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.
Everyone in Bolivia is focusing on the shift toward “participatory democracy,” from the previous “representative democracy.” Some embrace this change enthusiastically, while others view it warily. What is clear is that the traditional political parties have disintegrated here, as they have in many other countries in the Andean region, including Peru, Ecuador, and Venezuela.
It is also clear that new political parties are unlikely to arise anytime soon. Due to exclusion and corruption, the old system has been completely discredited. The MAS, which backs Evo Morales, is proud of its alternative organizational framework, based on linking various social movements and associations rather than forming a political party.
So where does this leave representation? Bolivia is institutionalizing a cycle which begins with protest marches, followed by negotiations with the government, and then ends in promises/governmental actions. These cycles are not necessarily new, as they played a key role in demand making in recent years. In fact, the inability of the governments of Sanchez de Lozada and Carlos Mesa to fulfill promises made during the negotiation phase led in large part to their downfall.
But with the election of Evo Morales, these dynamics have changed in meaning. Rather than arising from the opposition, these protesters and their organizations are now part of the ruling MAS, institutionalizing this protest cycle as the main means of interest intermediation. And, the nature of demands has changed. And rather than focusing on big issues of political and social inclusion, or of national redistribution of resources, these protests tend to focus on specific group or individual needs. For instance, this week the marches in La Paz involved teachers and sellers of used clothes, each wanting an improvement in their own economic situation.
This transformation of interest intermediation – due to the decline in political parties – concentrates power in the Executive branch, and in Evo Morales. Other moves by the government – including the undermining of the judiciary – have added to this effect. What Evo does with this power remains to be seen. It may allow him to address historic injustices and issues by bypassing old elite and interest group issues. But, it may also lead to new patronage networks, inefficiency, corruption, and in the end renewed frustration by those wanting to see real change in Bolivia.
The one area of real triumph for market-oriented reforms in Latin America was inflation. Unlike the uneven record on poverty, inequality, and economic volatility, structural adjustment and austerity programs of the early 1990s ended high and hyper inflation. These programs brought the Latin American average from 235% per year in the early 1990s to less than 8% by the turn of the century. Low and steady inflation has been a crucial element for attracting both foreign and domestic investment, increasing economic production, and encouraging the economic growth of the last several years.
But heterdox economic policies – reminiscent of Sarney’s Brazil, Alfonsin’s Argentina, and Garcia’s Peru (the first time around) – have reemerged. In both Argentina and Venezuela, the Kirchner and Chavez governments are using wage and price controls on basic goods as key parts of economic policy. Venezuela has gone a step further to reintroduce public control and management of “key” industries, including telecommunications, oil, and now perhaps steel and the banking sector. These policies are bringing back worries of inflation and leading to shortages in basic goods.
Venezuela’s inflation for 2006 topped 17%, the highest in Latin America. Most expect it to surpass 20% this year. Argentina too has seen increasing inflation, from a negative rate in the late 1990s to 10% last year. As worrisome, Kirchner fired the head of the national statistics agency, INDEC, briefly replacing her with a more malleable political appointee until public clamor forced the promotion of a INDEC senior employee.
Shortages in these economies are as important, and hamper both consumer-led and manufacturing-led growth. A recent Wall Street journal article argues that Chavez’s threat to nationalize the steel and banking industries has as much to do with the issue of shortages as with nationalism. News articles, as well as personal conversations, show that shortages and economic bottlenecks are again appearing in Argentina. These mismatches are hampering growth, not to mention the quality of life of individuals within the country.
Poverty, inequality, and equal opportunity are key issues for the future of Latin American nations. Government programs to directly improve the health care, education, and resources of the poor are important and laudable. But, these governments should not overlook the dire effects of inflation on poverty and inequality. Inflation hits the poor the hardest. They are the ones least likely to receive compensatory pay raises, and are those unable to hedge their savings in indexed accounts or abroad. High inflation will wipe out any benefits of direct assistance programs, leaving individuals certainly no better off and most likely in a much worse situation. This means that as governments are designing programs for the poor, they need to include measures to keep inflation low, be that independent monetary policy, controlled deficits, and better financial regulation. Only with this combination will governments be able to truly help those at the bottom of the pyramid.
