Disaggregating Latin America: Diverse Trajectories, Emerging Clusters and their Implications

Disaggregating Latin America: Diverse Trajectories, Emerging Clusters and their Implications, Abraham F. Lowenthal, Nonresident Senior Fellow-Foreign Policy-Latin America Initiative, The Brookings Institution,01 de Noviembre 2011

From the time a 19th century French geographer labeled the countries south of the United States and Canada “Latin America,” the term has always seemed more of a reality from outside the Western Hemisphere than within it. From outside, and particularly from Europe, these nations often seem more closely related to each other than they appear to be up close. In fact, Latin American countries have long been divided by almost as much as that which unites them: different colonial heritages and histories, and radically different geographies, demographies, and ethnic compositions. They have different levels and types of economic and social development, political traditions and institutions, modes of insertion into the international economy, and international policies and relationships. Most of the countries of South and Central America and parts of the Caribbean do share common Iberian historical, religious, linguistic and cultural traditions; many have had broadly comparable relations most of the time with the industrial countries; and they all share the same hemisphere with the United States and Canada. But one should not lose sight of the many and important differences among the diverse countries of Latin America and the Caribbean. The policy communities, both in the United States and in Europe, came in the 1990s to think of the Latin American countries as tending then toward convergence—mostly proceeding, at different paces, along the same presumably irreversible path of political and economic liberalization, with Chile blazing the trail. This perception is highly questionable now, as various countries pursue distinct goals with contrasting approaches and policies. Easy rhetoric about regional integration, and even such institutional steps in that direction as the Community of Latin American and Caribbean States (CELAC) and the Union of South American Nations (UNASUR), South America’s recently established diplomatic and security communities, are mainly wishful thinking or, at best, “thoughtful wishing.” Rhetorical expressions of Latin American (or at least South American) unity are often rudely contradicted in practice. Transnational integration is occurring in Latin America much more at the level of corporations and professional networks than at the level of governments and multilateral organizations. Intraregional trade agreements have not taken hold, for the most part, and intraregional trade has been declining over the past several years, in fact, both among the Mercosur countries and in the Andean Community.

Disaggregating Latin America

The countries of Latin America may best be understood and analyzed by focusing on where they fit along five distinct dimensions—three structural, and two historical and institutional—which have significant implications for how they work politically and economically, and for their international roles:

• Their levels of demographic and economic interdependence with the United States, or with other major regions including Europe and China

• Their resource endowments and their degree of openness to international competition, and the consequent nature of their insertion into the global economy

• The extent to which they face the challenge of incorporating traditionally excluded populations, including millions of marginalized and disadvantaged but increasingly mobilized indigenous people, as well as Afro-descendants and others in deep poverty who have not previously been fully integrated into the economy nor able to exercise effective citizenship

• The relative strength and capacity of the state and of civil and political institutions beyond the state, such as political parties, trade unions, religious organizations, the media and other non-governmental entities

• The vitality of such key aspects of democratic governance as separate branches of government, checks and balances, free and fair elections, independent media, accountability and the rule of law.

Where these countries are found along a spectrum with regard to each of these five dimensions—rather than familiar dichotomous categories such as left or right, authoritarian or democratic, free market or statist—captures the most important variations among these many countries.

Indeed, the very term Latin America is not very useful. It is more helpful to think of subcategories, including the countries of North America (Mexico and the various nations of Central America and the Caribbean), almost all—even Cuba in some important ways—ever more closely integrated with the United States; Brazil, a nation of continental scope that has never felt itself closely and exclusively tied with the countries of South America and is now even more than before linked with Asia, Africa, the Middle East and Europe as well as with Latin America and the United States; the Amer-Indian regions, mostly on the Andean ridge, but also in southern Mexico, parts of Central America, and Paraguay, which are ever more shaped by their indigenous populations; and the truly “Latin” (or European) countries of the Southern Cone, with ethnic compositions, social structures, political institutions and traditions broadly similar to the countries of continental Europe. The subcategories I have suggested are not geographically defined, nor are most candidates for subregional economic integration; they are conceptual groupings, highlighting salient characteristics that make the members of each subcategory behave similarly in some important respects.

Focusing on these important differences, more than on aspirations of regional integration, is necessary to understand diverse countries that have been and are on quite different paths, reflecting their distinct pasts and shaped by different political leaders and constituencies, available resources, opportunities and ideologies.

The Universal Challenge: Reconciling Equity and Markets

In their efforts to achieve economic growth, socioeconomic equity and social inclusion, Latin American countries have all moved in recent years, from different starting points, away from the extremes of unbridled capitalism on the one hand and state-run socialist economies on the other.

Even Cuba under the Castro brothers, who still proclaim themselves Socialist with a capital S, is radically reducing the number of state employees, authorizing private ownership of housing, encouraging private agricultural production and markets as well as small businesses of many types, and otherwise experimenting with the reintroduction of material incentives and other capitalist practices. Few well informed observers doubt that in the next decade Cuba’s economy, whether through gradual reforms or rupture, will be significantly transformed, and that domestic and international investment in private enterprises will sooner or later spur a burst of economic growth. Nationalism, not socialism, is likely to be the lasting contribution of the Castro period to Cuban history.

Under Hugo Chávez, Venezuela has proclaimed that it is building “21st Century socialism” (a goal that Chávez did not unveil until he had been in power for several years). The Chávez government has nationalized various important companies, strongly regulated and intimidated others, and undertaken social programs and provided social services through redistributive programs (the Misiones). But Venezuela has also preserved a well-rewarded private financial sector, permitted significant other private sector activity and the continuing accumulation of private wealth, and maintained a primary trade connection with the United States while also diversifying its international relationships by cultivating countries antagonistic to the United States. Recently, moreover, in the wake of his cancer surgery and in the run-up to the elections scheduled for 2012, President Chávez appears, at least at times, to be downplaying the “socialist” discourse and concentrating on encouraging the market-oriented middle class, giving some signs of recognizing how vital their confidence and participation could be for Venezuela’s national success.

In Bolivia, Ecuador and Nicaragua—three other members of the Bolivarian Alternative (ALBA) that have employed “socialist” discourse in recent years—there are increased, if ambivalent, efforts to attract foreign investment, cooperate with international financial institutions, and coax national private investors to participate more actively. Ecuador’s Rafael Correa has explicitly downplayed the rhetoric of “21st Century socialism,” preferring the language of “buen vivir,” a concept of indigenous (Bolivian) origins connoting “living well,” in a normatively positive and sustainable way, privileging solidarity rather than competition. A similar though less clearly articulated discourse has emerged in plurinational Bolivia, where Evo Morales attempts to balance an appeal to indigenous peoples and ecological sustainability with occasional pragmatic efforts to attract foreign investment for major projects in natural resource extraction and development, a combination that sometimes leads to major contradictions and course corrections. Nicaragua under the Ortega couple, albeit in a cruder way, combines old-style “socialist” rhetoric with pragmatic policies to retain international markets, attract both official development assistance and private investment from the capitalist world, and coopt national business leaders by giving them opportunities to prosper.

The state “socialist” ideological model, in short, is giving way in practice to an evolving attempt, different in each case, to combine the goals of social inclusion, community solidarity and the integration of disadvantaged sectors with the use of capitalist instruments to expand economic growth. In all these countries, popularly-oriented economic and redistributive policies are accompanied by severely weakened legislative and judicial restraints on executive power and personal aggrandizement, populist appeals to disadvantaged majorities, systematic attacks on privileged elites and on “neoliberalism” (and behind that, the United States), and appeals to anti-globalization advocates around the world. These regimes do not foster coalition-building across social sectors nor do they seek Western Hemisphere cooperation to confront shared challenges.

There are many differences among these ALBA cases. Daniel Ortega and his wife, Rosario Murillo, operate in large measure as traditional Central American/Caribbean caudillos, manipulating personal ambitions and relationships with little regard for ideological coherence or legal constraints. Hugo Chávez brings a special combination of charisma, audacity, social resentment, military authority and tactical flexibility to his leadership, which is overwhelmingly personalistic, and therefore vulnerable if his health deteriorates. Rafael Correa is a U.S.-educated Ph.D. who is drawing on civil society activists to build technocratic bureaucracies, while continuing relentlessly to attack discredited elites and institutions. Evo Morales builds upon and exacerbates long-standing and deep-seated ethnic and regional cleavages within Bolivia and cultivates transnational support from NGOs, while striking out against real and imagined foreign enemies whenever he feels that domestic circumstances require an external foe.

Two Broad Groups

With all these and other variations, however, the “Bolivarian alternative” countries share deep suspicion of markets, free enterprise and globalization generally, and especially of the institutions of liberal representative democracy, where horizontal accountability is sought through separate and independent branches of government, checks and balances, and the rule of law. These Bolivarian experiments with “refoundation” and plebiscitary governance have been made possible by the thorough discrediting of previous regimes and, in most cases, have been financed directly or indirectly by windfall profits from natural resource endowments that allow immediate and broader distribution of expanded national income.

In the rest of Latin America, with the possible exception of Argentina, the ALBA approach has not lately been gaining further traction, and it is less likely to do so as the ALBA countries experience growing internal difficulties that will be further compounded if and when energy prices drop. But in many of the other Latin American countries there is emerging, to differing degrees, an amalgam of market-oriented, socially responsive and redistributive policies, combined, however, with an embrace (stronger in some cases than in others) of markets, capitalism and globalization. In these cases, moreover, there is a much more institutional approach to governance and accountability, combined with concerted efforts at consensus-building and international cooperation rather than polarization. Such attempts are evident in Chile, Brazil, Uruguay, Mexico, the Dominican Republic, El Salvador, Costa Rica, Panama, Colombia, and now in Peru. Peru’s recently elected president, Ollanta Humala, originally aligned with the ALBA approach, was finally elected and thus far appears to be governing in ways much closer to the mainstream approach.

In these countries, highly diverse in many other respects, there is a shared tendency to give high priority to achieving macroeconomic stability; to demonstrating openness to foreign private investment, although often on improved terms, especially in the mining and petroleum sectors; and to achieving previsibilidad (i.e stability of expectations about the rules of the game and about agreed procedures for changing these). These countries, at least in their stated goals, are all emphasizing policies to reduce and alleviate poverty through economic growth and expanded employment, conditional cash transfers, higher minimum wages, social programs and, in some cases, progressive taxation. They all aim to diminish socio-economic inequities; make conditions safer for the private sector by reducing polarization; expand access to and improving the quality of education and infrastructure; and strengthen accountable political, judicial and law enforcement institutions.

Implementation of this broad program varies greatly from country to country, in part because state capacity differs so widely. It has been called a “global social democratic” path by Fernando Henrique Cardoso, Brazil’s scholar-statesman. It is being funded in some countries by windfall income from high commodity prices, and is also made possible in part by the relatively mild impact in South America of the international financial crisis. This was a silver lining that resulted from the fact that their financial institutions and fiscal policies had been greatly strengthened in response to recent debacles. But it is also made possible, as Cardoso argues, by structural and political preconditions, including the prior diversification of economic production and the development of effective, albeit imperfect and uneven, institutions and practices of democratic governance. In several countries—Mexico, the Central American and some Caribbean nations, and still to some extent in Colombia—these advantages are being undermined, however, by organized crime, much of it related to drug-trafficking organizations.

There are also important differences, of course, in leaders’ backgrounds, political coalitions and specific programs. The presidents range from former guerrillas and leftist insurgents to former military officers, business tycoons and an ex-bishop; from internationally educated cosmopolitans to highly provincial figures; from very experienced politicians to newly minted ones. The political coalitions are grounded in some countries in the most modern and economically advanced regions, while in others, their base of support comes primarily from the most impoverished provinces, sometimes of indigenous ethnic composition. The scope of state enterprises in these countries varies widely, with some of the largest and most powerful state enterprises (Petrobras in Brazil, PEMEX in Mexico, and CODELCO in Chile, for example), operating in the most market-friendly nations. In all these diverse countries, however, the shared central challenge is how to combine the dynamics of market capitalism with improved social inclusion. Nowhere has the perfect solution yet been fashioned. Even in Chile, which had seemed the poster child for social democracy, strong pressures are building to expand effective participation; to redress class privileges, embodied in the country’s secondary and higher educational systems; and to extend to the middle class rights previously exercised only by economic and social elites.

Latin America, in sum, is not a unified region. Its heterogeneous countries differ significantly in several ways. But despite their many differences, they cluster at present into two broad groups. One comprises the “Bolivarian alternative” countries: profoundly suspicious of globalization, markets, liberal representative democracy and cooperation with the well-established world powers, but all groping in different ways to attract resources and markets from the capitalist countries. The other is a highly diverse set of nations that are trying to adjust to globalization by seeking access to the dynamic energies and resources provided by capitalist enterprises, while counterbalancing capitalism’s negative effects on equity and social inclusion through redistributive policies and by strengthening the institutions of democratic governance. These two clusters are more fuzzy than distinct, more “works in progress” than ideological models, and are responding tactically both to domestic pressures and to international constraints and opportunities, rather than conforming to consistent templates.

What Shapes the International Relations of the Latin American and Caribbean Countries?

These broadly differing approaches have important international policy implications. This is most evident in the recurring tendency in Cuba, Venezuela, Bolivia, Nicaragua and Ecuador to seek confrontation with the United States as one aspect of their domestic strategies for popular legitimacy. To the extent that these confrontational tactics are mostly symbolic, and often contradicted in practice by pragmatic cooperation, they have limited geopolitical importance as long as the U.S. government (and European governments when relevant) responds to provocations with the “rope-a-dope” technique made famous by Muhammad Ali in the boxing ring: letting the punches fall unanswered, without causing real damage, while the puncher tires. An interesting question is whether a more beleaguered Chávez, or perhaps another severely challenged ALBA leader, might eventually seek more concrete and genuinely threatening international cooperation with an extra-hemispheric power against the United States. This is an unlikely, but plausible, scenario.

The most important determinants of Latin America’s diverse international relationships are less ideological than structural and geoeconomic, however. First and foremost, there is an overwhelming distinction between the closest neighbors of the United States—Mexico and the countries of Central America and the Caribbean—and the nations of South America. During the past fifty years, the society and economy of the United States have become ever more intertwined with those of Mexico and the countries of Central America and the Caribbean, primarily as a result of massive migration, authorized and unauthorized, to the United States and of growing functional economic integration, particularly of labor markets, finance and production processes. The frontier between the United States and its closest neighbors is extremely porous. People, goods, money, and ideas flow easily back and forth across formal boundaries. Sixty percent of Mexico’s population have relatives in the United States, where nearly a fifth of Mexico’s population is employed, and more than half a million U.S. retirees, in turn, reside in Mexico. Some fifteen percent of those born in the Caribbean and Central American countries alive today have also moved to the United States. In Mexico, remittances from the diaspora amount to some $25 billion a year (more or less, depending on the state of the US economy), almost as much as direct foreign investment. In Central America, Haiti and the Dominican Republic, remittances exceed foreign investment and international economic assistance combined. Campaign contributions and votes from the diaspora are crucially important in home country politics, while the votes of naturalized immigrants play an increasingly important role in U.S. elections. Juvenile gangs and criminal leaders socialized on U.S. streets and in U.S. jails are wreaking havoc in their countries of origin, in many cases after being deported from the United States, while Latino gangs contribute to violence in Los Angeles, Phoenix, and elsewhere. Historical notions of “sovereignty” have much less real meaning in such circumstances, even as they are still vociferously articulated on both sides.

The issues that flow directly from the growing mutual interpenetration between the United States and its closest neighbors—human, drug and arms trafficking, immigration, the environment and public health, medical tourism and portable health and pension benefits, natural disasters, law enforcement and border management—pose particularly complex challenges for policy on both sides. These “intermestic” issues, combining international and domestic facets, are difficult to handle because the democratic political process pushes policies, both in the United States and in the neighboring countries, in directions that are often diametrically opposed. That makes it difficult to secure the intimate and sustained international cooperation required to manage difficult problems that transcend borders. The difficulty is compounded in those countries—Guatemala, Honduras and Haiti, in particular—with very weak state capacity. All this in turn makes the international relations of these countries different in kind from those of South America’s nations.

Brazil is an increasingly influential country with a population of more than 190 million and the world’s seventh or eighth largest economy, likely to become the fifth largest (with the United States, China, India and Japan) by mid-century or sooner. It has largely opened itself to international economic competition, dramatically modernized its vast agricultural sector, developed industries with continental and even worldwide markets and expanded the global competitiveness of its engineering, financial and other services. Brazil has also slowly but steadily strengthened both its state and its nongovernmental institutions. And it has forged an increasingly firm centrist consensus on broad macroeconomic and social goals, including the urgent need to reduce gross inequities and alleviate extreme poverty; to continue to expand its large, expanding and influential middle class (now numbering some one hundred million persons); to improve the quality of and access to education; and to improve productivity, infrastructure, citizen security and efficiency. Achieving these gains will be far from easy, especially with the country’s fragmented parties and governance, but at least there is a high degree of national consensus about where Brazil should be headed.

Brazil is playing and will play a growing role in international negotiations on trade, climate change, the environment, public health, food security and intellectual property. It is an active leader of the Global South; works closely with China, India and South Africa on several issues; and is cultivating ties with the Muslim world and with Africa. It is also one of the influential and growing BRICS (Brazil, Russia, India, China and South Africa) nations, the darlings of international investors and geopolitical analysts. It is taking an ever more prominent leadership role in South America, a lead role in UN efforts to stabilize Haiti, and has been active (though not always effective) in the United Nations, the G20 group of the world’s most important economies and in other multilateral global and regional fora.

The fundamental challenge at this stage for relations between Brazil and the United States, as well as with the EU nations, is to overcome conflicting domestic political imperatives, vested interests and policy gridlock on both sides in order to build greater synergy on major global issues: by strengthening regimes for trade, finance and investment; developing and implementing measures to cope with climate change and to develop alternative renewable energy sources; preventing and responding to pandemics; curbing nuclear proliferation; and reforming international governance arrangements. All this will require conceptual clarity, constructive diplomacy, and consistent tact by all involved.

The countries of the Southern Cone are neither as connected to nor as integrated with the United States as its closest neighbors, nor are they as globally influential or as important for Europe as Brazil. Chile is the Latin American nation most fully engaged in the world economy, with strong political institutions and entrenched democratic practices, but it remains, after all, a small to medium-sized country. Chile’s international influence, based on its soft power, is considerably greater than its size, military power or economic strength alone would command. It presents issues and opportunities, both to the United States and to European nations, comparable to those posed by long-time allies, grounded upon broadly shared interests. Argentina, by contrast, has had great difficulty over the years in building broad consensus, fortifying institutions, opening up its full economy to international competition and achieving the stability of expectations that is so important to overcome short-termedness (cortoplacismo) and to facilitate economic development and consistent international engagement. For both European countries and the United States (equidistant from Buenos Aires), Argentina always seems like a natural partner, but almost always disappoints. Uruguay is in some ways an extension of Argentina, but it acts internationally much like Chile, largely because of its well-developed political institutions.

The Andean countries (Bolivia, Colombia, Ecuador, Peru and Venezuela) to differing degrees are plagued by severe problems of governance and with the challenge of integrating large numbers of historically excluded people, living in poverty or extreme poverty, and in many cases from indigenous or Afro-descendant backgrounds. Poverty, compound inequities, mass exclusion, rising ethnic and class consciousness, market economies and electoral politics have made all the Andean nations, in different ways, politically unstable. Colombia has long had democratically elected governments and constitutional governance, but it has also faced a prolonged insurgency and pervasive corruption, weakening its institutions. Peru has seemed politically stable through several consecutive presidential elections, but its political parties have weakened more each time; the prospects that an anti-system “outsider” will triumph has been high time after time, and has produced the election in the past twenty years of three such outsiders (Alberto Fujimori, Alejandro Toledo and Ollanta Humala), all of who won because of their appeal in the most disadvantaged regions of Peru.

All these countries are mobilizing new participants in both politics and the economy, in many cases challenging established institutions and elites, and in some cases fostering efforts at “refoundation.” They tend, to differing degrees, to favor populist politicians who systematically weaken parties and other institutions, preferring to communicate directly with the public.

Implications for North America and Europe

First, the United States and Canada need to take more seriously the accelerating process of functional integration between them and their closest neighbors in Mexico, Central America and the Caribbean. New attitudes, approaches, policies and institutions are required to manage this increasingly complex but highly asymmetric interdependence.

Second, the countries of North America and Europe must adjust to Brazil’s new strength and stature by developing global cooperation with Brazil on a wide variety of issues, by no means confined to the Western Hemisphere.

Third the Andean countries present, especially to the United States but also to Europe, tough issues that include (in most cases) resource nationalism, narcotics trafficking, authoritarian governance and violations of human and labor rights, as well as international tensions arising from the ties some have been developing with global adversaries of the United States and Europe. For both the United States and Europe, a key aim in the Andean region, as also in Central America, is to help vulnerable countries strengthen their institutions in order to enable them to resist organized crime and drug trafficking organizations as well as resist the ALBA path. It is important for Washington and the members of the EU to distinguish carefully among the already aligned ALBA countries, looking in each case for common ground in order to confront shared problems. The thus-far promising beginnings by the governments of Juan Manuel Santos in Colombia, Ollanta Humala in Peru, and Mauricio Funes in El Salvador merit sympathetic attention and support, both from Europe and the United States. Both Washington and the EU countries should also seek case by case cooperation regarding shared concerns with Bolivia, Ecuador, Venezuela, Nicaragua—and Cuba. How the international relations of all these countries unfold in the coming years will depend in each case not only on their internal evolution, but also on the willingness and capacity of international actors to relate to them individually and constructively.

Fourth, the United States, Canada and the European countries should think of Latin American and Caribbean nations not simply as sources of commodities, arenas for investment, export markets and suppliers of labor but as important potential partners in confronting the broad global agenda, from climate change to public health, nonproliferation to fighting organized crime. They should also focus on the synergistic energies that could be released by investing in Latin America’s infrastructure and its educational and technological capacity.

Fifth, the United States, Canada, and the countries of Europe should invite all the countries of Latin America and the Caribbean, whatever their political orientation, to join in dealing with the challenges that affect them all, and on which the former have as much to learn as to teach: improving research, opening up debate and undertaking concerted efforts to curb the violence and corruption that the drug trade produces; improving citizen security by focusing on what can be learned from experiences throughout the world on the relationships between citizen security and economic prosperity, social equity, political participation, community-based policing, and judicial and penal reform; and exploring and implementing feasible ways to understand and respond effectively to climate change and its consequences.

These global issues are not unique to the Americas, but they are all challenges for which the diverse countries of Latin America and the Caribbean are highly relevant.