamentals of LNG, plus some sightseeing in Kyoto.” Big Japanese corporations’ natural gas profits match those the country’s mighty consumer electronics sector. By diversifying suppliers, investing upstream, and facilitating terminals, it has helped drive the overall expansion of LNG.

   Market dynamics

   As the market for LNG has boomed, the ways that it is bought and sold have radically changed. Multi-decade contracts from buyers were once the norm. These commitments helped to finance the expense of getting gas out of the ground and building big facilities to freeze it, as well as ships to carry it. More than four-fifths of LNG shipments in 2009 were under such long-term contracts; by 2021 it was less than two-thirds and falling. Financial intermediaries or “portfolio players” have grown, and they are increasingly eschewing contracted volumes of LNG in favor of the spot market; about 50 percent of their obligations are “open” rather than covered by a sale contract. That increases the flexibility of LNG for buyers, but also introduces more risks such as price spikes when disasters, wars, and shipping disruptions happen.

   LNG produced by the US is mostly “flexible” in terms of where it is delivered. This means it can leave sellers without buyers. Qatar is planning to almost double its export capacity by 2030 and is building out its production infrastructure with very few guaranteed, contracted sales. The strategic bet apparently rests on the likelihood that volumes from other exporters will decline (Australia) or face varying degrees of uncertainty (US, Mozambique)—but that demand will remain strong, especially from East Asian countries other than Japan, whose domestic consumption is falling. When the Houthis determinedly blocked the Bab al-Mandab straits, Qatar’s gas tankers were forced to go to Europe the long way around Africa.

   The abiding assumption among industry groups is that LNG demand will continue to grow through the 2040s. Shell, which was among the earliest and strongest LNG advocates, has identified China as well as “east Asian developing countries” as key areas of growth. In South Asia, Pakistan has gone from an LNG boom to an LNG glut. Having been subject to disastrous blackouts that hobbled households and factories in 2022 (when Europeans outbid ships with the South Asian country’s contracted supplies), the government introduced measures to encourage households and businesses to install solar panels being produced ever more cheaply in China. This led to an extraordinary solar boom—nearly 30 gigawatts of panels have flooded into the country since 2020—that has helped to crash LNG demand.

   Large and powerful importers, like India, are increasing their LNG use but are relaxed about locking in more supply, instead picking and choosing between contracts and relying on the spot market, because the latter is often cheaper. India’s contracted LNG falls sharply after 2028, but between Qatar’s planned expansion, the US’s likely expansion, and unexpected falls in appetite from Pakistan and China.

   Existential prospects

   Building a sovereign dependency on volatile tradable commodities is risky. Exporting countries that are highly reliant on any particular commodity will see their fortunes rise and fall with market movements that most of them have little control over (Mexico is the only oil exporter that has successfully hedged its sovereign exposure to fluctuating prices; OPEC+ increasingly disregards or even disadvantages its smaller members when setting production quotas). For importers, reliance for critical purposes creates a strategic vulnerability and heightens inflation risks—as Western Europe found in 2022. 

   Gas is volatile, versatile, and everywhere all at once. But LNG’s structural volatility, and security risks amid extreme geopolitical tension, mean it could be on a trajectory to a much more marginal role in the future energy mix than its boosters might suggest. No exporter is safe from declining demand for oil and gas; ships can get blocked from the Bab al-Mandab to the Panama Canal; petrostates and buyers should think twice about locking in new investments and infrastructure. All that is liquified can melt into air.

10. Militarized Capitalism

    March 27, 2025 6:03 am Comments Off on Militarized Capitalism

    Claudia Sheinbaum’s victory in June marked a watershed moment for Morena (Movimiento de Regeneración Nacional, Movement for National Regeneration), the party she had helped build since 2011. Together with its allies in the coalition Juntos Haremos Historia (Together We Will Make History), Morena won seven out of nine disputed state governments and achieved a supermajority in both chambers, with the help of some political “arrangements.” Around the globe, the result was celebrated as a symbol against the resurgence of far-right politics elsewhere. Nonetheless, the election was arguably the most violent in Mexican history. Thirty-six candidates were murdered, and over one thousand candidates and precandidates withdrew due to political violence. Ballot boxes were stolen, and some 175 voting booths could not be installed due to high levels of insecurity and conflict. But violence was not the only hindrance to electoral democracy. Political favors in return for loyalty and the creation of divisions among former alliances—all practices reminiscent of the former state party, Partido Revolucionario Institucional (PRI)—remained in place.

    The elections displayed what Mexicans might call a simulated democracy. In the new government line-up, the same names appear but in different positions. Morena promoted controversial figures: Omar García Harfuch, for example, who had served as the state coordinator of the Federal Police in Guerrero during the disappearance of forty-three students from Ayotzinapa—the most infamous case of violence by state forces in Mexico’s recent history—was appointed Secretary of Security. Some elected representatives committed fraud by taking positions designated for underrepresented groups. The institution overseeing the elections, the Instituto Nacional Electoral, had reserved sixty-three seats for indigenous people, Afro-Mexicans, migrants, people with disabilities, and LGBTQIA+ people, but at least ten candidates have been accused of falsely claiming indigenous or Afro-Mexican identity. Only 60 percent of the population voted in the election, and 2 percent of votes were recorded as invalid as a result of cross-outs. The opposition, such as the figure of Xóchitl Gálvez, was certainly not an option for those that still remember the Partido Acción Nacional (PAN) and PRI governments that came before. While there could be many explanations for a low turnout, we must also understand the election in the context of war.

    The Mexican government has led a “war on drugs” since 2006, transforming the country through the militarization of everyday life. Mexico exemplifies a highly militarized and brutalized form of capitalism where the lines between criminal and legal enterprises blur, and the military assumes an important role in refitting spaces to capital needs, oscillating between being a disciplining and economic actor. During the administration of López Obrador (2018–2024), Sheinbaum’s predecessor and the founder of Morena, the state granted the military a primary role in business—in civilian functions such as constructing public infrastructure and transportation. As a result, Mexico’s executive branch has become more dependent on the military than ever before. 

    Military inheritance

    In 2007, when President Felipe Calderón (2006–2012) declared a major militarization of Michoacán and some northern Mexican states, the US-coined term “war on drugs” entered the Mexican political debate with force. However, the policy to reduce drug consumption in the US through a sole focus on the supply side, by killing leaders of so-called cartels or through special operations in Mexico, preceded the “war on drugs” and dated back to the 1970s. Violence has nonetheless spiraled since Calderón’s declared “war.” According to official figures, there have been over 400,000 homicides and more than 120,000 missing persons since 2007. Impunity levels stand at about 96 percent of cases. Official recorded deaths of police and military personnel are significantly lower in comparison, with approximately 802 police killed on duty between 2013 and 2018.” As the war on drugs blurred the line between “criminals,” who could be killed with impunity, and civilians, forced disappearances, torture, and arbitrary detentions became an everyday occurrence. While the perpetrators aren’t always identified, local, state, and federal police and the military are frequently implicated in widespread violence.

    

    Cases against soldiers are typically restricted to military courts, despite legal efforts to change this. They hardly fear the civilian judiciary or the recommendations of the National Human Rights Commission—which collects complaints but has no competence for sanctions. To legally protect soldiers, a 2007 decree appointed soldiers as Federal Assistance Forces for “situations of turbulence or alteration of social peace.” However, a constitutional ruling maintained “public security institutions will be civilian.” Though various governments repeatedly discussed laws to increase the military’s presence in public security, they ultimately considered them too politically costly to be pursued. In 2017, a controversial security law passed by the Peña Nieto government which furthered the role of the military in civilian matters was repealed for being unconstitutional. The human rights consequences for the legal inconsistencies and protection of the military were disastrous. 

    Responding to popular discontent of the mid-2010s, Andrés Manuel López Obrador promised to end the war in his 2018 presidential campaign. During his government, he not only failed to achieve this promise, but the country recorded its highest death tolls. Rather than a break with prior politics of security, López Obrador’s “Fourth Transformation” opted for an authoritarian stance and granted greater power and purview to the armed forces. In 2019, López Obrador abolished the scandal-stricken Federal Police, and Congress created a new security force, the National Guard. But the changes were mainly nominal—76 percent of its members had come from the military or navy, making the National Guard highly controversial since its inception. In 2020, videos circulating online showed armed National Guard personnel chasing unarmed migrants close to Mexico’s Southern border, demonstrating their function in anti-migration operations rather than in anti-crime policies. 

    In May 2020, López Obrador finally achieved what his predecessors could not: via decree, he formally involved the armed forces in public security operations, including detentions and arrest warrants, significantly increasing military capacities. During his campaign, had explicitly promised not to take such an action as president. Through eighteen other decrees, López Obrador expanded the military’s functions and transferred 103 civil functions to the military. Like previous governments, López Obrador cited widespread violence to justify military expansion. Building on the various “war on drugs” policies implemented since 2006, the Mexican military’s authority today extends to migration enforcement, customs and airports supervision, social programs management, vaccine and medication distribution, science and research, and infrastructure construction, operation, and administration. 

    

    Even as López Obrador’s government implemented widespread austerity measures from 2018–2024, the armed forces continued to grow. Over this period, budgets for the Secretariat of National Defense (Sedena) and the Secretariat of the Navy (Semar) grew by 121 percent and 63.8 percent, respectively, together receiving $112 million in 2018 and $331 million in 2024.1The Defense, Marine, and National Guard are all active in public security, in addition to state and municipal police forces. Meanwhile, health, science, and the judiciary saw funding cuts, and civilian institutions were partly dismantled. During López Obrador’s term, the number of people without access to health services increased considerably. In addition, the broad transfer of public functions to the military has meant that even parts of the civil budget bolster the military budget. After the finance ministry, Sedena eliminated the second-highest allotment of trusts (fideicomisos), which form a discretionary supplemental budget. What these figures show is that during the past six years, the López Obrador government has deepened and intensified an ongoing militarization process by granting armed forces more power, a larger budget, and an expanded scope. 

    Military business

    Despite few official links between foreign direct investment and military intervention, many soldiers deployed to fight the “war on drugs” in the late 2000s were sent to Northern states that house crucial investment assets. The ties between military and business have only deepened under López Obrador, as the military has become an economic actor in its own right. To enable this transition, the government created the state company Olmeca-Maya-Mexica (OMM) to operate under the control of armed forces. OMM’s mission is “to manage, control, supervise, operate, and exploit national assets and companies for various economic activities.” Today, OMM administers airports, fuel centers, and tourist services including hotels, national parks and museums. 

    The military business stretches from transportation and communication infrastructure, including the airline industry. The government bought the extinct bankrupt national airline Mexicana de Aviación for approximately $48 million and granted it to the armed forces. As the Director of Advocacy at Mexico Unido Contra la Delincuencia wrote:

    Sedena and Semar control a total of thirty Majority State Owned Enterprises. Twenty of these companies belonged to the Secretary of Infrastructure, Communications and Transportation, but with the dismantling of this civilian institution, the armed forces have not only taken over the management of these companies but will be the main beneficiaries.

    The government has also granted the military control and ownership of controversial megaprojects, such as the so-called “Maya” Train, the Interoceanic Corridor and the new International Airport Felipe Ángeles in Mexico City. The military is involved in constructing these state-led infrastructure projects, which are accused of disregarding labor and environmental costs and bypassing legal procedures. Through these projects, the military is meeting the requests of international financial institutions: to “fill in critical infrastructure gaps.” But the military’s functions are not limited to construction. For the so-called “Maya Train,” Sedena created a subsidiary tourist company, Servicios Turísticos Itzamná, which will be building six hotels and a casino on the train route. 

    These shifts are not subordinating economic interests to military strategy. Rather, the government has created a powerful economic actor with military resources, and the public has almost no means to contest their activities. The protagonism of the military in state-owned corporations results in opaque and secretive management of public resources, with the benefits streaming to mostly a small military elite.

    

    Militarization of energy

    Corporations do not necessarily oppose the military’s role in infrastructure. In fact, they are rather supportive of a state that prepares the terrain for capital accumulation. Energy links—from gas pipelines, refineries and liquid gas terminals to additional energy production through hydro and solar—and the multimodal transport corridors—container ships, trucks, trains, alongside an interconnected ports, roads and rail system—are useful and necessary for private corporations competing in global markets. 

    Since 2007, the Mexican military has been involved in economic activity and even in construction tasks for the federal government for infrastructure that did not require public tenders. Several of the military’s subcontractors and partners have been difficult to trace. Moreover, Defense and Marines have long been involved in providing protection to Mexico’s state-owned oil firm PEMEX and securing its energy supply. In 2013, the Defense Secretary acquired a small wind park close to the military airport of Ixtepec in Oaxaca, “Granja SEDENA,” operated by Danish turbine producer Vestas. As in other energy projects, the project’s land deals were highly contested. 

    Militarization in Mexico is historically tied to a specific, fossil-fuel oriented, if partly state-owned vision of the energy system. PEMEX, Mexico’s debt-stricken oil firm has long been a highly symbolic entity as a provider of accessible fuel and jobs, and López Obrador has placed significant rhetorical emphasis on restoring state ownership of this essential resource. But the (re-)nationalization of the energy system has only been implemented in fragments. It remains premised on fossil fuels and benefits large consumers, like industrial producers. 

    Examining the energy system reveals the extent of Mexico’s militarization and growing dependencies on global economic actors. The Peña Nieto government secured contracts for gas pipelines currently operating or under construction, against the concerns of inhabitants and violence against environmental and land defenders. López Obrador heavily criticized these pipelines: until 2022, they were not fully functional and did not deliver the contracted amount of gas, but companies nevertheless charged the Mexican state. The government finally renegotiated some pipelines into joint ventures with state-owned Comisión Federal de Electricidad and arranged for additional pipelines as well to import shale gas from the US. 

    One major project under construction, a 715-kilometre marine gas pipeline running from Texas to the Yucatán, promises to transport more than 1.3 billion cubic feet (MMPCD) of natural gas daily. The project, named Puerta al Sureste, allows the Canadian corporation TC Energy to be part of key infrastructure projects handed over to armed forces. “This is about building an entire electricity system in the forest of the [Yucatán] peninsula,” stated the head of the CFE, Manuel Bartlett Díaz. Environmental defenders have dubbed the recent investments into oil and gas expansion as Proyectos de Muerte (Projects of Death). Weak or absent environmental licenses, ecological damage from pipeline leaks, illegal tapping, land conflicts, and pipeline accidents—including explosions—have intensified insecurity, violence, and toxicity for local inhabitants. 

    Those who protest these megaprojects have faced arbitrary detention, repression, and selective assassinations—over 102 environmental defenders have been murdered in López Obrador’s term. Such was the case of Samir Flores Soberanes, the first land defender killed during Lopéz Obrador’s administration in 2019 after protesting against Proyecto Integral Morelos, an energy and industrialization project in Mexico’s central region. Activists and campaigners have also reported being followed by armed forces, paramilitary groups, and organized crime groups aligned with fossil fuel interests. For locals, the intersections between the legal economy, violence, and state-led militarization are a constant threat. 

    

    War and economy

    Many claim that in order to keep the Mexican economy running, the state must protect the economy from ongoing violence. While this argument legitimizes the role of the military in the economy, there are few signs that Mexico’s macroeconomic indicators depend on its pacification. International institutions often commend Mexico for sustaining economic growth despite war and criminal activity. 

    When the IMF visited Mexico in October 2023, it boasted of “record-low unemployment” and “robust private consumption,” which has driven over 3 percent growth. The banking system was resilient to shocks, and the outlook remained stable, as “luckily,” some commentators said, López Obrador inherited a low deficit of 2 percent of GDP from his predecessor. After the huge drop of the peso in international markets during the pandemic, the currency sharply appreciated, earning the title of the “superpeso,” the best-performing currency in the world in 2023. Currency appreciation was attributed to nearshoring, increased remittances and exports, and high interest rates. In these indicators, socio-ecological issues and violent conflict are rarely mentioned.

    Precisely in those states in Northern Mexico which have seen atrocious rates of violence, US and Canadian corporations now see promising locations for manufacturing that avoid long and complicated supply chains which proved vulnerable during the pandemic. López Obrador promised massive tax cuts for e-vehicle producers and others, and Sheinbaum will likely offer the same. Mexico already has the OECD’s lowest tax-to-GDP ratio. These moves have attracted Chinese firms to the country as well. While some have expressed concerns that rising land prices—as owners await potential investors like Tesla—may deter companies, the real dangers will likely affect local communities, who may suffer intensified violence and land conflicts in an already volatile context. 

    The blurred boundaries between legal and illegal economies have meant that violence and economic growth continue to coexist across the country, benefiting a variety of actors. In the state of Chiapas, the home of the Zapatista rebellion and of dozens of indigenous communities, mining has led to dispossession, violence, environmental and health harms, and forced displacement. In 2024, civil society organizations estimated that over 3,000 residents had been forcibly displaced during the first forty-three days of the year in the Southern region alone. La Revancha mine in Chicomuselo is a key example of the dire situation. Originally run by the Canadian company Blackfire, the Federal Attorney’s Office for Environmental Protection closed down the mine in 2009 after the murder of anti-mining activist Mariano Abarca. Since 2023, however, La Revancha has been operating illegally under an armed group, for the extraction of barite, a mineral used in drilling oil wells whose primary consumer is the oil industry. La Revancha is now the site of an armed confrontation between different groups seeking control as well as local population defending their communities and lives. 

    Such conflicts are seen throughout Chiapas, which has been on the verge of a civil war since September 2021, as warned by the EZLN. Paramilitaries, self-defense groups and cartels are fighting over territory with the complicity of the government. The scenario has not changed with Sheinbaum’s ascendance into power. In October, the EZLN denounced threats, abuses, and harassment against the support bases; soon after, a local community defender and Tsotsil priest, Father Marcelo Perez, was assassinated. Violence in Chiapas, like in other regions of the country, seems to be the result of economic investment. 

    López Obrador’s government did little to hold investors and corporations accountable for the environmental, social, and violent impacts on the country. Rather, the continuation of the “war on drugs” consolidated an extractivist model, focusing on sectors in need of territorial control. As Carlos Slim, Mexico’s richest businessman, commented on López Obrador: “the important thing is that he has respected the private sector, which I believe is working well.” With renewable energy corporations, the relationship has been more tense; investments in that sector have gone down considerably since 2018, as some projects were stalled. Moreover, the renegotiation of NAFTA, which led to the United States–Mexico–Canada Agreement (USMCA), deepened Mexico’s economic subordination to its northern neighbors. Mexico remains highly dependent on US economic activity; US-based corporations efforts’ to reshape supply chains still utilize low-wage labor in Mexico for nearshoring and export.

    A new era?

    López Obrador promised to initiate a new era in Mexican politics, but the past six years brought fewer changes than expected. The perverse effect of this political reversal is most clearly seen with the government’s response to the Ayotzinapa case. López Obrador initially promised to investigate the disappearances and murders. His first act of government on December 4, 2018, was to create the Commission for Truth and Access to Justice (Covaj). However, a study by Quinto Elemento Lab found that by 2022, the Covaj had been compromised and the special prosecutor unit for the case was unable to operate. The government even pushed for the dissolution of the International Independent Expert Commission which had worked with families since 2014 to solve the case. As a recent communique by the Ayotzinapa families signals, the López Obrador government withheld information and only delivered fifteen of over 800 documents of military intelligence, and opted to further the opacity, discrediting and silencing families and their lawyers. In 2024, marking the tenth anniversary of the disappearances, families, alongside thousands of supporters, took to the streets to keep demanding truth and justice. 

    

    The state has continued to express disdain for victims’ families and their pain. Today, over 100 organizations are dedicated towards searching for missing relatives, facing numerous obstacles from the state and operating in an environment of fear. They have been doing the work governments refuse to do, investigating what happened to the disappeared without any budget. Many are mothers searching for their missing children; some of them have been killed while searching. Their searches have resulted in disturbing findings, such as the discovery of numerous mass graves, including two clandestine crematoriums and seven mass graves in Guadalajara. The López Obrador government had underestimated both the crisis of disappearances and the risks borne by the families who continue to search for their loved ones. Those who search for the forcibly disappeared did not vote for Sheinbaum. During the election, they organized the campaign, “I exchange my vote for my missing child,” as an act of protest. 

    Will Sheinbaum break from the legacy of López Obrador? Over the next six years, the relationship between economy and war will shape Sheinbaum’s mandate, but her track record casts doubt on the likeliness of a rupture. Under Sheinbaum’s mayorship, Mexico City was among the states that signed the greatest number of contracts with the Defense ministry. Sparking criticism from activist groups, her government tried to impose greater control on la Glorieta de las y los Desaparecidos, a collective occupied space for memory in the financial district. Feminist collectives and activists also criticized Sheinbaum for her administration’s repressive and militarized responses to protesters, as seen during the March 8 women’s marches. Today the conflict with feminist groups has reignited.

    

    Since her victory in June, Sheinbaum has strengthened ties to the military. In September, she led a ceremony before hundreds of militaries at the Military College where she confirmed that the “humanist armed forces” will continue their role in constructing infrastructure. On the last day of his term, López Obrador signed a reform validating military intervention in all civil duties and placing the National Guard formally under the command of the Defense Secretary. Sheinbaum’s inauguration speech the following day suggested a continuation of her predecessor’s aims. Speaking to the Mexican people and the world, she denied the militarization of the country and the violations of human rights, instead celebrated the armed forces as “structures with the discipline, education and manpower necessary to respond immediately” to the problems facing the country’s development. Despite this praise, Sheinbaum cut the Defense budget in 2025, part of a broader “republican austerity” which has shrunk funding for education and other sectors. Her government has reduced state funding for OMM, the “Maya” Train and the acquired Mexicana de Aviación. 

    Despite promising continuity through “the second floor of the Fourth Transformation,” Sheinbaum’s election initially triggered alarm for the business world. The peso experienced its biggest drop since the pandemic, a result of the possible loss of counterweights in the government and the approval of an extreme, eclectic and controversial package of constitutional amendments. In response, Sheinbaum has since aimed to transmit confidence to corporations. She held several talks with the Consejo Coordinador Empresarial, Mexico’s powerful business association, insisting on the business potential of US nearshoring efforts and the possibilities of a renewable energy value chain. She declared a proposed labor reform, which would reduce the working week from forty-eight to forty hours, would first require consensus from the business community in order to pass. 

    Many have suggested that Sheinbaum’s past as an Intergovernmental Panel on Climate Change author and climate scientist will usher the country towards renewables and away from fossil fuels, including a reliance on PEMEX. While such a transition could reduce greenhouse gas emissions, it would not significantly alter the ownership structure of energy generation or solve the violence and conflict associated with energy projects. Proposed solar and wind projects—such as the Ticul solar project in Yucatán and wind parks in Oaxaca—have faced significant local opposition, as they often fail to bring expected benefits to communities. Plans published by the past government project rising energy generation—and there are few signs Sheinbaum’s team will move away from this trajectory, given the proposed expansion of López Obrador’s “Fourth Transformation.” Sheinbaum is likely to continue building state-run infrastructures in close partnership with the firmly established military business, cementing the ties between the state, war, and economy.