Category Archive: Analysis

1. Meridional

   December 20, 2025 6:10 am Comments Off on Meridional

   A new monthly newsletter on Latin America’s political economy.
   
   In 2020, the late Bruno Latour remarked that “Brazil is today what Spain was in 1936, during the civil war: it is where everything that will be important in the next decades is visible.” At a moment when the fate of humanity seems to hinge on the outcome of the disputes between the United States and China, this could easily be considered an overstatement. Profound shifts over the last three decades have foregrounded East Asian production networks and their troubled relationship with the countries of the old capitalist core—pushing Brazil and Latin America to the margins.

   Yet Latour may have been on to something. Many of the decisive fault lines of contemporary capitalism are particularly apparent in Latin America, whose political economy is in this sense a window onto issues that affect the entire world. Roberto Dainotto has described the Global South as the “limit of the North,” “the place where all its contradictions become impossible to hide.” Latin American dilemmas are critical for Latin Americans, of course, but they may also illuminate developments further afield.

   Meridional will be an attempt to think about this region in the context of global fragmentation and the climate crisis. These monthly newsletters will share the results of ongoing research, raise theoretical questions, and explore new empirical material in the hope of stimulating fruitful conversations. Because “the political economy of Latin America” can mean many different things, it is worth taking a moment here to set out the general approach that will guide the writing of the column.

   Let’s start with the issue of climate. Given the state of current technologies, the coming electrification of the world—one of the conditions for decarbonization—will depend on a massive increase in the supply of so-called critical minerals, to produce batteries to store intermittent renewable energy and other components of the climate transition. The geographical distribution of these minerals is highly uneven. Some estimates suggest that more than half of the proven reserves of lithium are concentrated in the so-called “lithium triangle” of Argentina, Bolivia, and Chile. Three of the five countries with the largest proven reserves of copper are also located in the region—Chile, Peru, and Mexico, in that order—while Brazil alone is estimated to have more than 15 per cent of global reserves of nickel and rare earths.

   The boom in demand for these products is viewed as an economic opportunity by mining conglomerates and advocates for state-led minerals cartels alike. But one of its more worrying effects could be to revive the ghosts of the region’s past. Previous waves of extraction have led to ecological degradation, the dislocation of indigenous communities, and deeper dependency. In the memorable words of Eduardo Galeano:

   The division of labor among nations is that some specialize in winning and others in losing. Our part of the world, known today as Latin America, was precocious: it has specialized in losing ever since those remote times when Renaissance Europeans ventured across the ocean and buried their teeth in the throats of the Indian civilizations.

   Whether the region’s endowment of critical minerals proves to be a blessing or a curse remains an open question. The answer will depend on how political coalitions are built and mobilized, and how they deal with pressures foreign and domestic. But while the ultimate fortunes of “green extractivism” are far from settled, Latin America’s historical experience—its long-running tensions between multinational corporations, resource nationalism, and indigenous struggles—offers hints of what is to come. 

   Critical minerals are just one example of Latin America’s wider significance. The region is also home to the Amazon Rainforest, a key biome with implications for the global climate, as deforestation drives us towards a planetary scale “tipping-point” in which the ecosystem could lose its ability to reproduce itself, with potentially cascading effects. Parts of the region have, moreover, fallen prey to the global trend of far-right climate denialism, which has made it even more difficult to chart a political course that can simultaneously address the contemporary crises of democracy, inequality, and climate change.

   Nor is Latin America a bystander in the deepening geopolitical conflict between the US and China. It is, rather, a crucial theatre. China has sought to entangle the region in its Belt and Road Initiative, building on the trade and financial connections that it has established there since the 2000s. This has divided opinion among Latin Americans: some pin their hopes on what they see as South-South cooperation, while others fear that it will create a novel form of dependency. The US government, for its part, has abandoned any pretense of peaceful diplomacy and reverted to brute force and direct political interference, with its blatant tilting of scales in the recent Argentinian elections and murderous attacks on boats in the Caribbean and Eastern Pacific, launched as part of an overt regime-change operation against Venezuela—with military escalation now an imminent possibility.

   If the importance of understanding Latin America is beyond doubt, the next question is how best to do it. Conventional approaches are often tinged with colonial undertones, presenting the region as plagued by corruption and populism, lagging behind other parts of the world on account of its inadequate institutions. The implications of this framework are summed up by Tony Wood: “unstinting support for the prerogatives of foreign investors and domestic elites, together with a relentless emphasis on the need to keep politics firmly within the confines of the reigning orthodoxy.” No effort is made to grasp Latin American realities. Instead, there is simply a venting of frustration about the region’s refusal to follow the script: what Dipesh Chakrabarty colorfully describes as “the ‘failure’ of a history to keep an appointment with its destiny.”

   There are alternatives to this outlook. Latin Americans’ attempts to break free from Eurocentric dogmas are nothing new. In his founding manifesto for the United Nations Economic Commission for Latin America and the Caribbean, Raúl Prebisch faced this challenge head on, arguing that “one of the most conspicuous deficiencies of general economic theory, from the point of view of the periphery, is its false sense of universality.” Together with his colleagues at the commission, he developed ways to analyze Latin America—for instance, through the lens of the core-periphery system—that were among the high points of early development economics. At the same time, Marxist thinkers reacted against vulgar attempts to apply the schema of Europe’s feudalism-to-capitalism transition to Latin America’s colonial period, insisting on the particular dynamics of the latter. 

   An upshot of these efforts is that Latin America, as well as Global South in general, is now sometimes conceived as the “negation of the North (the ‘other’ place promising a better life).” The recent surge of interest in ancestral knowledge, agroforestry practices, and long-forgotten approaches to the relationship between nature and society reflects this attempt to “brush history against the grain” and overturn traditional ideas of progress. Yet if the South must also be seen as the “limit of the North,” then thinking about Latin America on its own terms cannot be simply about emphasizing particularity or depicting the region as a world apart, isolated from the centers of accumulation. The goal of structuralism and Latin American Marxism was, in fact, to shed light on the processes of uneven and combined development: the diverse impacts of capital across the globe. As the world market expanded and spatio-temporal barriers were broken down, capital transformed societies from East to West, North to South—though not all of them followed the same route or reached the same destination.

   Following in these tracks, contemporary political economy has much to offer: investigating the connections between Latin American production chains and wider markets, and assessing the changing class structures within countries, as a means of reading the turmoil that afflicts the region (along with much of the world). By mapping local attempts to resist global commodification trends and financial practices, we can begin to identify emerging political subjects. By examining the concrete effects of global climate change and climate policies, we can gauge the obstacles to a just transition, and the prospects for surmounting them. Meridional will contribute to the ongoing debate on such issues, ranging from particular commodities to theoretical controversies, specific countries to regional trends.

   In 1926 Gramsci drafted a series of notes on what he called the “meridional question” (or the “southern question,” as English translators chose to call it). “Meridional” in this case referred to the South of Italy, the region from which the author came from and which played a peripheral role in the European capitalism of the 1920s, although it also had much broader applications—including in his own later work—describing the jagged course of accumulation taking place across the globe. In these famous passages, Gramsci wove together multiple threads—the uneven dynamics of Italian development, the politics of an alliance between workers and peasants, the position of intellectuals—and refused to explain them through inherited formulas, instead searching for cracks in the status quo that could allow an emancipatory politics to take shape. While today’s meridional questions are very different to those of Gramsci’s Mezzogiorno, this column will nonetheless look to this tradition of critical thought as a compass to interpret our present moment.

2. The Big Ten

   6:01 am Comments Off on The Big Ten

   During the nineteenth and early twentieth centuries, US patterns of business and employment created huge auto, steel, and electrical products manufacturing complexes in cities like Detroit, Pittsburgh, and Chicago. In the latter half of the twentieth century, this manufacturing dominance gave way to that of large distribution and retail corporations: a slow transformation of market structures from those in which goods were “pushed” to market in large batches to those wherein goods are “pulled” to market by retailers with access to vast point-of-sale data. 

   The ability of retailers to dictate terms to manufacturers inverted the post-war power dynamic. In that previous era, all of the large employers were in manufacturing; today, they are mostly a mix of retail and parcel companies, whose core strength is in large part in their logistical capacities.

   Top 5 Largest Employers in the United States, 19551The total US civilian workforce in 1955 was about (<)a href='https://www.bls.gov/cps/aa2011/cpsaat01.htm'(>)74 million(<)/a(>). In 2025, it’s about (<)a href='https://fred.stlouisfed.org/series/CLF16OV'(>)171 million(<)/a(>).	Top 5 Largest Employers in the United States, 20252The total US civilian workforce in 1955 was about (<)a href='https://www.bls.gov/cps/aa2011/cpsaat01.htm'(>)74 million(<)/a(>). In 2025, it’s about (<)a href='https://fred.stlouisfed.org/series/CLF16OV'(>)171 million(<)/a(>).
   General Motors – 576,667 employees	Walmart – 1.6 million employees
   US Steel – 268,142 employees	Amazon – 1.1 million employees
   General Electric – 210,151 employees	Target – 440,000 employees
   Chrysler – 167,813 employees	Home Depot – 419,600 employees
   Exxon Mobil – 155,000 employees3Ford did not reply to Fortune’s survey that year, but it would have been in the top 5, edging out Exxon Mobil, had they responded.	Kroger – 409,000 employees

   What are the twenty-first-century equivalents to the vast concentrations of labor and capital that characterized the old manufacturing economy? Just as manufacturing prowess lay in bringing together diverse operations under centralized control and mechanizing as much of the total process as possible, logistics too can be automated and agglomerated. Supply chain scholars have noted that the tendency toward logistical agglomeration produces economies of scale and raises profitability through “mechanisms such as information sharing, intermediate input sharing, technology spillover, and resource acquisition.”

   Among transport geographers, such agglomerations of wholesale and retail inventory around transportation systems have come to be known as “logistics clusters.” 

   Sometimes this term refers to single logistics parks, like Logistics Park KC, with 15.5 million square feet of warehouses and growing. It might cost a bit more to rent space in their park than a mile or two outside of it, but corporate tenants there can save by sharing maintenance, trucking, and janitorial services and benefit from being close to a big intermodal yard. CenterPoint Intermodal Center in Joliet and Elwood, Illinois is the largest such instance of a logistics park in the United States, processing more than 3 million twenty-foot equivalent units every year—roughly the same as the ports of Seattle and Tacoma combined. 

   Other times, the term indicates much larger projects like AllianceTexas in Fort Worth, the fruit of a unique public-private partnership that is a whole planned community involving more than 60 million square feet of commercial space. And sometimes the term applies to entire logistics-oriented cities or regions, like Memphis or the Inland Empire. 

   All are forms of agglomeration, but the significance of each is varied. In addition to the costs of commercial rent, the presence of intermodal rail facilities, major freeways, land availability, and so on, one of the most important factors determining the degree of economic agglomeration in logistics is the tightness of the regional labor market. For organized labor, these clusters are crucial. There are some facilities that large employers will shutter at the first sign of labor trouble; others that would cause them great pain to close or move, like those fixed around cargo airports or intermodal yards. Focusing in on logistics clusters, and understanding the reasons behind such clustering, allows labor organizers to better identify strategic targets. It also allows us to spot architectonic shifts in a company’s strategy.

   Ten US logistics clusters

   Thanks to data I have accumulated on the distribution networks of the largest employers in the United States, it is possible to delineate a useful middle ground between single logistics parks and whole logistics-oriented regions: concentrations of large employer distribution facilities within a set area.

   In this map, I have included all distribution facilities where at least 400 people work (according to OSHA’s 2024 Injury Tracking Application data) of eleven of the fifteen largest private employers in the country. (The other four are Berkshire Hathaway, UnitedHealth, HCA Healthcare, and Allied Universal; the latter three do not have prominent logistical footprints, while Berkshire Hathaway does but primarily through its subsidiary McLane.) Since Amazon, UPS, and FedEx are all on this list, I also included similar nodes for the United States Postal Service.4All of the underlying data for this map can be found (<)a href='https://docs.google.com/spreadsheets/d/1OLgEOVSQDZ9G82_xgATAzPxRi99VEJ2mjM3dtJ41-MI/edit?usp=sharing'(>)here(<)/a(>).

   

   If we define a logistics cluster as any group of at least nine large employer distribution facilities with at least 400 workers within a thirty square mile area (judged through the admittedly crude method of tracing an outline around the facilities with Google’s measurement tool), then there are ten logistics clusters in the United States.

   Employer	US Workforce Size
   Walmart	1.6 million
   Amazon	1.1 million
   Target	440,000
   Home Depot	419,000
   Kroger	409,000
   UPS	406,000
   FedEx	370,000
   CVS	300,000
   Albertsons	285,000
   Lowe’s	284,000
   TJX Companies	261,000
   United States Postal Service	553,724

   I set the workforce size cutoff at 400 to mostly (though not entirely) exclude Amazon last-mile Delivery Stations. Delivery Stations are typically sited in urban settings, unlike most of the larger distribution nodes. Since we are not including Walmart or Home Depot last-mile nodes (their retail stores), it made sense to (mostly) exclude Amazon’s too. The “nine in thirty” formula was chosen inductively—this is what an examination of the map showed to be a workable definition for the largest logistics clusters in the United States. But there are many other ways to slice this cake. The data is here, and I welcome experimentation with it. 

   The Inland Empire

   It’s difficult to overstate the logistical importance of the Inland Empire to the United States. Forty percent of all containerized imports come in through the adjacent ports of Los Angeles and Long Beach, and the Inland Empire is where the mess of goods gets sorted out. According to my data on Amazon’s Q3 2025 imports, just over half of their total volume in twenty-foot equivalent units (the standard measure of container volume in shipping) came in through LA and Long Beach. 

   There are three logistics clusters in the Inland Empire according to the definition above. In each case, I will list the number of each company’s facilities depicted, as well as the total number of workers at the combined facilities. 

   

   

   

   These three clusters, so close together that they almost overlap, comprise Southern California’s Inland Empire. In the roughly 620 square mile area, from Chino in the west to Beaumont in the east, from San Bernardino in the north to Perris in the south, 69,009 people work in the 400+ employee distribution centers of the large employers listed above. Amazon has 24 such facilities, where a total of 36,681 people work—meaning that Amazon is now by far the dominant warehousing employer in the region.  

   

   The NAFTA superhighway

   That the Inland Empire would have three of the ten logistics clusters is not so surprising. That the Dallas-Fort Worth (DFW) area would have the same number is a bit more so, but it makes sense, for a number of reasons. 

   DFW is the key gateway of the so-called “NAFTA Superhighway,” running up from Laredo on I-35. It’s basically at the mid-point of the country, within a two-day drive of most major metro markets, and warm enough that the winter season doesn’t significantly impact operations. BNSF has a major intermodal hub by KAFW (which is also Amazon’s secondary air hub, second in flight traffic only to its main hub in Cincinnati, KCVG), and Union Pacific has one in South Dallas close to I-45 (pictured in Cluster DFW 1).

   

   

   

   Phoenix, Indianapolis, Atlanta, and Memphis

   The remainder of the logistics clusters are in west Phoenix, in Indianapolis around the KIND airport, in Memphis around the KMEM airport, and in south Atlanta. Most surprising is that nowhere in or around Chicago qualified. Chicago has traditionally served as the major freight routing point on the journey of imported goods from the west to the large east coast markets. 

   

   

   

   

   Labor market tightness

   What matters for both business and labor about these places are primarily two things: first, labor market tightness and, second, operational significance. The more distribution center workers already employed and the smaller the population of potential warehouse workers around a given cluster, the harder it will be for large employers to hire people at their desired levels and wages. For labor, of course, that same dynamic is an organizing boon.

   For example, whenever Amazon is spying a site for a potential new distribution facility, their Workforce Staffing team analyzes the company’s potential to staff up at that location. This involves knowing the size of the potential population they’re pulling from (in other words, from how far away people are willing to drive for work), how many of those people are currently making just under the wage that Amazon is going to pay, what percentage of their potential workforce is already employed in warehousing and at what wage, and many other things that I couldn’t begin even to guess. 

   Unions, community organizations, and progressive policy institutes like to portray Amazon’s wages as miserably low, but they are in fact carefully calculated to be just slightly above what people in a particular region are making on average so that Amazon can staff up at its desired level. What Amazon wants is not to pay its workers as little as possible; it wants to have perfect control over its staffing levels at any given time. This is a serious science. At the annual Operations Research and Management Science conference, Amazon researchers offer plenty of presentations about robotics deployments and inventory management, but a preponderance of presentations are about “labor planning.” 

   Laypeople can only offer crude approximations of a workforce staffing calculation compared to a sophisticated behemoth like Amazon, but let’s say a particular cluster is pulling in workers from within 25 miles. Tallying up the number of households in zip codes within that radius that make under $45,000 per year gives some approximation of the size of these companies’ potential distribution center workforce.5Annual income for a single worker earning an hourly wage of $16 to $17 is $33,000 to $35,000, but many households have multiple workers. In turn, adding together the total number of workers in a particular cluster with those at other sites of the twelve large employers within that twenty-five-mile radius, and then dividing that by the total number of households within that radius with income of less than $45,000 per year gives some idea of the potential availability of labor to the employers in that cluster.

   Cluster	Workers in cluster	Additional workers in 25-mile radius employed by twelve large firms6These are the number of workers at large employer facilities on the map linked above that are within the 25 mile radius from the center of a particular cluster, i.e., other places potential workers could go to.	Households earning less than $45,000/year within radius	Employed logistics workers of large employers as share of low-income households within radius
   Inland Empire 1	21,494	52,594	320,806	23.1%
   Inland Empire 2	15,693	53,316	200,726	34.4%
   Inland Empire 3	13,996	55,013	204,556	33.7%
   DFW 1	10,544	25,502	383,971	9.4%
   DFW 2	12,980	42,098	496,699	11.1%
   DFW 3	12,922	22,716	318,731	11.2%
   Phoenix	17,019	14,953	348,420	9.2%
   Indianapolis	14,104	11,717	190,660	13.5%
   Memphis	28,592	12,776	161,257	25.7%
   Atlanta	6,416	28,411	341,031	10.2%

   Given the results here, one would expect any company opening a distribution center in the Inland Empire or around KMEM (FedEx’s international air cargo hub in Memphis) to have a more difficult time staffing up than in west Phoenix or south Atlanta. In the Inland Empire, this rough estimate of geographic labor-market tightness for the sector shows each cluster employing a population equal to about a quarter to a third of the number of low-wage households in the region. In Phoenix, the estimate is less than one in ten. Many households are comprised of multiple workers, so this measure is suggestive and not a confirmation.  

   Of course, this is all just one component of a workforce staffing analysis. Also included would be more precision around the relevant radius (in some places, workers are driving from very far away to get to work), the average and median hourly wage rate of the potential workforce, local unemployment, job vacancy, and labor turnover rates, and again probably many other factors. These are questions that the large employers spend a great amount of time and money trying to answer, and so they’re also naturally of great import to organized labor as well.

   Operational significance

   The other relevant question about these clusters concerns operational significance. If all of these large employers are gathering tightly in a particular area, there must be some reason why this is the case. 

   “Cargo airports” is the two-word explanation. DFW 1 and Phoenix are the only clusters that do not include or sit directly adjacent to a prominent cargo airport, and it’s no mistake that they have the loosest warehousing labor markets in the calculation above—their largest logistics corporations employ the smallest share of the regional low-wage labor market. All of the cargo airports in or next to the other eight clusters are in the top 25 cargo airports in terms of landed weight, except for KRIV in Riverside. Amazon shuttered its operations there earlier this year; this cluster may not qualify when we get new employment level numbers from OSHA next year. 

   Unsurprisingly, some facilities of outsize importance to the employers under analysis here are included in these clusters. Both FedEx’s international hub (Memphis) and its national hub (Indianapolis) are included; these two clusters employ 25,574 FedEx workers (about 7 percent of its entire American workforce). Walmart has a multi-site Import Distribution Center (#6060) in the Inland Empire 1 cluster that is the major repository for all imports coming in from LA and Long Beach. The two largest Home Depot distribution centers by workforce size are in the DFW 2 and Atlanta clusters, both of which cater to their sizable “Pro” customer market of contractors and builders.

   One reason the Inland Empire 3 cluster might retain its place on this list, even with Amazon leaving KRIV, is that the company’s ONT8 Inbound Cross-Dock (adjacent to KRIV) appears, at least for the moment, to be its primary import processing center for its sortable network (items less than about 20 pounds). In Q2 of 2025, according to bill of lading data, ONT8 was the consignee for the largest volume of Amazon imports by twenty-foot equivalent units (TEU) and also by value ($519 million of goods, in one quarter). However, an initial analysis of 2025 Q3 data shows a steep dropoff in TEU volume at ONT8, indicating that Amazon may be consolidating its Inland Empire operations around San Bernardino and Ontario. It could be that ONT8 had been taking on a beefy load while Amazon’s National Inbound Cross-Dock network slowly came online. It could be that the dropoff represents a winding down of operations—unlikely, but always possible with Amazon. I’d need to know much more about what’s happening in Riverside and Moreno Valley to say for sure, but if Amazon were winding down ONT8, no amount of diligent worksite organizing could overcome it. 

   Zooming in and out

   The above analysis is predicated on a delimitation of present convenience: I already had the data on the eleven private sector employers and USPS, thanks to the distribution network primers I have previously worked up. A more robust analysis would include as many of the big warehousing retailers as possible, including the dollar stores, Costco, Walgreens, and others, as well as the big third-party logistics warehousers, including GXO, Ryder, and NFI. There might be good reason to drop the facility limit (9) and just count absolute worker totals, in which case Louisville (UPS’s main air hub, around which UPS has 7,830 employees) and Cincinnati (Amazon’s main air hub, around which they have 8,631 employees) would make the list, and Atlanta would drop off. Perhaps the 400+ limit should be dropped, or maybe it should be retained and retail stores be included—in which case many Walmart Supercenters would make the cut. Anecdotally, a few Amazon Fulfillment Center workers who I’ve interviewed previously worked retail at Walmart.

   To pursue any of these paths is to play with the variables and scales of analysis of the idea of logistical clustering. It’s in taking up multiple perspectives on what we know is an economically significant phenomenon that the concept’s true utility can be grasped. In other words, my point here is not so much to define a logistics cluster as to show how there are many useful definitions that can be employed to parse contemporary distribution networks in such a way as to make them more inductively metabolizable for analysts other than those working for the employers. It’s in fixing variables and seeing what comes into focus that we can pick out particular nodes and processes of importance to modern supply chains, and in turn the strategic nodes and implicit bargaining power within the contemporary logistical economy.

   In the former manufacturing clusters of the Midwest and Northeast, leading corporations amassed immense power, which in turn produced the countervailing power of organized labor. These clusters were home to epoch-defining labor struggles of the twentieth century, which defined the parameters of the New Deal coalition and set the stage for the greatest period of working-class prosperity in American history. Today there is much less appreciation for the political and cultural significance of economic agglomerations in the logistics industry, but I’d guess that if organized labor gains even an approximation of the power it held in the 1950s, we’ll think of the Inland Empire in much the same way that unionists then thought of Akron and Flint.

3. Labor & Logistics

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   The largest private-sector employers in the United States today are a mix of retail and parcel companies that have all built out sophisticated logistical operations. In the post-war era, the largest employers were all in manufacturing, and warehousing and distribution were both seen merely as supporting long production runs. In 1962, management theorist Peter Drucker referred to distribution as “the economy’s dark continent.”

   As America deindustrialized and the big retailers gained the ability to closely track consumer behavior through point of sale data, the United States broadly shifted from an economy where goods were “pushed” to market by the big manufacturers to one where they were “pulled” to market by the big retailers. Today companies like Walmart, Amazon, Target, and Home Depot dominate the supply chain, dictating terms to manufacturers, ocean carriers, and third-party logistics firms alike. Their corporate control also extends to labor; the wage stagnation and decline in working conditions that have attended the shift from a “push” to a “pull” economy are well-documented.

   While there is a great deal of attention paid to supply chains today, especially after the disruptions of the Covid-19 pandemic, the logistics industry is still difficult to grasp, given its state of flux—the disruption of traditional retail with e-commerce, new warehousing automation and industrial AI, and broader political developments driving supply chain diversification. That flux poses new threats to workers in logistics and transportation, but also new opportunities for asserting structural leverage. This monthly column—a complement to the On the Seams research and newsletter project—is dedicated to understanding the flux of the logistics industry, and discovering where that leverage lies.

4. Transformation without Taxation

   December 19, 2025 4:50 pm Comments Off on Transformation without Taxation

   In his famous 1918 essay “The Crisis of the Tax State,” Joseph Schumpeter captured the essence of fiscal sociology, arguing that “The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare—all this and more is written in its fiscal history … He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else.” In Mexico, however, this principle seems to have been suspended. There the Schumpeterian thunder is not heard. The project of the Fourth Transformation (4T), launched by Andrés Manuel López Obrador in 2018 and passed down to Claudia Sheinbaum Pardo last year, has sought to reorganize domestic political power, and it has had considerable success—redefining the national narrative and restructuring public spending priorities. Yet it has not significantly altered the tax structure built by previous governments. 

   This fiscal silence is even more surprising in light of the experiences of other leftist administrations in Latin America. In Bolivia, Evo Morales combined strategic nationalizations with an aggressive expansion of the fiscal apparatus. In Brazil, successive PT governments broadened the tax base while transferring income to the poorest citizens. Despite grappling with high levels of informality and low trust in state institutions, these projects understood that without new resources, it would be impossible to create new social rights. The 4T, by contrast, has tried to square the circle of distribution without serious tax reform.

   In what follows we will look closely at this anomaly. Our aim is not to evaluate the overall fiscal performance of the 4T or the ruling Morena party, but to understand its decision not to pursue this crucial measure, despite having the legislative majorities to push it through. The obstacles here are not merely technical or electoral; they are rooted in Mexico’s particular model of political legitimacy: a state that asks for allegiance without demanding a contribution, and a citizenry that asks for rights without viewing taxation as a duty.

   This model now appears to be reaching its limits. Sheinbaum has inherited not only the legacy of the 4T but also its most severe structural constraint: the state’s inability to adequately finance its own transformative project, which has become increasingly visible in the country’s latent fiscal deficit, pressure on public finances, and distributive conflicts. While the new president has tried to define her tenure as a bold extension of AMLO’s legacy, what we are beginning to see instead is a kind of exhausted continuity. 

   History of omission

   In Latin America, most projects of national transformation have had an explicit fiscal dimension. The independence processes of the 19th century, the construction of nation-states, the social reforms of the 20th century, and even the most radical neoliberal experiments: all were accompanied by disputes over who should pay the treasury, how much, and for what. Yet Mexico’s tax history stands alone, characterized by silence, evasion, and exceptionalism. It is the story of a country that has tried repeatedly to re-found itself without developing a stable consensus on the sources of public revenue.

   Since the colonial era, Mexico has had a highly ambiguous relationship between taxation and legitimacy. The Spanish Crown crafted a stratified tax system based on castes, privileges, and differentiated taxes, yet tax payments were nonetheless continually subject to negotiation, and exemption—rather than contribution—became a symbol of status. The War of Independence failed to change this situation. Though the conflict was catalyzed by fiscal tensions—ownership of tax revenues, indigenous tribute, customs duties, and ecclesiastical tithes—the newly independent state did not translate them into a modern tax system. The war destroyed the colonial apparatus without replacing it with a more effective one. 

   During the Reform period in the mid-19th century, fiscal questions were once again central to the project of modernization, amid the nationalization of clergy property and the confiscation of land. But this too failed to generate a coherent national culture of taxation or consolidate a sustainable tax base. The liberal state, more concerned with territorial control than fiscal equity, left intact many of the existing means of evasion. Far from creating a new relationship between citizenship and contribution, the regnant liberalism of this period relied on external loans, mining concessions, and structural indebtedness.

   The Mexican Revolution of the early twentieth century was perhaps the most clear-cut example of this omission: a social revolution without fiscal reform. The 1917 Constitution enshrined labor rights, distributed land to peasants, and forged an interventionist state, but neglected any equivalent transformation of the tax system. Public monopolies were created and a centralized redistributive apparatus was built with an extremely narrow financial base. The post-revolutionary tax system was defined by its dependence on extraordinary revenues—mainly natural resources—and its low level of direct taxation on the upper classes and accumulated wealth.

   This continuity has had long-term structural consequences. In 2024, tax revenues represented less than 18 percent of GDP, well below the average for Latin America and any OECD country. This is not just a quantitative weakness; there is also a deeper qualitative dimension, as the Mexican state seems to have given up on building a civic bond around taxation. The idea that taxes are the price of living together, a part of the social contract, has not taken hold among the masses or elites. Instead, the logic of exception—in which those with the means to evade tend to do so—has endured, and the state has become ever more resigned to its fiscal weakness, waiting for remittances from emigres or holding out hope that a new oil field will improve its fortunes. 

   

   During the 20th century, the governments of the then hegemonic Institutional Revolutionary Party (PRI) were able to maintain their legitimacy for decades through spending—on education, infrastructure, subsidies—without touching the fiscal interests of upper classes, thanks to the availability of natural resources like oil and the international credit lines that they unlocked. But this oil surplus was a mixed blessing, with at least two negative consequences for Mexico’s fiscal sociology. First, it made it unnecessary to build fiscal consent: to create a collective imaginary about how taxes are used and distributed, and how they relate to rights. Second, this lacuna allowed for increasing collusion between the spheres of political and economic power, as businesses’ lax approach to the tax authorities mutated into a relationship of parasitism, in which the public sector was used to stabilize, rescue, or “develop” private interests, from monopolies to banks to tourist traps.  

   By the end of the 1970s, this model had begun to falter, and the onset of the debt crisis, trade liberalization, and falling oil prices marked the beginning of a new era. The state now lacked both the resources to deal with these problems and the political will to rebuild the fiscal pact from its foundations. This was in large part because it had made substantial commitments to such private interests, who over the previous years had gone from being mere freeloaders to acting as managers of the public sector under the so-called New Public Management regime. It was in this same period that the PRI turned to the flagship neoliberal taxation policy, VAT, which was introduced in 1980 and increased in 1995: a regressive measure that taxes general consumption without distinguishing between people’s differing abilities to pay, reducing the burden on high incomes while targeting the poorest.

   Seven decades of PRI rule finally came to an end in 2000. In its wake, the two subsequent administrations of the right-wing National Action Party (PAN) refused to alter the main pillars of the tax regime, yet pledged to administer it more rationally. They pursued regulation to close loopholes in the system but made no attempt to move it in a more equitable direction. Exemptions continued to be granted on a transactional basis, informal labor was still treated as a cultural anomaly rather than a structural feature, and the political taboo on upsetting large taxpayers remained in force. In lieu of fiscal citizenship, spending was still the foundation of state legitimacy. 

   In 2012 the PRI returned to the presidency with the election of Enrique Peña Nieto, who pushed through a fiscal reform the following year that partially broke with this inertia. It sought to broaden the tax base, eliminate privileges, and increase non-oil revenue in a context of falling prices. Yet it lacked real political content: rather than seeking to transform the relationship between citizens and the state, its aim was merely to stabilize government revenues. The social order was untouched. Although the tax structure was now somewhat sturdier, this improvement was overshadowed by numerous corruption scandals that plagued Nieto’s six-year term.

   This was the backdrop for the Fourth Transformation of 2018 onward: a project that in some ways represented a definitive break with the past, but which also inherited and indeed reproduced this ingrained political culture.

   Conflict avoidance

   From the outset, López Obrador framed his presidency as a repudiation of neoliberalism, understood not so much as an ideology but as a set of practices associated with corruption, dispossession, and the subordination of the state to private interests. The 4T was not formulated as an economic program in the narrow sense but as a wider narrative of restoration: returning the state to the people, eliminating privileges, redistributing power, and rejecting technocratic mediation. Within this framework, there was always a certain ambivalence about the fiscal issue. While AMLO criticized the clientelistic use of the state budget, he offered no clear argument for increasing tax collection. His message was primarily a moral one: the problem was not how much tax was collected, but where it went: to the elites or to the people, the “corruption pipeline” or national development projects.

   This ambivalence later hardened into a doctrine. The AMLO government adopted a strategy that could be summed up as “austerity with efficiency,” seeking to cut superfluous spending, eliminate tax breaks for large taxpayers, and demonstrate that the existing budget, if spent wisely, was enough to finance the country’s transformation. AMLO himself argued that “if there are savings from outlawing corruption and the extravagances of senior public officials, there is no need to raise taxes … Just get rid of tax evasion, get rid of privileges, don’t forgive taxes for the powerful … and the revenue will be sufficient.”

   To support this vision, the economist Diego Castañeda invoked the image of the simple farmer: before “sowing” new taxes, the government must first clear the land, improve management, and harvest legitimacy through efficient and honest spending. The promise, then, was twofold: that existing resources would be sufficient if used correctly, and that powerful economic sectors would not be touched as long as they complied with the law.

   This strategy brought tangible benefits. Between 2019 and 2021, the Tax Administration Service (SAT) increased effective tax collection without the need for major legal reforms. Administrative capacities were strengthened and tax evaders were openly confronted. The state clamped down on the culture of tax forgiveness and evasion and audited large taxpayers, presenting this almost as an act of moral hygiene. The SAT reported that during AMLO’s administration tax collection increased by around 60 percent in nominal terms, from 2 trillion 299 billion pesos in 2018 to 3 trillion 697 billion pesos in 2024 (a figure only includes taxation of large taxpayers without oil revenues). 

   

   But there were difficulties beneath the surface. This agenda depended on the implicit consent of business, which accepted the new settlement as long as the main pillars of the tax regime were not challenged. At the same stroke, it also put the financing of the 4T in doubt, as programs such as “Jóvenes Construyendo el Futuro” (Youth Building the Future), “Sembrando Vida” (Sowing Life), and the universal pension for the elderly, were all funded without increasing the tax base—putting increasing pressure on the state budget, which could only stretch so far. 

   The Covid-19 pandemic brought these problems to the fore. While other countries resorted to debt and fiscal stimulus to deal with the crisis, the Mexican government insisted on maintaining strict budgetary balance. There were no massive bailouts, no universal direct aid, and no increase in public investment to mitigate the economic blow. The IMF rewarded the government for its pandemic response with Special Drawing Rights. As a result, austerity remained the guiding principle even in these exceptional circumstances: protecting the macroeconomic balance while sacrificing the income of millions of families.

   Politically, however, none of this seemed to matter. The government maintained high approval ratings, preserved its image of fiscal honesty, and managed to avoid direct confrontation with business elites—except for a few emblematic figures such as Ricardo Salinas Pliego. The 4T managed to consolidate fiscal orthodoxy while giving it a popular form, creating the image of a disciplined administration, meticulous in controlling spending, and unwilling to spark needless conflict.

   The avoidance of progressive tax reform was not only a matter of expediency, but also of genuine conviction. The government was invested in the notion that ordinary people already pay a lot—despite Mexico’s relatively low tax burden—and that the state must prove its worth before demanding more. Consequently the political capital Morena accumulated between 2018 and 2021 was not used to initiate a serious discussion about taxing wealth, inheritance, digital platforms, or idle assets. But while this may have paid off for AMLO, his successor is now encountering its contradictions.

   Turning point

   Claudia Sheinbaum came to power on the double promise of continuing the 4T project and addressing the areas it had neglected. Her academic background as a scientist, plus her track record as Head of the Mexico City Government from 2018 to 2023, generated different expectations among different groups—the popular sectors viewed her as the legitimate heir to AMLO’s project while the middle classes saw her as an enlightened technocrat capable of guaranteeing stability. After her election she reiterated that the transformation would continue without additional taxes and that fiscal discipline was a condition of sovereignty. Only a few months into her term, however, the cracks began to show. 

   When the National Coordination of Education Workers (CNTE)—a dissident teachers’ union with a long history of labor militancy—demanded pension changes along with salary increases, it highlighted an uncomfortable fact. The state no longer had any fiscal margin, thanks in large part to the financial burden of state-owned organizations such as the oil company Pemex, whose debt servicing is due to cost MX$180 billion in 2025 alone. Sheinbaum had also maintained existing social programs such as support for the elderly and launched three new ones—a special pension for women between the ages of 60 and 64, a universal scholarship scheme for secondary school students, and a program in which medical and nursing staff provide home health care to vulnerable populations—in addition to various public works projects. Looking at the balance sheet, the new president was forced to concede that the current reserves were “not enough” to satisfy the teachers: a candid admission of budgetary constraints of the kind that AMLO had never made. 

   Other incidents helped to foreground the tax  issue. One was the president’s promise, made in a morning press conference, to reimburse Mexicans living in the United States: a proposal so costly it was soon withdrawn. Another was the government’s conflict with Salinas over his debts to the SAT. Yet despite the issue having moved up the agenda, Sheinbaum’s administration continues to focus on other battles, such as judicial reforms to allow the popular election of judges. The pattern of evasion continues. When the government presented its annual revenue and expenditure proposals to the legislature in September, the Ministry of Finance had already reiterated that it had no plans to promote tax reform, aside from some piecemeal measures such as “health taxes” on products like sugary drinks. 

   

   In this context, the notion of a “second stage” of transformation has been put in doubt. Is this a programmatic expansion or merely an institutional consolidation? If the new phase of the 4T does not include tax reform, what distinguishes it from the old one? The risk is that, in trying to create this narrative of continuity without committing to fiscal conflict, Sheinbaum’s administration will become little more than a managerial one, whose main role is to allocate increasingly sparse resources. The Morena leadership appears to be aware that any attempt at progressive taxation will inevitably be met with resistance, not only from elites, but also from the informal sectors and even the middle classes who benefit from the status quo. What it is less willing to acknowledge is that, if it refuses to face up to this confrontation, it could jeopardize the social programs that it has pledged to maintain or extend, along with its ability to guarantee the rights to education, health, and even housing as enshrined in the Constitution. 

   The 4T has been extraordinarily successful in changing the political framework of the Mexican state without remodeling its financial base. Looking ahead to the next elections in 2027, and to Morena’s longer-term prospects, the question is not whether Sheinbaum’s ambitious policies can be achieved within these constraints—the overwhelming evidence is that they cannot. It is, rather, how long the ruling coalition can avoid an inescapable truth: there can be no transformation without taxation.

5. A Global Euro

   12:48 am Comments Off on A Global Euro

   When Emmanuel Macron observed last year that “our Europe is mortal; it can die,” he gave expression to long-gathering European anxieties about the bloc’s decline. Today, national politics and supra-national complacency leave the EU flailing, but there are opportunities to take on a larger global role. 

   As the US resiles from various functions pertaining to the global hegemon and declares open hostility towards Europe, an opportunity arises for the EU to become a true reserve currency issuer. A more global euro would allow countries to avoid, or at least hedge against, US financial sanctions. An international euro would also strengthen relationships with other countries and curtail US efforts to preserve and impose fossil-fuel dominance on much of the world. 

   Europe has all the resources required to do this, and below Shahin Vallee sets out exactly how to make it happen. Rather than leaving the task to the ECB—which lacks the political mandate to drive such a move—the Commission must take on the issue and bring it to member states for a comprehensive decision. — Kate Mackenzie and Tim Sahay

   A profound sense of uncertainty dominates the question of the international monetary order today. Trump’s presidency in the US, the growing Sino-American rivalry, and widespread sanctions against Russia’s Central Bank reserves are all contributing to the general indeterminacy. The rise of crypto assets, digital currencies and the return of precious commodities as a potential store of value have prompted some to predict the demise of a fiat based monetary order powered by fractional reserve banking at home and offshore money creation abroad. 

   After decades acting as the anchor of the global monetary order, the role of the dollar has now come into question. The promotion of stablecoins and other advanced commercial cryptocurrencies have been designed to expand the dollar’s global role, but the outcome of this cryptomercantilism remains to be seen. China has its own internationalization strategy built on the expansion of its central bank’s bilateral swap network to advance renminbi invoicing and the creation of a fully digital payment system backed by a digital currency. 

   Europe’s strategy is yet to emerge. There is an opportunity for European leaders—not just central bankers—to seize the moment to expand Europe’s global monetary role. A stronger role for the euro would likely enhance European resilience, be it by expanding protections from US sanctions, by helping to insulate Europe’s economy from swings in foreign exchange rates, or by securing better financing conditions for European governments, businesses, and households. But a stronger role for the euro, which doesn’t preclude some costs, will require a degree of planning and policy coordination across member states, as well as between fiscal and monetary authorities—both of which are so far lacking.

   A roadmap for Europe

   In a speech in June, ECB President Christine Lagarde stated her ambition to create what she called a “global euro.” Doing so, she argued, would require strengthening three main “foundational pillars”: geopolitical credibility, economic resilience, and legal and institutional integrity. In the aftermath of such proclamations, few plans have been made to achieve these ends. 

   One obstacle is the fact that this agenda will require much more than the ECB alone. It will need a “whole of government” approach, with the cooperation of various other European institutions and national governments. Yet neither at the European Commission, nor at the Eurogroup meeting of euro area finance ministers, nor at the European Council where heads of state meet, has a real discussion about internationalization taken place. That conversation has so far been left entirely to the ECB, which cannot possibly deal with all the various dimensions of the critical, and urgent, decisions required to make the euro truly global. Political leaders and policymakers need to be presented with a clear plan, ideally prepared by the European Commission and the ECB, so that the Eurogroup and eventually the European Council can properly assess the costs, benefits and trade-offs associated with the euro’s internationalization. 

   This plan should rest on five critical pillars: 

   Swap lines

   In times of national and international financial crisis, countries often need rapid access to hard currency—usually, this means the US dollar. Since the Global Financial Crisis, the Federal Reserve has had a standing line to selected (mostly wealthy) countries to swap virtually unlimited amounts of their own currency for dollars. It is one way that the global dollar system is maintained. The People’s Bank of China has also been increasing its provision of renminbi swaps in recent years, particularly to countries with Chinese sovereign debt or to trading partners. This provision has helped to increase the appeal of settling international transactions in the Chinese currency. 

   By comparison, Europe’s network of swap lines is incomplete and inconsistent, even within the EU. Countries outside the eurozone such as Denmark, Sweden and Switzerland can access swap lines; unlimited, in the case of the Swiss National Bank. The Bank of England also enjoys an unlimited swap line. Meanwhile Hungary and Poland can only access euro repo lines, a less generous arrangement which requires collateral. At the onset of the war in Ukraine, the ECB refused to provide a swap line to the National Bank of Ukraine, which would have helped it to stabilize its financial system at a time of acute stress. In keeping with that risk averse tradition, in 2010 the ECB also refused to offer a swap line to the Central Bank of Latvia but agreed to extend one to the Swedish Riksbank, which eventually provided euros to Latvia directly and indirectly via its own commercial banks.

   The EU has the largest network of trade agreements in the world, and Europe is the number one trading partner for seventy-two countries, which together represent almost 40 percent of world GDP. Much of that trade is denominated in USD, but if these  invoices were denominated in euros instead, with guaranteed swap lines in the European currency, and if trade deals included provisions to encourage settlement in euros, the impact would be significant. 

   Swap lines can play a critical role for emerging economies in financial distress and while the Fed and the PBoC have both used their financial might to provide political and financial support to several such countries, the ECB has not. It could, however, establish “zones of influence” in which it extends bilateral swap lines in times of crisis to a selected set of critical economic and geopolitical partners. This function is in tension with the concept of a fully independent central bank, but it is something that a truly global currency issuer in a contested and fragmented financial system must be prepared to underwrite. 

   Finally, swap lines may also prove necessary to backstop critical pieces of market infrastructure like central clearing houses that settle securities. The ECB sought to mandate that all euro clearing services be located in the EU but it was undermined by a European Court of Justice decision, and so most of the important euro clearing houses have remained based in the UK and the US. As a consequence, the measures ensuring liquidity rely on a high degree of cooperation between the ECB, the Bank of England, and the Federal Reserve. In light of the recent geopolitical instability, Europe might question the reliability of these arrangements.

   Payment system 

   Technology to create a stable and sovereign public digital payment system now exists, and China’s Central Bank Digital Currency and its full international payment system has almost no dependency on foreign-controlled systems. This means China is able to clear transactions outside of the reach of the US—a strong asset in a fragmented world. The EU has much to gain by developing a similar system.

   At present, though, Europe has no sovereign digital payment system and its entire architecture depends on US service providers. In the case of US-imposed sanctions, neither the most modest retail transaction (transiting Visa or Mastercard), nor the largest private-sector operation going through SWIFT and cleared through CHIPS, would be capable of bypassing them. Even Europe’s TARGET system, which enables settlements between the region’s banks, runs on US software and service providers. While these risks have so far been marginal, they can no longer be ignored. This is a critical vulnerability that must be addressed. 

   One possible area of development in this context is the EU’s project to build out its central bank digital currency (CBDC), which is a response in part to the rise of cryptocurrencies globally. But the European CBDC is held back, in part by lobbying from European banks who fear losing retail deposits that provide them an important source of cheap funding. Despite the ECB’s efforts  to reassure European banks, the final legislation will likely bow to banks’ concerns by prescribing a €3000 limit on holdings of digital euros, which will severely limit  their ability to function as a true store of value or means of payment for large transactions.

   The CBDC, or digital euro, is now part of a broader set of initiatives to establish a more solid European payment infrastructure, including the Pontes project to enable distributed ledger settlements that are interoperable with TARGET, and the longer-term Appia project, which is a more extensive distributed ledger that will  serve as a real interconnector between tokenized—or commercially-created—financial assets and digital central bank money. The Eurosystem is also working on interlinking its TARGET payment with foreign systems to enable robust and public international payments. 

   While these are positive initiatives, they are not comprehensive enough, nor (in the case of the more ambitious Appia project) are they being implemented rapidly enough to create the global and sovereign payment system that Europe needs. Accelerating these public payment systems initiatives should be a steadfast priority for the ECB, European governments, and co-legislators alike.

   Stablecoins

   There are two main views about stablecoins—a cryptocurrency pegged to  another asset (such as the dollar). One is the view implicit in the US GENIUS Act, which encourages the unfettered private issuance of stablecoins so as to bolster the international demand for the dollar, as well as for underlying US assets. Another view is that stablecoins, which are collateralized by assets such as US Treasury bonds in order to maintain their price peg, pose a risk to financial stability because of the uncertainty around the ability to maintain the price peg—par convertibility risk. In Europe, the latter view has prevailed. 

   Indeed, the EU has chosen to tightly regulate the issuance of stable coins and in particular to prevent the fungibility of USD stablecoins issued in the US (which account for the vast majority of stablecoin issuance) and the EU. In a report last month for the European Parliament, Daniela Gabor explained why fungibility between US and EU issued coins could create faultlines in the transatlantic financial system. In the FT, Richard Portes explained how this exposes the EU to considerable risk. Europe may well intend to guard against these risks, but those intentions have already been undermined thanks to the French capital markets supervisor (AMF), which has decided to de facto allow fungibility for Circle stablecoins issued in Europe and in the US. The ECB has rightly objected to this decision, and the episode illustrates the lack of an effective consensus in Europe about the use of stablecoins and its interaction with the international role of the euro.

   Europe has little to gain from stablecoins, neither as a means to accelerate internationalization of the euro, nor as a means to modernize Europe’s payment infrastructure. As Helene Reys has explained, stable coins are also part of a technological privilege in that each stablecoin is native to a certain technological ecosystem and gives access to a certain universe of technological and financial services. The European finance ecosystem isn’t conducive to the sort of large crypto and decentralized finance universe that exists in the US. Therefore the demand for European stablecoins, which are mostly a means to such an investment universe, is likely to remain very limited. Europe could adopt China’s approach and largely exclude the role of privately issued stablecoins. This would probably require an even tighter regulatory regime than the EU’s existing MiCAR framework.

   If this tighter regulation of private stablecoins is pursued, the publicly-issued digital euro, or CBDC, would have a greater role in wholesale and household transactions, and perform full functions of investment, savings, and store of value. However the current CBDC roadmap won’t deliver this. 

   A true safe asset

   The US dollar’s role is supported by the vast, deep and liquid market of outstanding US Treasuries, which have for decades been the default global “safe asset” that serve as a global benchmark and store of value for the entire financial system. Europe has the capacity to also become a large issuer of safe assets by significantly increasing its common debt issuance—which is currently too balkanized and sporadic—to meet the safe-assets demand of a true global reserve currency issuer. 

   A unified common issuer for Europe, a vast and predictable borrowing program, and a clear stream of non-recourse tax revenues to back them would lower borrowing costs and create the larger pool of safe assets that internationalization necessitates. The forthcoming EU budget negotiations due to be finalized by the end of 2027 could deliver this, but would require new bold proposals by the European Commission, including a reform of the European Stability Mechanism and the transfer of its borrowing power and resources to the EU budget. This is necessary for a much larger program than the current €750bn NGEU. The integration of other existing borrowing programmes (SAFE, SURE, MacroFinancial Assistance Facility) under one roof would enable the creation of a sovereign, safe asset interest-rate curve. To bolster the use of these safe assets by global reserves managers, the ECB could, like the Federal Reserve, play the role of custodian for foreign central banks. These services could even be extended to offer vault services in Europe for precious commodities like gold, thereby ensuring the physical holdings on European soil under a more stable and predictable legal system than that of the United States. 

   Capital markets integration

   The issuance of this deep and liquid safe asset market would go alongside an integrated European capital market. The ECB has long advocated for a framework to support this, starting with the creation of an integrated capital markets supervisor (a European Securities and Exchange Commission, or the capital markets equivalent of the single supervisor for banks created in 2014). But the dozens of roadmaps for a capital-markets union have each been shelved because they couldn’t summon the legal and political integration required. The creation of a new supranational EU legal regime—as suggested by Mario Draghi and others—would likely help overcome this hurdle, but no serious progress has been made on this front.

   Opportunities, however, are available. Europe’s traditionally bank-dominated financing environment is becoming more diversified with non-bank financial institutions (NBFIs) taking a bigger role. But reaping the benefits of a more diverse and agile capital market requires integration of the European capital markets, which are currently fragmented along national lines. Beyond a single supervisor, this will have to  mean a change and expansion in the role of the ECB’s operational framework, including expanding the list of eligible counterparties for repo and reverse repo operations to include non-bank financial institutions (NBFIs), something no capital markets union plans currently foresees. 

   ***

   The existing monetary order can no longer be taken for granted. But while stablecoins will certainly increase the demand for the dollar assets that back them (US Treasuries mostly), they are also likely to introduce more instability as the par convertibility of these newly created and poorly regulated stable coins is highly uncertain. A run on stablecoins could eventually create profound doubts not only about the associated crypto ecosystem, but also about the broader US dollar fiat system. Stablecoins could be the greatest boost to the US dollar, which is the hope of the current administration, but they could also turn out to be a thorn in its side. The IMF has been coy about the risk to the global financial system, but the Bank of International Settlements and, more recently, the European Systemic Risk Board have been more vocal. 

   China, for its part, has opted for the expansion of its currency for trading and settlement by combining a strong central bank digital currency and fully sovereign payment system with a broad network of bilateral swap lines to increase trade settlement in renminbi. It has ruled out any role for privately issued coins outside of the control of the government. 

   Europe seems to be stuck between these two approaches, without a clear strategy for internationalizing the euro. If Europeans are serious about growing the international role of the euro, they will need to do much more than rely on the efforts and goodwill of the ECB. Political coordination and legislative action will be necessary, as will the work of the European Commission and the Eurogroup. So far, however, there is little appreciation of the scale of the challenges ahead and the speed at which the international system is moving.

   
   

6. COP30 Without the USA

   December 6, 2025 12:10 am Comments Off on COP30 Without the USA

   At the Polycrisis, we’ve been charting the shifting relationship between climate policy and geopolitics. We have been especially interested in two shifts. The first is the mainstream recognition that action on climate means meaningful action on development goals. The second is the emerging understanding that climate is about industrialization. Until recently, multilateral climate politics have been based on transfers of money and technology from industrialized to less developed countries, and on stable relations between the US and China. This has been upended. What will take its place?  

   Previous editions of the Polycrisis have spotlit the way that money is sloshing out of poor countries and into the coffers of rich ones. We’ve also focused on the “new nonalignment,” where large, capable and regionally powerful countries like Brazil are setting agendas for the entire world. Elsewhere we have looked at China’s new role as the leader of future technology. For this edition, we asked Rio-based journalist Catherine Osborn, who writes the weekly Latin America brief at Foreign Policy, to assess the UN Climate Conference in Brazil.

   This is an updated version of an article that first appeared in Foreign Policy.

   Last month, the humid Amazonian rainforest city of Belém, Brazil was alive with all the usual signs of  a United Nations climate summit except one: a US negotiating team. Tens of thousands of participants from more than 190 countries and dozens of Indigenous groups staged two weeks of meetings, protests, and negotiations during this year’s summit, known as COP30. Though no US diplomats were present, a handful of conference-goers weaved through the crowds with white-and-green “Make Science Great Again” hats. California Governor Gavin Newsom made a defiant appearance.

   This year’s conference was the first since Donald Trump returned to the White House and triggered the United States’ second exit from the 2015 Paris Agreement. This time, Trump had gone beyond withdrawing from international climate diplomacy and was actively working to undermine it. Sanctions threats in October against envoys from countries on the verge of reaching a landmark deal to limit global shipping pollution succeeded in blocking the agreement.

   The threat of potential US sabotage hung over Belém as countries negotiated if and how they would speed up climate action. Trump’s pressure offered potential political cover to delegations that were already dragging their feet on climate issues for any number of reasons. Saudi Arabia, for example, had moved in lockstep with the United States to torpedo the shipping pollution deal. 

   Against this adverse political backdrop, a key pillar of Brazil’s approach to COP30 was what some climate strategists have called “coalitions of the doing.” Rather than waiting for absolute consensus among UN member states, Brazil tried to move in smaller groups to push action forward and emphasize how climate action can lead to economic development. By conventional metrics of COP summits, this one yielded incremental progress rather than any big breakthrough—showing the UN climate regime is surviving, but only barely.    

   Forest fund

   Since their inception in the 1990s, UN climate conferences have aimed to compile an annual set of decisions that require the unanimous consent of more than 190 countries, plus the European Union. These yearly agreements have famously committed countries to work toward limiting global warming to 1.5 degrees Celsius (about 2.7 degrees Fahrenheit) above preindustrial levels, an agreement reached in Paris in 2015, and to transition away from fossil fuels, agreed upon in Dubai in 2023.

   But many targets set at past conferences have not been met. As a result—and given geopolitical headwinds—Brazilian officials said that Belém should focus more on implementing existing goals than on setting new unanimous targets.

   To address unmet climate pledges, Brazilian officials focused extra energy on countries that are eager to engage. This is a growing trend at COP summits: Because the unanimous agreements can be vague and cautious, in recent years, countries have united in smaller groups to set more ambitious targets. These include pledges to end deforestation and reduce heat-trapping methane emissions by 30 percent (compared to 2020 levels) by the end of this decade.

   For COP30, Brasília helped craft a plan for a new investment fund to protect tropical forests that had received at least $6.7 billion in pledges by the end of November. Brazil and the United Kingdom announced a program to help seven countries track and reduce so-called super pollutants such as methane. And Brazil rallied at least sixteen countries and the EU to join a group devoted to collaborating on carbon markets.

   With the forest fund, Brazil overcame a potential obstacle from the United States. The fund’s technical supervision is due to be carried out by the World Bank, where Washington is the largest shareholder. Earlier this year, US Treasury Secretary Scott Bessent called for the bank to deprioritize some of its climate-related work. If the United States wanted to block the bank’s participation in the forest fund, it likely could have.

   “The World Bank is a multilateral institution, and many of its members emphatically supported the idea,” senior Brazilian Finance Ministry official Rafael Dubeux said. The project’s backers carefully emphasized that it was focused on forests rather than climate change more broadly. The fund got the green light.

   The Brazilian summit hosts also emphasized the economic dividends of climate action. They are far from alone in this approach. UN Secretary-General António Guterres said in July that countries clinging to fossil fuels are “missing the greatest economic opportunity of the 21st century.” Finnish President Alexander Stubb echoed this language in Belém, calling climate investments a “growth and prosperity plan.”

   Globally, investments in clean energy this year are on track to be double those in fossil fuels, according to the International Energy Agency. But the trend is uneven across the world. China dominates global production of green technologies such as solar panels, batteries, and wind turbines, far outpacing the United States. Although the adoption of these products is speeding decarbonization across the developing world, without transfer of the underlying technologies, countries might miss the opportunity to develop green industries at home.

   Labor organizers in Brazil are worried about importing green technologies rather than building them domestically, said Deyvid Bacelar, the general coordinator at the Brazilian Unified Federation of Oil Workers. Though some oil workers might one day get clean energy jobs due to decarbonization, Bacelar pointed to union research that found that in jobs such as installing imported solar panels, “the pay is lower, and the benefits are worse.”

   Though Brazil is rich in many of the raw ingredients for the energy transition, that does not guarantee decent work, Bacelar warned: “We hope the government works so there are green industries in Brazil with well-paying jobs, instead of our country’s role being only selling raw materials.”

   At COP30, Brazil called for green dividends to be shared among countries. Several top officials in the Luiz Inácio Lula da Silva administration had already crafted national policies to try to address these concerns. (Lula is a former union leader.) Furthermore, the state government of Bahia, home to a BYD plant, secured commitments from the Chinese automotive giant to build a local research center, use Brazilian components in its vehicles, and train local workers—using the prospect of access to the large Brazilian market to bargain for a higher-value slice of China’s massive green overseas investments.

   Until now, green industrialization has been less prominent in the COP agenda. Lula highlighted the importance of technology transfers in speeches ahead of the Belém conference. And on its fifth day, Brazil and a dozen other countries including Indonesia, Germany, South Africa, South Korea, and the United Kingdom pledged to create a secretariat for cooperation on green industrialization, saying in a joint declaration that the process must “address, rather than deepen global inequalities.”

   The declaration also pledged to work to align countries’ standards about which goods count as low carbon. That can benefit both developed and developing countries, said Linda Kalcher, the executive director at European climate consultancy Strategic Perspectives: “Not only does it help the Europeans import material that meets their standard, it also helps them diversify away from one single supplier. … Most importantly, it builds value chains in other countries.”

   Roadmaps?

   Confirming climate advocates’ pre-conference worries about the bleak state of multilateralism—and climate cooperation in particular—COP30’s negotiated decision included only limited steps forward, with much of the noteworthy news occurring on the sidelines. 

   One of the main accomplishments in the summit decision was a commitment for countries to triple the amount of money globally available for climate adaptation by 2035. A decision on this topic was broadly expected, and had been seen as an indicator of whether the UN climate regime as enshrined in the Paris Agreement—cooperation by 190+ countries—was still producing results.

   Climate adaptation funding often goes to projects without a quick and straightforward financial profit. These include sea walls to prevent flooding and irrigation systems to help farmers cope with droughts. “The private sector will not spend a lot of money on [climate] adaptation, full stop,” Kalcher said. That’s why years of UN talks have formalized the requirement for governments, especially in richer countries, to help pay. If climate diplomacy is reduced merely to small-group coalitions of the doing, poor countries may be left stranded.

   On other topics, and for more ambitious countries, the COP30 decision fell short. In a surprise move, Lula at the start of the conference called for economic roadmaps away from fossil fuel dependence after years of reluctance to endorse the idea. Including this concept in the summit decision would advance a vague 2023 COP outcome on the need for countries to transition away from fossil fuels. Lula’s comments prompted a frantic push to codify the topic, which won support from more than eighty countries but ultimately failed.   

   While the US absence in Belém offered other actors the chance to show leadership—be they China, the European Union, or Brazil itself—some veteran climate hands came away from the summit with a feeling that “the wheels came off,” in the words of former UN climate boss Yvo de Boer. 

   For others, the conference was simply a sign of the difficult geopolitical times. And many countries vowed to work outside the summit to keep advancing topics discussed there. Brazil pledged to publish ideas for roadmaps away from fossil fuels over the course of the next year, and Colombia and the Netherlands announced they will host a conference on the topic in April.  

   The debate on roadmaps is moving forward much like the debate on equitable green industrialization: through a coalition of the doing rather than via a unanimous decision. And ultimately, by elevating issues such as technology transfer in Belém, Brazil flexed its influence as a middle power on the world stage.

   The climate conference in the jungle made clear that the global energy transition is moving forward without the White House. The open questions are how fast it will go—and which countries will benefit.

   
   

7. Missed Opportunities

   December 5, 2025 3:07 pm Comments Off on Missed Opportunities

   Argentina has one of the largest supplies of lithium worldwide and a unique potential to harness it. The northwestern provinces of Salta, Jujuy, and Catamarca account for 13 percent of proven reserves globally. In the salt flats of this long neglected region, four mines produced 72,000 tons of lithium carbonate equivalent (tLCE) for export last year. With two extra mines now ramping up production and five others under construction, this figure is projected to increase to 600,000 tLCE—transforming Argentina into the second largest lithium exporter on earth. 

   So far, Argentina has predominantly been a passive supplier of the resource: producing it primarily for export without industrial promotion or value addition. The country’s mining and business laws have helped to ensure this subordinate role in the global economy. But with demand for lithium surging thanks to the energy transition, there is now an opportunity to boost industry and create quality jobs. This key metal, which is essential for the expansion of green technologies, could provide a lever for growth and productive diversification in a nation historically afflicted by dependency, poverty, and unemployment. The state could pursue active policies aimed at developing the value chain in new strategic sectors such as batteries and their components.

   But not all that glitters is gold. Along with these vast reserves, Argentina also has a government with a deep ideological opposition to internal development. Rather than using lithium to set in motion a process of reindustrialization, President Javier Milei’s hardline neoliberal project aims to attract foreign investment by repealing regulations and imposing austerity, thereby paving the way to “green extractivism.” Its effect will be to reinforce the dynamics of underdevelopment, leading to more primarization and deindustrialization, and aggravating the social problems that flow from them. 

   Growth prospects

   Argentina mainly produces lithium carbonate from brines extracted from these northwestern salt flats. Of the four active mining projects, the two oldest, Olaroz and Fénix, were recently acquired by the multinational mining giant Rio Tinto. The newer ones are the Cauchari-Olaroz mine—whose domestic owner, Minera Exar, is partnered with Ganfeng, the largest lithium mining company in China—and the Sal de Oro mine, owned by South Korea’s Posco. Current production levels may seem modest compared to Chile’s 260,000 tCLE, Australia’s 468,000 tCLE, or even Zimbabwe’s 117,000 tCLE. But what sets Argentina apart is its growth prospects. In addition to the eleven mines that are either fully operational or still in progress, there are also fifty additional projects, from exploration to feasibility studies, at various stages of development, plus reserves vast enough to sustain extraction for decades. 

   Another factor that distinguishes Argentina is the high grade of the resource. In economic terms, the country is not a marginal producer; its salt flats are one of the lowest-cost sources of extraction in the world. According to various estimates, the average pre-tax cost of lithium extraction in Argentine projects is below USD $4,000/ton: only slightly higher than extraction costs in Chile’s Atacama salt flat, and far below the current world price around $9,000/ton.1Cochilco (Chilean Copper Commission) in its 2024-2025 Market Report, Benchmark Minerals Intelligence, corporate reports from mining companies, and Liu and Domenech Aparisi (2025). The price of lithium is highly volatile. This is the average value for the month of September 2025. Lithium in these South American nations is worth only a fraction of its price in places such as Australia, Brazil, Zimbabwe, or China.

   

   It is not just about the quantity of the resources, however. Argentina has other capacities that could underpin a more strategic approach to the lithium sector: a robust scientific and technological system, strong national universities and research centers, a sophisticated industrial apparatus in manufacturing (including the chemical, metalworking, and automotive industries), skilled workers, and labor organizations committed to the goals of industrial development. All this makes it possible for the state to make active interventions in the lithium value chain, particularly in storage applications.

   Over the past decade, a group of actors within these networks has explored such avenues for development. They have created centers near the salt flats with the aim of researching technologies such as direct lithium extraction and extraction methods that minimize environmental harm. They have also supported advances in battery chemistry, cell manufacturing, recycling, and battery safety. In 2022, the National Institute of Industrial Technology (INTI) and the Chamber of Metalworking Companies (Adimra) received funding from the Ministry of Science and Technology to create a lithium battery quality control center—CENBLIT—aimed at building capacity in battery quality regulation.

   This research has led to advances in direct lithium extraction technologies, studies on the hydrogeological characteristics of Argentine salt flats, and the continent’s first battery cell manufacturing plant. The manufacture of lithium iron phosphate (LFP) batteries2These are the fastest growing batteries in the last five years and do not require cobalt. The use of this chemistry has led to a significant reduction in battery prices, while the expansion in production scale has resulted in multiple improvements in performance (stability, energy density, charging speed, etc.). by the company Y-TEC, and the installation of a plant (UNILIB) to manufacture battery cells in association with the National University of La Plata, are two salient examples. 

   Between 2012 and 2021, the state invested $5.7 million in projects related to lithium and its value chain through competitive public funding. If we add the work carried out through national universities, the CNEA, the INTI, and the UNILIB plant with funding from Y-TEC, the monetary efforts are multiplied several times over. Such state-led ventures were not always adequately funded, nor could they bring about a decisive transformation in the sector’s development prospect, but they were nonetheless effective in expanding the country’s technological capabilities, and signaled a clear intention to seize this developmental opportunity. 

   Obstacles

   Yet there was a much wider range of actors with little interest in this project. In the private sector, the dominant multinational mining companies cannot be expected to revive the country’s industrialization or improve its geoeconomic position. They base their calculations on the quality of the resource and ease of access to mining properties, rather than any broader considerations. Today, mining firms such as Rio Tinto, Minea Exar, and Ganfeng have one primary aim: to guarantee the supply of critical minerals in the face of growing fragmentation of supply chains, trade wars, and disputes over productive hegemony in critical sectors such as batteries and electromobility. 

   Nor are many politicians willing to pursue a long-term industrial strategy. Argentina’s 1994 constitutional reform defines the provinces as the owners of the natural resources in their territories and gives them authority over their use: a provision which gives provincial leaders significant power to resist national government intervention in fiscal, environmental, and industrial matters.3For example, in terms of environmental or fiscal control, some provinces did not support the EITI (Extractive Industries Transparency Initiative) initiative, whose adoption was promoted by the national government with the aim of increasing transparency in the operations of extractive companies. Since they stand to benefit from attracting foreign investment in the exploitation of new salt flats, many of them oppose the kind of state policies that would incorporate local added value or develop suppliers and technology transfer. They argue that such development planning would discourage investors and help the productive center more than the extractive provinces.4 For example, they strongly criticized the installation of the YTEC battery plant (see below) in the province of Buenos Aires. Their position aligns with that of national politicians who similarly favour capital inflows—used to develop salt flats and expand exports of lithium carbonate, chloride, or hydroxide—over creating higher value-added links in the chain that stretches from natural resources to battery production. 

   Moreover, the severe constraints on the Argentine economy, which have only gotten worse as Milei has deepened the country’s external indebtedness, give politicians an extra incentive to attract mining companies—as a means of generating foreign exchange and thereby loosening the stranglehold of debt. Yet this is ultimately a self-defeating strategy whose aggregate effect is to deepen such financial instability. Historical experience shows that foreign investment, when concentrated in the production of raw materials and the creation of export enclaves, tends to accentuate structural problems with the balance of payments rather than resolve them. Once investments mature, the foreign exchange balance can even become negative—creating a situation of volatility that is compounded by changes in international commodity prices.

   Enter Milei

   Despite the urgent need for an expansion and diversification of Argentina’s exports, the policies of the Milei government, which came to power in 2023 on a right-wing libertarian platform, are now pushing in the opposite direction. Contrary to the prevailing global trend of active industrial policies and protection of strategic resources, Milei last year implemented the Large Investment Promotion Regime (Régimen de Fomento a las Grandes Inversiones, or RIGI), which provides extraordinary incentives for extractivist projects—consolidating a liberal regulatory framework that works in their favour, and militating against previous attempts to build a different model. Precursors to the current law include the Mining Code and the Mining Investment Law: the former regulates the conditions for granting concessions and is specifically aimed at protecting the extractive business from state “discretion,”5The provinces can dictate their administrative procedures and grant concessions. However, the law requires provincial administrations to accept applications that comply with the law. Once granted, these concessions can be transferred without prior authorization. This situation encourages the proliferation of projects and a high degree of fragmentation of the mining cadastre, leading to significant real estate speculation. while the latter, in addition to providing fiscal stability and tax exemptions, sets a ceiling on royalties of 3 percent of the value at the mine mouth, which translates into less than 2 percent of the export value. 

   Along with the Basic Law—Milei’s Omnibus bill of December 2023, aimed at deregulating the economy and privatizing public companies and agencies—the RIGI represents the relinquishment of all sovereign capacity to define industrial development objectives around extractive projects. It encourages investment in mining (especially lithium) as well as hydrocarbons,6Seven projects have so far been approved: two related to hydrocarbons, two related to renewable energy, one related to steel, and two lithium projects belonging to the Australian companies Galán and Rio Tinto. It is important to note that the lithium project presented by the Chinese company Ganfeng was not approved. offering tax exemptions and tax and customs stability, while allowing projects under its purview to avoid bringing foreign currency from exports into the country.7 In other words, income from strategic exports is exempt from being deposited and settled in the foreign exchange market in the following proportions: during the first year, 20 percent of exports will be freely available; during the second year, 40 percent; and from the third year onwards, 100 percent of export income will be freely available. It curtails the prospect of an effective industrial policy, closing off strategic paths to onshore higher stages of lithium’s value chain—for instance by preventing the national government from implementing quotas or export bans. It also limits local content requirements, local supplier development, and even R&D or technology transfer. Finally, the bill cedes sovereign powers by giving different international bodies the authority to settle commercial disputes, with investors able to choose between the Arbitration Rules of the PCA (Permanent Court of Arbitration), the Arbitration Rules of the International Chamber of Commerce, or the ICSID (International Centre for Settlement of Investment Disputes) of the World Bank. 

   The RIGI thus transforms Argentina into one of the countries in the region with the most lax mining regimes. This makes for a stark contrast with neighbouring Chile, where the National Lithium Strategy ensures that only joint ventures with state-owned companies, such as Codelco and Enami, are granted access to Special Lithium Operation Contracts (CEOLes) in new salt flats. Whereas Rio Tinto is the sole actor in a lucrative RIGI project, for example, just across the mountain range it must partner with Codelco to access the resource—giving the state a more central and strategic role. Existing projects in Chile meanwhile face sliding royalties of between 6.8 and 40 percent of the sale value, as well as being required to contribute to the communities in which they operate and to invest in R&D requirements. In order to sell at a preferential price on the domestic market, they must make 25 percent of their production available. With this value-added policy, the Boric government hopes to dramatically increase national capacity for the production of battery materials and components.  

   Another example of greater interventionism from outside the region is Zimbabwe, which since 2022 has been promoting restrictions on exports of unprocessed minerals with the aim of increasing export value and improving local industrial capabilities. The government recently announced that it will ban the export of lithium concentrates from January 2027, extending its value-added strategy in a similar vein to that which Indonesia is pursuing with nickel. Such policies have not stopped investment or undermined production in either Chile or Zimbabwe. Chile went from exporting 114,000 tCLE in 2020 to 261,000 tCLE in 2024, charging royalties of around 40 percent during the international price boom that took place during this period. Zimbabwe went from 2,000 tCLE to 117,000 tCLE between 2020 and 2024. 

   The results in terms of value added remain variable: while Chile’s use of quotas has not yet brought any meaningful investment, Zimbabwe has had more success in driving investment in processed products such as lithium sulfates as part of its industrial strategy. But regardless, these examples from abroad illustrate the extent to which Argentina is failing to lay the foundations for a new dynamic core of industrial and technological development. Milei’s anti-industrial outlook is also clear from his government’s underfunding of science and technology and its dismantling of institutional and industrial capacities. His abandonment of initiatives like YPF’s lithium and battery project, combined with his singular focus on attracting large investments in extractive industries, will have profound social and environmental implications.

   Reprimarization, deindustrialization

   The energy transition is reshaping production paradigms globally. Significant cost reductions and improvements in the efficiency of clean technologies suggest that, even in the context of the current climate denialism promoted by Trump and other reactionary leaders, the spread of transition technologies will accelerate over the coming years, particularly in renewable energies supported by stationary batteries and electromobility.8Over the last 15 years, renewable wind power generation costs have fallen by 65 percent (from USD 135/Mw to USD 50/Mw), while solar photovoltaic costs have fallen by 83 percent (from USD 359/Mw to USD 61/Mw). Although it is difficult to estimate due to product variability and the specificities of national markets, the International Energy Agency estimates that electric vehicle prices fell by up to 11 percent between 2023 and 2024, which, added to the drop of up to 30 percent in battery charging systems, is significantly reducing the total cost of ownership of an electric car. Batteries have played a key role in this trend, with prices falling by more than 90 percent over the last 15 years. In turn, the fall in the price of lithium and the shift towards LFP (lithium iron phosphate) batteries (which do not contain cobalt) have been the driving forces behind the decline in prices. These are mature technologies that reduce emissions in the most polluting sectors, such as transportation and electricity generation, which together account for more than 60 percent of global emissions. For many countries, the adoption of these technologies is a matter of vital energy security, because it limits dependence on fossil fuel imports. 

   Without active industrial policies, though, the possibility of participating in these sectors will fade from view. Without a means of structuring competition and production, states will merely reaffirm the existing global division of labor and diminish their industrial capacities. This will entail not only the primarization of Argentine exports, but also the deindustrialization of its entire productive structure. Amid the energy transition, national sectors such as automotive, metalworking, and capital goods are at risk, either because of their growing obsolescence and lack of alignment with global environmental standards, or because of their low level of local integration and a widening technological gap. How to avoid this fate is a question of increasing political urgency. 

   One point of agreement across the spectrum is that Argentina’s productive destiny is tied to its strategic energy and mineral resources. In 2024, exports from hydrocarbons and mining accounted for 20 percent of total exports; it is estimated that this will rise to 30 percent by 2030. The argument made by Milei’s supporters, that the best way to stimulate these sectors is simply to reduce the tax burden and offer other incentives, does not stand up to scrutiny given the international direction of travel. If current predictions are correct, demand for lithium will multiply by a factor of 1.6 over the next five years and 2.5 over the next decade, rising from the current 1.2 million tons of CLE to 3.8 million tons in 2035. This means that, despite the current phase of low lithium prices caused by excess supply, soon enough demand will once again exceed supply and the price will be above USD 20,000/ton.9 Cochilco, S&P Global, Benchmark Minerals Intelligence, among others.

   

   One possible effect of such global trends could be to improve the balance of power for countries like Argentina as they negotiate with companies and investors who are desperate to access such resources. Nations in the Global South could build new strategic capabilities by exploiting this aspect of the energy transition: securing better trade terms and using investment to their strategic advantage. A state like Argentina need not force battery production at source, but it can make consistent progress at successive links of the value chain.10 According to Benchmark Minerals Intelligence, as of July 2025, the price of LFP was around USD 4,900/ton, while that of lithium carbonate was around USD 9,000/ton. However, each ton of lithium carbonate can produce between 3 and 4 tons of LFP. This means that one ton of lithium carbonate transformed into LFP can increase the export value by between 1.8 and 2.4 times. The lithium chain includes various intermediate phases that would represent a quantitative leap in terms of value generation and offer significant opportunities for technological enhancement. In terms of the balance of payments, each ton of lithium exported in the form of LFP cathode material could represent twice as much foreign exchange.11This segment is where much of the product innovation and therefore technological learning is concentrated. For example, in July of this year, China implemented restrictions on LFP exports.

   And yet, the horizon of industrial development of lithium is now being eclipsed by the green extractivism of the RIGI. If Milei succeeds in reversing the tentative gains that Argentina has made in this arena, it is hard to see how the country will exercise its considerable bargaining power as the demand for lithium continues to grow. A new cycle of deindustrialization is looming. The time to avoid it is limited. 

8. Lithium Experiments

   December 4, 2025 9:20 pm Comments Off on Lithium Experiments

   Chile holds 190 million metric tons of copper reserves—roughly 19 percent of the world’s total—and 9.3 million metric tons of lithium reserves, approximately 31 percent of global supply.1 U.S. Geological Survey, “Copper,” (<)em(>)Mineral Commodity Summaries 2025(<)/em(>) (January 2025). (<)a href='https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-copper.pdf'(>)https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-copper.pdf(<)/a(>); U.S. Geological Survey, “Lithium,” (<)em(>)Mineral Commodity Summaries 2025(<)/em(>) (January 2025). (<)a href='https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-lithium.pdf'(>)https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-lithium.pdf(<)/a(>) It boasts world-class solar radiation in the Atacama Desert and strong coastal winds. Although Chile plays a peripheral role in international affairs, these natural endowments, along with its stable democratic regime and strong state capacity, position it to integrate into emerging green supply chains and acquire greater geopolitical relevance amid global fragmentation. Domestically, Chile has the capacity to increase green energy generation from 19 percent to 40 percent between 2019 and 2024.2EMBER, “Chile surpasses 40 percent wind and solar for the first time in December.” (January 2025). https://ember-energy.org/latest-updates/chile-surpasses-40-wind-and-solar-for-the-first-time-in-december/

   While the resource base and capacity exist, Santiago’s challenge lies in leveraging these advantages to reignite a stagnating economy through value-added production and export diversification. Since democratization in the 1990s, Chilean governments have increasingly broken with free market orthodoxy to increase value-added processing in lithium and copper, while making ambitious but increasingly uncertain bets on green hydrogen. Additionally, Chile  has begun to renegotiate investment terms with foreign firms to reconfigure relationships with major powers, seeking better positioning in the emerging multipolar order. 

   President Gabriel Boric (2022–2026) has been particularly assertive in embracing state-led development, mandating direct government participation throughout the lithium value chain and establishing joint ventures designed to capture greater rents from critical minerals. However, this strategy is not without its challenges. In May 2025, Chinese firms abandoned their lithium processing projects, while the Energy Ministry recently announced that Chile would downgrade its green hydrogen targets amid weakening global demand. These setbacks coincide with electoral uncertainty—the December election features two candidates across the spectrum questioning Mr. Boric’s strategy. Whether Chile’s industrial policies can survive remains an open question, one with implications for other resource-rich nations attempting similar transformations. The future of Chile’s state-led development model will be determined not solely by its domestic industrial policies, but also by the country’s ability to navigate strategic relations with the world’s great powers: the US and China. To succeed, Chile must both elevate its position in the global economic hierarchy and secure its role in the lithium value chain.   

   Industrial policy in Chile

   Chile’s political economy is perhaps most widely known for its role as the guinea pig of “shock therapy”—a policy of deregulation, austerity, and privatization that devastated its economy and society. Less known, perhaps, is the history of industrial policy experimentation that preceded the 1970s. In the aftermath of the Great Depression, Chile, like much of Latin America, embarked on large-scale industrialization through import substitution. After a series of authoritarian interruptions destabilized its nascent democracy, a coalition of bourgeois and Marxist parties won the presidency in 1938. Led by the Radical Party, the Popular Front coalition created Chile’s developmental strategy, centered on the Corporación de Fomento de la Producción (CORFO).

   CORFO directed investment into strategic sectors, including energy, steel, oil, and sugar refining, while providing technical and financial assistance to the private sector. The agency ranked among Latin America’s most autonomous and efficient development corporations, forming part of broader state-building efforts that incorporated and politically insulated engineers and technocrats within ministries, the comptroller’s office, and state-owned enterprises. This bureaucratic development had enduring effects, positioning Chile as a high-capacity state by regional standards—a legacy that differentiates Chile from most Latin American economies today. 

   Despite creating new industries and infrastructure, Chile’s developmental state yielded mixed economic results. Like much of the region, Chile implemented broad, indiscriminate protectionism rather than the selective approach advocated by the Economic Commission on Latin America and the Caribbean’s (ECLAC) Raúl Prebisch, who recommended replacing imports of consumer goods while maintaining imports of capital goods and strengthening the traditional export sector. Chile’s approach encountered challenges common across Latin America: persistent inflation, recurring balance of payments crises, widespread cronyism, insufficient domestic demand, and an inability to transition toward producing sophisticated goods.3Hirschman, Albert O. 1968. “The Political Economy of Import-Substituting Industrialization in Latin America.” (<)em(>)The Quarterly Journal of Economics(<)/em(>) 82(1): 1. doi:10.2307/1882243; O’Donnell, Guillermo. 1973. (<)em(>)Modernization and Bureaucratic-Authoritarianism: Studies in South American Politics(<)/em(>). Berkeley: Institute of International Studies, University of California.

   The contested legacy of Chile’s past industrialization efforts has made it difficult for politicians and civil society to mobilize support for new industrial policy initiatives. But since the 1990s, there has been an increased urgency of finding a new economic model. After democratization, the center-left Concertación coalition governed for twenty years, slowly implementing redistributive policies while maintaining the authoritarian-era economic framework. Rather than restructuring the export-oriented model, these governments channeled growth into targeted social programs, significantly reducing poverty and improving health and education outcomes. The strategy generated impressive results—7 percent average annual GDP growth in the 1990s and 5 percent in the 2000s, measured in per capita terms to control for demographic changes.4Ibid. By the 2000s, Chile’s political and economic elites proudly announced that it had become Latin America’s highest GDP per capita economy. Chile emerged as a market-oriented counterexample to the state-led development models of the Asian Tigers.

   Unlike East Asian economies, however, Chile’s economic growth in the early 2000s was largely driven by a commodity boom. Rapidly growing demand for copper from China and India drove a remarkable rise in Chile’s exports. Since the early 2010s, the fall of this boom has seen persistently declining growth rates.5Toni, Emiliano, Pablo Paniagua, and Patricio Órdenes. 2025. “Policy Changes and Growth Slowdown: Assessing Chile’s Lost Decade.” (<)em(>)Public Choice(<)/em(>). doi:10.1007/s11127-025-01318-w. Continued lackluster economic performance throughout the last decade and a half has brought forward a new pro-industrial policy coalition interested in reviving the legacy of the 1930s.

   Green industrial strategies

   For the first time since the 1960s, Chile’s government has begun to implement decisive sectoral policies. In 2024, President Gabriel Boric of the left-wing Frente Amplio launched the National Lithium Strategy, signaling the government’s intention to expand state involvement in economic development. His government aimed to climb the battery value chain by establishing domestic production of higher-value components, including cathode materials, anodes, and electrolytes. The lithium strategy mandates direct state participation throughout the entire lithium production cycle—from exploration and exploitation to manufacturing. Central to this plan was establishing a National Lithium Company designed to coordinate strategic joint ventures with private firms. 

   The strategy has sought to transform Chile’s traditionally extractive approach by developing upstream and downstream connections in the lithium value chain. On the upstream side, the government has sought to build expertise in advanced exploration and extraction technologies, hydrogeological modeling, renewable energy integration, and water treatment systems. Downstream initiatives focus on developing refinement processes for high-purity lithium compounds, manufacturing battery precursor materials, and potentially establishing early-stage battery production facilities. This integrated approach reflects the government’s determination to prevent lithium extraction from becoming an enclave economy—a persistent challenge that has limited economic benefits in many resource-rich nations.

   As part of the National Lithium Strategy, Sociedad Química y Minera de Chile (Chemical and Mining Society of Chile, SQM), a firm holding concessions for lithium extraction, and Codelco, Chile’s state-owned copper mining company, established a landmark joint venture to exploit lithium in the Atacama salt flat in 2023.6 Since the Pinochet era (1973-1990), CORFO has allocated its strategic lithium concessions to SQM, an originally state-owned enterprise privatized in the mid-1980s. This partnership extends SQM’s lithium extraction rights in the Atacama region until 2060 while securing Codelco’s substantial position within Chile’s lithium industry. Notably, the agreement structure gives Codelco an initial minority stake that will progressively increase to a controlling stake (50 percent plus one share), signaling Chile’s determination to assert greater state control over its critical mineral resources. SQM and Albemarle (an American corporation) conduct the primary exploitation of the Atacama salt flat, one of the world’s largest lithium reserves.

   The Codelco-SQM partnership operates through a phased joint venture structure in which SQM maintains general management control until 2030, after which Codelco assumes operational leadership through 2060. The arrangement, formalized through Codelco’s subsidiary Minera Tarar and SQM Salar, targets a cumulative additional production of 300,000 tons of lithium carbonate equivalent between 2025 and 2030, followed by a sustained annual output of 280,000 to 300,000 tons from 2031 onward.7 Codelco-SQM Partnership. (<)a href='https://acuerdocodelcosqm.cl/en/codelco-sqm-partnership/'(>)https://acuerdocodelcosqm.cl/en/codelco-sqm-partnership/(<)/a(>)  The venture commits to achieving these production increases through process efficiency improvements and new technologies rather than expanding brine extraction or inland water use, addressing environmental concerns that have plagued the Atacama operations. Implementation remains contingent on completing contractual, technical, and environmental legal requirements, including indigenous consultation processes with affected communities.

   Rather than pursuing aggressive value-chain upgrading, Chile’s copper policy focuses primarily on maintaining production levels and modest downstream integration. The government has supported investments in smelting and refining capacity to capture more value beyond raw ore exports. However, these efforts remain constrained by financial limitations and the global dominance of Chinese copper processing. Unlike lithium, where Chile seeks to build entirely new value chains, the copper strategy is more defensive—preserving existing capabilities and market position as copper demand grows for electrification and renewable energy infrastructure. 

   Chile’s third industrial strategy represents a higher-risk bet on green hydrogen production. While Chile possesses competitive advantages—including the world’s lowest potential production costs—the sector faces fundamental uncertainties about commercial demand and technological viability that distinguish it from the established roles of lithium and copper in the new global green economy. In 2020, the conservative Sebastián Piñera administration (2018–2022) unveiled an ambitious roadmap that positioned Chile as a potential global leader in green hydrogen. This plan established three concrete targets: becoming the world’s lowest-cost green hydrogen producer by 2030, ranking among the top three global exporters by 2040, and developing 5 GW of electrolysis capacity by 2025.8Government of Chile, Ministry of Energy, “National Green Hydrogen Strategy” (November 2020), (<)a href='https://energia.gob.cl/sites/default/files/national_green_hydrogen_strategy_-_chile.pdf'(>)https://energia.gob.cl/sites/default/files/national_green_hydrogen_strategy_-_chile.pdf(<)/a(>).

   Building on this foundation, in 2024, the Boric administration introduced a new action plan to guide investment in green hydrogen through 2030. The plan features a $1 billion package to incentivize private investment, expedited land allocation for development projects, corporate tax incentives for clean technologies, streamlined regulatory processes, and improved access to international certification systems. 

   These three strategies—lithium, copper, and green hydrogen—rely heavily on CORFO, which is  again positioned to play a pivotal role in the country’s developmental strategy, especially  in lithium extraction, where it operates under a distinct ownership regime. When the Pinochet regime privatized most state-owned firms, lithium remained under government control due to national security considerations. In 1979, Pinochet designated lithium a strategic asset because of its applications in nuclear technology, long before batteries drove global demand. 

   This security-based classification positioned CORFO as the overseer of lithium operations. Today, CORFO administers concessions in the Atacama salt flats, developing joint ventures with the private sector for both extraction and processing operations, coordinating upstream and downstream linkages, and implementing environmental and social impact mitigation programs in collaboration with local communities. Beyond lithium, CORFO has been designated a key role in the green hydrogen strategy, where it will provide financial incentives through targeted subsidies and tax credits while conducting rigorous technical analyses to assess project feasibility and maximize economic returns.

   Geostrategic practices

   Chile’s ambitions, however, have already encountered setbacks that expose the gap between announcements and implementation. The most emblematic failure involves downstream lithium processing: in 2018, the government celebrated agreements with Samsung and POSCO to build cathode materials plants for electric vehicle batteries, promising production by 2021 with guaranteed lithium supply from CORFO. These facilities never materialized, and subsequent attempts to attract battery manufacturers have similarly faltered—most recently in 2025 when Chinese companies BYD and Tsingshan abandoned plans for lithium processing plants.9 Reuters. South Korea’s POSCO drops plans for Chilean battery material plant. (<)a href='https://www.reuters.com/article/business/south-koreas-posco-drops-plans-for-chilean-battery-material-plant-idUSKCN1TM2LQ/'(>)https://www.reuters.com/article/business/south-koreas-posco-drops-plans-for-chilean-battery-material-plant-idUSKCN1TM2LQ/(<)/a(>); Reuters. China’s BYD, Tsingshan scrap plans for Chile lithium plants. (<)a href='https://www.reuters.com/markets/commodities/chinas-byd-tsingshan-scrap-plans-chile-lithium-plants-newspaper-reports-2025-05-07/'(>)https://www.reuters.com/markets/commodities/chinas-byd-tsingshan-scrap-plans-chile-lithium-plants-newspaper-reports-2025-05-07/(<)/a(>). The pattern reveals structural obstacles beyond policy frameworks: inadequate infrastructure, regulatory uncertainty, and insufficient coordination between lithium supply guarantees and downstream manufacturing requirements. 

   Green hydrogen faces different but equally concerning challenges. In October 2025, Energy Minister Diego Pardow announced that Chile would downgrade its ambitious production targets, citing declining global demand prospects. The statement acknowledges that external market conditions, not merely domestic policy, determine these sectors’ viability.10 El País. “Diego Pardow por el ajuste de los objetivos de hidrógeno verde en Chile: “Tendremos que hacer un chequeo de realidad.” https://elpais.com/chile/2025-10-06/diego-pardow-por-el-ajuste-de-los-objetivos-de-hidrogeno-verde-en-chile-tendremos-que-hacer-un-chequeo-de-realidad.html The adjustment, expected before the current administration concludes in March 2026, follows similar recalibrations by other nations and reflects broader difficulties in green hydrogen commercialization worldwide.11International Energy Agency. “Low-emissions hydrogen projects are set to grow strongly despite wave of cancellations and persistent challenges.” https://www.iea.org/news/low-emissions-hydrogen-projects-are-set-to-grow-strongly-despite-wave-of-cancellations-and-persistent-challenges

   These setbacks underscore a fundamental tension in Chile’s industrial policy experimentation: while the country possesses abundant natural resources and institutional capacity through CORFO, translating comparative advantages into functioning value chains requires not only state coordination but also sustained private investment, technological capabilities, and favorable global market conditions—elements that remain elusive despite policy ambitions.

   Precisely for this reason, Chile’s position in the changing global landscape is vital to the success of its industrial pursuits.  While the US historically maintained significant influence in Latin America, the past twenty-five years have witnessed China’s impressive growth in commerce and infrastructure development. China’s trade volume with Chile has increased tremendously: in 2024, Chilean exports to China reached $37.82 billion—more than double the $15.25 billion exported to the United States, with copper shipments to China alone totaling $5.56 billion.12Trading Economics, United Nations COMTRADE database, (<)a href='https://tradingeconomics.com/chile/exports/china'(>)https://tradingeconomics.com/chile/exports/china(<)/a(>). While Chile’s exports to China are mainly copper and lithium, its exports to the US are more diversified, including fresh fruits, wine, seafood, wood products, and minerals.13U.S. Department of Commerce, “Chile – Agricultural Sector,” International Trade Administration, (<)a href='https://www.trade.gov/country-commercial-guides/chile-agricultural-sector'(>)https://www.trade.gov/country-commercial-guides/chile-agricultural-sector(<)/a(>). These patterns reflect different structural demands of each relationship despite the free trade agreement in effect with Washington since 2004.

   In order to successfully reimagine its developmental path, Chile must revisit its relationships with great powers—moving from an agnostic stance toward a foreign policy that actively seeks to rebalance its interests amid China’s growing involvement in its lithium sector. The government has begun to do this by initiating joint ventures with foreign firms to exploit lithium and copper, aiming to increase value added and facilitate technology transfers. It is also seeking to curb Chinese firms’ influence in its lithium industry, particularly in SQM, Chile’s privately-owned lithium firm. 

   In 2018, Tianqi Lithium, a Chinese company primarily focused on lithium extraction and processing, acquired a 23 percent stake in SQM for $4 billion by purchasing shares previously held by Canadian fertilizer company Nutrien. Tianqi’s purchase triggered substantial opposition in Chile, prompting the country’s antitrust regulator to impose restrictions that limit Tianqi’s board representation and voting rights. These measures were designed to prevent Tianqi from accessing SQM’s sensitive information and maintain state influence over SQM. 

   In addition to enhancing the Chilean state’s ability to develop industrial policy, the SQM-Codelco partnership is also a geopolitical move designed to limit China’s expanding influence. The agreement was executed without Tianqi’s involvement or prior notification, despite the Chinese firm’s significant shareholding in the company. Tianqi’s principal objection to the arrangement centered on procedural grounds: the agreement should have gone through competitive procurement rather than direct negotiation. Furthermore, Tianqi maintained that such a decision warranted formal deliberation and a vote by SQM’s board of directors, where Tianqi holds three of the eight seats. 

   Although Tianqi escalated the dispute to Chile’s financial regulatory authority, the oversight body ultimately ruled in favor of the transaction. In September 2024, Chile’s Supreme Court rejected Tianqi’s final appeal. In April 2025, the national antitrust authority approved the joint venture, accompanied by mitigation measures designed to restrict information sharing between competitors. Yet as of late 2025, the partnership awaits critical approval from Chinese regulators—an uncertain prospect given Tianqi’s opposition and Beijing’s strategic interest in protecting its firms’ lithium investments. 

   From the 1990s until recently, US policy priorities in Latin America centered on Central America, the Caribbean, and Mexico, with limited high-level engagement in the Southern Cone. Albemarle represents an exception—the American company operates under a long-term contract in the Atacama and benefits from linkages through the US-Chile Free Trade Agreement. Yet this presence differs fundamentally from China’s more comprehensive engagement, which combines corporate investment with active diplomatic advocacy, state-backed financing, and public campaigns by ambassadors and officials promoting corporate interests. US engagement, by contrast, has remained confined to Albemarle’s commercial operations without the coordinated state support that characterizes Chinese firms.

   The Trump administration’s return in 2025, however, signals a potential shift toward greater hemispheric engagement. South America has featured prominently in US foreign policy: a military buildup in the Caribbean, threats to invade Venezuela, the termination of military collaboration with Colombia, and deliberate tensions with Brazil following former President Jair Bolsonaro’s sentencing for coup plotting. While the durability of this approach remains uncertain, the US is likely to seek a larger role in Chile’s mineral sector to counter Chinese influence and build resilient supply chains amid China’s dominance in rare earth processing and critical minerals. Whatever the new balance of power might look like, it will significantly shape the country’s industrial prospects.

   The path forward

   Great power competition may go so far as to subsume domestic challenges to the industrial policy agenda. Leading up to the December election,  Right-wing contender José Antonio Kast announced that, if elected President, he would revise the SQM-Codelco joint venture. The left-wing candidate Jeanette Jara initially championed more aggressive nationalization before moderating her position during the campaign.

   But changes in US trade policy under the Trump administration—including the expanded use of tariffs and industrial incentives—are reshaping global supply chains and altering patterns of geoeconomic competition. These developments, while outside of Chile’s direct control, will significantly influence the opportunities and constraints facing Chile’s green industrial strategy. In particular, disruptions to established supply chains could create openings for Chile to strengthen domestic manufacturing capabilities and deepen local value chains in lithium processing and hydrogen technologies.

   To navigate this evolving landscape, an active industrial policy at home must complement proactive diplomacy abroad. Chile will need to engage strategically with both the United States and China, advancing its interests while maintaining flexibility within an increasingly competitive international system. In February 2025, for example, Chile’s modernized free trade agreement with the European Union entered into force, featuring the EU’s first dedicated Energy and Raw Materials chapter designed to secure stable access to Chilean lithium and copper. Managing these external relationships will be as crucial as executing domestic initiatives to secure Chile’s place in the emerging global value chains.

9. Careless Profit

   December 3, 2025 8:23 pm Comments Off on Careless Profit

   Elder care in Spain has been steadily deteriorating since the 2008 financial crash, and is now entering a state of crisis. One of the largest nursing home chains is under increasing pressure from residents’ groups and families, who have made a series of high-profile complaints about the poor quality of the service. Precarious workers in the sector, seeing their wages decline while profits are syphoned off to tax havens, have been taking to the streets to demand better conditions. The wider political implications could be significant. 

   The origins of the crisis can be traced back to the 1990s, when the Spanish welfare state moved towards a system of universal care by increasing residential services and outsourcing them to private firms. Rather than creating the kind of competitive market for which some had hoped, the result was greater concentration and financialization. As large multinationals and investment funds helped to expand the sector, the social and economic costs became clear. Responsibility for managing care was delegated from public to private bureaucracies, causing greater inefficiency and needless complexity. The lives of older people were placed at the mercy of the markets.

   With such challenges now impossible to ignore, there is an urgent need to transform both the infrastructure and organization of nursing homes: shifting away from this broken model and creating spaces under democratic control, rooted in their local area, and capable of providing dignified conditions for both residents and caregivers. To open up this pathway towards “deprivatization,” we must also reevaluate the nature of the public-private bureaucracies which have become central to the sector—and, indeed, to states across the developed world. 

   Family and state

   During the Franco era, social care was delegated to the family, with little state intervention and no financial remuneration. This model, which later became known as “familialism,” relied on breadwinner salaries that were high enough to support an entire household. For those without the resources to provide care, some forms of assistance were available—although the state mainly outsourced them to the religious entities along with small, for-profit managers. It reduced costs by relying on Church officials, with nuns playing a significant role, while these religious institutions in turn gained more revenue streams and political power from the arrangement. Social care thus remained in the informal sector, with scant regulation and heavy reliance on private and civil society structures.1The following two works can be consulted on the relationship between religious institutions, social care, and political power in Spain: I. B Herranz, “‘Sección Femenina’ y ‘Acción Católica:’ la movilización de las mujeres durante el franquismo,” (<)em(>)Gerónimo de Uztariz(<)/em(>) 21 (2005): 55-66; S. N. de Prado, “The role of the Church in shaping Francoism,” (<)em(>)La albolafia: journal of humanities and culture(<)/em(>) 1: 97-114.

   Following the advent of democracy in 1975, this model began to change. Economically, industrial restructuring contributed to unemployment and wage stagnation, which worsened after the introduction of the euro and the real estate crisis of 2008. Politically, the demands of feminist movements and the incorporation of women into the labor market—both out of material necessity and in order to gain rights that hinged on participation in the productive economy—dealt the final blow to the male breadwinner model. The female labor force participation rate rose decade by decade: from 23 percent in 1976 to 35 percent in 1990, and then from 41 percent in 2000 to 54 in 2023. Yet the types of employment on offer were uneven. Women disproportionately worked in segmented service sectors such as care, cleaning, and education, which were characterized by lower wages, irregular working hours, and temporary contracts.2Although women have had a lower level of union membership than men, the situation seems to have been evening out in recent years, partly as a result of demands for better working conditions. See, for example, Alemán et al.,“Women’s leadership through the CAE unions: facilitators, barriers, and challenges,” (<)em(>)Basque Institute for Women(<)/em(>) (2022).  As a result, both the unpaid labor force and the family income available for social care decreased significantly. 

   At the same time, though, the Francoist practice of outsourcing care to the family was never fully overturned, which contributed to a growing care deficit in households and an increasing burden on women. On the one hand, many middle-income women were forced to work double shifts—both waged labor and unwaged domestic labor—which limited their opportunities for professional development and access to better jobs. On the other hand, hundreds of thousands of migrant workers, mainly from Latin America and Eastern Europe, stepped in to cover caring responsibilities, working under precarious conditions and often as live-in employees. Such migratory flows became a key factor in the country’s social reproduction.3M. León, “Migration and care work in Spain: The domestic sector revisited,” (<)em(>)Social Policy and Society (<)/em(>)9, no.3 (2010): 409-418.

   Pressure meanwhile grew on regional and local administrations to provide care services—thanks in part to the activities of feminist campaigners, pensioners’ groups, and, most notably, people with disabilities. Between the 1990s and 2008, Spain thus experienced a marked expansion in social care services, including nursing homes for the elderly. There was sustained growth in both the number of places—with an average of 8,100 new beds per year between 1988 and 2011—and employment in the sector, with 7,300 new jobs per year between 2000 and 2010.4The number of places has been calculated using data from the CSIC’s Envejecimiento en Red database and data in Sancho-Castiello and Rodríguez-Rodriguez’s article, “Aging and social protection of dependency in Spain. Twenty years of history and a look to the future,” (<)em(>)Psychosocial Intervention(<)/em(>) 10, no.3 (2001): 259-275. The number of workers for 2023 has been obtained from the census carried out by the IMSERSO in 2024, and to calculate the number of workers for 2000 and 2010, the number of places for each year has been multiplied by the ratio of workers per bed in 2023. The data on the number of beds in 2000 and 2010 from Envejecimiento en Red have been corrected according to the difference ratio between the IMSERSO census of 2023 and the Envejecimiento en Red data for the same year.

   The turning point came in 2007, when the ruling Spanish Socialist Workers’ Party (PSOE) passed the Personal Autonomy and Dependency Care Act (LAPAD), which recognized social care as a right for people with officially recognized dependency. With that, the state assumed a central role in caregiving. It was now obliged to support not only the poorest households but also those in the middle class. Of course, the legislation fell short of making care a genuinely universal right: state provision was subject to significant co-payments, which were determined according to household income, while low financial benefits for informal care within the family implicitly reaffirmed the familialist model. But the LAPAD nonetheless represented a historic advance in establishing minimum funding guaranteed by the central government. Its passage meant that older people, regardless of their income level, could now apply for a public residential place or a voucher for a private place in accredited centers.

   And yet, during this period, the expansion of care services mapped onto the growing commercialization of the sector, through the proliferation of for-profit entities which acted as key allies of regional administrations. While the state continued to maintain around 25 percent of the total number of nursing home places, it typically delegated their management to private actors. The process of outsourcing and the significant presence of the ‘third sector’ were carried over from the previous model. Savings banks found a new business niche in the residential sector and became the financial arm for its expansion.5Manuel Rico, (<)em(>)Shame: The scandal of nursing homes (<)/em(>)(Barcelona: Planeta, 2021), 191.

   

   Financialized care

   In the aftermath of 2008, the welfare state was targeted for deep cuts, which led to a drastic reduction in the financial responsibilities of both the central government and regional administrations. The state budget began to fall in 2010 and did not recover until 2021. Despite the promise it appeared to hold, the LAPAD was born into conditions of severe austerity, which included a freeze on public sector wages for more than a decade, a contraction of various cash transfers, and long waiting lists to access underfunded services. As unemployment rose and property values declined, people struggled to make enough private income to pay for services, putting further pressure on public administrations.

   Between 2011 and 2022, the residential care sector saw its growth halved, falling to around 4,500 public jobs and 2,600 people employed per year. It also began to see an increased standardization of services and infrastructure. The freezing of public prices prompted a search for economies of scale to increase the economic sustainability (and profitability) of the centers. The average size of nursing homes increased. Whereas in 2006, places in centers with more than 100 residents accounted for 46 percent of the total, by 2022 this proportion had risen to 54 percent.6Data obtained from (<)a href='http://envejecimiento.csic.es/'(>)envejecimiento.csic.es(<)/a(>)

   In line with the increase in services, the higher value of investments, and the growing complexity of management, big business began to play an even more active role. This was exacerbated when the real estate bubble burst in 2008, bringing private construction and public works to a halt, and thus encouraging both construction companies and real-estate investment funds to take a greater interest in the residential sector. Savings banks, heavily indebted by the real estate crisis, were meanwhile forced to merge with large banks and sell assets to investment funds at bargain prices.7Rico, (<)em(>)Shame(<)/em(>). 193. This influx of big capital led to aggressive strategies to expand services and, above all, to obtain public contracts.

   The result has been an increasing concentration in the ownership of nursing homes. Between 2000 and 2023, the ten largest private employers in the residential sector grew from 2 percent of total employment to 23 percent. While these ten companies accounted for 30 percent of total employment growth in the sector between 2000 and 2010, they accounted for 71.5 percent between 2010 and 2023. The figures in terms of residential places and turnover also reflect this trend, in which the sector’s growth is led mainly by companies with the most market power. In 2020, 17 large operators controlled around 21 percent of beds, while in 2023 the top ten operators accounted for 33.2 percent of turnover: a stark contrast to 2009, for example, when the figure stood at 25 percent.8DBK, (<)em(>)Nursing homes for the elderly(<)/em(>), 2024, available at (<)a href='https://www.dbk.es/es/detalle-nota/residencias-tercera-edad-2024'(>)dbk.es/es/detalle-nota/residencias-tercera-edad-2024(<)/a(>)

   Today, ownership of nursing homes is generally dominated by international finance capital. The five largest multinationals in Spain are linked to investment funds and other financial vehicles,9The most interesting research in this regard is that of Rico, whose book (<)em(>)Shame(<)/em(>) explains the origins, owners, and strategies of the main residential bed managers in Spain. DomusVi (18,500 beds) is a company belonging to the Spanish firm (<)em(>)Geriavi(<)/em(>), which in turn is a subsidiary of the large French conglomerate of nursing homes owned by Yves Journel, which entered Spain in 2010 making major acquisitions. In 2017, the British fund Intermediate Capital Group, based in the tax haven of Jersey, acquired a majority stake in DomusVi, becoming its main shareholder. Emeis (8,000 beds) is a multinational formerly known as (<)em(>)Orpea(<)/em(>), of French origin, which has made major purchases in Spain since its entry in 2006. On account of its debt problems, it was taken over in 2023 and the French public fund Caisse des Dépôts et Consignations became the majority shareholder, leading a consortium of institutional investors that provided capital to save the company. Ballesol (7,500 beds), owned by (<)em(>)Santa Lucía(<)/em(>), is an insurance company. Vitalia (7,000 beds), controlled since 2017 by the investment fund CVC Capital Partners, has a corporate structure that passes through low-tax countries such as the Netherlands, Luxembourg, and Jersey. Amavir (7,000 beds) has been majority owned since 2017 by the investment company controlled by the Mulliez family, which manages business assets in various sectors, such as the Auchan supermarket chain and the Decathlon company. whose purpose is to raise money from investors (pensioners, insurance companies, family wealth, etc.) to invest in assets that generate returns. These funds invest in shares (sometimes majority stakes), provide liquidity to management companies, or engage in “buy and hold” or “buy and rent” strategies. The latter involve acquiring real estate assets in the residential sector and renting them to private companies—sometimes to the same multinationals in which they have stakes.

   

   Anatomy of a fund

   To show how these dynamics work, we can examine the residential services company DomusVI. The investment fund PAI Partners bought it for €639 million in 2014, then sold it to Intermediate Capital Group (ICG) for €2.4 billion, generating a capital gain of around €500 million.10Rico, (<)em(>)Shame(<)/em(>), 161. IGC bought 55.5 percent of DomusVI as part of a direct investment strategy to buy, revalue, and sell assets in the short term. DomusVI then either sold or rented some of its residences to Threestones Capital Management, a fund based in Luxembourg with assets valued at €2 billion. 

   As part of their efforts to attract investors, the funds regularly create new investment instruments. In this case, Threestones Capital Management launched the Eurocare IV SICAV, an open-ended investment company that seeks to invest €500 million in the residential sector in Europe. Such investment instruments are particularly profitable when we consider the tax deductions they receive compared to the amounts they would be expected to pay as a normal company through corporate income tax.

   One of the main priorities for the funds is to secure a reliable flow of cash. Elder care facilitates this, both because of the role of public institutions in financing it—public places can account for up to 42 percent of the total turnover—and because of aggressive cost-cutting strategies in a sector with little inspection and few penalties. In addition, business owners can reduce their tax burden for as long as they are managing the services. The parent company can charge fees to subsidiaries and burden them with debt, as if the latter were providing services to the former, while the main investors can locate their tax domicile in favorable tax jurisdictions.

   In the case of DomusVi, the ICG investment fund imposes a debt burden with interest of up to 11 percent on the parent company, which means that a large part of the profits must be used to pay this interest. Nor does ICG pay tax on dividend distributions in Luxembourg, where it is domiciled. With such an arrangement in place, the company that manages nursing homes can operate at a loss, both due to the debt incurred in the purchase of DomusVi and the new debt generated subsequently, which can relieve them of tax responsibilities. 

   Before 2008, non-profit organizations could achieve similar margins, but after the crash their profitability fell thanks to the freeze on public prices and competitive pressure from large companies. Meanwhile, despite the advance of finance capital, religious entities have maintained a prominent position in the residential sector, accounting for around 11 percent of places. They are no strangers to financial strategies, often adopting a “buy and rent” approach in which they acquire assets but leave management in the hands of companies like DomusVi. The Church can thus retain its patrimonial power while displacing the increasingly difficult task of management.

   These strategies based on rent extraction have broader consequences. In care work, the pursuit of profit maps directly onto worse working conditions. According to data from the survey in Catalonia, for-profit entities are the worst payers in the sector, with hourly wages 25 percent lower than in the public sector and 15 percent lower than the non-profit sector. Between 2009 and 2019, for-profit entities increased the total wage bill per hour worked by just 4.6 percent, compared to cumulative inflation in Catalonia of 15.3 percent: a real-terms fall in the total wage bill of 10.7 percent.11In the case of large business groups, the situation could be even worse if, as Rico points out, they seek to reduce personnel costs by up to 50 percent of total costs, which can only be achieved by drastically reducing wages. The deterioration of working conditions also leads to precarity and low job retention,12According to the same survey, the turnover rate for care workers stood at around 25 percent in 2019, which means that in just four years, the entire workforce in a nursing home would have been replaced. which has direct effects on the quality of care, preventing bonds of trust from forming between residents and carers. 

   

   The new bureaucracy

   The case of nursing homes in Spain illustrates the extent to which public-private partnerships act as the Trojan horse of neoliberalism.13 Faranak Miraftab, “Public-private partnerships: The Trojan horse of neoliberal development?” (<)em(>)Journal of Planning Education and Research (<)/em(>)24, no.1 (2004): 89-101 The financing and organization of services must balance both the demands of public regulation—such as the establishment of minimum hygiene standards or staff-to-resident ratios—and those of big capital. Decisions depend as much on public regulations as on the imperatives of financial managers. Labor relations, investment, and the technologies and infrastructure promoted in the care sector are both the causes and consequences of this institutional configuration.

   The ongoing outsourcing of public care services to private entities should be understood, in this context, as a strategy to discipline labor, which is essential to keeping costs low in a sector where staffing is the major expense. Despite rhetoric about the need to recognize the value of care work, few governments have been able or willing to transform the large public procurement machines which treat professional caregivers with an iron fist. Especially for homes with more than 100 beds, large bureaucracies must control labor processes to generate returns—creating a deeply hierarchical management model. 

   The residential sector also relies on large administrative and financing capacity. In the private market, empty beds or late payments represent a significant loss of income, which must be recouped with liquidity reserves or cheap credit. Although public bed contracts guarantee relatively secure cash flow, there is also a risk of late payments, with low public prices compounding the difficulties of financial management and cost minimization. Moreover, with new care ceters requiring huge quantities of investment, the only players capable of financing them are private financial entities and the Church, which can deploy the strategies of capital gains and asset revaluation outlined above. In the absence of an empowered public sector, then, bureaucracy and speculation come to dominate. 

   To improve quality and retention, this public-private bureaucracy cannot simply be subjected to further liberalization. These bureaucracies spring up precisely because the sector cannot function as a “normal” competitive market. It is doubtful that private companies could remain sufficiently profitable without reaching full occupancy, given the prices and purchasing power of the current population—which means that “market choice” is an illusion. The limited supply of beds puts pressure on people to use whichever service is available, and households have little means to discriminate between providers, since such institutions are highly opaque and there are few public sources of information on them. Nor can older people move between facilities as if they were hotels; changes of this kind would be highly destabilizing, especially for people suffering from dementia or cognitive impairments. Most of them do not want to be treated as “consumers” in the traditional sense.14John Clarke and Janet Newman, “What’s in a Name? New Labour’s Citizen-Consumers and the Remaking of Public Services,” (<)em(>)Cultural Studies(<)/em(>) 21, no.4-5 (2007): 738-757.

   Rather than trying in vain to create a competitive market, we could instead strive to make care more democratic. At present, vital decisions are made by managers whose overriding purpose is to achieve profitability and meet standardized quality criteria. Unlike fully public bureaucracies, where people can at least appeal to the public interest and challenge mismanagement by political means, private ones diffuse responsibility across the corporate structure, with the owners of capital protected from accountability. Their profits are sustained by precarious female workers, whose influence over the system is negligible. 

   Companies that operate in the sector are also forced to compete with the rents generated in other industries such as real estate—which means that their business strategies are necessarily short-termist, reacting to fluctuations in the markets. The task of building long-term infrastructure or innovative care models is subordinated to that of reducing personnel or food costs. With the fortunes of nursing homes tied to financial cycles, facilities face the constant threat of disinvestment or supplier bankruptcy. This, rather than the needs of residents, becomes the determining factor.

   After profit

   How to change course? The first step would be to restore the welfare state’s responsibility for the sector. Since 2019, the PSOE-led government has moved in this direction: providing more funding and unfreezing public prices. Yet it is doubtful that this price increase alone will lead to greater investment, improved working conditions, and better quality services. In the current outsourced and privatized system, increased public participation should be accompanied by systems that guarantee adequate investment and wage increases, either through public financing or across the board through labor agreements. There should also be strict profit limits for nursing homes with a minimum number of public beds and maximum salaries for those that manage public nursing homes. As part of this package, the state could begin to play an active role in creating public companies, which are virtually non-existent at present. 

   The care of older people in Spain could even be better protected through greater decentralization and coordination of services at the municipal level, with services like at-home care and cooperative housing that enable better aging within the household. Here we can look at two encouraging case studies: Denmark and Barcelona. Despite growing marketization in Denmark since the 1980s, the public and community sector remains dominant there, as a result of at least four factors: the greater weight of municipal home care services, which offer fewer opportunities for financial returns; the existence of a pre-existing network of medium-sized public nursing homes, often partly owned by the residents; unfragmented trade unions with real bargaining power; and a stronger culture of care, caused by women entering the labor market in the 1970s. 

   In the case of Barcelona, a new model for managing the Home Care Service (SAD) has been promoted since 2017 based on territorial proximity: teams of 10-12 workers provide care for 50-60 people in a small geographical area, according to service schedules based on the daily needs of users (rather than on a standardized working day).15Sara Moreno-Colom, “Building community from the public sphere: the case of the Superilles Socials,” (<)em(>)Revista Española de Sociología (<)/em(>)30, no.2 (2021): a27. Municipal territorialization also means that nursing homes can be transformed into smaller centers, organized into cohabitation units with high resident participation and greater community involvement. The Spanish government’s recent Deinstitutionalization Strategy appears to recognize this fact, with its movement toward limiting the creation of large nursing homes, promoting the establishment of cohabitation units and improving quality. 

   There are still doubts about the state’s ability to enforce such regulations, though, particularly given its lack of control over the existing system and the hundreds of centers that claim they lack the capacity to invest. To improve the outlook in such places, there must be a concerted effort to reduce informality and precarity. Leaving care to families and their purchasing power puts downward pressure on wages and vocational training, which in turn affects the most formalized sector. To solve this problem, we need a new social pact that guarantees not only livable wages, but also adequate training and socially valued career paths. Reducing the feminization of care while offering adequate recognition and protection to migrant workers are challenges in this regard.

   Such obstacles can only be overcome by uniting and strengthening the various organizations that are currently fighting for a better model of care, from trade unions to mutual support networks. The feminist strike held in the Basque Country in 2023 shows a potential path forward: rallying large numbers to defend the collective right to care and demand a more accountable system, with the public sector at its core.  The encroachment of large capital on the care sector has not happened in a vacuum. It reflects the dynamics of concentration and financialization that have long afflicted other essential areas, such as banking, energy, and food. While it is necessary to reduce the scope of such problems with greater regulation, we must also set out a positive alternative, based on equal access to the services on which we depend, and a stronger community role in shaping them. 

10. After Boric

    November 28, 2025 4:45 pm Comments Off on After Boric

    In April 2024, speaking to a crowd of the country’s most prominent business leaders, Chilean President Gabriel Boric stated that he was “elected to lead Chile into the future, not to restore the past.” This future would lay the foundations for a large-scale transformation of Chile’s exhausted export-oriented economic model, in place since the end of the Pinochet dictatorship in 1990.  

    In his first year of government, in 2022, Boric positioned lithium, copper, and green hydrogen as catalysts for technological progress, subjecting the resources to new commercial rules and renegotiating contracts with foreign actors and private firms. Boric’s team also pursued greater state participation in the management of strategic resources and increased public financing. But the recent victory of right-wing presidential candidate José Antonio Kast places the fate of this developmentalist turn into peril.

    The Boric agenda (2022–2026) should be understood within a broader global context of state intervention. As Isabel Estévez and Thea Riofrancos have pointed out, industrial policy agendas are shaped by asymmetrical power dynamics.1Estevez, I., & Riofrancos, T. (2025). Global green industrial policy: Navigating power dynamics for a pro-working-class, pro-development green transformation. (<)em(>)Climate and Community Institute. (<)/em(>)https://climateandcommunity.org/research/global-green-industrial-policy While the United States and the European Union deploy massive subsidies for domestic industry, they restrict the ability of peripheral countries to implement similar tools. Indeed, Amir Lebdioui warns that the uneven industrial geography of decarbonization, inadequate climate finance, and green protectionism threaten to deepen development gaps between the North and South.2Lebdioui, A. (2024). (<)em(>)Survival of the greenest: Economic transformation in a climate-conscious world(<)/em(>). Cambridge University Press. https://doi.org/10.1017/9781009339414 This asymmetry reveals that the problem lies not just in which policies to adopt, but in the power relations that determine who can use them. These asymmetric structures are dynamic and constantly evolving. There are windows of opportunity for peripheral economies to scale up in global value chains.3Whitfield, L., & Wuttke, T. (2025). Opportunities for latecomer technological catch-up in the era of renewables capitalism: Possible pathways out of the periphery. (<)em(>)Development and Change. (<)/em(>)(<)a href='https://doi.org/10.1111/dech.70016'(>)https://doi.org/10.1111/dech.70016(<)/a(>)

    The experience of the Boric government reveals the challenges of a pursuing a progressive trade and industrial program in the periphery, and it remains unclear what aspects of this program, if any, will remain under Kast’s newly formed government. The future of development in Chile not only confronts the constraints of the global economic hierarchy, but also the political defeat of a transformative domestic agenda.  

    Economic stagnation

    Following the democratic transition, Chile deployed a growth regime driven by the expansion of primary exports, a boom in foreign investment in finance, mining, commodities, and infrastructure, and the control of domestic markets by national conglomerates. This regime generated a decade of growth in the 1990s, but it began to show clear signs of exhaustion by the 2000s. Exports were not breaking away from their dependence on raw materials, technological gaps widened, and the productive investment cycle was closing in.4French-Davis, R. and Diaz, A. (2019). “Productive investment in Chile’s economic development: evolution and challenges”. (<)em(>)CEPAL Review(<)/em(>), No. 127.

    As in the rest of the region, the exogenous boom in commodity prices from 2003 to 2013—driven by Chinese demand—generated a positive shock in Chile. But this raw materials bonanza came to a halt in 2014, marking the end of a period in which improving terms of trade led to a kind of “Dutch disease”—strong exchange rate appreciation, stagnating levels of non-copper exports, and a decline in new exports.5 French-Davis, R. (2018). (<)em(>)Economic reforms in Chile (1973-2017): neoliberalism, growth with equity, inclusion(<)/em(>). Taurus; Sossdorf, F. (2024). Boom and bust of the Chilean export cycle. (<)em(>)Latin American Journal of Trade Policy, 6(<)/em(>)(18). https://doi.org/10.5354/0719-9368.2024.74309. https://doi.org/10.5354/0719-9368.2024.74309. Indeed, the last decade has seen economic stagnation and an increasingly precarious and indebted labor force in Chile. While exports grew at 10 percent per year between 1990 and 1999, their growth slowed to only 4.7 percent between 2000 and 2009, and 0.9 percent between 2010 and 2019.  Even more revealing, while the value of exports grew 61.5 percent in the last decade—boosted by the price of copper—the volume of exports increased by a meager 7 percent. Since the pandemic, Chile has increased its export volume by 4.9 percent, compared to a 19.6 percent volume increase across South America and 8.1 percent increase worldwide.

    

    

    Chile’s export concentration has also risen significantly over the past decade. In 2024, the top ten products accounted for 62.9 percent of exports, versus 58 percent in 2019, reaching levels similar to the height of the commodity boom in 2013. The Herfindahl-Hirschman Index (HHI), a measure of market concentration, shows that after a brief post-pandemic improvement in 2022, concentration increased again in 2023. China and the United States concentrate 52.8 percent of exports, and the top ten destinations account for 81 percent of exports, and intra-regional trade fell from 18.1 percent of exports in 2015 to 13.8 percent in 2024, moving Chile away from the goal of greater regional integration.

    

    The end of the commodity boom has led to a cycle of diminishing returns and intensifying environmental impacts. Chile’s inherited economic structure has made it impossible to resume a dynamic and sustainable growth rate in the long term. With this dilemma in mind, Boric’s left-wing coalition—the Frente Amplio (Broad Front)—proposed “a new development model to overcome our productive stagnation and face the climate crisis.”6Programa de Gobierno Apruebo Dignidad (2021), page 62. https://frenteampliochile.cl/wp-content/uploads/2024/06/3.-Programa-de-Gobierno-Apruebo-Dignidad-2022-2026.pdf This model would combine industrial policy with strategic and development-focused trade policy. Key to Boric’s program were renegotiated trade agreements, increased state management of lithium, and a proposal for a new development bank.

    Transforming Chilean industry and trade

    The Boric government built a new national strategy around lithium, starting with the renegotiation of the concessions of Chile’s main salt flats—Atacama and Maricunga—with the aim of creating a national lithium company that would allow the state to recover market power over the resource. A crucial agreement between the state-run Corporación de Fomento de la Producción (Corfo) and the private lithium companies of Sociedad Química y Minera de Chile (SQM) and Albermarle created a joint venture between Codelco, Chile’s state-owned copper company, and SQM to exploit the country’s largest salt flat, the Salar de Atacama.7SQM was fraudulently privatized during the dictatorship, and it is currently controlled by Julio Ponce Lerou (Augusto Pinochet’s son-in-law) with 32% and Tianqi Lithium Corp with 23.77%.

    The state holds 50 + 1 percent of shares in the venture, granting greater state control. SQM will maintain the operation under current contracts with Corfo until 2030 and deliver profits to the Codelco; from 2031 onwards, the joint venture will operate under a new contract. This agreement effectively allowed the Boric administration to create a state-run venture without parliamentary approval, a difficult task given the ruling party’s legislative minority. Still, the agreement does not guarantee that the state will pursue a development strategy under future boards of directors. SQM has a strong clientelist network, making a joint venture a risky strategy. The venture can only function as a catalyst for technological progress if it seeks to promote both forward and backward linkages in lithium supply and processing.

    The lithium strategy also includes new operating contracts with investors for the exploitation, production, and commercialization of lithium in small salt flats. The contracts require public-private partnerships and demand certain performance requirements and local content percentages. These operating contracts only apply to smaller salt flats, outside the main lithium reserves in Salar de Atacama and Maricunga. The strategy has also established the National Lithium Institute, a center for research and development dedicated to adding value to lithium extraction and processing. To support long-term capital financing, the government proposed the creation of a National Development Bank, with a board of directors including representatives of civil society, universities, unions, trade unions, sectoral ministries, and regional governments.8The body guarantees independence from the political cycle through boards of directors made up of members selected through the Senior Public Management System and presidential nominations approved by Congress. This bank would have enabled long-term financing for strategic projects, but the proposal ultimately failed.

    The government also attempted to renegotiate trade agreements with the European Union (EU) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), while simultaneously advocating for a turn towards greater Latin American regional integration. To support regional value chains and coalitions to improve negotiation power, the Boric government sought greater investments in research & development, proposing to double the state budget for science and technology to reach 1 percent of GDP.

    The EU wanted to ensure a reliable supply of critical minerals from Latin America while restricting export taxes, preferential prices, and performance requirements for European investments in Chile. But EU-China competition and European dependency on Chilean lithium bolstered Chile’s leverage in the negotitations. Ultimately under pressure from opposition parties and the EU, the Boric government signed an “agreement in principle” at the end of 2022.9Dünhaupt, P., Gräf, H., Jiménez, V., & Jungmann, B. (2025). Industrial policy space in emerging economies: The case of Chile’s lithium industry and the energy and raw materials chapter in the EU-Chile free trade agreement (Working Paper No. 251/2025). Berlin School of Economics and Law, Institute for International Political Economy (IPE). European negotiators were pushed to soften their demands, allowing Chile to maintain a preferential pricing system for lithium. Despite this victory, the agreement limits the Chilean state’s ability to adapt to future policy challenges.10As the authors indicate, this was achieved through the expansion and convening on several occasions of the Interministerial Committee for International Economic Negotiations, the Subcommittee of Negotiators, as well as the formation of an Interministerial Working Group on Preferential Lithium Prices.

    The CPTPP already faced significant obstacles to ratification in 2019, under the government of Sebastián Piñera. Recognizing that only marginal trade gains would flow into Chile, Boric’s Foreign Ministry agreed to the deal on the condition that that the investor-state dispute settlement (ISDS) mechanisms—which limited states’ abilities to impose trade and environmental restrictions on foreign capital—be eliminated.11Having already reached agreements with the ten countries, the new preferences focused on a small number of products not previously liberalized and, for the most part, without Chilean exports. Also see Undersecretariat of International Economic Relations (SUBREI). (2023). (<)em(>)Tariff and trade assessment of the CPTPP: An evidence-based analysis(<)/em(>). Santiago, Chile. Mexico, New Zealand, Malaysia, and the United Kingdom supported this proposal, but it was rejected by Japan and Canada—the two main investors of the CPTPP bloc in Chile.12The negotiation with the United Kingdom took place in parallel to Chile’s ratification of the CPTPP, where Chile took the opportunity in 2022 to request, as a condition for the UK’s entry into the bloc, the elimination of the bilateral IPPA, signed in an exchange of letters in January 2025. Mexico is committed to the delivery of the letter. However, with the change of cabinet in 2023, the new authority in the Chilean Foreign Ministry opted not to continue with the strategy.

    But the turning point in trade negotiations was not the result of international disputes, but rather the rejection of a proposed new constitution in Chile, which sought to replace the country’s Pinochet-era constitution. In September 2022, Chileans voted against a constitution drafted by the Constitutional Convention, a body elected after the social uprisings of 2019. The defeat weakened the most progressive sector of Boric’s government coalition (Frente Amplio-Partido Comunista) and strengthened the centrist faction, Socialismo Democrático. The shifting forces in the ruling coalition led to an overhaul of the cabinet in March 2023, setting the stage for progressive defeat.

    The first two years of the Boric government thus sought to remake trade relations and extend Chile’s political autonomy. Chilean policymakers argued that trade policy should align with industrial policy: these were interdependent arms of a coherent development strategy. But facing greater political pressure and lacking strategic leverage, the government reversed course. By 2023, the Boric government returned to a largely orthodox trade policy.

    Course reversal

    The second half of the Boric government was characterized by defeat, with the government returning to the strategies inherited from previous governments. With the governing coalition moving to the right, policies such as the National Development Bank were indefinitely stalled. In May 2024, a bill to create the Agencia de Financiamiento e Inversión para el Desarrollo (Financing and Investment Agency for Development, AFIDE) sought to address Chile’s challenges by securing long-term financing for innovation and economic diversification through private finance.

    With an institutional architecture geared towards technological independence, AFIDE was designed as a corporation formed by the Chilean Treasury and Corfo.13AFIDE would operate along two complementary lines: a specialized technical advisory function that inherits the capabilities of Corfo’s Investment and Financing Management to assess project viability, and a wide range of financial instruments including loans (direct and second-tier), debt acquisition, investment in venture capital funds and guarantee instruments. AFIDE can act as a direct financier in the face of market failures or a source of private financing. Through direct and indirect financing, fund management, coordination, and strategic investment, the fund would effectively “derisk” private investment in strategic sectors, facilitating private investment without disciplinary mechanisms, and leaving the control of economic and financial infrastructures in the hands of conglomerates and foreign investors.14According to Gabor (2021), ‘(<)em(>)de-risking’ (<)/em(>)is the process by which the state creates a “safety net” for investors in development assets, assuming and transferring to its public balance sheet multiple types of risks, Thus, the “development as de-risking” paradigm socializes risks and privatizes profits, transferring fiscal costs to the state while protecting the profits of global finance capital, thus narrowing the political space for green developmental states and just climate transitions. See Gabor, D. (2021). The Wall Street Consensus. (<)em(>)Development and Change(<)/em(>), 52(3), 429-459. (<)a href='https://doi.org/10.1111/dech.12645'(>)https://doi.org/10.1111/dech.12645(<)/a(>) Without public direction, this form of financing limits the transformative potential of public investment.

    AFIDE represented a departure from the participatory spirit of the government’s earlier industrial policy push. It no longer included a body of civil society representatives (as proposed alongside the National Development Bank) nor the participation of regional territories in decision-making processes. The result was a more centralized and technocratic institutional framework that, while maintaining the objectives of productive transformation, dispensed with the mechanisms of social consensus and intersectoral coordination that characterized the original programmatic vision. Of particular concern was the absence of trade policy as a development strategy—unlike the proposal for the National Development Bank, AFIDE did not include a comprehensive trade and export policy.  Still, AFIDE was approved Chamber of Deputies in December 2024, though it remains in discussion in the Senate Finance Committee. With Kast’s victory in the national election, the AFIDE’s future again remains in limbo.

    A disconnect between industrial and trade policies was also apparent in the government’s “Sustainable Productive Development Program,” created in 2023 and financed by lithium revenues. The program was meant to promote decarbonization, environmental resilience, and economic diversification with $360 million of public spending between 2023 and 2025. However, it excluded the export sector and international trade authorities from its governance. The program also utilized the logic of derisking, providing subsidies to private actors without disciplinary mechanisms. As a result, the program is likely to maintain current extractive patterns.

    It is in the international arena that the Boric government’s reversal is most evident. The post-2023 agenda abandoned attempts to modernize or renegotiate agreements to safeguard Chile’s strategic autonomy. As important, the government proved unable to present an effective strategy in the face of Donald Trump’s unilateral tariff increases in 2025. The US tariff onslaught broke trade rules established by the World Trade Organization (WTO) and forced countries around the globe to renegotiate trade. The Boric government opted to accept the terms of the White House, instead of assuming a regional leadership role and coordinating a multilateral response. Though negotiations are still underway, they are likely to heavily favor the United States.15Nogales, D. (2025, September 15). Aranceles: Chile revela que ya se puso fin al proceso técnico y que ahora la Casa Blanca debe ver qué gravámenes aplica. (<)em(>)Pulso La Tercera. (<)/em(>)(<)a href='https://www.latercera.com/pulso/noticia/aranceles-chile-revela-que-ya-se-puso-fin-al-proceso-tecnico-y-que-ahora-la-casa-blanca-debe-ver-que-gravamenes-aplica/?utm_source=chatgpt.com'(>)https://www.latercera.com/pulso/noticia/aranceles-chile-revela-que-ya-se-puso-fin-al-proceso-tecnico-y-que-ahora-la-casa-blanca-debe-ver-que-gravamenes-aplica/(<)/a(>)

    After Boric

    Gonzalo Winter, the Frente Amplio’s candidate for the president, drew from Boric’s early trade and industrial policies in his platform.16Available at (<)a href='https://winterpresidente.cl/'(>)https://winterpresidente.cl/(<)/a(>) and https://drive.google.com/file/d/1_SUBQhNEeJKva4PPx1YxHqAjOdaDauVp/view He advocated for a robust export diversification agenda, increased public coordination of industry, a push to reform and overcome the ISDS mechanisms, and a multilateral approach to trade negotiations. But Winter lost handily in the primary in June 2025. By December, the second round victory of Republican candidate José Antonio Kast over Communist Party candidate Jeannette Jara indicates that an aggressive deregulatory agenda is on the horizon.

    Kast’s program revolves around a central principle: growth is achieved by removing obstacles to private sector expansion. He proposes repealing regulations and instituting a regional “immediate action force” to speed up bureaucratic processes. Throughout the campaign, Kast failed to outline a coherent development strategy, instead only making generic references to Chile as an “agri-food power” and tourist site. More notably is the striking absence of a trade policy in his agenda. Beyond invoking “sovereign and pragmatic multilateralism,” Kast only mentions the intensive use of existing free trade agreements and the “active search for new markets,” with no details on coordination, export promotion, or targeted markets. In contrast, Jara proposed raising investment from 24 percent to 30 percent of GDP, increasing the coordinating role of the state in private investment, and creating a national lithium company.17Available at (<)a href='https://jeannettejara.cl/'(>)https://jeannettejara.cl/(<)/a(>) and https://drive.google.com/file/d/1Ppf6IZsmKQang337f5-q5IYaDn7ihcdE/view She also prioritized Latin American integration, including a convergence of the Pacific Alliance and Mercosur.

    The differences between Jara and Kast’s programs reveal divergent visions for the role of the state in economic transformation. Kast’s victory demonstrates a return to classic orthodoxy, but the experience of the Boric government shows that those who prioritize austerity and fiscal produce can coexist in coalition with advocates of active industrial policy. This is a contradiction that the past four years has revealed, but not resolved.  

    Ultimately, Boric’s goal of transforming Chile’s economy remains stalled. On the one hand, his government was able to uplift the state as a key player in the management of lithium. Although the state’s participation in the joint venture remains a question under the new government, the creation of the venture itself marks a starting point for a longer-term industrial policy.18Note: On December 30, 2025, NovaAndino Lithium was (<)a href='https://www.gob.cl/noticias/nova-andino-litio-codelco-sqm-produccion-litio-salar-de-atacama/'(>)established(<)/a(>) as a public-private company under the joint venture of Codelco-SQM. The company held its first directors meeting on December 31. But when it came to trade and foreign policy, Boric conceded to the terms set by the Trump administration, leaving Chile isolated in asymmetric negotiations.

    Other Latin American countries have seen greater success with interventionist industrial policies. Brazil is deploying the “Nova Indústria Brasil” with R$300 billion19About US$ 57 billion at the average exchange rate of November 2025. until 2026 to promote green industrialization, decarbonization, and technological sovereignty. Colombia has developed an industrial policy agenda focused on the “popular economy” with massive formalization and productive linkages. Honduras, whose government faces international lawsuits worth $14 billion for trying to dismantle inherited corrupt contracts, has led a coalition to challenge the ISDS system. These cases teach us that successful policy is dependent on both global structural conditions as well as the willingness of political actors to push forward path-breaking agendas.

    Progressive governments will continue to face obstacles in reforming international trade policies and domestic export sectors, but the alternative is an austere and militaristic agenda led by the economies of the global North.20Ahumada, J.M.; Sossdorf, F. A progressive industrial policy for the global south: a Latin American perspective, at https://www.socialeurope.eu/a-progressive-industrial-policy-for-the-global-south-a-latin-american-perspective. Such a Trumpian vision is likely to find a key ally in Chile’s new president, foreshadowing a return to a privatized, dependent state of affairs.