In Summary
The history of the automotive industry in Brazil is more than just a technological or economic development; it reflects a broader quest by the Brazilian people for national modernisation, geopolitical positioning and economic autonomy.
The arrival of the Chinese car manufacturer BYD in Camaçari, Bahia, shows that the balance of power is shifting towards China, but Europe remains present for the time being and continues to invest in Latin America. Geopolitically, this is a strategic move.
At the same time, Ford’s withdrawal from the region for the second time in history clearly demonstrates that building geopolitical capital for Brazil as a middle power requires knowledge and understanding of local realities.
Latin America Regional Update | Over the course of a century, the Brazilian car industry has not only grown, but has also evolved in line with the state’s orientation and dependencies: first towards the US, later towards autonomy, then globalisation, and today in line with the emerging multipolar powers. Recently, the
Chinese electric car manufacturer BYD (short for ‘Build Your Dreams’) increased its investments in the former Ford factories in Camaçari, Bahia. In 2024, Brazil became BYD’s largest market after China. Instead of the Ford Fiesta, Dolphin Mini hatchbacks – an invention of Henry Ford, no less – now roll off the production line in Bahia. How does this symbolise the shifting world order, and what lessons can be learnt from this?
Rubber and Fordlândia
The origins of the Brazilian car industry lie with American companies, notably Ford and General Motors, which set up assembly plants in São Paulo in the 1920s and 1930s. This economic penetration fitted into the broader pattern of the growing American sphere of influence in Latin America – ‘the backyard’ – as enshrined in the ‘Monroe Doctrine’ and later the ‘Good Neighbour Policy’.
The Fordlândia project in the Amazon region and the state of Pará was a prime example of this: an attempt by Henry Ford to produce rubber independently of the European powers that controlled the raw materials. The struggle for raw materials – such as lithium for electric cars today – bears direct parallels with the current pursuit by foreign powers of strategic autonomy or strategic dependence through activity in resource-rich regions.
The colossal failure of the Fordlândia project – due to ecological, social and logistical problems – illustrated how economic control could be foreign in nature, yet local realities rarely lend themselves easily to industrialisation. A town built and opened in 1928 for 10,000 workers, who were admittedly recruited under relatively favourable working conditions, but were far from their families and subject to imposed American norms and values, including working days from 9 am to 5 pm (which are ill-suited to the Amazonian climate), American forms of entertainment, an American diet, and a ban on alcohol proved to be sources of social discontent that regularly led to uprisings.
After six years, the project was completely abandoned, and another project was launched elsewhere in the region, but to no avail. With the advent of synthetic rubber, the rubber factories in Pará were definitively phased out. Fordlândia was not an isolated, neo-colonial incident, but an early confrontation between imperialist capital and Brazilian territory.
From dreams of autonomy to the Washington Consensus
After the Second World War, a powerful movement towards economic autonomy emerged under presidents such as Getúlio Vargas and, later, Juscelino Kubitschek. With the slogan ‘fifty years of progress in five years’, Kubitschek gave multinationals such as Volkswagen, Fiat and GM the green light to set up factories, provided that components were produced locally. European car manufacturers therefore also entered the market. This policy was part of a broader trend amongst post-colonial states to pursue economic independence and to
reduce their reliance on imported goods. The Brazilian state acted as the driving force behind industrialisation, supported by the development philosophy of the United Nations and the ECLAC school (Comisión Económica para América Latina y el Caribe), which advocated import-substitution industrialisation. The car industry was seen as a benchmark for modernity.
The 1964 coup d’état and the ensuing military dictatorship were likewise characterised by a drive for development through industrialisation. It was in this context that the unique Gurgel project emerged: a Brazilian car manufacturer founded in 1969 and dedicated to producing vehicles of its own design. Gurgel’s BR-800 became the symbol of ‘autonomia nacional’, but the dream proved fragile.
The paradox of this period is striking: whilst the state spoke of national technology and modernisation, the structures remained largely dependent on foreign supplies, capital and licences. Gurgel received no structural state support, whilst multinationals did benefit from tax breaks – as is still the order of the day in today’s car industry.
The Brazilian dream once again came up against the geopolitical reality of economic dependence within a globalised production chain. This dependence only grew after the dictatorship, as Brazil, under pressure from debt crises, hyperinflation and IMF programmes, opened up its market within the broader framework of the Washington Consensus.
Towards a multipolar world order
With Brazil’s emergence as a BRICS nation in the 2000s, a renewed sense of self-confidence took hold. During the earlier terms of Presidents Lula da Silva and Dilma Rousseff, domestic consumption was stimulated, the middle class grew and there was renewed foreign interest – this time also from Asia. South Korean, Japanese and Chinese car manufacturers invested in new factories.
At the same time, a striking example is the Ford factory in Camaçari, Bahia, which opened in 2001 as part of a strategy to decentralise industrial development and extend it to the less prosperous north-east. The choice of Bahia was driven by economic, social and geopolitical motives: regional integration, social inclusion and the attraction of alternative global partners.
The factory was seen as a model of modernisation, but was eventually closed in 2021 – a painful reminder of the volatile nature of globalised production. Once again, Ford suffered heavy losses in Brazil. With the benefit of hindsight – in light of (constantly looming) import tariffs – they may well have left just in time. The vacuum is being filled by China.
It could hardly be more symbolic, then, that the Chinese car manufacturer BYD is investing in the former Ford factory in Camaçari after it had stood empty for around four years, with a promise to create 10,000 jobs. However, neither the Ford factories nor the BYD factory are or were free from controversy. Even when the contracts
between the state of Bahia and Ford were signed, it became clear that Ford was receiving enormous tax breaks (sometimes via subsidies), partly due to competition between various Brazilian states in a ‘race to the bottom’. There were fears that Ford was primarily involved for the subsidies, and that upon ceasing production it would shift its focus to other countries. When Ford closed its factories, it remained unclear exactly what had happened to the compensation payments made to the state of Bahia. BYD also receives tax breaks, such as a 95 per cent reduction on the ICMS tax, which applies, amongst other things, to the import of goods.
This raises questions about unfair competition, at best, and corruption, at worst. It is clear that the state of Bahia and Brazil as a whole will find it difficult to break away from this dependence, now that the path has been set for the labour market to be driven by foreign manufacturers. After all, there are no domestic alternatives. BYD recently made negative headlines due to suspicions of slavery-like conditions for workers of Chinese nationality. Are both (local) Brazilian authorities and the Chinese car manufacturer falling into the same traps as in the past?
Today, the Brazilian car industry finds itself once again in a transitional phase. Whilst the world is switching to electric mobility, Brazil is attempting to capitalise on its lead in the field of biofuels. Flex-fuel technology, which allows vehicles to run on both petrol and ethanol, is a Brazilian innovation that is unique worldwide. This technology reflects not only energy autonomy but also Brazil’s geopolitical potential as a bioenergy power. Yet the shift to electric vehicles is slow. Infrastructure, import costs and energy policy mean that electric vehicles are only slowly gaining market share.
Lessons for Europe and the Netherlands
Now that the ‘America First’ policy is taking on increasingly serious forms and proportions – including import tariffs – the idea is gaining ground that we must become more independent of the US. Just as Brazil has sought to attract foreign investment whilst maintaining its own economic autonomy, the EU must strike a balance between attracting foreign investment and protecting national economic interests where car manufacturing is concerned. This may mean imposing conditions on foreign companies to promote local production and employment. The shift from US to Asian investment in Brazil highlights the importance of diversifying economic partners. The risk for Brazil is becoming overly dependent on China.
The development of flex-fuel technology in Brazil highlights the importance of investing in innovative technologies that align with national strengths. Europe and the Netherlands can focus on developing technologies that support their own energy transition and climate targets. Furthermore, this shows that countries such as Brazil can also be of interest for knowledge exchange.
The ‘Brussels effect’ describes how the EU, through its strict regulations and standards, often sets de facto global standards. This may also apply to the automotive industry, where European emissions standards and electrification policy influence global trends. Although European manufacturers appear to be losing ground to Asian manufacturers, they are still investing heavily in the Brazilian market. Stellantis, headquartered in Hoofddorp, is a French-Italian-American multinational – with brands such as Citroën, Chrysler, Fiat and Peugeot – and is set to invest some 5.6 billion euros between 2025 and 2030.
The consortium is investing in both lithium in Argentina and ethanol in Brazil. Volkswagen, too, remains active in Brazil, whilst Ford has completely withdrawn from production there. A (positive) side effect of European presence could be that Brazil may find itself compelled to adapt its policies and technology to these global standards in order to remain competitive on the international market. Such effects should not be underestimated.
To remain relevant in Brazil, European car manufacturers will need to invest not only in technology but also in understanding — not as neo-colonial players, but as partners who take local realities, culture and dynamics genuinely seriously. Learning from Ford’s failure could lead to better long-term relationships. In this way, the car market can play a role in building geopolitical capital within a middle power that is important to the Netherlands and Europe in the new multipolar world order.