Between December 2005 and December 2006, 12 countries in
The first meeting in this series took place at ODI on the 25th April, and was organised by the ODI’s Latin American and the Caribbean Group. The speakers were George Philip (LSE), Victor Bulmer-Thomas (Chatham House) and
George Philip (LSE) considered the current Latin American political context and then set out possible scenarios for the future:
Latin America has awakened a recent interest in the last few months because of changes in the region, but most importantly for more radical changes in some of its smaller countries (e.g.
The policy context in the region has changed:
- Neo-liberal policies have been discredited in the region
- Most countries are fully integrated into the international financial markets
An unexpected boom in commodity prices is giving policymakers in the region more resources to play with
- The
Looking ahead it is possible to expect:
- More of a series of National Stories than Regional ones
- A more politically secure region where leaders will be less afraid of speaking out against the interests of stronger economies
- Countries will have a chance to use the new resources associated with higher commodity prices to flirt with policy alternatives
- The social issue will be higher on the agenda
Still pending are reforms to the public sector and the professionalism of the civil service which are al most a pre-requisite to better manage commodity-price cycles and democratic transitions.
Victor Bulmer-Thomas (Chatham House) opened with an optimistic note: the celebration of democracy; and addressed the current changes in the economic policies in the region:
There is a clear link between economic performance or the economic model and politics and the elections (and vice versa). Hence it is perfectly natural to expect a swing to the left; and this is true for the medium to long term. However, if we focus in the short term, in these elections, the swing is not that clear:
- It has happened in
- But there is no change in
- And in fact there has been a swing to the right in the
The international context has never been better for
- Global growth
- High commodity prices
- Terms of trade have improved
- International interest rates are low and risk premiums paid by Latin American countries are also low
- The
However, these new governments face some limits in terms of what they can possibly do or experiment with:
- Fear of hyper-inflation: sound macroeconomic policies are necessary
- Membership of the WTO: imposes constraints on economic policies
- Globalisation: demands policies to increase competitiveness
Within this context, Latin American policymakers have the freedom to undertake a series of transformative policies in the following areas:
- Microeconomics: regulation and competition policies, micro-credit, labour markets
- Social policy: health, education, hunger, pensions, minimum wages
- Preferential Trade Agreements: little can be done if they are already in, but there is surely some degree of flexibility if these have not been signed or ratified. In reality, though, opposition to them is mostly down to political rhetoric as most policymakers would need them to address the limits posed by globalisation.
- FDI and foreign capital: access some of the additional profits associated to the rise in commodity prices are controlled by the private sector (often foreign)
Rather that talking about economic models it is more appropriate to talk about economic paradigms. These do not change in the short term. Latin America is still living the new economic models paradigm (neo-liberal) so what the region might very well see are changes in policies but not in the paradigm it self. A change in paradigm would probably involve external actors.
Duncan Green (Oxfam) addressed the changing face of the political context and in particular the relation between civil society and the state, providing a more in-detail analysis of the current political actors in the region:
The political context is different: Although Latin America is celebrating democracy in the ballots; opinion polls show a broad disenchantment with democracy and traditional politics and politicians. The left in
The left that is taking power in the region, however, faces some constraints:
- Most governments are loose coalitions
- Their economies depend on foreign capital due to low savings and investment
- FTA constrain economic policies
- There is an absence of an alternative model
The left is also not a homogenous group. In
- Liberal Republican:
- Traditional Populist:
- Social Movement-based Left:
-
The proposals of the Social movement-based left could be seen as an alternative to the prevailing model. In some ways they are expected: limits and regulations to foreign investor and multinationals so that they serve national interests and industrial policy that protects vulnerable sectors of society. However, they also raise the possibility of state regulated and provided social services.
There are some key questions that still need to be addressed; and that cannot wait until the full effects of the changes are felt:
- Can other liberal-republicans replicate
- What happens to the populists if commodity prices slump?
- Will Morales build something new, or be a repeat of
- When/how can a new economic paradigm emerge e.g. developmental state on East Asian lines?
For the discussion and Q&A visit the ODI website…
