THE NEW FACE OF LATIN AMERICA

(The following article has just been published at independentvoice.ca)

As with so much else, our views on Latin America come pre-digested by the American media. We hardly recognise the spin. Indeed, our own new masters seem to have blown in on a cold wind from the West with the quaint notion that Ottawa is an important northern suburb of D.C.
It would perhaps normally not matter a jot to us what is happening in Latin America. Most of us, if we are honest, can hardly arrange even the bigger countries on a blank map. Our image of the thirteen countries in South and the six in Central America is anyway that they are far away, poor, dirty, chaotic, corrupt, priest and dictator-ridden.

On our own slippery slope into the American stew-pot, we note perhaps distant theatre-thunder from Venezuela or reports that another country has gone pro-Castro. Donald Rumsfeld, that great democratic Liberator of our time, now alas pondering his knowns and unkowns somewhere in retirement, famously likened Hugo Chávez to Adolf Hitler. “El Presidente” for his part called George W. Bush “The Devil”. Is there anything going on down there but free trade in insults?

There remains to be seen if there is a hidden sermon for Canadians in the now well-established trends in Latin America.

Democracy and the Washington Consensus

The good news about Latin America is that democracy has put down deep roots over the past generation in most of Latin America.

Nearly a generation ago, the privileged upper and middle-classes were the first to take over both the reins of government and control over the nation’s wealth, still to the exclusion of course of the vast majority of citizens including many indigenous peoples who, nominally enfranchised, have remained to this day largely poor, malnourished and uneducated.

In addition to promoting democracy (for themselves, at least), these elites advanced what has become the standard neo-liberal agenda (sometimes also called the “Washington Consensus”). It called ideally for: reduced “interference” by government in the economic and social life of the country (government to focus on combating inflation rather than promoting full employment); unregulated “free” markets at home to promote entrepreneurial creativity which would create jobs for exploding populations; lower taxes on income and wealth to reward successful entrepreneurs, on the one hand, which in turn would to “trickle down” to the supposedly less creative while, on the other hand, but simultaneously also hampering the state’s ability to interfere with business; free trade and globalisation internationally; freely convertible currencies; balanced budgets; removal of government-sponsored social safety nets. The grand prize was to be access to the rich markets of Norteamerica, Japan and Europa.

Not surprisingly since they have both the money to lend as well as the purchasing power, the U.S.A. and to a lesser degree the Europeans have dominated international institutions like the IMF (International Monetary Fund), the World Bank and the Inter-American Development Bank. Latin-American governments hoping to access First-World development aid or loans must first sign written Structural Adjustment Agreements with the IMF. No agreement, no money.

Twenty-five years of failure

The unvarnished truth is that twenty-five years of missionary zeal on behalf of the Washington Consensus has been a disastrous flop throughout Latin American. The countries themselves and their citizens are far worse off now than they were a generation ago.

One comes to this glaring conclusion whether the country is a struggling but fairly modern economy like Brazil, Argentina or Mexico, or a hewer of wood and drawer of water like Venezuela, Ecuador, Bolivia, Peru or Columbia with their huge natural resources. The former have been shut out of real access to First-World markets even after major IMF-driven overhauls of their economies. Closely allied with the powerful in Washington, New York, London, Frankfurt and Paris, local string-pullers in resource-rich Latin-American countries have meanwhile over the years permitted the patrimony of all to be plundered in exchange for personal bribes to the influential and wealth for a relatively small class at home. It fattened pocketbooks in the First World too: adjusting the thermostat on your oil-central heating of an evening this winter, pause therefore for a moment of silent thanks that their selfishness and their greed have so generously contributed to our own well-being.

Revolt of the masses

Thriving mass democracy therefore, on one hand, and failing economies on the other. To the horror of the well-to-do, democratic leadership has been passing steadily like an ever-expanding ripple across the hemisphere to the impoverished masses, a “Pink Tide”, if you will, of populist, New-Deal administrations. They have certainly learned how to work the system. Indigenous peoples too, treated like untouchables in the past and stunted economically, politically and physically, have now an important hand in the making of leftist governments in several countries. As voter registration offices opened in Ecuador last fall for the presidential elections, lines of indígena women formed all around the block. By striking contrast, to the U.S.A., moreover, recent elections in Venezuela, Ecuador, Bolivia, Argentina, Brazil, Uruguay and Nicaragua, have been certified as fair and above-board.

Wherever in Latin America the impoverished were ostracised from power till now it is frequently because there was too little democracy and not too much. Old oligarchies still kept a strangle-hold on the process. Wherever pro-American, neo-liberal governments retain power in Latin America - Mexico and Columbia come to mind -, the national elections in those countries are also widely believed to be fraudulent and manipulated. How long, therefore, before even those two large and resource-rich countries tire of neo-liberal shibboleths and send their elites packing?

The accession by leftists to legitimate power in Latin America, moreover, contrasts sharply with the two recent questionably-legitimate presidential elections in the Grand Old Republic. Latin America is therefore disinclined to be hectored about democracy by the likes of George W. Bush, Dick Cheney and Donald Rumsfeld.

Thus, the new leaders (call them populists, progressives, leftists, New Dealers - whatever), brought to power by the poor, hungry, uneducated and ostracised, in countries like Brazil, Argentina, Venezuela, Uruguay, Bolivia, Ecuador, Nicaragua and Peru, arrive with the burden and the promise to eradicate poverty, ignorance and hunger amongst their constituents. Will countries like Mexico soon march to the same drummer?

Where’s the lolly?

But where are they to get the money? Tighter national control of the country’s natural resources is the obvious answer. This applies especially to hydrocarbons but includes other valuable minerals such as bauxite and copper.

To date, these resources have largely been plundered free of charge by and for the benefit of the First World, its consumers and its businesses. Left-leaning governments in Latin America come to this issue therefore with a strong sense of past injustices and resent their own elites for selling them out.

First Venezuela raised royalties and taxes on oil from nearly nothing to now 33% and will be seeking majority stakes in the vast new Orinoco tar-sands. Bolivia has also begun nationalising natural resources, though not its coca, as well as raising taxes and royalties to international levels. Expect Ecuador to follow suit under its moderately-leftist new president, economist Rafael Correa.

Big Oil and Big Minerals will surely wring their hands in mock despair but they have already begun to sign. No Canadian should find anything shocking in state ownership of natural resources. Until a conservative government frittered it away into the hands of foreigners, did not the people of Saskatchewan actually own and operate their huge deposits of potash for the benefit themselves? And, if provincial governments do not actually own oil companies outright, the future prosperity, after all, of Alberta, Saskatchewan and British Columbia – perhaps even Canada as a whole - will depend largely perhaps even completely upon the tax and royalty intake from Big Oil.

Manage your cash flow

The other major source of cash flow, if not of actual income, lies in “renegotiating” the punishing loads of international debt with which past governments have saddled both current economic development and future generations yet unborn. Poorer countries like Ecuador might hope for cancellation of some debt under international agreements. Countries like Brazil and Argentina are unlikely to get in on that deal.

Argentina’s left-leaning President Kirchner may perhaps therefore have altogether changed the course of Latin-American and financial history when he defied the international financial system and defaulted on a loan instalment, the largest such default in history. He also took control of the currency, regulated some key prices, developed an incomes policy and in general desecrated the holy alter of international financial orthodoxy.

The IMF was horrified, of course, its high priests and acolytes holding their breaths and averting their eyes. Result? Nada! More pertinently, Argentina’s economy has been flourishing ever since.

How do they get away with it?

Latin American governments are now able to strike off in new political, economic and social directions for two reasons. The most important is that the lending and aid cartel so long dominated by the U.S. and E.U, has now been broken.

This has occurred because oil-rich Venezuela under Hugo Chávez with over $36 billion in currency reserves is ready, willing and able to function as a lender of last resort. Four other South American countries are also hydrocarbon producers though not perhaps yet so ready or willing to share. Argentina was able to ignore IMF objections because Chávez offered his support. The same held true for Ecuador and Bolivia, not to mention Cuba, which until Chávez came along, was on its last pins following abandonment by Russia.

Moreover, there are other lenders and investors besides Venezuela in the wings. China, watching its foreign-currency reserves of approximately $800 billion dwindle in value as the dollar shrinks, has already established itself in South America with trade-related investments and raw-material and energy contracts. Venezuelan bonds are a good deal right now.

Socialism for the 21st Century

Exactly what will this Latin “New Deal” - in some countries called “Socialism for the 21st Century”- actually consist of going forward? The old Stalinist “real socialism” is not well thought of and is felt to be unsuitable for the Latin temperament (though it is found in Cuba, which is widely admired in Latin America for the care of its people and resistance to America hegemony). As once practised in Europe and Cuba, however, “real socialism” would be “Socialism for the Last Century”. It is anyway inconsistent with democracy.

New-Deal countries are already moving to some sort of a mixed economy (government and private); the details are not yet clear – probably even to the new, leftist leaders themselves. Expect experimentation, perhaps also with the old-fashioned import-substitution model. There is theoretical agreement amongst the countries that a much larger regional common market is necessary and there are already formal structures in place like Mercosur (Common Market of the South)

Breaking chains

The Latin version of the New Deal has come increasingly to include an open declaration of independence from American hegemony. Call it anti-imperialism, call it anti-colonialism but accept that it exists. The resentment of American domination is historic and deep amongst the newly enfranchised voters if not their economic and social betters. All Latin Americans remember to well the havoc wreaked in recent memory by the U.S.A. in places like Nicaragua or Guatemala (labelled “genocide” by the U.N.), the decades-long humiliation of Cuba, the interference in internal affairs. And not only in this hemisphere! They see the blatant greed and naked aggression of the U.S.A. in the Middle East.

Nor are Latin Americans unfamiliar with the seeming arrogance and ignorance with which American policy is formed and shaped. In this Canadians may feel some brotherhood. In point of fact, Washington’s Latin American policy is now made principally by and for “Cuban” voters in the critical swing state of Florida.

In place of American hegemony, Latin American leadership is now actively promoting some form of Latin America integration (ALBA, Hugo Chávez’ Bolivarian union, for example, or Mercosur); this integration process will commence with social, economic and political reforms at home, and then, like the E.U. before it, move on to regional-free trade and greater political cooperation amongst like-minded members. In time, it could well achieve much greater political integration.

This seems utopian at first glance. But the odds against it are in some ways less than for E.U. There are of course widely varying levels of industrialisation, from poor banana republics, on the one hand, and advanced industrial economies, on the other. But the differences are no greater, for example, than in the early Common-Market days between Germany and the Mezzagiorno, between France and Ireland, between Denmark and Spain. Central and South America at least speak only two languages and those two are closely related, more so than French and English in Canada. They have very similar histories. They have the same need for economic development and large markets. They all resent the U.S.A. The real and large economic gulfs are to be found more between the economic classes within each country than between rich and poor countries of Latin America.

What do the Masters of the Universe do now?

The old ruling classes and oligarchies in Latin America are, naturally, terrified. As always in the past, they run wringing their hands and clucking to Washington for succour, calling their new leaders over their shoulders dictators and communists. Nothing so gets the attention of the patriotic backwoods congressman like a good old-fashioned Red! They conspire with the C.I.A. to eject the new leaders from office, not stopping simply because the measures are illegal?
The U.S.A. hears their wailing. Distracted, however, by the catastrophic failure of its military adventurism in the Middle East, it is currently unclear how Washington can or will react. Most of Central and South America has anyway already joined the “Pink Tide” (of the larger units, only Columbia remain clearly true to older models; Mexico has already come within a hairs breadth of a New-Deal administration in its last federal election).

Bolivar’s successor

If there is one man in our own time, however, who has articulated the goals of the journey, has also laid out the route and is providing for the moment both the financial and moral drive, it is President Hugo Chávez of Venezuela. Is he a dictator? Is he the new Castro? Is he cunning or is he mad? Canadians, perhaps not yet totally beyond hope of finding their own way, may find a sermon here after all.

The next issue will discuss this key man.