A Slight Lean Left
Brazil," it has been quipped," is the country of the future and always will be." But back in the 1990s, Brazil and the rest of Latin America generated some real economic momentum. Growth boomed--the region's gross domestic product grew 79 percent--as governments dismantled trade barriers and sold state-owned companies. The change was more evidence of what political scientist Francis Fukuyama referred to as the "end of history," with democratic capitalism triumphant.
Catchy hypothesis. But the "domino theory" might better describe recent events in the region. In country after country, left-wing parties with more skeptical attitudes toward free markets have been on the march. Turns out that Venezuela's Hugo Chavez was just the prologue. On January 15, socialist doctor and former Defense Minister Michelle Bachelet won a runoff for the Chilean presidency, while the indigenous Bolivian politician Evo Morales--who once described capitalism as mankind's "worst enemy"--took office January 22. They join leftists of various flavors who, since 2002, have captured the presidencies of Brazil, Argentina, and Uruguay. And Mexico and Peru could be next.
Cronies. Why the leftward turn? Some blame rampant inequality. "The region went through a period of free-market reform in the '90s ... but there was too much crony capitalism,"says Alvaro Vargas Llosa, director of the Center on Global Prosperity. "Clearly there's been a backlash."Then, after the boom came a bust from 1998 through 2003, triggered by the Asian currency crisis. And even though regional economic growth has returned to a 4 percent annual pace, spurred on, in part, by the rising price of oil and other commodities, the turnover in governments continues. Hardly a paradox, says Morgan Stanley economist Gray Newman. "Those headline numbers mask a real unevenness in growth,"he explains. Chinese demand and rising prices may boost economic growth stats in these commodity-based economies, but not jobs or incomes. Yet fiery political rhetoric may not translate into radical economics, says analyst Carol Graham of the Brookings Institution. While Chavez and Morales favor more statist policies, most other leaders are modeling themselves on Tony Blair--not Fidel Castro. Bachelet has vowed to continue Chile's free-market approach, a set of policies begun back in the 1970s by the "Chicago Boys," a group of University of Chicago-trained Chilean economists working under the Augusto Pinochet administration. And Brazil's socialist president, Luiz Inacio Lula da Silva, is considered by investors to be a budget hawk. "Although there's been lots of talk about the return of the left, the way the economies are being managed suggests otherwise," Graham says.
This story appears in the January 30, 2006 print edition of U.S. News & World Report.
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