THE BRAZILIAN DISTRIBUTIVE CONFLICT IN THE EARLY 21ST CENTURY AND THE ROLE OF THE FOREIGN SECTOR

Abstract

The first two decades of the 21st century in Brazil were characterized by an increase in the wage share, which was largely associated with the higher workers’ bargaining power that resulted from institutional changes and lower unemployment. We show that the foreign sector also played a key role in this process and explore how its effects on the domestic income distribution changed over the years. We highlight the importance of the industry and, in particular, the manufacturing sector to the higher wage share. At the beginning of the period the depreciated domestic currency did not compromise the profit share due to the low bargaining power of workers, while during the years of appreciated domestic currency the distributive conflict was attenuated. Yet, the currency depreciation after 2011 occurred in an economic structure more dependent on imports and with high workers’ bargaining power, thus pressuring downwards profit margins.