South / Latin America Today

Historical causes of political, economic and social instability:

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Political:

The Spanish / European colonization of South America installed monarchial and church domination that lasted for over three centuries and instituted a tendency towards one man or strongman rule.

The several centuries of colonization limited the development of strong political institutions regarding rule by the people. After the revolutionary period of 1817 – 1823, authoritarian rule remained the norm until the democratic blossoming during the 1980’s.

By the 1990’s, virtually every country stretching from Mexico to Chile, except for communist Cuba, were functioning democracies with capitalist economies. The American strategy for Latin America was that regional democratization and a faith in free markets would provide an economic take-off that has eluded most and included barely a handful of Latin nations.

A reaction to Bush 43 and Obama Administration policies resulted in a number of countries turning leftward. The first was Hugo Chavez of Venezuela who admired Fidel Castro and pushed his oil rich country towards socialist transformation.

Chavez, who died recently and has been succeeded by Nicolas Maduro, believed that his country’s oil benefited a handful of Venezuelans and left a huge percentage in poverty. Chavez began redistributing oil wealth to the poor and to create a fairer Venezuela. He primarily did this through increasingly more authoritarian decrees and policies. Chavez taunted the United States by allying with Iran and Russia to limit an envisioned threat of invasion from the US.

Chavez was followed by Bolivia and Evo Morales who headed the large Indian majority that had mostly been left out of the country’s wealth centered in the majority Caucasian Santa Rosa area. Morales, similar to Chavez, has tried to redistribute national wealth to the poor Indians, but has been partially blocked by the Santa Rosa area’s resistance to his policies. Chavez was lavish with economic assistance to Bolivia.

Ecuador, led by Pres. Correa, is another South America leader that has spouted populist political beliefs to win office. The government pits the poor against the elite’s domination of the market place and promises an economic improvement that is based on redistributionist promises that the party can’t deliver on without destructive capital and business flight.

Nicaragua experienced a civil war during the 1980’s. Military and economic aid from the Reagan Administration ultimately defeated the Marxist Sandinista political party. Led by political moderates for the past 20 years who disgraced themselves repeatedly with graft and corruption schedules, the people recently restored the Sandinista Party to power figuring that they could not do worse. Daniel Ortega, who had toned down his socialistic beliefs in previous unsuccessful election campaigns, has again pushed Nicaragua to the left. Ortega has joined the Chavez’ camp too – their aim is to limit US influence in the region.

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Honduras got a taste of the Chavez movement through the election of Pres. Manuel Zelaya who became so unpopular with the leadership classes that he was ousted by the Congress and Army.

Zelaya’s removal was viewed as a coup by the Obama Administration, one of the rare times that the US has been in accord with the Chavez bloc on any matter. The U.S. demanded that Honduras restore the Zelaya administration, permit it to finish the term, then hold a new election.

Honduras, led by Zelaya’s successor, President Micheletti, a former army officer, complained that Honduras democratically removed (impeached) Zelaya. Brazil, through its consulate, played a leading role – one bordering on serious interference in another nation’s affairs – in a failed effort to reinstate Zelaya.

Summary: Latin American democracies are maturing and developing stronger political institutions. Unfortunately, wide spread corruption demeans the political process, encourages a return to leftist parties who scorn trickle down economics and promise the poor improved economic outcomes in their lifetimes.

It is doubtful that the leftists can deliver on their promises without authoritarian rule that causes serious inflationary pressures, produces restless populations and crime surges, worsens capital flight and undermine banks and foreign investment sources that are seen as tools of the elites and past US hegemony.

Economic instability:

Latin American economies have traditionally been geared to agriculture and extraction industries (mining). The countries mainly produce commodities which are dependent on global market prices which fluctuate. When prices are high, times are relatively good; when low, unemployment and bankruptcy rises and faith in free markets also plummets.

Few Latin American economies have successfully industrialized. Until the end of the Cold War, Latin economies usually industrialized by developing capital intensive businesses such as steel mills, textile mills, automobile assembly plants. These industries were rarely competitive globally for three essential reasons:

1- Latin wages are not low enough to carve out markets through low price

2- Plants reflected aging industries that were declining though still viewed as

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3- Populations lacked the skill set to win market share through niche adaptations.

Only Brazil, with its wealth of land, natural resources, relatively low wage labor base has successfully industrialized, indeed, stands on the threshold of finally becoming the major power that was predicted for decades.

Venezuela, with its oil wealth, developed a broad middle class that has withered due to an over-reliance on oil and lack of investment in new industries.

Argentina is the model for a country that became rich by producing commodities (beef, wheat) but experienced decline due to failure to competitively industrialize.

Chile, due to a large entrepreneurial class, is currently the most successful Latin economy and serves as an exporter of capital to Argentina and other countries.

The decline of the middle class’ living standards and failure to improve the lives of the poor has lessened faith in the region’s free markets – people want to see improvements in their lives and increasingly buy into the populist platitudes of the late Chavez and company.

Social instability:

The urban populations / cities of Latin nations have exploded in recent decades. Mexico City and Sao Paulo are the two largest cities in the world; Buenos Aires contains a third of the population (12 million).

The trend of migrants from the poorer rural and agricultural areas into the wealthier cities where jobs are believed to be abundant has caused many problems.

  • First, migrants bring raised expectations which are sobered upon encountering harsh urban poverty.

  • Second, populist rhetoric inflates middle class expectations who then demand economic improvement.

  • Third, government expands and enriches new administrators; capital flight worsens the economy causing inflation to soar – Venezuela is a prime model – oil prices are high, wealth pours in but insufficiently to meet raised expectations.

The poor, constantly being told that poverty is not their fault, come to believe it. Expensive government projects pour money into the poor neighborhoods. The poor, stoked by class struggle rhetoric, develop a sense of impunity that causes crime surges which mostly hurt the poor and middle class.

Instability may make a majority nervous – the people call for a new election that a moderate coalition can win and take back power. Unfortunately, the coalition eventually cracks, corruption again rages and cynicism spreads. The populists next make a new play based on old grievances.

In recent years, traditional values of family and church have been breaking down; drug dealing and usage has surged. The modernization of women’s roles has resulted for many in sexual exploitation. A shrinking Catholic church is losing its place in society; new evangelical faiths promising wealth and a better life while in earth are gaining new converts.

Summary: Latin America’s economies are growing, industrialization is finally taking root, and a sizable middle class is forming. The region is increasingly being viewed as a more stable area for investment which is beginning to fuel the normalization of the region.