Sunday, 10 July 2011


Transformation Policy vs. Inter-Dependent Integration Model
Should Latin Americans follow the IMF-US-EU prescription to manage the impact of global economic dislocation and acquiesce to US transformation policy - a model for perpetual dependence and underdevelopment - or do they pursue regional inter-dependent integration model (similar to the EU integration model) geared toward greater self-sufficiency and regional leverage with other countries and regional blocs?

Under Bill Clinton’s sponsorship in 1994, representatives of 34 Western Hemisphere nations took part in a conference (FTAA) in Miami to discuss a pan-American ‘dollar’ trading zone that never materialized. In November 2005, FTAA’s last such follow-up conference resulted in failure, after Hugo Chavez characterized the FTAA integration model an ‘instrument of imperialism’ and Bolivian President Ebo Morales dismissed it as ‘colonialist’. Morales and Chavez among others claimed that powerful local, regional, and US corporate interests were behind FTAA determining the course of national economies for the benefit of a tiny minority and to the detriment of the vast majority. 

Unlike EU that lifts its weakest members closer to the level of the strongest, the US patron-client model keeps its neighbors chronically weak. Nor did MERCOSUR forged in 1991 under the aegis of Brazil and Argentina result in anything of substance to improve terms of trade, or alter the transformation policy and by extension raise living standards. MERCOSUR could have helped in negotiations with powerful US, Japan, and EU-based multinationals, but progressive centrists and leftist political pressures did not permit the neo-liberal oriented institution to go unchecked by the state. 

In 2004, Hugo Chavez and Fidel Castro created ALBA as an integration instrument mainly for the Bolivarian republics and Central America – mostly symbolic. Nevertheless, ALBA contains the seeds for a plausible regional integration model that could afford the republics some leverage with the world if the republics act in concert to institutionalize such a bloc. Faced with similar crisis in the 1930s, all Latin republics except Argentina defaulted on their foreign debt. Eventually Sec/State Cordell Hull signed bilateral agreements with all of them for debt rescheduling linked to trade, investment, and strategic deals. 

Today’s global crisis presents the ideal opportunity for LA to default on foreign debt, move toward greater state ownership of significant sectors that need state aid, and start negotiations anew with US, EU, Japan and IFIs with strings attached for in-ward-oriented development programs. Just as many Americans believe that in time of crisis ‘we are all Keynesians’ similarly Latin Americans in such times become ‘socialists’ and if that is the case, why not take another look at Venezuela under Chavez.

Venezuela’s Populist Experiment
Venezuela is certainly not the ideal model for other republics to follow given that there are vast differences between them. Chavez is following the path of left-leaning-populist caudillos and more specifically Accion Democratica when Romulo Gallegos, president for a few months before US-backed dictator Marcos Perez Jimenez overthrew him in November 1948. Such a populist orientation has benefited Venezuela’s poor. Key socioeconomic statistics show that Venezuela has done much better under Chavez than Colombia, Mexico or other republics that have followed US transformation policy. 

The percentage of Venezuelans living below poverty level has dropped from 42.5% in 1998 to 9.5% in 2008. The percentage of public funds devoted to education has risen from 3.2% of GDP in 1999 to 5.8% in 2008, and the percentage of youth completing high school has climbed from 27.3% in 1998 to 50% in 2008. Clean drinking water is now available for 92% of the population; it was only 80% in 1998. All of this came at a cost for the top 20% of the richest Venezuelans who saw their income drop from 53.6% of the country’s wealth in 1998 to a respectable 25.5% in 2008, with the state redirecting resources toward social programs and raising living standards for the lower classes. 

On the down side, Venezuela’s economy remains heavily dependent on oil, thus monocultural dependence is no different from most Latin republics - Brazil, Argentina and Mexico the exceptions undergoing ‘dependent development’ in the past half century (foreign capital-based development geared to serve the world market without raising living standards anywhere close to the core countries). 

Venezuela’s unemployment rate is the highest in South America, but at 8.5% (officially) it is the same as the average in the EU with the US fast approaching that level. However, at 30% (close to Ukraine’s level), inflation - monetary inflation mostly – poses a threat to living standards at a time crude oil price is low. And it doesn’t help Chavez’s image that he places rice businesses under military control after they refused to keep prices affordable, or that his caudillo-style rule takes precedence over democratic institutions and processes, no matter the domestic and US conspiracies to undermine and/or remove him from office. 

Now that the Pope has taken a very strong position condemning those responsible, especially US, for the current global crisis, Chavez’s ‘anti-imperialist’ rhetoric may have gained greater legitimacy and become more mainstream on the part of Latin American Catholics who see themselves victimized by Protestant political and financial elites in the northern hemisphere where the world’s wealth is concentrated.

Prospects for Development: EU-Style Inter-Dependent Model 
As China, India, Russia, and EU increase their role in LA and more Latin Americans are trained in Europe and East Asia, the republics south of the Rio Grande will have greater leverage with the US even with Obama expressing concern that Venezuela and Bolivia, possibly Ecuador and Nicaragua, pose a problem for Inter-American solidarity rooted in the Monroe Doctrine. 

The time has come for Latin America to break the traditional iniquitous integration model on which the Pan-American system is based that for more than a century favors the US. The current global economic crisis affords greater legitimacy and thus stability for populist-left-leaning regimes like those of Chavez and Morales to reject the 100-year-old US patron-client model. Greater involvement by extra-continental powers as a counterweight to ‘American imperialism’ as Chavez claims for his own political reasons is not enough of a solution because all countries are playing more or less by the same rules of global capitalism. 

The only hope is for LA governments to forge an integration bloc operating under the inter-dependent model to negotiate with other regional blocs or powerful nations on all issues from capital investment and technology transfers to better terms of trade and borrowing. Otherwise, there can be no hope for self-sufficient development any more than it was in the 1930s. In 2009 Brazil could take the lead to propose a regional bloc that goes into the G-20 meetings with a fixed agenda and a position of strength. 

However, this is not likely to happen if the Latin American regimes are unwilling to cooperate on this overriding issue because they are captives to local oligarchies and foreign capital, especially given that the US, EU, and Japan see their interests best served with bilateral agreements in each republic instead of a strong regional bloc. The current crisis, the change in the US political climate and the global trend toward statism presents a great opportunity for fundamental change. “Why think that the social justice sought by progressive Europeans for their own countries cannot also be the goal for Latin America, with different methods for dissimilar conditions?” wrote Gabriel Garcia Marquez in 1982. 

In short, an EU inter-dependent integration-type model is the future. One way to achieve this goal is to forge a broad popular coalition that brings about political change in the republics, a coalition that makes use of some of the same constituents (labor, intelligentsia, small businessmen, and small farmers) as the Chilean Popular Front of the 1930s. If such grass-roots coalitions in the larger republics elect progressive regimes, and if they move toward regional solidarity, Latin America has great prospects to begin improving the quality of life for its people. 

However, what will actually happen will be determined by: a) the long-standing US-Latin American patron-client relationship; b) the evolving inter-dependent relationship between Western and Eastern Europe that Latin Americans are interested in emulating; c) and the growing influence of EU and East Asia in Latin America and simultaneous diminishing role of US super power status that will force the US back to the Western Hemisphere perhaps with some sort of a new Good Neighbor Policy as the basis for integration.

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