TCS Daily

Consequences for Bad Leadership

By Andres Mejia-Vergnaud - April 26, 2005 12:00 AM

This week (April 25-30), the U.S. Secretary of State Condoleezza Rice is visiting several countries in Latin America. In recent years, this region has been marked by a high degree of political instability, which has been reflected in the rise and growth of populist leaders and parties.

In this context, Ms. Rice's visit to the region should have, above all, the purpose of countering this wave of instability and ideological radicalism. She will visit El Salvador, Chile and Colombia. But she'll also visit Brazil, a country with a somewhat double-faced leadership represented by former union leader "Lula" Da Silva.

In many ways, the policies carried out by Lula's administration have been a nice surprise. All of us who knew about his extreme-left past were full of fears about him taking over the presidency. We thought he would become Venezuela strongman Hugo Chavez's best ally, and would pursue far-left economic policies. In regional affairs, he maintains somewhat good relations with Chavez, but he's far from having become the ally some feared he would be. In fact, in some instances, he has publicly taken distance from Chavez.

However, this doesn't mean that Lula's administration is fully practicing sound politics and sound economics. Lula and his team have been putting all sorts of obstacles to trade and economic integration. Lula remains convinced that trade integration with rich nations is not the way for developing countries. These countries, in his view, should unite in a sort of common front to face rich nations in trade negotiations. This brings to mind the years of the "non-aligned movement," and will probably have the same disappointing results.

Lula has favored integration with the ineffective Mercosur. He's also assumed the leadership of the so-called G-20, a group of developing countries created with the noble purpose of demanding the end of agricultural subsidies, but finally transformed, thanks to Brazil's leadership, into an activist bloc that has contributed to the current stalling of trade negotiations. This is really bad leadership. Any effort to help poor countries develop should start by making them aware of the importance of trade and integration.

The consequences of this bad leadership were clear and apparent during the 2003 trade negotiations in Cancun (WTO) and Miami (FTAA). Both meetings ended with no positive result, and in both cases, Brazil's activism was a critical factor in blocking possible agreements. The case of the FTAA is really dramatic. FTAA could be the best hope for poor countries in Latin America, but Brazil's stubbornness, and its insistence in pursuing an "FTAA lite", have virtually erased all hopes for a Pan American area of trade and development (with Cuba and Venezuela looking from outside).

But, what do they mean by an "FTAA lite"? In few words, it would be an agreement which would not include topics such as government procurement, trade in services and Intellectual Property (IP). This would be a materialization of Brazil's current reluctance to respect the rules of international trade. In this, perhaps the most dramatic case is Intellectual Property (IP).

The Lula administration's approach to IP has been nothing but populism at a global level. Lula's high ranking officers are constantly threatening and attacking pharmaceutical companies, the contemporary scapegoats of government inefficiency and institutional failure. Very recently, Lula's administration threatened to issue compulsory licenses for anti-retroviral drugs, used in the treatment of AIDS. This approach is wrong, misguided and dangerous. It is wrong, because it's based on a false belief ("patents are to blame for lack of access to medicines"). It is misguided, because it aims at charging private companies with the cost of a public policy. It is dangerous, because a deep application of his approach would result in no incentives for further research in AIDS vaccines and medicines.

The latest expression of Lula's global populism is his bid for a permanent seat in the U.N. Security Council. With this background (and the background of the U.N.), we could only expect the worst for such a scenario.

This week, as she visits Brazil, Secretary of State Rice should remind Lula that a rules-based system of global trade and integration cannot tolerate such aggressive activism, which sees heroism in breaking the rules. She should also warn him of the consequences of bad leadership: the victims of bad leadership will not be the "rich nations", the usual target of his rhetoric. The victims would be the poor, who would miss another opportunity for integration and progress.

The author is Director, Instituto Desarrollo y Libertad (Bogota, Colombia).


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