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Foreign Policy
Is Latin American Doomed to
Failure?
By Peter Hakim
This abstract is adapted from an article appearing in the Winter 1999-2000 issue of Foreign Policy magazine.
In Peru, an autocratic president has curbed the power of the congress and the courts and muffled the press. Voters in Venezuela last year elected the leader of a failed military coup d’état as president and now overwhelmingly support his campaign to radically transform the nation’s political institutions. Guerrillas in Colombia have free run of about half the country. Brazil was forced to devalue its currency in January 1999, provoking an open rift with Argentina and threatening the survival of MERCOSUR, Latin America’s most successful trade pact. In the region’s worst performance in more than a decade, nearly every major Latin American economy has fallen into a deep slump this year.
Throughout the early 1990s, expectations were high that Latin America had transcended its legacy of repressive military regimes, Cuban style revolutionaries, and boom-and-bust economies that had so badly hobbled the region for most of its history. Sustained economic growth, social progress, decent government, and genuine hemispheric partnerships all seemed within reach. Yet now, as the decade comes to a close, these expectations are far from fulfilled. Many people are asking whether they ever will be.
The global economic turmoil of the past two years has revealed the vulnerability of Latin America’s economies and cast into doubt whether the region can soon achieve rapid, long-term growth. True, Latin America’s dramatic economic restructuring and policy reforms have delivered sharply lower inflation, increased exports, and expanded access to international capital. But bottom-line results are still elusive. For the entire decade, 1990 to 1999, the region’s economies will have grown, on average, at a rate of less than 3 percent a year. That is better than the 1.9 percent growth of the 1980s, but is less than one half of Latin America’s 6 percent average in the 1960s and 1970s, and substantially below the 3.4 percent the World Bank estimates is necessary to reduce poverty. It is far short of what the region’s economic reforms were supposed to deliver.
At the same time, inequalities of income and wealth are worsening almost everywhere. Latin America suffers the worst income disparities of any region in the world (with sub-Saharan Africa running a close second).
But it is not only economic hardship that is undermining democracy’s credibility. Few of Latin America’s democratic goverments are managing to do a very good job of actually governing. A large share of Latin America’s population has little or no access to minimal government services. Only 1 of 3 Latin American children attends secondary school, compared with over 4 of 5 in Southeast Asia, and most drop out before graduating. On average, Latin American workers have two years less schooling than workers in identical jobs in other countries with similar income levels.
Compounding these problems, Latin America’s basic democratic institutions-judicial systems, legislatures, political parties, even the presidency-are weak and discredited in most countries. Sometimes, they barely work at all. By comparison, freedom of the press has been a bright spot, but the media still face sharp restrictions in a number of countries, including Argentina, Chile, Mexico, and Peru.
Nevertheless, debates over whether Latin America’s glass is half empty or half full miss the point. Latin America is neither going to leapfrog to full-fledged democracy and prosperity overnight, nor spiral into anarchy. The region is in trouble. But some countries will start to make slow and steady gains in the next decade.
Chile has set the standard. In the last 10 years, it has achieved steady growth averaging above 6 percent a year, a sharp and visible reduction in poverty (although not inequality), and continuing improvements in government services.
Argentina has made impressive economic and political advances since democratic rule was restored in 1983 and is now well situated-probably better than any other Latin American country-to accelerate its progress on both fronts.
Uruguay and Costa Rica, which along with Chile have the strongest democratic heritage in Latin America, will almost surely sustain the vitality of their democratic institutions and maintain the quality of their public services. The future of their economies is harder to predict. Historically, the economic performance of both countries has been uneven, and both are heavily dependent on their larger neighbors.
Mexico shows good prospects of significant economic success, particularly if the U.S. economy remains strong. The quality of its politics, however, will be hampered by its short experience with democracy, continuing deep political divisions, and extensive drug problems, criminal violence, and corruption.
Among the region’s smaller countries, El Salvador, Panama, and the Dominican Republic have demonstrated recent economic vitality. Brazil, which accounts for nearly one third of Latin America’s population and economic activity, will heavily influence the region’s overall economic performance in the coming years. It is the wild card.
Brazil’s growth throughout the 1990s has been sluggish and will average less than 2.5 percent a year for the decade. Nevertheless, the country succeeded far beyond anyone’s expectations in squeezing inflation out of its economy and quickly recuperating from its recent currency crisis.
Nowhere in Latin America today is democratic rule threatened by military takeover, as it has been through most of the region’s history. Moreover, governments across the region have resisted the populist temptations that have typically plunged Latin America’s economies into crisis. They are trying to maintain fiscal discipline by controlling spending and collecting more taxes. Nowhere is there any serious discussion of renationalizing privatized enterprises, reimposing high tariff barriers, or shutting the door on foreign investment. Even Venezuela’s President Chavez, who has denounced “savage market capitalism” and promised to redistribute his country’s wealth, has not strayed from market orthodoxy.
Is Latin America doomed to failure? Surely not. Even though Latin America has fallen short of expectations, most of the region will avoid outright disaster. Neither true military dictatorships nor populist economic strategies are likely to re-emerge, at least not any time soon. Most of the region’s political leaders and financial managers are betting on democratic politics and market economics, and struggling to make them work.
Two Hours with Hugo Chávez by Tomás Eloy Martínez
References
M. Delal Baer’s “Misreading Mexico” (Foreign Policy, Fall 1997)
Shahid Javed Burki and Guillermo Perry, eds., Beyond the Washington Consensus: Institutions Matter (Washington: World Bank, 1998.
Burki and Perry’s The Long March: A Reform Agenda for Latin America and the Caribbean in the Next Decade (Washington: World Bank, 1997)
John Cavanagh and Robin Broad’s “The Death of the Washington Consensus” (World Policy Journal, Fall 1999)
Amaury da Souza’s “Cardoso and the Struggle for Reform in Brazil” (Journal of Democracy, July 1999)
Jorge Domínguez “Latin America’s Crisis of Representation” (Foreign Affairs, January/February 1997)
Sebastian Edwards’ Crisis and Reform in Latin America: From Despair to Hope (New York: Oxford University Press, 1995)
Edwards and Moisés Naím, eds., Mexico 1994: Anatomy of an Emerging-Market Crash (Washington: Carnegie Endowment for International Peace, 1997)
Mark Falcoff’s “Argentina: An Electoral Turning Point” (Latin American Outlook, October 1999)
Inter-American Development Bank’s annual report on economic and social progress in Latin America for 1999-2000, entitled Facing Up to Inequality in Latin America
Inter-American Development Bank’s recent book, Too Close to Home: Domestic Violence in the Americas (Washington: IDB, 1999)
Inter-American Dialogue’s The Future at Stake (Washington: IAD, April 1998)
Inter-American Dialogue report’s Convergence and Community (Washington: IAD, 1993)
Steven Levitsky’s “Fujimori and Post-Party Politics in Peru” (Journal of Democracy, July 1999)
Abraham Lowenthal’s “Latin America: Ready for Partnership?” (Foreign Affairs, 1993)
Nora Lustig’s Mexico: The Remaking of an Economy, second edition (Washington: Brookings Institution Press, 1998)
Scott Mainwaring’s “The Surprising Resilience of Elected Governments” (Journal of Democracy, July 1999)
Ken Maxwell’s “The Two Brazils” (Wilson Quarterly, Winter 1999)
Michael Shifter’s “Tensions and Trade-Offs in Latin America” (Journal of Democracy, April 1997)
Shifter’s “Colombia on the Brink” (Foreign Affairs, July/August 1999)
John Williamson, ed., Latin American Adjustment: How much has happened? (Washington: Institute for International Economics, 1990)
The best cross-country surveys of public opinion in Latin America are presented in the annual publication, Latinobarómetro, published by PROMPERU.