The Neoliberal model implemented in Chile after the 1973 Military Coup gives us hints as to what will happen in Brazil under a future Jair Bolsonaro Government. The resemblance is no mere coincidence.
By Joana Salém Vasconcelos and Rejane Carolina Hoeveler.
Still shocked by the electoral results in Brazil, many Brazilians are asking how an avalanche of votes for Jair Bolsonaro and General Hamilton Mourão took place and what exactly will happen when a right wing extremist government takes over. We are still a long way off from answering this, but the connections between Bolsonaro’s main economic guru, Paulo Guedes, and the Augusto Pinochet dictatorship in Chile (1973-1990), give us important leads about the underlying plans.
Until recently, Paulo Roberto Nunes Guedes (69) was relatively unknown to the Brazilian public. Although he was a columnist for Epoca magazine and O Globo newspaper and founder of the Millenium Institute, the economist spent decades isolated from the mainstream, rejecting all of Brazil’s economic plans for the last 35 years, from those of President José Sarney to Dilma Rousseff. Reading some of his articles it becomes clear why. Guedes shows an aversion to the social contract guaranteed in the 1988 Constitution, which he interprets as an obstacle to his political project. For him, Brazil suffered from an “interventionist curse” which has blocked the “irreversible evolutionary process (…) towards a great open society.”
On May Day, 2017, Guedes wrote, “the right wing hegemony governed for two decades and the left wing hegemony governed for three, both with a disastrous, interventionist economic model.” In his mind, the 30 years of democratic Brazil, from Fernando Collor to Itamar Franco, Fernando Henrique Cardoso, Lula and Dlima all comprised part of the same hegemonic left. Looking at this tabula rasa, it’s not hard to understand his political preferences. The social rights system guaranteed in the 1988 Constitution may have has survived to the present day, at least on paper, but Guedes is part of the group that wants to exterminate it by capitalizing on the authoritarian wave of Jair Bolsonaro. This implies a radicalization and destruction of the democratic contract. But how will he try to do it?
From Chicago to Chile
Guedes got his PhD in Economics from University of Chicago, a center of Austrian-American neoliberalism dominated by figures like Milton Friedman, in 1978. As Friedman says in his book Freedom of Choice, it was a time in which his “apostles” were “wandering in the desert”. Forged in Chicago, Guedes economically-extremist vision has not caught on in Brazil until now. But the contrary happened in Chile. The first laboratory of the Shock Doctrine, as Naomi Klein designated the process, resulted from the Freidman-Pinochet alliance. It was there that the brothers in faith from Chicago found perfect partners for their economic plans after September 11, 1973: Chilean militarism and fascism promised, at the same time, repression and “innovation”.
The inspiration for Guedes’ recent proposals for pension and education reform come from the Pinochet dictatorship, tied to the idea of a “subsidiary state.” Antithetical in many ways to the Brazilian Constitution of 1988, the Chilean Constitution of 1980 was imposed by the Dictatorship and preserved to this day. Contrary to the idea of State as guarantor of rights, the subsidiary Chilean State was relieved of the responsibility for promoting welfare to its citizens and converted into a financier for market expansion. This has taken place through massive transfers of public resources to the private sector while generating a perverse public debt.
In Chicago, Guedes earned his doctorate with a 63 page, typewritten dissertation. His work, according to Folha de São Paulo newspaper, “was never published and had no repercussions in Brazil,” which caused him to resent his more successful colleagues. This bitterness became public recently, when he called his ex-student, economist Elena Landau, “mediocre”, alleging that he had flunked her during her Master’s degree work at PUC University in Rio. Elena Landau, 9 years younger than Guedes, was one of the most important economists in Fernando Henrique Cardoso’s privatizations, coordinating the sale of Electrobras state energy company for the National Destatization Council during the 1990s. With her transcripts in hand, Landau disproved his claim, saying, “It’s Paulo who was a poor professor. He missed classes and didn’t correct papers.”
Professor Paulo Guedes entered the University of Chile in a suspicious manner during the 1980s, during the height of the dictatorship, after a broad purge of critical intellectuals. As Federico Fullgraf writes, the Chilean dictatorship viewed the universities as one of the main “theaters of war”, a territory to be retaken from the “Marxist enemy”. In the place of critics, professors were hired who were aligned with the only school of thought that the military supported in academia. Milton Friedman and his allies had been attracting Chilean economists to Chicago since the 1950s, working to reinsert them into academic positions in the country’s main universities. However it was only with Pinochet that the Chicago Boys political experiment consolidated. Guedes was part of this movement, along with his colleague, the Chilean businessman Jorge Constantino Demetrio Selume Zaror (67). In returning from Chicago, where he first med Guedes, Selume also joined the economic cathedral of the University of Chile. In a few years he became Pinochet’s director of budgets and oversaw privatizations of state companies such as Chliectra and Entel. At the same time, he built a financial empire which included banks and real estate. Among them, Rupanco, a 47,000 hectare farm which had been redistributed to the workers during the Salvador Allende government, but that was appropriated by the military in 1979 and given to the El Cabildo S.A. company, which was later taken over by the Selume family. According to Fullgraf, “ Selume is a kind of unofficial spokesman of the hard line Pinochet supporters in the private sector.
It was in this manner, taking over the position of a professor who was arbitrarily fired by the dictators, that Guedes left his part-time teaching jobs at PUC-Rio, IMPA and FGV-Rio, in exchange for, according to him, a “too good to refuse” salary of $10,000/month. When asked about his ties to the Chilean dictatorship, however, he changes the subject to his supposed academic qualifications and tells a story of how he was once inspected by Pinochet’s political police.
Private retirement pensions and the shock of poverty
During the years in which Guedes lived in Chile, José Pinera, the most powerful Chicago Boy and brother of current Chilean President Sebastian Pinera, completely privatized the retirement system through a decree issued by Dictator Pinochet on November 13, 1980. In this system, formed today by an oligopoly of six private pension funds, wage earners are required to deliver 10% of their salaries for capitalist speculation with no counterpart from the employer. Currently, after 30 years of contribution, 90% of Chilean retirees receive pension checks worth less than half of the national minimum wage of 154,000 Pesos (approximately $220). Symptomatically, the pension system privatization does not apply to members of the military.
Driven by the same kind of pro-capitalization rhetoric that paved the way for Michel Temer’s failed pension reform efforts in 2017, the Chilean pension system represents the appropriation of more than 10 million worker’s retirement funds. Today, five of the six existing pension funds manage 69.6% of the country’s GDP and 94.6% of its social security contributions, having accumulated profits of $ 1.5 million a day in 2017, according to the Sol Foundation.
The collection system is based on individualism, not solidarity, because each worker depends exclusively on himself to increase the value of his pension. Furthermore, pensioners are susceptible to market volatility, trapped in the pension fund managers’ mathematical models. During recent years, the retirement pension crisis has led to dramatic increases in suicides of Chilean seniors: nearly 1000 in 5 years. Since 2016, popular anger against the privatized retirement system has caused gigantic street protests, led by the #No+AFP movement.
In Brazil, the project that would accelerate the deterioration of public welfare was rejected by the population in 2017. But popular resistance was only one of the factors that blocked the Temer government from approving the project, as it was also bogged down in the costly bribery dynamics of a system of corrupt political parties. It is worth noting here that Paulo Guedes is under investigation on the federal police’s Operation Greenfields, which is investigating fraud in management of private pension funds that generated R$6 billion in profit between 2009 -2013. There is also evidence of money laundering by the HSM Educational SA company, which paid Guedes millions of reais in speaking fees.
Guedes privatization crusade finds itself confronted by resistance on the streets on the one hand, and on the other, by a governmental machine which wants a piece of the spoils. This is why he seems be thinking of the Pinochet era when he calls for a shock of capitalism that can only be imposed through militaristic force, all for his own benefit.
Pinochetista clans and big data
The Millennium Institute has an ideological sister organization in Santiago with much more influence over its nation‘s politics: The Liberty and Development Institute, a private organization run as a company which was founded in 1990 in the luxurious neighborhood of Las Condes. Organized by business leaders and high level cabinet ministers from the Pinochet administration like Hernán Buchi, Carlos F. Cáceres, Cristián Larroulet and Luis Larrain Arroyo, the institute is recognized for working as a revolving door for business executives from major corporations to enter the government and consolidate their company’s market positions from inside the state apparatus.
This organization provided ten important members of the government of President Sebastian Pineira, who recently said, “on the economic front, Bolsonaro is heading in the right direction.” It is not only the Pineira family, however, who view the emergence of Bolsonaro positively. His right wing extremist competitor from the 2017 Chilean presidential elections, José Antonio Kast, is the Chilean politician most invested in a partnership. The businessman of German descent was the fourth most popular presidential candidate last year, with 523,000 votes. On October 18th, Kast traveled to Rio de Janeiro to meet with Bolsonaro. Afterwards, he published a photo smiling next to the captain in his social media accounts. “Today we met with Jair Messias Bolsonaro and wished him luck in the election. We gave him a Chile jersey so that we can continue strengthening the relationship between both countries and, together, build an alliance that can definitively defeat the left in Latin America,” he said.
In addition to both being admirers of Pinochet, Kast and Bolsonaro rely on a political strategy based on clans. Senator Felipe Kast, nephew of José Antonio Kast, ran for office as part of the coalition which elected Pinera, and was his planning minister in his previous government. During the primaries, Felipe Kas was supported by Jorge Selume Aguirre, the son of the businessman who studied with Guedes – a 37 year old psychologist who was recently nominated as Pinera’s Communications Secretary. Selume Jr.’s resume features a diploma from Adrés Bello University (part of the Laureate, for profit university multinational, directed by his father), and years of work at Cambridge Analytica. Not less important is the fact that young Selume is the owner of Artool, the largest Chilean big data company.
If there are signs that the Jair Bolsonaro campaign in Brazil could have been strengthened – as was the case of Donald Trump in the US – with the theft of millions of people’s personal data from the social media networks, among them WhatsApp, and the dissemination of fake news on a previously unseen scale, the Chilean far-right has all of the tools to do it.
A revolving door with private education
The narrow circle of Brazilian and Chilean right wing extremists closes with the Arab businessman Jorge Selume, father of Pinera’s recently nominated communications secretary. As previously mentioned, Selume was Guedes’ classmate in Chicago during the 1970s. During the 1980s, he built an economic empire from the largest financial operation ever to take place in Chile at the time. Together with Laz Diez Mesquitas, a consortium of Arab-owned companies, he bought Banco Osorno and sold it to Santander in 1985 for 495 million dollars. At the same time he served as Pinochet’s Budget Director.
Today it is more and more clear that education and culture are priority frontiers for the expansion of neo-pinochetista business negotiations. Jorge Selume Jr. created a powerful communications and political marketing machine with Artool and spurred the election of 46 mayors from the Partido Renovacion Nacional in 2016, using Cambridge Analytica techniques. Furthermore, Banco de Chile and Banco Santander, which together hold at least half of the national population’s bank accounts, are among Artool’s top clients.
Meanwhile, Jorge Selume, the father, has been investing in education for years and is now one of the most influential executives in the for-profit education multinational Laureate, which is being investigated for fraud in the private university accreditation system. In Brazil, Laureate has prioritized distance learning. It is no coincidence that Paulo Guedes defends a “shock of digital inclusion in grammar school,” Bolsonaro has been talking about distance learning for children and the name of Stravos Xanthopoylos, international relations director for the Brazilian Association of Distance Learning, has been cited for Education Minister in the future right wing extremist government- if the ministry will even continue to exist.
What is in store for us?
During his first interview with the international press after his connection with Jair Bolsonaro became public in November, 2017, Guedes said, “the last 30 years have been a disaster – we corrupted democracy and stagnated the economy (…) We should have done what the Chicago Boys defended.”
When asked why he would associate with known defender of the Brazilian military dictatorship, during an event organized by the Credit Suisse bank in São Paulo, Guedes classified this type of question as “patrolling”. In talking about his long conversations with Bolsonaro, he repeated one of his favorite catchphrases, playing on the words on the Brazilian flag: “who knows if order isn’t speaking with progress?”
It is not hard to decipher the message between the lines. The first time that Latin America witnessed an organic union between the military and the Chicago Boys in a government was in 1973 in Chile, a chapter of history written in buckets of blood. All that is left for Brazilians is to find out what kind of situation this dangerous association will lead to.
This article was originally published in LeMonde Diplomatique Brasil, was translated by Brian Mier and can be seen in its original form here.