US Policy Toward Latin America Ignores Poverty, Disparity

16 July 2002

Latin America is imploding. Not every country in the region is experiencing a political and/or economic crisis, of course, but enough of them are to make this statement only a slight exaggeration.

Yes, Mexico so far is a major exception, and there are others. But the situations in Colombia, Venezuela, Argentina, Brazil, Uruguay, Ecuador, Bolivia, Peru and Nicaragua, while hardly identical, are critical enough to worry even the most optimistic observers.

Yet, it was only a few years ago that policymakers in the United States and international financial organizations were touting Latin America as a success story of democracy, free trade and the market economy. The United States envisioned a hemispheric partnership of prosperous democratic nations stretching from Alaska to Tierra del Fuego. What happened on the way to that bright future? Here is a hypothesis, subject to contradiction and revision:

Stable democracy depends on specific social and economic conditions, including a big middle class and shared prosperity. Trying to build democracy while doing nothing to create those conditions is like putting up a building with no foundation. It may look impressive, but it won't last.

Democracy doesn't work well in the face of high and increasing poverty, gross social injustice and awesome economic inequality. Yet these are the very conditions that have characterized Latin America during 20 years of U.S.-inspired free-market economic reforms, as a recent report by the United Nations Economic Commission for Latin America and the Caribbean makes clear.

From 1980 to 1999, the percentage of households in poverty in Latin America (defined as insufficient income to meet basic needs) grew to 35.3 percent from 34.7 percent. The percentage of individuals in poverty increased to 43.8 percent from 40.5. (The difference in the two sets of figures is likely the result of larger families among the poor.) By 1999, there were 211 million poor people in Latin America, up from 136 million in 1980.

Extreme poverty (defined as insufficient income to meet food needs) decreased slightly during this period (to 13.9 percent in 1999 from 15 percent in 1980 for households and to 18.5 percent fom 18.6 percent for individuals). In other words, the same proportion of people is starving today as was starving 20 years ago, only now there are more of them.

And inequality is greater than ever. In Brazil, as of the end of the 1990s, the richest 10 percent of the population received 43.9 percent of the total income, while the poorest 70 percent had only 28.11 percent of the income. Even in Argentina, with its vaunted middle class, the top 10 percent received almost as large a share of the national income (34.8 percent) as the poorest 70 percent (37.6 percent).

It doesn't take an economic or political hurricane such as a world economic depression to shake a democratic edifice with such built-in structural weaknesses. Milder disturbances, such as an economic downturn or a vacuum in U.S. leadership, will do the trick. That is what is happening in Latin America today, with major potential consequences for the United States, ranging from increased migration to new security threats.

If the United States is interested in a long-term partnership with Latin America, it needs not new policies but a different conceptual approach.

In building a European community, the countries of the European Union recognized that a partnership of the poor and the privileged is unworkable and trade alone would not eliminate the chasm. They created mechanisms to decrease disparities by channeling resources to the poorer countries. It worked.

In contrast, by demanding that Latin Americans open their economies to our goods and capital while closing our economy to their agricultural goods and abundant labor, U.S. policy works to increase the hemispheric gap. Is it any wonder it's not working and Latin Americans are mad as hell?

Max Castro
Published in the Miami Herald © 2002 Miami Herald

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