The institutional complementarities of that marked Brazil’s political economy between 1985 and 2018 period were placed under considerable strain by the recession, fiscal crisis, corruption investigations, and political upheaval that culminated in the 2018 election of Jair Bolsonaro. An open question was whether the multiple and overlapping crises of the 2010s would destabilize the institutional equilibrium that had prevailed over the previous generation. To evaluate this question, this chapter summarizes the contributions of this manuscript to our understanding of Brazil’s political economy under democracy. It then describes how past reform efforts failed to move the political economy away from the status quo equilibrium, and the ways in which institutional complementarities shaped the pace and scope of change. It concludes with an evaluation of the “stress test” posed by the Bolsonaro administration, pointing to the importance of changes in the political realm for resolving Brazil’s long-term economic developmental challenge.

Between 1985 and 2018, Brazilian economic well-being stagnated, with lackluster growth and regressive public policies destroying citizens’ life opportunities. There is considerable consensus about the sources of this low-level economic equilibrium, including low savings, low investment, and modest human capital improvements. Despite this consensus, and despite decades of reform, however, the overall institutional equilibrium changed only marginally. Drawing on the study of varieties of capitalism, this chapter describes how institutional complementarities drove actors’ incentives toward a collectively suboptimal equilibrium. Complementarities within and across five domains sustained the equilibrium: 1) the macroeconomy of a middle-income developmental state, 2) the microeconomy of firm organization; 3) the coalitional presidential political system; 4) the weak control mechanisms this political system set in place; and 5) an autonomous bureaucracy that permitted incremental reform but in consequence, may have moderated demands for more dramatic reforms while deepening fiscal constraints and impelling policymakers to preserve the tool kit of the developmental state.