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Latin America's Problems
By JONATHAN POWER Indeed this is the question for all of democratic, free-market, Latin America, bar the continent's one success story, Chile. Unemployment and the deep poverty it sustains is every country's bain. "How long will the people wait for trickle-down to trickle down?" as Newsweek's David Schrieberg tellingly asked recently. Even in the best of times Latin America has never been good at dealing with its poor. It is the continent that is the sharpest and most distinct antithesis of east Asia. Its Spanish and Portuguese, medieval, Catholic-inspired, feudalism and mercantilism runs deep. Land reform and peasant rural development have always been sideshows--and even when, following the revolution in Mexico, there was some significant effort to give land to the peasantry the resources and expertise to realize the small farmers' immense potential was never forthcoming. In Japan, South Korea and Taiwan large-scale land reform, shortly after the end of World War 2, was the defining moment when the genie of economic development was effectively uncorked. In more recent times--the 1970s--no other continent so indulged itself at the trough of cheap credit. And no other continent was taken for such a ride by young, inexperienced, western, commercial bankers who thought they could earn points from their superiors by massively recycling petrodollars to such solicitous customers, knowing (or unknowing?) that if there ever would be a day of accounting they would probably have long moved on and over from the responsibility for it. The bubble burst in the early 1980s. The West's serious recession, combined with steadily rising interest rates, broke the back of most of Latin America. It was the "lost decade" par excellence. The middle classes suffered but the poor were crucified. Unemployment went through the roof and with it crime. Yet, even in the midst of crisis, there was one very important benign development. Partly it was driven by economic forces and partly by the campaign waged by U.S. president Jimmy Carter. The traditional military regimes and chaotic civilian administrations were finally discredited. In their place there were democrats, promising economic renewal, a chapter now completed with Sunday's election in Mexico. Beholden to the "Washington consensus" they concentrated their reforms on unshackling trade from its mercantilist chains and creating sound money, attaining lift-off by attracting vast quantities of "emerging market funds," but, mistakenly, with little regard for rising unemployment and worsening income distribution. It was in Mexico that the dikes burst. In December, 1994, the currency crashed. It wasn't the foreign investors who pulled the plug on the peso. It was Mexico's own businessmen, anticipating political and economic disturbance, precipitated by the peasant uprising in Mexico's southern province, Chiapas and the assassination of the front-running presidential candidate. To be fair, much has been achieved by financial rigor. Right across Latin America, inflation is now down from the stratosphere. Foreign investment is on the up and up. Privatization is well underway and democracy continues to be well accepted. Nevertheless, the chance of business confidence being rudely shattered, as it was in Mexico two and a half years ago, remains a real one. The rising tide doesn't lift all boats. As Mr. Cardenas said during his campaign, governments have to focus not just on improving their country's macro-economics but on job creation and education. Growth alone will not be enough. The Chilean example of special high schools built in poor neighborhoods in an attempt to reach talented but impoverished students is one pointer to the direction needed. As yet there are no significant barbarians at the gate. Nor hoards of dispossessed about to burn down the presidential palace. Even in Peru, still picking up the pieces after the guerrilla take-over of the Japanese embassy, the government has never felt itself seriously threatened. But universally, there is that most dangerous of all phenomenon, the revolution of rising expectations. If the democrats cannot now deliver, then cry for Latin America. Fortunately, with politicians like Mr. Cardenas now coming on to the scene--President Cardoza in Brazil is another--there are signs that the electorate may be, nearly too late, wise enough to vote to avoid disaster.
July 9, 1997, LONDON Copyright © 1997 By JONATHAN POWER and e-mail: JonatPower@aol.com
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