Politics, Business & Culture in the Americas

Democracy’s Growing Pains

Reading Time: 10 minutesFernando Henrique Cardoso, former president of Brazil, and Ricardo Lagos, former president of Chile, in a candid conversation with Moisés Naím, Editor-in-Chief of [i]Foreign Policy[/i]. Two of Latin America’s leading political figures confide that one of the region’s greatest challenges in political polarization.
Reading Time: 10 minutes

Twelve Elections: Two Messages

The rounds of elections in 2005–2006 carry two messages, the presidents say. The first was positive: Latin Americans remain committed to elections as the path to political change. Even the sharp political differences, clashing political visions exposed by the electoral campaigns, and the persistence of stark inequalities did not dampen citizens’ faith in the democratic process.

President Lagos believes that the depth of voter participation from Latin America’s urban slums to its remote villages demonstrated that the region has achieved a hard-won political maturity. Respect for democratic institutions now appears to be hemisphere-wide. This holds true even where breathtakingly close election results were interpreted by some observers as a sign of increasing polarization (reinforced by the second-round contests in Chile, Peru, Ecuador, and Brazil). While a few races were decided by a literal handful of votes, the majority accepted the final decision with equanimity—often following confirmation by international observers—in effect, agreeing to wait until the next time. Equally noteworthy was the fact that the losers (with the possible exception of Andrés Manuel López Obrador in Mexico) read the results as a signal from voters to re-examine their platforms or to repackage their ideas in hopes of being competitive when they meet the electorate again.

The second message from the elections is that one ideological size no longer fits all. According to President Cardoso, the election results reflected the region’s political diversity. Latin American nations chose different paths towards modernization, globalization, integration, and democracy. Cardoso offers some pointed examples. Peruvian voters, in electing the pro-market and centrist Alan García, rejected the anti-globalization, anti-U.S., and pro-state-intervention approach espoused by his Venezuela-backed rival. Mexicans made a similar choice, although the electorate was more closely divided. In many of the hemisphere’s elections, voters demonstrated a results-oriented mentality that often translated into a desire for improvements in public services. Brazilians, for example, displayed a shrewd pragmatism when they sent their elections into a second-round runoff between PSDB candidate Geraldo Alckmin and PT President Luiz Inácio Lula da Silva (Lula). While Lula handily won the second round, Brazilian voters made clear they wanted less ideology from their government and more attention to specific problems.

In some cases, the results hinged on the personality of the candidates. In Bolivia, the unprecedented election of indigenous candidate Evo Morales signaled a popular desire for a leader who reflected the background and values of the majority. The risk, of course, is that Morales’ victory raised expectations that will be difficult to satisfy, says Cardoso. Meanwhile, in Nicaragua, despite his apparent moderation, the election of former Sandinista President Daniel Ortega represented a throwback to the past.

But even where sharp ideological divisions remain, President Cardoso believes that they do not have to be an impediment to political and economic stability. To illustrate the point, he cites Spain. Spanish political parties, he says, are deeply polarized, but there is a common, underlying agreement that integration with the global economy is key to Spain’s economic and political progress.

More than ideology, President Cardoso believes the 2006 elections revealed a different type of division. What is emerging, according to Cardoso, is a troubling schism between those who invoke a romanticized past to promise miraculous change, and those who have a clear appreciation of today’s global realities.

The Past Isn’t What It Used To Be

President Lagos, on the other hand, believes too much has changed in the political context for this to be a significant threat. “The Cold War, with its tragic consequences for progressive politics and dreams in the region, is long over,” says Lagos. What matters now, he says, are the economic factors that are forcing countries to adapt to Latin America’s new realities.

In the 1960s, economies grew for two reasons that at the time dovetailed nicely: first, the world-wide economic expansion; and second, the savings rate enjoyed by Latin American countries. This savings rate was transformed into economic investment that was in turn plowed back into local economies. Since few countries were governed by democratic regimes at the time, there was little social pressure for public expenditures. Governments concentrated budget surpluses in industrial investment that paid dividends in the expanding world economy.

But this honeymoon period came to an end in the 1980s. With the oil price crunch, inflation (in some cases hyperinflation), and the debt crisis, Latin America’s period of growth closed with a resounding thud. Debt-burdened governments had to redirect tax revenues from industrial investment to servicing their debt. Many countries have still not recovered from this shift away from public savings. Brazil, for example, has an investment rate that tops out at 20 percent of gross domestic product—quite low by international standards—even though it enjoys economic stability. Limited capital investment straps the capacity of a government to attract private capital.

The so-called Washington Consensus of the 1990s was supposed to solve the problem. Supporters of the consensus’ neo-liberal approach advocated rigorous fiscal policies as the key to macroeconomic stability and open markets. But, President Lagos argues, the reforms themselves were “reductionist.” While macroeconomic reforms are certainly important factors for economic growth, they do not meet the larger challenge of tying growth to social development through institutional reform and more enlightened public policies. Making matters worse, some basic changes in the management of Latin American economies, such as guarantees for the enforcement of contracts and the establishment of independent, effective government regulatory agencies—both necessary to attract long-term investment—have largely not occurred. “Progress” in Latin America, concludes President Lagos, has therefore “meant reducing the number of poor from 213 million people to 209 million people, of whom 80 million live in extreme poverty. This is slow progress indeed, and it has left the population understandably frustrated.”

President Cardoso believes that this frustration “transcends left or right or populism of one side or the other.” The frustration, he adds, is aggravated by the failure of Latin America’s emerging democracies to produce truly republican, representative governments—with a clear separation between the public and private realms —and by the persistence of corruption.

Ironically, Chile, considered to be the model for economic growth in the region, pursued a different course within the Washington Consensus. In addition to ensuring that the basic elements of fiscal stability, trade liberalization, and a reduced role for the state in the economy were in place, Lagos says, Chile sought to orient public policies towards the most neglected sectors of its population. The result: Chile cut poverty in half. Perhaps more important, however, is that by addressing the interests of the marginalized, Chile avoided the social upheaval and divisions that accompanied the implementation of pro-market reforms in other countries.

An important point here is that other Latin countries’ abilities to attract effective investment or make progress in closing the income gap have been hampered by the absence of the high levels of social cohesion characteristic of Chile. Nations where democratic institutions work effectively, and where the risk of social upheaval is correspondingly low, enjoy the kind of stability that attracts investment.

Unfortunately, stability does not necessarily have to be linked to democratic institutions in order to act as a magnet to investors. Both presidents noted that the best contemporary example of this is China, but that the attractiveness is illusory.

For the last two decades, China has offered investors the kind of guaranteed stability that Latin America lacked. China’s autocratic, single-party system has been able to channel resources to economic goals without having to answer to a formal opposition.

But before Latin Americans rush to emulate the Chinese model, the presidents urge caution. The reality is more of a bandwagon effect than a rational calculation of the market. China still has yet to undergo the strains of fiscal adjustment and migration. President Cardoso expressed this sentiment, echoed by Lagos, saying that investor “expectations in China are unrealistic. . .[while at the same time] there has been an exaggerated pessimism regarding Latin America” in the investor community.

Both presidents are bullish about the investment opportunities offered by Latin America’s developing democracies. But they add, significantly, that the region must go beyond its rich historical legacy of pluralism to begin the process of integration, both within national borders and throughout the continent. There is, for example, a pressing need to expand and improve the region’s often neglected infrastructure—ports, waterways, airports, and highways—so that the long-ignored interiors of many Latin countries can be linked with the rest of the region. This would entail substantial investment, but it is a key step in making the region competitive in the global economy. Similarly, Latin America needs a hemisphere-wide energy grid that would ensure stable and less expensive supplies. That will also require substantial internal and external investment, and governments, especially the largest ones, should waste no time in forming a broad consensus in their countries to make this happen.

The Corruption Challenge

Corruption is another well-publicized challenge facing the region. Not only does it have corrosive effects on political and economic planning, but it has led to rising public resentment. Recent attention on corruption without the corresponding prosecution has worsened the problem at a popular level. In the face of a series of well publicized and documented corruption cases, the failure of governments and judiciaries to prosecute and jail high-level politicians and businessmen has increased the perception that all politicians are corrupt, tainting the overall legitimacy of politics.

All the same, Cardoso warns that to think that “the elimination of corruption is the only way to resolve Latin America’s problems simplifies the issue.” In the midst of a popular panic about corruption, Latin voters should be wary of “magic bullets” that end up aggravating the problem rather than resolving it, the presidents say. President Lagos warns that some Latin politicians, exploiting the issue for its demagogic appeal, “stir things up without strong proof.” The result, in many cases, he argues, is that “these leaders themselves abuse the powers that access to the state and its economic resources gives them.” Instead, corruption is best addressed in Latin America by encouraging more open societies, a thriving free press, and a non-politicized judicial system.

High levels of corruption, particularly in the judicial system, have allowed international criminal networks to flourish, leading to an alarming rise in crime. Narcotics-related violence and corruption constitute a grave threat to the region’s stability, the presidents say. Violent gangs threaten to overrun São Paulo.

All this has led to a sense of desperation, says President Cardoso, “reminiscent of public attitudes towards the inflation of previous decades.” And like inflation, Cardoso believes that crime will finally be addressed when politicians recognize there is a political advantage in tackling it seriously. That now seems to have occurred in Mexico. In Mexico, newly elected President Felipe Calderón has responded to public anxieties over crime by moving against drug cartels, which he calls the greatest threat to national security.

Nevertheless, Lagos worries that what is already a serious crime problem is often worsened by inflammatory media coverage that threatens to eclipse other parts of governments’ agendas. Even in Chile, where the problem is fortunately less severe, President Lagos says that the prominence of crime and public security in national media coverage has been out of proportion to its danger.

What would an effective crime-fighting strategy look like? From the responses of Presidents Lagos and Cardoso, a three-step policy emerged that takes into account the complex structural and social origins of Latin America’s crime problem. The strategy would first of all require comprehensive reform of police and national security structures, beginning with the training of more effective and professional law enforcement agents. National security structures established in earlier periods for reasons that were related more to internal politics than to crime-fighting are in dire need of an overhaul. In many countries, that means improving coordination between police forces at the municipal and state levels with national agencies, including the military. Modernizing both sectors—police and national security—will require substantial new public investment.

A second step in the strategy borrows from an idea that has proved successful in other countries: community policing. In the Latin American context, this would mean involving the grassroots social or religious networks that have emerged among the hemisphere’s diverse and often marginalized populations. President Cardoso observes that economic and social diversification not just in Latin America but globally has “created micro-sectors of power” or fragmented niche communities, where traditional top-down methods of enforcing law and order, and generating collective action for change no longer work. Identifying and mobilizing these networks would give governments a modern and effective social tool for crime-fighting. Cardoso points, for example, to the potential power of the “growing Pentecostal movement” across the hemisphere as an agent for grassroots change.

Third, the international dimension of the narcotics trade and other trans-border criminal activities requires Latin governments to engage the U.S. and other major consumer markets overseas. Washington has still not adequately addressed the consumption side of the drug equation, says President Cardoso. One potentially innovative method of addressing this, Cardoso points out, was the recent reform in Brazil to criminalize the sale of narcotics but not possession.

Prolonging the Honeymoon

Both presidents, with a combined 14 years of experience in governing their nations, told Americas Quarterly that the hard-earned lessons they learned in office demonstrate how the exercise of power and practice of politics have changed over the last decade in Latin America. With legislatures emerging as prominent and powerful players in modern Latin American democracies, leaders need to spend more time and effort building a relationship with them if they want to carry out their priorities. Failure to do so means the failure of a president’s agenda. Political honeymoons are especially short today.

A president must also not lose contact with the people. He or she must, above all, be an educator, not just explaining government policies to the people but the reasons for them. President Cardoso says he pursued this course while introducing the Real Plan in Brazil. But by his own admission, such direct communication was not adapted with the same level of intensity during Brazil’s subsequent privatization debate. As a result, he believes, his government failed to generate deep, long-term popular consensus and support around privatization.

To their successors in office and elsewhere in the hemisphere, the presidents offer an important piece of advice: if you want to develop support for your policies, you need to articulate your goals clearly and concisely. Setting a minimum of four to six goals that can be readily understood by the people, and for which you are willing to be accountable, says Lagos, is crucial.

A key component of this is conveying that good macroeconomic management is non-partisan. There is no left or right approach to establishing the economic and political security essential for economic development and growth. To this end, presidents must search for the right balance between growing the economy and redistributing wealth and production. Doing just one is neither sufficient nor sustainable. There is no easy formula for achieving this balance. But it is worthwhile remembering that Latin American voters today vote with their wallets, not their hearts.

Integrating and Growing the Region

Latin America today is awash with debate about how closely the hemisphere’s economic and political future should be tied to the U.S. and about the kinds of political and trade alliances inside the hemisphere that will strengthen the region. While these represent serious challenges, President Cardoso believes that resolving any or all of them depends upon how far individual countries have progressed along the road to achieving national and regional consolidation.

According to Cardoso, the relationship between international economic integration and the incomplete process of national integration is often overlooked. Certain sectors of Mexico, particularly in the north, have integrated with the U.S., but the southern regions of Oaxaca and Chiapas remain isolated and largely unconnected with the national economy—and represent a brake on the nation’s economic progress. Similar geographic imbalances are evident in Ecuador, Bolivia, Guatemala, and, to a lesser degree, Peru. Such geographic, cultural and social cleavages prevent countries from exploiting the advantages of global markets. In Venezuela, where the petroleum industry sped the process of national integration, the government has now tipped the balance towards the rural and poor south in order to project itself as a champion of the marginalized and excluded populations. Internal imbalances are also blocking the process of integration with the global economy in Central America and other Andean countries. Central America in particular has the double task of resolving its domestic cleavages before it can fully benefit from its trade agreement with the U.S.

Meanwhile, resolving the equally tough challenge of regional integration is crucial to the future of the Southern Cone countries. Will Brazil join Argentina in the movement to unify the South or will it strike out on its own to be a regional and global leader? Brazil cannot hang its economic future on the hemisphere alone if it is to develop to its fullest potential, says President Cardoso. Currently, Brazil sends 25 percent of its exports to the U.S., 25 percent to Europe, 25 percent to Asia, and the remaining 25 percent to Latin America. Fifty per cent of the total export base consists of manufactured goods. But the content of exports to those regions varies. Raw materials and foodstuffs make up the bulk of Brazilian exports to China, while manufactured goods dominate Chinese exports to Brazil. To expand not just exports but its export base, Brazil needs to integrate itself commercially with all of these regions and not depend on Mercosur or Asia, or the U.S.

Both presidents tempered their advice with a note of humility, admitting that even the wisdom that comes with experience often looks like hindsight. But it is a sign of how far the hemisphere has come that these former leaders were willing to rise above the often tempestuous domestic politics of their countries to think regionally and globally. “Putting up walls will not provide answers,” cautions President Lagos. Instead, integration and the construction of institutions and respect for norms is the greatest task for governments in the region, says Lagos.

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