WILL LATIN AMERICA TAKE THE POPULIST PATH AS THE ELECTION OF LULA LOOMS?
By Sebastian Edwards
Sebastian Edwards, a Chilean economist, was chief economist on Latin America
for the World Bank from 1993 to 1996.
MADRID -- On Oct. 27 the citizens of Brazil will go to the polls to
elect a new president. The overwhelming odds are that Luiz Inacio ''Lula''
da Silva, a former union leader and candidate of a left-of-center coalition,
will be elected by a wide margin. Most analysts see Lula's election as
a clear sign that the Brazilian public has become disillusioned with the
market system, and that it is ready to try something different.
Some have even argued that the massive support for Lula -- according to
some polls he will get more than 60 percent of the votes -- consolidates
a new trend in Latin American, and that the region is on the brink of
a populist revival. Wall Street analysts point toward anti-market government
actions in Argentina and Venezuela as clear evidence that populism is
back with a vengeance. They foresee an outburst of inflation, a backtracking
of the market-oriented reforms implemented during the last decade, the
nationalization of public utilities, the repudiation of the public debt
and a steep increase in protectionism. Some observers have gone as far
as arguing that even Chile -- until now the reform-oriented superstar
in the region -- is succumbing to populist temptations.
This generalized gloom is not justified and misses the subtleties of the
economic and political dynamics in the region. Moreover, it is based on
gross generalizations that ignore Latin America's rich diversity and heterogeneity.
Different countries have different histories and traditions, and move
at their own pace. Flirtation with populism in some of them does not mean
that the region as a whole -- and not even the majority of countries --
will follow the path toward economic heterodoxy.
Nowhere in Latin America -- and certainly not in Brazil -- are people
clamoring for a return to the days of galloping inflation. And people
remember with horror the time when the government heavily regulated their
lives, and when populist promises vanished in the midst of corruption
and inefficiencies. On the contrary, today more people than ever value
economic freedom and support a democratic political system.
Lula and his team have repeatedly said that they will not embark on an
irresponsible populist adventure. After years of seeking the presidency,
Lula is aware that fiscal discipline, low inflation and honoring debt
commitments are fundamental ingredients for a modern economy to attain
sustained growth. He is also aware that without robust growth there is
no chance that his social programs will be successful. In order to convince
international investors that he really means what he says, it is essential
that he appoint a solid, credible and well-respected economic team immediately
after the elections.
It is true, however, that voters across the region are fatigued with the
pace of reform and are deeply concerned about the lack of economic growth
during the last few years. Politicians want to take a ''time out'' and
reevaluate their countries' development strategies. In some countries
there is concern about rising unemployment, while in others issues related
to the provision of social services, including health and education, are
at the forefront of the discussion. In very few, however, is the ''official''
position one of nostalgia and populism. But even in those countries, the
anti-market sentiment is far from generalized, as it has been illustrated
by the increasing rejection of President Hugo Chavez' statist and interventionist
policies in Venezuela.
There is increasing sentiment among the Latin American public, however,
that the region has done more in terms of reforms than the advanced countries.
Take, for example, the case of international trade and protectionism.
Since the early 1990s the Latin countries have made tremendous progress
in eliminating trade restrictions, slashing import quotas and lowering
import tariffs. As a result, the region has become a major market for
U.S., European and Asian products. While only 15 years ago it was difficult
to find U.S.-made products in Latin American supermarkets or department
stores, today Latin consumers have access to the same products as their
But Latin America has not only opened up to imports of manufactured goods,
it has also liberalized its financial sector, allowing international banks
and insurance companies to do brisk business throughout the region. In
contrast, the advanced countries have become more protectionist during
the last few years. The United States has imposed tariffs on products
such as steel and has massively increased agriculture subsidies; Europe
continues to protect heavily its agricultural sector, making it increasingly
difficult for Latin exports to find their way onto European consumers'
It is too early to know whether this sense of ''unfairness'' in trade
will be eventually translated into serious reform backtracking. To a large
extent that will depend on the advanced countries themselves. Policies
in the United States and Europe that promote true free trade and allow
Latin agricultural commodities and other exports to reach their markets
would go a long way toward finally defeating the specter of populism in
(c) 2002, Global Viewpoint. Distributed by Tribune Media Services International.