Tuesday, July 11, 2006

Would the Left be Better for Latin America?

A very clear piece on the reality and basic facts relevant to Mexico and the region's left vs. right battles... that only the San Jose Mercury News has printed.

Would the left be better for Mexico?
By Mark Weisbrot

... (edited - It begins by noting the near-universal anti-Obrador opinion in the US papers, coinciding with the immigration debate...)

Mexico's most pressing economic problem is to restore economic growth. Like the region as a whole, the country has suffered a profound economic growth failure over the past 25 years. From 2000-2005, Mexico's income per person -- the most basic number that economists use to measure economic progress -- grew only 2 percent. From 1980 to 2000, it grew just 15 percent. If we compare this to the 1960-1980 period, when income per person grew 99 percent, it is easy to see that this last quarter-century is a failure of disastrous proportions.

Supporters of Mexico's current economic policies point to the North American Free Trade Agreement as a success, but the country's average annual growth since NAFTA was implemented in 1994 -- again looking at income per person -- has only been about one-third of its pre-1980 growth rate. This is in spite of the fact that foreign direct investment increased from $4.4 billion in 1993 to a peak of $22.7 billion in 2001, and Mexico's exports nearly doubled as a percent of GDP, from 16.8 percent to 29.9 percent, from 1994-2005.

If Mexico had simply continued to grow at its pre-1980 rate, the country would have about the same per-capita income now as Spain. There would not be millions of Mexicans willing to take the risks of illegal immigration to the United States for a wage that would not be much higher than what they could get back home.
Calderón promises to continue the policies of the (recent) past.... López Obrador has also proposed a stipend for the elderly and universal health care to help the poor. And he has said he will renegotiate parts of NAFTA that have hurt millions of rural Mexicans by flooding Mexico's markets with subsidized U.S. corn and other food crops.
The past 25 years have been so exceptionally bad in terms of economic growth for Latin America that in order to find anything comparable, one has to go back more than 100 years, and pick a period that includes both World War I and the start of the Great Depression. This is the main reason for the widespread poverty in the region, and for the continuing revolts at the ballot box, and sometimes in the streets.

The past 25 years have also seen the implementation of a number of economic reforms in the region, some of them implemented during the Latin American debt crisis in the 1980s. The reforms included: an indiscriminate opening up to international trade and investment flows; privatization of public enterprises; higher interest rates set by central banks that are less accountable to elected governments; tighter fiscal policies; and the abandonment by governments of overall industrial policies or development strategies. These reforms are often described as ``neoliberalism'' in Latin America, or ``the Washington consensus,'' since they were strongly backed by the United States.
In Argentina ....Kirchner ... stuck to a number of economic policies that Washington economists predicted would lead to ruin. ...The economy has grown at about 9 percent annually for more than three years, pulling 8 million people (more than 20 percent of the population) across the poverty line.

In Bolivia.... the government raised the royalties it charges foreign oil and gas companies, increasing government revenue from the country's natural gas by about 3.4 percent of GDP -- an amount equivalent to most of our federal budget deficit in the United States. On May 1, the government also renationalized the gas industry and is negotiating terms with gas producers that will further increase the government's revenue. So far, no major gas producers have left the country. The government also seems committed to keeping its promises to the poor.

And then there's Venezuela.... Despite bad relations with the United States, Venezuela is tied with Argentina for the fastest-growing economy in the hemisphere. In addition, the majority of the population -- mostly poor people who never before shared in the country's oil wealth -- has free health care for the first time. They also have subsidized food and greatly increased access to education.

Some think that Venezuela's current economic boom is a result only of high oil prices, but the country had high oil prices in the past and the poor never shared in the windfall. Furthermore, Venezuela's per capita income actually declined in the 1970s despite very high oil prices.

Given those economic realities, Americans should be extremely skeptical of their politicians' and pundits' hostility to the political changes sweeping Latin America. Much of it is based on ideology and a desire to maintain Washington's influence in the region. But most people on both sides of our southern border will be better off as Latin America becomes more politically independent and finds new ways to restore economic growth.

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research, in Washington, DC


Blogger DLP said...

Kirchner keeps the superavit high as the Washington economists always recommend. It's true there is growth and less unemployment (even though still high) There is still 40% people in Argentina under the poverty line and about 20% under the indigence line. And half of the workers are outside the formal employment system (they don't have retirement fund or social services that other workers have.

1:07 PM  

Post a Comment

Subscribe to Post Comments [Atom]

<< Home