[stop-imf] Weisbrot: Latin America's Long Economic Failure Sparks Desire for Change

[robert weissman]

LATIN AMERICA'S LONG ECONOMIC FAILURE SPARKS DESIRE FOR CHANGE
By Mark Weisbrot
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This column was printed in the Providence Journal (RI) on October 9,
2005 and other newspapers and was distributed by Knight-Ridder/Tribune
Information Services. If anyone wants to reprint it, please let me know.
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The winds of political and economic change are reaching severe storm
levels in Latin America, and it's not difficult to see why: the region
has suffered a 25-year economic failure, unprecedented in its modern
history.

At a conference in Bogot=E1, Colombia last week, Jos=E9 Serra -- the mayor
of Brazil's mega-city of Sao Paulo -- argued that "the Washington
Consensus" had failed in Latin America, and that a new economic model
needed to be created. Serra, who served as Health Minister in the
previous (centrist) Brazilian government and is currently polling very
close to President Lula da Silva for the 2006 election, pointed out that
Brazil in the 1960s and 1970s had one of the fastest-growing economies
in the world. Since 1980 Brazil's income per person has grown by less
than one-half percent annually.

Serra is right. Brazil would have European living standards today if its
economy had continued to grow as it did prior to 1980. The story is
similar for M=E9xico, which doubled its income per person from 1960-1980
but has seen lackluster growth since then. For the region as a whole,
growth in GDP (or income) per person -- the most basic measure of
economic success or failure -- was about 80 percent from 1960-1979, but
only 11 percent for 1980-1999 and a mere 3 percent for 2000-2004.

There is no way to hide a collapse like this. A generation and a half
has lost out on a chance to improve their living standards.

The failure occurred during a period in which Latin American governments
adopted a number of economic reforms that were supposed to promote
economic growth. These reforms were strongly advocated by the United
States, as well as Washington-dominated institutions such as the IMF and
World Bank, sometimes with considerable economic and political pressure.

Trade was liberalized and average tariffs cut by half since the 70s.
Restrictions on international investment flows were abolished or
drastically reduced in most countries. In the 1990s alone, more than
$178 billion of state-owned industries were privatized -- more than 20
times the value of privatization in Russia after the collapse of the
Soviet Union. Governments also adopted higher interest rates and tighter
fiscal policies. The short-term interest rate set by Brazil's central
bank is currently at 19.5 percent, as compared with 3.75 percent in the
United States.

The resulting long-term failure has produced a popular and electoral
backlash against the reforms, which are often labeled "neoliberalism" in
Latin America. In the last seven years, left-populist candidates running
against "neoliberal" policies have taken the presidency in Argentina,
Brazil, Ecuador, Uruguay, and Venezuela. Bolivia is possibly next, and
in M=E9xico, former M=E9xico City mayor Andres Manuel Lopez Obrador of the
left opposition Democratic Revolutionary Party, who has denounced
"twenty-five years of economic failure" in M=E9xico is in the lead for
next year's presidential election.

The electoral revolt has already produced some positive results.
Argentina, after engaging in the largest sovereign debt default ever,
rejected the IMF's economic prescriptions, took a hard line with foreign
creditors, and -- without any outside assistance -- has grown by about 9
percent annually for the last two and a half years. Venezuela's
government has kept its promise to share the country's oil wealth with
its poor majority, providing free health care, subsidized food, and much
improved access to education and literacy programs.

For its part, Washington has yet to accept the new reality. Given the
importance of Florida-based Cuban-Americans in our national elections,
it is politically more convenient here to blame Venezuelan President
Hugo Ch=E1vez -- or even Fidel Castro -- for the growing political and
social unrest in the region. But these revolts are very much home-grown,
and are the predictable result of a prolonged, failed economic experiment.
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Mark Weisbrot (http://www.cepr.net/pages/mwbio.htm ) is co-director of
the Center for Economic and Policy Research.
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Center for Economic and Policy Research
1611 Connecticut Ave, NW, Suite 400, Washington, DC 20009
Phone: (202) 293-5380, Fax: (202) 588-1356, Home: www.cepr.net