Despite the calm, Chile’s presidential election Sunday was one of the transformative political moments in Latin America in recent years. This transformation did not entail street demonstrations, a new constitution or the introduction of 21st-century socialism–yet it was no less radical. Chile has transitioned toward a more pluralistic democracy and away from two decades of electoral dominance by the Concertación–a coalition of mostly Socialists, Radicals and Christian Democrats forged in opposition to the Pinochet military government (1973-1989).
Right-leaning Alianza candidate Sebastián Piñera won the first-round December vote, outpacing Concertación candidate Eduardo Frei by nearly 15 percentage points. Sunday, by a closer margin, Piñera pulled another victory, making him the first elected conservative Chilean leader in several decades.
This was not an election driven by issues or ideology: Both candidates promised to continue Chile’s market-friendly macroeconomic policies and its popular social welfare programs. Instead it was driven by personal stories. Piñera presented himself as an entrepreneur who would foster greater innovation and competitiveness; Frei as a wise, experienced former president (he led the country from 1994 to 2000).
Piñera’s victory suggests a new era for Chile’s politics. It signifies that the right has finally emerged from the shadow of Pinochet’s military dictatorship to become a viable electoral alternative once more, able to lead an open and dynamic country without a fear of backsliding into the past. It is the end of the pro/anti Pinochet political divide–the guiding cleavage of Chile’s politics since the 1970s.
The Concertación’s loss is also in some ways the result of its successes. While many talk of the economic growth and stability brought by Pinochet’s reforms, it is the policies and actions of the governing Concertación coalition that have truly transformed Chile into a modern state. These successive governments–through sound macroeconomic management combined with the creation of a broad social safety net–succeeded in reducing Chile’s poverty rate from nearly 40% in 1990 to just under 14% today (nearly equivalent to U.S. rates). Chile’s now much larger middle class is more politically independent, and Piñera openly wooed this cohort–ultimately successfully.
While highlighting the diminishing role of Chile’s old political fracture, this election also highlighted a new divide–that between the old and the young. While Frei and Piñera came firmly from the old guard, the spectacular rise of Marco Enriquez-Ominami, a 36-year-old filmmaker and former congressman with the Socialist party, upended politics as usual. He became the most successful independent candidate in Chilean history, winning 20% of the first round votes. His strength lay in an emerging middle class focused on the future and open to political change. Whether we see an Enriquez-Ominami candidacy again in four years, this will surely be the last election where the leading candidates’ formative years occurred under the Pinochet regime.
But Chile’s future political challenge will be how to engage its younger generations. Unlike their parents, seared by the turmoil of the 1970s and 1980s, Chile’s youth is politically apathetic. Less than 10% of 18- to 29-year-olds are even registered to vote. Many older citizens are also disillusioned. Polls show that 60% of the population believes that none of the candidates–or their parties–represent their ideas well. As the leftist Concertación tries to recreate a winning strategy and the right Alianza looks to deepen its victory, opening up the political system is vital. Chileans are demanding new approaches and more diversity. This election shows us that after decades of dominance by first the right and then the left, Chile’s politics are now up for grabs.
This op-ed first appeared on Forbes.com
In May 2009 I participated in a workshop entitled “American Foreign Policy: Regional Perspectives” sponsored by the William B. Ruger Chair of National Security Economics at the Naval War College in Newport, Rhode Island. With a new administration in office, the meeting aimed to formulate and recommend new directions for American policy for each of the major regions of the world. The monograph from the meeting was released today and is available online at: http://www.usnwc.edu/academics/courses/nsdm/documents/Ruger09_WEB.pdf
Along with my own views on U.S.-Latin America relations, you can find writings from Peter Hakim, President of the Inter-American Dialogue, and Amb. Paul D. Taylor, Senior Strategic Researcher at the Naval War College. Assuming Arturo Valenzuela will in fact be confirmed now that Congress is back in session, he will be soon facing the many issues we discussed – public security, sustainable energy, economic advancement, and hemispheric migration among others.
What are the 6 books you find most useful in thinking about Mexican politics? Foreign Affairs asked me for my list. I’d be interested in yours…
Mexico’s rise on the American foreign policy agenda should not come as a surprise. Over the last generation, deepening business, personal, cultural, and community relations have drawn the two countries closer together. Trade between them has tripled, with Mexico becoming the United States’ third-largest commercial partner. Flows of people, always part of the bilateral relationship, skyrocketed: over four million Mexican citizens have headed north in the last decade, while over a million U.S. citizens have migrated south, forming the largest nonmilitary community of American expatriates in the world. At the start of the twenty-first century, Mexico is still forging its political, economic, and social identity. It has undergone a true democratic transformation, and its three political parties now compete in clean and transparent elections. But it remains unclear whether Mexico will follow a path of growth, stability, and market-based democracy or one of instability, corruption, and crime. What is certain is that understanding Mexico — where it came from, how it got there, and where it might be headed — is vital to U.S. interests.
Politics in Mexico: The Democratic Consolidation. By Roderic Ai Camp. Oxford University Press, 2006.
In this book, now in its fifth edition, Roderic Ai Camp, one of the preeminent scholars of Mexican politics, deftly guides readers through more than 200 years of political evolution in Mexico, analyzing the events and concerns that created the Mexican state one sees today and exploring both the continuities and changes in that state’s relationship with societal organizations and interests. Camp focuses on Mexico’s extended transition to democracy, including reforms to the electoral process, the expansion of political participation, and the subsequent shifts in power among the various branches of government. Those interested in delving deeper can consult Camp’s specialized works on many of the themes presented, such as the recruitment of political leadership and popular political attitudes. But Politics in Mexico, drawing on decades of experience and innovative research, provides a comprehensive overview of the main issues and forces affecting the country today.
Mexico: Biography of Power. By Enrique Krauze. HarperCollins, 1997.
This exhaustive history, written by one of Mexico’s best-known intellectuals, chronicles nearly two centuries of Mexican politics, from independence to the early 1990s. After identifying major themes underlying the country’s political and social identity — its colonial legacy, its mestizo population, and the early power of the church — Enrique Krauze turns to a leader-driven historical narrative, examining the lives of Mexico’s various strongmen and presidents, who, from the battlefield to the executive office, shaped Mexico’s political development. This personalized dynamic has faded with democratization, but the memory and vestiges of it remain relevant in Mexican politics today.
Opening Mexico: The Making of a Democracy. By Julia Preston and Sam Dillon. Macmillan, 2005.
Written by Julia Preston and Sam Dillon, the New York Times correspondents covering Mexico in the late 1990s, this readable narrative provides a thoughtful analysis of the country’s democratic opening. Spanning the period from the devastating 1985 earthquake in Mexico City to the 2000 presidential elections, the authors investigate the economic changes, security threats, and political intrigue crucial to understanding the shifts that occurred in Mexican politics. The book explores the many pressures on the old one-party PRI (Institutional Revolutionary Party) system, the individuals and organizations that pushed for change, and the events leading up to democracy’s final breakthrough: the election of the opposition PAN (National Action Party) presidential candidate Vicente Fox.
First Stop in the New World: Mexico City, the Capital of the Twenty-First Century. By David Lida. Riverhead, 2008.
Spanning 570 square miles and home to more than 20 million people, Mexico City is the largest metropolis in the Western Hemisphere. Even as federalism has decentralized power to Mexico’s states, the capital remains the political, cultural, and economic center of the nation. In this journalistic account, David Lida offers many telling vignettes that capture politics, culture, and life in el D.F., the federal district. He lays out the intricacies of Mexico’s economic inequalities, its sex and age discrimination, its traffic jams, and its deep-seated corruption. But he also illuminates the thriving high- and low-brow art scenes, from well-respected galleries and theaters to lucha libre (Mexico’s version of professional wrestling). Lida explores the country’s cabarets, cantinas, and street food, as well as the coexistence of traditional markets and Wal-Marts that make the city — and Mexico — what it is now.
The United States and Mexico: Between Partnership and Conflict. By Jorge I. Domínguez and Rafael Fernández de Castro. Routledge, 2001.
At the turn of the twentieth century, strongman Porfirio Díaz lamented, “Poor Mexico! So far from God, so close to the United States.” Some still share that view, but whatever the tone of bilateral relations, all would agree that Mexican politics cannot be understood in isolation from the United States. Expertly dissecting the complicated relationship of these two neighbors, Jorge Domínguez and Rafael Fernández de Castro analyze the impact of the end of the Cold War, internal changes within Mexico and the United States, and the creation and strengthening of bilateral and multilateral institutions over the last two decades. The authors show how these multiple factors led to closer ties in areas as diverse as security, the economy, and the border.
The Closing of the American Border: Terrorism, Immigration, and Security Since 9/11. By Edward Alden. Harper, 2008.
Mexico’s possible futures cannot be fully understood without a thorough comprehension of U.S. concerns over and approaches to border management. Edward Alden skillfully investigates the transformations of U.S. border policy since 9/11 — in particular, the rise of immigration enforcement as the predominant means of protecting the United States against further terrorist attacks. This shift has had strong repercussions for Mexico, because of the 2,000-mile-long border it shares with the United States, its estimated ten million citizens living in El Norte, and the deep economic and social links between many U.S. and Mexican communities. It also has had significant consequences for policymakers trying to develop more effective bilateral relations, as this mindset influences approaches to issues of organized crime, trade and economic development, and the health and safety of populations on both sides of the border.
For those of you who may prefer to read in Spanish, my Foreign Affairs article on Mexico has been translated and appears in the latest issue of Foreign Affairs Latinoamerica, which you can find here.
This Sunday Venezuelan voters will go to the polls to decide whether elected officials, including President Hugo Chávez, can run for re-election indefinitely. Chávez has thrown the full force of the government behind the yes vote, while the opposition and student movement have brought hundreds of thousands into the streets for the “no.” Many inside Venezuela and abroad believe this referendum could be the last straw, breaking Venezuela’s fragile and imperfect democracy if passed. Overlooked by optimists and pessimists alike is the real decider of Venezuela’s political future – the economy.
The referendum does matter. Ten years of single strong executive rule have taken a toll on the country’s democratic institutions. The referendum’s passage would open the possibility for Chávez to run again in 2012, and indeed to remain in office for decades to come. But, Chávez would still have to win reelection – and that may now prove to be the most difficult part.
High oil prices granted Chávez an extraordinary political honeymoon. Multi-year double digit economic growth, historically low unemployment, and prolific public spending on social programs fueled the adoration of previously excluded sectors of society. Skyrocketing consumption and the halving of poverty levels won the approval of the middle class. In fact, according to the pollster Latinobarometer, Venezuelans are among the most satisfied with their democracy in the region.
As the world financial crisis hits Latin America, it is easy to equate it to the repeated financial crises that hit the region in 1982, 1995, and 2001. In these past episodes, irresponsible fiscal policies by Latin America’s governments often led to and then exacerbated the region’s financial troubles. But this time around, as many analysts rightly point out, Latin American countries facethe global crisis with much sounder economic policies in place, including fiscal balances (and even surpluses), lower debt levels, and high international reserves. The quite different public economic fundamentals fuel predictions – by the UN’s Economic Commission for Latin America and the IMF among others – that the region will weather the crisis with only a few scratches.
Yet these analyses neglect the situation of the region’s private sector, which may prove to be the region’s Achilles’ heel. As Latin America’s economies slow down (due to tight credit, falling commodity prices, and falling consumer demand at home and worldwide), the poor and even irresponsible financial decisions of the region’s private sector are coming into relief.
With world markets teetering in recent months, rash financial bets – outside of the core competencies of many Latin American companies – went south. Stalwart firms such as Comercial Mexicana in Mexico and Grupo Votorantim in Brazil bet against the dollar and are now paying highly for it – perhaps with their very existence. More unwise financial bets are still waiting to be uncovered. In fact, one analyst recently estimated that derivative losses from Latin America’s largest companies could reach $50-60 billion in the coming months.
Latin America’s private sector troubles are not limited to dallying in derivative markets. Particularly troubling is the huge debt piled on by businesses in recent years, including many of the region’s largest companies. This became apparent this week when Cemex, a company long touted for its responsible and successful business strategy, was unable to refinance its debt. And Cemex is not alone. Others undoubtedly will follow, as tight worldwide credit markets limit the rollover of short term debt.
The macroeconomic and fiscal responsibility of most Latin American governments in recent years is welcome. And, it does mean that the effects of the worldwide financial crisis for the region differ this time around. But while necessary for a speedy recovery, public prudence alone is not sufficient. The financial health of the private sector – the main engine for the job creation and economic growth – is equally important. Here, the emerging data is not so sanguine, and some of it is missing or unreliable. Past crises have encouraged and sometimes forced greater reporting and transparency in the public sector, but the private sector remains somewhat of a blackbox. Yet how the private sector weathers the crisis will define the region’s economic future.
Here is a piece I authored with my colleagues at the Council on Foreign Relations on the effects of the world financial crisis in Latin America. It originally appeared here.
Latin America: Not So Insulated After All
Latin America Studies Program, Council on Foreign Relations
Tuesday, November 18, 2008; 9:24 AM
In recent years, commentators and policymakers alike have praised Latin America for its growing financial independence and maturity. Fiscal discipline, high commodity prices, and sustained economic growth brought down external debt levels, built international reserves, and strengthened government and corporate balance sheets, placing the region on firmer economic footing. When crisis hit U.S. financial markets, many at first assumed that Latin America’s increasing openness and growing trade with China and India would cushion the impact of a U.S. slowdown. In September 2008, President Luiz Inácio Lula da Silva of Brazil boasted, “People ask me about the crisis, and I answer, go ask Bush. It is his crisis, not mine.”
Yet the widely touted financial “decoupling” between the United States and Latin America (and emerging economies in general) was a myth. Contrary to initial expectations, the spiraling worldwide credit crisis is hitting Latin American nations hard. The region may be free of subprime mortgages, but plummeting access to cross-border financing is stifling lending and investment. In Brazil, the state-owned oil company Petrobras has announced delays in the exploration of its new deepwater oil finds. In Peru, funding for two iron-ore projects has also been delayed. As in the United States, once-boisterous consumer demand across the region is waning. After several quarters of robust private consumption growth, demand has weakened in Brazil, Mexico, and other countries, and overall consumer spending may stall in the coming quarters. With both firms and families holding back, future economic growth remains uncertain.
Capital Flight Takes Off
Rather ironically, money is flowing out of the region and seeking the safe haven of U.S. treasuries. This outflow is pressuring national currency reserves and precipitating steep declines against the U.S. dollar. The Brazilian real is down 27 percent against the dollar since July and the Mexican peso has plummeted 23 percent against the dollar since August. The trend also hammered stock markets across the region, with the Brazilian Bovespa and the Mexican Bolsa both falling 50 percent between August and November. Poor currency bets have brought to their knees economic stalwarts such as Comercial Mexicana in Mexico and Grupo Votorantim in Brazil that are nearly a century old. Concerns about bad future loans encouraged the marriage of two of Brazil’s largest banks–Banco Itau and Unibanco–forming the largest bank in Latin America.
Much of the pain is still to come. With credit scarce, investment down, and the United States and other parts of the world edging toward recession, demand for basic economic goods–commodities–is already declining. Prices for Latin American staples like wheat and corn fell over 35 percent and 30 percent respectively between August and November, while sugar slumped 20 percent until a recent uptick.
Petro-Economies Hit Twice
Oil–the most watched of Latin America’s commodity exports–has plummeted from its $147-a-barrel high three months ago. It has now fallen to below $60 a barrel. Given this volatility, the region’s endemic vulnerability to commodity price swings bodes ill for the future. Oil economies across the ideological spectrum will struggle to keep their economies afloat. The Mexican and Venezuelan governments, in particular, will suffer, as oil profits comprise 40 percent and 50 percent respectively of their public budgets. Oil at its current price level will curtail ambitious plans to cushion the impact of a U.S. recession through public infrastructure investment in Mexico, as it will hamper Venezuela’s wide-ranging petro-diplomacy. Venezuela’s capacity to borrow abroad to finance ambitious social programs may well atrophy, reinforcing the decline in President Hugo Chavez’s standing at home on the eve of local elections, scheduled for November 23.
Countries less dependent on oil income also will suffer from a global downturn. The price of soy already has fallen 40 percent since its recent peak in September and analysts anticipate further declines. As a result, economists have substantially lowered 2009 economic growth projections for Argentina, the world’s third-largest soy supplier, from 6.2 percent in January to 2.2 percent today. Chile’s dependence on copper prompts concern, too, since world prices have halved since April. Peru, second only to Chile in terms of copper production in the world, will also feel these declines. The Economist Intelligence Unit predicts Chilean economic growth will fall below 3 percent in 2008, and shaved off 1.5 percent from its estimates for Peru’s gross domestic product (GDP) growth to 5.5 percent. Even more diversified economies, such as Brazil’s, will see their first downturn in export earnings in a decade. Brazil’s growth projection for 2008 has almost halved from 4.3 percent in January to 2.4 percent in November.
Finally, countries receiving substantial remittances from their nationals abroad, such as Mexico and Central American countries, may feel pinched. Already Mexico, El Salvador, and Guatemala report significant decreases in returning funds, which support the poorer segments of their populations. Further declines could lead to worrisome increases in national poverty levels.
Reasons for Guarded Optimism
Given the region’s volatile economic history, these developments may seem nothing more than the recurrence of crises past: 1982, 1995, and 2001. But this time key differences provide some room for optimism. Latin American countries hold some of the lowest debt to GDP ratios in the world today, a sharp contrast with previous crises. Chile and Brazil, for instance, have become net creditors. Latin America’s governments now run more balanced budgets and pursue healthier fiscal policies. In April, both Peru and Brazil received investment-grade sovereign-debt ratings for the first time, joining Mexico and Chile. Lastly, Latin America now boasts a number of large “multilatinas”–multinational Latin American companies–with presences from Hudson Bay to Patagonia and beyond. Among these are Televisa, Gerdau Ameristeel, Cemex, Embraer, and Grupo Bimbo.
Still, a number of questions remain. As China, and soon the United States and perhaps other major economies, introduce massive economic stimulus packages, what might their effect be on Latin America? Could the region lose more capital absent similar domestic stimulus efforts?
The Geopolitical Dimension
Also unclear is the impact of the financial crisis on politics and political thought in the region. Despite obvious differences among Latin American governments’ approaches to the market, social policy, globalization, and the role of the state, most now believe that Washington failed to heed its own prescriptions for fiscal discipline. In the last few years, as Latin America’s left has gained in popularity and political power throughout the hemisphere, commentators have tended to group the region into “good” left governments (Brazil, Chile) and “bad” left governments (Venezuela, Bolivia). Following this superficial conceit, it may be tempting to conclude that the current financial crisis will reinforce the positions of those on the “bad” left, who will trumpet the end of market dominance. Yet after the dust settles, Latin America may also realize that weathering a global financial crisis will take more then ideology. Today, every goverment in the Western Hemisphere, including the United States, faces the same challenge: how to finance domestic programs that advance the common good, enhance global competitiveness, and ultimately deliver votes. Starting with the United States, a Western Hemisphere focused on solving problems rather than on market or political orthodoxy would be the best–if improbable–outcome, not only for the poor, but for working class sectors, middle class professionals, and economic elites as well.
While there is little in Latin America’s history to suggest that an end to political polarization is near, the region’s leaders do generally recognize what is at stake, and a political center with a global consciousness seems to be emerging, as Brazil’s leadership of the G-20 industrial and developing economies attests. The downturn also provides Latin American nations with an unexpected opportunity to demonstrate the region’s newfound fiscal prudence, creditworthiness, and accountability. If governments are able to ride out the crisis while providing for the most vulnerable populations in the region, Latin America should remain an increasingly attractive destination for investment once international funds begin to flow again. These trends would augur well for the emergence of a new financial architecture that reinforces Latin America’s path toward socially inclusive economic prosperity.
CFR Fellow Shannon O’Neil, Senior Fellow Julia Sweig, and research associates Sebastian Chaskel and Michael Bustamante all contributed to this article.
After taking a 3 plus month maternity hiatus, I am back and will be posting regularly again.
To kick things off, here is a link to a new Independent Task Force report from the Council on Foreign Relations, titled U.S.-Latin America Relations: A New Direction for a New Reality. The Council brought together 19 individuals of various interest and expertise under the chairmanship of Charlene Barshefsky and General James T. Hill. As director of the project, I can attest to the long hours of intense and at times spirited discussion among its members.
The group decided that U.S. policy should focus on four critical areas: poverty and inequality, public security, migration, and energy integration. The main recommendations are the following:
Poverty and Inequality:
U.S. should expand targeted assistance for poverty alleviation and institution building by fully funding the Millennium Challenge Account and developing new initiatives to reach the poor regions of the larger middle income countries. These programs should reflect the priorities of Latin American governments and also involve restructuring and integrating the programs of various U.S. government bureaucracies and multilateral institutions.
Alongside aid, the United States should approve pending free trade agreements with Colombia and Panama and extend trade preferences to Bolivia and Ecuador to encourage productive relations with these complex countries.
Public Security:
The United States should assist Latin American countries in strengthening their law enforcement and judicial systems. Only through strong institutions can criminal networks and drug traffickers be controlled in the long term. The United States should also focus more on the demand side of the drug equation, working closely with other large drug consuming nations, specifically those in the European Union.
Migration:
Push through a comprehensive reform in 2009. This must deal with border security, employer responsibility, some sort of regularization of the 12 million unauthorized workers here today, and a flexible guest worker program to deal with future labor demands.
Energy Security:
The United States should provide FDI incentives to help build energy infrastructure i the region. It should also sponsor regional and subregional working groups to forward best practices.
Finally, the task force touches briefly on 4 bilateral relations. It recommends deepening U.S. relations with Brazil to promote global trade negotiations and manage energy demands; strengthening cooperation with Mexico to stop narcotics trafficking, increase U.S. investment in energy production, and reform immigration policies; using multilateral institutions to address foreign and domestic policies of Venezuela; and opening informal and formal channels of communication with Cuba, with the eventual goal of lifting the embargo.
As the primaries proceed, little attention had been paid to Latin America. Given the de facto integration of the Hemisphere through migration, trade, and other links, it is high time that U.S. foreign policy focus more attention on Latin America.
In this interview I lay out four main areas the next administration should focus on to reframe and redirect policy toward the region. These include: energy, public security, migration, and poverty and inequality. It is a tall order, but any progress on these fronts would be welcome after the recent years of neglect.
Obama and the World: Latin America As the primaries proceed, little attention had been paid to Latin America. Given the de facto integration of the Hemisphere through migration, trade, and other links, it is high time that U.S. foreign policy focus more attention on Latin America.
In this interview I lay out four main areas the next administration should focus on to [...]
Chile Votes for Change Despite the calm, Chile’s presidential election Sunday was one of the transformative political moments in Latin America in recent years. Chile has transitioned toward a more pluralistic democracy and away from two decades of electoral dominance by the Concertación.
Despite the calm, Chile’s presidential election Sunday was one of the transformative political moments in Latin America in recent years. This transformation did not entail street demonstrations, a new constitution or the introduction of 21st-century socialism–yet it was no less radical. Chile has transitioned toward a more pluralistic democracy and away from two decades of electoral dominance by the Concertación–a coalition of mostly Socialists, Radicals and Christian Democrats forged in opposition to the Pinochet military government (1973-1989).
This Sunday Venezuelan voters will go to the polls to decide whether elected officials, including President Hugo Chávez, can run for re-election indefinitely. Chávez has thrown the full force of the government behind the yes vote, while the opposition and student movement have brought hundreds of thousands into the streets for the “no.” Many inside Venezuela and abroad believe this referendum could be the last straw, breaking Venezuela’s fragile and imperfect democracy if passed. Overlooked by optimists and pessimists alike is the real decider of Venezuela’s political future – the economy.
