Latin America’s New Pragmatism

Latin America is back in the spotlight this year. The political climate is warming up once again, with major elections taking place in several countries. Economic prospects remain bright, as low interest rates and high prices of raw material exports bolster Asian-style growth rates, while China in particular sucks in huge quantities of soya, iron, copper, oil and gas. The emerging markets are awash in liquidity, with high yields attracting investors. Latin America has recorded three successive years of growth, its first such run in half a century and one that looks set to continue in 2006.

But underneath this impressive performance lies a rather turbulent social and political picture. Global markets may have spurred the growth, but a cocktail of persistent poverty and social discontent has enhanced

the popular appeal of anti-globalization policies. Presidents have been driven out of office in Argentina, Bolivia, Ecuador, and Peru, replaced by populist icons such as Bolivia’s Evo Morales, an indigenous Indian,

leftist and critic of the US. Latin Americans – and the markets – are divided about this sea of changes. Some see instability and

worse poverty ahead. Others see hope and a better, more independent, future. But putting these events into perspective, what really stands out are not so much the popular protests as the profound – and less noisy – domestic transformations that have been taking place

in some of the countries of the region over several decades. Indeed, for the last quarter century several countries in Latin America have been laying institutional pillars, and casting monetary and fiscal anchors, without the confines of any predetermined path or strict ideology. Chile is one of those countries, Brazil and Mexico also.

Javier Santiso is Chief Development Economist and Deputy Director of the OECD Development Centre. Previously he was the Chief Economist for Latin America and Emerging Markets at BBVA (Banco Bilbao Vizcaya Argentaria). He has also been a tenured research fellow at Sciences Po Paris and Professor at SAIS Johns Hopkins University.

This article is based on the author’s new book, Latin America’s Political Economy of the Possible: Beyond Good Revolutionaries and Free-Marketeers, published by MIT Press (Cambridge, Mass.) in 2006. Th e article was written for the OECD Observer and originally published in OECD Observer No. 255 in May 2006.

The graphs and figures in this article are taken from a Powerpoint presentation used by Mr. Santiso during a May 2006 roundtable at the Center for International Private Enterprise. To view the entire Powerpoint or to listen to an audio file of the presentation, please visit www.cipe.org/programs/roundtables/webevents/052406.php. The views expressed by the author are his own and do not necessarily represent the views of the Center for International Private Enterprise. The Center for International Private Enterprise grants permission to reprint, translate, and/or publish original articles from its Economic Reform Feature Service provided that (1) proper attribution is given to the original author and to CIPE and (2) CIPE is notified where the article is placed and a copy is provided to CIPE’s Washington office via mail, e-mail, or fax.