One of the main policy recommendations in the poverty and growth report disucssed at the meeting – i.e. prioritising growth in low income countries and in contrast prioritising redistribution to catalyse growth in middle income countries - already seem to be gaining traction. The FT reported Tuesday morning (31 Oct) that the new Lula administration is planning on focusing more on poverty reduction to increase growth (http://www.ft.com/cms/s/ca172614-6885-11db-90ac-0000779e2340.html). I am copying some of the text of the article below, and note that the FT calls this “a further weakening in orthodoxy,” which has implications for the way that the financial markets and other investors respond to the policy proposed in the report.

“All have spoken of the need for a change of emphasis from stability to growth. All appear to agree that the best way to achieve growth is to stimulate consumption through income distribution, rather than - as argued by those who support more orthodox policies - by cutting government spending to release money for investment.

Mr Lula da Silva appeared to support this view in his first speech after winning the election on Sunday night. He promised to maintain "tough fiscal policies" but added: "At the same time I am convinced that the solution for Brazil's problems is no longer to make the people suffer with heavy adjustments [i.e. spending cuts] that end up being borne by the poor."

He said that whereas in the past it was said Brazil must grow in order to distribute wealth, his view was that Brazil must first distribute wealth in order to grow.”

A case of new World Bank research findings nad policy recommendations changing Latin American strategy immediately? It's unclear, but it's certainly a rather radical change for both the bank and the region's policy makers!

I attended the conversation, on Monday 30th, with Guillermo Perry and I wanted to thank ODI for organizing such events. The understanding of the Latin American complexity is an on going effort, both for economists and business operators, where any contribution is welcome. Further more than ten years of personal involvement in the Latin American investment arena though, initially for Telecom Italia and later for CDC Capital Partners, I developed the idea that local artists and writers are in the forefront of a genuine explanation of the Latin American complexity, while politicians and economists are lagging behind. The conversation with Mr. Perry was no exception to this pattern. But, while the Latin American people are owners of their complexity, it is surprising to see we aren’t able to break this vicious circle. Stimulating Mr. Perry, a former Minister of Finance, member of the Senate and long-term servant of the World Bank to speak about poverty alleviation is equivalent to ask Mr. Guy Hands to elaborate on European integration or Mr. Abramovich about Russian wealth redistribution: their opinions are irrelevant. The deep divide between elite and ordinary people is a reason for “cien anos de soledad” of any place in Latin America where majority of Europeans feel like coming from the future. The communication breakdown between aristocracy (which Mr. Perry is a member of) and “clase media” is the main explanation why the two books we spoke about at the meeting are merely extraneous to the local debate. Unfortunately, other slogans have much more appeal on the public opinion such as “Latin America, basurero mundial del capitalismo” (Castro) and “A.L.C.A., A.L.C.A., AL Carajo!” (Chavez) which in a nutshell give the world a fair idea of what ordinary people think of their condition. Also, I read on this subject a ODI flyer with the opinion of Miss Alina Rocha, research officer at ODI. I think her conclusion that “we would do well to follow Lula, Bachelet, Lopez Obrador closely, engage with them and support them in their efforts to avoid the mistakes of the past”, is the right way to help close the gap. In conclusion, I would encourage ODI to invite and voice the opinions of the few educated poor in the region with a public role in the community, asking their views on how to reduce poverty at home.
Yours Sincerely
Andrea Alunni

I agree with the fact that there is a great divide between elites and the rest. And that it is difficult to explain Latin American complexity in the language of economics, alone -which makes it so much easier for Garcia Marquez and Vargas Llosa to do it so eloquently. But Gabo's relation to the poor of Colombia could be said to be as far removed as Perry's. Regardless of Gabo's interest in them and his (lower?) middle class background. And even if Gabo was in fact one of the poor, his views of the world are too far removed to those the poor in the southern Peruvian Andes or Bolivia. Latin America is complex because it is as heterogeneous as any place can be. The black (to use the non-pc Peruvian)community of Chincha in Peru has little or nothing in relation to the Chinese community in Lima –except the fact that the Chinese replaced the black slaves in the haciendas of the coast after they gained their emancipation.

I agree that literature, and music, are a way of understanding the continent. But then again in this music and literature, at least in some parts of the region, we talk to the dead and people outlive their sons, grandsons and great-grandsons.

But forget the literature... This is the world of the vladivideos (the videos filmed by Fujimori's right hand man of himself corrupting everyone in Peru). What can be more Latin American than this magical-politick?

I disagree with: local artists and writers are in the forefront of a genuine explanation of the Latin American complexity, while politicians and economists are lagging behind, if you mean that this is not the case in other regions. I would tend to agree if this is just a general comment of what happens all over the world. But this does not mean that politicians and economists do not know what is going on; it might mean that they cannot say it or let others know.

I would suggest that we had a ‘conversation’ with Alan García and see if he is not clued into what is really going on. Or Lula, or Bachelet, or Morales, or any leading politician. But they need to articulate all of this in political actions and this is not easy. What the economists are doing is articulating the magical world in a common language. They will surely fail, but are making progress. And the report presented by Mr. Perry is an example of it.

I agree that we should have more of the few educated poor of the region over at ODI. We should have them in the World Bank and the UN and the IMF. Alejandro Toledo, comes to mind. Should we get him to come over? But will he be Mr. Toledo, an educated poor... or Mr. Toledo, former president of the republic?

If you managed to invite Mr. Toledo over to ODI, I would book my seat on the first row. I enjoyed a meeting at the City with him a few years ago and I find him very convincing and inspired. And he is Mr. Toledo, full stop: because he was elected by his fellow citizens as opposed to other powerful aristocrats who wouldn’t get a single vote in a country with a large electorate.

On the same line of reasoning, if you invited Mr. Bucaram, the meeting would be as relevant as with Mr. Toledo, although less convincing, I suppose. I agree: the focal point is to be able to articulate political consensus into actions and that’s why we should engage with politicians and their advisors into public debates.

Artists have the privilege not to be accountable for their plays. While economists and politicians must be consistent and rational, that is hard. But in Latin America comedians often are less hilarious than their leaders. Equally, Sandra Cisneros stories are more vivid and illuminating than ten lectures on the economic migrations from Mexico to the US. And I find this quite peculiar to Latin America, while it is rare to spot it elsewhere. Wouldn’t you agree?

I don't think that the explaining of Latin America's current conditions can be done by any one discpline - no country or region could be explained in such a narrow way. Economists who misundestand or ignore politics are missing something vital, political scientists who don't understand history produce flat analyses, and apolitical artists are often criticised for being purely interested in asthetics. So why should one be forced to say that economics or literature / arts explains Latin America better? Do we have this debate about India, where there is another strong strain of magical realism literature and an equally strong interest in explaining the regions (fast growing) economics? About French, Italian or British economies given their rich artistic, literary and itellectual traditions?

What Mr Alluni's comment does indirectly hint at is that there is perhaps a stronger cross over in Latin American society between artists, writers, politicians and public intellectuals than in the Anglo-Saxon world: Fuentes was a diplomat in London and Paris among other places; Neruda was also a diplomat and served as a senator; Vargas Llosa ran for president, etc. But that does not mean that all of the governing and economic analysis should be completed by artists and intellectuals instead of economists and politicians.

Finally, what would it mean to say that all Latin American artists are the representatives of a Latin American reality? I recently read Gabriel Garcia Marquez's newest book (Memories of My Meloncholy Whores) which I strongly recommend, not because I think that it can inform my conception of gender relations or economics in Latin America, rather because it is very beautiful. As we would not want our economists to be divorced from reality, we would not want our writers to be divorced from imagination.

I agree, no one discipline can pretend to explain the world and we should keep our options to understand open. What I am advocating is a genuine reaction to the rusty analysis on the Latin American situation. Brilliant minds in the continent find more exciting to express themselves in literature, painting, sculpture, poetry instead of engaging their spirits in the black forest of local politics and in turn on economic analysis. If we fail in spreading the virus of change we will, in the next decades, see again Noboa in Ecuador running for presidency, Cisneros and Mendoza in Venezuela backing the Chavez opposition, Rocca in Argentina influencing the political debate, not to mention Marinhos in Brasil pulling the strings behind any President. We need a cultural revolution not a populist one. We need brilliant and brave people to speak up and break the circle of continuity that keeps majority of ordinary people without a fair hope of emancipation. Do you think Panamanian people will receive a fair deal from the enlargement of the canal or the usual suspects will reap the benefits? If I was a young and bright student I would try to write a song on my frustration rather than writing an article on the local newspaper: just in case some prominent member of the establishment tried to kick me out of the school...

I met him before too. It was as a the president in Peru, then as the President at LSE and I had seen him before he was a president. And yes, he is Mr. Toledo full stop. But what i wanted to say is that his knowledge of poverty (first hand) failed to translate into policies to tackle it. There is no clear link. Although I would much rather have Mr. Toledo as President than a member of the club that has ruled for centuries already. (Let's try to get him to come over)

On the comedy, I'd have to disagree. I don't laugh at my leaders.. I cringe and stare in a state of self-pity and shock (even though I've always kind of expected the worst). At (or with) Porcel, Cantinflas Chespirito, Pablo and Pachu; with them, I laugh.

Apologies if I touched a sensitive string. Me too, listening to Mr. Berlusconi’s jokes in the past, I straggled to laugh… Luckily, we have an alternative, while many Latin American nations don’t.

I found interesting the comments regarding the debt. I think that international development agencies should help in managing the debt, that otherwise will remain as a hurdle to the internal development. Is there anything to do a part from permanent devaluation of the Latin American currencies?

I agree that the management of debt is a crucial part of the economic policy for Latin America. On the other hand we need a different point of view to tackle the issue: saying, as Mr. Perry did, that LA countries must pay the debt, otherwise will face a demotion of their credit history is a broken disc. Only a handful of LA nations have an international rating (not very high, actually) for their foreign debt and the rest are not even rated. So, the risk a lender is taking in lending money to such states is already factored in the agreements. On the contrary a write down or off of the existing debt burden could be seen favourably by new lenders, enhancing the probability of a pay back in the future by freeing resources for the country development and initiating a new way of public spending. On this issue we need a radical cultural change. If the World Bank marries the views of the existing lenders, pushing for a full pay back of the existing debt, is issuing a death sentence for the public finances of majority of LA nations, that, unfortunately, have a long history of appointing Dracula as a chairman of the blood donor associations. Borron y cuenta nueva is the only way out. Too bad for the old lenders and frankly, I don’t see why a local citizen, should be hesitant to this solution. Too much time in Washington?