Tropical Capitalism: The Industrialization of Belo Horizonte, Brazil

Published by EH.NET (August 2002)

Marshall C. Eakin, Tropical Capitalism: The Industrialization of Belo

Horizonte, Brazil. New York: Palgrave, 2001. xvi + 269 pp. $55.00 (cloth),

ISBN: 0-312-22306-4.

Reviewed for EH.NET by Gail D. Triner, Department of History, Rutgers

University.

At the beginning of the twenty-first century, Belo Horizonte is the second

largest economic center of Brazil (second to S?o Paulo, and ahead of Rio de

Janeiro), and it is one of the fastest growing industrial regions in Latin

America. In 1897, when the city was inaugurated as the capital of the state of

Minas Gerais, it was barely more than a backwater village with an ambitious set

of plans. The transition was no accident; it required a century of concentrated

effort and resources, as Tropical Capitalism: The Industrialization of Belo

Horizonte, Brazil makes clear. According to Marshall Eakin’s business

history, a tiny group of local leaders commandeered state economic policy to

engineer this transition. State-owned enterprise and foreign multinationals led

the way with large-scale heavy industry. Local entrepreneurs simply went along

for the ride. Eakin identifies two findings in this book. The first is that the

extensive industrial base came about without accompanying social and political

change. Secondly, the regional economy did not develop self-sustaining local

technological innovation. Mineiros (people from the state of Minas Gerais)

continued to import technology long after their industrial base was in place.

These features are very different than scholars with knowledge of the

historical process in now-industrialized economies would expect. Could

industrialization among current third world economies be substantively

different from earlier successful efforts? This is one of the few case studies

that can help us to consider that question.

This book falls within the discipline of business history. Eakin, a professor

of history at Vanderbilt University, with long experience in Minas Gerais,

accurately describes his methodology and sources as “interdisciplinary and

eclectic” (p. 4.) For the most part, the methodology falls within the scope of

the social and political history of business and the personal histories of the

public figures who engineered the transition of Belo Horizonte. The book draws

upon a wide range of sources, and the author uses them resourcefully. The text

and footnotes direct the interested reader to the available macroeconomic

histories of industrial growth.

For most of Brazilian history, Minas Gerais seemed a remote province (then,

state). Landlocked and with rugged terrain, the province enjoyed a short-lived

burst of fame and wealth with the discovery of gold and precious stones in the

first half of the eighteenth century. However, by the nineteenth century,

mineiros were not core participants in the export economy, centered in Rio de

Janeiro and S?o Paulo. Nevertheless, the area maintained a robust, diverse

local economy and a strong national political presence. Shortly after the

introduction of the Brazilian Republic in 1889, state politicians converged on

a plan to move the capital from Ouro Preto — a remote colonial town that had

served as the administrative capital during the colonial mining boom — to Belo

Horizonte. The new location was more accessible geographically, and not

coincidentally, close to the hometowns of the prevailing political elite. The

emergence of a commercial and industrial center to rival the larger coastal

cities of Rio de Janeiro and S?o Paulo was central to the plans and hopes of

the original planners. However, for the first fifty years, progress was slow.

Concentrating on the region’s core industries of textiles, food processing,

iron and steel and electric power, Eakin traces the gradual consolidation of a

commercial community in Belo Horizonte and its close environs. At the beginning

of the twentieth century, new companies remained small; they relied on

traditional technologies and their owner/managers came from a small

inter-related (often by family) pool of the commercial and political elite.

Technologies remained simple and financing methods did not support capital

accumulation. As the author recognizes, this pattern paralleled the early

industrialization of many current first-world economies. Belo Horizonte was

different from the first industrializers in that self-sustaining growth, based

on local factors, did not develop.

Large-scale heavy industry became increasingly important from the 1940s. Eakin

finds that this change required marshalling public policy, at both the state

and federal levels, and the recruitment of non-Brazilian multinational firms.

Many of the companies ultimately became state-owned enterprises. Iron mining

and steel production were at the core of this transition. The cement and

construction industries took advantage of their business environment and

participated in building infrastructure in the Belo Horizonte area. To

accommodate the heavy demands from other industrialization, the electric power

industry grew; and, through the 1950s and early 1960s, the state of Minas

Gerais became both its owner and regulator. A growing public-sector technocracy

coordinated the ownership, management, engineering and construction

requirements, state and federal policies, and the entrance of multinationals

during these years. A development bank within the state (among other public and

private associations supporting local business) in addition to the active

federal development bank, generated an incremental layer of “state capitalism”

in Minas Gerais. In a sense, state technocrats became the entrepreneurial force

directing growth.

The result was the presence of heavy, infrastructural industry that created the

foundation supporting subsequent manufacturing. Mineiros benefited from this

foundation during (approximately) the last quarter of the twentieth century.

Industrial growth took off in the 1970s. Indisputably, Belo Horizonte had

become a locally dominant pole of industrial growth. Continuing development of

basic infrastructure in state-owned electricity and telecommunications

companies supported the introduction of new industrial firms. The 1973 arrival,

and subsequent expansion, of Fiat provided the strongest experience of state

government combining with a multinational firm to produce exceptional growth.

At least in the business realm, mineiros were not nationalistic; German,

Belgian, Italian, and Japanese firms were among those attracted by the market

opportunities, subsidies and supportive policies in Belo Horizonte.

Mineiros participated in the local management of multinationals and they

created a state-level bureaucracy that strategized further development and

managed the state-owned businesses. However, key individuals, drawn from a

close-knit and small pool, continued to provide industrial, commercial,

bureaucratic and political leadership, as they had in the nineteenth century.

These individuals moved fluidly between public and private sector and between

professional activities during their careers. Traditional family-oriented

business groups teamed with new actors, foreign multinationals, to advance

their mutual interests. Industry in Belo Horizonte developed successfully

without the concomitant broadening of social structure.

As something of an epilogue, Eakin suggests that the recent tide of

privatizations of important Belo Horizonte firms, such as iron mining, electric

and telecommunications firms — again, with important participation of

multinationals — will consolidate the presence of foreign technology and

capital, while diminishing the role of the state as entrepreneur. Extrapolating

the future from the present is always courageous.

Like all good scholarship that addresses useful questions, the findings of this

book raise even more interesting avenues for research.

Foreign multinationals played a central role in this story. They arrived in

Belo Horizonte at crucial times and received important support in the forms of

equity partnerships, land subsidies, supply and pricing preferences. Rather

than relying on ideas from dependency theory, this interpretation follows

Gershenkronian logic. Multinationals introduced incremental capital, technology

and management resources into the region. Local economic agents invoked the

state and outsiders to induce an advanced industrialization process that did

not occur indigenously. In this effort, Eakin asserts that foreign

multinationals introduced their own technologies into their Belo Horizonte

plants, without change or adaptation to local circumstances. Without expanding

and changing the book substantially to explore the actual production processes

in these plants, we need to accept the author’s word on this important point.

By focusing on political/business elites and multinationals, Eakin identifies

the sources motoring industrial growth. Especially when considering the

regional effects of Fiat’s presence in Belo Horizonte, he recognizes the

opportunity created for local supplying and supporting business and the service

sector. However, one cannot help but wonder if the exceptional effects of a few

companies might have overshadowed dynamic, innovative and prosperous — if less

spectacular — activities by smaller-scale local entrepreneurs. A parallel

study of regional small businesses and their owners could be an interesting

supplement to this study.

Eakin does not position his findings as only a specific case study. Throughout

the book, he insists that, even if the extent of Belo Horizonte’s experience

was exceptional, its nature has been replicated elsewhere throughout Brazil and

Latin America. Historians have begun to expand their attention from the

“megacephalic pattern” (p. 167) of highly concentrated urban growth to

understand important “secondary” cities. Eakin extends this scholarship to

understand how the local business community engineered the emergence of one of

the most important secondary cities of Latin America. Doing so demonstrates the

desirability of additional regional studies (or at least of making regional

studies accessible to an international readership.) Additionally, this regional

study also begs the serious question of the integration of multiple centers of

industrialization into a national whole. Belo Horizonte’s history demonstrates

the multiple tensions of the local competing with, supporting, and providing a

model for national ambitions in various circumstances.

In the final analysis, Eakin characterizes the industrialization of Belo

Horizonte as successful but “flawed” (p. 178) because it did not generate

widespread local social development. He also aptly demonstrates that the

successful recent privatization of state-owned companies rests upon the prior

decades of dynamic “state capitalism.” This finding raises an interesting

question about the underpinnings of current “neo-liberal globalization:” Could

current participants in market capitalism be realizing the benefits of earlier

state-directed economic development?

Economic historians who regret this book’s lack of traditional cliometric

methods for analyzing output, productivity and finance will miss important

insights that re-animate the study of industrialization in innovative

directions.

Gail D. Triner is Associate Professor of History at Rutgers University. Her

publications include Banking and Economic Development: Brazil 1889-1930

(Palgrave Press, 2000).