[Article] The responsible face of Latin American Socialism

Diaspora

García’s choice of finance minister cheered
By Hal Weitzman in Lima

Published: July 21 2006 20:47 | Last updated: July 21 2006 20:47

The appointment of a fiscally orthodox technocrat as Peru’s finance minister was welcomed on Friday both in Lima and internationally.

With the choice of Luis Carranza, president-elect Alan García is hoping to plot continuity with the current administration, under which Peru has registered impressive economic growth. The country’s gross domestic product exp*anded by 6.7 per cent in 2005 compared with the previous year and is forecast to grow between 5.5 and 6 per cent this year.

“My government’s goal is to ensure growth but also social equality through state and private investment,” Mr García said. “Luis Carranza, who comes from a great international bank, will be a great support in this.”

That signals Mr Carranza’s difficult task – to balance the demands for greater social spending that Mr García’s promises of “responsible change” have fuelled, with a need to keep a tight hold on the government’s purse strings.

Mr Carranza joins the finance ministry from BBVA, the Spanish bank, where he was chief economist for Latin America and emerging markets. He is also a consultant to the Inter-American Development Bank.

He was deputy finance minister in the current administration of President Alejandro Toledo but resigned in 2005, reportedly over plans to increase public spending ahead of elections.

In Lima, the appointment reassured local analysts who remember Mr García’s mismanagement of the economy during his first stint as president from 1985-90.

Fernando Zavala, the outgoing finance minister, called Mr Carranza “a first-class technician and one of the best economists in Peru”, while Claudia Cooper, head of market analysis at BCP, the Peruvian bank, said: “There is no one in Peru more capable for this position.”

The choice also cheered Wall Street, where Peruvian sovereign bond spreads tightened after Mr García confirmed the pick. UBS said in a research note that “markets will be pleased with this appointment”.

But Mario Huamán, president of the main trade union body, expressed disappointment. “It looks as though Alan García is not going to fulfil his promise to change economic policy,” he said.

Copyright The Financial Times Limited 2006

It would appear that after Argentina, Uraguay, Brazil and Chile that Peru has become the latest Latin American Socialist administration to adopt orthodox economic policies aimed at stabalising and or building up the economy.

Given that Uribe in Columbia is the only right wing Presdient on the Continent has the ideological debate in South America now switched from far left vs far right to a more of a European debate between which model of socialism to be adopted i.e. the new model of socialism a la Romano Prodi & Zapaterro vs old model of Chavez and Morales

Dirk Gently

Diaspora wrote:

the new model of socialism a la Romano Prodi & Zapaterro vs old model of Chavez and Morales

I wouldn't necessarily agree that Chavez is "old model socialism". He has rejected old socialism time and time again. Chavez's attitude is that he wants to build a new socialism for the 21st centaury. He has said often enough that he doesn't follow any socialist rule book and that he will apply the best socialist model that fits his country and not some pre prepared one size fits all socialism. You have to understand that Venezuela is in a position to advance socialist policies more so than other countries because of the enormous wealth in Venezuela and the fact that Venezuela is not at huge risk of a flight of capital from the country. Obviously if other countries were to apply Venezuelan socialism to their countries it wouldn't sustain itself because the conditions are different in every country. Chavez's socialism has reaped major rewards for Venezuela and I believe it’s the best form of socialism for that country. Other countries of course have to apply the economic ideology to their country which best suits their own conditions so European style socialism will work better in some states and a stronger socialism can be applied in other countries which can sustain it.

One of my favorite Chavez quotes is "I don’t know what socialism is, let’s discuss what socialism means and how we can make it work". It is a mature approach and one which has benefited Venezuela massively. Each country must apply the best strategy to its own economic conditions and in Venezuelans case Chavez is getting it right but in other countries a weaker form of socialism unique to their own conditions will be necessary. To have a blanket form of socialism, either Chavez style or European centre left style across all countries in South America would not work as a one size fits all approach is unrealistic.

The main achievement of South America in the past few years is that they realise that neo-liberal economics are never going to address poverty and equality or do anything to provide the majority of people with decent education, housing and health services. It is good to see the solidarity and co-operation between the South America countries and that they are making a genuine effort to address the needs of their peoples.

Jackie laughlin

The political tide shows signs of turning but it will take many years to undo the restoration of class power and wealth which has taken place and the crushing poverty imposed by doctrinaire economics.

Rozie

Who was that American Eejit who "proved" that a fixed plan economy couldn't work due to there being nobody who can grasp the sheer complexity of every cause and effect in economics(apart from him, of course)?

Nice to see he's wrong.

Still, this isn't real socialism(yet), it's more akin to what Sweden has. None the less, there's still an "emulation" of a fixed plan in place, and it seems to be working. Chavez DOES have a very good approach. I think that approach would work for most average sized countries.

Diaspora

How Chile cooled its ideological fever
By Richard Lapper

Published: July 30 2006 19:37 | Last updated: July 30 2006 19:37

Latin America’s Politcal Economy of the Possible, by Javier Santiso, MIT Press, $27.95/£18.95



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Latin America’s political landscape has changed beyond recognition in the past five years or so. In country after country a new generation of leaders has emerged. Many of them – such as Luiz Inácio Lula da Silva, Brazil’s trade unionist president, or Michelle Bachelet, Chile’s and South America’s first elected female leader – have come from the moderate and market-friendly left, giving rise to the idea that a “pink tide” is rising in the region.

However, there have been some other trends, too. This year a more radical, anti-American strain of politics has been evident, in the radicalisation of Venezuelan politics under Hugo Chávez and the increasing influence of Venezuelan oil diplomacy in Bolivia and some other countries.

To make matters even more complex, in recent weeks the political barometer has swung sharply in the opposite direction, with the emphatic re-election of the rightwing Álvaro Uribe in Colombia and the narrow disputed triumph in Mexico of Felipe Calderón. Even the idea that a new generation is taking over has been put to the test. In Peru the electorate has just given a new lease of life to Alan Garcia, a 57-year-old moderate socialist who took the country into bankruptcy when he was president in the late 1980s.

In his book Javier Santiso, the chief development economist at the Organisation for Economic Co-operation and Development, provides insights that explain some of these developments. He argues that leaders such as Colombia’s Uribe or Brazil’s Lula da Silva may come from different political traditions, but both are moving towards a political centre-ground defined by a commitment to democratic politics, social reform and the market economy.

Borrowing a phrase from Albert Hirsch*man, the German liberal economist, Santiso calls this approach the “political economy of the possible”. For Europeans and North Americans it might sound like common sense, but good government based on democratically accountable institutions is unusual in a continent where politicians have often preferred to champion ideological models and abrupt sweeping change.

What Santiso calls an “endless waltz of paradigms” took Latin America from the liberal right in the 1930s to state-centred corporatism and radical socialist models of the postwar period and then dizzyingly back to the free market right in the 1990s. Ideology still has its appeal. Witness the domestic popularity of Chávez and his leftwing “Bolivarian revolution”. But “possibilism” rather than populism is becoming the dominant theme, argues Santiso.

This is an attractive argument and provides an interesting framework in which to measure the region’s political progress. It is a particularly valuable way to see Chile, the most successful economy in the region over the past two decades. Santiso attributes Chile’s achievements not to the blind application of free-market orthodoxy but to flexibility in policy-making from the mid-1980s onwards. In other words, the crucial moment was not, as the liberal right argues, the 1973 coup against Salvador Allende, the socialist president, but the catastrophic banking crisis of 1982, the product in part of economic policies pursued by the radical free-marketeers known as the Chicago Boys.

During the 1990s, when countries such as Argentina and Mexico implemented shock therapy and quickly sold off state property, a newly democratic Chile controlled its exposure to world financial markets and maintained its efficient copper company in public hands. The result was a relatively smooth encounter with globalisation, a decade of consistent expansion and a 50 per cent reduction in poverty levels.

Chile, says Santiso, is often presented as the “culmination of Latin America’s neo-liberal trajectory”. In fact, “the great lesson” to be taken from the country’s experience is “achieving distance from ideological fevers of all kinds”.

However, he is less convincing when he suggests that Brazil and Mexico – Latin America’s two biggest economies – have successfully embarked on the same development route. True, Lula da Silva and Vicente Fox of Mexico have pressed through important reforms and impressively maintained macroeconomic stability. But whether their pragmatic approach to reform amounts to very much is another matter. Neither government has made anything like the social progress of Chile, nor invested nearly as much in physical infrastructure. While Chile has grown at an average of more than 5 per cent, neither Mexico nor Brazil in recent years has been able to achieve expansion approaching half that rate. Mexico’s stability is now underpinned by growing integration with the US economy, but to equate the North American Free Trade Agreement with European-style convergence is overly optimistic.

The result is that while neither country is likely to imitate Venezuelan-style extremism, nor are they are as politically stable as Santiso suggests. Chile’s achievements signal a way forward for the region. Mexico, Brazil and most of the rest of Latin America, however, are still some way from emulating them.

The above is a good analysis of the region in general and its star performer in terms of economy and political maturity in particular