DOCUMENTO DE TRABAJO N 29

Latin American Democracy after the Lost Half Decade (1997-2002).

How to Rescue Political Science from the Third Wave of Democratization?

Marcelo Cavarozzi
Diciembre de 2007

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Marcelo Cavarozzi
2007

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Latin American Democracy after the Lost Half Decade (1997-2002):

How to Rescue Political Science from the Third
Wave of Democratization Approach?

Marcelo Cavarozzi
Dean
School of Politics and Government
Universidad Nacional de San Martin
Buenos Aires, Argentina
Revised Version of the
Draft prepared for the Conference
organized by the Center of Strategic
Studies (CSS) and the Arab Center for
Development and Futuristic Research
(ACDFR) in Petra, Jordan, 1997

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I. Introduction
In the 1970s Latin America became one of the main battlefields of the
global confrontation between Revolution and Counter-revolution. The conflict
between insurgent movements and maximalist socialist parties, on the one hand,
and right wing conservative governments, whether military or civilian, on the
other, grew in intensity and protractedness. The left made some advances: in
1970, Chiles Unidad Popular won the presidential elections, with Salvador
Allende leading the first Socialist-Communist coalition to achieve power in the
world through parliamentary means while advocating the abolition of capitalism;
in Uruguays the leftist Broad Front managed in 1971 to break the monopoly of
the two traditional catch-all parties which had governed the country throughout
the 20th Century sharing the spotlight with an initially popular Robin Hood-like
urban guerrillas, the Tupamaros; Argentinas Montoneros sudden irruption with the
1970 assassination of a former military president seemed to indicate that
Peronism his old leader includedwas veering to the left; in 1979 Nicaraguas
Sandinista guerrillas defeated the National Guard created with the support of
the United States in the 1930s-- and ousted the corrupt regime of Anastasio
Somoza Jr.; the following year the Farabundo Mart National Liberation Front
was founded in El Salvador and immediately achieved an impressive strength of
6,000 armed combatants; after a dozen years of gestation in the southern, and
largely Indian, department of Ayacucho, Sendero Luminoso emerged in Per in
1980 soon to become the most formidable, as well as the most lethal, guerrilla
movement of the continent.
However, the tide of the 1970s was overwhelmingly moving in the
direction of the right. In Mexico, in 1971 the PRI administration under a
progressive presidente, Luis Echeverra, methodically eradicated the rural
guerrilla groups of Guerrero and neighbouring states resorting to the well known
formula of illegal repression combined with cooptation. The same year, the
Bolivian army put an end to the brief nationalist pro-union dream of General
Torres with the installation of General Banzers dictatorship. But the most
dramatic shifts unfolded in the Southern Cone where successive military coups in
1973 interrupted the long established constitutional democracies of Uruguay and
Chile in order to inaugurate sine die dictatorships. Both the Uruguay high
command and general Pinochet openly proclaimed that their primary goal was
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the extermination of communists and their allies at any cost. An equally brutal
military junta took power three years later in Argentina easily removing a
weakened Peronist government which had proved unable to control inflation
and its own internal disputes: thirty thousand desaparecidos were the lethal
outcome of the decentralized pattern of state terrorism implemented by the
dictatorship. Reviewing the regime changes of the 1970s, thus, the balance
showed a continent where the vast majority of the population was under the rule
of conservative pro-capitalist regimes, several of them explicitly claiming that the
rule of law was just an obstacle in the crusade against communism. In the year of
1980, representative party democracy was just confined to Costa Rica and oil-rich
Venezuela.
Last but not least, the decade was closed with the victory of Ronald
Reagan in the presidential elections in the United States, one of whose closest
advisors, the expert Latin Americanist Jeanne Kirkpatrick, advocated supporting
authoritarian anti-communist dictators, and confronting totalitarian left-wing
ideologues and regimes. This vision implied, obviously, abandoning the human
rights concerns that had prevented the previous administration of Democrat
Jimmy Carter from overtly supporting military dictatorships both in Central and
South America.
On the other hand, and more fundamentally, the attempt to cast
contemporary Latin American actors and regimes as left, right, and center veils
two other processes which began to unfold in the 1970s. These processes have
been reshaping the countries of the region in a more substantial way than the
conflicts, or the oscillation, between right and left.
The 1970s became the stage where these two other processes, which
actually were going to affect more significantly the future of Latin America than
the conflict between right and left, were beginning to reshape the countries of the
region. In part, these processes were not unrelated to trends also prevailing in
North America and Europe. However, they were too the manifestation, and at
the same time the cause, of a major domestic phenomenon: the breakdown of
the socio-economic and political model which had prevailed, at least in the most
advanced Latin Americas countries, since the inter-war years. I have defined this
model as the state-centric matrix. 1 Lets examine the main features of these
processes.
1

I have developed the concept of state-centric matrix in Beyond Transitions to Democracy in

Latin America, Journal of Latin American Studies, 1992, 24 (3), and in Politics: A Key for the Long
Term in South America, in Latin American Political Economy in the Age of Neoliberal Reform:
Theoretical and Comparative Perspective for the 1990s, eds. William C. Smith, Carlos H. Acua and
Eduardo A. Gamarra. 1994. Coral Gables, Florida, North-South Center Press at the University of
Miami.

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II. Latin America in the last quarter of the 20th Century

Beginning in 1971 the increasing disorganization of the international
economic system would become the most relevant force in irreversibly wearing
down the economic and political fabric of the regions state--centric societies.
The United States abandonment of the gold standard decided by Richard Nixon
in 1971 was a distinctive indication of the radically declining capabilities of the
advanced capitalist countries, and of their states, to govern international finance.
In part as a result of the evolving strategies of the major corporations, and in part
as a result of the changing economic policies of the United States and the United
Kingdom under Ronald Reagan and Margaret Thatcher, finance became global
and turned to be almost exclusively ruled by markets. In other words, private
capital flows and the decisions of investors and money managers grew capable of
overwhelming the strategies of nation-states, and the directives of official
agencies including the International Monetary Fund and the World Bank
making international financial markets increasingly resemble a free-for-all.
The significant prices increases decided by the Organization of Petroleum
Exporting Countries created in 1974 further contributed to the generation of a
high liquidity, and enormously volatile, regime. In the fluid context of the mid
and late 1970s, liquid cash was first deposited in New York and London banks,
and it was later re-circulated to Latin American (and other Third World)
countries in the form of balance of payments loans. These loans were initially
very attractive; real interest rates were extremely low in the (First World)
inflationary context of the decade. For different purposes, almost all Latin
American countries fell into the debt trap and they increased their foreign
exposure in a dramatic fashion; Argentina and Chile in order to finance orthodox
anti-inflationary policies (and military rearmament as well); Brazil promoting its
last developmental spur; Venezuela, and later Mexico, proving incapable of
escaping the lure of irresponsible lubricated fiscal spending. 2
The mirage of inexpensive foreign financing dissipated abruptly in 19801981; under the influence of Paul Volcker head of the United States Federal
Reserve-- real interest rates jumped from near zero to close to 10 percent. The
flow of external funds was completely cut, and the creditors soon began to
demand punctual servicing of the debt and repayment of the principal. To make
2

Beginning in the late 1970s Mexico again became a net oil exporter as a result of the discovery of
vast fields in the Gulf of Mexico. (Many analysts forget that Mexico had been the worlds second
exporter of oil until the 1930s). During the following decade both Mexico and Venezuela managed
to become paradigmatic examples of Dutch Disease. The huge influx of foreign exchange as a
result of oil exports largely contributed to fiscal irresponsibility and the dramatic increase of foreign
debt.

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matters worse, the fiscal burden was significantly increased because the public
sector was forced to assume the loans contracted by overexposed private firms,
both domestic and foreign-owned. Latin American states were thus faced with
the radical reversal of its role vis--vis their societies: after being the main
instrument for subsidizing firms and redistributing income during the post-war
period, they became the key channel for pumping out domestic resources in
order to service the foreign debt. Throughout the 1980s, before and after the
default of 1982, Latin America became a net exporter of capital, and, from the
first time since the 1930s, the regions gross domestic product experienced a
sharp decline. Hence, the regions largest countries, which had been autarkic
during half a century, were suddenly immersed in the globalization process. But
Latin America was globalized through its indebtedness; rather than immersed,
the continent was drowned by its exposure. The United Nations Economic
Commission for Latin America (ECLA) aptly labelled the 1980s as the lost
decade for the region.
The second process was initially less apparent than the generalized fiscal
bankruptcy and the catastrophic effects it had on economic growth and income
distribution during the last quarter of the 20th Century. But it was closely
interconnected to it. Although the phenomenon was largely overshadowed by the
wave of military coups that plagued the Southern Cone, in the 1970s Latin
America started to become democratic.
This democratization process was not paradoxical simply because it was
inaugurated under the shadow of Pinochet and his Southern Cone counterparts
dislodging various constitutional regimes from power. Democratization was
paradoxical in other ways. Contrarily to what most text books on transitions
assume, in the late 20th Century representative party democracy was not the
alternative of authoritarianism in Latin America. Starting in the 1980s democracy
rather filled the void left by the exhaustion of a system that could be defined as
politicized statism. In the longue dure, and even including the ultimately brief
interludes of sine die military dictatorships which Guillermo ODonnell called
bureaucratic authoritarianism, the political formula of the state-centric matrix
mentioned above was neither democratic nor authoritarian. This formula had a
hybrid nature, within which authoritarianism and democracy were, at the same,
contradictory and complementary. The defining element of this political formula,
thus, was (with the rather marginal exception of Uruguay) an uneasy tension
between democracy and authoritarianism. 3 In other words, although the
3

The rule of law and representative parliamentary democracy prevailed in Uruguay during the first
three quarters of the 20th Century. However, Uruguay --a small country of 3,000,000 people; i.e.
well under one per cent of Latin Americas population stood apart from the major trends

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formulas democratic and authoritarian components tried to suppress each other,

they ended up coexisting, and even complementing each other. The result was a
political formula in its own right, i.e. an institutional and non-institutional mix
that pendulated between the two poles. This political formula, which I define as
politicized statism, became rather resilient. But its strength depended on relatively
volatile attributes: the capacity to deliver pay-offs to social actors, and the appeal
of its founding myths, rather than on the legitimacy of its procedural
mechanisms.
. The hybrid formula of politicized statism grew increasingly weak during
the 1960s and the 1970s. As I have indicated, beginning in the early 1970s statecentric societies failed to adapt to the changing conditions of the world economy;
as a consequence its capacity to distribute pay-offs was greatly diminished. Not
accidentally, this trend coincided with the weakening of their founding myths.
Some earlier and some later, but powerful myths like the Mexican Revolution,
Uruguays Batllismo, Venezuelas Adeco-Copeyano bipartisanship; Argentinas
Peronism, Brazils national developmentalism, and Chiles party-centered
democracy gradually faltered. 4
Why do we argue, against the evidence suggested by common sense, that
Latin Americas democratization actually started in the 1970s? Largely because
beneath the dramatic surface of military takeovers and the continent-wide
confrontation between leftist insurgency and diehard counterinsurgency, in
January 1974 the largest and most populous country, Brazil, was beginning to
travel a 16-year prolonged journey towards full political democracy. And indeed
the peculiar Brazilian itinerary was more representative of the way in which the
processes of democratic installation and consolidation, on the one hand, and
market reforms, on the other, were going to become intertwined in the continent
unfolding in the rest of the continent. Chile, has also been defined by some authors as a political
democracy since the advent of the Popular Front in 1938. However, as Manuel Antonio Garretn
has argued (2003), the exclusion from voting of peasants and urban poor because of illiteracy, and
the manipulation of the electoral system until the late 1950s was a major limitation. Thus, its
definition as a restricted democracy until the 1960s reflects more adequately the nature of the
Chilean political system. Incomplete Democracy. Political Democratization in Chile and Latin
America. Chapel Hill, N.C (United States) and London: The University of North Carolina Press; page
100.
4
The 1910 Mexican Revolution put an end to oligarchic rule and it became the founding ground of
the Partido Revolucionario Institucional (PRI) which uninterruptedly governed the country until
2000. In Uruguay the brief 1904 civil war was won by the national army under the command of
president Jos Batlle y Ordez, whose role in the countrys history could be equaled to Turkeys
Mustafa Kemal. His Colorado party was the cornerstone of Uruguayan democracy until 1973.
Finally, adecos and copeyanos were, respectively, the members of Accin Democrtica (AD) and
COPEI, i.e. the two political parties that democratically governed Venezuela from 1958 to the early
1990s and the advent of Hugo Chvez.

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as a whole in the late 20th Century. The Brazilian journey to democracy was
indeed quite long; the transfer of power to a civilian leader from the opposition
would take place as late as in 1985, and the first democratically-elected president
took office five years later. However, as I already hinted, the complex Brazilian
democratization began when the president, General Ernesto Geisel, decided to
relax the more repressive aspects of the military dictatorship. These actions came
to be known in Portuguese as the distenao. 5 The transition would later go
through the stages of abertura (i.e. opening), controlled democratization, and
finally, the formation of a system that would qualify as a moderately successful
competitive party democracy. And it was precisely the tortuous nature of the
Brazilian transition to democracy, that ended with the 1990 inauguration of
Fernando Collor de Mello as president and its rapid demise, which best
exemplified the course of Latin Americas political and economic changes of the
late 20th Century.
To put it in a nutshell the main arguments of this paper are that:
1) Latin Americas contemporary political democracy did not emerge as a
result of the defeat, or the collapse, of pre-existing authoritarian regimes; rather it
was born in the context of a crumbling hybrid political formula. Many
ingredients of this state-centric matrix did not vanish altogether; on the contrary
they survived, and thus decisively shaped the contours of the new democracies;
and,
2) With the partial exception of Chile, market-friendly state actions
promoting deregulation, privatizations and economic opening were not
implemented as a result of a process that could be minimally characterized as a
governmental plan, or even as a relatively coherent elite-inspired reform agenda.
Rather, the adoption of market-friendly policies consistent with the ongoing
process of globalization experienced by the world economy since the late 1970s
was the last resort in the light of severe hyperinflationary crises especially in the
cases of Bolivia, Argentina, Peru, and Brazil coupled with unsurmountable
balance of payments deficits. All Latin American countries, with the exception of
Colombia, experienced the second phenomenon during the 1980s.
III. The paths of market reforms

In a fundamental sense, Brazils distenao was the precursor of the transitions from
authoritarianism of the Southern European triad Greece, Portugal, and Spain.

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The economic reforms implemented during the 1990s were directly

inspired by the suggestions/demands put forward by Secretary James Baker to
the Latin American governments when they asked for the refinancing/bail out of
their debts. The so-called Washington Consensus only gave an academic patina
to the code of good behaviour elaborated in 1985-1986 by James Barker as a
precondition for persuading the creditors to accept the emission of bonds
guaranteed by the United States government. 6 Initially, the new democratic
governments under the informal command of the presidents of Brazil and
Argentina, Jose Sarney and Ral Alfonsn, attempted to lead the formation of a
so called Club de Deudores (Debtors Cartel); they soon failed; each country was
thus forced to separately negotiate the re-financing of the debt from an extremely
weak position. 7 What was the core of the message that Baker, and the
International Monetary Fund as well, gave to the grieving South American
leaders? The savvy Texan politician told Sarney, Alfonsn, Alan Garca, and other
heads of state, that their countries were not only suffering a liquidity crisis, i.e.
one that could be solved with the traditional fiscal adjustments that the IMF had
inspired since the early 1950s. The conventional stand-by agreements signed with
the Fund largely rested in reducing state expenditures and increasing the fares of
public transportation, power and phone state enterprises, and other analogous
measures.
Baker added that the major challenge faced by Latin America was, in fact,
associated to an even more serious solvency crisis. Inspired by the growing
appeal of the neo-liberal economic philosophy, the Treasury Secretary argued
that Latin American societies needed to radically deactivate the state-centric
economic model that had prevailed since the Second World War. Neo-liberal
economists advocated that the long term sustainability of monetary stability and
external equilibrium required structural adjustment, i.e. the reduction of the size
of the state. But the leverage of the neo-liberal vision was not related to its
theoretical appeal; in the late 1980s and the early 1990s the majority of the Latin
6

James Baker has been a resilient Washington operator. Originally, Baker was a member of Lyndon
Johnsons Democratic party in his native state of Texas, but he joined the Republicans in the late
1960s. He became an influential figure in several cabinets of Ronald Reagan and George Bush
between 1981 and 1993, as Secretary of State, and Secretary of the Treasury. He has recently
resurfaced in the forefront of Washington politics; George W. Bush appointed him as coordinator of
the so-called Iraq Panel. In turn, John Williamson, an economist, wrote the document that
popularized the policy recipes of the resourceful Texan politician.
7
Actually, the so-called Baker Bonds were never accepted by the European and United States
banks which held the majority of the debt. In contrast, Bakers successor, Nicholas Brady, managed
to make his bonds more credible in the eyes of the major creditors. He won international praise,
as his biographers would later put it, because his Plan was successful in defusing the $1.3 trillion
Third World (largely Latin American) debt crisis.

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American leaders had to extricate their societies from the syndrome of chaotic
adjustment. 8 The way the political economy was evolving provided the
explanation: hyperinflation and the debt strangulation had caused a major
recessionary process; recession, in turn, resulted in the reduction of the external
gap, due to the fall of imports. The improvement of the balance of payments,
however, could not be attributed to the success of economic policies: In a rather
paradoxical twist, external adjustment was caused by the failure of governmental
actions. The traditional tools of economic policy-making had become absolutely
helpless to manage the most basic transactions: the currency evaporated;
devaluations were ineffective; and the Olivera-Tanzi effect on tax revenues left
the treasuries empty.
The syndrome of chaotic adjustment contributed to a drastic delegitimation of the state, inasmuch as the public sector was incapable of
rendering the most basic services. In this dismal context, a void of political
authority was generated, and it was not surprising that the vast majority of
incumbent presidents saw their parties being trashed in the next round of
elections. The most relevant examples of this trend were the defeat of the leftwing coalition headed by president Siles Suazo in the 1985 Bolivian elections, the
victory of the opposition Peronist party in the 1989 presidential elections of
Argentina, and the surprising electoral success of two political newcomers in the
1990 presidential elections of Peru and Brazil, Alberto Fujimori and Fernando
Collor de Melo. Furthermore, both in Peru and Brazil, the presidential candidates
of the outgoing power-holders, i.e. APRA and the PMDB, received less than ten
per cent of the vote.
And in fact, the successor of Siles Suazo, Vctor Paz Estenssoro became
Latin Americas first democratically elected president to launch a Nueva Poltica
Econmica or NEP (i.e. a new economic policy) inspired by the recommendations
of the neo-liberal gurus. Like other new presidents who came to power during
the late 1980s and adopted the neo-liberal creed, like Argentinas Carlos Menem,
Mexicos Carlos Salinas and Venezuelas Carlos Andrs Prez, Paz Estenssoro
was a prominent member, actually the founder, of a party which had promoted
dirigiste policies since the 1940s. The Movimiento Nacionalista Revolucionario
(MNR) had engineered an anti-oligarchic revolution in 1952 which implemented
a radical agrarian reform and nationalized the tin mines. The new kind of selfremade politicians all former ideologues of national-statism and practitioners of
8

Cf. Damill M., J. Fanelli y R. Frenkel (1994), "Shock externo y desequilibrio fiscal. La
macroeconoma de Amrica Latina en los ochenta. Argentina", Documento CEDES N 105, Buenos
Aires, Argentina.

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populist clientelism were the protagonists of a formidable ideological leap into

liberal anti-statism. The implementation of the required policies often included
severe repression of the unions, firing of public employees, and closing down of
deficit-ridden public enterprises. 9 The erstwhile populists had undertaken
unpopular measures of this sort in the past; the Menems and the Salinas of the
1980s belonged to the breed of politicians who would be capable of maintaining
an even kill in the face of pressure. However, the crucial difference was that this
time they dismantled unions (and especially in Bolivia and Mexico jailed and
killed scores of their leaders) in the name of, and with the rhetoric, of the
economic orthodoxy they had condemned during their entire political careers. In
fact, the populist-turned-into-orthodox leaders probably overacted the neoliberal
libretto, because they felt that they had to erase the political sins of their pasts in
order to convince their new partners.
The reason for the turnaround was quite clear; the presidents did it for
political survival. All of them needed to restore political authority in the eyes of
the main actors of the drama of chaotic adjustment: foreign creditors, the United
States government, domestic firms in the brink of bankruptcy, and last but not
least, the populace facing inflationary levels that threatened bare survival. And in
the medium run, most of these hyperpresidents achieved success in reaching
their main objectives. 10 First, and foremost, they restored monetary stability with
9

Perhaps the harshest structural reform was the one carried out in Bolivia by Paz Estenssoro.
Public sector employment was cut from 245,000 employees in 1985 to 204,000 in 1988 and state
companies went from 100 to 56. Public deficit was reduced from 15% to 2.3% of the Gross
National Product in one year. (Juan Antonio Morales. 1994. Democracy, Economic Liberalism, and
Structural Reform in Bolivia, in William Smith, Carlos Acua & Eduardo Gamarra (eds.) Democracy,
Markets and Structural Reform in Latin America. New Brunswick (U.S.A) and London: Transaction
Publishers.
10
In a previous article I have argued that the hyperpresidents were able to establish a sort of
complicity with the popular masses that reinforced the populations political apathy. After
experiencing dramatic declines in their standard of living, as well as suffering the effects of
hyperinflation, the popular sectors and segments of the middle class longed for some who would
get things done, without requiring their participation beyond the act of voting. The new
caudillos were shrewdly attuned to this collective mood and promised to accomplish their objective
while arguing that political organization and mobilization were counterproductive. They also
favored a style of leadership in which they attempted to maintain the initiative in a exclusionary
fashion, thus permanently generating political innovations linked to an increasingly absorbing and
exceedingly centralizing presidency (Last but not least) the practices of hyperpresidents like
Fujimori, Menem, and Salinas have rekindled and intensified a trait already present in the statecentric matrix: a significant degree of corruption. Marcelo Cavarozzi, 1994. Politics: A key for the
Long Term in South America in William Smith, Carlos Acua & Eduardo Gamarra (eds.) Latin

American Political Economy in the Age of Neoliberal Reform. Theoretical and Comparative
Perspectives for the 1990s. New Brunswick (U.S.A) and London: Transaction Publishers; pages 146-

147

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unprecedented speed. 11 Second, Latin American economies overcame recession,

with some of them reaching relatively high rates of growth during most of the
1990s. Third, investment in infrastructure especially in energy, transportation,
and communication-- reached high levels, a trend that contributed to increase the
degree of competitiveness of selected export sectors.
The virtuous circle of the neo-liberal began to weaken in the mid-1990s.
The Tequila crisis hit Mexico in late 1994 at the time of Salinas transfer of
power to his fellow party member, albeit unlikely successor, Ernesto Zedillo.
Lenders clearly perceived that Mexico would not be able to continue servicing its
debt since domestic investment and consumption was financed through an
annual external deficit of over thirty billion dollars. A run on the peso forced an
initially disorganized devaluation; however after the replacement of minister of
Finance Serra Puche, the United States government decided to intervene and it
swiftly organized the hitherto largest bail-out of the history of world finances.
Under the leadership of the president Clinton, Mexico received a contingent loan
of over fifty billion dollars, including ten billion of the United States Emergency
Stabilization Fund As a result of the installation of the United States protective
umbrella and the rise of Mexicos (cheaper) exports during 1995 the pesodollar parity went from three to eightthe country was able to recover its
relatively moderate rate of growth. Most of the other countries of the region,
which had been hardly hit by the Tequila effect, were able to restart growing. The
only economy of the region which avoided the dramatic downturn of the
mid1990s was Chile.
Anyway, the relatively strong growth rates of the post-Tequila triennium
proved to be little more than a mirage. In 1997, the crisis of Thailands currency
fueled the loss of confidence in Malaysia, and immediately in Indonesia and
South Korea; the South East Asian crisis was soon followed by the partial
collapse of the Russian economy. 12 Beginning in 1998, the growing volatility of
the worlds financial markets reached Latin Americas beaches. After the
devaluation of the Brazilian real in early 1998, several of the regions economies
began to experience the mounting loss of confidence of investors and, hence,
serious threats of de-stabilization. This pervasive trend culminated with the
largest public default of worlds economic history, i.e. Argentinas economic and
11

In Bolivia and Argentina, inflationary rates went from levels of 8,000 % and 6.000 % per year to
one digit rates in less than twelve months.
12
Reflecting upon the succession of South East Asian crises, Paul Krugman (1999) stresses the
importance in economics of panics that, whatever sets them off, validate themselves because
the panic itself makes panic justified. The Return of Depression Economics. New York: W.W.
Norton & Company.

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political meltdown of December 2001. Ocampo aptly characterized the 19972002 years as Latin Americas Lost Half Decade.13
IV. The continuity of neo-liberal policies in the midst of their
politico-cultural crisis in the turn of the Century.
The beginning of the 21st century clearly exposed the main shortcomings
of the neo-liberal model. Some of them were associated to the success of the
neo-liberal policies:
1) The deepening of the trends of wealth and income concentration
initially triggered by the Southern Cone foundational military
dictatorships and 1982 debt crisis; 14
2) The growing segmentation of the labour market as a result of the
significant reduction of unionized workers and the expansion of the
size of the so-called informal economy;
3) The pronounced deterioration of health and education services
rendered to the lower strata of the population; and
4) The deepening of various patterns of inequality and exclusion, a
phenomenon which has increased the growing risk of widespread
societal disintegration. One of the consequences of this trend has been
the expansion of subcultures of the poor in urban enclaves controlled
by powerful criminal associations. Although the most relevant
examples are the ones offered by Rio de Janeiro and Sao Paulo in
Brazil, similar phenomena are apparent in many Mexican cities
controlled by narco-traffickers and the growth of maras in Honduras, El
Salvador and Guatemala.
5) The privatization of collective behaviour as a major socio-psychological
phenomenon.
The above-mentioned shortcomings were inherent attributes of the neoliberal model. However, the trends prevailing in the late 20th Century made
apparent the fragility of those ingredients of neo-liberal policies which were
supposed to ensure its dynamism in the long run:
1) High indexes of economic growth proved to be extremely feeble in the
volatile global context;
2) The continued dependence upon the influx of foreign capital seriously
threatened the sustainability of growth; and
13

Jos Antonio Ocampo; Amrica Latina y la economa mundial en el siglo XX largo. Unpublished
manuscript
14
Manuel Antonio Garretn; Ibidem.

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3) Safety nets that were supposed to protect the more vulnerable segments
of the population in times of recession were wiped out by, what some analysts
argued, were the unintended consequences of de-statization.
V. Post-scriptum
Latin Americas apparent political and ideological U-turn circa 1980, in fact,
seemed to forecast the worldwide eclipse of the visions and utopias of the
socialist left in its two variants, the insurrectionary and the parliamentarian. In a
certain way, this conclusion would be supported by the unexpected end of the
Cold War: the collapse of socialism materialized a few years later with the
breakdown of the Soviet Union and Chinas shift towards capitalism during the
1990s. Furthermore, during the 1990s in Latin America itself economic policies
almost uniformly adopted a pro-market orientation that reinforced the view that
socialism and economic nationalism were phenomena of the past.
However, in the early years of the 21st Century, Latin America appears to
be reversing its course again. Analysts from different academic and ideological
persuasions have argued that Latin America is turning to the left, and that the
rebirth of nationalist and neo-populist economic policies could probably lead the
region into further disarray. The high visibility of Venezuelas Hugo Chvez, and
more recently of Bolivias Evo Morales, i.e. two leaders who have combined a
strong anti-United States rhetoric, a rapprochement with Cuba, the mobilization of
popular sectors against internal and external enemies, and a heterogeneous
array of statist and nationalistic policies, has fueled these views. Yet another just assumed South American president, Ecuadors Rafael Correa, has openly
proclaimed his ideological proximity with his Venezuelan and Bolivian
counterparts. Even more so, a broader trend seems to have been in the making:
several parties which had sustained in their programs the need of superseding
capitalism are now in power i.e., Socialists from Chile and Uruguay, Brazils
Partido dos Trabalhadores (PT), and Nicaraguas Sandinistas. Still, if one
examines Latin American reality with a lighter charge of drama, one could not fail
to realize that there are as many right-leaning presidents as leftists. On the one
hand, there are the traditional conservative Central American triad of Guatemala,
Honduras and El Salvador i.e., countries which have been ruled by conservative
presidents since the military left the formal positions of power, albeit retaining
connections with illegal trafficking and paramilitary death squads. On the other
hand, there are other countries, three of them among some of the regions more
highly populated ones, like Mexico, Colombia, Peru, and Costa Rica-- that have
recently elected (or re-elected) middle-of-the-road or conservative politicians as
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presidents; Felipe Caldern, lvaro Uribe, Alan Garca, and Oscar Arias,
respectively
But, are we in the right track if we simply scan the region trying to define
actors in terms of a right wing/left wing distribution? I would argue we are not.
On the one hand, the turbulent periphery resorting to the captivating imagery
of Wanderley Guilherme dos Santosis often less amenable to dichotomous
partitions of reality than the center. 15 As the well known Brazilian political
scientist puts it
dichotomies surpass the elementary level of conceptual hastiness with
difficulty. Right and left do not usually take ambidexterity into account;
the fight between right and wrong tends to exclude purgatories; the
beauty and the beast are insensitive to the intermediate charme.
An obvious example of the weakness of conceptualizations that do away
with nuances of political phenomena was given by Seymour Martin Lipset and
Gino Germani in their less than successful efforts to define Peronism as a kind
of Fascism of the left. 16
In the way of a preliminary conclusion I would argue that the most
pervasive political trend in most countries of the region is the existence of a
virtual political void. Political democracy has failed to take roots and its
traditional adversaries (military regimes, populist corporatism, oligarchic neoclientelism) have been thoroughly discredited, both internally and internationally.
It is not surprising that several Andean countries are witnessing the return of
nationalistic ideologies. Especially in Bolivia and Ecuador, the polities are facing
the dilemma of preserving various modes of direct democracy (including
elements of increased popular participation, on the one hand, and of
plebiscitarian delegation, on the other) and subcultural associationism (ethnic
communities, unionized landless and unemployed groups, neighbourhood
associations, non-catholic religions, organized cliques of football fans) while
integrating them into public arenas and stable patterns of collective behaviour
consistent with the rule of law.
The irrelevance of political institutions is a major threat to the achievement
of viable societies in Latin America. Democratic and republican institutions in
15

Wanderley Guilherme dos Santos. 2006. Horizonte do desejo: instabilidade, fracasso coletivo e
inrcia social. Rio de Janeiro: Editora FGV; pages 17-18
16
Cf. Gino Germani. 1962. Poltica y sociedad en una poca de transicin. De la sociedad tradicional
a la sociedad de masas. Buenos Aires, Paids; page 231, and Seymour Martin Lipset, 1960. Political
Man. The Social Bases of Politics. Garden City, New York: Doubleday; pages 173-176.

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general, and party politics and governmental agencies in particular, have become
increasingly ineffective in addressing, not to mention solving, the problems
affecting the daily life of the different social sectors, from the upper to the lower
classes. One of the undesirable consequences is the expansion of diverse patterns
of informal privatization of sociability, mere survival, profit maximization, and
security. This obviously works for the advantage of the more powerful poderes
fcticos --from firms operating beyond regulations (black markets and the informal
economy) to narcotraffic and terrorism. In the case of some economic actors, in
particular, they are fully equipped to use to their advantage, the possibility of
circulating back and forth legal and illegal channels. An additional negative
outcome of this type of privatization is political corruption. Many politicians
have adapted in a perverse way to the growing irrelevance of party politics. In
addition to the growth of overt and hidden forms of politics for profit,
personality has tended to overwhelm political content. Thus, personalism, a
traditional feature of Latin American politics, has become an even more effective
trump card than in the past. Politicians who emphasize substantive, but
seemingly non urgent issues, are easily displaced by star politicians like the
Fujimoris and Menems of the past decade, who skilfully resort to the message I
can do it better if you (the individual citizen) leave it to me.
Last but not the least, one factor that cannot be dismissed is the
irrationality of United States strategies during the George W. Bush years. The
protracted conflict with Castros Cuba (a conflict which has become a political
relic at this point), the tendency (largely rooted in short-term electoral
calculations) to engage in verbal warfare with Hugo Chvez, and the myopic
reading of the political and social trends unfolding in two major countries like
Mexico and Colombia (where the United States government has been supporting
the struggle against rural guerrillas and urban crime as a part of his world wide
fight against international terrorism).
It looks extremely difficult at this point to what contributions could
moderate Republican or Democratic administrations in the United States make
to overcome the dead ends in which quite significant issues have become
entangled. Let me finish just mentioning a few of those issues which will
contribute to decisively shape the future of Latin America in the coming decades:
1) an open-minded bargaining of the drug issue, not excluding the possibility that
some of the regions countries could decide to legalize drugs; 2) a realistic and
long-term negotiation of the trade conflicts involving agricultural and mineral
commodities, and other products like steel; and 3) agreeing upon a joint
approach toward finding solutions or palliatives to uncontrolled immigration
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flows. In summary, the mid-2000s are witnessing the loss of an opportunity to go

beyond the one-dimensional strategies that prevailed during the Cold War.

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