The Latin American paradox Al Edwards, La Jolla, California Friday, May 26, 2006 If Latin American economies are doing so well, why is there such an anti-market backlash? A cursory look at the macro- economic picture of Latin America would suggest that all is rosy in the garden. Growth of three to four per cent over the last three years with public debt being reduced to 30 per cent of Gross Domestic Product (GDP) is not bad by Latin American standards. Last year alone saw regional growth of three per cent in per capita terms and foreign direct investment (FDI) was US$60 billion. A third of that sum went to Brazil, a quarter to Mexico and the rest to Argentina, Peru, Colombia and Chile. In many of these countries there is low inflation, low fiscal deficits and the monetary situation looks promising. Yet, despite this picture, people of the region are not happy and there is growing discontent. This observation was the theme of Senior Fellow and Director for the Center on Global Prosperity at The Independent Institute (based in Washington DC), Alvaro Vargas Llosa's address to the 15th Annual Latin American Energy Conference on May 15, 2006, held at La Jolla, California. The conference was hosted by the Institute of the Americas. "The people of Latin America are empowering anti-market forces and populist leaders. There is a huge disconnect between the above- mentioned positive numbers and what people want," said Alvaro Vargas Llosa. But while these numbers may look good it must be borne in mind that Latin America is growing at half the rate of other developing countries. Over the last decade China and India have grown by 10 and eight per cent respectively. Ireland and New Zealand are growing faster than Latin America. Chile has reduced its poverty rate by half over the last 10 years while the rest of Latin America has 40 to 55 per cent of its population living below the poverty line. Latin American investment rates are low by international standards. Right now the rate of investment in the region, according to Alvaro Vargas Llosa, is 18 per cent of GDP. Now this is low compared with East Asia, which is 25 per cent, and in some cases 30 per cent of GDP. In Chile, the rate of investment is 25 per cent of GDP. Last year in Latin America foreign investment came to US$60 billion. Yet that was only 0.5 per cent more than 2004. Compare this with the worldwide situation where FDI went up 29 per cent in 2005 compared to 2004. In the Latin American region poverty went down by only four per cent over the last four years as opposed to 10 and 15 per cent in other countries. "If you look at these figures more closely you get to realise why so many people are angry and dissatisfied at the state of affairs and why this is translating politically into all sorts of populist governments who come to power riding on a wave of anti-market sentiments. "Now the question is why is this happening all over Latin America? This is very important because much of what happens in Latin America over the next decade or so is going to be dominated by that sentiment," declared Alavaro Vargas Llosa who made it clear that he comes from an unabashed free market perspective. He collaborated on a book called Guide to the Perfect Latin American Idiot who contends that the free market reforms that characterised the '90s in Latin America were in many cases contradictory and did not go deep enough. The book argues that behind this wave of left wing governments is popular frustration with the failure of the 1990s, a decade of reform under governments of the right that were supposed to catapult the region toward development. "Instead of decentralisation and the creation of a free, competitive economy and strong legal institutions open to all, crony capitalism and authoritarianism grew. "Unless Latin America's leftist governments are willing to deepen reform, the continent is unlikely to break free of its recurring cycle of economic stagnation and political disillusionment." Case study - Argentina A century ago Argentina was ranked one of the 10 most developed nations of the world. When President Mena came to power he was suppose to be an avowed free market thinker yet in the decade he was in power, public spending went up by 100 per cent! Also during the '90s GDP in Argentina went up by 40 per cent and the rate of growth of the government was two- and-a-half times the rate of the growth of the economy. This was a period where tariffs were supposedly slashed and the government said it would do away with trade protection. yet 71 out of 97 groups of items saw their level of protection against foreign competition go up rather than down through Mercosur-protectionism at the regional level. What is Mercosur? Mercosur is a trading zone between Brazil, Argentina, Uruaguay and Paraguay, founded in 1991 by the Treaty of Asuncion. Its purpose is to promote free trade and the fluid movement of goods, people and currency within Latin America. Bolivia, Chile, Colombia and Peru have associate member status. Venezuela was accepted as a member last year. The organisation has a South and Central America vocation. Fans of Mercosur believe it has the capability to combine resources to balance the activities of other global economic powers especially the United States and the European Union. Half of the member countries of Mercosur have rejected the Free Trade Area of the Americas (FTAA). The effectiveness of Mercosur was diminished by the collapse of the Argentine economy back in 2002.
I think Alvaro Vargas Llosa makes an interesting point by pointing out that what people are rejecting in Latin America as capitalism wasn't even capitalism as it's commonly known. Leaders like Chavez is taking advantage of people's unfamiliarity with real capitalism to discredit something that wasn't even or barely put in place throughout Latin America. Anyway, I think it's good that several other leaders in Latin America are begining to have problems with Chavez and his meddling.
What are you talking about? Venezuela was at one time one of the most developed counties in the world (I believe it was the tenth most developed) with a higher standard of living than some Western European counties such as Italy. That being said, you don't have to experience the full effects of capitalism and imperialism to realize that they are anti-humanitarian and see the need for change. Also, I think you're a crackpot.
What do you mean Venezuela was one of the most developed countries? Who's responsible for it's present condition then?? Anway,back to Alvaro Vargas Llosa's main point. What Latin American countries would be considered capitalist according to it's actual definition? How can people like Chavez be criticle of capitalism in the region when few Latin countries actually practiced it?
I think the whole piece rather misses the point that it is the rich people who made that profit and not the poor workers. In imprecise terms if the country got richer by 3% that means about 50 people got richer by 3000% In every country it is the same 82% of the wealth being held by 1% of the population (in rough terms) these figures prove nothing but that the rich are richer the poor workers are starved by the neccessity of the USA to profit at the expense of peasant work forces. LONG LIVE THEIR REVOLUTION
Well generally speaking, it's the rich folks who financed and own the businesses so they will desereve to make the most from any business since they also have much to loose if a business they financed doesn't succed. Another point that was made by Alvaro Vargas Llosa in other articles and that's related to what you're saying, is that during the 90's,capitalism in Latin America came under monopoly conditions and not in the open way it should have occured. This affected and kept more people in Latin America from fully benefiting from free markets.
No-one but the rich benifit from a free market that is why south america is taking a anticapitalist revolution to the people - the fact that the USA doesnt like it is hard cheese. For once the people of those countries will have something to celebrate. The USA had better take notice - because if the USA is frozen out and disenfranchised from its own continent then it will lose world dominance. The only way the US does this is to pay the rich to eat the poor - this time the poor are up in arms and they will eat the rich - Let south america be free of the USA That is to say - I hope so - I hope The USA burns in a pyre of its own making
Neither one of those is true. The rich aren't the only ones who benefit from U.S capitalism and not every Latin American country is following Chavez and Bolivia. If only the rich benefited from U.S capitalism America would be a third world country. Poverty in America and many other countries can be tied to a lack of capitalism in various communities,such as a lack of job creation and a lack of job diversity in local economies. The solution is to attract more investment to these areas. Not all Latin American countries are going socialist like Hugo and Evo Morales. Several Latin countries like Chile,Costa Rica and Brazil are still embracing free market ideas.
Responsible leftist leader set to leave office in Chile BY ANDRES OPPENHEIMER This weekend, when Chile's Socialist President Ricardo Lagos steps down after six years in office, Latin America will lose its most outstanding sitting head of state. What's so special about him? It's not just that he will be leaving office with a 70 percent approval rating. More importantly, he has proven that Latin Americans can have responsible leftist leaders who -- unlike Venezuela's radical populist President Hugo Chávez -- can rule democratically, insert their countries into the global economy and reduce poverty at record rates. Q: A recent Globescan poll shows that Latin America is the world's region that is most critical of free-market capitalism. Can the region draw more investments with that attitude? Lagos: ``I'm not surprised to find that response in Latin America. Too many countries have grown, have followed Washington's recipes, yet people haven't seen any benefits of that at their home level. Progress is seen on TV, but not at home. But investments are important. Latin America's defect is often wanting to blame others outside our hemisphere or our region for our problems. I'm not saying that there aren't things that need to be fixed -- but we often forget that our first responsibility is to put our house in order. In that sense, we need clear policies to attract investments.'' Link
" In government, he emerged in the 1990s as an apostle of the free market, committed to integrating Brazil with the global capitalism he had earlier decried. In hindsight it might seem that there was no other choice. In Brazil, as elsewhere in Latin America, socialism, neo-fascism, military rule all had failed. But even as Cardoso reached the pinnacle of Brazilian politics, there remained sharp discord about whether to endure the pain of market-oriented reforms. At the time, the heavy hand of the state in markets? fixing prices and discouraging exports ? had left Brazil ill-prepared for globalization. Long-term planning meant little in the early 1990s, with prices rising more than 2,500% annually. Cardoso instituted major economic reforms that shrank the state's domination of economic life and attracted foreign investors to the continent's largest market. When the emerging markets crisis caught up with Brazil in 1999, he steered the country through a painful currency devaluation. Then he handed power on Jan. 1, 2003, to his successor, Lula In?cio Lula da Silva, a leftist who had spooked markets as a campaigner with talk of economic populism. Today, reflecting the enormous difference between the pre- and post-Cardoso eras, President Lula is staying the free-market course..." link
Yeah and I dont suppose for one minute he left office several hundred million $$$$ poorer - do you?- socialists can be arseholes too - take Stalin, Lenin, In fact take Tony Blair as well who sold socialism in Britain right up the river. etc etc.
Look out Chavez,Peru's Garcia may buck leftist wave Mon Jun 5, 2006 3:19pm ET LIMA, Peru, June 5 (Reuters) - If Alan Garcia's pledges are to be believed, his victory in Peru may signal that pragmatic social democracy is making more inroads in Latin America than headline-grabbing anti-U.S. populism in Venezuela and Bolivia. The election of Bolivian President Evo Morales and his backing from anti-U.S. Venezuelan leader Hugo Chavez have sparked worries in Washington about the influence in the region of leftists ready to befriend Iran or nationalize the operations of U.S. firms. But the victory of former President Garcia -- a self-proclaimed moderate -- over the Chavez-backed leftist army nationalist Ollanta Humala in Sunday's presidential election may have put a stop to that trend. "Garcia's victory may be a defining moment for Latin America... LINK
