Thank you very much for this warm welcome and for the invitation to come to speak to you today. I would like to thank my friends from the Latin American Student Association (LASA) who made this event possible and express my appreciation to the Director for the Center of Latin American Studies, Erick Langer, and to all the community for their continued interest and rigorous study of Latin America.

Latin America presents itself today with a new face, more optimistic and assertive in the global stage but still haunted by many of the issues and plights that historically seemed to characterize the region.

The primary reason for this new optimism is economic. After the fears and the uncertainties triggered by the Great Recession of 2009, the region’s economies begun soon to show vigorous growth, beginning with Brazil and Argentina, but also Peru, Colombia, Chile, Panama, Uruguay and, more recently Mexico, with rates at times higher than those preceding the crisis.

It is not only a year of growth that is cause for celebration. Before the crisis from 2003 to 2008, the region had already grown by over 5% a year on average. The fact that the economies bounced back so quickly, just one year after many of the leading economies experienced even negative growth rates, spurred optimism. While the pace has grown slower in some of the large countries, the rates of growth projected for this year are over 3%, although the majority of the countries in the region will have a stronger growth.

Though the figures stand out compared to those of the developed world, Latin America and the Caribbean region is the second slowest performer in the developing world, marking a slower pace in its expansion compared to the likes of China or India. But if you compare the region throughout the last decade, from 2002 to 2012, that period saw more growth than the two previous decades put together. That is quite a reason to be optimistic.

During this decade poverty rates have dropped to levels not experienced since before the 1980s. Tens of millions of Latin Americans have moved out of poverty and a large number of jobs have been created. A vigorous, industrious middle class has risen from 103 million to 152 million, a key factor of the progress of Latin America.

Recent reviews of the Millennium Development Goals by a group of United Nations agencies reveal that important advances have been made in most indicators, despite the fact that it appears that some of the poorer countries in the region are being left behind. We are still faced with many challenges–we will discuss them in a moment– but the opportunity to tackle them is a certainty, as is the optimism on the part of many people today.

I do not know if you remember a column from The Economist in 2008 which showed a map of the world upside down with Latin America on top of the world. The question is whether we will continue in this positive momentum or whether we will give way to the exacerbation of social conflict as a result of the enduring shortfalls we have. Part of this success has to do with the political situation. Sometimes —people do say and I think rightly so— countries that overcame the crisis earlier was not just due to a matter of the rise of commodity prices, but also due to the fact that the economies were handled in a much better way than they were in previous crises.

The quality of macroeconomic policies adopted by the governments before and during the recession was a factor that enabled them to mitigate the impacts of the economic downturn. Even countries that proclaimed their aversion to policies of the past acted with fiscal prudence and accumulated the reserves needed to implement anti-cyclical policies. This is interesting to reflect upon.

There is a lot of talk about a political division within Latin America but it doesn’t really stand in the economic realm as some of the less orthodox economies have been doing pretty well. One example is very revealing. As a percentage of its gross national income, Bolivia has by far the highest foreign exchange reserves in the continent. As a percent of national income, the reserves of Bolivia are equivalent to those of China. Twenty years ago, Bolivia had a negative reserve and now it has more than fourteen billion dollars in international reserves.

When you analyze who is getting the most investment in Central America, aside from Panama due mainly to the extension to the Canal, which is something enormous, and Costa Rica, which usually receives a lot of Foreign Direct Investment, Nicaragua tops the list giving all kinds of guarantees to investors. This supposedly divide is not as simple as it seems, that is what I wanted to explain.

Most countries —regretfully not all— have followed very prudent fiscal policies, and I think that it has been one of the main reasons of the successes they have achieved. The Latin American banking sector proved to be much less exposed than those of the developed world and as a result, major rescue operations entailing excessive government spending were not necessary.

In other words, as never before, the causes of the crisis came from outside and internal public policies played a positive role in mitigating it. In addition to the fact that this is partially responsible for the reigning optimism, it shows that, with all the weaknesses of our governments, their action is not only indispensable but it can also be effective in dealing with approaching challenges. This time, the government may be part of the solution.

This opportunity is presented during a time when democracy has unquestionably been on the rise in our region. In the last four Summits of Heads of State and Government of the Americas, all the leaders that were present had been elected democratically. That is a far cry from the previous decades, from the sixties to the late eighties, when “national security” dictatorships were a majority of governments in South America and the civil wars in Central America made way for the establishment of a majority of illegitimate governments, needless to say that the violation of human rights was rampant at the time. Coinciding with the end of the Cold War a large process of democratization took place in Latin America and democracies appeared or reappeared over the region.

The first key requirement for democracy, without which the others are meaningless, is that the legitimacy of government originates with and is based on the will of the people. If the idea of democracy is taken in its aspect of generation of power, we can say that the Americas represent the other democratic continent in the world together with Europe. This, in and of itself, is the greatest historical achievement of recent decades.

Governments are created, therefore, by universal elections and a policy of consensus and broad agreements has allowed, among other things, an adequate follow-through of public policies during a large period of time without entailing significant disruptions. I can speak from experience here since the past five years we have observed around 50 elections processes of all kinds in different parts of the region and every one of them has fulfilled the requirements for democratic elections.

However, the extension of the democratic ideal has given the concept a broader content that also includes a series of values related to the organization of the state and the rights of citizens. The recognition of this extended concept of democracy was the result of the democratic consensus that arose in the region in the late eighties and early nineties, after this democracy wave, democracy went from being defined as an “aspiration” of the peoples of the Americas to a “right” of those peoples. The Inter-American Democratic Charter begins by stating that the citizens of the Americas have a right to democracy and, therefore, their governments have an obligation to promote and defend it.

This trend was set in motion by the 1991 Santiago Commitment—Resolution 1080—of the General Assembly of the Organization of American States and it culminated —I would say— on a very sad day, the 11th of September of 2001, in Lima, Peru. Democracy builds upon a series of mechanisms upheld by the inter-American system and inherently expands the very concept of democracy. In order for a government to qualify as democratic, not only must it be democratically elected, but it must also govern democratically.

The Charter encompasses a set of values and rights as conditions for democracy. It includes the fulfillment of a series of conditions as the holding of free and fair elections, but also respect for human rights, the respect of the rule of law, the upholding of fundamental freedoms, the pluralistic system of political parties, the separation of powers and independence of the branches of government, freedom of expression and of the press, and transparency of government activities.

No democracy in the world meets one hundred percent the standard set forth by the Charter. The IADC is a program for democracy; an ideal that we aspire to and that can always be improved upon. Yet it enables us to compare its principles with the actual political situation in our region, to see how far we have gone in building democracy and democratic practices among citizens, and to see that the risks of a relapse are still present. The historic development of democracy is not linear, but sprinkled with advances and setbacks, which in many cases are normal symptoms of a complex process, but in others, may constitute actual breaches of the foundations of democracy.

In recent years, governments have also increased their staying power. Since the return of democracy 17 elected presidents prematurely concluded their mandate, by coups, resignation, impeachment or upheaval. From June 2005 to this day, only two such events have occurred. The coup d’État in Honduras, which led to a collective response and a suspension of this country unanimously at the OAS until democracy was restored; and more recently Paraguay, where the OAS, while regretting the premature demise of the government of President Fernando Lugo, did not qualify the impeachment process as illegitimate (as other organizations did) and is supporting the strengthening of democracy with a view to the elections of next April. Certainly these two situations have been unfortunate; but the difference between the previous period and the last seven and a half years shows that governance has greatly improved in Latin America.

But these democracies, generated in legitimate elections, are more stable than ever, still face severe challenges if they are to really deliver on the promises of three decades ago.

1.- The first challenge to democracies in the region is achieving stable sustainable growth. As we have already seen, the present cycle of growth, though supported by good economic policies, has been based on an advantageous price of commodities, which has risen at a much larger pace than the economies themselves.

This trend has taken place before in parts of Latin America followed by long periods of stagnation or low rates of growth. Several reasons have been given for those negative cycles: lack of sustained internal investment, of adequate infrastructure, a well-trained labor force, coupled by excessive accumulation of wealth on a small upper class more prone to consumption than to productive investment. Most of those limitations still exist in the region today.

2.- Poverty and inequality continue to be the prime factors that hold back Latin America. Despite the advances of recent years, the fact is that over one-third of its inhabitants continue to live in poverty, and this is not consistent with a region with our level of development. The fact that 1% of the population accounts for more than 50% of the national income does not fit with our democratic discourse.

Neither tax systems nor labor laws have been reformed to provide for a better distribution of wealth, as shown by recent OECD studies on the virtually zero change in the Gini Coefficient after taxes in our region of Latin America. Poverty is accompanied by discrimination; poverty has gender and color. The indigenous poor, the Afro-American poor, poor persons with disabilities, and poor female heads of household are the true reality of our poverty.

3.- Today crime is a threat to democracy and a general feeling of public insecurity has become a major concern of citizens in our Hemisphere. The crime rates across countries are very uneven, but some countries of Latin America and the Caribbean have crime rates four times as high as the global average. Actually, in the last Latinobarometro poll in the two countries in which the rate of murder is lower, Chile and Uruguay, crime was cited as the most pressing problem of society.

The increase in drug trafficking with its related crimes of money laundering and other highly lucrative criminal pursuits, such as arms trafficking and trafficking in persons, have given rise to authentic criminal corporations.

4.- While democracies are stable, the institutions are still very fragile, and this is a central problem for democratic governance. We have weak and poorly financed governments that need to tackle serious issues. Our governments, in response to their citizens (and exaggerated electoral promises), take on social and security responsibilities that they are not in a position to fulfill, because they lack the necessary resources, as well as strong and reliable institutions to carry out those policies.

Government reform should start with fiscal reform that will increase government revenue and, at the same time, become a legitimate method for redistribution of revenue, as it occurs in all countries of the developed world.

5.- In the context of a legitimate political struggle, the democratic fallacy that the majority has the right to change the system as it sees fit has been gaining force, and so it tends to accumulate power and to disregard the participation and rights of minorities. The justification for this temptation to grab absolute power on the grounds of majority is always the need to “complete a task” or to deal with urgent crises in society. But if institutions and laws are changed for this reason, institutions are weakened, as is ultimately democracy, which they claim to defend.

In some countries there have recently been substantive constitutional changes that have yet to prove their capacity to forge stable governments. In other countries, the temptation to reform laws governing the length of terms of office and re-election arises every time they see a possible political advantage in it, while they frequently amend laws regulating fundamental aspects of democracy, including the exercise of public freedoms.

Latin America is in a constant process of reviewing of its political institutions, and it gives cause for concern that in some countries this process does not occur as a result of a legitimate desire to create a broader consensus and greater stability, but rather to take advantage of electoral gains to preserve or enhance an administration’s power.

6. - Especially worrisome is the attempt to control the branch of government on which the very subsistence of the rule of law relies: the judicial branch. The tendency to politicize the judicial system is negative in and of itself, but if a political sector controls the judicature, it leaves its opponents defenseless and illegitimately alters the political equilibrium of society.

7. - Similarly, control of the media poses a serious risk for democracy in a society in which effective freedom of expression depends on it. The first negative factor is the lack of access to reliable information by a majority of citizens, due to the high concentration of media property in the hands of just a few people or firms, sometimes associated to the ones holding economic power. Another risk is the introduction of types of control that eliminate free opposition, on the legitimate pretext of breaking the monopoly of the media. Laws that fully guarantee the free circulation of ideas by all citizens can also set objective limits on the degree of concentration of the media that disseminate information in society.

I have emphasized these negative trends, so that I can conclude with a positive assessment and a warning. In one of his last publications, a book that bears the simple title of Democracy, the eminent Charles Tilly referred to three large-scale processes that give form to democracy or, on the contrary, can represent historical setbacks destructive of democracy when they are prolonged or reappear. These are suppression of power centers outside the government, the manifestation of deep inequalities between categories, i.e., rigid divisions between social sectors, and the lack of “trust networks” within society.

Many limitations can be attributed to the still short time in which all these events have occurred; democratic governments have taken a long time to develop in other regions of the world, and there is no reason to expect full success in the Americas in a few decades.

Nonetheless, the risks of de-construction (destruction) are there, as I pointed out earlier. Criminal groups today are a seed of independent power; they control their own territories and obey their own laws, which they impose on others outside the authority of the state. The privileges that some people enjoy and the existence of social systems (health, education, and security) that are differentiated in terms of access and quality lead to the creation of distinct categories of citizens. In some countries, previously existing consensuses are giving rise to extreme political polarization, and this is not a good foundation for the urgent reforms required in Latin American states.

In short, although democracy has achieved major gains in the region, based on many constructive elements, the elements of its destruction exist alongside this strengthened democracy. Interaction between the two on the political front will determine whether, this time, our region takes advantage of the major opportunities offered by the global economy or it remains, as so many times in the past, at the “threshold,” a prisoner of its own phantoms.