TCS Daily

Latin America's Changing Chessboard

By Martin Krause - February 7, 2006 12:00 AM

The recent election of Evo Morales in Bolivia has raised the eyebrows of those who follow Latin American affairs. Their concerns about the political direction of the region might be following, where the trend would be towards a picturesque blend of leftwing discourse and traditional populism, the best example of which is Hugo Chávez in Venezuela.

A closer look at the region shows that an important debate is going on, one that goes to the root of political philosophy, even though the terms of it are far from being academic.

The questions are old ones. Why do we have a state? What functions should it have? What is its role with regard to other nations and the rest of the world? And, with all the folklore of Latin political debate in the middle, two main positions are arranged in the Latin American chess game:

One is the leftwing, populist and statist. This group wants to micromanage society and the market, not just for ideological reasons associated with a move onto socialism, but for the practical one that more state control means more power. For them the question is to have power and keep it, without much concern with what direction will then be used to.

The other is moderate and socially democratic. This group promotes a degree of economic intervention -- but carried out via institutions -- and not for the personal ends of the leadership. This group, the best example of which is Chile, leaves considerable leeway to economic activities in the marketplace. Note that there is no "classical liberal" alternative in place, and the "conservative" one failed in the 1990s and left in its wake the present an undertow of leftwing populism.

But the pieces in this game are changing in both directions, and trade has a lot to do with it. The two sides mentioned above would present their differences with regard to trade mainly in the issue of the Free trade of the Americas Agreement (FTAA), with the left wing populist side against the FTAA and the moderate social democratic in favor. The numbers on each side may change for two reasons: the first is local politics -- Evo Morales defeats a pro-FTAA candidate and Bolivia moves into the anti-FTAA side.

But what is interesting is the second reason: some countries understand that it is in their "national" interest to reach larger markets and a "national policy" or "consensus" starts to develop regardless of the political preferences of a government. The best and last example of this is Uruguay. Tabaré Vázquez became president when his left-wing coalition defeated the two traditional parties for the first time. His government included everyone from independents, to moderate socialists, to former Tupamaros guerrilla leaders.

But as soon as they got into power, they realized they were trapped within the Mercosur, including the protectionist ambitions of Brazilian and Argentine industries. What benefits does Uruguay get from two big partners who make deal among themselves to protect each others' business? And who even make agreements without even consulting their minor partners?

A few months ago, the Vázquez government ratified an agreement on foreign investments with the US and it is now requesting to start conversations for a bilateral trade agreement. That means a potential member of the left wing populist coalition has, instead, decided to move towards the other one.

A source of future movement in the same direction could be the Doha round. Those who oppose the FTAA have ideological baggage, special interest motivations, and just one sound economic reason (respectively). The first is just bald hatred of the market and private companies. The second is the overall protectionism of local industries. The third, however, is a sound concern that free trade should also include agriculture. If the Doha round moves into this area -- or if, at least, the US and countries like Argentina can agree on a unified position in this area -- the Latin American chessboard will change. Argentina, and probably others as well, without the argument in favor of agricultural trade will have a much weaker resistance even with a leftwing populist government.

Martin Krause is Dean of the ESEADE Graduate School in Buenos Aires.

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