Analysis: Latin America at the Crossroads

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Today Latin America is at a crossroads, struggling between the end of a golden age and the beginning of a new order. This “great transformation” is the subject of a publication titled ‘Latin America at the Crossroads’, in which leading international scholars and experts scratch beneath the surface of such transformation to have a clearer glimpse of what the future holds for Latin America.

Loris Zanatta’s introductory chapter guides the reader through a detailed overview of the manifold reasons that explain the “crisis of populism” affecting the whole region today. On the one hand, populism has simply lost its exceptional nature and appeal by participating in the game of democracy. On the other, it is challenged by the rising expectations of the new middle-classes, and especially the younger generations, demanding more opportunities, efficiency, and inclusion. Above all, Latin America’s populists have lost their links with their traditional social base, the very pueblo they had promised to emancipate from poverty and exclusion: poverty is on the rise again, and so is the social exclusion of the most disadvantaged.

The author concludes, a new opportunity is arising for Latin American democracies: the end of the populist phase might open an unprecedented – and to some extent promising – era, marked by a more pragmatic and less ideological, more rational and less emotional political paradigm. With a view to drawing an even clearer picture of this situation, Peter Schechter and Rachel DeLevie-Orey’s second chapter examines the dramatic changes the region has undergone during the last two decades and its current shift away from leftist and populist movements. In this process, the main and most urgent issues that will drive the region’s global engagement and dominate relations with outside actors for the foreseeable future are the need to resume economic growth, improve business climates and encourage major investments in infrastructure. This is why, contextually, the region’s leaders will have to deal with several sensitive matters, such as: regional integration; the growing relationship with Asia and with China in particular; the endemic problem of political corruption and impunity; the struggle against organized crime; and, last but not least, security cooperation, peacekeeping and the prevention of natural and humanitarian catastrophes.

As Latin America is opening up to the world, the West – and Europe above all – should grasp the economic, political and social opportunities the region offers today. The sooner the better, as new alliances with Asia might just be around the corner. “How can Latin America return to grow at high rates in a scenario of lower commodity prices?” is the crucial question of Antonella Mori’s chapter. The author offers an in-depth analysis of the rationale behind Latin America’s weak economic performance in recent years. While the internal factors are the result of a mix of bad economic policies and political/institutional crises (which might be overcome in the near future), external factors are here to stay, as they depend on mid-to-long-term processes (the sharp global decline in commodity prices and slowdown of the Chinese economy). A prospect that requires a comprehensive rethinking of Latin America’s economic models. Bearing this in mind, the author describes the mandatory changes and measures to bring the continent back to satisfying growth rates, while preserving its social achievements and emancipating it from dependence on commodity markets. A new Latin American economic model is possible. In particular, it should build upon greater regional in integration, intraregional trade, specialization in high value-added products, institutional reforms and the fight against corruption. Needless to say, this should go hand in hand with new investments in education, research, innovation and infrastructure.

A Barcéna’s chapter highlights that, although some social and economic improvements were made during the commodity boom years – not only in income distribution, but also in public transfer policies and distribution of labour earnings – in absolute terms inequality is not falling but rising in many countries of Latin America, and there has been no widespread increase in the GDP share of earnings. Taking stock of these findings, this chapter offers a number of policy suggestions for decision-makers in the region to move not only towards greater equality but also to restore a “moral” pre-condition needed to reverse Latin America’s current crisis: a culture of equality. Shifting the spotlight to energy, Lisa Viscidi and Rebecca O’Connor’s chapter analyses the impact of the sharp decline of oil and commodity prices in terms of economic growth, political stability and, most of all, resource nationalism.

In fact, its destabilizing effects might already have engendered a general shift of the political climate throughout the region: away from state-led economic models and towards the support of more market-oriented economic policies. The countries that increased state control over the oil sector during the “commodities supercycle” of the last decade are now undoing those policies in order to draw private sector investment (Brazil and Argentina). Other countries (Colombia and Mexico) that had already introduced market-friendly policies before the current downturn are further liberalizing their markets. At last, even resolute nationalist incumbent politicians (Venezuela and Ecuador) will be forced to introduce reforms, since the economic crisis is rapidly eroding their political legitimacy. If the oil-dependent economies of the region wish to continue to use oil wealth to achieve social and political gains – comparable to those of the “age of abundance” – they will need to make the energy sector more efficient and attract private investment. But they also need to look for alternative sources of revenues. Along with the current economic and political crisis, another

To date, single national responses have proved insufficient in confronting this threat, as they tend to focus on punitive measures for small drug producers, distributors or consumers while neglecting the need to provide more structural and wide-ranging answers to the challenge. However, this phase of momentous change for Latin America provides a unique opportunity to promote a more integrated and coordinated regional response to organized crime: a response that could play a major role in pulling Latin America out of the current crisis and making its democracies more resilient to an enemy that by now is widely perceived as almost “endemic”. It is striking that in times of increasingly inward-looking and discouraged countries in the liberal West, Latin America might be at the dawn of a new era. An era inaugurated with the retreat of populism and the need to replace inadequate, demagogic economic models. Is this an opportunity? Maybe. If the old liberal adage that “good politics make good economics possible, and vice versa” still holds true, Latin Americans – and the rest of the world – ought not to waste it. To download a copy of the publication, please click HERE.

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