Jerrald Pfabe

Editorial Note: Jerrald Pfabe is a professor of history at Concordia University, Seward, Nebraska. He teaches courses in Spanish and U.S. and Latin American history. He has traveled extensively in Latin America and has studied in Mexico and Costa Rica during sabbatical leaves. A graduate of Concordia, River Forest, he has M.A. and Ph.D. degrees in history from Saint Louis University. He has served as the Social Science Department chair and received the Outstanding Teaching Award in 1984.

Venezuela’s president, Hugo Chávez, shocked the diplomatic community and many others when he called President George W. Bush the “devil” in an address to the General Assembly of the United Nations this past September. Chávez’s undiplomatic remark was more than a personal attack on the president. It reflected a critique of the neo-liberal global policies which the United States and many wealthy nations of the world have been advocating and imposing on developing nations for the past two and a half decades. Chávez, president since 1999, is one of a growing number of Latin American leaders who have been challenging the domination by developed nations, international financial and trade institutions and transnational corporations over Latin America.

There is a pronounced trend in recent Latin American elections and popular movements to confront the prevailing free-market economy orthodoxy and to seek a political and economic path which will give their nations more economic and social autonomy. Recently elected presidents in Uruguay (Tabaré Vaquez, 2004), Argentina (Néstor Kirchner, 2003), Brazil (Luiz Inácio Lula da Silva, 2002) and Bolivia (Evo Morales, 2006) all have, in some degree or another, questioned neoliberal orthodoxy. In addition, Mexico’s leftist candidate, Manuel López Obrador, narrowly lost the hotly contested July 2006 election to the more conservative Felipe Calderón. In Ecuador leftist Rafael Correo, whose anti-Bush rhetoric exceeded that of Chávez, is in a runoff election on November 26, 2006. Public opinion polls in Nicaragua indicate that Daniel Ortega, former Sandinista president, is leading a long list of candidates for November elections there. These all reveal the strength of the movement to the left in the politics of the region. We need to back up, however, and examine the historical background in order to understand this new direction in Latin American politics.

Beginning generally in the 1940s and continuing for decades, most Latin American governments pursued an economic policy of “import substitution industrialization” (ISI). They were attempting to break their dependence upon industrialized nations and develop their own industrial capacity. ISI involved a complex set of trade controls, government incentives for private businesses and government-owned corporations. The Mexican government eventually owned over 1,100 enterprises. While ISI contributed to substantial rates of economic growth in many countries, it ran into considerable difficulties by the early 1980s. Many Latin American exports had become non-competitive. Nations accumulated untenable external debts. Then they faced a serious global recession. In August of 1982 Mexico announced that it had reached the point of insolvency and could no longer service its international debt. Many other Latin American countries found themselves in economic distress in the 1980s, the so-called “lost decade” for the region.

The nations in debt crisis had to call in the International Monetary Fund (IMF) to develop structural adjustment plans (SAPs) to revamp their economies in order to resume debt payments and be eligible for additional foreign loans. The IMF insisted upon drastic changes in the structure of the economies. While SAPs varied from country to country, there emerged a common set of prescriptions known as the Washington Consensus. This program called for trade liberalization and the opening of the economies to the outside world; deregulation of national economies; privatization of state-owned enterprises; ending restrictions on foreign investment; downsizing the functions of national government and working toward balanced government budgets. The latter often involved the reduction or elimination of government subsidies on essential commodities (such as on tortillas in Mexico) and less support for health care and education. Not only was the Washington Consensus proposed as the route to servicing the external debt, it was proclaimed as the best way to reduce poverty in these countries. (President George W. Bush has frequently told Latin America that the way out of their poverty was to “open their economies.”) In 1994 the US, Canada and Mexico agreed to the North American Free Trade Agreement (NAFTA) to liberalize trade between these nations. More recently Chile and the US have signed a free trade accord, and a Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) has been signed by several Central American republics, the Dominican Republic and the United States. It is against this free-market-economy prescription that the contemporary movement to the left in Latin America is reacting and demanding change.

The neo-liberal program of globalization and poverty reduction has been and is controversial. Its defenders assert that it provides opportunities to many and offers the advantages of a competitive free-market economy, eliminating inefficiencies and corruption found in the ISI system. They usually cite countries such as India, China and Vietnam as examples of what this form of globalization can offer. There millions of people have risen above the poverty level in recent years, and economic growth rates have been positive and impressive. In Latin America Chile is touted as a model of a free-market system that has produced economic growth and poverty reduction.

Critics point to other realities. Economic growth in Latin America has not been impressive, averaging only 2.4% from 1986 to 2002. More Latin Americans were living in poverty in 2001 than in 1994. The Economic Commission on Latin America and the Caribbean indicates that 43% of the people live in poverty, and that percentage is rising. Inequalities in income distribution remain high, especially in Brazil and Mexico. Mexican workers have lost 81% of their purchasing power since the early 1980s. In 1982 the Mexican minimum wage provided for the purchase of 93.5% of the basic needs of a family; in 2002 it provided only 19.3%.

The process of privatization demanded by the IMF has produced harmful results to many citizens, especially the poor. A large percentage of government-owned enterprises have been sold, but unemployment and poverty grew rather than declined. Bolivia, one of the poorest South American republics, privatized the water companies. In Cochabama, Bolivia, after a subsidiary of Bechtel assumed operation of the city’s water system, some residents faced water rate increases of up to 200% and were paying as much as 25% of the minimum wage for water alone. The result was a “water war” in the city with widespread protests between February and April of 2000. Bolivian President Gonzalo Sánchez de Lozada turned over control of oil and natural gas reserves to foreign firms. His attempt to finalize a natural gas deal in 2003 ignited massive demonstrations led by indigenous Aymara people which resulted in the ouster of Sánchez de Lozada.

Some church groups have spoken against free trade. The Lutheran Church of Costa Rica and several of its partner churches in Central America have opposed the DR-CAFTA because they believe it will harm the most vulnerable people of their nations.

The process of free-market liberalization generally coincided with major political changes in Latin America, specifically the transition from military dictatorships to elected governments. However, the failure to achieve hoped-for economic gains, along with political problems such as deep-seated corruption, led to widespread disenchantment with leadership and with democracy in general. Early resistance to trade liberalization became evident on 1 January, 1994, the day that NAFTA went into effect. An indigenous guerrilla force, the Zapatista Army for National Liberation in Chiapas, Mexico, seized control of the state capital, San Cristobal de las Casas, for a couple days, More recent public opinion polls since have showed that voters in several countries prefer authoritarian over democratic regimes. In addition, a large majority express a desire for greater state intervention in economic matters. It is here that the leftward trend in Latin American politics emerges.

Current leftist presidents have all adopted, in varying degrees, domestic programs which challenge free-market economics. Let a few examples suffice: Chávez and Morales both have enacted agrarian reform to distribute land to poor farmers. These same presidents have sought to secure national control of their important hydrocarbon resources and have reversed the process of privatization of that industry. In both nations a minimum of 51% of ownership in any joint operation must be held by the state-controlled hydrocarbon company. Chávez and Lula have created programs to benefit the poor sectors of the populace in the areas such as education and nutrition. Vázquez in Uruguay has proposed a program of assistance to the poor, but its implementation has been delayed.

Internationally we see the impact of these left-leaning governments. All maintain warm relations with the Castro government of Cuba. Chávez is supplying Cuba with low-priced Venezuelan petroleum. Chávez has initiated two regional petroleum organizations, Petrocaribe and Petrosur, whose members are Venezuela, Brazil, Argentina and Uruguay. These organizations work for regional sharing of petroleum resources in opposition to control of transnational corporations. In October 2003 presidents Lula and Kirchner issued a joint statement, the Buenos Aires Consensus, in which they promised to work for more equitable distribution of wealth in Latin America and to regional integration. They pledged their willingness to continue negotiations toward a Free Trade Area of the Americans (FTAA) but in a way which respects the specific situation and needs of the nations of the area. They expressed alarm over the massive concentrations of wealth which globalization has produced in the world. Chávez has proposed a “Bolivarian Alternative for the Americas” in place of the FTAA. The Bolivarian Alternative proposes solidarity with the poorest nations of the region. To one degree or another, these left-leaning leaders have voiced their concerns and objections to the neo-liberal system of globalization and seek regional cooperation to achieve greater justice for the peoples of Latin America.

What should we think about these political and economic changes in our hemisphere? This movement which challenges the precepts of free-market economics and neo-liberal globalization is quite new. Clearly, the results are not yet in. We don’t know whether the nations individually and in cooperation with each other will be able to change their societies to realize a greater degree of socioeconomic justice than currently exists in them. Hugo Chávez has taken a militantly anti-US stance. Brazil’s president Lula and Argentina’s Kirchner have maintained generally good relationships with the US at the same time that they seek their own route through the process of globalization.

Chávez’s critics within and outside Venezuela charge him with increasingly authoritarian tendencies and with restricting free expression of ideas. They contend that his promises of reducing poverty seem empty. They argue that perhaps 74% of the Venezuela populace still lives in poverty. (Note: government figures give a much lower percentage.)

In my lifetime I have followed closely and hopefully the efforts of a number of reformist and revolutionary governments in Latin America to effect significant change and to redistribute wealth and power more justly. They have ended in failure. In 1970 Chile democratically elected Socialist Salvador Allende. He granted significant wage increases to workers, redistributed farmland and gained national control over mineral resources and major industries. Economic conditions rapidly deteriorated and inflation soared. The United States cut foreign, but not military, aid and blocked Chile from obtaining loans from international financial institutions. Domestic opponents participated in massive demonstrations. Finally, the experiment with democratic socialism ended with a military coup in 1973 which ushered in the repressive military dictatorship under Augusto Pinochet.

A few years later the Sandinista Revolution in Nicaragua promised justice to its citizens through transformation of its economy and political structure. However, within a few years the small Central American nation suffered economic catastrophe from which it still has not recovered. It was the victim of hostile policies from the Reagan administration, Sandinista mismanagement of the economy and an increasingly authoritarian political style.

In sum, the historical record of governments which have attempted to transform their societies is not encouraging. One wonders if the current regimes can produce a different result. Chávez’s goals of greater justice for the poor and regional solidarity sound good. His style and methods are disturbing.

In my own study of issues of economic justice and their relationship with Christian faith, I have found useful the statement of the US Roman Catholic bishops, Economic Justice for All: Pastoral Letter on Catholic Social Teaching and the US Economy (1986). They pose three basic questions to judge any economic system: What does an economy do for people? What does it do to people? How do people participate? In a follow-up document ten years later, the bishops stated, “A fundamental moral measure of any economy is how the poor and vulnerable are faring.” (“Catholic Framework,” US Catholic bishops, November, 1996). Fulfilling the basic needs of the poor is the highest priority.

When we look at Latin America in the light of these questions and ethical guidelines, we find that it is not faring well. Economies have produced great benefits for a relatively small portion of the population. Many millions still live in miserable conditions, unable to satisfy their basic needs. Neo-liberal economic changes seem to be wanting. Participation in determining the direction of Latin American economies has been largely in the hands of international financial institutions such as the IMF and World Bank, powerful transnational corporations, industrial nations and cooperating internal elites. The poor have had little meaningful voice. Latin America has been living to a great extent under a system of external domination, and many there now are seeking an opportunity to have a greater voice in determining their own futures.

Scripture unmistakably describes God’s profound concern for the poor—both for their spiritual and material well-being. God calls for justice; God condemns the wealthy for their exploitation of the poor; God provided laws for Israel so that the poor could obtain goods to supply their essential needs and to gain access to productive resources—the land. I look to these new regimes with an attitude of hopefulness (though not without some caution). Their goals are important and laudable. If they can bring a greater measure of justice and provide an authentic participatory voice to those who in the past have had difficulty in speaking for themselves, they merit our encouragement and support.