A call for economic change: Latin America today

National Catholic Reporter, June 4, 2004 by Barbara Fraser, Paul Jeffrey

Part Two: Economics

Economic imbalance, both within Latin American countries and between Latin America and the wealthier economies of the United States and Europe, is destabilizing societies throughout the region. The economic unsteadiness can hold significant consequences for the political arena and is the product of a host of influences, including national pride, indigenous rights, persistent poverty, unemployment, severe underemployment and the huge gap between rich and poor.

The scene last October in Bolivia's Altiplano, a plateau some 12,000 feet above sea level, was a familiar one. Thousands of peasant farmers, angered by government policies, were protesting in one of the few ways in which poor people in Latin America can get attention--by throwing up roadblocks, bringing transportation and commerce to a halt.

As the days dragged on, food and fuel grew scarce in La Paz. President Gonzalo Sanchez de Lozada called out the troops to clear the way for gasoline trucks to reach the city and extract stranded tourists from an isolated mountain town. When the smoke cleared, at least 80 people were dead, the president had fled to the United States and his vice president, Carlos Mesa, a journalist with virtually no political background, was the new chief executive.

Michael Gilgannon, a diocesan priest from Kansas City, Mo., who works in campus ministry in La Paz, had just returned to the country. His taxi from the airport had barely reached the city limits when the roadblocks went up.

"This had been building up for three years," Gilgannon said. "You just knew that there was no stopping it. It was a tinderbox."

Bolivia's protests were a microcosm of ingredients that are brewing, in various combinations, throughout the region. National pride, indigenous rights, persistent poverty, joblessness and, above all, the huge gap between rich and poor have implications not only for economics, but also for politics. Surveys show that in countries where the income gap is greatest, people are most likely to tolerate nondemocratic governments.

In Bolivia, the spark that lit the tinder was the government's decision to ship gas from southern Bolivia to Mexico and the United States, probably through a port in Chile--which has been a hated rival since it annexed Bolivia's coast in a war in the late 1800s.

"Gas was the focal point that everyone, even groups separated by class and race, could rally round," Gilgannon said. "Even the business class had begun to ask, 'What's in it for us and what's in it for Bolivia if the gas goes straight from the well to the port?'"

But in Bolivia, as in the rest of the region, the problems run deeper than the gas wells. The protesters outside La Paz were mainly poor, indigenous farmers, while the president whose resignation they forced was a 73-year-old businessman with a declared fortune of $50 minion. In places like the Andes and Central America, that balance of economic power--a small, wealthy elite running a country with a largely poor, indigenous population--has not changed since the Spanish conquest.

And between the "lost decade" of the 1980s and what is now being called the "lost half-decade," from 1997 to 2002, an entire generation in the region has grown up with little hope of economic advancement.

After several years of stagnation or outright recession brought on the by international economic downturn in the late 1990s and exacerbated by the slump after Sept. 11, 2001, Latin American economies held steady or edged slightly into the black last year. Overall, the region's economy grew by 1.5 percent, with the notable exception of Venezuela, which contracted by 9.5 percent. Regional growth of 4 percent is expected this year.

Those figures, however, do not translate into a better quality of life in most of Latin America, where a full 44 percent of the region's population lives on less than $2 a day. According to the U.N. Economic Commission on Latin America, unemployment rose by a mere one-tenth of one percent last year --but that was enough to put 700,000 more city dwellers out of work, bringing the total urban unemployment figure in the region to 16.7 million.

The jobless rates themselves are misleading. While unemployment stands at just over 10 percent, that doesn't mean that nearly 90 percent of the region's workers are employed. The ranks of the "employed" include not only professionals and semi-skilled laborers, but mothers and fathers who must support their families with the pennies they earn peddling pencils or candy on street corners.

"Three out of every four jobs created in the 1990s were in the informal sector," said Ricardo Ffrench-Davis, the U.N. economic commission's principal regional adviser and an economics professor at the University of Chile. "That's a failure."

But who failed whom?

High debt, low growth

Part of the blame--as large-scale protests in places like Seattle and Cancun have shown--must be placed at the door of multilateral lending agencies and the architects of the "Washington Consensus," that began lending liberally to governments that had questionable credentials but either oil reserves of friendly militaries. Later, when oil revenues dropped and countries were unable to meet their payments, the lenders insisted that the borrowers institute drastic free-market reforms in order to qualify for assistance.