Saturday, August 23, 2014
22

Latin America’s Unfinished Quest

SANTIAGO – The participants came, European guests were greeted, speeches were delivered, toasts made, and, in the end, the annual meeting of the Community of Latin American and Caribbean States (CELAC) was hailed as a success. But what remained the morning after was the clear sense of a region that is deeply divided, missing a common purpose, and, above all, lacking leadership.

First, the good news: the four main countries on the Pacific Rim – Mexico, Colombia, Peru and Chile – took important steps to deepen their trade-and-integration agreement. By the end of this year, 90% of all trade within the bloc will be tariff-free. Costa Rica asked to join, and Japan was accepted as an observer. This Pacific Alliance, with nearly 40% of Latin American GDP and $500 billion in annual exports, has the potential to become a driving force for economic growth in the region.

Venezuelan President Hugo Chávez’s health kept him from attending, but the heads of state who follow his lead were out in force, and collectively blocked a European request to include in the final statement a guarantee that investment rules will not be changed arbitrarily. Bolivian President Evo Morales used the forum to criticize Chile and reiterate his country’s territorial claims. When, at the end, Cuban President Raúl Castro took over the rotating presidency of CELAC, an institution presumably devoted to extending democracy’s range, not even the most seasoned diplomats could suppress an ironic grin.

CELAC, which pointedly excludes the United States and Canada, was launched in 2010 so that countries in Latin America and the Caribbean could shape their own path toward democratic politics and shared prosperity. They have not.

To be sure, most countries in the region remain nominally democratic. But political freedom is nonexistent in Cuba, and democratic rule is under permanent challenge in Venezuela and elsewhere.

True, most economies in the region have grown since the crisis, profiting from an international environment characterized by sky-high commodity prices and rock-bottom interest rates. But, given limited competitiveness and little business capacity to innovate, no one knows what will happen to growth in Latin America if and when commodity prices return to Earth.

Likewise, some measures of inequality have declined recently in a handful of countries. But the region remains the most unequal on the planet, and poorly functioning schools and labor markets suggest that it will retain that dubious honor for the foreseeable future.

Ask Latin American and Caribbean leaders how they plan to cope with these challenges, and you get a cacophony of answers – not all of them coherent. The roots of the problem are in the 1980’s and 1990’s. Back then, governments in several Latin American countries launched radical attempts to deregulate their economies and open them to international trade and capital flows.

Some liberalizing reform was long overdue in those countries. But privatizing without strengthening pro-competition policies often led to the creation of private monopolies that charged high prices for mediocre goods and services. Similarly, permitting massive capital inflows before properly regulating the domestic banking system caused lending booms and massive financial crises. The social and economic costs of those strategic missteps were huge.

A backlash was inevitable. Indeed, populism, so familiar from the region’s history, made a roaring comeback in Argentina, Bolivia, Ecuador, Venezuela, and elsewhere. The rhetoric has been 1960’s-style and crudely anti-capitalist, and the policies have been erratic and often arbitrary. And, despite the windfall provided by the global commodity boom of the past decade, the results leave a great deal to be desired.

In Venezuela, per capita income today is lower than it was three decades ago. In Argentina, the government addressed persistent inflation of 20% or more by cooking the price data.

Of course, the countries that have performed better are those that have steered clear of both right-wing zealotry and left-wing populism. Brazil under President Fernando Henrique Cardoso and President Luiz Inácio Lula da Silva comes to mind, along with Chile under the Concertación governments. In those cases, market incentives for investment and growth were combined with ambitious social policies. Incomes expanded and poverty fell, while a broad range of human-development indicators improved.

Brazil and Chile do not have all the answers: both countries remain highly unequal and their educational systems are mediocre, to mention just two entrenched problems. But they do seem to have found more answers, more effectively, than countries pursuing alternative approaches. So, why haven’t Brazil and Chile become modern, center-left development models for the region?

In Chile, the Concertación was an ineffectual advocate for its own achievements, because many older, more traditional Concertación leaders never quite approved of the moderate policies that the coalition was putting into place. Brazil, a much larger country, was the natural candidate for political and ideological leadership in the region. But, unwilling to confront Chávez and too eager to be everyone’s best friend, Brazil forsook that role.

Imagine a future meeting of CELAC in which that body’s presidency is handed over to a modern, progressive leader who can put forward a compelling agenda of personal freedom, economic growth, and social inclusion. Imagine a meeting at which claims to defend democracy were something more than a cruel joke. Is that too much to ask? An entire generation of Latin Americans hopes that it is not.

Hide Comments Hide Comments Read Comments (22)

Please login or register to post a comment

  1. CommentedGustavo Lopes

    "Brazil under President Fernando Henrique Cardoso and President Luiz Inácio Lula da Silva comes to mind, [...]. In those cases, market incentives for investment and growth were combined with ambitious social policies." What "ambitious social policies" did take place in Mr. Cardoso's Government? On the contrary, shortage of social policies was one reason for poor economic performance in those years.

  2. CommentedGustavo Lopes

    "most economies in the region have grown since the crisis, profiting from an international environment characterized by sky-high commodity prices and rock-bottom interest rates." And by Government spending and income distribution as well.

  3. CommentedGustavo Lopes

    "democratic rule is under permanent challenge in Venezuela and elsewhere." Is this an educated assess or just common sense?

  4. CommentedJuan Andres Marambio

    El autor, candidato a la Presidencia de Chile, debe estar ansioso de que le aprueben, le comenten, le celebren su artículo. Que se "viralice" por todos los canales posibles. Sin embargo a dos días de publicado no son muchos los tweets (65) y tampoco los que lo han compartido en Facebook (186). Qué decepción no? Qué "liderazgo"!

  5. CommentedJuan Andres Marambio

    Que desinformado, pesimista y destructivo comienzo!

    Pronto habrá un concurso de "leadership" en Chile. Velasco está entre las candidatas.

  6. CommentedJuan Andres Marambio

    Debieran haberle dejado espacio para que líderes jóvenes, como Velasco por ejemplo, defendieran el modelo de Chile ante... Chávez.

  7. CommentedJuan Andres Marambio

    Están más pobres que antes en Venezuela? Qué gente no? Y siguen eligiendo a Chávez... Por qué será?

    Ah, y en Argentina son unos corruptos...!

    Nada dice que en Chile cocinamos los datos de la pobreza.

      Commentedjuan carlos

      les dieron migas de pan, con eso convencen a cualquier persona que antes no tenía nada y por eso siguen votando a chavez. la verdad es que de ahí no va a pasar el país, va en declive, una economía mal gestionada, una corrupción imparable. un pozo sin fondo.

  8. CommentedJuan Andres Marambio

    En Chile lo privatizaron todo, primero en dictadura y luego durante los años de la Concertación... "Strategic missteps"!

  9. CommentedChristian Molinari

    All very valid points; however the fact that Mr Velasco is a presidential hopeful in Chile is mentioned neither in the article nor in his profile. Is there some hidden agenda in this piece?
    http://www.andresvelasco.cl/web/

  10. CommentedFrank O'Callaghan

    Recognize that Brazil is the success story. A reduction of inequality/poverty was the key. The "Lula miracle" can be replicated by reducing inequality and lifting the economic conditions of and for the poor.

    The gap between "the rich and the rest" in Latin America is very large but removing it provides a great opportunity for reduction of misery and boosting growth.

Featured