Forgotten Continent: A History of the New Latin America

Michael Reid

• Publisher: Yale University Press
• Year: 2017
• ISBN:
  9780300231700
• Topic: Geschichte
• Subtopic: Lateinamerikanische & karibische Geschichte

The bestselling primer on the social, political, and economic challenges facing Central and South America—now fully revised and updated. Ten years after its first publication, Michael Reid's bestselling survey of the state of contemporary Latin America has been wholly updated to reflect the new realities of the "Forgotten Continent." The former Americas editor for the Economist, Reid suggests that much of Central and South America, though less poor, less unequal, and better educated than before, faces harder economic times now that the commodities boom of the 2000s is over. His revised, in-depth account of the region reveals dynamic societies more concerned about corruption and climate change, the uncertainties of a Donald Trump-led United States, and a political cycle that, in many cases, is turning from left-wing populism to center-right governments. This essential new edition provides important insights into the sweeping changes that have occurred in Latin America in recent years and indicates priorities for the future. "[A] comprehensive and erudite assessment of the region... While the social and economic face of Latin America is becoming more attractive, political life remains ugly and, in some countries, is getting even uglier."— The Washington Post
"Excellent... a comprehensive primer on the history, politics, and culture of the hemisphere."—Francis Fukuyama, New York Times bestselling author "Reid's book offers something valuable to both specialists and the general reading public... He writes of Latin America with great empathy, intelligence, and insight."— Hispanic American Historical Review

CHAPTER ONE

The Forgotten Continent

The future of the world, we are told with increasing insistence, lies in Asia and particularly in China and India. The terrorist attacks of 11 September 2001 and those that followed, the disastrous aftermath of the invasion of Iraq, the bitter failure of the Arab Spring and the emergence of the chiliastic and brutal Islamic State group have all meant that the Middle East and the broader Islamic world are of unavoidable strategic interest to the United States and Europe. Despite some recent progress, Africa’s wars and dictators, its epidemics and poverty, still tug at the consciences of the rich world.

What of Latin America, the other great region of the developing world? ‘Latin America doesn’t matter . . . People don’t give one damn about Latin America now’, Richard Nixon told a young Donald Rumsfeld in 1971, when advising the future American defence secretary which part of the world to avoid if he wanted a brilliant career.¹ With the exception of the violent overthrow of Salvador Allende in Chile in 1973, which Nixon’s administration encouraged, and the debt crisis and the Central American wars of the 1980s, his judgement largely held true in the following decades. To be sure, the sickening collapse of Argentina’s economy in 2001–02 attracted horrified glances. Colombia’s drug lords and guerrilla violence sometimes made headlines. Fidel Castro remained a curiosity, stubbornly ensconced in his communist island well into old age. But this only served to underline Latin America’s status as a largely forgotten continent. It was neither poor enough to attract pity and aid, nor dangerous enough to excite strategic calculation, nor was it growing fast enough economically to quicken boardroom pulses.

Then, suddenly, the veil of oblivion thrown over Latin America by much of the media in Europe and the United States parted. Presidential elections in the region brought to power a cohort of left-wing leaders of various kinds in a ‘pink tide’, inspiring the notion that Latin America was moving out from under the thumb of the United States, where it was asserted to have forever languished. Much of the interest was catalysed by Hugo Chávez, Venezuela’s voluble populist president who aroused fears in some quarters and hopes in others that he was another Castro – but one armed with oil. Seemingly in his wake stood Evo Morales, a coca growers’ leader and socialist, who became the first Bolivian of Andean Indian descent to be elected to his country’s presidency, and Ecuador’s Rafael Correa, a self-described ‘Christian leftist’. In Brazil, the election in 2002 of Luiz Inácio Lula da Silva, a former trade-union leader born in poverty, brought to power the Partido dos Trabalhadores (PT, or Workers’ Party), Latin America’s largest left-wing party. Néstor Kirchner, a previously obscure provincial governor from Patagonia, and his feisty wife, Cristina Fernández, took charge in Argentina, declaring war on the International Monetary Fund (IMF), foreign-owned utilities and holders of the country’s bonds. In Chile, Michelle Bachelet, a socialist whose father died after being tortured by General Pinochet’s secret police and who was herself briefly a political prisoner, became the first woman to be elected president in Latin America who did not owe this distinction to marriage to a famous husband (she was a separated mother of three children). José Mujica, who as a captured Tupamaro guerrilla had spent ten years in solitary confinement, two of them at the bottom of a well with only ants and rats for company, was elected president of Uruguay in 2009 for the left-wing Frente Amplio (Broad Front). In office, he continued to live austerely in his three-room farmhouse, drove an ancient VW Beetle and lunched in the nondescript cafeterias of Montevideo’s Avenida 18 de Julio, its main commercial street. He attracted worldwide attention not just for his modest lifestyle, but also for successfully promoting the legalisation of marijuana in Uruguay.²

By 2008, eight of the ten republics of South America (excluding the Guyanas) were governed by the left, broadly defined. Something, it seemed, was stirring in the region. This led Eric Hobsbawm, a British historian and unrepentant communist, to declare: ‘today, ideologically, I feel most at home in Latin America, because it remains the one part of the world where people still talk and conduct their politics in the old language, in the nineteenth- and twentieth-century language of socialism, communism and Marxism’.³ Others despaired that in the twenty-first century, Latin America remained seemingly locked in what they saw as archaic ideological battles. But in a region long notorious for its extreme inequalities of income and wealth, in part racially based, many saw the new left-wing governments as an overdue response to the lingering legacy of Iberian colonialism.

Soon Latin America began to attract notice for a second reason. China’s breakneck industrialisation and its entry into the global economy unleashed unprecedented demand for the metals, fuels and foodstuffs that the region (and especially South America) produces in abundance. Helped by the sharp and sustained rise in world commodity prices, much of Latin America joined the emerging-market boom. At its height, from 2004 to 2008, the region’s economy, taken as a whole, grew at an annual average rate of 5.5 per cent, while inflation remained low and foreign investment poured in. This was Latin America’s best economic performance since the 1960s. The region seemed to sail through the 2008–09 world financial crisis, suffering only a brief slowdown; thanks to its new economic robustness, governments were able to respond not with austerity, but rather with ‘counter-cyclical’ (i.e. expansionary) fiscal and monetary policies, without triggering inflation. The economic boom went hand in hand with extraordinarily swift social progress. In 2002, 44 per cent of Latin Americans lived below the poverty line; by 2012 that figure had fallen to 28 per cent, meaning that some 60 million Latin Americans escaped from poverty.⁴ Even the region’s income distribution became somewhat less unequal. The middle class expanded, and on some definitions began to outnumber the poor. All in all, the years from 2003 to 2012 were a golden decade for Latin America.

Because of its size, Brazil attracted particular attention among foreign investors. In 2003, Goldman Sachs, an investment bank, published a report in which it highlighted the growing importance for the world economy of the ‘BRICs’, a new acronym in which Brazil took its place alongside Russia, India and China. Brazil is the world’s fifth-largest country in area and population, and its fourth-largest democracy. By 2012 it had become the world’s seventh-biggest economy, neck-and-neck with Britain. It began to be seen as a country of global significance in other respects, such as in world trade and environmental negotiations. It had aspirations to become a permanent member of the United Nations Security Council. Lula’s expansive diplomacy landed the 2014 World Cup for Brazil and the 2016 Olympics for Rio de Janeiro. The award of the latter meant that Brazil was at last recognised as a ‘first class country’, he declared.

Latin America’s left-wing leaders proclaimed a new era of ‘South–South’ ties and regional solidarity, in more or less explicit rejection of the United States and what they claimed was its hegemony over the region. They were pushing at an open door: the Iraq debacle and the financial crisis damaged the self-confidence of the United States and its claims to world leadership. The long-drawn-out agony of the Euro zone and the challenges of enlargement and mass migration plunged the European Union into introspection and tension, culminating in Brexit (Britain’s vote to leave the EU in a referendum in June 2016). Meanwhile, China became the largest trading partner of several Latin American countries, including Brazil, and a growing source of investment and of loans to governments.

From triumphalism to stagnation

By the time the Rio Olympics took place, the triumphalism had congealed and the mood in Brazil and across Latin America was much more sombre. The slowing and maturing of China’s economy prompted commodity prices to fall from 2011 onwards. By 2016, Latin America’s economies, taken as a whole, were suffering their sixth consecutive year of deceleration. According to the IMF, the region’s GDP stagnated in 2015 and contracted by 1 per cent in 2016.⁵ The average hid dramatic variations. While the commodity boom saw uniform growth across South America, the bust exposed the recklessness and mistakes of some of the left-wing governments. By 2016, Venezuela was suffering the world’s highest inflation rate and its economy was in free fall. Brazil was mired in its deepest slump since records began; Argentina was locked in stagflation; and Ecuador sank into recession. In the region as a whole, poverty began to edge up again. By contrast, growth continued, albeit at a slower rate, in Chile, Colombia, Mexico and Peru, as well as in Bolivia.

Not surprisingly, the political cycle began to turn against the left. In a presidential election in Argentina in November 2015, Mauricio Macri, a former businessman of the centre-right, inflicted a narrow defeat on Fernández’s candidate. Chávez died of cancer in 2013, just when Venezuela was paying the socio-economic price of his ‘twenty-first-century socialism’. His successor, Nicolás Maduro, lacked his mentor’s political skills. In a parliamentary contest in December, the regime suffered its first clear electoral defeat at the hands of the variegated opposition. In February 2016, Morales, who had held Bolivia’s presidency for a decade, lost a referendum that would potentially have allowed him to remain in power until 2025 (though he later indicated that he would try to overturn this vote). In Brazil, Dilma Rousseff, Lula’s handpicked successor, was impeached for fiscal misdemeanours; behind her ouster, which she called a ‘coup’ but which followed constitutional procedures, lay a collapse of governability brought about by her deep unpopularity and lack of elementary political skill, the recession and a massive corruption scandal involving Petrobras, the state oil company (in which the PT was deeply implicated, though there was no evidence that she was personally involved). In Chile, Michelle Bachelet, elected by a landslide for a second term in 2013 after a centre-right interlude, lost popularity and was obliged to scale back an ambitious but technically flawed programme of social-democratic reform. In Peru, a centre-left president, Ollanta Humala, was followed by Pedro-Pablo Kuczynski, a former investment banker, who narrowly defeated another candidate of the centre-right, Keiko Fujimori. Only Ecuador bucked the trend – just. Correa opted not to run for a fourth term, but his candidate, Lenín Moreno, narrowly defeated Guillermo Lasso, a conservative banker.

Behind this ebbing of the ‘pink tide’ lay a combination of voter anger over harder economic times, rage against corruption and frustration over the failure of governments of all political persuasions to provide the better public services that Latin America’s societies, less poor and more middle class than in the past, were demanding. Empowered by the spread of smartphones and social media in the region, Latin Americans took to the streets to vent their anger. In Brazil in 2013, small protests over an increase in bus fares in São Paulo mushroomed into a nationwide outpouring of anger against the graft of self-serving politicians, symbolised in the unnecessarily expensive stadiums built for the World Cup, juxtaposed with the poor quality of public transport, health provision and schools. Mass protests over corruption occurred in Mexico and Honduras, and helped to topple the president in Guatemala, as well as in Brazil. In Chile in 2006 and again in 2011–12, tens of thousands of students repeatedly took to the streets in protest over the high cost and poor quality of higher education. Bachelet tried to placate them by promising to make university education ‘free’ (i.e. taxpayer funded). But her second presidency never recovered from her clumsy handling of a scandal over a dubious property development by her son and daughter-in-law.

The problem of corruption, especially in public contracting, had become systematic. Odebrecht, a Brazilian firm that was Latin America’s biggest construction company and was at the centre of the Petrobras scandal, admitted to paying bribes to politicians and officials in nine other Latin American countries totalling $436 million between 2000 and 2015, according to documents released by the US Department of Justice as part of the settlement of the largest-ever lawsuit under the Foreign Corrupt Practices Act. That was in addition to $349 million in bribes it paid in Brazil.⁶

There was an additional cause of voter discontent: the chronic insecurity of everyday life in a region where criminal gangs came to operate with impunity in many countries in the face of ineffective and often corrupt police forces and judiciaries. Proportionately, Latin America suffered more murders than any other part of the world (barring war zones). With only 8 per cent of the world’s population, it accounted for about 37 per cent of total homicides in 2012, when 145,759 people were murdered in the region, according to the UN. Worryingly, despite the region’s social progress, the murder rate rose.⁷ A poll commissioned by the UN Development Programme suggested that nearly two-thirds of Latin Americans avoid going out at night for fear of crime, and one in eight had moved house in order to feel more secure.⁸ No wonder that (at least until the economic slowdown set in) polls found crime had overtaken money worries as Latin Americans’ top concern. Crime was an issue that few governments of either the left or the right got to grips with.

The combination of austerity and corruption was politically toxic. It brought about a demand for the alternation of power that is normal in democracies but that was a relative novelty for Latin America. Indeed, it was this combination and the anti-incumbent mood it engendered that had brought about the region’s left turn in the first place.

Between progress and the populist temptation

In the dying years of the Cold War, Latin America had undergone a historic transformation, with the seemingly definitive establishment of democratic government. In 1978, outside the English-speaking Caribbean, only three countries in the region were democracies; by 1994, all except Cuba and Mexico were (and Mexico would soon become one).⁹ This democratic wave swept away some of the bloodiest and nastiest dictatorships the Latin American countries had seen in their long – though far from continuous or generalised – history of authoritarian rule. It went hand in hand with a surge of free-market economic reform after half a century of statist protectionism. Dubbed the ‘Washington Consensus’ or, if you prefer, ‘neoliberalism’, this prompted much optimism that Latin America had finally embarked on what some in the financial markets thought would be a seamless path of sustained growth and development.¹⁰

Those eager expectations turned out to be over-optimistic. History, as so often, took a more complicated course. The initial fruits of economic reform were mixed. Inflation, so long a Latin bugbear, was tamed. Growth picked up at first, as foreign investment poured in. But it was checked, and in several countries reversed, as it became clear in a string of wrenching financial crises that foreign capital could leave as fast as it had arrived. Between 1998 and 2002, the region suffered what the UN Economic Commission for Latin America and the Caribbean (better known as CEPAL, from its initials in Spanish) called ‘a lost half-decade’ of economic stagnation.¹¹ This disappointing record meant that the free-market reforms fell into widespread disrepute, albeit often unfairly. Privatisation was particularly abhorred, partly because it was associated in a few cases with corruption or the substitution of public monopolies for private ones. Moreover, the policies of the Washington Consensus were widely – if mistakenly – blamed for Argentina’s economic and financial collapse in 2001. The ‘lost half-decade’ not only paved the way for the ‘left turn’, as electorates soured on centre-right incumbents. It brought political instability, too: eight presidents failed to complete their terms between 1997 and 2005.

The arrival of the left in power evoked widespread hopes of progressive reform. The left-wing leaders were united in their rhetorical opposition to what they called ‘neoliberalism’, an often-meaningless term of political abuse which exercises a baleful influence in the region. It is often used simply to denounce an open, capitalist economy.¹² I will use ‘neoliberal’ far more narrowly to refer to those who believe that macro-economic stability, free markets and free trade on their own are sufficient to achieve economic development, rather than being necessary conditions which require the complement of an effective state.

Despite their shows of backslapping solidarity at frequent regional sum...