ENERGY REVOLUTION: IDEAS, POLICY ENTREPRENEURS, AND INSTITUTIONAL CHANGE IN BRAZIL FOLLOWING THE 1973 OIL CRISIS by Liliana Paola Diaz Barrrera A dissertation submitted to Johns Hopkins University in conformity with the requirements for the degree of Doctor of Philosophy Baltimore, Maryland May, 2018 © Liliana Diaz 2018 All Rights Reserved ABSTRACT This research focuses on the role of ideas in policymaking. It examines the Brazilian energy policy response to the 1973 oil crisis. Today, Brazil is the 10th largest energy producer in the world with a diversified and clean energy matrix. In the early 1970s, it was an energy poorcountry highly dependent on imported oil supplies to fuel an aggressive industrialization process. How did Brazil manage to transform its energy profile? To answer this question, I argue that it is necessary to study the policymaking process that led to the adoption of energy diversification policies in 1974-75. Structural, exogenous, institutional, and ideational factors affected the policymaking process and thus the resulting policies. Although structural and exogenous factors played important catalyst and enabling roles, I argued that four old Developmentalist ideas, namely, 1) national development through industrialization; 2) energy as a growing point for the economy; 3) self-sufficiency; and 4) technological autonomy recombined by able policy entrepreneurs who acted through centralized institutions and through the creation of new institutions explain the policy course adopted by Brazil in the energy sector. The result was revolutionary or transformational change in the Brazilian energy sector. The research contributes to explaining the role and impact of ideas in effecting institutional change in a less developed and authoritarian setting and in doing so, fills a knowledge gap in the academic literature on Brazil with respect to its energy sector. It also sheds light on the outcome of state intervention in this sector during the 1974-1979 period and contributes to the Developmental state literature. ii DEDICATION This thesis work is dedicated to my parents, who sadly no longer accompany me. This accomplishment is as much theirs as it is mine. From my father I learned that perseverance and hard work achieve a great deal. My mother taught me to dream big, fly high, and spread my wings. iii ACKNOWLEDGEMENTS Undertaking this PhD has been a truly life-changing experience and it would not have been possible to pursue it without the support and guidance that I received from many people. Firstly, I would like to express my sincere gratitude to my advisor and professor Dr. Riordan Roett for his continuous support of my PhD study. If I have done something correctly in this journey is to have you as my advisor and to have chosen a topic I am extremely passionate about. Thank you so much for your support and patience. I am deeply indebted to my professor –and ad-hoc advisor- Dr. Francisco González. During the past 11 years, Dr. Gonzalez has been a tremendous mentor. I would like to thank him for encouraging my research, coming to my rescue in times of need and self-doubt, and finally, for giving me an opportunity to share my research with the students and learn the art of teaching. I would also like to thank Dr. Robert Devlin, Dr. Matthias Matthijs and Dr. Leandro Alves for serving on my committee. Over the past five and half years, I have received support and encouragement from a great number of individuals at SAIS. I am greatly indebted to the Latin American Studies program and its staff. I would also like also to extend thanks to the many people in Brazil who generously contributed to the work presented in this thesis. A special thanks to my family. My gratitude goes to my siblings who not only encouraged me, but at times helped fund this project. I would not be where I am today without the love and support of my children Mateo and Sofia- I love you. Words cannot express how grateful I am to my husband, Nano, for being the rock that supports me and the engine that pushes me to excel. iv CONTENTS ABSTRACT ............................................................................................................ ii DEDICATION ....................................................................................................... iii ACKNOWLEDGEMENTS ................................................................................... iv LIST OF FIGURES .................................................................................................x CHAPTER 1: ANALYTICAL FRAMEWORK .....................................................1 The Puzzle ................................................................................................................1 The Argument ..........................................................................................................4 Theoretical Underpinnings.......................................................................................5 The Explanatory Power of Ideas ..................................................................5 Old Ideas and Revolutionary Change ........................................................11 Ideas Travelling Through Institutions ........................................................14 Important Institutional Arrangements Favoring Industrialization .............16 The Brazilian Developmental State ...........................................................21 Brazil Focused Literature ...........................................................................23 The Analytical Model ............................................................................................27 Independent Variable: Ideational factor.....................................................28 Control Variables: Institutional, Exogenous and Structural factors ..........33 Alternative Explanations ........................................................................................38 Economic Interest Groups/ Class Alliances ...............................................38 Rational Choice (Political Survival) ..........................................................40 Autonomous Technocracy .........................................................................41 Contribution to the Literature ................................................................................43 v Research Design and Methodology .......................................................................44 Approach and Design .................................................................................44 Methods......................................................................................................46 Chapter Outline ..........................................................................................48 CHAPTER 2: THE CONTEXT .............................................................................51 The First Oil Shock and Its Impact on Global Energy Markets ............................51 The Geopolitics of the 1973 Oil Shock......................................................52 The Impact of the Crisis .............................................................................54 The Politics of the Geisel Presidency ....................................................................58 Theoretical underpinnings of decompression ............................................59 Geisel’s Political Project ............................................................................60 Evolution of Geisel’s Goals during His Presidency ..................................64 An Economic Strategy in Times of Crises .............................................................72 Assessment of the II PND ..........................................................................77 Conclusion .............................................................................................................78 CHAPTER 3: BRAZILIAN MILITARY THOUGHT ..........................................80 The Military and the End of the Empire ................................................................81 The Military at the Dawn of the 20th Century and After WW I .............................83 Argentina- The Foreign Threat ..................................................................85 Military Academy Education and Positivist Ideas .....................................87 The Tenentes Movement........................................................................................89 The 1930 Revolution..............................................................................................92 vi Getúlio Vargas, Positivism and the Estado Novo ..................................................93 The ESG and a new national security doctrine ......................................................96 Conclusion ...........................................................................................................104 CHAPTER 4: DEVELOPMENTALIST THOUGHT AND ITS INSTITUTIONAL CONSOLIDATION IN THE ENERGY SECTOR .............................................105 Developmentalist Thought (1930-1985) ..............................................................107 Developmentalism Originates with Simonsen in the Private Sector .......108 The Developmentalist Nationalists ..........................................................109 The Cosmopolitan Developmentalists .....................................................115 Consolidation of Developmentalist Thought: The building of an institutional apparatus and its incidence in energy policy .................................................122