February 25, 2014 6:43 pm
Latin America stops dancing to the populist beat
Brazil is the new model for left-leaning countries, writes Daniel Lansberg-Rodriguez
Across Latin America, populist governments are in the doldrums. Years of unrestrained social expenditure, coupled with consistently lax fiscal and monetary policies, have left some countries on the brink of economic ruin. Argentina’s embattled leadership has announced the biggest devaluation of the peso in over a decade.
Venezuela has run out of money and is harried by dwindling currency reserves, annual inflation of almost 60 per cent and shortages of everything from toiletries and foodstuffs to chemotherapy agents. Despite resorting to increasingly violent tactics, the government of President Nicolás Maduro has been unable to quell the resulting unrest.
It is almost as though the region’s on-off affair with Marxism were finally over. But before concluding that the much maligned neoliberal policies once proselytised by the IMF have finally come into fashion, one would do well to study the case of Brazil.
The government of President Dilma Rousseff is not brazenly populist. It does not seek “revolutionary” transformation through statist policies such as nationalisations of the kind instigated in Venezuela by Hugo Chávez, the late president.
Ms Rouseff may not be entirely trusting of free markets but her scepticism is more tempered. She is essentially a social democrat, attempting to balance – sometimes awkwardly – strong social programmes and workers rights with an investor-friendly climate.
At times these approaches differ more in attitude than policy. In the early 2000s Argentina and Venezuela earned the chagrin of foreign investors by implementing currency controls and keeping them in place long after the immediate threat of capital flight had subsided. This is anathema to many economists. When Brazil did something similar – aiming to prevent what it considered to be excessive inflows – it used a sleight of hand, introducing a “financial transactions tax”. This sounds less ominous than a policy of capital controls but proved equally prohibitive for many investors.
In any case, the two models no longer compete. The cash-strapped government in Caracas can no longer afford to play godfather to the region’s hardline socialist revolutionaries. Sympathetic client regimes in Bolivia, Ecuador and Cuba are likely to be left in the lurch. Some once saw Venezuela as a model; now it is a cautionary tale.
Today only Brazil’s softer style of leftism remains a seemingly plausible alternative.
Brazil has traditionally been the Gulliver of Latin America: gigantic but a bit alien, separated from its neighbours by language and a unique colonial experience under Portugal. Even its primary trading partners have tended to hail from East Asia or North America.
Despite accounting for nearly 50 per cent of South America’s land mass and population, and more than half of the continent’s gross domestic product, it has only recently begun to come into its own as a regional leader – and then almost as an afterthought to its aspirations for leadership on the global stage.
Recently, left-of-centre presidential candidates in El Salvador and Costa Rica have sought to distance themselves (at least publicly) from Venezuela’s troubled legacy, instead endeavouring to convince voters that they would steer their small Central American republics towards becoming micro-Brazils. This is a dubious economic strategy, given that Brazil relies heavily on exports of commodities that El Salvador and Costa Rica lack. But the candidates nonetheless fared well, each forcing second-round elections slated for next month.
Yet Brazil itself has scant reason to celebrate. It may not be in the throes of economic cataclysm, like Argentina and Venezuela. But it has struggled with large-scale civil unrest, the result of anaemic growth and wide inequalities. Brazil’s economy grew only by about 2 per cent in 2013. That is slower than the other Brics, the entire Group of 20, the economies of Peru, Colombia and Argentina – and even Costa Rica, which may soon be embarking on the same path.
Yet to many people across Latin America, Brazil remains the rarest of success stories: a self-styled leftwing Latin government that has not ended in disaster. Unable to perceive the local giant clearly, they see only the country privileged with hosting the 2014 football World Cup and 2016 Olympics – and not, like the rest of the world, the country seemingly incapable of preparing for them.
The writer is a columnist for the Venezuelan newspaper El Universal, and a fellow at the Comparative Constitutions Project
Copyright The Financial Times Limited 2014.
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