Especial atención a como el análisis hace incapié en las fortalezas de Argentina, sus posibilidades de crecimiento y como limitamos a Brasil.
"El éxito de Brasil es más sobre lo que Argentina ha hecho mal que lo que Brasil ha hecho bien."
The Geopolitics of Brazil: An Emergent Power's Struggle with Geography
Analysis
MAY 13, 2012 | 10:59 GMT
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STRATFOR
Analysis
Editor's Note: This is the 15th in a series of Stratfor monographs on the geopolitics of countries influential in world affairs.
South America is a geographically challenging land mass. The bulk of its territory is located in the equatorial zone, making nearly all of the northern two-thirds of its territory tropical. Jungle territory is the most difficult sort of biome to adapt for human economic activity. Clearing the land alone carries onerous costs. Soils are poor. Diseases run rampant. The climate is often too humid to allow grains to ripen. Even where rivers are navigable, often their banks are too muddy for construction, as with the Amazon.
As the tropics dominate South America, the continent's economic and political history has been problematic. Venezuela, Guyana, Suriname and French Guiana are fully within the tropical zone, and as such always have faced difficulties in achieving economic and political stability, though the discovery of oil in Venezuela improved that country's economic trajectory. Throughout the tropical zones nearly all of the population lives within a few dozen kilometers of the coast. For the most part, however, those coasts are not naturally sculpted to encourage interaction with the outside world. Natural ports — deepwater or otherwise — are few and far between.
There are, however, two geographic features on the continent that break this tropical monotony.
The first is the Andean mountain chain. The Andes run along the continent's western edge, giving rise to a handful of littoral and transmountain cultures physically separated from the continent's eastern bulk and thus largely left to develop according to their own devices. Colombia and Ecuador straddle the tropics and the Andes, with their economic cores not being coastal, but instead elevated in the somewhat cooler and dryer Andean valleys, which mitigates the difficulties of the tropics somewhat. Farther south are the arid transmountain states of Peru and Bolivia. Peru has achieved some degree of wealth by largely ignoring its own interior except when seeking resource extraction opportunities, instead concentrating its scant capital on the de facto city-state of Lima. In contrast, landlocked Bolivia is trapped in a perennial struggle between the poor highlanders of the Altiplano and the agriculturally rich region of the lowland Medialuna.
The combination of mountains and jungle greatly limits the degree to which states in this arc — from French Guiana in the northeast to Bolivia in the southwest — can integrate with each other or the outside world. In all cases, basic transport is extremely difficult; tropical diseases are often a serious issue; there are few good ports; agricultural development is both more labor and capital intensive compared to more traditional food-producing regions; humidity and heat hinder conventional grain production; and the ruggedness of the mountains raises the costs of everything.
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South America: Countries and ClimateFREE
Historically, the only way these states have achieved progress toward economic development is by accepting dependence on an external (and usually extraregional) power willing to provide investment capital. Without this, these states simply lack the capital generation capacity to meet their unique and staggering infrastructure challenges. Consequently, the broader region is severely underdeveloped, and the residents of most of these states are generally quite poor. While some may be able to achieve relative wealth under the right mix of circumstances, none has the ability to be a significant regional — much less global — power.
The second exception to the tropical dominance of South America is the temperate lands of the Southern Cone. Here, the summers are dry enough to allow traditional grains to ripen, while cooler weather — especially winter insect kills — limits the impact of disease outbreaks. Unlike the scattered populations of the Andean region, the Southern Cone is one large stretch of mostly flat, moderately watered territory. The bulk of that land lies in Argentina, with significantly smaller pieces in Uruguay, Paraguay and Brazil. The only remaining country on the continent is where the temperate Southern Cone overlaps with the Andean mountain zone: Chile, one of the world's most physically isolated states. It takes longer to fly from Santiago to Lima than it does to fly from London to Moscow, and longer to sail from Santiago to Buenos Aires than it does from New York City to London. Chile consequently does not participate significantly in the politics of the Southern Cone.
In stark contrast to the mountains and jungle that dominate the majority of South America, the Southern Cone flatlands are the best land on the continent. Their flatness, combined with their natural prairies, lowers the cost of construction, and the temperate climate makes them rich agricultural zones. But the real advantage lies in the region's river structure. The Parana, Uruguay and Paraguay rivers combined with the Rio de la Plata — a massive estuary that empties into the Atlantic between contemporary Buenos Aires and Montevideo — are all navigable for a great portion of their length.
Moving goods via water costs about 10 to 30 times less than moving the same goods by truck. Such riverine transport systems therefore generate massive amounts of capital with little difficulty compared to land-transport systems. Collectively, this river network overlaying the agricultural flatlands is known as the Rio de la Plata region.
These rivers are particularly valuable for agricultural regions such as the Rio de la Plata. Wheat, corn, soybeans and the like suffer from a weak value-to-bulk ratio — oftentimes transporting them great distances can only be done at an economic loss. Water transport allows for foodstuffs to cheaply and easily be brought not just downstream but to the ocean and then the wider world. Russia presents a strong contrast to the Rio de la Plata region. Its famines often directly result from the inability to bring foodstuffs to the cities efficiently because its navigable rivers are not well situated — meaning foodstuffs must be transported by truck or train.
The most important geographic fact on the continent is that the Rio de la Plata region's rivers are navigable both independently and collectively via a system of canals and locks. Only the Greater Mississippi River network of North America has more kilometers of interconnected maritime transport options. This interconnectivity allows greater economies of scale, greater volumes of capital generation and larger populations, and it greatly enhances the establishment of a single political authority. In contrast, the separate rivers of the North European Plain have given rise to multiple, often mutually hostile, nationalities. Argentina controls the mouth of the Rio de la Plata and the bulk of the navigable stretches of river. This leaves the Uruguayans, Paraguayans and Brazilians at a disadvantage within the region. (Brazilian power is greater overall than Argentine power, but not in the critical capital-generating geography of the Rio de la Plata region.)
The Brazilian Geography
Most of Brazil's territory does not lie within these Southern Cone lands. Instead, roughly one-third of Brazil's 8.5 million square kilometers is composed of vast tracts of challenging jungle, with the Amazon Basin being the most intractable of all. While there are many potential opportunities to exploit minerals, they come with daunting infrastructure costs.
South of the Amazon Basin lies a unique region known as the cerrado, a vast tropical savannah with extremely acidic soils. However, because the heat and humidity is far less intense than in the jungle, the cerrado can be made economically viable by brute force. The cost, however, is extreme. In addition to the massive infrastructure challenges — the cerrado lacks any navigable rivers — the land must in essence be terraformed for use: cleared, leveled and fertilized on an industrial scale to make it amenable to traditional crops. There is also the issue of distance. The cerrado is an inland region, so shipping any supplies to or produce from the region comes at a hefty transport cost. Brazil has spent the greater part of the past three generations engaged in precisely this sort of grand effort.
Luckily for the Brazilians, not all of Brazil's lands are so difficult. About 600,000 square kilometers of Brazil is considered traditionally arable. While this represents only 7 percent of the country's total land area, that still constitutes a piece of arable territory roughly the size of Texas or France. All of that land lies in the country's southern reaches. But much of that territory lies in the interior, where it is not easily accessible. Brazil's true core territories are less than one quarter of this 7 percent, about the size of Tunisia, straddling the area where the tropical zone gives way to the temperate lands of the Southern Cone. These areas formed the core of Brazil's original settlements in the early colonial period, and these lands formed the population core of Brazil for the first three centuries of its existence. As such, the topography of these lands has had an almost deterministic impact on Brazil's development. Understanding that topography and its legacy is central to understanding what is empowering Brazil to evolve — and hampering Brazil from evolving — into a major power in the years to come.
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South America: Rio de la Plata RegionFREE
Two obvious characteristics stand out regarding this core Brazilian region. First, it is semi-tropical, so development in the region faces a somewhat less intense version of the challenges described above for fully tropical zones. Second, and more critical, the Brazilian interior is a raised plateau — called the Brazilian Shield — which directly abuts Brazil's Atlantic coast along nearly the entirety of the country's southeastern perimeter. The drop from the shield to the Atlantic is quite steep, with most of the coast appearing as a wall when viewed from the ocean — the source of the dramatic backdrops of most Brazilian coastal cities. This wall is called the Grand Escarpment, and most Brazilian cities in this core region — Rio de Janeiro, Vitoria, Santos and Porto Alegre — are located on small, isolated pockets of relatively flat land where the escarpment falls to the sea.
The primary problem this enclave topography presents is achieving economies of scale. In normal development patterns, cities form around some sort of core economic asset, typically a river's head of navigation (the maximum inland point that a sizable cargo vessel can reach) or a port or nexus of other transport options. The city then spreads out, typically growing along the transport corridors, reflecting that access to those transport corridors provides greater economic opportunities and lower economic costs. So long as somewhat flat land remains available, the city can continue growing at low cost. In time, nearby cities often start merging into each other, allowing them to share labor, capital, infrastructure and services. Economies of scale proliferate and such megacities begin generating massive amounts of capital and skilled labor from the synergies.
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Coastal Urban AreasFREE
Megacities — such as New York City, Los Angeles, London, Paris, Tokyo, Buenos Aires, Istanbul and Shanghai — form the core of the global economic system. This "standard" development pattern has been repeated the world over. The premier American example is the "megalopolis" region of cities on the American Eastern Seaboard stretching from Washington to Boston, encompassing such major locations as Baltimore, Philadelphia, New York, Hartford and Providence. In Europe, a similar conglomeration contains the many cities of the German Rhine Valley. In both cases, major and minor cities alike merge into an urban/suburban conglomeration where the resources of each location are shared with and bolstered by the others. In all such cases, the common characteristic is the existence of land upon which to expand.
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Major Economic Centers By Total AreaFREE
That land is precisely what Brazil's core territory lacks. The Grand Escarpment comes right down to the ocean throughout the Brazilian southern coast. Brazil's cities, therefore, are forced to develop on small enclaves of relatively flat land in the few areas where the escarpment has not pushed all the way to the sea. The lack of a coastal plain means no small cities can form between the major cities. Any infrastructure built by one city never serves another city, and linking the cities requires climbing up the escarpment onto the shield itself, traversing the shield and then going back down the escarpment to the other cities, a difficult and costly endeavor in terms of both time and engineering. Because Brazil does not have direct access to the navigable rivers of the Rio de la Plata region, it has to scrounge for capital to apply to this capital-intensive project. Absolute limitations on land area also drive up the cost of that land, injecting strong inflation into the mix right at the beginning and raising development costs. Enclavic geography is not something that can be "grown out of" or "developed around." The topography is constant, and these cities simply cannot synergize each other — a modern, low capital-cost city cannot be built on the side of a cliff. Moreover, since these enclaves are Brazil's primary points of interaction with the outside world, they represent a constant, permanent restriction on Brazil's ability to grow.
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Major Brazilian InfrastructureFREE
To this day, Brazil has very few major highways and railways because even where the topography does allow for the possibility, the costs still are much higher than in flatter lands farther south. The country lacks a major coastal road system, as the escarpment is simply too steep and too close to the coast. Following the Brazilian coastline makes clear how Brazil's coastal roads are almost exclusively two-lane, and the coastal cities — while dramatic — are tiny and crammed into whatever pockets of land they can find. And most of the country is still without a rail network; much of that soy, corn and rice that the country has become famous for exporting reaches the country's ports by truck, the most expensive way to transport bulk goods.
The Grand Escarpment drops almost directly down to the coast in most portions of southern Brazil. This photograph vividly illustrates how the Grand Escarpment starkly limits Rio de Janeiro's development. Brazil's southern coastal cities have developed along similar patterns, lacking the traditional hinterlands of major cities elsewhere in the world.
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PhotoFREE
The one exception to the rule is Sao Paulo state, centered on the city of the same name. Only Sao Paulo has sufficient flat lands to follow a more standard development pattern and thus achieve any economies of scale. It is also the only portion of Brazil that possesses anything resembling the modern, integrated infrastructure that follows more traditional development patterns. Unsurprisingly, this single state accounts for more than one-third of Brazil's gross domestic product (GDP) despite only serving as home to one-fifth of the country's population. As recently as 1950, Sao Paulo state produced more than one-half Brazil's economic output.
Unfortunately, Sao Paulo is not a coastal city. The escarpment at Sao Paulo is too steep and the coastal enclave — the port of Santos — is too small to take full advantage of Sao Paulo's potential. Sao Paulo sits at an elevation of about 800 meters atop the Brazilian Shield, some 70 kilometers inland. (In comparison, the U.S. city at the Mississippi River's head of navigation, Minneapolis, Minn., sits at less than 200 meters elevation despite being 3,000 kilometers inland.) This sharp elevation change helps mitigate the climatic impact of the region's near-tropical conditions that predominate on the coast, but comes at the dauntingly high capital and engineering costs required to link the city and state to the coast. So while Sao Paulo is indeed a major economic center, it is not one deeply hardwired into Brazil's coastal cities or to the world at large.
The lack of economies of scale and the difficulty of integrating local infrastructure forces bottlenecks. The worst of those bottlenecks occur where the coastal enclaves interact with the outside world — in Brazil's ports — and it is here that Brazil faces the biggest limiting factor in achieving economic breakout. Brazil is correctly thought of as a major exporter of any number of raw commodities, but the hostility of its geography to shipping and the inability of its cities to integrate have curtailed port development drastically. The top seven Brazilian ports combined have less loading capacity than the top U.S. port, New Orleans, and all Brazilian ports combined have considerably less loading capacity than the top two U.S. ports, New Orleans and Houston.
Building a more sustainable Brazil cannot be done on the coast; there simply is not enough land there to feed a growing nation. But climbing up the Grand Escarpment to develop the interior introduces a new problem.
The coastal ridge at the top of the Grand Escarpment also divides drainage basins. Within a few dozen kilometers of the southeastern coast, South American rivers flow west, not east, ultimately emptying into the Rio de la Plata network. As the early Brazilian cities attempted to develop interior hinterlands, those hinterlands found themselves more economically intertwined with Argentine and Paraguayan lands to the south than with their parent communities to the east. For many in the interior it was cheaper, easier and faster to float products down the rivers to the megaport of Buenos Aires than to lug them by land up and over the Brazilian coastal mountain ranges and down the Grand Escarpment to the middling disconnected ports of coastal Brazil. Similarly, it was far easier to sail down the Atlantic coast and up the Rio de la Plata Basin onto the Parana than expend the cost of building on-land infrastructure. Brazil's early efforts to develop integration within its own territories paradoxically led to an economic dependence upon its southern neighbors that weakened intra-Brazilian relationships.
Those southern neighbors took advantage of this situation, leaving Brazil struggling to control its own land. Unlike the U.S. independence experience, in which all of the colonies were part of the same administration and battled as one against their colonial overlord, South America was a patchwork of different entities, all of which fought for their independence in the same 15-year period. Paraguay achieved independence in 1811, Argentina in 1818 and Brazil in 1823. Immediately upon independence, the region's new states struggled for control of the waterways that held the key to being the dominant, integrated economic power of the Southern Cone. Since Brazil was the last of the region's states to break away from its former colonial master, it had the least time to consolidate in preparation for post-independence wars, and its enclave nature made such consolidation far more challenging than that of other Southern Cone states. Brazil accordingly did very badly in the ensuing conflicts.
Those early wars resulted in Uruguay's separation from Brazil and the removal of Brazilian authority to above the heads-of-navigation on all of the Rio de la Plata region's rivers. All of the rivers' navigable lengths were now shared between Argentina, Paraguay and Uruguay, leaving capital-poor Brazil sequestered in its highland semi-tropical territories. Argentina and Paraguay rose rapidly in economic and military might, while Brazil languished with little more than plantation agriculture for more than a century.
The next two generations of regional competition focused on Argentina and Paraguay, which struggled for control of the Rio de la Plata maritime system. That competition came to a head in the 1864-1870 War of the Triple Alliance in which Argentina, Brazil and Uruguay eventually won after a brutal struggle with Paraguay. Fully 90 percent of the male Paraguayan population died in the conflict, nearly destroying Paraguay as a country; its demography did not finally rebalance until the 1990s. With Brazil's wings clipped and its more serious regional rival all but destroyed, Argentina fashioned Paraguay and Uruguay into economic satellites, leveraging the region's river systems to become a global economic power. By 1929 it had the world's fourth-highest per capita GDP. Brazil, in contrast, remained impoverished and relatively isolated for decades.
Nor was Brazil united. Between the economic pull of Argentina and its rivers and the disconnected nature of the enclavic coast, regionalism became a major feature of Brazilian politics. Contact between the various pieces of Brazil was difficult, while contact with the outside world was relatively easy, making integration of all kinds — political, economic, and cultural — often elusive.
Regionalism remains a major issue in Brazilian politics, with strong rivalries triggering divisions among states and between states and the federal government. The preponderance of power at the beginning of the 20th century lay in the hands of the wealthier states, Minas Gerais and Sao Paulo. For many years, control of the central government alternated between the two states. This left Brazil's remaining states isolated politically, prodding them to seek economic opportunities globally while defining their identities locally. For the better part of a century, "Brazil" was less a national concept as much as it was a geographic concept. Rio de Janeiro and Rio Grande do Sul states, for example, in many ways started acting like independent countries. This state of affairs lasted until very recently.
Brazil's Inflation Trap
Brazil's biggest problem — which began with the colonial settlement process and continues to the current day — is that it is simply not capable of growth that is both sustained and stable. Economic growth anywhere in the world is inflationary: Demand for arable land, labor, transport, capital and resources pushes the prices of all of these inputs up. Growth in most places can continue until those inflationary pressures build and eventually overtake any potential benefit of that growth. At that point, growth collapses due to higher costs and a recession sets in. Brazil's burden to bear is that land, labor, transport infrastructure and capital exist in such extreme scarcity in Brazil that any economic growth almost instantly turns inflationary. Arable land, transport infrastructure and capital have already been discussed, but labor requires a more thorough examination, particularly given contemporary Brazil's population of 194 million.
The labor issue is rooted in Brazil's oligarchic economic system, something that also has a geographic origin. Brazil suffers from low capital generation and high capital costs — the opposite of most of the world's economic power centers. In those power centers, the relative omnipresence of capital allows a democratization of economic power.
In the American experience, anyone could easily venture out of the cities into the lands of the Greater Mississippi Basin and, within a year or two, be exporting agricultural produce to both American and European cities. In Brazil, by contrast, massive amounts of capital were needed simply to build roads up the Grand Escarpment. The prospect of a common citizen establishing an independent economic existence in that sort of environment was unrealistic, as the only people who had the capacity to "build" Brazil were those who entered the country with their own pre-existing fortunes. So while the early American experience — and the industrialization that followed — was defined by immigrants from Europe's rural poor seeking land, Brazil was started on its path by rich Portuguese settlers who brought a portion of their fortunes with them.
The American culture of small businesses long predates independence, whereas its Brazilian equivalent did not take root until the immigration waves of the late 19th century. As could be expected in a location where capital was rare but the needs for capital were high, these oligarchs saw no reason to share what infrastructure they built with anyone — not even with each other.
Complicating matters was that early Brazil did not have full access to that France-sized piece of arable land — most of it lay in the interior on the wrong side of the Grand Escarpment. The tropical climate drastically limited agricultural options. Until the mid-20th century, the only crops that could be grown en masse were plantation crops, first and most famously sugar, but in time coffee, citrus, bananas and tobacco. But unlike more traditional cereal crops that only require a few weeks of attention per year, such tropical crops are far more labor intensive in their planting, tending, harvesting and transport. Tobacco had to be cut and dried; sugar had to be cut, cooked and refined. Whereas a grain field can be quickly harvested and dumped into a truck, harvesting and transporting bananas, for example, takes much longer.
These characteristics impacted Brazil in two critical ways.
First, the capital required for these plantations was so great that smallholders of the American model were largely shut out. No smallholders meant no small towns that could form kernels of education and industrialization. Instead, plantations meant company towns where economic oligarchies gave birth to political oligarchies. In time, the political and economic power imbalance would provide the foundation for the Brazilian military governments of the 20th century. Even in modern times, Brazil's geography continues to favor oligarchic plantation farming to family farming. At present, 85 percent of farms in the United States — a country with a reputation for factory farming — are 500 acres or fewer, whereas 70 percent of Brazilian farms are 500 acres or more.
Time has not moderated this trend, but rather deepened it. In the latter half of the 20th century, Brazil launched a massive agricultural diversification effort that included the clearing of vast swaths of land in the interior, some of it in the cerrado and some as far inland as the Bolivian border. Among other agricultural products, some of these new lands were appropriate for corn and soybeans, crops normally quite amenable to farmers of a more modest capital base. But the cerrado requires massive inputs before agriculture can be attempted, and the interior lands are often in excess of 1,000 kilometers from Brazil's perennially overworked ports. The twin development and infrastructure costs wound up reinforcing the oligarchic nature of the Brazilian agricultural system to the point that the average "new" Brazilian farm is six times the size of the farms of "old" Brazil.
Second, plantation agriculture calls for unskilled labor, a pattern that continues into the modern day. Unlike the more advanced New World colonies — which enjoyed access to easier transport and thus more capital, yielding the kernels of urbanization, an educational system and labor differentiation — Brazil relied on slave labor. It was the last country in the Western Hemisphere to outlaw slavery, a step it took in 1888.
A lack of skilled labor means, among other things, a smaller middle class and lower internal consumption than other states at a similar level of development. Consequently, Brazil has a small number of landed elite and a large majority of poor. As of 2011, fully one in four Brazilians eke out a living in Brazil's infamous slums, the favelas. According to the Gini coefficient, a sociological measure of income inequality, Brazil has been the most unequal of the world's major states for decades.
"El éxito de Brasil es más sobre lo que Argentina ha hecho mal que lo que Brasil ha hecho bien."
The Geopolitics of Brazil: An Emergent Power's Struggle with Geography
Analysis
MAY 13, 2012 | 10:59 GMT
Text Size
STRATFOR
Analysis
Editor's Note: This is the 15th in a series of Stratfor monographs on the geopolitics of countries influential in world affairs.
South America is a geographically challenging land mass. The bulk of its territory is located in the equatorial zone, making nearly all of the northern two-thirds of its territory tropical. Jungle territory is the most difficult sort of biome to adapt for human economic activity. Clearing the land alone carries onerous costs. Soils are poor. Diseases run rampant. The climate is often too humid to allow grains to ripen. Even where rivers are navigable, often their banks are too muddy for construction, as with the Amazon.
As the tropics dominate South America, the continent's economic and political history has been problematic. Venezuela, Guyana, Suriname and French Guiana are fully within the tropical zone, and as such always have faced difficulties in achieving economic and political stability, though the discovery of oil in Venezuela improved that country's economic trajectory. Throughout the tropical zones nearly all of the population lives within a few dozen kilometers of the coast. For the most part, however, those coasts are not naturally sculpted to encourage interaction with the outside world. Natural ports — deepwater or otherwise — are few and far between.
There are, however, two geographic features on the continent that break this tropical monotony.
The first is the Andean mountain chain. The Andes run along the continent's western edge, giving rise to a handful of littoral and transmountain cultures physically separated from the continent's eastern bulk and thus largely left to develop according to their own devices. Colombia and Ecuador straddle the tropics and the Andes, with their economic cores not being coastal, but instead elevated in the somewhat cooler and dryer Andean valleys, which mitigates the difficulties of the tropics somewhat. Farther south are the arid transmountain states of Peru and Bolivia. Peru has achieved some degree of wealth by largely ignoring its own interior except when seeking resource extraction opportunities, instead concentrating its scant capital on the de facto city-state of Lima. In contrast, landlocked Bolivia is trapped in a perennial struggle between the poor highlanders of the Altiplano and the agriculturally rich region of the lowland Medialuna.
The combination of mountains and jungle greatly limits the degree to which states in this arc — from French Guiana in the northeast to Bolivia in the southwest — can integrate with each other or the outside world. In all cases, basic transport is extremely difficult; tropical diseases are often a serious issue; there are few good ports; agricultural development is both more labor and capital intensive compared to more traditional food-producing regions; humidity and heat hinder conventional grain production; and the ruggedness of the mountains raises the costs of everything.
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South America: Countries and ClimateFREE
Historically, the only way these states have achieved progress toward economic development is by accepting dependence on an external (and usually extraregional) power willing to provide investment capital. Without this, these states simply lack the capital generation capacity to meet their unique and staggering infrastructure challenges. Consequently, the broader region is severely underdeveloped, and the residents of most of these states are generally quite poor. While some may be able to achieve relative wealth under the right mix of circumstances, none has the ability to be a significant regional — much less global — power.
The second exception to the tropical dominance of South America is the temperate lands of the Southern Cone. Here, the summers are dry enough to allow traditional grains to ripen, while cooler weather — especially winter insect kills — limits the impact of disease outbreaks. Unlike the scattered populations of the Andean region, the Southern Cone is one large stretch of mostly flat, moderately watered territory. The bulk of that land lies in Argentina, with significantly smaller pieces in Uruguay, Paraguay and Brazil. The only remaining country on the continent is where the temperate Southern Cone overlaps with the Andean mountain zone: Chile, one of the world's most physically isolated states. It takes longer to fly from Santiago to Lima than it does to fly from London to Moscow, and longer to sail from Santiago to Buenos Aires than it does from New York City to London. Chile consequently does not participate significantly in the politics of the Southern Cone.
In stark contrast to the mountains and jungle that dominate the majority of South America, the Southern Cone flatlands are the best land on the continent. Their flatness, combined with their natural prairies, lowers the cost of construction, and the temperate climate makes them rich agricultural zones. But the real advantage lies in the region's river structure. The Parana, Uruguay and Paraguay rivers combined with the Rio de la Plata — a massive estuary that empties into the Atlantic between contemporary Buenos Aires and Montevideo — are all navigable for a great portion of their length.
Moving goods via water costs about 10 to 30 times less than moving the same goods by truck. Such riverine transport systems therefore generate massive amounts of capital with little difficulty compared to land-transport systems. Collectively, this river network overlaying the agricultural flatlands is known as the Rio de la Plata region.
These rivers are particularly valuable for agricultural regions such as the Rio de la Plata. Wheat, corn, soybeans and the like suffer from a weak value-to-bulk ratio — oftentimes transporting them great distances can only be done at an economic loss. Water transport allows for foodstuffs to cheaply and easily be brought not just downstream but to the ocean and then the wider world. Russia presents a strong contrast to the Rio de la Plata region. Its famines often directly result from the inability to bring foodstuffs to the cities efficiently because its navigable rivers are not well situated — meaning foodstuffs must be transported by truck or train.
The most important geographic fact on the continent is that the Rio de la Plata region's rivers are navigable both independently and collectively via a system of canals and locks. Only the Greater Mississippi River network of North America has more kilometers of interconnected maritime transport options. This interconnectivity allows greater economies of scale, greater volumes of capital generation and larger populations, and it greatly enhances the establishment of a single political authority. In contrast, the separate rivers of the North European Plain have given rise to multiple, often mutually hostile, nationalities. Argentina controls the mouth of the Rio de la Plata and the bulk of the navigable stretches of river. This leaves the Uruguayans, Paraguayans and Brazilians at a disadvantage within the region. (Brazilian power is greater overall than Argentine power, but not in the critical capital-generating geography of the Rio de la Plata region.)
The Brazilian Geography
Most of Brazil's territory does not lie within these Southern Cone lands. Instead, roughly one-third of Brazil's 8.5 million square kilometers is composed of vast tracts of challenging jungle, with the Amazon Basin being the most intractable of all. While there are many potential opportunities to exploit minerals, they come with daunting infrastructure costs.
South of the Amazon Basin lies a unique region known as the cerrado, a vast tropical savannah with extremely acidic soils. However, because the heat and humidity is far less intense than in the jungle, the cerrado can be made economically viable by brute force. The cost, however, is extreme. In addition to the massive infrastructure challenges — the cerrado lacks any navigable rivers — the land must in essence be terraformed for use: cleared, leveled and fertilized on an industrial scale to make it amenable to traditional crops. There is also the issue of distance. The cerrado is an inland region, so shipping any supplies to or produce from the region comes at a hefty transport cost. Brazil has spent the greater part of the past three generations engaged in precisely this sort of grand effort.
Luckily for the Brazilians, not all of Brazil's lands are so difficult. About 600,000 square kilometers of Brazil is considered traditionally arable. While this represents only 7 percent of the country's total land area, that still constitutes a piece of arable territory roughly the size of Texas or France. All of that land lies in the country's southern reaches. But much of that territory lies in the interior, where it is not easily accessible. Brazil's true core territories are less than one quarter of this 7 percent, about the size of Tunisia, straddling the area where the tropical zone gives way to the temperate lands of the Southern Cone. These areas formed the core of Brazil's original settlements in the early colonial period, and these lands formed the population core of Brazil for the first three centuries of its existence. As such, the topography of these lands has had an almost deterministic impact on Brazil's development. Understanding that topography and its legacy is central to understanding what is empowering Brazil to evolve — and hampering Brazil from evolving — into a major power in the years to come.
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South America: Rio de la Plata RegionFREE
Two obvious characteristics stand out regarding this core Brazilian region. First, it is semi-tropical, so development in the region faces a somewhat less intense version of the challenges described above for fully tropical zones. Second, and more critical, the Brazilian interior is a raised plateau — called the Brazilian Shield — which directly abuts Brazil's Atlantic coast along nearly the entirety of the country's southeastern perimeter. The drop from the shield to the Atlantic is quite steep, with most of the coast appearing as a wall when viewed from the ocean — the source of the dramatic backdrops of most Brazilian coastal cities. This wall is called the Grand Escarpment, and most Brazilian cities in this core region — Rio de Janeiro, Vitoria, Santos and Porto Alegre — are located on small, isolated pockets of relatively flat land where the escarpment falls to the sea.
The primary problem this enclave topography presents is achieving economies of scale. In normal development patterns, cities form around some sort of core economic asset, typically a river's head of navigation (the maximum inland point that a sizable cargo vessel can reach) or a port or nexus of other transport options. The city then spreads out, typically growing along the transport corridors, reflecting that access to those transport corridors provides greater economic opportunities and lower economic costs. So long as somewhat flat land remains available, the city can continue growing at low cost. In time, nearby cities often start merging into each other, allowing them to share labor, capital, infrastructure and services. Economies of scale proliferate and such megacities begin generating massive amounts of capital and skilled labor from the synergies.
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Coastal Urban AreasFREE
Megacities — such as New York City, Los Angeles, London, Paris, Tokyo, Buenos Aires, Istanbul and Shanghai — form the core of the global economic system. This "standard" development pattern has been repeated the world over. The premier American example is the "megalopolis" region of cities on the American Eastern Seaboard stretching from Washington to Boston, encompassing such major locations as Baltimore, Philadelphia, New York, Hartford and Providence. In Europe, a similar conglomeration contains the many cities of the German Rhine Valley. In both cases, major and minor cities alike merge into an urban/suburban conglomeration where the resources of each location are shared with and bolstered by the others. In all such cases, the common characteristic is the existence of land upon which to expand.
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Major Economic Centers By Total AreaFREE
That land is precisely what Brazil's core territory lacks. The Grand Escarpment comes right down to the ocean throughout the Brazilian southern coast. Brazil's cities, therefore, are forced to develop on small enclaves of relatively flat land in the few areas where the escarpment has not pushed all the way to the sea. The lack of a coastal plain means no small cities can form between the major cities. Any infrastructure built by one city never serves another city, and linking the cities requires climbing up the escarpment onto the shield itself, traversing the shield and then going back down the escarpment to the other cities, a difficult and costly endeavor in terms of both time and engineering. Because Brazil does not have direct access to the navigable rivers of the Rio de la Plata region, it has to scrounge for capital to apply to this capital-intensive project. Absolute limitations on land area also drive up the cost of that land, injecting strong inflation into the mix right at the beginning and raising development costs. Enclavic geography is not something that can be "grown out of" or "developed around." The topography is constant, and these cities simply cannot synergize each other — a modern, low capital-cost city cannot be built on the side of a cliff. Moreover, since these enclaves are Brazil's primary points of interaction with the outside world, they represent a constant, permanent restriction on Brazil's ability to grow.
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Major Brazilian InfrastructureFREE
To this day, Brazil has very few major highways and railways because even where the topography does allow for the possibility, the costs still are much higher than in flatter lands farther south. The country lacks a major coastal road system, as the escarpment is simply too steep and too close to the coast. Following the Brazilian coastline makes clear how Brazil's coastal roads are almost exclusively two-lane, and the coastal cities — while dramatic — are tiny and crammed into whatever pockets of land they can find. And most of the country is still without a rail network; much of that soy, corn and rice that the country has become famous for exporting reaches the country's ports by truck, the most expensive way to transport bulk goods.
The Grand Escarpment drops almost directly down to the coast in most portions of southern Brazil. This photograph vividly illustrates how the Grand Escarpment starkly limits Rio de Janeiro's development. Brazil's southern coastal cities have developed along similar patterns, lacking the traditional hinterlands of major cities elsewhere in the world.
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The one exception to the rule is Sao Paulo state, centered on the city of the same name. Only Sao Paulo has sufficient flat lands to follow a more standard development pattern and thus achieve any economies of scale. It is also the only portion of Brazil that possesses anything resembling the modern, integrated infrastructure that follows more traditional development patterns. Unsurprisingly, this single state accounts for more than one-third of Brazil's gross domestic product (GDP) despite only serving as home to one-fifth of the country's population. As recently as 1950, Sao Paulo state produced more than one-half Brazil's economic output.
Unfortunately, Sao Paulo is not a coastal city. The escarpment at Sao Paulo is too steep and the coastal enclave — the port of Santos — is too small to take full advantage of Sao Paulo's potential. Sao Paulo sits at an elevation of about 800 meters atop the Brazilian Shield, some 70 kilometers inland. (In comparison, the U.S. city at the Mississippi River's head of navigation, Minneapolis, Minn., sits at less than 200 meters elevation despite being 3,000 kilometers inland.) This sharp elevation change helps mitigate the climatic impact of the region's near-tropical conditions that predominate on the coast, but comes at the dauntingly high capital and engineering costs required to link the city and state to the coast. So while Sao Paulo is indeed a major economic center, it is not one deeply hardwired into Brazil's coastal cities or to the world at large.
The lack of economies of scale and the difficulty of integrating local infrastructure forces bottlenecks. The worst of those bottlenecks occur where the coastal enclaves interact with the outside world — in Brazil's ports — and it is here that Brazil faces the biggest limiting factor in achieving economic breakout. Brazil is correctly thought of as a major exporter of any number of raw commodities, but the hostility of its geography to shipping and the inability of its cities to integrate have curtailed port development drastically. The top seven Brazilian ports combined have less loading capacity than the top U.S. port, New Orleans, and all Brazilian ports combined have considerably less loading capacity than the top two U.S. ports, New Orleans and Houston.
Building a more sustainable Brazil cannot be done on the coast; there simply is not enough land there to feed a growing nation. But climbing up the Grand Escarpment to develop the interior introduces a new problem.
The coastal ridge at the top of the Grand Escarpment also divides drainage basins. Within a few dozen kilometers of the southeastern coast, South American rivers flow west, not east, ultimately emptying into the Rio de la Plata network. As the early Brazilian cities attempted to develop interior hinterlands, those hinterlands found themselves more economically intertwined with Argentine and Paraguayan lands to the south than with their parent communities to the east. For many in the interior it was cheaper, easier and faster to float products down the rivers to the megaport of Buenos Aires than to lug them by land up and over the Brazilian coastal mountain ranges and down the Grand Escarpment to the middling disconnected ports of coastal Brazil. Similarly, it was far easier to sail down the Atlantic coast and up the Rio de la Plata Basin onto the Parana than expend the cost of building on-land infrastructure. Brazil's early efforts to develop integration within its own territories paradoxically led to an economic dependence upon its southern neighbors that weakened intra-Brazilian relationships.
Those southern neighbors took advantage of this situation, leaving Brazil struggling to control its own land. Unlike the U.S. independence experience, in which all of the colonies were part of the same administration and battled as one against their colonial overlord, South America was a patchwork of different entities, all of which fought for their independence in the same 15-year period. Paraguay achieved independence in 1811, Argentina in 1818 and Brazil in 1823. Immediately upon independence, the region's new states struggled for control of the waterways that held the key to being the dominant, integrated economic power of the Southern Cone. Since Brazil was the last of the region's states to break away from its former colonial master, it had the least time to consolidate in preparation for post-independence wars, and its enclave nature made such consolidation far more challenging than that of other Southern Cone states. Brazil accordingly did very badly in the ensuing conflicts.
Those early wars resulted in Uruguay's separation from Brazil and the removal of Brazilian authority to above the heads-of-navigation on all of the Rio de la Plata region's rivers. All of the rivers' navigable lengths were now shared between Argentina, Paraguay and Uruguay, leaving capital-poor Brazil sequestered in its highland semi-tropical territories. Argentina and Paraguay rose rapidly in economic and military might, while Brazil languished with little more than plantation agriculture for more than a century.
The next two generations of regional competition focused on Argentina and Paraguay, which struggled for control of the Rio de la Plata maritime system. That competition came to a head in the 1864-1870 War of the Triple Alliance in which Argentina, Brazil and Uruguay eventually won after a brutal struggle with Paraguay. Fully 90 percent of the male Paraguayan population died in the conflict, nearly destroying Paraguay as a country; its demography did not finally rebalance until the 1990s. With Brazil's wings clipped and its more serious regional rival all but destroyed, Argentina fashioned Paraguay and Uruguay into economic satellites, leveraging the region's river systems to become a global economic power. By 1929 it had the world's fourth-highest per capita GDP. Brazil, in contrast, remained impoverished and relatively isolated for decades.
Nor was Brazil united. Between the economic pull of Argentina and its rivers and the disconnected nature of the enclavic coast, regionalism became a major feature of Brazilian politics. Contact between the various pieces of Brazil was difficult, while contact with the outside world was relatively easy, making integration of all kinds — political, economic, and cultural — often elusive.
Regionalism remains a major issue in Brazilian politics, with strong rivalries triggering divisions among states and between states and the federal government. The preponderance of power at the beginning of the 20th century lay in the hands of the wealthier states, Minas Gerais and Sao Paulo. For many years, control of the central government alternated between the two states. This left Brazil's remaining states isolated politically, prodding them to seek economic opportunities globally while defining their identities locally. For the better part of a century, "Brazil" was less a national concept as much as it was a geographic concept. Rio de Janeiro and Rio Grande do Sul states, for example, in many ways started acting like independent countries. This state of affairs lasted until very recently.
Brazil's Inflation Trap
Brazil's biggest problem — which began with the colonial settlement process and continues to the current day — is that it is simply not capable of growth that is both sustained and stable. Economic growth anywhere in the world is inflationary: Demand for arable land, labor, transport, capital and resources pushes the prices of all of these inputs up. Growth in most places can continue until those inflationary pressures build and eventually overtake any potential benefit of that growth. At that point, growth collapses due to higher costs and a recession sets in. Brazil's burden to bear is that land, labor, transport infrastructure and capital exist in such extreme scarcity in Brazil that any economic growth almost instantly turns inflationary. Arable land, transport infrastructure and capital have already been discussed, but labor requires a more thorough examination, particularly given contemporary Brazil's population of 194 million.
The labor issue is rooted in Brazil's oligarchic economic system, something that also has a geographic origin. Brazil suffers from low capital generation and high capital costs — the opposite of most of the world's economic power centers. In those power centers, the relative omnipresence of capital allows a democratization of economic power.
In the American experience, anyone could easily venture out of the cities into the lands of the Greater Mississippi Basin and, within a year or two, be exporting agricultural produce to both American and European cities. In Brazil, by contrast, massive amounts of capital were needed simply to build roads up the Grand Escarpment. The prospect of a common citizen establishing an independent economic existence in that sort of environment was unrealistic, as the only people who had the capacity to "build" Brazil were those who entered the country with their own pre-existing fortunes. So while the early American experience — and the industrialization that followed — was defined by immigrants from Europe's rural poor seeking land, Brazil was started on its path by rich Portuguese settlers who brought a portion of their fortunes with them.
The American culture of small businesses long predates independence, whereas its Brazilian equivalent did not take root until the immigration waves of the late 19th century. As could be expected in a location where capital was rare but the needs for capital were high, these oligarchs saw no reason to share what infrastructure they built with anyone — not even with each other.
Complicating matters was that early Brazil did not have full access to that France-sized piece of arable land — most of it lay in the interior on the wrong side of the Grand Escarpment. The tropical climate drastically limited agricultural options. Until the mid-20th century, the only crops that could be grown en masse were plantation crops, first and most famously sugar, but in time coffee, citrus, bananas and tobacco. But unlike more traditional cereal crops that only require a few weeks of attention per year, such tropical crops are far more labor intensive in their planting, tending, harvesting and transport. Tobacco had to be cut and dried; sugar had to be cut, cooked and refined. Whereas a grain field can be quickly harvested and dumped into a truck, harvesting and transporting bananas, for example, takes much longer.
These characteristics impacted Brazil in two critical ways.
First, the capital required for these plantations was so great that smallholders of the American model were largely shut out. No smallholders meant no small towns that could form kernels of education and industrialization. Instead, plantations meant company towns where economic oligarchies gave birth to political oligarchies. In time, the political and economic power imbalance would provide the foundation for the Brazilian military governments of the 20th century. Even in modern times, Brazil's geography continues to favor oligarchic plantation farming to family farming. At present, 85 percent of farms in the United States — a country with a reputation for factory farming — are 500 acres or fewer, whereas 70 percent of Brazilian farms are 500 acres or more.
Time has not moderated this trend, but rather deepened it. In the latter half of the 20th century, Brazil launched a massive agricultural diversification effort that included the clearing of vast swaths of land in the interior, some of it in the cerrado and some as far inland as the Bolivian border. Among other agricultural products, some of these new lands were appropriate for corn and soybeans, crops normally quite amenable to farmers of a more modest capital base. But the cerrado requires massive inputs before agriculture can be attempted, and the interior lands are often in excess of 1,000 kilometers from Brazil's perennially overworked ports. The twin development and infrastructure costs wound up reinforcing the oligarchic nature of the Brazilian agricultural system to the point that the average "new" Brazilian farm is six times the size of the farms of "old" Brazil.
Second, plantation agriculture calls for unskilled labor, a pattern that continues into the modern day. Unlike the more advanced New World colonies — which enjoyed access to easier transport and thus more capital, yielding the kernels of urbanization, an educational system and labor differentiation — Brazil relied on slave labor. It was the last country in the Western Hemisphere to outlaw slavery, a step it took in 1888.
A lack of skilled labor means, among other things, a smaller middle class and lower internal consumption than other states at a similar level of development. Consequently, Brazil has a small number of landed elite and a large majority of poor. As of 2011, fully one in four Brazilians eke out a living in Brazil's infamous slums, the favelas. According to the Gini coefficient, a sociological measure of income inequality, Brazil has been the most unequal of the world's major states for decades.
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