November 17, 2017 / 6:33 PM / a year ago

Breakingviews - Review: The next fight for Latin America's soul

NEW YORK (Reuters Breakingviews) - Latin America has battled dictators and demagogues. Its next adversary is lawlessness. As Michael Reid writes in “Forgotten Continent: A History of the New Latin America,” further steps toward prosperity depend on the region’s willingness to embrace the rule of law and effective institutions – both of which are still lacking.

People holding flags walk past a mural depicting Venezuela's President Hugo Chavez during a workers parade in Caracas, May 1, 2008. On the flags are (L-R) former Cuban President Fidel Castro, Ernesto Guevara and Venezuelan national hero Simon Bolivar. REUTERS/Jorge Silva

Having sloughed off various strongmen in the last 20 years of the 20th century, Latin American nations have found themselves struggling recently between charismatic firebrands such as Venezuela’s Hugo Chavez or Argentina’s Cristina Fernandez, and less lurid reformers with a stronger grasp of economic reality. A commodity-price crash, coupled with their own ineptitude, has undone the lofty plans of several populist spendthrifts. In his extensively revised new edition of a book first published a decade ago, Reid suggests that “reformism has clearly won the intellectual battle”.

Pedlars of miraculous solutions to complex problems are indeed in retreat in much of the region. The sugar rush of unsustainable spending, hyped-up nationalism and fiery rhetoric has mostly ceded to the duller, more sober grind of economic competence, typified by presidents Mauricio Macri in Argentina or Michel Temer, despite graft imbroglios, in Brazil. Reform is improving Latin Americans’ lives more than revolution.

Reid, the Economist’s Latin America columnist, first visited the region in 1980 and has lived there for nearly half the years since. The result is a time-lapse perspective on progress. Take the Peruvian shantytowns north of Lima, founded by impoverished city dwellers, indigenous people fleeing worse conditions in the Andes and refugees from guerrilla or army violence. In some areas where once there were unpaved streets and half-built dwellings without drinking water or sewer service, there are now supermarkets, shopping malls, banks and schools. A metro line runs to central Lima. Gone is the reek of excrement. 

Community action has been at the heart of such change, Reid writes, but so has a de facto consensus among national leaders around free-market economics, the acquisition of property titles, individual hard work and support from NGOs, churches and government. Since the generals began returning to the barracks in the 1980s, encouraged by the end of the Cold War as well as their own bankruptcies of leadership, democracy has taken ever deeper root in the region.

True, holdout dictatorships of the left remain. In Cuba, one Castro brother or another has called the shots since 1959. In Venezuela, Chavez’s successor Nicolas Maduro presides over a regime unable to feed its own people despite sitting atop some of the world’s biggest oil reserves. As Reid puts it: “The most modern country in Latin America” has been reduced “to a Zimbabwe.”  

Elsewhere, progress has been considerable, even if not sufficient. Regional poverty rates have fallen thanks to economic growth, improvements in schooling and in particular the spread of so-called conditional cash transfer programs such as Progresa in Mexico and Bolsa Familia in Brazil. These typically pay mothers a modest allowance to keep their children in school and take them for regular health checkups. They have become, Reid says,  a successful Latin American public-policy export.

In fact, Latin Americans have never been better educated, enjoyed better health or been more middle-class. And yet the next steps toward prosperity will be harder. For all its historic legacy of legalism, lawlessness is Latin America’s biggest problem. In Mexico, for example, “sound macroeconomic management and electoral democracy were not enough,” leaving the country victim to widespread corruption and crime. In 2013, Reid writes, eight of the world’s 10 most violent countries, and 42 of its 50 most violent cities, were in the region. Much economic activity happens off the books. 

There is much variation. It is unwise to offer a bribe to a policeman in Chile, though it may be unwise not to in Mexico. A new generation of prosecutors in Brazil has exposed massive wrongdoing among the country’s political and business elites, leading to prison terms, ruined careers and a change in public attitudes. Guatemala has outsourced efforts against serious crime to a body backed by the United Nations. The Dominican Republic has shown a possible way forward for penal reform. In Mexico, civil organizations oppose corruption when many politicians do not.

Charismatic figures such as Chavez - or in a previous generation, former Argentine President Juan Peron and his wife Evita – speak to those who feel dispossessed. Yet the quest for lasting prosperity is unglamorous and ultimately ill-served by populism of left or right. That lesson, “Forgotten Continent” suggests, could be another worthwhile Latin American export to the world.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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