Media Center



April 26, 2011 - San José, Costa Rica

The hot topic in Latin America these days has a much more positive tone than has been customary in the region over the past three decades. In September of last year, a magazine, The Economist, proclaimed (illustrated with a backwards map of the Americas, with the south at the top and the north at the bottom), “No more backyard. The rise of Latin America.” The internal title of the article was a little more careful, asking, the “Decade of Latin America?” Several similar articles on the same day, one of the World Bank itself, made the question that has continued to transform the debate in the region a hot topic.

Coming after a global depression, in which serious consequences had been predicted that would include a great amount of job loss bringing nine million people below the poverty line, this change of tone is more than welcome. And while many have expressed doubts about disclosed pessimism (see, the article by Andres Oppenheimer, Latin American Decade or Wishful Thinking in the Miami Herald last February 7), the truth is that there are many reasons to express cautious optimism.

Most economies in the region have begun to grow vigorously, starting with Brazil and Argentina, but also Colombia, Chile, Mexico, Uruguay, Paraguay (the highest rate of growth in 2010) and others have seen growth, with rates even higher preceding the crisis. This is not only a year of growth and recovery that we celebrate: in the decade of 2000, Latin American and the Caribbean economies grew more than in the previous two decades combined. Yet, as Oppenheimer points out, it is a much lower growth than China or India. But when comparing, on the other hand, to the region itself, it is an encouraging success, especially when it is due, in part, to greater skills in managing the economy, the presence of sound financial systems, improved organization of public finances, and higher foreign exchange reserves in our countries. Indeed, this comes with the important role played by two factors that everyone mentions: the high price of raw materials and increased availability of funds in international financial organizations. But, also, properly coping with the crisis of our region lies in the quality of macroeconomic policies developed by our governments before and during the recession. With some exceptions, even countries that proclaim their aversion to the policies of the past maintained necessary fiscal prudence and accumulated the necessary reserves to create counter-cyclical policies to mitigate the effects of economic lags and job losses. Latin American banking has demonstrated that it is much less exposed than United States and European banking, and therefore, a large rescue operation was not necessary that would have imposed excessive costs onto the governments.

In other words, as never before, the causes of the crisis came from outside, and the domestic public policies played a positive role in mitigating the damage. In addition to generating optimism, it shows that, with all the weaknesses of our States, its action is not only indispensable, but it also can be effective to meet the challenges ahead. The government can be a part of the solution this time.

Furthermore, in the decade that just ended, the poverty rates have dropped—something that had not occurred since before the eighties; more than thirty million Latin Americans are no longer in poverty, and a significant number of jobs have been created; and, there is an emerging burgeoning middle class, which is always a key factor of progress. The recent review of the Millennium Goals set by UN agencies and coordinated by ECLAC, reveals that in most of the indicators there has been significant progress, although some countries appear to be staying behind.

Certainly, the obstacles that lie ahead in order to be able to say that Latin American and the Caribbean countries have embarked on a right path to development are still numerous. As mentioned, an important part of the growth has been driven by a substantial increase in the export of raw materials, yet the progress in education and scientific and technological developments has been insufficient. Savings have not increased, and investment and job creation is lagging. Although exportation has increased enormously in the last period, Latin America's insertion into the global economy is still less than expected, and the sub regional economic integration processes seem to have stagnated over the past decade.

Also, in terms of the social arena, progress can be contrasted by the many shortcomings. Still a very large number of its inhabitants remain poor, in quantities greater than those expected in a continent with our level of growth. Young people, the “neither-nor” are still in need of work and education, so named because they neither study nor work; and the large flow of migrants into the United States and Europe remains, and also, to a significant extent, from the poorest to the richest countries of the same sub region. There is still discrimination against indigenous and afro-descendants, and there are still a disproportionate number of poor households headed by women.

These and other problems also go hand in hand with an alarming increase in violence and crime. Drug trafficking, organized crime, kidnapping, human trafficking, arms trafficking, and youth gangs are an integral part of the panorama of the region.

In sum, the challenges remain immense. But, the opportunity to overcome them is there as is the optimism that many demonstrate in the face of the current situation. The coming years will tell whether this was indeed the decade for Latin America and the Caribbean or whether the progress will be short-lived once more, and instead, the social conflicts rooted in poverty, unemployment, crime, and inequality will grow.

The issue of economic growth is key in this regard. It is not the first time the region has experienced significant growth marked by booming exports of raw materials and food supplies. It is said, for example, that some countries in the region were once much richer than they are now, at least in comparison to European countries that today far exceed their levels of development. It is said, for example, that Argentina came to occupy a place among the ten richest nations in the world or that Chile, in the late nineteenth century, had a GDP equivalent to 80 per cent of that of the Nordic countries. What is ignored is the circumstance that produced the closeness between some developed countries and ours. This occurred when, as a result of industrial development, an uncontainable demand for raw materials, food, fertilizers, fuels and natural products of all kinds surged. In the “golden” years that encompass the last decades of the 19th Century and the early years of the 20th Century, until the First World War, Latin America experienced a huge boom that, nevertheless, failed to trigger an effective development process and only generated some middle sectors, and above all, substantially increased the ostentatious consumption and the accumulation of property in key sectors, without producing the industrialization that took place throughout Europe. In short, Latin Americans spent this wealth, without investing in improving their production and, above all, improving the skills of their employees, generally condemned to successive generations of farming or quarrying.

The question is why should something different occur. In fact, the phenomenon that is emerging of inflation that has been occurring in some of the most successful countries reveals an imbalance in the flow of money and increasing production. This has to do, however, with low interest rates in developed countries, which drives many investors in those countries to emerging markets. What I refer to here is to the savings and investment in our countries, which necessarily must be higher and of a different quality from what has occurred in other booms driven by a rise in demand and the prices our products. If the more affluent sectors of our society, once again, directed themselves to “renter” investments and ostentatious consumption rather than investing in areas that would add value to our products, particularly through education, innovation, and the creation of productive employment, the distribution of wealth will become even more unequal than it currently is today.

An important part of these challenges also has to do with politics. Making the decisions that modify development policies, generate quality education, increase the generation of productive jobs, reduce energy costs, etc., is not something that can be left solely to the market. More than 80 years ago, John Maynard Keynes wrote something similar in “The End of Laissez Faire,” months from the Great Depression: “I believe that some coordinated act of intelligent judgment is required as to the scale on which it is desirable that the community as a whole should save, the scale on which these savings should go abroad in the form of foreign investments, and whether the present organization of the investment market distributes savings along the most nationally productive channels. I do not think that these matters should be left entirely to the chances of private judgment and private profits, as they are at present.”

In more modern terms, neither improving access nor the quality of education, nor productive innovation, nor the allocation of resources to production sectors so as to expand employment opportunities, will magically happen with the operation of the market. The question is, in fact, if those that decide will be those who because of their wealth and control of the process, will have more information to do so, or if it will be decided by democratic means, through the democratic State.

This opportunity comes at a time when democracy has grown in our continent, but still falls short of generating enough confidence in the citizens to encompass these processes with complete legitimacy.

The first prerequisite of democracy, without which all others are meaningless, is that governments have their origin and derive their legitimacy from the will of the people. Democracy is elections and the democratic exercise of elected officials. And in recent years, despite the crisis experienced in Honduras, which we hope to overcome soon, this essential requirement has been met. I can speak with knowledge of the facts: in the past six years, the OAS has observed more than 60 electoral processes in all countries of the region and all have met the requirements of a democratic election. They have had important problems, but they have been clean processes with massive voting turnout and secret ballot and with results adjusted to the reality of the vote.

If the idea of democracy is reduced to the generation of power, we can say that America is, along with Europe, the other democratic continent of the world, which is in itself the greatest historical achievement of recent decades. Nevertheless, the extension of the democratic ideal itself has broadened the content of this concept, to include a set of values that encompass the organization of the State, the rights of citizens, and that distinguish the origin of democracy and the exercise of democracy. Such has been the trend in America since the adoption in 1991 of the Declaration of Santiago of Chile by the Assembly of the Organization of American States, until the signing, by all Member Countries of the Inter-American Democratic Charter in Lima, Peru, on September 11, 2010. Democracy is both of origin and of exercise, and to be called democratic, a government must not only be elected democratically, but govern democratically.

The problems and questions about democracy in the region are from this solid reality. There is a generation of democratic power, but there is also evidence of some traits of a true democracy (not only defined by the report of the Economist, but especially by our Inter-American Democratic Charter of 2001). Democracy in the Americas has a definition that is much more demanding than the purely electoral definition.

By adopting the Inter-American Democratic Charter, our States, through their governments, stated clearly that what is called democracy of origin is only one aspect of democracy. There is also what is called democracy of exercise or the exercise of democracy. From this point of view, I think that Latin American democracies are facing a set of problems, some of which are on the path to improvement and others are receding. The most serious cases, and there are three, if not resolved, may roll back democracy and the trust of citizens'.

A first problem, as Charles Tilly has pointed out, is to speak of democracy when in it the place of individuals is relatively predetermined, as in the caste society; democracy is not compatible with a system in which the place of individuals in society is predetermined at birth. Therefore, in Latin America we have a first major de-democratization factor, which is shaped by poverty, inequality, and discrimination. By the way, there can always be some mobility, but in our region that mobility is limited: one is rich or poor from birth AND one can not close their eyes: on this continent, the afro-descendant populations are much poorer than the entire population, as are indigenous people, and a majority of poor households are single parent households headed by women. When you try to remove poverty and inequality or poverty and discrimination, the reality hits us in the face: poverty has a race and it has a gender.

Regarding this first problem, in any case, one could argue that we have advanced in the last decade. Perhaps because it was a decade of more economic growth than the previous two combined, despite the crisis, it produced a result of a decrease of 8 points: in 2002 there was a peak that was more than 40 percent, and today it must be around 32 percent. However, one third of the citizens of Latin America are poor, but with the economic growth and development that this continent shows, we should not have one third of the poor.

Sometimes these comparisons are bad, because as much as I do not like comparisons of economic growth between Chile and India, they are also not good in this case. Until recently, 40 or 45 percent of people in extreme poverty in the world were in India, so we can’t compare one thing with another. But, in our region—a region whose per capita income roughly corresponds to the world average—we need not have a situation of discrimination and poverty as large as we have. We have made progress, but we still have far to go.

The second is a structural problem of Latin American democracies, already spoken about. When we talk of crime in Latin America and the Caribbean, we are not only talking about the number of crimes being committed; what is a threat to democracy is organized crime, which has its heart, its basic core, in narcotics, even though it also dabbles in human trafficking, money laundering, trafficking of weapons, piracy, trafficking of organs, and why continue. Any company, however criminal, tends to grow and eventually becomes a conglomerate when successful. In this problem, unlike the prior one, we have gone backwards and not forwards. This problem is now a factor of de-democratization that is greater than it was 20 years ago, and in this, I agree with the conclusion of the previous panel.

Unfortunately, there are no known successes in the fight against drug trafficking and organized crime in recent decades; rather on the contrary, it constitutes a threat to democracy. It is also not a democracy in which there are some individuals who clearly lay outside the law, do not accept the common rules that govern the whole of society, and are governed by their own rules. But, nevertheless, organized crime tends to find its way into political issues.

Someone said this a few years ago: first in many villages of our countries people bought or threatened their leaders; today, they are neither bought nor threatened, they just place themselves in the position to govern. This is happening in our region, organized crime is getting into the politics of our countries, which creates a critical need for transparency in our political system to prevent that, especially in smaller countries, they practically come to rule over almost all of society.

The third problem is the subject of democratic governance, which is what makes the Economist Intelligence Unit, in a recent report, characterizes the greater part of our democracies, as imperfect flawed democracies.

I do not want to go into all the issues, but I think it is necessary to illustrate a few:

(1) The existence of a weakness in the institutions is very strong and is marked by increasing trends towards what is called Cesarism. In our countries, there is a tendency to change the government of republics, the government of laws, the government collectively, for individual governments. We are in our region, prone to successive re-elections.

(2) We also see a tendency to weaken the institutions exercising control within society. The judiciaries in many places are not independent, and when we talk of separation and balance of powers—there is, especially in presidential systems, a balance between the executive and the legislature that has never really existed—but I would say that a key issue in a democratic society is the independence and autonomy of the judiciary and its strength. And it is there that I think we have a great problem, both in the judiciary, as in the prosecutorial power and the constitutional powers to actually, in an independent manner, allow the rule of law and the state of law to govern.

(3) Thirdly we have some difficulties in the exercise of civil sovereignty and the right people. I think there is no democracy without full freedom of expression; actually there really is no politics without freedom of expression because freedom of expression in dictatorships is not necessary as the dictatorship assumes we all think alike. The dictator assumes that everyone thinks like him and that it is not necessary for others to express themselves. And, not just democracies, politics, but also the imperfect democracies require freedom of expression. Nevertheless, we have different kinds of threats to freedom of expression; I have always condemned that in seeking to limit freedom of expression via bureaucratic means, state standards, enforcement etc., there is a primary issue at hand in this legislative attempts. But, control of the media in our region is also excessively concentrated in fewer hands, and we also have something much more brutal, which is violence exerted in cases involving freedom of expression by the same criminal groups whom I spoke of previously. I think the human rights issues, of freedom of association and expression, are not fully guaranteed yet.

In short, the democratic institutions in most of our countries is still too fragile to fully take advantage of the opportunities that the new international reality offers in order to achieve sustained and sustainable economic growth, provide security for citizens, and promote fair and equal societies. But these challenges do not wait; the effective strengthening of democratic governance depends on this really being the Latin American Decade.

Thank you very much.