Latin America Since 1980: Political & Economic Changes

˙ Voces

On April 7, the Dialogue invited four of its senior staff and members (Sergio Bitar, Jorge Dominguez, Peter Hakim and Jeff Puryear) to meet with junior staff and interns to discuss their personal and professional experiences, and to suggest how junior staff might prepare for the challenges facing the region. Hakim was asked to speak about the history of the Dialogue; Dominguez about Latin America today; and Bitar about Latin America in the future. I was asked to speak about trends in Latin America, and specifically about the major political and economic changes that have taken place over the past 30 years. Here are my remarks.

What is most striking is that Latin America has changed enormously over the past 30 years. On the surface the region I knew as a junior staff member with the Ford Foundation looks and sounds much as it did then. The mountains, pampas, altiplanos, jungles and beaches still impress. People continue to speak Spanish, Portuguese and a variety of indigenous languages. The skylines, of course, have been transformed by new construction, but it’s clearly Latin America. Under the surface, however, major changes have occurred. I will mention just four:

First, authoritarianism has declined. In 1980 authoritarianism was the norm in much of the region, either obviously (as in the military dictatorships of Chile and El Salvador) or more subtly (as in Mexico under the PRI). Brazil, Cuba, Argentina, Chile, El Salvador, Uruguay, Nicaragua, Mexico and several other countries were all governed by some form of authoritarian regime. Peru had just returned to constitutional rule. Guatemala was on the verge of a coup. Even in countries with democratic governments (with the probable exception of Costa Rica), authoritarian practices and institutions were common. With authoritarianism, and often because of it, human rights emerged as a key issue. The OAS became a player in the human rights debate, a network of national and regional human rights groups appeared, and the U.S. government began to emphasize human rights in its relations with the region. Also, and perhaps because of authoritarianism, corruption was not a key issue. Priorities were elsewhere.

Today, democracy has become the norm. Cuba is the only bona fide dictatorship remaining. The creeping authoritarianisms of Venezuela, Ecuador and Bolivia are on the defensive. Brazil, Argentina, Chile, El Salvador, Uruguay, Nicaragua, Mexico and many others are ruled by democratic regimes. And those democracies, despite their deficiencies, tend to be more liberal than illiberal.  It is hard to imagine a military coup taking place. Also in contrast to the 1980s, human rights are much less mentioned—except in conjunction with Cuba and Venezuela. Instead, we are more likely to hear about civil rights. And corruption has become a key issue, as demonstrated dramatically by events in Brazil, Chile and Guatemala. The political context is very different than it was in 1980.

Second, economic orthodoxy has been transformed. In 1980 economic orthodoxy in most countries was some combination of government planning, import substitution, price controls, protectionism, state corporations, dependency theory, and socialism. Monopolies, oligopolies and other forms of “crony capitalism” were common. Markets, competition and efficiency were not much on the agenda. Economic growth was not impressive, and inflation was a recurring problem. The 1980s, with its debt crises and economic stagnation, became Latin America’s “lost decade”.

Today, those orthodoxies have largely disappeared. There are exceptions—Venezuela and Cuba are the most prominent, along perhaps with the Kirchners’ Argentina. But their place has gradually been taken by some version of the Washington Consensus, as originally set forth by John Williamson: macroeconomic stabilization, open economies and the embrace of market forces. In 1980 almost no government in Latin America applied those three principles; today most do. The conventional wisdom regarding economic policy is fundamentally different.

Third, the oligarchs have dwindled. In 1980 traditional political and economic elites dominated in most countries. National leaders were almost always white, male, well-connected and over 50. Your last name and who your father and grandfather were made a huge difference. Indigenous peoples were largely unrepresented in national (and even regional) politics. Women seldom held major political positions (Maria Estela Martínez de Perón – Isabelita Perón – was the exception in 1974). Technocrats did not become presidents, and seldom became ministers.

Today, traditional oligarchs have much less influence, and new groups have emerged. We now see leaders from indigenous backgrounds, Alejandro Toledo and Evo Morales being the most obvious. (A recent reference to Toledo in the Peruvian press as a ‘caudillo’ says a lot about how much the political arena has changed.) More generally, the concerns of indigenous peoples have a stronger presence in the political debate than in the past. Women have significantly expanded their influence in politics. Bachelet, Kirchner, Chamorro, Rousseff and Chinchilla are clear examples. But women are also increasingly occupying leadership positions below the level of chief executive in politics and the economy. Moreover, intellectuals and technocrats now have much more political influence. Fernando Henrique Cardoso was an early example in Brazil. Today Ph.D. presidents like Ernesto Zedillo, Rafael Correa, Sebastián Piñera and Ricardo Lagos are almost commonplace. Many other highly trained intellectuals (e.g. Alejandro Foxley and Sergio Bitar in Chile) have attained major leadership positions. Latin America has a broader and more diverse cadre of leaders than it did in 1980.

Fourth, social policy has evolved. In 1980 there was plenty of concern for helping the poor and reducing inequality. But the debate tended to be traditional (or ideological) and seldom informed by research or experience. Some assumed that capitalism was the problem and that a transition to socialism was the solution. Others assumed that economic growth, market reforms and low inflation would reduce poverty and inequity more or less automatically. Others simply assumed that more government spending and programs would lead to more social advance (i.e. if you put more money into education and health, you would get more education and more health).

But none of those worked out very well. Measurable social progress was not impressive, and gradually there was recognition that socialism was not a panacea, that a rising economic tide would not necessarily lift all boats, and that much of government social spending was inefficient and had little impact on poverty or inequality. Gradually there emerged a greater emphasis on experimentation and on measuring results. The World Bank’s 1993 World Development Report and the Inter-American Development Bank’s 1996 Economic and Social Progress in Latin America report were influential. These and subsequent analyses, along with the influx of well-trained technocrats into high government posts, generated a much more practical attitude toward social policy. Increasingly, the question became: “What works?” Major innovations like conditional cash transfers appeared, along with a greater emphasis on measuring results via rigorous impact evaluations. Today social policy is less traditional, less ideological, more dynamic and more results-based than it was in 1980.

Finally, I was asked “If you were 25 years old today, what would you do to prepare as a leader of the Western Hemisphere?” My answer is that the leaders of tomorrow should move beyond the challenge of promoting good policy to address the challenge of building effective institutions. Policy is about knowing what to do, and is of course fundamental. We must know which policies are best, and we must convince political leaders to adopt them. But once good policies are identified and adopted, you have to act. Good policy must be implemented, and implementation is done by institutions, not by political leaders (nor by “leaders of the Western Hemisphere”). Institutions convert policy into services. They get things done. Brazil’s court system is currently demonstrating dramatically the impact strong institutions can have.

But institutions in Latin America, particularly government institutions, are often weak, lethargic and even corrupt. Their leaders may be mediocre—or worse. They may favor political figures or ideologies over professional principles. They may fail to recruit talented staff, reward success, or sanction failure. Standards may be low, evaluation inadequate, and consequences non-existent. For all those reasons they often fail to convert policy into acceptable services. Increasingly, failures of execution may become more common than failures of policy in Latin America. And failures of execution are caused by weak institutions. Dialogue member Francis Fukuyama has observed that in public policy “…the big failures really come in the execution.” Future leaders of the western hemisphere would be well advised to pay much more attention to building effective institutions.

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