For months, the commentators had predicted unrest in Argentina. But when it came before Christmas, both the extent of the violence and the rapid political and economic change that came in its wake took almost everyone by surprise.
It started on Friday 13th December when a few supermarkets were looted in the cities of Rosario and Mendoza. Sunday newspapers reminded Argentines that similar food riots had forced the resignation of Ra?l Alfonsin 12 years ago. By Wednesday, youths were surrounding the presidential palace and Buenos Aires was a sea of tear gas and smoke.
Late that night, Domingo Cavallo, Argentina's most famous globaliser and conqueror of the hyper-inflation a decade ago, resigned. A day later, President Fernando de la R?a fled the presidential palace, his helicopter slowly rising above the devastation. At the time of writing (early January), four other politicians from the centre-right Peronist party have briefly held office. One of them Adolfo Rodriguez S?a, a shady figure associated with former President Carlos Menem, held on for rather longer than the others, only to be swept away by rioting. Eduardo Duhalde now leads another effort.
These events are part of a broader pattern in Latin America. For some time, opposition to globalisation has been growing. Indeed, viewed from afar, the entire region has appeared to be on the brink of a new upheaval over the last couple of years. From Mexico to Colombia, from Brazil to Central America there are now powerful movements rejecting the free market orthodoxy that has dominated the region for 15 years. And nowhere, it seems, has globalisation so decisively failed as in Latin America.
For old socialists and anti-global activists alike, the continent has become exciting again. In a recent essay, James Petras, a veteran US Marxist, discusses the revolutionary potential of the Colombian "insurgency" and the "growing nationalist and leftist discontent in key adjoining countries." Richard Gott, the British journalist who reported Che Guevara's death in1967, writes enthusiastically about President Hugo Ch?vez of Venezuela and his "revolutionary aspirations." Ch?vez's "hostility to neo-liberalism and globalisation help put him in tacit alliance" with the Seattle protesters. Globalisation may be "the disease of the new millennium" but "antibodies to combat it are slowly being created," he adds.
How real are these claims? How bad has globalisation really been for Latin America ? Do Latin America's varied anti-globalists offer any kind of answer? There is no doubt that a kind of anti-globalisation hard left has emerged in Latin America.
In Colombia, leftist guerrillas-financed by the drug trade-roam freely over large parts of the country. FARC, the biggest of the groups, has been given a zone of its own the size of Switzerland as part of a stuttering peace process.
Next door, President Ch?vez, a charismatic former paratrooper who led two failed coups in 1992, has completed his third year in office as Venezuela's elected president. His government has overhauled the country's political institutions and is trying to decentralise its oil-dependent economy. Ch?vez and his supporters, like FARC, draw some of their inspiration from Simon Bolivar, the leader of Latin America's 19th-century independence struggle.
To the south, in Brazil, the Workers' Party (PT), formed by the most uncompromising trade union opposition to military governments of the 1970s and 1980s, is nearer to achieving power in the continent's biggest economy than it has ever been before. Its leader, Inacio Luiz "Lula" da Silva, who as a factory worker lost a finger in a work accident at 14, is Brazil's best known politician and leads the opinion polls ahead of next year's presidential election. PT mayors control some of Brazil's biggest cities.
In Central America, the Sandinistas, the fashionable guerrilla-based party that ran Nicaragua in the 1980s, failed in October to win back the presidency, but has cemented its domination of opposition politics. Its leader, Daniel Ortega, a dour hard-leftist, has survived electoral defeat, the defection of allies like novelist Sergio Ramirez, and has even brushed off allegations that he molested his stepdaughter.
There are signs, too, that Latin America's large but long-quiescent indigenous groups are beginning to mobilise against free-market reforms. In Ecuador, indigenous organisations came close to forcing a military coup early last year that would have derailed plans to dollarise the country's currency. In Mexico, sub-commandante Marcos and his Zapatista National Liberation Front, have forced the militarisation of the southern state of Chiapas, where they led a brief but violent insurrection eight years ago.
And in the background stands Fidel Castro. Without Soviet oil and economic aid, Cuba has become a more austere place. But it has refused to embrace free-market reform and, in spite of daily hardships, the Cuban government retains a high degree of popular support, especially outside its capital city. Its health and welfare systems are short of resources but just about functional. So Cuba's idiosyncratic socialism continues to serve as a reference point for left-wingers elsewhere. Venezuela's Ch?vez, for example, enjoys a close relationship with Castro, to whom he supplies cheap oil. He says that he wants Venezuelans to swim in the same "sea of felicity" as Cuba.
There is little doubt that the connections between these movements are causing concern in Washington. Ch?vez's links with Castro and his tolerance of FARC activity in Venezuela-as well as recent visits to Iraq-have at times seemed to put him on a collision course with the US. As recently as August 2000, Venezuela closed down the US military mission in its capital, Caracas. After a thaw in the early 1990s, US policy towards Cuba has hardened since 1996 and the US embargo, imposed in 1962, remains intact.
James Petras, meanwhile, claims that FARC, Ch?vez's Venezuela and the Ecuadorean Indian movements form a "radical triangle" that "can contribute to undermining the mystique surrounding the invincibility of US hegemony." He sees Plan Colombia-under which the US has provided more than $1bn in military aid to Colombia for drug eradication-as designed to maintain that mystique.
Events in Argentina seem likely to strengthen the connections between Latin American radicals and the north American and European anti-global movement. Le Monde Diplomatique, the French monthly that has become an intellectual voice for anti-globalisers, last year held its anti-Davos World Social Forum in the southern Brazilian city of Porto Alegre, a city run by the PT for a decade. For Mexico's Zapatistas, European anti-global campaigners are valuable allies in the movement's campaign for Indian rights. The movement's European supporters lobbied their governments to suspend talks on a planned free trade agreement between Mexico and the EU, in order to force concessions in the Chiapas region. The Zapatistas, like the anti-globalisers, use the internet to co-ordinate mobilisations. When Zapatista leaders marched from Chiapas to Mexico City last year, Marcos timed his speeches to coincide with prime-time European news broadcasts. His revolutionary romanticism appeals to anti-globalisers. "Zapatismo," writes Ana Carrigan in her introduction to an English translation of Marcos's speeches and poems, "is not a party nor a guerrilla force-it is a catalyst, an instigator, a creator of possibilities."
Latin america's free-market reforms have not solved the continent's problems. Indeed, in many ways it is worse off than it was a decade ago. Poverty was being slowly reduced during the 1990s but has increased again in the last two years. Studies by the UN Commission on Latin America (Ecla) show that more than 200m Latin Americans (out of a total of 475m) have an income insufficient to meet basic needs, while some 70m do not have sufficient food. In both instances, little progress has been made since 1980.
In the 1990s, Mexico was one of the best performers on poverty reduction. But according to the census for 2000, more than 40m people live on an income of 26 pesos-about $3-or less a day, 14m people live in houses with dirt floors and 6m live in shacks with cardboard roofs.
With an average population growth rate of 1.3 per cent per annum, Latin America must expand by at least 5 per cent in order to make a significant dent on poverty levels. Only Chile in the first half of the 1990s and Mexico in the last four years have managed these kind of growth rates. Since 1990, most countries have only managed to grow on average by between 2 and 3 per cent a year.
Growth has also been erratic. Since 1990, Latin America has been hit by three major financial crises. Mexico's devaluation at the end of 1994 provoked a flight of capital from the whole region. Confidence, investors and growth returned in 1996 and 1997 as a result of Bill Clinton's rescue package. But when the crises in Asia and Russia spread to Brazil in 1997 and 1998, the region was again hit by a flight of capital. Similarly, after a brief spurt of growth last year, most economies are now struggling again.
Nowhere is the situation bleaker than in Argentina. Two years ago, Fernando de la R?a was elected at the head of a broad centre-left alliance pledged to revive a sickening economy and wipe out the corruption with which his predecessor, Carlos Menem, had been associated. His government has been an unmitigated disaster. His left-wing allies deserted in protest at failures to quash malpractice by senators. Nine months ago, de la R?a recalled Domingo Cavallo, a political enemy, in a desperate effort to restore confidence and get the economy moving. But Cavallo has swayed between liberalism and interventionism, further eroding support. Economic activity has slumped. Twenty per cent of the population are officially unemployed-with many more trapped in the informal economy. The middle classes have begun to lose confidence in the banks, triggering a run on deposits that culminated in early December in the imposition of partial bank and capital controls. This squeezed the amount of cash circulating in the economy and dealt a harsh blow to the poor, who eke out an existence shining shoes, selling flowers at road junctions or picking out recyclable rubbish from garbage dumps.
Suddenly, middle-class anger at the bank freeze fused with the unrest of the poor, producing the explosion. So far, Argentina's crisis has had relatively little impact elsewhere in the region, yet it is the deepest financial crisis of the new era and is all the more remarkable given Argentina's previous reputation as a model of liberal reform.
But even without a significant Argentina effect, unemployment is increasing and social programmes are being cut elsewhere. In countries where assets are reasonably well spread to begin with, the benefits of growth tend to be broadly distributed, and the poor benefit-even if the rich benefit more. South Korea, Taiwan, Vietnam and China are the textbook cases. Where history, race and colonialism has left countries with a highly-skewed distribution of wealth-as in Latin America-growth is less likely to reach the poor. Measured on the standard inequality measure, the Gini co-efficient, Latin America is more unequal today than it was 15 years ago.
However economically naive the overall prescriptions of the continent's populist politicians may be, in highly unequal societies demands for increased equality in the distribution of land and assets are as important to poverty reduction as measures to boost the average growth rate. That is especially true for the jobless. And Latin America has many of the latter partly because the import-substituting industrialisation of earlier decades was capital intensive and created few jobs. One in two Latin Americans work in the informal sector, scratching a living on the edges of society. During the 1950s, 1960s and 1970s industrialisation attracted thousands of rural migrants to cities, where many settled in huge shanty-towns. In the past the lifestyle of these poorer groups differed sharply from that of urban workers and middle-class professionals. But during the last ten years, the gap between those in the formal and informal economies has become much more blurred.
In some countries, already imperfect social security provision has become even less extensive. In others, the trade unions and social organisations that once might have helped bind together poorer communities have been weakened by privatisation and the decline of traditional industries. Ecla argues that "a generalised sense of insecurity" became a feature of Latin American societies in the 1990s.
Predictably, the economic policies associated with this state of affairs have not been popular. Indeed, consistently over the past five years, opinion polls have highlighted a growing "adjustment fatigue." In Argentina, fewer than one in ten people favour privatisation. Like many Russians nostalgic for communism, most Latin Americans perceive life to have been better for their parents and grandparents during the 1940s to 1970s. In some ways they are right. In the first three decades after the second world war, Latin American governments intervened to promote growth. Tariff barriers were high, subsidies for domestic companies and public ownership were the norm. Against a background of rapid world growth between 1945 and 1973, the region's economies expanded at an average annual rate of 5.3 per cent and income per head increased at 3 per cent per year.
All this is grist to the mill of the anti-globalisers. But other aspects of Latin America's recent experience complicates the argument. For a start, Argentina's problems have a lot to do with the particular exchange rate policy that its governments have chosen. The policy-based on the idea of a currency board-requires a particularly rigid regime that deprives a government of any means of managing its own monetary policy and leaves it victim to the ups and downs of the international economy. Favoured by right-wing US think tanks like the Cato Institute, currency boards have relatively few advocates even among orthodox economists. Most other Latin American countries have allowed their currencies to float against the dollar.
But wind the tape back a little. The "import substitution" model favoured by the Latin American governments in the 1950s and 1960s ran into deep problems in the 1970s and its difficulties contributed to the political turmoil of that decade and the debt crisis of the 1980s. Its successes in the 1940s and 1950s were dependent on post-war economic expansion. Matters became complicated when the world economy began to slow down and the costs of subsidies and other state support became unsustainable.
The poverty issue is also more complicated than it appears. Poverty levels may be stubbornly high, but Latin Americans have more access to primary health care and live longer than they did ten or 20 years ago. They are also better educated. In 1980, one in five people in the region were illiterate. Now, the proportion is nearer to one in ten. Children still spend less time at school than they do in Europe or the US, but many countries are making progress. In the last seven years, average school-time in Mexico has risen by a year to 7.6 years. Fifty years ago, average life expectancy was 47, two-thirds of the US level. Now it is 69 years, only seven years less.
Growth rates have been insufficient but in general the quality and consistency of economic management has improved. Poverty would be far worse had Latin American governments not moved to eliminate the extraordinarily high levels of inflation of the 1980s. In Brazil, Argentina, Peru and some smaller countries prices were increasing at several thousand per cent per year at various points in the late 1980s and early 1990s. Shopkeepers were changing prices several times a day and people resorted to elaborate strategies to preserve the value of their wages. The middle class was able to protect itself to some extent through ownership of assets like cars and houses, which retained their value. But the poor were devastated by inflation. Tighter and more consistent fiscal and monetary policy has reduced inflation almost everywhere. In 2001, prices will increase by less than 7 per cent. Memories are short: people are very aware of the pain caused by adjustment, but tend to forget the pain of the preceding hyper-inflation.
Privatisation has also made-on balance-a positive difference. Apparently successful state companies were often hopelessly inefficient and technologically backward. Subsidies enabled business owners to amass huge personal fortunes, leaving their clients to pay for expensive and often poor products or services. During the early 1990s, many Latin American governments privatised such companies. The process was messy. Companies were sometimes sold too cheaply. Businessmen with close links to the government often benefited, with inefficient public monopolies replaced by inefficient, poorly regulated-and sometimes more expensive-private ones. But the process did allow Latin America to attract capital and technology to some key sectors, like telecommunications and power. In the late 1980s, many telephone systems were primitive. In her book, Bad Times in Buenos Aires, Miranda France describes the shortcomings of the Buenos Aires telephone system in 1991. "I had the sensation, not necessarily unpleasant, of taking part in a massive game of Blindman's Buff. One made calls into the void, with no certain idea who would answer them." This has changed. Customers sometimes justifiably complain about costs; calls in cities are sometimes more expensive than before privatisation, but the system works.
There is another issue too. Countries such as Chile and Mexico have made progress in developing their export sectors. In 1980, nearly four fifths of Mexico's export revenue came from the sale of oil, leaving the country vulnerable to price falls. Over the last 20 years, the country has developed a powerful manufacturing export base-initially through the promotion of maquila, whereby foreign investors imported raw materials, processed electronic parts or fabric, assembled them in plants along the Mexican border and exported the finished product into the US market
Mexico's labour costs-one tenth of the US-have been pivotal. But maquila has generated the industrial infrastructure and trained labour-force which is enabling the growth of a manufacturing sector, producing not for a protected home market, but to the standards required for export. Since 1994, when Mexico signed the North American Free Trade Agreement (Nafta) with Canada and the US, dozens of companies have moved to Mexico's northern cities. Under Nafta, Mexico-based companies can export duty free into the biggest market in the world
Since Nafta, cities like Tijuana, Juarez, Monterrey and Hermosillo have become industrial powerhouses in their own right. Most televisions sold in the US are made in Tijuana. Juarez is now a centre of car component manufacture. As more complex industrial processes have come to be located in these cities, the workforce has become more skilled, more productive and better paid. There is still a big gap between US and Mexican pay levels, and many Mexican cities now face serious environmental problems. But manufacturing growth is creating jobs and establishing a more sustainable economic base.
Another positive trend of the past ten years-unremarked by the anti-globalisers-is the democratisation of Latin America. In 1975, military dictatorships ran every country in Latin America apart from Mexico, Venezuela and Colombia. And of these three, Mexico was effectively a one-party state, controlled through coercion and corruption by the Institutional Revolutionary Party (PRI). Even in Venezuela, regarded as a model two-party system by many political scientists in the 1980s, democracy was flawed.
Twenty five years later, things are much healthier. The military have retreated from the political stage in all the big countries. There has been no successful military coup since the early 1980s. Argentina and Uruguay have imprisoned the military dictators of the 1970s. Ex-President Pinochet faces legal proceedings in Chile. Argentina's political parties have alternated in power for the first time since 1916. Ch?vez won power at the ballot box rather than through either of two attempted coups in 1992. In Peru, popular unrest and diplomatic pressure eventually ousted Alberto Fujimori and defeated his plans for a one-party state. Fujimori's corrupt security adviser, Vladimir Montesinos, languishes in jail. And in Mexico, the PRI last year gracefully conceded electoral defeat after 71 years in power-the longest spell of one-party rule in history. These profound achievements make the political landscape much less bleak than is sometimes portrayed. Furthermore, US pressure has played a part in sustaining democracy in some states including Peru, Ecuador and Paraguay.
For some of these reasons support for radical leftism is limited. This could change but for the moment it means that the left's rhetoric does not translate into policy. In opposition, these movements have been loudly anti-globalist; in power they have been pragmatic. Venezuela's Ch?vez inveighs against the evils of neo-liberalism. But in practice his government has been cautious in economic management. Public spending has risen but not by much and a lot of the revenue from higher oil prices has been deposited in a fund, to cope with a future downturn in prices. Venezuela's radical trade unions, which supported Ch?vez's election, have been sidelined in government. Foreign investors continue to invest. AES, a US energy group that has amassed a Latin American empire as a result of privatisation, was discreetly welcomed when it successfully bid to take over Electricidad de Caracas, the country's biggest energy company. Cuba's survival owes more to tourism and remittances from the US than to socialism.
This contrast between rhetoric and reality runs right through Latin America's biggest and most important anti-global movement, the Workers Party (PT) of Brazil. Hardline leftists are now a minority in the PT, having lost ground to social democratic moderates. However, left-wingers still control the PT-dominated trades and peasant unions and have the sympathy of most grassroots PT members. Even moderates, like Cristovam Buarque, a former mayor of Brasilia, and member of the party's national committee, professes orthodox anti-globaliser views. In his book, The Admirable Real World, Buarque compares globalisation to the Holocaust ("a globocaust.")
Buarque's florid political philosophy has precious little to do with his pragmatic practice. When it ran Brasilia, the PT combined its commitment to clean and efficient government with innovative social policy such as the bolsa escolar, a programme that made welfare payments dependent on school attendance. This kind of municipal socialism Brazilian-style has been extended to other cities and largely accounts for the PT's success in local elections (it now controls seven of the country's largest cities). In a recent interview, Buarque said that he had more problems with PT-controlled public sector unions than with the right-wing political opposition.
Looking ahead to next year's presidential election, he dismisses talk about a new non-market ideology as "confusing the debate." He says that a PT government would guarantee monetary stability, possibly through the appointment of a finance minister from outside the party's ranks. Failure to guarantee continued low inflation would, "set the party back a generation...We will not be able to eliminate poverty if inflation returns and the PT will be over as an alternative power," says Buarque.
For the left of the party the IMF is the devil incarnate, but Buarque says it is necessary and sensible to deal with the fund. "Going to the IMF is like going to the doctor to have your prostate examined, it's neither good nor bad, it's necessary." He is confident that the PT has rejected its old prejudices against privatisation, competition and monetary stability.
Latin america's problems defy solutions of the simple kind advocated by anti-globalisers. There is broad agreement that the region requires less external dependence, deeper democracies and better institutions. This is precisely the reform agenda of the multilateral bodies-the IMF, the World Bank and the Inter-American Development Bank-which are vocally opposed by the anti-globalisers. For more than five years, the multilaterals have been promoting "second generation reform": the concept that Latin America must reduce poverty and inequality, improve education and health care and improve the effectiveness and fairness of legal systems if it is to grow in a sustainable way.
In Latin America, as in the rest of the world, the economic liberalism which appeared to be the solitary goal of the Washington consensus of the 1980s is now just one part of a broader package of institutional reform measures. Which is not to say that more liberalism would not be a benefit. Certainly an extension of economic liberalism to labour markets would help Latin America. Currently around 20m Mexicans work in the US but many are condemned to the most insecure conditions because of their status as illegal migrants. President Fox has made some progress in developing Nafta as a free trade compact for labour as well as capital, enabling labour to move across borders, as it does in the EU. On drug policy, a dose of liberalism-or even libertarianism-would help Latin America. It is unrealistic to expect major change in US policy, but the illegality of the international drugs trade generates resources for guerrillas and for criminal gangs across the region.
Latin America needs more not less globalisation, especially in international trade. More open trade in agricultural goods would benefit big and efficient producers like Argentina and Brazil. Both countries have been gaining bigger shares of the international market for products like coffee, orange juice, sugar (Brazil), and soya (Brazil and Argentina). In Brazil, government-led research has helped the development of new seeds and irrigation technologies, converting previously barren areas of the north-east and centre-west into fertile farmland. Productivity gains in Brazil have been twice the world average over the last ten years. Argentina almost doubled its market share of soya in the last five years. Both countries have huge potential to expand further, especially Brazil. But they face opposition from protectionist lobbies in Europe and the US. Farmers in the US, Germany and France opposed the cheap grains from Argentina and Brazil. The poultry barons of Arkansas and Maryland have blocked the arrival of chicken products from Brazil.
So where does all this leave us? Liberal economic reforms have failed to deliver either dynamic economic growth or European standards of welfare. On the other hand, most of Latin America enjoys greater stability than it did ten or 15 years ago. The reforms may eventually fail in Argentina, but that failure reflects Argentina's particularly deep institutional problems and the inflexible monetary system that the country embraced in order to push through change. Overall, Latin America's democracies remain deficient in many ways but few societies are as closed and repressive as they were. The media is less restrictive and there is a more informed debate about public policy.
It is not surprising therefore that the simplistic formulations of the anti-global left hold little attraction for most Latin Americans. Left-wing parties find that they have to tack towards a centrist consensus around market-based policies in order to win political relevance. Indeed, anti-global rhetoric can actually be an obstacle to the development of a coherent social-democratic or socially responsible political alternative in the region. It reinforces the populist, nationalist and socialist ideas that are still part of the world view of many Latin American politicians and form a sort of regional political mythology. The more Latin America can escape these myths, the easier it will be to tackle the challenges arising from globalisation.
