Transitioning of Latin America in the twenty first century

Latin America is in media headlines these days for mass protests, political instability and economic crisis. In the past, these were explained in terms of the traditional ideological polarisations and economic cycles of boom and bust. But the current protests have gone beyond ideologies and people have risen against both Leftist as well as Rightist governments. There have been agitations in economically distressed countries (Venezuela) as well as in rich countries such as Chile. The voters have changed the governments from Left to Right in Brazil and Uruguay but in the reverse in Argentina and Mexico in the last two years. These protests and changes are part of the process of transition of the region into the twenty first century which is promising a new future.  

In the last four decades, the region has undergone a paradigm shift and profound transformation. The political power has shifted from the military barracks to oligarchic mansions and now to the streets. The masses, who have been empowered by the democracies, have started exercising their power assertively by bringing down governments which do not fulfil the promises, or become too corrupt or gone astray. In the first decade, public protests brought down governments in Ecuador, Peru and Bolivia before completion of their term. The anti-corruption protests lead to jailing of corrupt leaders in Brazil, Peru and Guatemala. In the case of Chile, Ecuador, Peru and Brazil the governments bowed to the demands of protestors and agreed to change their policies such as increase in transport costs and cut in fuel subsidies. Only in the cases of Venezuela and Nicaragua people are unable to change the regimes which are hanging on to power through unconstitutional and authoritarian manoeuvres. 

The main drivers of the political discontent is the raising expectations of the citizens and the high inequality and social divide between the rich and poor in the region. Latin America has the highest disparity in income in the world. The masses, who had no other option but to suffer this situation silently in the past, now feel free to express their frustration and anger with protests. The only exception is Cuba which continues to be a dictatorship and does not allow protests. The Cuban government wants to open up their economy and society slowly at a controlled pace, as being done in China.  

Military dictatorships in the region came to an end in the eighties. There are no more military dictatorships in the region in the new century. Although the military intervened to remove presidents in Honduras and Bolivia in 2009 and 2019 respectively, they avoided taking over power and let the civilians run the governments. By 1990, the power had shifted decisively from the barracks to the civilians, who were mostly traditional oligarchs. These were from the established ruling class and some of them had collaborated with dictatorships and benefitted from them. 

In the eighties, the rulers of the nascent democracies were forced to adopt neoliberalistic Washington Consensus policies which included privatization and trade and market opening. The implementation of the Washington Consensus policies worsened poverty and inequality. Poverty rate increased from 40.5% in 1980 to 48.3% in 1990. Regional growth stagnated at an average of 1.3% from 1981 to 1990, and per capita income declined. The average inflation of the region increased from 159 percent in 1985 to 1,189 percent in 1990. The region was struck by a debt crisis in 1982 with the accumulated debt since the mid-1970s. The economies of many countries were shaken to their very foundations. Not surprisingly, the Latin Americans called the eighties as the Lost Decade. 

The people reacted to this Lost Decade by voting Leftists to power in the first decade of the twenty first century. Many of those elected as presidents were former activists against dictatorship, leftist guerillas, trade unionists and leaders from the working class and those excluded from political power in the past. Lula was the most emblematic of this new crop of leaders from the bottom of the society. He was a lathe worker and had worked his way up as a trade unionist and founded the Workers Party. President Evo Morales of Bolivia was from  the native Indian community which was kept outside political and economic power for five hundred years by the descendants of European colonisers. He is from a poor coca leaf growing peasant family and started his political career as a coca leaf growers trade union. President Mujica of Uruguay had suffered imprisonment for about fourteen years during the military dictatorship for his guerilla activities. President Fernando Lugo of Paraguay was a simple catholic bishop who had worked with poor communities and had no political experience. President Michelle Bachelet of Chile had been in exile and her father was assassinated by Pinochet dictatorship. Naturally, these leaders sympathized with the poor and marginalized and gave priority to poverty alleviation and empowerment of the masses. 

Growth Decade

The beginning of the twenty first century saw unprecedented political stability, economic growth, Inclusive Development, prosperity, regional integration and collective strength. The climax was in 2010 when the region showed an impressive 6.3% GDP growth. This is even more significant, coming in the aftermath of the global financial crisis. The region was, of course, helped by the high prices and demand for commodities, especially from China. External debt as percentage of GDP came down from 40% in 2000 to 17.4% in 2008. Brazil and Argentina had paid off their IMF debts ahead of schedule. The region had succeeded in taming inflation and bringing it under control within single digit. Over forty million people in the region were lifted from poverty, thanks to the pro-poor policies of the governments of most countries in the region. Poverty rate was brought down from 44% in 2002 to 32.1% in 2010. Leftist governments swept to power in Brazil, Argentina, Venezuela, Bolivia, Peru, Ecuador, Uruguay and Paraguay. It was called as a Pink Tide. 

President Lula had found the ideal formula for development with a pragmatic and balanced blend of pro-poor and business-friendly policies. The business, which started flourishing, paid more taxes which was ploughed back for social welfare expenditure. This new model was called as Lulaism or “Brasilia consensus”. This was hailed as the perfect indigenous model for governance and development of Latin America which faces enormous poverty and other developmental issues. 

Latin America had started acquiring collective strength by regional and subregional integration through Mercosur (Brazil, Argentina, Paraguay and Uruguay), Unasur (Union of South American States) and CELAC (Community of Latin American and Caribbean states).  The region, lead by Brazil, Argentina and Venezuela stood up to the US domination by defeating the US proposal for a Free Trade Area of the Americas (FTAA) at the Mar del Plata Summit of the Americas in 2005. President Bush stood isolated at the summit and had to accept the new equation with the assertive Latin America, which the US had considered as its backyard in the last century.

It was heady times. The first decade was celebrated as the Decade of Growth or Golden Decade. The President of Inter American Development Bank Luis Moreno published in 2011 a book with the title “ The Decade of Latin America and the Caribbean (LAC): A real opportunity”. He says in the book “ I have maintained, both publicly and privately, that the 2010s should be considered the Decade of Latin America and the Caribbean. By the Decade of Latin America and the Caribbean I mean that in the coming years the region’s recent gains will be locked in and the average citizen will be more prosperous than ever before in the history of the hemisphere. A new day is dawning for the economic and social outlook of the LAC  region. Although it must be said that this promising perspective is not a certainty, it represents a unique opportunity for the region.”

Decade of Deception

But unfortunately, the second decade has belied the expectations as a Decade of Deception with political crisis and economic problems resurfacing in some countries. There were costly political mistakes by some such as President Dilma Rouseff of Brazil and President Evo Morales of Bolivia. Corruption scandals shook Brazil and some other countries discrediting established political parties and leaders. The regimes in Venezuela and Nicaragua have made a mockery of socialism by perpetuating their unconstitutional hold on power by vitiating the rules and spirit of democracy. The commodity boom was over. Countries which enjoyed high export revenue did not prepare themselves for the cyclical downturn. Economic growth has come down and poverty has gone up. Budget for poverty alleviation and public service have been cut as part of austerity measures. While the poor and the middle class got hit by the economic downturn, the rich and the business people had done well thanks to the manipulation of policies in their favour. It is this situation which has angered the citizens to hit the streets with protests against the excess of rulers, corruption and unfair policies. 

Chile

The protests which started against the increase in metro fares in 2019 had escalated with more substantial demands for revision of the Pinochet-era constituition with its market-driven model (imposed and implemented by the Chicago Boys who were students of Milton Friedman) that led to the privatisation of pensions, healthcare and education as well as basic services like water. Prices of consumer products and cost of services are kept high by corporate cartels. The companies pay less taxes and the government spends less on education and health care. The centre-right billionaire President Pinera, after initial mishandling of the protests, had  agreed to consider demands of the citizens such as increase in minimum wages and topping of pension benefits.  The major political parties signed an “ Agreement for social peace and a new constituition” This will be the first time in the history of Chile that all citizens will be given a voice in the drafting of their own future. A time table has been agreed to hold a referendum in 2020. Already, many municipalities and community groups have started convening thousands of local assemblies to address the grievances and seek possible solutions. 

President Pinera was complacent on the assumption that Chile is the most prosperous and politically stable South American country. He did not realise the suffering of the poor and middle class for whom education, health care and utilities have become too expensive under the private sector lead economy with the least contribution from the government.

It should be noted that both the Chilean people and the political leaders have shown remarkable maturity in the region. In the last four elections, Left was elected twice and Right was chosen twice alternately. The election campaign and the transfer of power have taken place smoothly and the campaign rhetoric has been moderate. 

Bolivia 

Evo Morales was elected as the first ever native Indian President of Bolivia in 2006. Despite forming 60% of the population, the indigenous were kept away from political and economic power for the last five hundred years by the minority white elite who are less than 15% of the country. So it was a historic turning point in Bolivia. The fourteen years of the Morales government was an unprecedented long period of political stability in Bolivia which had seen many coups in the past. He empowered the native Indians who started taking part in the political and economic activities. With his socialist agenda, Morales was the most successful in Latin America in poverty reduction. He built schools, hospitals and infrastructure in the indigenous areas. Although he uses radical leftist rhetoric, Morales had managed the economy prudently and pragmatically. The GDP of Bolivia has grown an average of five percent during his long 14 years of rule.Morales lead a simple and austere life without any personal ostentation. He was free from corruption and did not acquire personal wealth or indulge in any luxuries. 

After having been in power for such a long period, Morales should have stood down in the 2019 elections, as mandated by the term limit imposed by his own new constituition. This would have safeguarded his great legacy of achievements as the first indigenous president who transformed the country. But power went to his head and Morales started believing that he was indispensable. He did not groom a successor. He held a referendum in 2016 seeking approval for another term. This was rejected by the people. But he went to the constituitional court and got from friendly judges a verdict approving his reelection, on the spurious ground of his personal human rights. 

Morales made his worst mistake by indulging in manipulation of the results of the October2019 elections. The live counting and telecast was shut down abrupty and mysteriously for almost 24 hours, when the margin between Morales and his nearest rival Carlos Mesa was narrowing. The next day, counting was resumed and it was announced that Morales won with more than ten percent difference in votes. When the opposition and external election observers questioned, Morales agreed to an audit and later to holding a new election. But it was too late. Seeing the best opportunity to bring down Morales, the opposition resorted to protests and clashed with his supporters. The military and police took the side of the protestors and turned against him. Fearing for his personal safety, he took the offer of Mexico for asylum and left the country. 

Many Leftist leaders and countries have expressed moral support for Morales and described his exit as the result of a coup and right wing conspiracy against the Left. It is true that the military had asked him to step down. But this was done at the very last stage when Morales had already dug his own grave. Morales had been making deliberate mistakes one after another since the failure of his Referendum in 2016 to unlawfully extend his term and undermine democracy. This is unpardonable and he has paid the price.

The country will now hopefully move on with new elections as agreed between the interim government and the opposition from Morales’ party.

    

Brazil

Brazil enjoyed a golden period in the period 2003-11 under president Lula. Brazil's global profile reached unprecedented new heights during the Presidency of Lula who pursued proactive and visionary foreign policies. During Lula's term, the economy had high growth and at the same time poverty and inequality were reduced with successful Inclusive Development policies. 

President Lula took initiatives in the formation of regional groups such as UNASUR and CELAC, besides strengthening Mercosur. Brazil was an active player, mover and shaker in UN and multilateral fora. There was a new confidence and optimism with which Brazil sought its place among the global powers.

After Lula’s presidency, Brazil faced a series of crises. President Dilma Rouseff was impeached in 2016 by a combination of Congressional and Judicial coup in 2014. The Car Wash and other massive corruption scams brought the masses to the streets in 2014. The scandals discredited political and business leaders many of whom including Lula were sent to jail. The rightist fringe politician Bolsonaro was the beneficiary of the wave of public anger which carried him to fill the vaccum and get elected as president in 2018. He does not have a large political party nor any positive political agenda for development.

President Bolsonaro has shaken the confidence of the world in Brazil with his extremist, polarising and disruptive right wing discourses. He is an anti-globalist and considers climate change as a Marxist Cultural Plot. He is a fierce anti-socialist both within and outside Brazil. He wants to align the foreign policy of Brazil to that of US and seeks closer links with right wing leaders of Israel, Hungary, Poland and Italy. Ernesto Araujo, Bolsonaro’s foreign minister  and a career diplomat, is even more obscurantist and anachronistic. It is hoped that Brazil will become a normal country again after the aberration of the Bolsonaro regime. 

Argentina turns back to Left

After twelve years of Leftist rule, centre-right Mauricio Macri was elected as President in 2014. He removed socialistic controls, opened up the market and became the posterboy of Free Market. But the economy became worse at the end of his four year term. Inflation reached over fifty percent and the currency suffered severe depreciation. Poverty and inequality went up. Macri had to resort to IMF which gave the largest credit of 57 billion dollars. Because of the failure of his neoliberalistic policies, he was voted out in the October 2019 elections and the Leftist Peronist party has come back to power. 

Mexico chooses a maverick Leftist

In the 2018 elections, Mexico elected a radical Leftist Lopez Obrador as President for the first time. The country was under a one-party dictatorship of the Institutional Revolutionary Party (PRI) for 77 years and a two-term reign of the centre-right National Action Party (PAN) from 2000 to 2012 followed by PRI in 2013-18. 

President Obrador is an unconventional politician. He has refused presidential privlleges such as living in the Presidential mansion and travelling in the Presidential jet. He travels in economy class in commercial airlines.  As president, he has not travelled outside the country saying that he does not believe in governmental tourism. He is fully absorbed in dealing with domestic issues and has no time for foreign policy. He is a fiery anti-establishment crusader, fighting against the corruption of the ‘power mafia’ of the political and business oligarchy. He is an ardent leftist with an agenda for the uplift of the poor, emancipation of the indigenous people and the reduction of inequality in society. 

Obrador, is however, unable to control the violent crime of the drug cartels who are holding the whole country to ransom. He believes in tackling the fundamental developmental problem, the underlying cause for crime. 

Uruguay 

Centre-Right National Party candidate Lacalle Pou has won the presidential elections in Uruguay in the second round in November 2019. The country was ruled by centre-left coalition Broad Front in the past fifteen years. It was a period of political tranquility and inclusive economic growth. The left had pursued progressive and pragmatic policies. They did not indulge in excesses nor were they tainted in any corruption scandal. 

President Pou is not likely to make any drastic changes in policies or pursue any extremist rightist agenda. He will follow the Uruguayan tradition of balanced and mature policies.

The election result should be seen as anti-incumbent verdict. The Uruguayan voters did the right thing by giving opportunity to the other side after having been ruled by one side for three terms. When one president, party or coalition stays in power for too long, they become complacent or get corrupted by power. It is essential to change governments periodically for democracy to remain healthy and vibrant. 

Venezuelan crisis

President Chavez came to power in 1998 as an outsider candidate against the corrupt two party political system which had kept millions of Venezuelans as poor despite the huge oil revenue of the country. The oligarchs mounted a coup against him in 2002 and removed him from power. However, some military officers rescued Chavez and brought him back as president after two days. The coup angered Chavez who started taking revenge by systematic destruction of the opposition and the industry and business which supported the coup. His successor President Maduro continues the destructive path of Chavez. By rigging elections, Maduro get himself reelected in 2018. But the US, EU and some Latin American countries have recognised Juan Guaido, the president of the Assembly as the legitimate interim president of the country. Under President Maduro, the economy has completely collapsed with the world’s highest inflation of 200,000 %, shortage of essential food and medicines, long queues in front of supermarkets, massive devaluation of the currency and rampant crime and corruption. The economic crisis has got worse after the US sanctions against oil exports. Over three million Venezuelan refugees have sought asylum in neighbouring countries to escape the crisis. There have been lot of protests against the unpopular government but these have failed to change the regime or their policies. The country is in a hopeless mess with more uncertainty and misery in the coming years. 

Nicaragua

The Sandinista revolution was the the second most admirable after the Cuban Revolution in Latin America. The Sandinistas had undergone enormous sacrifices to liberate the country from Somoza dictatorship and survive the brutal contra war of US. But now the noble Sandinista revolution has been taken over as a family enterprise by President Daniel Ortega. He has perpetuated his rule indefinitely by bending the constituition. He has been President since 2007. His wife calls the shots as vice president and his son has emerged as a power broker. 

Mass protests erupted when the Ortega government removed some pension benefits and other welfare measures in 2018. However, Ortega has managed to contain the situation by agreeing to the demands of the protestors and some political manouvres.

It is interesting that Ortega, a Marxist, refuses to recognize the Communist China and still has diplomatic relations with Taiwan, which pays for the relationship.

Mass protests in other countries

There were massive demonstrations in Ecuador when the government removed the fuel subsidies in 2019. The protests in the Ecuadorian capital Quito became so violent that the government had to abandon the capital and move to Guayaquil, in the coast for some days. 

In Peru, there were protests against some actions of the Congress which was pitted against President Martin Vizcarra, who dissolved the Congress and has announced elections. The political uncertainty is likely to continue in the near future.

The Colombians took to the streets in November 2019 to express their dissatisfaction in general. The protestors included students, trade unions, teachers and indigenous groups who have called for full implementation of the peace agreement and ending of military abuses and killing of indigenous leaders among other demands.

  

Challenges of the region

Violent crime, drug trafficking and racial discrimination are some of the deep rooted problems in the region. Some parts of Latin America continue to have serious security and law and order issues. Guatemala, El Salvador and Honduras, the Northern Triangle of violence, have the highest rates of murder in the world. The notorious Mara and other gangs hold the governments and people to ransom with their extreme violence. This is the main reason for the illegal emigration of people from these countries to US which has provoked and fuelled the anti-immigration policies of President Trump.

Mexico is the worst sufferer from the drug cartels which have been indulging in brutal violence and crime with impunity. The main urban centres of Brazil such as Rio and Sao Paulo continue to face crime and violence from the drug traffickers and freelance criminals.  

It needs to be stressed here that the US war on drugs is a complete failure. It has mislead public opinion by blaming the producers of drugs. But the truth is that drug is a consumer driven business. As long as millions of US consumers are willing to pay billions of dollars to continue their consumption, drug trafficking will never end. Out of the 100 dollars generated in the drug business only about 20% goes to the producers and traffickers while the rest of 80% stays within the US. While the US accuses Mexico and Latin America of supplying illegal drugs, the US government turns a blind eye to illegal transfer of narco dollars into Latin America from US and more importantly the smuggling of US guns to the region which kill thousands of Latin Americans. 

It is heartening to note that Medellin, Cali and Bogota which were the capitals of Narcos such as Pablo Escobar, have now become peaceful and transformed themselves into vibrant centres of business and innovation. The Peace Agreement with the FARC guerillas has given a fresh start to Colombia. The guerillas had control over almost half the total territory of Colombia during the height of their power. The liberated areas are now being explored for hydrocarbons and minerals and are being developed with new infrastructure and agriculture.

The people of African origin numbering around 80 million in Brazil are the poorest with the least representation in economic and political power. It is true of the people of African origin in Colombia and Venezuela too. The native Indian population of about 40 million in the Andean region and in Mexico and Central America are also marginalized to the bottom of the society.  

Corruption

The Car Wash corruption scandal shook the foundation of Brazil. All the major political parties and many large public and private sector companies were found to have instituitionalised bribery system. There were massive anti-corruption protests across the country. Over two hundred top political leaders (including the iconic Lula), business tycoons and senior corporate executives were sentenced to jail. 

The Odebrecht (the largest construction company of Brazil and the largest in Latin America too) corruption scandal went beyond Brazil after the company admitted to bribing political leaders in many countries of the region including Peru, Colombia, Venezuela, Mexico, Argentina and Paraguay. President of Peru Pablo Kuczynski, resigned after allegation of his accepting Odebrecht bribe. He is under house arrest. Three other ex-Presidents of Peru were accused, of which one committed suicide and the other two are in jail. The opposition leader Keiko Fujimori was also caught in the bribery charge and was in prison for some time.

In Guatemala, a sitting President Otto Perez Molina and senior officials of his government including the Vice president were sent to jail on corruption charges in 2015, following anti-corruption agitations. Many other ex-presidents in Central America have also been convicted on corruption charges.

The mass protests against corruption is indeed a stern warning and deterrent to those in power in the region.

Economy

Latin America is a large Middle Income market of 600 million people with a combined GDP of 6 trillion US dollars and per capita income of about 10,000 dollars. Demographically it is a vibrant region with average age of the population at 32 years.

Latin America’s GDP is projected to grow by 0.1 % in 2019, according to the ECLAC report of November 2019. This meagre growth will close the miserable second decade with an average annual growth of just 1.4% in the last nine years. Fall in export revenue, investment and domestic consumption as well as the decrease in Chinese demand and low commodity prices are the main reasons for this poor performance.

After the peak growth of 6.2% in 2010, the GDP growth rate has come down in the last nine years and ran into negative growths in 2015 and 2016. 

The good news is that the GDP growth rate is projected to increase to 1.4 % in 2020 and the growth could be sustained in the coming years. However, Venezuela will continue to suffer acute economic pain with the estimated GDP contraction of 25% in 2019 and 14% in 2020 after having suffered a cumulative GDP contraction of over fifty percent since 2014 to 2018. Argentina too will face challenges in the coming years to repay its huge external debt, control inflation and get out of poverty. 

Positive news

While there are many ongoing transitional problems, one should not fail to give credit to some positive features of the region. Costa Rica has set an example to the world with a military-free society. It was the first country in the modern history of the world to abolish armed forces in 1948. Costa Rica boasts that they spend their money on teachers and schools instead of guns and barracks. This is extraordinary, considering the fact that Costa Rica is in the middle of the volatile Central America which had gone through many violent conflicts including a traumatic civil war in the eighties. Rather than passive peaceful isolation, the country’s President Arias took the initiative to stop the regional conflict by brokering a peace agreement for which he was awarded the Nobel peace prize. Costa Rica runs a Peace University to disseminate peaceful means of resolution of conflicts in the world.

Costa Rica is a pioneer in environmental protection and clean energy. It was one of the first in the world which combined its ministries of energy and the environment back in the 1970s. The country generates an impressive 99 per cent of its energy from renewable sources. It is working proactively towards its goal of becoming Carbon Neutral and stopping the use of fossil fuels such as petrol and diesel in the next decade.

Brazil’s Bolsa Familia conditional cash transfer and other pro-poor schemes during Lula’s presidency became a role model for the world. 

Uruguay has become the first country in the world to legalise production, distribution, sale and consumption of marijuana. This has drastically cut drug trafficking and related crime. This is a lesson for the region and especially for US which has been pursuing a failed War on Drugs and continue to suffer from drug addiction.  

Conclusion

Power has irreversibly shifted from the barracks and oligarchic mansions to the streets in the last four decades. The masses, who have been empowered by democracy, have started assertively exercising their power by voting in those who promise pro-people policies, voting out those who fail to deliver and forcing governments to change unpopular policies.   This is the clear message for the current and future rulers in the region that they need to be more responsible and accountable. The presidents cannot take their full terms for granted if they fail to fulfil their promises. This power of the masses is a clear signal and positive trend of the strengthening of the democracies in the twenty first century. This should bring about better governance in the region in the future. 

Both the Left and the Right have learnt that neither pure socialism nor uncontrolled Free market have the complete solutions for the problems faced by the region. What the region needs is the Brasilia Consesus of pragmatic and balanced mix of pro-poor programmes and business-friendly policies. So the Left and the Right should go beyond their ideological boundaries and show flexibility, moderation and pragmatism in their governance and development policies. 

With the lessons learnt in the last four decades, Latin America is expected to become politically more stable, economically more prosperous and socially more harmonious in the coming decades.