LatAm politics: lessons for the economists
Despite popular discontent in a number of Latin American
countries, democracy in the region is more entrenched than ever.
By Lucy Conger
There's plenty of noise in Latin American politics these days. Argentina's unemployed mass on the streets and sometimes turn violent; enraged disenfranchised Bolivians topple their leaders demanding a state-controlled gas industry; Venezuelans shout at each other from opposite sides of the fence; coalitions that backed presidential candidates fall away; and public support for presidents slumps to single-digit levels.
These latest headaches in Latin America are not robbing analysts of their sleep, however. ?We are in processes of ?democratic construction', and these are neither automatic nor lineal processes, and they take time,? says Edmundo Jarquin, chief of the state, governance and civil society division at the IDB.
Political risk is not perceived as growing and the region is not in a crisis, say observers of the region. The process of democracy in Latin America is today seen as being quite healthy, and demonstrations, referendums and vehement debates are part of the package.
But forces are at work that threaten stability, and after two decades in which the region was analyzed almost exclusively through the lens of economics, it is time to take a serious look at politics in Latin America, say market and academic analysts.
Historic first
In a historic first, all of continental Latin America is governed by democratically elected regimes. Gone are the military governments of the 1980s, and gone, too, are the threat of military coups and violations of human rights as a policy of state. A growing respect for press freedom and freedom of association strengthen civic life and create some checks on power.
Markets have long said they favour democracy, but it is only recently that Wall Street has begun to take a sanguine view of the messy politics typical in democracy. ?Especially in Brazil, it took 15 years for analysts to realize that if you have one wing of the party contradicting the president, it's [just] the normal chaos of politics,? says an investment bank analyst.
Then, too, in the last 15 years, many market forces have been put in place that narrow the parameters for policies that are hostile to markets. The region's leading economies, Brazil and Mexico, are well aware of how the market can punish them for stepping out of bounds on fiscal or debt policy, and countries of stature, such as Chile and Colombia, are also governed by market discipline.
Fragile power
Democracy in Latin America faces dangerous threats, however, and there is widespread agreement that political stability is fragile, particularly in the Andean countries. ?There is an imbalance with a very active civil society that acts outside of institutionality,? says Genaro Arriagada, a former chief of staff for Chile's former president Eduardo Frei and now a political consultant.
Vigorous civil society movements in recent years in Argentina, Bolivia, Ecuador, Peru and Venezuela have eroded popular support for government and forced some presidents to step down. In this decade alone, presidents Jamil Mahuad of Ecuador, Fernando de la Rua of Argentina, Gonzalo Sanchez
de Losada of Bolivia and Jean-Bertrand
Aristide of Haiti have been driven out of office as civic protests fuelled institutional crisis.
Modern communications technology is empowering civic demands. ?Anyone with a computer and a link to the web can organize a political movement, and this presents a challenge to political leaders,? says Susan Kaufman Purcell, vice-president for public policy at the Council of the Americas, a policy centre for multinational corporations doing business in Latin America. The internet played a role in mobilizing the piquetero protests in Argentina and the conservative opposition in Venezuela, she says.
Latin American societies face other deep-rooted social problems that pose obstacles to consolidation of the emerging democracies. Longstanding claims for social development that grow more pressing as inequality has worsened and ?a more difficult problem ? violence, street crime, corruption, [lack of] personal security ? is pervading the hemisphere, and the two issues are causing enormous instability,? says Peter Hakim, president of the Inter-American Dialogue, a Washington, DC think-tank.
Fragmentation
The crisis in Latin American politics today resides in political parties that ?are not capable of channelling anything?, says Arriagada. Parties have fragmented in recent years, diminishing their potential to represent constituencies. In the last election in Colombia, for example, some 70 parties were competing; in Peru, President Alejandro Toledo's hastily formed party, Peru Posible, is collapsing as the president's popularity has sunk to 8% and corruption allegations have caused legislators to abandon the party.
The relative absence of strong party structures in many countries leaves a vacuum. De facto powers such as civil society are taking up some of the slack and pressing their own agendas. Private economic interests are also gaining influence in the body politic. ?We have a democracy that is divorced from the general interest, and tied largely to de facto power centres that ultimately control the country's economy through their oligarchies, and replace the democratic government with a plutocratic government,? says a former Latin American president who is cited in
a recent UN Development Programme
survey on democracy in the region.
Also stepping into the power vacuum are charismatic or populist leaders or simply political outsiders. Presidents Lucio Gutierrez of Ecuador, a former colonel, Antonio Saca of El Salvador, a former radio commentator, ex-president Alberto Fujimori of Peru, an academic, and President Toledo, a former World Bank consultant, exemplify this trend. From this perspective, Venezuelan President Hugo Chavez, a former colonel, ?is not the creator of this hell; Chavez is the latest expression of this hell of a permanent crisis of parties,? says Arriagada.
These personalities present themselves as providential figures who can solve problems but who commonly lack political sensitivity and experience in administration. Outsiders embody another risk for the struggling economies and evolving political systems of the region. ?There are independents without political support, and we see stagnation,? says Walter Molano, head of research with BCP Securities in Connecticut.
The weakening of political parties has taken place over the last 40 years and will surely take a long time to cure. ?The US has gone out of its way to help undermine party structure [and] has not trusted political parties in Latin America without realizing that socialism and communism are not indicative of changes in economic systems,? says Molano.
IMF failure
The IMF has failed to promote stronger political parties in the context of the return to democracy in Latin America. ?The IMF understands that modern market economies function very well with democracy, so they push for elections but stop at that level, and an election is a superficial type of event,? argues Molano. ?Most macroeconomists at the IMF don't know the difference between a political party and a Merrill Lynch party,? he quips.
Economic forces will shape politics in the region for the foreseeable future. Widespread, entrenched poverty in Latin America is a potent political risk, creating fertile ground for populist appeals. Under very particular circumstances, populism could help reduce the region's deep social divisions. ?If managed correctly, populism could enfranchise groups excluded from the political system,? particularly the indigenous in the Andean region who are a source of instability, says Purcell.
The realities of the global economy are likely to impose restrictions on populism, analysts say. The need for foreign investment to develop oil and other sources of energy restrains leaders, as shown by Hugo Chavez' investor-friendly policies, and free trade negotiations or agreements set parameters on economic policy.
Latin American voters are increasingly demanding their leaders follow sound economic policy. ?How they think about policies is how they affect their pocketbooks ? it really is the economy,? says Hakim at the Inter-American Dialogue.