Latin America and the Caribbean - Fork in the Road

By Scott B. MacDonald

2002 is going to be a busy year on the electoral front for Latin America and the Caribbean. In South America, Brazil, Bolivia, Colombia and Ecuador go to the polls, while Costa Rica does the same in Central America. Argentina could also go to the polls, depending on what occurs with the economy and a supreme court justice opinion pertaining to the legality of the Duhalde government. In the Caribbean, elections are scheduled in the Dominican Republic and Haiti and are likely in Trinidad & Tobago, where the two major parties share an equal number of seats in parliament and cannot agree on a speaker. Although there has been some occasional rule-bending, it would appear that with the exception of Venezuela (where there was a recent coup attempt in April) and Cuba (a dictatorship), Latin America has come to accept change through the ballot box. This does not mean that democracy is well-entrenched, but rather that democratic rules are in place at least in a superficial sense.

Latin American remains an important region for the United States, Europe and industrialized Asia in terms of trade and investment relations. Yet, the current struggle to recover positive growth momentum is having an effect in the region's politics. Argentina, once the prize pupil of the neo-Liberal economists, has imploded under the weight of an onerous external debt burden, inflexible labor laws, and a political elite wracked by corruption and scandals. Although the region largely avoided contagion from Argentina, the longer that country's economic crisis continues, the greater the risk that other countries will be sucked in, which appears to be the case of Uruguay.

While Argentina sinks, there is increasing evidence that globalization has not lived up to the high expectations of many well-wishers. Clearly, the downturn in the U.S. and Canadian economies was accompanied by downturns throughout Latin America and the Caribbean. As Anne Kruger, First Deputy Managing Director for the International Monetary Fund noted in May, 2002: "Finally, the synchronized downturn reflected separate but coincident local disturbances, including the bursting of the IT bubble in the U.S., the energy crisis in Brazil, natural disasters in Central America, an outbreak of foot-and-mouth disease in Uruguay and - most dramatic - the crisis in Argentina."

The cyclical economic downturn and increased sensitivity to the international economy in Latin America has also led some to criticize globalization as a force for negative change. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLA), the "increasing demands for competitiveness posed by globalization harmed employment, education and social protection interests in the region." ECLA's most recent data indicates that 44% of Latin Americans lives below the poverty line, with a further 25-30% of the population having a good chance of slipping below it in the near future.

The difficult economic environment has led to the rise of a class of populist politicians who call for simple solutions to complex problems. This includes Hugo Chavez in Venezuela, Eduardo Duhalde in Argentina, and presidential candidates such as Brazil's Ignaco da Silva (popularly known as Lula). Considering that globalization has made Latin America much more sensitive to the ups and downs of the global economy, a simple response clearly has an appeal. That response is that market capitalism must not be left unfettered, but controlled and channeled from commanding heights by the government. While this thinking clearly has neo-Marxist groundings, most of the populists grudgingly recognize it will be difficult to overturn many of the earlier reforms that opened up their economies. Consequently, Latin America's political terrain has become an uneasy competition between those still favoring market-oriented reform and open economies and those preferring greater regulation, controls and protectionist trade policies. Ironically, the Bush administration's protectionist trade policies are giving Latin America's populists something to cheer about, considering that the most "free trade" nation is happy to slap on protectionist measures to win domestic votes - something they would like to do as well.