The Latin American left and its discontents

Since the election of Chávez, fifteen years ago, to the more recent re-election of Correa and the election of Maduro earlier this year, the left of center parties have been on the rise in Latin America. The list is long and includes the Kirchners in Argentina, Lula and Dilma in Brazil, Evo in Bolivia, Correa in Ecuador, Funes in El Salvador, the return of Ortega in Nicaragua, Tabaré and Mujica in Uruguay, and Chávez and Maduro in Venezuela. The Concertación (particularly the Socialists, Lagos and Bachelet), and Ollanta in Peru seem to be in a different category altogether. Lugo in Paraguay and Zelaya in Honduras were brought down by coups (yes they are still around), and López Obrador in Mexico was prevented from getting the job by fraud (these never vanish completely).

Overall the period was one of relatively fast growth for the region as a whole, particularly since 2003. And the recovery from the 2008-9 global crisis was relatively fast in most countries. Further, income inequality and poverty tended to decrease, with the expansion of social spending. Yet, even though growth was more or less general, some countries did better than others, and not all can be simply attributed to the external conditions.

As noted by UNCTAD (2012, p. 58): "the income gap has narrowed in Latin America since the early 2000s, in parallel with a significant economic recovery. Between 2002 and 2010, the average regional Gini coefficient declined by 4 percentage points, and by even more in several countries in South America (Argentina, the Bolivarian Republic of Venezuela, Bolivia, Brazil, Paraguay and Peru). Together with significant improvements in external conditions, the general policy reorientation played a central role in achieving growth with better income distribution. On the macroeconomic side, many of the successful countries followed countercyclical fiscal policies, achieving fiscal balances through an increase in public revenues (including commodity rents) rather than by expenditure cuts." Note that the improvement in income inequality in the 2000s is not a global phenomenon (see figure below from UNCTAD, 2012, p. 56).

There are, obviously, problems, and not everything is perfect. The strategy of development is over-dependent on commodity exports in South America, and the export of people (directly through migration, and indirectly through maquilas; both cases of cheap labor) in Central America and Mexico (see more here or here for the full paper). And that implies that Import Substitution has not gone too far in this last decade. A risk of integrating once again as an exporter of commodities and cheap labor into world markets, this time around with the Asian periphery (i.e. China) rather than Europe and the US, is dangerous. Risks are associated to the instability of terms of trade, remittances and demand for consumption goods in developed countries.

But note that the opposition to the left of center governments has not changed its discourse from the Washington Consensus period. The alternative offered is basically the extension of bilateral Free Trade Agreements (FTAs) and Bilateral Investment Agreements (BITs), like the one recently signed by Colombia, that ossify a peripheral integration into world markets, in the case of Colombia as an exporter of commodities, increasingly oil to the US (see here), which favors mostly transnational corporations and the powerful few in the region (for the Colombian FTA go here).  And ultimately, it is important not to forget that the US geopolitical project for the region is fundamentally one that expands 'free trade' in region (see here). Note that on the Pacific coast, with the exception of Ecuador, the US does indeed already have a FTA.*

MERCOSUR (or MERCOSUL in Portuguese) is the only alternative in town. And yes, it was originally thought as a regular FTA in the 1990s, but the current problems between Argentina and Brazil are a good starting point for a return to the old ECLAC idea that integration was necessary for productive reasons. That is, to increase the size of markets and the returns to scale associated to larger production levels. Development banks like the Bank of the South and the Brazilian BNDES could play a role in that, including pushing infrastructure integration, which is desperately needed. And for now MERCOSUR is there to preclude the expansion of more FTAs, which is in of itself a good thing.

Protesters in the region, the Brazilian ones being the more recent, are welcome and show a thriving civil society willing to demand more and better public spending on services (from transportation to education), less environmental degradation, and accountability from their representatives, and more. But note that while most protests are punctual and associated to specific problems within their respective communities, there are also in Latin America several groups that resemble the Tea Party in the US, in Latin America associated to middle class groups for the most part. They want the reversal of the policies of the last decade that have been good for the majority (including for them too). And like the Tea Party in the case of the US, if governments actually followed their demands they would actually hurt the poor. The cries against the 'populism' of the left of center governments is a thinly disguised demand for the return of the failed neoliberal policies of the 1990s.

* Ecuador, the exception, is interestingly enough dollarized, as are El Salvador and Panama, the only cases of dollarization with FTA. Mind you, while the US does not officially push for dollarization, informally the use of the dollar is always encouraged, and loans from multilaterals guarantee that a sizable amount of debt is in dollars. In a sense, dollarization cum FTA is the US project for integration with Latin America, which makes the European project, hijacked by neoliberals with the euro and Free Trade look good in comparison. Of course, go ask the Greeks, Irish, Italians, Spaniards, and Portuguese what are their views on the euro and the European neoliberal project of integration these days.