Ask whether Latin American economies are too tied to commodity prices
Colburn, Forrest D.
POLITICS ABROAD Latin America: Captive to Commodities Forrest D. Colburn THE COUNTRIES of Latin America remain highly susceptible to international political and economic trends . Since...
...Likewise, the more recently settled, and more productive, lowlands of Bolivia oppose Morales, whose base is in the arid highlandshome to the country's indigenous population . In a bid to consolidate his hold on the country, Morales held a referendum : the joke is that he won what is left of Bolivia . In fact, Morales is said to be unable even to visit four of the country's nine departments, the four that have declared their "autonomy ." In both Ecuador and Bolivia commodity revenuereal or anticipated-seems to have generated a kind of political intoxication and contributed to divisive policies . Social resentment is neither an ideology nor a development strategy...
...Is ít...
...The surprise is that there is no necessary correlation between heated, "revolutionary" rhetoric and government spending on welfare programs...
...For example, the center of industry in the country is in Guayana: half the factories in the region's industrial park have closed, the others suffer from shortages of raw materials, labor agitation, and raids by gangs looking to steal anything of value...
...The things that matter most for promoting economic development are prosaic: social harmony, education, infrastructure, saving and investment, management of the national currency, innovation, taxation and the quality of public administration -none of which is soul-stirring . Surprisingly, perhaps, bountiful natural resources seem relatively unimportant for building salubrious nation-states...
...We have earned the right to be wrong ." The Salvadoran was duly impressed with the accumulated rancor in Bolivia-and the extent to which it is shaping public policies, especially those that target the private sector...
...COLBURN'Smost recent book is Varieties of Liberalism in Central America: Nation-States as Works in Progress, written with Arturo Cruz S . DISSENT I Winter 2009 . 3 1...
...Whites have been robbing Bolivia and leav ing nothing but misery for centuries ." "Yes, but what you are doing is not making things any better...
...Dismantling the private sector just creates a big hole...
...Not all countries in the region have a valued commodity...
...In the absence of such gains, the region's economies are especially vulnerable to a sudden fall in commodity prices...
...The political myths of the 1960s, set against the backdrop of the Cuban Revolution, were widely embraced-and in some corners of Latin America they have endured...
...Their future is ominous...
...Peasants are often seen as the guardians of national culture, a bastion of defense against "globalization"-so it is all the more tempting to suggest that they stay put, especially when, as one colleague put it, "neither I nor my children are peasants, living in mud and misery...
...But today these myths seem to limit the ability to move forward...
...Whatever else he may be accomplishing, Chávez is increasing Venezuela's dependence on the export of oil . N ECUADOR and Bolivia, political rancor and a generalized hostility to the private sector-has exacerbated regional divisions . In Ecuador, the impoverished highlands area (sierra) is largely sympathetic to the indictment of the private sector...
...There is no new model for how to organize the economy...
...What is strikingly different, though, is that the two countries-in contrast to Venezuela, Bolivia, and Ecuador-accept and even encourage private economic activity, which, in turn, contributes to a healthier economy...
...However, in Venezuela-and in Ecuador-social resentment is not based on race but on social class...
...Political conflict and violence are debilitating . Some countries are more dependent on the health of the U .S . economy-and its porous borders-than are other countries...
...With food prices soaring, including the prices of basic grainsmaize, beans, and rice-questions are being asked about the desirability of importing grains . There is renewed talk in the region of "food security" of "food sovereignty" Peasants should not be encouraged to leave the fields but to cling to the land, to grow more food, and so protect their urban brethren from the ruthless international market...
...Brazil and Chile have benefited from the commodity boom: Brazil from a basket of agricultural products (notably soybeans), oil, and minerals, and Chile, above all, from copper...
...Is prudent management of the region's economies inured to a weakening of commodity prices...
...In all three countries, the private sector is regulated and taxed but not bludgeoned . The Economic Commission for Latin America and the Caribbean, known by its Spanish-language acronym CEPAL, has published data on social welfare spending in Latin America...
...A general disdain for private economic activity seems gratuitous, because no one-certainly not Hugo Chávez-has come up with an alternative form of organizing economic activity...
...Economists fear that the commodity boom undermines efforts to develop well-balanced, robust economies propelled by innovation and able to compete in the international economy Economies may be dominated by a handful of industries, but at the least these industrieswhatever they may be-should be constantly increasing both their production and their productivity...
...Can commodity prices remain high...
...Most labor agitation is held to be politically inspired and coordinated . There is even speculation that organized crime is politically driven...
...Still, Costa Rica has a wellbalanced economy, earning revenue from tourism, traditional exports like coffee and bananas, and a variety of nontraditional exports, from dried fish to computer software...
...Chile's Michelle Bachelet is from the Socialist Party...
...And that hole cannot be covered, at least for long, with the export of state-controlled commodities . There are no new myths...
...And economists worry that commodity prices willsooner or later-fall...
...Venezuela and Ecuador are dazzled by their oil revenue, and Bolivia is euphoric with the value of its natural gas . (Their junior partner, Nicaragua, has little of its own, but has placed its hope in Venezuela's sharing its oil-and oil revenue .) In Venezuela, Ecuador, and Bolivia, hydrocarbon resources are firmly in the hands of the state, and their respective heads-of-state-Hugo Chávez, Rafael Correa, and Evo Morales-íntend to use this valued resource for a social transformation . However, the reigning ideology is little more than social resentment and a distrust of private initiative...
...30 . DISSENT I Winter 2009 POLITICS ABROAD B Øn., CHILE, and Costa Rica take a very no correlation between the extent to which different tack...
...As a percentage of gross national product (GNP), social welfare spending is higher in Bolivia than it is in Chile and Costa Rica, but still less than in Brazil . And social welfare spending in Brazil, Chile, and Costa Rica is higher than what is spent in Venezuela and Ecuador...
...The net effect is a decline in the production of everything but petroleum . The state does not have an alternative "model" of production, but Chávez doesn't seem worried: gaps in foodstuffs and consumer and capital goods are simply made up with imports funded by oil revenues . Venezuela's "development model" is an extended charity program paid for by the international sale of a single commodity-oil . What happens, though, if the price of oil falls...
...Brazil's "Lula" da Silva is from the Workers' Party...
...Still, the boom from robust commodities prices, in everything from oil to copper to soybeans, raises unsettling questions . A healthy average growth rate masks weaknesses...
...This boom-and-bust pattern has plagued Latin America since the colonial era . In addition to the risk of being blinded by the gush of funds from commodity exports, there is the temptation to succumb to a naïve romanticism about agriculture and about what remains of the peasantry, los campesinos (literally, the people of the fields...
...But credit must also be given to governors who have pursued sober macroeconomic policies...
...Lately we have been doing very well . But if prices fall, we wí11 end up in the dustbin...
...He asserts that most poor Venezuelans don't really expect that their lives wí11 be made more comfortable, but they are pleased that those held responsible for their poverty wí11 be castigated . In each of the three countries, the private sector is being intimidated, forcefully regulated, or outright dismantled . Attacks on the private sector are most pronounced in Venezuela, and they take diverse forms...
...POLITICS ABROAD Latin America: Captive to Commodities Forrest D. Colburn THE COUNTRIES of Latin America remain highly susceptible to international political and economic trends . Since 2002, the region has prospered: growth has been close to 6 percent per year-the highest since the 1970s, and far above the lackluster, longrun average of 3 percent . This growth spurt is traced in large part to a bonanza : high international prices for commodities...
...Indeed, one Venezuelan academic reports that the "revolution" is about exacting revenge, not about improving the welfare of the poor...
...FORRESTD...
...Costa Rica's Oscar Arias heads the National Liberation Party...
...Moreover, within each country there are sectors that are stagnant or worse . In particular, the region's incipient industrial sector is not faring well, with stiff competition from China and other countries in Asia-the same set of countries credited with lifting commodity prices...
...Looking at Latin America at large, data from CEPAL suggest there is also welfare...
...Most worrisome, though, is dependence on a handful of commodities as an "engine" of growth . "This time is different," many believe...
...In contrast, the humid coast, where entrepreneurs produce bananas, shrimp, and other products for export, largely opposes the Correa government...
...Costa Rica has only suffered from the appreciation of commodities-it exports those with stagnant prices and imports those that have risen...
...The shortage of inputs is tied to state control of foreign exchange, necessary for purchases abroad . Despite the country's healthy reserves, there are delays of months for the approval of imports...
...Valued resources can be as beguiling as the invective rhetoric of a charismatic charlatan . One of the most obscure but telling facts about Latin America is that tiny Costa Rica, with no prized windfall of commodity earnings, has a higher per capita income than Venezuela with its gushing oil wells . Nonetheless, given the generalized complacency in the region-and the glee at windfall gains-Latin America remains vulnerable to a fall in commodity prices . As one Peruvian quipped, "Minerals are the train of Peru's economy...
...A Salvadoran friend, dark-skinned and of short stature, recounts-in private-a telling conversation with a minister in the Morales government: "Whites have never respected us-now we are teaching them to respect us through force ." "But your economic policies are not working ; they are creating hardship...
...The governments of Brazil, Chile, and Costa Rica spend more per capita on social welfare than Venezuela, Bolivia, and Ecuador...
...Brazil's oil company is state-owned, as is Chile's copper mining company...
...These three are also gov-countries have benefited from the present com erned by leaders who aspire to redress modity boom and their commitment to social poverty...
...Venezuela, Ecuador, and Bolivia are not faring well...
...To date the region has navigated the shoals of the concomitant weakening of its most important trading partner-the United States-and the mess in the international credit market...
...Other sectors, including construction, suffer from the rise in those prices . Energy and food costs are up, and this hurts consumers...
...Venezuelans perceive something similar in their country...
...Can commodity-led growth contribute to broad-based economic development...
...DISSENT I Winter 2009 . 29 POLITICS ABROAD Surprisingly, the three countries said to be governed by the "left" are most dependent on the commodity boom...
...Similarly, some argue that opportunities to export grains to take advantage of the rise in prices should be shut down . Instead, the surplus should be used to force prices down for the nation...
Vol. 56 • January 2009 • No. 1
