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Editor
Carlos Henrique Cardim
Correspondence address:
Revista DEP
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International Cataloguing in Publication Data
DEP: Diplomacy, Strategy & Politics / Raúl Prebisch Project no. 9 (January/March 2009)
–. Brasília : Raúl Prebisch Project, 2009.
Published in portuguese, spanish and english.
ISSN 1808-0499
1. South America. 2. Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana,
Paraguay, Peru, Suriname, Uruguay, Venezuela. I. Raúl Prebisch Project.
CDU 327(05)
The DEP Diplomacy, Strategy & Politics Review is a periodical on South
American affairs published in Portuguese, Spanish and English. It comprises
the Raúl Prebisch Project and is sponsored by the Brazilian Ministry of Foreign
Relations (MRE/Funag – Alexandre de Gusmão Foundation/Ipri – International
Relations Research Institute), Construtora Norberto Odebrecht S. A., Andrade
Gutierrez S. A. and Embraer – Empresa Brasileira de Aeronáutica S. A.
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91
Argentina-Brazil: a desirable, possible project?
Roberto Lavagna
Keys for understanding Bolivia
Pablo Solón
United States, South America, and Brazil:
six topics for discussion
José Luís Fiori
Changes in the sociopolitical matrix and
development in Chile
Manuel A. Garretón M.
Colombia: foreign policy, economy and the conict
Marta Lucía Ramírez
Ecuador, perspectives from an ex-President
Rodrigo Borja
Summary
D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Number 9 January / March 2009
The great divergence: history or path dependence?
Results from the Americas
Steve De Castro
What has happened in Paraguay?
Fernando Lugo
The Peruvian paradox: economic growth
and political disapproval
Julio Cotler
Political, economic and social introduction
of Suriname
C.A.F. Pigot
Uruguay and the learning divides
Rodrigo Arocena
Energetic integration in Latin America and the Caribbean
María A. Hernández-Barbarito
Fernando de Szyszlo
125
149
159
174
195
215
233
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
5
* Ex-Minister of Finance of the Argentine Republic.
Argentina-Brazil:
a desirable, possible
project?
Roberto Lavagna
*
T
he convergence of initiatives between Argentina and Brazil has made signicant
progress since the 1986 agreements. At that time, negative tendencies toward
conictive competition and the less visible but no less negative tendencies
toward mutual indifference were brought to a halt, although they have not
completely disappeared. The two attitudes and stances can be overcome only
through a common political decision and strategic plans that converge to a
point where strategy becomes a regional project.
The achievement of the objectives of a regional project and thus the
advance of the qualitative jump taken in 1986 faces two considerable obstacles
that should be acknowledged:
(i) the tendency observed at least since the early eighties to adopt, in
respect of the economy and foreign policy, conducts that did not
coincide in time, and
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
6
Argentina-Brazil: a desirable, possible project?
(ii) the lack, in bilateral relations, of a more thorough discussion about
the strategy for development and for the countries integration into
the region and the world scene.
This would be an impossible, useless task, as might be argued by many
pragmatically-minded people, for whom laying roads or erecting power lines,
or trade increase are much more effective and are worth more, both internally
and at the regional level, than abstract discussions about the coordination of
economic policy phases or the even more remote discussions about strategic
visions. Those who argue thus adduce realities and trade or infrastructural
gains in contrast to the tedium of bureaucratic discussions that fail to address
specic interests and needs.
I would both agree and disagree with such an argument.
It is true that often in our region – why not say in the world as well –
there are more discussions and speculations than actual work and decisions
anchored in reality and in our people’s immediate needs.
However, such pragmatism could not by itself alone take the place of
a “vision” of whither we are headed, whither the world is going, and of how
we can adapt to and effectively integrate into this world.
The European Union example reminds us of the twofold need of action
based on reection: What would have happened to the European project if a
more profound motivation had not underlain the conception of the European
Coal and Steel Community encompassing two strategic sectors? In this case,
the extra-economic motivation was the determination to lay the foundations
for a European pax that would make impossible a repetition of confrontations
such as World Wars I and II. On that occasion, the pursuit of enduring peace
conditions was supported by the matrix of a project soon realized through
political agreements pertaining to coal and steel, as well as to agriculture.
It might not be too absurd to wonder if the current difculties faced
by the construction of the European Union are not due precisely to the loss
of vision and profundity and to the fact that its geographic expansion may
be happening at the price of greater superciality, given that it is dictated by
exclusively economic interests.
Although necessary, pragmatism is in no way sufcient. It is thus worth
analyzing the two obstacles that are hampering our integration process.
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
7
Roberto Lavagna
I. Dissimilar behaviors
It is possible to identify three periods in the last twenty-ve years when
Argentina’s and Brazil’s behaviors did not coincide in their reading of economic
reality or international policy.
The rst occurrence took place at the time of the Mexican debt crisis
in 1982. For a decade the major international banks had recycled the windfall
resources the oil-producing countries had derived from the rst shock of the
high prices of oil and oil products in 1973. During this recycling period, Latin
American countries took advantage of the supply of credit on markedly more
exible terms, thereby signicantly increasing their foreign indebtedness.
When the crisis broke out, it elicited two different interpretations:
according to one, we were faced with a “liquidity” crisis, while the other pointed
to a more serious crisis, namely, one of “solvency.”
The central countries and the major international banks that had acted
as lenders supported the liquidity thesis and their stance was to avoid outright
haircuts and favor as an alternative a rescheduling scheme that implied some
small reductions of the debt. The “solvency” theory, on the other hand, claimed
that the debt was unsustainable and that more explicit, extensive haircuts were
needed, under risk of mortgaging the growth of many countries.
The choice of one or the other possibility did not depend on the decision
of individual countries, as there was the risk of a domino effect. Had the debtor
countries, or at least those of greater weight, been able to make prevail the
idea of a solvency crisis, it might have been possible not only to reschedule
but also to alleviate considerably their foreign debt.
But this did not happen. While Funaro, the Brazilian Minister of Finance
under the Sarney administration was inclined toward a concerted action based
on the solvency theory, the Argentine government, during the Alfonsín-
Sourrouille administration, preferred to subscribe to the liquidity theory and
engage in a process of debt rescheduling instead of its effective reduction.
The second occurrence took place in the nineties. Argentina, under
the Menem-Cavallo administration, engaged in a generalized process of
nancial liberalization, privatizations, and drastic revaluation of the national
currency, as well as adopting the rigid exchange regime of “convertibility,”
which operated practically as a currency board. Under the Fernando Henrique
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
8
Argentina-Brazil: a desirable, possible project?
Cardoso-Malan administration during those years, Brazil maintained instead a
more autonomous monetary, exchange, and economic policy in general. This
disparity between economic policies, which widened over the years, especially
as of 1995 and during the post-Tequila period, hindered the formulation of
common strategies. Furthermore, Argentina wrapped up its economic policies
in an international alignment sharply inclined toward the United States, under
the doctrine known in Argentina as one of “carnal relations,” in the words of
the Argentine foreign minister at the time.
Argentina became fashionable on the international markets, was
designated a NATO South-Atlantic partner, took part in the Gulf War, and
acted as the Washington Consensus’s best student. This extremely close
alignment was not shared by Brazil and although this did not give rise to open
conict, it did lead to mistrust and even unnecessary competition.
The third occurrence has taken place in the current decade. The fall
of “convertibility” coincided with Argentina’s loss of social and political
condence in the Washington Consensus’s orthodox policies. Argentina
experienced then its worse economic and social crisis in a century, owing to
the nancial system’s failure to honor its obligations in 2001, under the De la
Rúa-Cavallo administration, and to the subsequent, inevitable default on the
debt, decreed with extreme levity by a transitory government that lasted only
a few days (Rodríguez Saa administration).
The renegotiation of the debt afterwards, with a substantial haircut,
under the Duhalde-Lavagna and the Kirchner-Lavagna administrations,
and the implementation of a new economic policy that deviated from the
orthodox recommendations of the International Monetary Fund-IMF and
the World Bank-WB occurred when Brazil opted for more conventional
policies. Flexibility and the undervaluation of the Argentine peso coincided
with a steady revaluation of the Brazilian currency. For a while, Argentina’s
low interest rates coincided with high basic interest rates in Brazil under the
Lula-Palocci/Mantega administration.
Argentina spearheaded worldwide the debt reduction policy with the IMF
and the World Bank. In addition, with the World Bank and the Inter-American
Development Bank-IADB, Argentina decided to revert from the structural
adjustment programs to loans for infrastructure projects. Brazil took longer
to adjust to the idea of debt reduction; rather, the Brazilian representatives
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
9
Roberto Lavagna
defended the maintenance of the structural adjustment programs, which in
our view meant further, unacceptable meddling in internal policies. On this
occasion, Argentina preserved its monetary policy’s autonomy, while Brazil
adopted a more rigid ination targets scheme.
Today, the wave is in favor of Brazil and clearly to the detriment of
Argentina. It would be impossible to discuss here the pertinence of one or the
other of these positions. Our point is to stress that there was no synchrony in
the choice of policies, which in addition were adopted without any consultation
between the two partners. While one of them was exible, less orthodox, and
thus more independent from external factors, the other preferred to remain
orthodox and attach top priority to the opinion of the markets.
II. Development strategy and regional participation
and integration
The second obstacle is the lack of a development strategy that does not
reect only national decisions but has a regional scope.
As in the preceding case, some may counter this claim. Examples of
strategic development could be adduced, such as the nuclear industry, the
pharmaceutical sector or the introduction of soybeans in Argentina. In Brazil,
one cannot ignore the no less spectacular expansion of soybeans, the biofuels
program, the development of the aeronautic industry, or the medium-term
policies in the oil sector, which have converted Brazil from being a nearly net
oil importer into one of the world reserves.
Further examples could be cited in each country and seen as a reection
of national policies that have an indirect impact on the region.
However, I do not think that this is the point. Obviously, each country
has strategic plans. But “plans” is a plural word and do not mean the same as
one global, integrated “plan.” Plans refer to specic sectors or areas and can
be demonstrably successful and change important segments of national reality.
But unless one thinks that the mere sum of plans makes a strategic plan from
a global standpoint, partial successes can coexist with global insufciency.
This is also the position of the Brazilian government’s Minister for
Strategic Affairs, who has recently stated that “the point is that there is no
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
10
Argentina-Brazil: a desirable, possible project?
debate about our respective national development strategies; we do not have
an intellectual community, but we should.”
Once again, the European example is appropriate. Other than open
internal boundaries, especially trade boundaries, there are numerous scientic,
technological, industrial development and services programs for the ensemble
or for subgroups of countries. This, and not only a common external tariff,
differentiates a free trade project from a common market and economic union
project. Precisely for this reason, the current project looks more like a free
trade zone in the Nafta style than the original project.
Along these same lines, former Brazilian president Sarney, says: “But
we made a mistake in respect of our integration process when, in July 1990,
Brazil and Argentina signed the Buenos Aires Act and decided to change
course and, instead of focusing on a common market, attached priority to
the establishment of a free trade area and a customs union within ve years,
thereby assuming the risks implicit in this new approach.”
From a global perspective, one could wonder and demonstrate whether
this sum of plans has not changed our countries’ most serious internal problem,
namely, the acute inequality in income distribution and of opportunities.
Social fragmentation, the Latin American countries’ most salient evil, has not
changed, and compensatory initiatives through social plans do no more than
alleviate current needs without modifying future conditions.
Argentina could hardly argue that it has a global vision, as within one
decade it has moved from an economy based on the overvaluation of the national
currency and on hyper-indebtedness to an economy based on an undervalued
currency and the pursuit of unindebtedness as the essential objective. No
strategic plan could justify these variations, which, in addition, have reected
on international relations. In the last ten years, we moved from an uncritical
adherence to the policies of the central countries and multilateral organizations
to a kind of “light leftism,” sharply opposed to the multilateral organizations.
Brazil also could hardly explain why, notwithstanding the compliments
received and the investments attracted, it has been the one among the
“continental size” countries and the emerging powers (BRIC) that has grown
the least. It is possible that such a great difference in respect of China, Russia,
and India – a category Brazil aspires to join – is related to the fact that the
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
11
Roberto Lavagna
Central Bank’s overnight lending rate (Selic) and the free capital movements
have had a greater inuence on the country’s authorities and private sector
than on the gross product growth rate.
Gross domestic product
Yearly average growth rate
Period Brazil China India Russia*
1980-1989
1990-1999
2000-2007
2.98
1.72
3.44
9.71
9.99
9.85
5.57
5.65
7.10
n.a.
-3.80
7.03
* Average 1993-1999
III. Obstacles to be overcome
In brief, the basic issues that have hindered progress and still continue
to do so are as follows:
• Solvency or liquidity as alternative concepts for diagnosing nancial crises;
• Overvaluation or undervaluation in relation to exchange worldwide;
• Macro-sustainability or markets acceptability, and
• Strategic planning or a sum of plans, i.e., a global vision that modies the
fundamental issues of the social apparatus and of economic dynamics
or a partial vision, expressed in a sum of plans in relevant areas.
Obviously, there are other issues that can hinder the integration process
but in my view those addressed here are relevant and certainly not just
theoretical. It would be useful to reect about them, as they affect the social
and economic fabric and thus have fundamental political consequences.
IV. Development strategy and integration
into a globalized world
A country’s isolating itself from an increasingly more globalized world is
equivalent to falling into backwardness and irrelevance. A country’s opening
itself up without a national and regional strategy, though, is tantamount to
renouncing the possibility of growth and distribution.
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
12
Argentina-Brazil: a desirable, possible project?
If one wished to express globalization graphically, one would certainly
use a sphere. This is an ideal vision, as globalization can be represented by a
smooth, perfect sphere, on which the shortest distance between two points has
only one solution. In addition, a sphere is rigid, so that any action incident upon
it never changes. Reality, though, may be better represented by another kind
of sphere. A walnut is also spherical, but it is rugose and the shortest distance
between two points on it may have more than one solution. It is also sufciently
porous, so that an action incident upon it may change certain conditions.
This difference in representation could also be the observed between
a passive acceptance of just one way – that of globalization – and an active
acceptance of the globalized world, that recognizes that there may be more
than one way to become part of it.
The economic and social orthodoxy established in the developed world’s
intellectual centers and in the multilateral organizations, and particularly in
the International Monetary Fund and the World Bank, usually expresses the
interests and wishes of the G-7, favoring a “perfect” image of globalization.
The basic principle is that anything that resists the free movement of goods,
services, and capital is negative and entails the loss of growth possibilities. But
this predominant thinking encompasses one, no minor exception. Globalization
is no longer perfect, it begins to become rugose, apt for dening national
solutions, nding new ways in respect of the movement of persons. In this
case, barriers, controls, and restrictive and selective policies are advocated and
implemented with increasing rigor. Walls are raised against unqualied workers
but tend to open for people qualied at universities and training centers of
the developed world.
Some major developing countries, as India, for example, have assumed a
different position at international forums such as the World Trade Organization
as a negotiation strategy: controls on the international trade in goods and
services, and free movement of persons, i.e., controls on goods but not on
production factors, or ultimately free movement of both.
Notwithstanding this often repeated discussion at major international
conferences, the actual reality of the developing world gains from the
acceptance of the idea that rugose globalization is closer to its interests. This
is so because it allows the recognition of different development stages; the
possibility of attempting to develop new sectors and of a gradual adaptation of
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
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Roberto Lavagna
productivity to international standards, as well as of countering policies, such
as those that favor the importation of unprocessed goods by the developed
world and discriminate against goods with aggregated value through an inverted
tariff schedule, and so on and so forth.
Once this principle of joining globalization with maneuvering room is
accepted, the big difference is whether the principle will be expressed through
punctual, ad hoc policies for the short run or whether policies will be part of
a country’s global policy. A big difference, indeed.
The problem with sheer pragmatism and the casuistic nature of punctual
policies is that they remain in the hands of entrepreneurs avid for prots,
corruption spreads owing to connivance with sectoral interests, and the value
of the State’s technical structures tends to decline. However, when a stable
national policy is adopted, with well-dened objectives and perspectives,
the earning capacity of prot seekers is fast restricted and the ght against
corruption is endowed with two powerful instruments – the development
of highly qualied technical teams and the possibility of balancing concrete
results against the objectives envisaged by the strategic plan.
Many are the voices raised against globalization, from those that sound
decidedly negative and those that surround the phenomenon with warnings
and caveats. According to French novelist and essayist Viviane Forrester, “We
are not living in the fatal grip of globalization but under the yoke of a sole,
planet-encompassing, unrecognized regime: ultraliberalism, which governs
globalization and exploits it to the detriment of the great majorities. This
dictatorship without a dictator does not aspire to take over power but to direct
those who exercise it.”
1
As Harvard economist Dani Rodrik said in an interview: “What I don’t
like and which sometimes happens is that some end up immensely rich while
the situation of others worsens; and globalization denitely plays a role,
contributing to this second consequence.”
2
And closer to us, Aldo Ferrer states that “globalization is selective and
encompasses the areas in which the interests of the more powerful countries
predominate.”
3
1 Una extraña dictadura.
2 Interview. Clarín, 04/13/2008.
3 De Cristóbal Colón a Internet: América Latina y la globalización.
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
14
Argentina-Brazil: a desirable, possible project?
Both sides are right, but as a technological phenomenon globalization
is here to stay and there is little likelihood of a retrocession. Thus, three
possibilities are open:
• To reject it and remain on the margin of the worldwide ows of
technology, trade, and investment;
• To accept it passively and restrict the benets that can be derived
from it, or
• To accept it actively, limiting the risks and maximizing possibilities.
To take further the denition of active integration, it helps to think of the
basic factors of comparative and competitive advantages. In this respect, four
major competitiveness factors should be exploited:
(i) lower labor costs;
(ii) natural endowment (climate, land, mineral resources);
(iii) large scales of production, and
(iv) differentiation of goods and services associated with the availability
of better product and/or processes technology.
Low labor costs are typical of countries with great availability of labor,
which is dened in economy as abundance of one of the production factors,
namely, labor. This has been one of the major assets of countries such as
China and India and to a less extent of other developing countries such as
Indonesia. Natural endowment means privileged conditions of land, climate,
water, and mineral resources.
Large scales of production allow a signicant reduction of xed costs,
from product and processes research and development to marketing, including
intermediate stages, such as advertising, design, service chains associated
to the product, etc. The achievement of these scales depends on a large
domestic market as regards population and purchasing power and/or decisive
penetration into relatively open international markets.
Lastly, it is necessary to have technologies to ensure that the variety,
usefulness, and quality of goods and services and the renovation cycle are a
differential in relation to what is available on the world markets.
Today there are countries that can count on several of these elements
on which competitiveness depends; others, only on one.
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
15
Roberto Lavagna
Countries, such as China, are formidable in respect of competitiveness
because they have vast low-cost labor resources, operate with large scales
of production, and, more recently, have begun to produce goods on a
technological basis.
Others, usually the developed countries, can meet high labor and social
security costs. This is because they have advanced technologies, which allow
them to enter deregulated world markets with goods (capital goods and
equipment in general, medicinal drugs, etc.) and/or services with aggregated
value (software and audiovisual materials, for example), and thus consolidate
large scales of production.
Low development economies (Africa) with a low degree of integration,
diversication, and internal linkage (oil-producing countries) only operate on
markets based on natural resources, particularly minerals.
Then, there are countries specializing in highly differentiated goods, particularly
goods with aggregated value (Israel, in security equipment; Italy, in leather,
among others) or services (nance and portfolio administration, as is the case
of several European countries).
This being the overall picture, Argentina and Brazil should dene their
national strategies accordingly.
In light of the preceding, the following observations are in order:
• Argentina has a small population and Brazil has a population of
medium size as compared with the countries of Southeast Asia;
• We can count on natural conditions and on signicant entrepreneurial
development in productive agricultural and livestock and sheries
sector, as well as major mineral resources;
• Except for some intermediate, or exceptionally final products
(agricultural and livestock goods), our scales of production are small
in Argentina and medium in Brazil, and
• Despite smaller scales of production, our incorporation into the world
economy can be based on differentiated products. These may range
from products of high technology, such as capital goods, to food
products of high quality, and thus differentiated on a world scale, to
nely designed consumer goods, or services with aggregated value,
such as software, contents, etc.
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
16
Argentina-Brazil: a desirable, possible project?
Thus, our active incorporation into the world economy, with some
exceptions, should be on the basis of natural resources, most of which are
renewable (food products) and of specialization in differentiated goods and
services. To a large extent, this differentiation forms part of the value aggregating
chain, starting with agro-industrial goods or natural resources in general.
However, in the case of natural or acquired resources (agriculture and
livestock), market access is limited by policies of countries that subsidize or
exaggeratedly protect their local production. This combination of subsidies and
protection is actively adopted by no less than the United States, the European
Union, and Japan, i.e., by markets with high purchasing power.
Obviously, the Argentine and the Brazilian situations are not identical.
Sufce it to note that limitations regarding population and abundance of
available labor have a much stronger weight in Argentina than in Brazil. The
same thing applies to efcient scales of production, as Brazil’s size is two to
three times larger.
While Brazil has this relative advantage, Argentina has the advantage of
having to develop a much smaller economic and employment apparatus, which
makes it easier to achieve an occupational, and thus social, equilibrium.
Regardless of these differences, the important thing is that today neither
Argentina nor Brazil has the advantage of a developed country’s productive
system or of human resources reserves comparable to those of Southeast Asia.
Particularly in respect of population, Argentina is a small country that
cannot and should not compete on the basis of low salaries or little or no
social protection. Neither can it count on large scales of production, except
in the agricultural and livestock sector. It can count only on exports by the
agricultural, livestock, and sheries sectors and must face the challenge of
winning access to markets on the basis of differentiated goods and services.
Whether the country will be capable of finding a way of active
incorporation into the globalization process will depend on the combination
of the primary sector’s scale of production, product differentiation, and
dynamic technological progress.
A model of this kind implies real salaries and substantial social benets
as in developed countries. To be sustainable, this requires one thing, namely,
technological progress. Progress may be achieved through a combination of
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
17
Roberto Lavagna
adoption of technologies available in the world, adaptation of technologies,
or to a limited extent, on the development of our own technological solutions.
This is possible only in a country that assigns a central role to education at all levels, including
vocational, scientic. and technological training. The manufacturing of a candy, an object’s
design, the treatment accorded agricultural inputs, the building of a nuclear plant or an
aircraft, data processing goods or services, etc. are unattainable without a population capable
of absorbing methods, of copying, adapting, and innovating.
Unless we implement substantial educational programs, we will not be
able to take advantage of globalization. This applies to both differentiated
products and services and to the primary sector. Even in the latter case,
an intensive educational effort is necessary for acquiring the technological
advantages that make possible large scales of production.
Summing up:
• The globalization phenomenon cannot be denied;
• Preparation, denition of a country strategy, a clear idea of direction
and of what to do in the face of this technologically irreversible
phenomenon are a must;
• It must be recognized that there is room for a regional strategy, under
which the Argentine and the Brazilian alternatives differ more in
respect of “degree” than of substance, although this does not minimize
differences or alternatives, and
• Ascribe to education in the broadest sense an absolutely fundamental role.
DEP
Translation: João Coelho
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
18
Keys for
understanding Bolivia
Pablo Solón
*
May 24, 2008. Since last night, groups of young people with pieces of wood and
dynamite sticks slash out on peasants coming to welcome the President. It is the eve
of the city of Sucre’s 199
th
anniversary. The Army and the Police fall back so as
not to respond to the provocation of young Sucre University students that are seeking
a bloody confrontation. President Evo Morales cancels his trip. With bloodied,
terried face, Angel Vallejos, mayor of Mojocaya, and some thirty peasants are
dragged under blows to Sucre’s main plaza. With bared chests, they are forced on
their knees and made to kiss Sucre’s ag, while fascist youths burn a “whipala”
1
and a red poncho.
T
o understand today’s Bolivia it is necessary to keep in sight this territory’s
long history. Bolivia is a country where dilemmas of more than ve hundred
years ago still persist. It is a territory in permanent rebellion.
History has too many paths. What is occurring in Bolivia has many aspects
that cannot be covered by these pages. It is clear, though, that the country is
experiencing a drastic polarization, with the elites ejected from government
reviving racism, regionalism, and fascist slogans in an attempt to survive.
* Ambassador. Republic of Bolivia.
1 Flag and symbol of the indigenous peoples.
Pablo Solón
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19
Evo Morales assumed power on the strength of 54 percent of the ballots.
No President in the last decades had been elected by an absolute majority. All
of them had to enter into pacts to be inaugurated as Presidents. History since
1985 has been a history of pacts involving three or four neoliberal parties
that have alternated in power. Evo’s rise meant a double rupture owing to the
emergence of the indigenous peoples and to the incipient dismantling of the
neoliberal model.
True, other indigenous individuals had arrived at government positions,
but never as Presidents and even less with an identity and a proposal of their
own as an alternative to the dictates of the dominant classes.
Evo Morales could have been a Mandela, but chose to be Evo Morales.
Had he limited himself to claiming the original indigenous identity and to
just making some adjustments to the neoliberal model agreed with the old
dominant classes, he would certainly be now in a comfortable situation. But
he chose change and rejected pacts in the traditional style, i.e., the allotment
of power shares and perquisites to coopt adversaries.
Why did Evo Morales choose this course? Why has he not changed his
discourse once in ofce? Why has he not done as all candidates do after they
become Presidents?
Evo Morales is the expression of a very deep process of change that
comes from far away and from the inside. He is the result of a series of axis
that converge in the heart of South America.
Tupaj Katari’s return
The indigenous peoples were overpowered but not exterminated by
the colony. Some experts estimate that together the Aztecs, Mayas, and Incas
totaled between seventy and ninety million at the time of the Conquest. One
century and a half after conquest and colonization, only three and one half
millions of them remain – a mere ve percent of the original population of
these lands.
Arriving missionaries had different ideas about converting the Indians.
Some thought only of destroying their temples, prohibiting ancient rituals,
and punishing those that insisted on practicing them. Others believed that
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they should be convinced through preaching and example, and endeavored
to learn the language and costumes of each people.
This gave rise to a mix of domination and resistance: cathedrals were
built over ancient sacred sites, and indigenous celebrations assumed the guise
of Catholic rituals.
The shock between two cultures over ve hundred years ago was uneven
and painful. The conquest was an irreversible fact against which the peoples’
resistance was of no avail. The territory belonging to some was seized by others.
The Christians’ God of love forgot the other; the greed for gold ashed in the
dusk on a vast continent. However, neither the sword nor the cross managed
to exterminate the Indians or to bring them down to their knees.
From the beginning, numerous rebellions occurred. One of the strangest
was the dancing disease, or “Taqui Onkoy.” Quechuas and Aymaras danced
themselves to death to escape this “new world” they could not understand.
In 1780, various indigenous rebellions broke out on the Andes against the
Spanish colony.
Tupaj Katari besieged the city of La Paz on two occasions for more
than one hundred seventy days, mobilizing an army of forty thousand Indians.
Nobody and nothing entered or left the besieged city. The Spaniards suffered
from hunger and despair until reinforcements arrived and permitted them to
break the siege.
Tupaj Katari was betrayed by one of his aides as he was rallying new
troops on the margins of Lake Titicaca. In November 1781, he was quartered
by four horses in Peñas, a locality situated on the vast altiplano of what is
known today as Bolivia. His body, quartered and torn apart by horses, was
displayed throughout the territory as “an example to rebellious Indians.” As
he was dying, the Aymara leader pronounced a now famous phrase: “I shall
return and I will be millions.”
The Spaniards broke Tupaj Katari’s siege by did not extinguish the
Aymaras’ and the Quechuas’ long memory. According to the legend, Tupaj
Katari’s severed members are coming together under the earth and when his
body is once again whole, he will return in the form of millions.
True, this is but a legend, but it expresses the deeper feelings toward the
changes Bolivia is undergoing. After Evo, this territory’s history will never be
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the same. The indigenous peoples have reencountered themselves; they have
discovered their strength, their identity, and their fortitude. It is no longer
possible to think of a Bolivia controlled by white and mestizo elites dominating
submissive Indians. “The shitty Indians,” as the rich and mighty usually refer to
them, including some of indigenous origin, no longer wish to wait on tables;
they want to sit at table, be taken into account, and even govern!!! This is too
much of a pretension for a “society” that has always looked down its nose
on them and that for centuries debated about how to get rid of, exterminate,
or convert this “inrm race.”
To live well
To be taken into account, to be treated as equals, and to govern is
unpalatable enough to the elites who have exercised hegemonic power in the
last centuries. But to have these Indians deprive them of their privileges – this
is unacceptable! At bottom, what is at stake in Bolivia is the new sharing of the
pie around transnational enterprises, dominant classes, regional elites, higher
middle classes, popular sectors, social movements, and indigenous peoples.
The indigenous peoples’ and social movements’ proposal is summed
up in the slogan “To Live Well,” as opposed to the never-ending pursuit of
“better living,” which implies an unceasing competition to go one better than
the other. It is a proposal that aspires at establishing harmony among human
beings, the environment, regions, and the world, instead of competitiveness
and the law of the strongest that governs the world markets. According to this
view, one should not “live better” at the expense of exploiting one’s neighbor
or at the cost of nature or of solidarity and harmony.
The indigenous view does not seek the elimination of the other but rather
the redenition of a new, more equitable equilibrium that necessarily implies
income redistribution and reduction of the privileges and exorbitant prots
of the more powerful sectors – true negotiation, instead of just crumbs.
Europe’s most equitable country is Austria, where the poorer twenty
percent of the population earn three times less than the richer twenty percent.
In Switzerland, the richer earn up to seven times more than the poorest. In
Bolivia, this ratio is abysmally higher: the population’s richer twenty percent
earn nearly sixty percent more than the poorer twenty percent.
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Nationalization
Nationalization and recovery of state resources and enterprises is the
lever of this redistribution. In 2004, before the nationalization of hydrocarbons,
State revenues from tax and royalties totaled 293 million dollars; in 2007, this
amount jumped to 1,393 billion dollars.
In 2005, state revenues from taxes and royalties on hydrocarbons totaled
350 million dollars; in 2007, this total reached 1.47 billion dollars – this was the
impact of the recovery of hydrocarbons’ ownership and the renegotiation of
more than forty contracts with transnational enterprises. “Partners, not bosses”
is this change process’s basic premise. The Evo government recognizes the
importance of foreign investment, but of genuine investment that is not just
in search of easy, enormous gains based on the meting out of crumbs to the
ruling power circles. This does not please the multinationals and sets a bad
example, which if replicated around the world, would be devastating to their
prots. But in the end they accept it because it is better to earn lower prots
than no prots at all.
Nevertheless, relations with transnationals are tense. Some of them,
longing for a return to the past, postpone their investments in an attempt
to bring the government down to its knees. But Evo’s government will not
be brought down to its knees; on the contrary, it forges ahead, recovering all
enterprises of the gas and oil productive chain, as well as other sectors, such
as telecommunications, foundries, and water.
Under the new draft Constitution, both the basic services in the areas
of education, health, water, energy, and telecommunications, and the strategic
hydrocarbons and mining sectors as well as other sectors are under State
control; in some cases, services and construction contracts may be awarded,
but always preserving state ownership.
The higher revenues are being used rst to improve public nances. In
2006, for the rst time since 1940, Bolivia recorded a 3,664,000-dollar surplus.
Secondly, children and the aged have beneted from school and old-age
universal grants, respectively; thirdly, the State hydrocarbons enterprise (YPFB)
has been restored to its condition as concession contracts administrator;
lastly, the departments have seen their revenues double or triple owing to the
redistribution of hydrocarbons tax revenue and royalties.
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The ght for land
Bolivia is a country with a vast territory – 1,098,581 km
2
and with a
population of 9.5 million people, which results in a density of 6.7 per/km
2
,
quite lower than France’s (109 per/km
2
) and the United States’ (29 per/km
2)
.
The problem is the unequal distribution of land.
Bolivia undertook an Agrarian Reform in 1953, which partly resolved
the problem, but created another. On the altiplano and in the valleys, it
abolished “pongueaje”
2
and gave land to peasants and communities. Thus,
lands became the property of “those who worked them,” with the drawback
that they eventually became insufcient as the indigenous population grew and
hereditary rights gave rise to “minifundia” and even to “furrowfundia.”
3
In eastern Bolivia, the land problem was just the opposite. First, the
Agrarian Reform Law did not recognize the existence of the indigenous
peoples of the East. It considered them as rainforest peoples who needed
State protection and care. Secondly, the law allowed the President to give
them up to 50,000 hectares in the East. Thirdly, successive governments and
the military dictatorships of the seventies in particular freely donated eastern
lands to their relatives and political supporters, and repaid favors with tens of
thousands of hectares. This originated new latifundia that were in the hands of
a group of families that used their lands for speculation and for mortgaging,
expanding, leasing, or selling them.
Large and medium entrepreneurs obtained more then 51 percent of the
lands distributed between 1953 and 2002, while peasants and small farmers
were allotted no more than 5 percent. Today, the majority of poor, small
farmers own only 1.4 percent of cultivated lands, while rich estate proprietors
own 85 percent of them.
4
In 2002, the National Agrarian Reform Institute-INRA Law was enacted.
This law had the merit of recognizing the existence of the indigenous peoples
of the East and the Original Community Land Grants, but from the World
Bank’s concept of market-assisted agrarian reform, which sought to do the
2 “Pongos” were a sort of serfs attached to the land, which they worked without pay for the boss or estate
owner in exchange for access to a plot of land.
3 “Surcofundio,” or “furrowfundium” results when land division reaches such an extreme that one of the
children inherits only one furrow.
4 Ministry of Rural, Livestock, and Environmental Development, Land Directorate.
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“saneamiento,” or regularization of lands (solving conicts over boundaries,
location, double titles, and other legal aws) so as to prepare them for the land
market. The INRA legislation’s great shortcoming was the fact that it did not
establish an effective mechanism to recover the latifundia but instead dened
a procedure that rather favored their legalization.
The INRA Law provided for the reversal of lands with indemnication
only in the case of “abandoned” lands. “Abandonment” was declared for
nonpayment of land taxes for two years. Thus, to prevent reversal owing to
“abandonment,” a latifundium owner who never even set foot on those lands
only had to pay taxes based on his own “self-assessment” of his land.
5
Between 1996 and 2005, 36,815 hectares were distributed, an average
of 3,681 hectares a year. In the rst two years of Evo Morales’s government,
697,882 hectares were distributed in the departments of La Paz, Pando, Santa
Cruz, and Tarija, or 350,000 hectares a year. Between 1996-2007, a total of
734,697 hectares of government land were distributed, 95 percent of them
under Evo Morales’ administration.
The difference between land redistribution under the 1953 and the 1996
agrarian reforms should be pointed out: the new grants are not to individuals
but to communities; they provide access to nancing for productive and
services provision programs; and they contemplate the sustainable management
of forest areas.
Between 1996 and 2005, the Sánchez de Lozada, Banzer, Quiroga, Mesa,
and Rodríguez governments regularized 9.2 million hectares; in the rst two
years of the MAS government, 10.2 million hectares were regularized. While
between 1996 and 2005 one thousand hectares per year were regularized, in the
period 2005-2007 a total of 5.1 million hectares per year were regularized.
6
The ejection of the elites
Bolivia has always been a country of extreme concentration of wealth
in few hands. Before the 1952 revolution, Bolivia was under the dominion of
5 Article Four of the INRA Law (Tax Base and Exemptions). I. The tax base for assessing taxes on agrarian
property shall be established by the owner in accordance with the value attributed to his property.
6 Viceministerio de Tierras.
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three Tin Barons. One of them, Simón Patiño, known as the Tin King at one
point, was one of the world’s richest men. The 1952 nationalization of the tin
barons’ mines did not lead to the development of a national entrepreneurial
bourgeoisie. On the contrary, what emerged was a parasitic bourgeoisie and
middle class, a bureaucratic dominant class that lived and still wants to live
from perquisites, contracts, quotas, consultancies, arrangements, and crumbs
from foreign enterprises.
A survey
7
shows that in 2002, only 10 percent of the entire population,
approximately 830,000 people, accounted for over 46 percent of total income
generated in the country, while the poorest 10 percent had to make to with
less than 0.17 percent of total income.
This means that in the division of 100 bolivianos among 100 Bolivians,
the richest 10 percent would receive up to 46 bolivianos, while the 10 poorest
would received only 17 centavos, i.e., 270 times less.
In Bolivia, no national bourgeoisie with a country vision has ever
developed. The development of an economic sector supported by the strength
of a productive apparatus practically never existed. The new dominant
sectors took form in the shade of transnationals and the State. Theirs was an
immediate, family project devoid of a country vision.
Since democratic freedoms were recovered in 1982, this bourgeoisie
and middle class subsidiary to the State had alternated in power under
different pacts among neoliberal parties. After the fall of the Berlin Wall,
a large portion of the middle class’s militant left, which to a certain extent
had ties to the dominant political sectors, joined the establishment. From
inside the government, they dismantled the State capitalist regime that had
existed since 1952. Hydrocarbons, electric power, tin smelting, air transport,
telecommunications, pension funds – everything was privatized. Nine yeas
before the WTO Uruguay Round, Bolivia had already started to implement
free trade policies. The market was enshrined as a god and the governing elites
adopted a neoliberal discourse with a vengeance.
Neoliberalism did not bring the proclaimed foreign investment but rather
the auctioning off of the natural resources and state enterprises. The great
majority of the dominant sectors did not bet on the productive entrepreneurial
7 Comisión Episcopal de Pastoral Social Caritas de Bolívia. Research done by Alfred Gugler.
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sector and continued to live from the State and transnationals as parasites.
Social differences and dissatisfaction continued to increase until the irruption
of the social movements with the so-called Water War in 2002. This marked
the beginning of the rise of social movements and of Evo Morales.
When the MAS government began in 2006
8
, the elites suffered a profound
blow. The government xed the President’s salary at approximately 2,000 U.S.
dollars and determined than no one in government (Executive, Legislative, and
Judiciary) could earn more than the President. Consultancies totaling hundreds
of thousands of dollars were dropped. Contracts that were damaging to the
State were suspended or cancelled. Evo Morales took in earnest the principle
that public servants should serve the people, not be served by the people. For
the rst time in decades, families whose grandparents, parents, and children
had always lived from the State were ejected. These elites then entrenched
themselves in the departments’ government, civic committees, and in some
municipal governments. The banner of the departments’ autonomy, which in
itself was no more than the continuation of the decentralization under way, was
hoisted to oppose a supposed centralism of the Evo Morales administration.
The media that belonged to the dominant elites were used for organizing the
opposition that had been dealt a severe blow by the 54 percent of the votes
won by MAS and by the growing support of nationalization.
Regionalism and racism as confrontation strategy
The Evo Morales government set itself the task of waging a democratic
and cultural revolution in the context of democratic institutionality.
Nationalizations took place within the law and a Constituting Assembly was
to be convened so that the structural changes could be consolidated at the
constitutional level.
Owing to ingenuity and political misjudgment, MAS negotiated the
holding of elections for a Constituent Assembly, which would be impossible
to win, much less with 90 percent of the votes. In each electoral jurisdiction,
the party that ranked rst would have the right to appoint two Assembly
8 Movement to Socialism, whose actual name was Political Instrument for Peoples’ Sovereignty, the electoral
political arm of peasant and indigenous organizations that kept growing to the point of encompassing most
of the social movements.
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delegates, while the second-placed would be entitled to one delegate, even
if it had won only 2 percent of the votes.
9
MAS won nearly all departments,
including Santa Cruz, but did not obtain, nor could it ever have obtained, the
required two thirds for approving the new Constitution.
MAS thus bet on negotiation. It believed that the other forces would
negotiate a new Constitution, but what happened from the very rst moment
was sabotage, a systematic boycotting of the possibility of a new Constitution
– rst, under the argument that any agreement at any of the Constituent
Assembly’s bodies would have to be approved by two thirds majority, and then
under the argument of “capitalía plena” [full capital status] for Sucre.
10
On the day of the election of representatives to the Constituent
Assembly, a referendum was also held to determine which departments wanted
autonomy. In Santa Cruz, Beni, and Pando, those voting for autonomy won.
The strategy of the elites ejected from government and the State’s central
apparatus was clear from that moment on: to arouse and incite the regionalist
feelings against the Evo government’s central power. The regionalism of the
eastern departments combined with the exacerbation of racism against the
indigenous populations, whose majority had come from the western altiplano.
The Cruceñista Youth Union
11
took to the streets beating indigenous persons
and dissidents in Santa Cruz, creating a climate of threats and fear for the
population.
With the Constituent Assembly paralyzed and blocked by the demand of
“capitalía plena” and surrounded by mobilizations staged by university students
and city government employees that prevented the latter’s functioning, the
government opted for guaranteeing the holding of the sessions at a military
school a few kilometers from Sucre. Groups of the Cruceñista Youth Union
took themselves to Sucre. Some broadcasting stations and the university
channel in particular called on the population to occupy the hall where the
Constituent Assembly was convened. On the way, there were some clashes
with the police. The media started talking of a massacre and exacerbated the
9 At the department level, the rst majority would be entitled to only two delegates of the ve in the contest,
while the second-, third-, and fourth-placed would have been entitled to one delegate each.
10 Sucre is Bolivia’s capital but the seat only of the Supreme Court of Justice. “Capitalía plena” implied the
transfer of the Executive and the Legislative from La Paz to the city of Sucre.
11 Groups of Santa Cruz young people with fascist and racist characteristics, who are part of the Santa Cruz
Department’s Civic Committee.
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population’s feelings. The Constituents approved the general draft Constitution
and left so as to avoid greater confrontations. The mob in the city set re to
the police headquarters, the prison, the mayor’s home, and several cars. During
the confrontation, three people died.
The Constituent Assembly nished its sessions in the city of Oruro.
The new constitutional text was approved in detail in the absence of the
opposition. The constitutional draft included the issues that had been agreed
by consensus in the commissions. The opposition did not recognize the new
draft Constitution and in forty-eight hours drafted an Autonomy Statute for
Santa Cruz.
The government expressed the intent to reconcile the new draft
Constitution and the Autonomy Statute. The opposition governors opposed
this and convened referendums in the four departments where those voting
for autonomy had won. The referendums were not convened by Congress
as required by the Referendum Law and the phrasing of the question was
deceitful, as it posited the approval and immediate implementation of the
Autonomy Statute, when it is known that the State’s Political Constitution
in force does not contemplate the existence of department autonomy. The
government did not recognize the legality of the referendums and classied
them as expensive consultations without binding authority. The Constitutional
Tribunal has not handed down an opinion yet because so far the opposition
at the Senate has blocked the appointment of the court’s missing members.
The tension increased as the day of the rst referendum in Santa Cruz
approached. Aggressions, threats, and confrontations promoted basically by
the Cruceñista Youth Union continued. The objective was to provoke the
government so that it would resort to the public forces to impose the state of
siege and prevent the holding of the referendum. The national government did
not respond to the provocation. The consultation took place with a signicant
abstention of 38 percent. The Autonomy Statute won the approval of 85
percent of the valid votes cast. In varying degrees, the situation was replicated
in the other three departments.
12
The day after the “referendums,” the Statutes could not enter into effect
as they were not covered by the country’s current national juridical order. The
12 In Beni, abstention was 31 percent and approval was 80.5 percent; In Pando, the respective gures were 45
percent and 78 percent; and in Tarija, 39 percent and 78 percent.
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“Prefectos” had themselves renamed as Governors, but legally they are still
“Prefectos.”
Throughout this whole process, the government insisted on the need to
agree rst on the chapter pertaining to the departments’ autonomy in the new
constitutional draft. That was the correct way: to give birth rst to the mother
(the new Constitution) and then to the children (the Autonomy Statutes). But
the opposition’s strategy was not to come to an agreement but to destabilize
and discredit the government in the hope that it would react to the provocation
in violent confrontations, and that chaos would ensue, casing the fall of the
government or its thorough debilitation.
The “opposition” to the government is not a well-integrated whole. It
involves some of the “prefectos” and civic committees of some departments
and the neoliberal parties that have majority in the Senate. Among prefectos and
civic and political leaders there is a constant struggle for heading the opposition.
These discrepancies arose when the opposition in the Senate approved the law
calling for a referendum on recalling the President, the Vice-Presidents and
the Prefectos, which the government had proposed months before, without
thinking that some prefectos might lose and be destituted.
Perhaps they thought that the President would veto such a law for fear
of defeat after the results of the so-called “referendum” of Santa Cruz. But
on that very day, Evo welcomed the decision to consult the people’s will and
to drop violent provocation and to go the polls in a legal, democratic way.
Referendum results
On August 10, a Recall Referendum for President, Vice-President, and
Governors was held, with the participation of observers missions from the
Organization of American States, Unasur, Mercosur, and different countries
from Europe, Asia, and Latin America. The election was preceded by various
actions of provocation and violence that even prevented the visit of the
Presidents of Argentina and Venezuela to Tarija on August 5.
The results were overwhelming, and the President and Vice-President
of the Republic were ratied by 67.41 percent of the votes, or 2,103,732
votes.
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Do you agree to the continuity of the change
process led by President Evo Morales Ayma and
Vice-President Alvaro García Linera?
In eleven years, MAS votes increased by over 2,000,000. The percentage
of votes won by MAS steadily rose from 3.7 percent to 67.4 percent.
Number of votes to the Movement to Socialism
1997-2008
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Percentage of votes won by the Movement to Socialism
1997-2008
The governors of the so-called Media Luna [Half Moon], on the other
hand, lost 26,190 votes between the 2006 and the 2008 referendums, while the
number of votes for MAS in that same region and period rose by 182,116.
MAS votes vs. Governors in the Media Luna Region
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MAS not only won more than two thirds of the votes but also won 95 of
the 112 provinces, thereby showing that the so-called “half moon” resembles
rather a “waning moon.”
The referendum results cornered the opposition but at the same time
radicalized it, making it much more violent and desperate. The more violent
factions assumed its leadership, precluding any possibility of dialogue, as it
realizes that any future referendum on the new Constitution would be at a
disadvantage.
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DEP
Translation: João Coelho
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United States, South
America, and Brazil: six
topics for discussion
José Luís Fiori
*
1 .
As the twenty-rst century begins, it becomes increasingly clear that
the dispute between the great powers did not end in 1991. It just decelerated
– temporarily – as it used to happen after a great war or an overwhelming
victory, as was the case of the North American victory in the Cold War.
In this case there was no explicit surrendering of the defeated or a “peace
agreement” among the victors heralding a new world order, similarly to what
happened after World War II. This time, there was no other power with the
might and capacity to negotiate or limit the United States unilateral will and
the Americans were little willing to negotiate or limit their new power position
in the world. The international projection of U.S. power began soon after
the country’s independence and continued without interruption throughout
the nineteenth and twentieth centuries. It was only in the second half of
the twentieth century, though, after the “70s crisis,” that the United States
* Federal University of Rio de Janeiro (UFRJ).
José Luís Fiori
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
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adopted an explicit imperial strategy
1
that achieved a crushing victory in 1991,
fueling the dream of absolute global power, of a world empire. After 2001,
this victorious strategy took on a warlike character, and after 2004 met with
successive reversals. This, coupled with the expansion of China and India
and the rebirth of Germany and Russia, reinserted competition and conicts
among the great powers into the core of the world system.
This reversal is usually associated with the United States’s impasse in the
Middle East and the failure of its “global war” against terrorism. Underlying
this temporary situation, though, it is also possible to detect a long-range
structural change brought about in large measure by the very global projection
of American power. It can be said that the United States recent foreign
policy has been responsible for two inconclusive wars and for the failure of
its project for a “Grand Middle East.” At the same time, though, it can be
said that American expansionism has also – paradoxically – been responsible
for the economic success of China and India, as well as of the entire world
economy after 2001, and that it is this success that is strengthening the United
States main competitors within the inter-State system. That is, the hegemonic
power’s expansionist policy ends up by activating and deepening the world
system’s contradictions and strengthening the resistance of States that are
challenged by the United States advance and at the same time are fortied by
the American economy’s success.
Obviously, these international changes are not the work of the United
States alone; they involve political decisions of other countries and processes
that are outside American control. However, there is no doubt that the
United States’s ambitious expansionism and recent upsets are very important
for understanding the international situation since the onset of the twenty-
rst century. The exponential increase of competitive pressures is affecting
all regions of the world, fueling hegemonic disputes, and signaling a new
1 The Reagan government, combining Carter’s anticommunist messianism with Nixon’s economic liberalism,
intended to eliminate the Soviet Union and build a new political and economic world order under the
uncontested command of the United States. It is clear today that this strategy adopted in the 1980s under the
leadership of the United States and Great Britain hastened the turnabout in the world system’s organization
and functioning that had been aborning for at least two decades. Little by little, the world system left behind a
“regulated” model of “global governance” under the United States’s benevolent hegemony and moved toward
a new world order with more imperial than hegemonic characteristics.” “O poder global dos Estados Unidos:
formação, expansão e limites” [The United States’s global power: genesis, expansion, and limits] in J. L. Fiori
(Org.) O Poder Americano, Editora Vozes, Petrópolis. 2004, pp. 93-94.
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imperialist race among the great powers. In sum, the expansion of the United
States’s power after the crisis of the seventies and particularly after the end of
the Cold War, coupled with its project/process of economic globalization, has
reignited the hegemonic contest among the national States and economies in
nearly every region of the inter-State capitalist system.
On the other hand, governments are reasserting their role in economic
life, raising protectionist barriers, and assuming command of their national
development strategies with their enterprises and “sovereign wealth funds.”
Nearly all countries are again regulating their markets somehow, including the
American nancial market.
2
There is no longer talk of “world regimes” and “world
governance” and there is no longer any consensus on “international ethics.”
3
2. As regards South America, the impact of this systemic, global
competitive pressure takes on particular characteristics because South America
is a continent where there has been no outright hegemonic dispute among
national States. It was rst a colony; after independence, it remained under
Anglo-Saxon tutelage: of Great Britain until the end of the nineteenth century,
and of the United States until the beginning of the twenty-rst century.
4
In these two centuries of independent life, political and territorial disputes
in South America never reached the intensity or had the same effects as in
Europe. Nor did an integrated, competitive system of Sates and national
economies emerge, as was the case in Asia after decolonization. As a result,
2 National barriers are being raised even on the Internet, the symbol of a world without frontiers. Internet was
conceived to be outside the reach of governments, transferring power to individuals or private organizations.
Now, under pressure by Russia, China, India, and Saudi Arabia, the U.S. company that assigns Internet addresses
is working on ways for countries to use the alphabet of their mother tongue. “We’re facing a step-by-step
Balkanization of the global Internet. It’s becoming a series of national networks” according to Columbia
University law Professor Tim Wu.” Bob Davis, “Rise of nationalism frays global ties,” The Wall Street Journal, as
reprinted in Valor Econômico, April 29, 2008.
3 Carr, E.H. The Twenty Years’ Crisis, 1919-1939. Perennial, New York, p. 150.
4 In August 1823, George Canning, British Foreign Secretary proposed to Richard Rush, U.S. Ambassador in
London, a joint declaration opposing intervention by Continental powers in Latin America. President James
Monroe, backed by his State Secretary John Quincy Adams, declined the British invitation. Three months
later, though, Monroe himself proposed to the U.S. Congress a national strategy that was nearly identical
to the British proposal. This is how the Monroe Doctrine was born on December 2, 1823. As it was to be
expected, the Europeans considered Monroe’s proposal impertinent and without importance, as it came from
a still irrelevant State in the international context. And they were right. Sufce it to say that the United States
recognized the independence of the rst Latin American countries to declare it only after the approval of
England, France, and Russia. Even after Monroe’s address, Europeans refused to meet the intervention requests
from the independent governments of Argentina, Brazil, Chile, Colombia, and Mexico. This is why early on the
Europeans and the Latin Americans themselves realized that the Monroe Doctrine was conceived and would be
upheld nearly throughout the entire nineteenth century by the force of the British navy and capital.
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Latin American States have never played an important role in the world system’s
major geopolitical disputes; it functioned throughout the nineteenth century
as a sort of laboratory for experimentation of “free trade imperialism.” After
World War II and during the Cold War, South American governments aligned
themselves with the U.S. side, with the exception of Cuba after 1959.
5
After the Cold War, in the nineties, once again most of the region’s
governments adhered to the neoliberal policies and reforms prescribed by the
United States. Beginning in 2001, though, the continent’s political situation
changed with the victory of the nationalist, developmentist,
6
and socialist
political forces in nearly every South American country. A great novelty was
the fact that this “turn to the left” coincided with the world economy’s new
growth cycle. After 2001, a resumption of economic growth occurred in all
the South American countries in tandem with the world economy’s expansive
cycle. The new element in this South American growth cycle was the decisive
weight of Asian pressure on the Continent’s economy. This applies particularly
to China, which has become the major buyer of South American exports,
5 After 1991 and the end of the USSR and the Cold War, the United States kept up and intensied their
offensive against Cuba, while maintaining friendly relations with Vietnam and China. At the peak of the
economic crisis caused by the end of the preferential relations with the Soviet economy, between 1989 and
1993, the George Bush and the Bill Clinton administrations attempted a checkmate against Cuba, forbidding
U.S. transnational companies abroad to negotiate with Cuba, then imposing penalties on foreign companies
doing business with the Island under the 1996 Helms-Burton Law. For now, this xed stance on the part of the
United States does not betoken much hope of changes in the two countries. From the Americans’ viewpoint,
Cuba belongs to them and lies within their “security zone.” Accordingly, the United States main objective in any
prospective negotiations will be the weakening and destruction of the hardcore of Cuban power.
6 Fernando Lugo’s 2008 election as Paraguay’s President meant another victory of left political forces, following
upon the election of Hugo Chávez, Luiz Inácio da Silva, Michele Bachelet, Nestor and Cristina Kirchner,
Tabaré Vásquez, and Rafael Correa. This political-electoral change brought back some “national-popular” and
“national-developmentist” ideas and policies that had been laid aside during the neoliberal nineties. In a way,
these ideas and policies hark back to the Mexican Revolution, particularly to the program adopted by President
Lázaro Cárdenas’s government in the thirties. Cárdenas was a nationalist and his government undertook a
radical agrarian reform, nationalized oil production, set up Latin America’s rst industrial development and
foreign trade state banks, invested in the building of infrastructure, implemented industrialization and domestic
market protection policies, introduced labor legislation, and adopted an independent, anti-imperialist foreign
policy. After Cárdenas, this program became the common denominator of several Latin American governments
that, as a rule, were neither socialist nor even of the left. Even so, his ideas, policies, and international positions
became a major reference for Latin American left thinking and left forces. Sufce it to recall the 1952 Bolivian
peasant revolution; Jacobo Arbenz’s leftist democratic government in Guatemala, 1951-1954; the rst phase of
the Cuban revolution, 1959-1962; and the military-reformist government of general Velasco Alvarado in Peru,
1968-1975. In 1970, these ideas resurfaced in the program of Salvador Allende’s Popular Unit government,
intent on the radicalization of the “Mexican model” by speeding up agrarian reform and the nationalization of
foreign copper companies, while advocating the establishment of a state-owned “strategic industrial nucleus”
meant to be the embryo of a future socialist economy.
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especially minerals, energy, and grain, while steadily increasing its exports to
the region. In addition, the new prices of international commodities have
reinforced the States’ scal capacity and are now nancing the policies geared
to the Continent’s energetic and transport infrastructure integration. The new
prices of energy and minerals have also permitted the establishment of reserves
in strong currencies, thereby decreasing the region’s external vulnerability and
enhancing its power of resistance and international negotiation. Venezuela’s
huge reserves in strong currency have allowed it to act twice as lender of last
resort to Argentina and Paraguay. In every respect, China is playing a new,
fundamental role in South American economy, but it is unlikely that it will
get involved in regional geopolitics. The important thing is that this expansive
cycle of the world economy has pressured the South American economies
and strengthened their national States. There is no longer any possibility of
shunning competition; at the same time, the current economic success is
potentiating the South American States’ internal and external power. South
America’s prolonged “assisted adolescence” is coming to an end, although
the price of this change in the medium term could be the intensication
of conicts within the region itself, as well as the hegemonic competition
between Brazil and the United States for supremacy in South America – unless
Brazil chooses and strives to maintain its status as “junior partner” within the
hegemonic space and the United States “supranational economic territory,”
as Canada and Mexico have done in North America.
3. In Brazil’s case, its past weighs heavily on its future position, as a
country that never entertained expansionist designs and never disputed for
hegemony over South America with Great Britain, or the United States for
that matter. After 1850, Brazil no longer knew any civil war or threats of
internal secession and, after the Paraguayan war in the 1860s it had only a
punctual participation in World War II, in Italy, and some participation in the
United Nations and the OAS “peace forces” thereafter. Its relations with its
South American neighbors after 1870 have been consistently peaceful, with
little competitiveness or political and economic integration. During the entire
twentieth century, Brazil’s position on the continent was that of an assistant
partner of U.S. continental hegemony. After World War II, Brazil had no
major part in the Cold War, but despite its alignment with the United States
it began to implement a slightly more independent foreign policy as of the
sixties. In the seventies, particularly under general Ernesto Geisel’s government,
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Brazil assigned itself the role of an “intermediate power,” deepened its
developmentist economic strategy, rescinded its military agreement with
the United States, expanded its relations with Africa and Asia, and signed
an atomic agreement with Germany. The economic crisis it endured in the
eighties and the end of the military regime took the steam out of this pattern,
which was completely laid aside in the nineties, when Brazil once again aligned
itself with the United States and its FTAA project. More recently, after 2002,
Brazilian foreign policy changed course and assumed a more aggressive stance
of assertion of its interests and leadership both in South America and in
the international sphere. This is illustrated by the priority being attached to
South American integration and to closer relations with some countries of
Africa and Asia, particularly with China, India, and South Africa. However,
Brazil still faces major limitations to expanding its international power: rst,
owing to the strategic refusal to recognize the existence of a competitor or
adversary in the struggle for hegemony in South America, simply because
this inevitable competitor is none other than the United States of America;
secondly, owing to the lack of strategic organization of its economic growth,
which precisely for this reason has been very meager in the last two decades;
thirdly, owing to its limited capacity to coordinate public and private investment
abroad, particularly in South America; and, nally, due to the political force
of the stance propitious to keeping Brazil as a junior partner within the U.S.
hegemonic space and “supranational territory” that prevails within the Brazilian
elites and within the very foreign policy establishment.
4. As to the United States’ position in the hemisphere, attention should
be paid to the U.S. 2008 Presidential elections, as they are already part of a
process of realignment of U.S. international strategy. This process should
take a few years but there is little likelihood that the United States will give
up the three self-assigned “intervention rights” that guided its hemispheric
policy in the twentieth century: (i) in case of “outside threat;” (ii) in case of
“economic disorder;” and (iii) in case of “threat to good democracy.” During
the Cold War, the United States sponsored civil wars, military interventions,
and dictatorial regimes throughout the Continent against an alleged “external
enemy.” After the Cold War ended, it sponsored – in the same countries –
nancial interventions and neoliberal economic reforms to check an alleged
“internal economic disorder” and to guarantee that South America would
honor its international nancial commitments. Finally, since 2001, the United
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States has clearly encouraged conservative political forces and public opinion
against governments it considers “authoritarian-populist,” which would
allegedly pose a threat to democracy.
5. At this crossroads at which the United States nds itself, it is interesting
to recall and ponder the lofty principles that guided U.S. foreign policy toward
South America in the second half of the twentieth century. Those principles
were formulated by the principal American “geostrategist in the century, who
was born in Amsterdam in 1893 and died in the United States in 1943, namely,
Nicholas J. Spykman. He died still young, at 49, and left only two books on
U.S. foreign policy: America’s Strategy in World Politics, published in 1942, and
The Geography of the Peace, published in 1944, one year after his death. These
two books became the cornerstone of American strategic thinking in the
second half of the twentieth and the beginning of the twenty-rst century.
The spacious room he devoted to discussing South America, and particularly
“the struggle for South America” strikes the attention. He starts from a radical
separation between the Anglo-Saxons’ America and the Latins’ America.
According to him, “the lands below the Rio Grande represent a different world,
the world of Latin America. It is perhaps unfortunate that the English and
Latin speaking parts of the continent should both be called America, thereby
unconsciously evoking an expectation of similarity which does not exist.”
(p. 46)
7
. He then proposes to divide the “Latin world” into two regions from
the American strategic viewpoint: a “Mediterranean” region, which would
include Mexico, Central America, the Caribbean, Colombia, and Venezuela;
and one that would encompass all of South America south of Colombia and
Venezuela. Spykman proceeds thusly: “The American Mediterranean is today a
zone in which the United States holds a position of unquestioned naval and air
supremacy. This body of water is now to all intents and purposes a closed sea
to which the United States holds the keys… Even the countries of large size
like Mexico, Colombia, and Venezuela are precluded by topography, climate,
and absence of strategic raw materials from becoming great naval powers.
The supremacy of the United States in this area can, therefore, be challenged
only by forces from outside the zone, either in South America or in Europe
or Asia” (p. 60). Thus, any threat to U.S. hegemony in South America would
be exerted over the South, particularly over Argentina, Brazil, and Chile, the
7 Spykman, N. American Strategy in World Politics, Harcourt, Brace and Company, New York, 1942.
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“ABC region.” As he says, “To our neighbors below the Rio Grande we remain
the ‘Colossus of the North’ which in a world of power politics can mean only
one thing, danger.” (p. 64). And concludes: “The A.B.C. states represent a
region in the hemisphere where our hegemony, if challenged, can be asserted
only at the cost of war.” (p. 62). The interesting point is that if these analyses,
predictions, and warnings had not come from Nicholas Spykman, they would
sound like boasting from some of these Latin American populists that invent
external enemies and proliferate like mushrooms, in accordance with the
conservative idiocy.
6. After Nicholas Spykman, Henry Kissinger was the intellectual that
played the most important role in the formulation and implementation of U.S.
foreign policy in the sixties and seventies. He decisively participated in South
America’s internal political life. Sufce it to read the ofcial U.S. documents
now declassied and the various journalistic and academic surveys that point
to the former U.S. Secretary of State’s direct involvement in the preparation
and staging of the violent military coups that toppled the elected governments
of Uruguay and Chile in 1973 and of Argentina in 1976. In addition, there are
numerous judicial proceedings in several countries
8
involving Henry Kissinger
with the Condor Operation
9
carried out by the intelligence services of the
Armed Forces of Argentina, Brazil, Chile, Paraguay, and Uruguay, which
kidnapped, tortured, and assassinated political opposition gures. Analysts have
always been perplexed at the support lent by Kissinger and American diplomacy
to these “military interventions” characterized by extraordinary truculence. But
it is not difcult to understand what happened if one looks at the U.S. strategic
interests and its defense of South America from a long-range perspective,
as outlined by Nicholas Spykman in 1942. Spykman dened the American
continent from a geopolitical standpoint, as a rst and last line of defense of
8 In France, Henry Kissinger was summoned by Judge Le Loire to testify in the proceedings in the death of
French citizens under the Condor Operation and the Chilean dictatorship. In Spain, he was also called by Judge
Juan Guzmán to testify and in Washington he had also to testify about the death of U.S. journalist Charles
Horman under the Chilean dictatorship. In Argentina, Kissinger is also being investigated by Judge Rodolfo
Canicoba for his involvement with the Condor Operation and, in Washington, he is being accused before a
federal court of having given the order for the assassination of General Schneider, Commander in Chief of
the Chilean Armed Forces in 1970.
9 Interest on the subject has been recently rekindled by journalist Christopher Hitchens’ The Trial of Henry
Kissinger (2003) and by Kenneth Maxwell’s review of Peter Kornbluh’s article “The Pinochet le: a Declassied
Dossier on Atrocity and Accountability” in the Foreign Affairs of December 23 on Kissinger’s relations with
Augusto Pinochet’s regime, and particularly with the 1976 assassination of Chilean diplomat Orlando Letelier
in Washington.
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U.S. world hegemony. In this hemisphere, he thought it unlikely that a direct
challenge to U.S. supremacy would be posed by “Mediterranean America,”
in which he included Mexico, Central America, and the Caribbean, as well as
Colombia and Venezuela. He thought, though, that such a challenge could
come from the ABC region in America’s Southern Cone. If this happened,
recourse to war would be inevitable. The ABC acronym refers to Argentina,
Brazil, and Chile but the ABC region also encompasses the territories of
Uruguay and Paraguay, thus covering precisely the ve countries involved
in the Condor Operation. It might thus be said that Henry Kissinger strictly
followed Nicholas Spykman’s recommendations regarding the control of this
geopolitical region. His only personal contribution was replacing the “external
war” proposed by Spykman by “the internal war” waged by the local Armed
Forces against sectors of their own national populations. But even in this
regard Kissinger was not original: he resorted to the method that had been
used by the British in India for two hundred years, as well as in all the places
where Great Britain dominated the weak, by utilizing divided and subordinate
elites to control their own local populations.
In the eighties and nineties, Henry Kissinger withdrew from the direct
exercise of diplomacy by maintained his personal and intellectual inuence
on the American establishment and on South American conservative elites.
In 2001, he published a book about the geopolitical future and the defense of
American interests around the world.
10
In respect of South America, Kissinger
attenuated Spykman’s form but maintained his “spirit,” asserting that South
America remains essential to U.S. interests and should be kept under U.S.
hegemony. Today, though, the threat to this hegemony no longer comes from
Germany or the Soviet Union, but from inside the continent itself – on the
economic plane, it comes from regional integration projects that exclude the
FTAA; and on the political plane, from the populisms and nationalisms that
are reemerging on the continent.
DEP
Translation: João Coelho
10 Kissinger, H. Does America Need a Foreign Policy?: Toward a Diplomacy for the 21
st
Century, Simon & Schuster,
New York, (2001).
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Changes in the
sociopolitical matrix
and development
in Chile
Manuel A. Garretón M.
*
Chile around the 1950s
I
n the early twentieth century, Chile began to gestate what we call Latin
America’s classic sociopolitical matrix: a state, national, popular, democratic,
and, in Chile’s case, parties-based matrix. Up to that time, the economic and
social model was based on a free market system known as the model of
outward development grounded on the more orthodox free trade paradigm.
The orthodox economic model was associated with an oligarchic system of
democracy limited by considerable political and social exclusion. The State
played a minimal role during this period of the cities’ capitalist expansion
spurred by the mining and industrial development that attracted major
migratory ows from the rural areas and the center of the country. This resulted
in grave social problems that brought to the fore the oligarchic model’s crisis,
* University of Chile
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which denitively collapsed with the 1929 world crisis, entailing a decisive
change in the development strategy and heralding a new era in which the State
assumed a role for the rst time.
The so-called “social question” of the twenties, which had to do with
the unsustainable exclusion of the new proletariat, created a propitious
environment for major social changes. Between 1880 and the 1920s important
progressive political groups of the middle class were formed, coupled with the
emergence of a labor movement that reached a signicant level of organization
by 1922, with the founding of the Communist Party. Although they did not
have much political signicance before the twenties, the progressive groups did
help the inclusion of new issues on the social agenda and made considerable
progress under the liberal candidacy of Arturo Alessandri Palma, who was
elected president in 1920.
Under the Alessandri Administration, a new Constitution was drafted in
1925, strongly inuenced by the constitutional social doctrines that prevailed
in the twentieth century, and based on the outstanding fundamental charts that
were the Mexican and the Soviet Constitutions (1917 and 1918, respectively).
Chile’s new Constitution was thus aimed at ensuring a minimum degree of
well-being for the citizens, including explicit protection of labor, industry,
and social welfare. In 1931, the Labor Code, a sanitary code, was drafted on
the basis of the institutional groundwork laid down by the 1925 Constitution.
This Constitution established a presidential system of government, leaving
behind the traumatic parliamentary system that had led to serious institutional
crises in the late nineteenth century; a new electoral system that incorporated
proportionality as the governing principle of representation in Congress;
and the separation of Church and State. The Central Bank was created, new
banking and budgetary legislation was enacted, and the Ofce of the Controller
General of the Republic was established.
The 1925 Constitution laid the institutional foundation for the subsequent
development of the social processes (to be addressed further on), which
helped shape the classical sociopolitical matrix supported by elements such as
a relatively modern economic institutionality, political democratization, social
protection, an strong role played by the State, and laicism. All of this, though,
in a relatively precarious balance subject to some backsliding owing, until the
sixties, to the exclusion of the peasants and the urban poor, as well as to the
existence of oligarchic and economic enclaves such as foreign ownership of the
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mining industry, in addition to the lack of stable center-left political coalitions
and of political expression by the middle and popular sectors.
The Great 1929 Depression ruthlessly affected Chile, more so than any
other countries in Latin America or elsewhere, as nitrate and copper exports
plunged, slashing scal revenues and reserves, and leading to default on
the external debt by 1931. The strategy to overcome the crisis was import-
substitution industrialization (ISI), which together with the adoption of
domestic demand expansion and exchange rate control policies, reduced
imports. The gold standard was abandoned and a series of measures was
adopted to strengthen production and internal demand, in view of the closing
of international markets owing to the application of quotas and tariffs, coupled
with anti-cyclical monetary and scal policies.
The application of the ISI model resulted in the development of a
national industry promoted and protected by the State through institutions
such as the Production Promotion Corporation (Corfo), established in 1939,
which gave origin to a symbiotic relationship between an entrepreneurial
State and a heavily subsidized private sector. The basis of the capitalist system
remained unquestioned until the fties, thanks to a circumstantial adaptation
to the 1929 crisis in the rst place and then to the consolidation of a concept
or model of a “Compromise State,” a Latin American version of the welfare
state that was never consolidated in Chile.
At rst, the application of these measures was a natural, rational
response to the crisis, as there was no other way out owing to the international
nancial disaster and then to World War II. Toward the end of the war,
though, these measures were buttressed by the emergence of a Latin
American ideology grounded on the Eclac development or structuralism
theory in the mid-forties.
A state-national-popular-democratic-parties-based matrix
The Chilean social model or prevailing sociopolitical matrix in the
twentieth century can be dened as a state, democratic, popular, national, and
political-party one, characterized by the interaction between politics and civil
society, including the economy, and the preponderant, coordinating role played
by the ensemble of political actors, or party system, in relation to the State.
Changes in the sociopolitical matrix and development in Chile
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It was a question of a national community’s afrmation of its identity
through the work and struggles of the actors that represented it in the political
eld. This implied an effort toward comprehensive social incorporation and
the solution of conicts within an institutional framework rather than by force
or coercion and exclusion.
At the center of the political scene, which had always been the main
expression of the national-state-democratic-popular-party idea, were the
1925 Constitution and institutions concerned with ensuring respect for the
law and freedoms, as well as State and civil service accountability. From
this time, date the social legislation, universal suffrage, and, since 1920, the
incorporation of masses into politics. This provided the basis for the projects
of the Radical Party and the parties on the left of the Popular Front, with
the integration of the middle class and of popular segments, the Patria Joven
[Youth’s Homeland] and the Revolución en Libertad [Revolution with Freedom]
of the Christian Democrat project of the sixties and of the Via Chilena al
Socialismo [the Chilean Way toward Socialism], headed by the Popular Unity
and president Allende between 1970 and 1973. In the socioeconomic sphere,
this project took the form of industrialization under the State’s leading role,
free public education, universities throughout the country, agrarian reform,
and further on nationalizations and the National Health Service, among many
other signicant accomplishments. Up to a certain point, military service played
also a role in national integration.
The Popular Front movements from 1938 to 1952 ensured a strong
phase of social reforms and industrial growth owing to policies aimed at
laying down the infrastructure for production and a social protection system
for the working and middle classes. Between 1940 and 1953, industry grew an
average of 7.5 percent a year. Its GDP share rose from 7.9 percent in 1929
to 23.0 percent in 1955.
Developments in this period indicate that, independently from the political
or ideological orientation of the governments that succeeded each other for
over forty years, there was basic political and social consensus regarding the
industrialization effort and the State’s role as the fundamental development
axis through institutions such as Corfo, which accounted for 30 percent of
total investments in capital goods, 25 percent of public investments, and 18
percent of total gross investment. Nevertheless, agreement about the role of
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the State did not preclude the existence of economic and political divergences
in the right’s camp or of different social views in the democratic-popular or
center-left camps. The industrialization and foreign trade disincentive policy
involved also an implicit political discussion related to the workers’ movements
represented in the State’s and parties’ structures. These workers movements
established alliances with the new industrial entrepreneurial sector, to the
detriment of the agricultural sector more oriented to exports; this would
become a conict factor when the import-substitution model fell into crisis.
In the late fties, the model began to collapse. Ination and unemployment
were symptoms of serious problems stemming from the adoption of protection
measures in the economy, despite improved indicators of quality of life and
the population’s access to services, and augured a grim future scenario. The
conservative government of Carlos Ibáñez del Campo, elected in 1952, attempted
in vain to reform the Eclac model based on the recommendations of the Klein-
Saks U.S. mission (1955) to cut down the money supply and public spending,
which could not be implemented in view of their recessive results.
The import-substitution model did not yield the expected results.
Critics claimed that this model gave rise to an excessive, inefficient
bureaucratic apparatus that proved incapable of maintaining the social
benets infrastructure, and to inefcient productive sectors. This did not
lead to the desired independence from the external sector, owing to increased
dependence on capital goods and raw material imports to feed domestic
production; it did entail price distortions caused by subsidies and the lack of
competitiveness, all of which led to higher prices and unemployment rates.
These developments intensied the questioning of the model, sharpening the
ideological confrontation between the advocates of the Eclac model and its
detractors, who were for neoliberal modernization.
In 1958, as Conservative Jorge Alessandri Rodríguez took ofce, a
modernizing capitalist reform was attempted, based on the effort to make the
private sector into the development engine, while maintaining an active scal
policy à la Keynes. A nominal exchange rate was set as a kind of anchor – a
Keynesian scal indebtedness policy to stimulate domestic demand through
scal spending. Although appropriate, the reforms did not produce the expected
results, nor were results sufcient to support the growth of production or
price controls, as the modernizing strategy lacked medium-term consistence
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with the contemplated adjustment measures and price controls, owing to the
containment of Alessandri measures, which had but a momentary effect in
controlling ination. In addition, these measures were not supported by the
entrepreneurial sector or by a consistent political majority.
Eduardo Frei Montalva’s democratic government (1964) set in motion
a reform process according to a plan known as Revolution with Freedom, based
on gradual, nonrecessive exchange stabilization, agrarian reform, intensive
promotion of peasant labor unions, industrial modernization impelled by the
State’s active role in promoting the telecommunications and the petrochemical
industries, as well as the beginning of the nationalization of copper (the so-called
“Chilenization”) to be completed later by the Popular Unit government.
Between 1965 and 1973, reformist tendencies gained force. Their main
platform was closer economic, political, and social integration of the poorest
popular segments of the agrarian and urban worlds. Under Eduardo Frei’s
government, reforms became more gradual, while under Allende the strategy
adopted was that of radical changes, particularly in respect of economic and
social organization. Except for the expansion of citizenship rights, no reforms
of the political and institutional system were undertaken under any of the
reformist governments.
The main economic reforms (agrarian reform, nationalization of the
copper sector) were related to the system of ownership of the sectors considered
strategic for development. The reforms aimed at democratic expansion were
centered on social organization and the extension of suffrage to peasants,
young people, and the illiterate. Under these governments, the rural workers’
unionization law was passed, which contributed to the rural sector’s incorporation
into political life, a segment for centuries deprived of social and political rights;
the right to vote was extended to illiterate persons; and the voting age was
reduced from 21 to 18 years. The two Administrations ensured strict respect
for the Constitution, the regular functioning of democratic institutions, and the
unrestricted prevalence of public freedoms and the Rule of Law.
The political spectrum underwent a twofold change: on the one hand,
expansion owing to the emergence of leftist parties split off from Christian
Democracy; on the other hand, polarization and rigidity owing to the right’s
unication into a more nationalistic, authoritarian party (National Party) and
the autonomy achieved by the more ideological center, which had its own
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alternative project (Christian Democracy) and the left’s rallying round a Marxist-
Leninist matrix and a radically more anti-capitalist project.
From the 1929 crisis thru 1973, the State played a central role not only
in development’s orientation and in the “ordering” of the economic and social
actors under a common development model, but also as the prime social and
political coordinator. The governments in place – of the right, center, and
the left – maintained the economic measures aimed at protecting the national
industry, subsidizing the economic agents (low credit interest rates), and
systematically and gradually redistributing income, assuming salary and price
regulation functions as well as increasing budgetary appropriations for social
services, including education, health, and housing. Their social investment is
today recognized as one of developmentism’s enduring effects and seen as
the foundation without which the Chilean economy’s current growth would
not have been possible. The economic achievements of the period under
consideration could be seen in the moderate but sustained trends of economic
growth, low unemployment, and reasonable investment rates, although
accompanied by high ination, which reected the rather political character
of the 1973 overturn of democracy.
The classic matrix’s main characteristic is the centrality of politics. This
is so not only in respect of economic processes, but also of the social actors’
makeup and of cultural orientations, notwithstanding the latter’s autonomy.
Cultural orientations did indeed value education, equality, and solidarity; the
nation’s collective projects; the dominance of the middle class; but meritocratic,
class-oriented, and oligarchic elements were not lacking either, owing to the
inuence of the culture of the rural sector or of the haciendas. But politics
was the central axis around which Chilean identity and the collective identities
within it were forged. Politics, then, meant far more than the processes that
determine the government and its decisions. Politics was the particular way
whereby society formed itself, a form of social life. It provided the main locus
where to look for answers for questions about meaning, and the institutions
were the main channel for these answers, which were enshrouded in perpetual
ambiguity or hypocrisy, oscillating between acceptance of the norm and doubt
about is intrinsic value.
The peculiarity of Chilean politics was that it had a stronger party
connotation than a personalistic or populist character as was the case in other
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Latin American countries. The existence of a full ideological party spectrum
before the masses began their active participation in social and political life
imparted to this centrality of politics a highly ideological character that became
radicalized in the sixties, combining abstract ideology and concrete demands.
Despite its achievements, the national-popular, democratic-state, party-
political model described in rapid strokes in the preceding displayed major
contradictions and limitations, including the marginalization or subordination
and tardy incorporation of peasants, urban dwellers, women, and regional
segments. To this was added the exclusion and vassalage of various cultural
expressions and identities unrelated to politics, especially as regards the original
peoples. A consistent sectarianism in the appropriation and application of the
popular national idea by a given social, political or cultural sector excluded
all other segments, segregating instead of integrating them. There prevailed a
culture that instead of encouraging individual creativity and diversity, favored
an apparent homogeneity that concealed mediocrity, discrimination, classism,
and hypocrisy. Lastly, there was excessive dependence of the economy on
politics instead of on elements of a more markedly technical nature.
It was precisely these contradictions and the difculty in overcoming
them that created the propitious conditions for a crisis that was taken advantage
of by the dominant economic sectors and the Armed Forces to implement
their own socioeconomic and political project, totally alien to the principles
on which the preceding model was based.
In 1970, a crisis broke out about the legitimacy of the capitalist
development model and its consequences, but not about the democratic regime.
In the 1970-1073 period, though, a crisis concerning democratic legitimacy
broke out, leading to the collapse of the political system.
Popular Unity and the political and economic crisis
The ensemble of Chile’s leftist parties grouped into the Popular Unity
under Salvador Allende’s leadership shared with Chilean political forces at any
point of the ideological spectrum the revolutionary aspiration to a radical,
thorough change in society. The left understood this change in the socialist
sense, as a substitution of the capitalist society, but differently from most Latin
American countries, within a democratic regime framework. On the other
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hand, as regards content, the transformation of the capitalist model and the
beginning of the transition to socialism paid the price of the predominant
views at the time, such as the economic determinism of social and political life,
the ideological constructs based on relatively monolithic thinking and, above
all, the lack of referential models for leftist thinking other than the historical
or real socialisms or the Marxist-Leninist revolutionary matrix.
This notwithstanding, it was possible to formulate a distinctive view,
the “Chilean way to socialism,” which found its best doctrinaire expression
in Salvador Allende’s rst presidential Message to Congress, in 1971, as he
stressed the relation between political democracy and economic and social
democracy. The Popular Unity program also referred to certain goals and
strategic formulations as well as to specic measures aimed basically at
redistribution and at satisfying the needs of the large majorities. The connection
between them was the expropriation of monopolies, which would provide the
State with the requisite surpluses to redirect the productive apparatus toward
meeting those needs.
In a highly anticapitalist spirit, the Popular Front’s economic program
was centered on a redistributive policy aimed at economic democracy based
on structural changes regarding property, through a nationalization program
directed at the copper, nitrate, iron, and coal mining sector, the banking
system, foreign trade, and strategic monopolies. Private distribution enterprises
considered strategic suffered intervention, while others were arbitrarily taken
over by workers’ organizations, as were the agricultural estates that had not
been affected by the agrarian reform in the preceding period. Public tariffs
were reduced and salaries were increased, based on Central Bank emissions
that fueled ination, which reached 293 percent in 1973.
In addition to the theoretical and programmatic shortcomings of the
Popular Unity’s project and of a discourse that put exaggerated emphasis on
the popular social actors, endowing them with an exclusive, confrontational
prole, what was sought was the squaring of the circle – making a revolution
with nonrevolutionary, democratic means, without counting on the institutional
majority that, in Chile, is achieved only through the political parties. The need
for a strategy to ensure a majority, for whose lack Social Democracy had also
been liable, is a major lesson of the period. Indeed, the Concertación de Partidos
por la Democracia that followed the military regime in 1990 cannot be explained
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only by the need to ght against the military dictatorship, but also by the
learning of this lesson. Be as it may, to analyze the reality of the 1970-1973
period and its culmination in the 1972 coup d’état in terms of a failure owing
to the weakness and unfeasibility of a project and its strategy would betray
a lack of knowledge. Those three years were marked by a political struggle,
whose defeat a segment of the opposition to the Popular Front and to the
Allende government pursued from the very beginning, an objective equally
pursued by the U.S. Government at the time.
The authoritarian neoliberal project
Between 1973 and 1989, the de facto military government under Augusto
Pinochet’s leadership interrupted the democratic regime. The coup d’état put
an end to the institutional normality the country had experienced with but
brief interruptions in over 150 years of republican life, with the dissolution
of Congress; the assumption of the legislative power by a Government Junta;
the prohibition of political parties; the suspension of electoral mechanisms;
the virtual elimination of public freedoms; the massive, systematic repression
of those suspected of being supporters of the previous government and
opponents of the new regime; and the subordination of the Judiciary to
the de facto government. The authoritarian regime’s institutional model was
consolidated by a fraudulent plebiscite, while the 1980 Constitution supported
a process of authoritarian institutionalization that would lead eight years later
to the 1988 plebiscite.
What occurred was a counter-revolutionary project. The history of
the Chilean military regime from 1973 through 1981/1982 is the history
of a twofold process. On the one hand, repression and deactivation of the
previously established actors, which given the way those actors had come onto
the stage, started with the suppression of the parties’ political activity, initially
under the Church’s aegis. On the other hand, the embodiment of political
and military power in general Pinochet, combining personal dictatorship and
institutional regime features. A hegemonic nucleus came then into being,
combining this personalized political power and the socioeconomic conduction
of the State by a technocratic team soon associated with nancial capitalism
and known as the Chicago Boys.
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The main thrust of the civilian-military project was reversing relations
between the economy and the State. The State was restricted to the extent
possible to its integrating and redistributing tasks and to its role related to
collective action, while being used for coercive tasks and for implementation of
the model. Another objective was to trigger a series of social and institutional
changes, known as “modernization,” whose main result was the atomization
of social relations, which were reduced to market mechanisms and dissociated
from political action.
The authoritarian-neoliberal formula was a radical change from the
preceding formulas – the traditional capitalist formula, the mixed formula
of the sixties, and the Popular Unity’s socialist orientation. By suppressing
politics, the military regime could make the changes deemed necessary by the
technocratic team, which were imposed by the state without social inputs. The
social costs of the adjustment have been exhaustively analyzed and its effects
on society now and in the future will be felt for a long time. The neoliberal
formula meant not only economic restructuring but also intervention in politics,
which established the regime’s institutional model fashioned after the 1980
Constitution; a social reordering that brought to the fore the entrepreneurial
actor and caused the dissolution of the popular, social actors; and produced
changes in the cultural orientation of the social and political actors.
The military Government’s stabilizing, re-foundational economic plan
was based on the disarticulation of the Compromise State of the classic
sociopolitical matrix and on the construction of a new project that, from
our analytical point of view, would convert itself into a neoliberal matrix.
First, policies were adopted to address macroeconomic disequilibria as the
top priority for controlling hyperination, and then to embrace unilateral,
indiscriminate trade opening, and the liberalization of prices and the nancial
market. In addition, the state apparatus began to be dismantled, just as the
state enterprises system had been through privatizations, including some areas
that had traditionally belonged to the State, such as the pension system and
health care. Foreign borrowing was a fundamental pillar to support the new
economy’s reforms – a two-edged weapon that led the Chilean banking system
to defaulting at the time of the worldwide debt crisis.
In addition to introducing radical changes in the economy (liberalization,
outward opening, and privatization), the military government also changed
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social policies. These changes occurred in six major areas: drastic reduction
of resources, which affected with particular intensity the housing, health,
and educational sectors (and within these sectors, even sharper reduction of
investment and remuneration of personnel); transfer of executive functions,
reassignment of services to the private sector, and geographical decentralization
of ministries and services; introduction of market mechanisms to allocate
public funds (subsidized demand); implementation of specic measures
aimed at literally reducing universal programs and redirection of public funds
to poorer segments of the population; development of compensatory social
programs aimed at extreme poverty situations; and weakening of the power of
workers and unions, accompanied by rigid control of collective manifestation
of social demands.
Despite the absence of a consistent “package of administrative reforms,”
from the very beginning of the rst policy adjustment in 1975, the military
government adopted a series of measures that drastically changed the State
apparatus. These measures included the wholesale privatization of public
enterprises – although some privatizations were left “pending” and the copper
mining sector was exempted – as well as the privatization of public services,
especially social security; transfer of public services functions; transfer of the
municipalities’ scal decit in the areas of education and health; sharp reduction in
the number of government employees and elimination of agencies; restructuring
and weakening of “social” ministries and modernization of “economic” ones;
new regionalization of the country with a military cast; administrative legislation
that led to increasing instability; and issuing of a Constitutional Organic Law
that made changes to this legal instrument extremely difcult.
In practice, despite some initial measures of nancial and administrative
rationalization, the result was a pronounced deterioration of public
administration, as the military regime’s economic authorities considered the
State inefcient by denition. The constant arbitrariness, authoritarianism, and
devaluing of public functions played havoc with the bureaucrats’ morale. Their
salaries were disproportionately reduced by the scal adjustments. Obsessed
with privatizations, the Pinochet government delivered public functionaries
to their fate.
All of this gave rise to an extremely negative concept of the role of the
State and to the identication of modernization and efcient administration with
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the private sector. The dominant political thinking associated the public sector
with obsolete, bureaucratic, and anachronistic ideas and images. Accordingly,
all civil servants were unfairly considered inefcient. This biased view, which
disdained the functions and effectiveness of public policies, persisted in the
subsequent democratic governments among political groups of the right and
entrepreneurs. Underlying these arguments was an interest in preventing the
adoption of regulation strategies as well as in privatizing all available public
capital and services. But a major ideological, political element was also at play
– the penalization of a sector seen as being responsible for the 1973 crisis
and the elimination of State intervention, seen as the main cause of society’s
politicization. Neoliberals and neoconservatives, stressing the inefciency of
State action and its alleged damaging effects on economic growth, did indeed
reined in the endogenous modernization of public administration, opposing
various reform initiatives attempted by the democratic governments.
In 1981-1982, the debt crisis led to a crisis of the economic model,
which in turn led to the outbreak of public protests by the population and the
opposition. Only in 1986 was the regime able to partially restore its economic
model and pave the way for the 1988 plebiscite, in which the opposition
accepted to participate, so as to change it from a projection mechanism for
the regime into a mechanism for triggering a process that would bring the
dictatorship to an end and initiate the transition to a democratic regime.
The military regime did manage to impose a new development model,
but only after the resounding failure of 1981-1982. The new model meant
regressive growth for a while and a degree of recovery as of 1986. Thus, there
is no sense in speaking of a Chilean economic miracle. The recovery, however,
did not encompass any social indicator, if compared with the seventies.
In brief, the military dictatorship and its neoliberal model changed the
Chilean sociopolitical matrix; but instead of creating a new one, it basically
just dismantled the old one.
Democracy and a hybrid matrix
The political transition in Chile was spurred by the 1988 plebiscite,
when the possibility of an authoritarian relapse was denitively eliminated,
despite the clearly undemocratic intentions of Pinochet’s civilian and military
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regime. The transition ended with the inauguration of the rst democratic
government in March 1990. Since then, there have been four governments of
the Concertación de Partidos por la Democracia, a center-left coalition formed by
the Christian Democrats, the Socialist Party, the Party for Democracy (PPD),
and the lesser Radical Social Democratic Party. There have been two Christian
Democrat presidents (Patricio Aylwin, 1990-1994; Eduardo Frei, 1994-2000) and
two Socialist (PPD) presidents (Ricardo Lagos, 2000-2006; Michelle Bachelet,
2006-2010). Thus was partially solved one of the Chilean society’s major problems
in the twentieth century: the intertwining of social actors and the party system
that occurred in each progressive democratic party, which with the exception of
the Popular Front of the late thirties, had never led to a progressive democratic
coalition uniting the center and the left. The problem was only partially solved
because the social actors’ makeup had changed so much that they could no
longer be totally represented by the party system.
The rst democratic government – Patricio Aylwin’s – dened the
national task in terms of “transition to democracy” and pointed to the idea of
“growth with equity,” while maintaining the macroeconomic equilibriums and
seeking to redress the social effects of the economic model. It also adopted
a method of negotiations and punctual agreements it called “consensuses
democracy.” The truth is that a transition was no longer under way nor were
there any real consensuses. Be as it may, whatever criticism is leveled at these
denitions as being partial or insufcient, it must be recognized that there were
goals and directions and that on their basis the government made progress. It
must be recalled that during the second Concertación government, despite very
good economic performance until 1997 and major progress in terms of public
works and of reforms in the areas of the Judiciary and education, projects and
orientation, and objectives susceptible of mobilizing social and cultural energies,
the country became adrift, without a shared compass, and thus without political
conduction. Under Ricardo Lagos, presidential leadership was recovered: the
envisaged goal was to make Chile into a development country by its second
centennial as an independent nation. Despite the great progress made in the
areas of infrastructure, social reforms, and international integration, this goal
is far from being achieved and the social actors and politicians do not seem to
be clearly moving in the same direction either. Under the Bachelet government
– Latin America’s rst government whose Executive is equally shared by men
and women and headed by a woman – whose term in ofce is only four years
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as established by the 2005 constitutional reform, the main concern during its
rst ten months, as was the case during the campaign, has been the idea of
a new, so-called “citizenship” style. This is dened by an agenda of specic
measures but seems to lack a political project or horizon to give meaning to
government action, except for the generic proposal of a protection system to
be achieved through social security reform, as announced at the end of 2006.
But the government has been overwhelmed by unforeseen problems, the most
signicant of which was the secondary students’ movement.
The end of transition did not mean that under genuinely democratic
governments the political regime and society actually had real democracy. The
incomplete transition led to a limited, low-quality democracy interspersed with
authoritarian enclaves. The task called for was neither going on with transition,
as it was nished, nor consolidating the new, post-authoritarian regime, as it
had already been consolidated in so far as no relapse into authoritarianism
was possible. The task called for was a thorough reform of this new regime
and the creation of an authentic political democracy under which limits to
popular will and sovereignty are not set by the powers that be or by political
minorities. In other words, it was necessary to solve the transition problems
that were left unsolved.
The relative successes of Chile’s political democratization paid a high
price, as can be seen in the great unsolved problems, i.e., in the failures stemming
not from the nature of the process itself, but to political conduction.
There has been much insistence on the consensual character of Chilean
transition, but what was foremost was the lack of debate about the great issues
that dene society and the foundations of democracy, disguised only by the
illusion of consensus. In reality, there was consensus only about getting rid of
the dictatorship. What followed were circumstantial or punctual agreements
between government and opposition. But no one anywhere would have dared
to call these agreements “consensual democracy.” The inexistence of real
consensus about the basic elements of reconstruction of the post-dictatorship
society is explained in part by the veto of the minority and the actual powers
(entrepreneurial organizations, economic groups that controlled the means of
communication, and even the Armed Forces); and in part by the Judiciary, the
voting minority of the right with veto capacity owing to the electoral system;
and because there had been no debate about crucial issues or because debate
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had been stied by the requirements of economic and political stability. Lastly,
because a trauma of dissent, conict, and confrontation, which are demonized
or seen as pathological. Basic societal consensus can be achieved only through
debate and conict.
The main problems about some of which there was limited debate
that failed to lead to any consensus were the question of justice regarding
the violation of human rights under the dictatorship; regional reform; the
Mapuche problem; the issue of equality and redistribution; issues related to
living together and reproduction, vetoed by the Church; the constitutional
model; the reformulation of the development model vis-à-vis globalization,
etc. It should be noted, though, that there was a degree of consensus about
the primacy of education, which led to the educational reform under the Frei
government but which showed its limitations in the 2006 student mobilization
that in turn led to a new debate and new consensus mechanisms, equally partial
and precarious; the ght against hunger, which required the setting-up of the
National Commission against Poverty, although redistribution was omitted
from the debate; the modernization of the Judiciary and reform of the Penal
Code, accompanied by the establishment of the Public Attorney’s Ofce and
oral proceedings. All of these achievements meant undeniable progress.
There is no denying either that Chile’s democratization policy was
successful to the extent that it put an end to dictatorship, prevented society’s
disintegration by controlling macroeconomic variables, and made possible a
government based on a democratic majority coalition. But one cannot speak
of an “exemplary” or “successful” transition if one considers the result of this
process and the quality of the democratic regime. The latter is characterized
by precarious institutions, the existence of factual powers, and the weakness
of representation owing to the tensions between political actors and society,
as well as by the fragility of its cultural base stemming from the absence of
basic consensus and from the lack of societal cohesion, unity, and direction
that resulted from the State’s weakness.
The inexistence of a world economic crisis in the beginning, which in
many other transition cases altered the correlation of pro-democracy forces
and led to destabilization or de-legitimization caused by factual powers or by
the alienation of the middle class and of popular segments, did not force the
rst democratic governments to adopt unpopular or regressive policies to
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solve an inherited circumstantial crisis. They had not inherited a crisis but a
model, which is a much more serious structural problem, something that had
to be replaced, not corrected.
Regrettably, the opportunity to concentrate on political aspects to
complete the transition, overcoming the authoritarian enclaves, was not
exploited, and the absolute priority ascribed to economic stability discouraged
the forming and the activity of social movements and actors, to the detriment
of their relation with politics and the parties.
True, Chile has stood out in the last decade among its Latin American
peers as a remarkable emerging economy and because its indicators related to
income, growth, and poverty reduction, reected in the human development
indicators, are the region’s best. However, problems persist in relation to the
socioeconomic model to be mentioned further on, susceptible of not only
undermining growth’s dynamism but also of jeopardizing the progress achieved
and the country’s very existence as a community on the social plane. This has
been at the root of discussions about correcting or changing the economic
model, carried out during the 2005 presidential campaign, particularly by the
left outside the Concertación.
The rst of these problems had to do with economic development’s
pace, kind, and targets. One target was making Chile into a developed country
by 2010, something impossible in terms of both per capita income and a
“developed” distribution of the fruits of growth. Here lies the core problem.
The world’s growth model based on the major role played by the transnational
market forces and by what is called the new economy has ceased to be a
development model. Growth and development are no longer inseparable and
the employment structure problem is the best illustration of this, requiring
direct interventions by the State and society in the economy. Despite the
celebration of extremely important international economic agreements and
socioeconomic reforms such as the Auge en Salud Plan [Maximum Health
Plan] or Chile Solidario [Chile in Solidarity] pertaining to combating poverty,
these are clearly insufcient. The debate about the very nature of the growth
model based on exports without high aggregated value and accompanied
by a seemingly structural unemployment rate has been only attempted and
soon abandoned, as apparently the only voices that inuence and even set
the agenda of public agencies are the voices of the major entrepreneurial
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groups and organizations, their class associations and and the media at their
disposal.
This is also the second problem that has not been solved by the Chilean
socioeconomic model – the problem of who are the development’s actors. On
the one hand, the country has lived in a cyclic climate of relations between
the government and the entrepreneurial sectors, which move from verbal
guerrilla and recrimination on the part of the government and threats from
the entrepreneurial sector to declarations of absolute mutual condence and
support, especially when the economic policy yields positive results. The truth is
that despite signicant exceptions the degree of ideologizing and the generalized,
unbounded greed for prot at all costs prevent Chile from relying on one of the
requisite engines of economic development under the current economic model
prevailing in the world, namely, a responsible entrepreneurial class committed
not to prots at all costs or to its extra-economic whims but to the country.
To this end, this class must think in terms of the country and of its own role
as a development agent in constant cooperation and association with the State.
On the other hand, a critical or timid attitude persists in relation to a
more active role of State in its leading and mobilizing capacity. True, in a highly
globalized economy as Chile’s, in comparison, for example, with the major
Mercosur partners, the formulation of active economic policies is very difcult.
But it is also true that, excepting for public works, the State is still lagging
and constrained by the self-limitations imposed by the neoliberal ideology, as
regards its role in redistributing resources and wealth and ensuring equality,
as well as in promoting essential areas, such as research or the environment.
Although it has made signicant progress in data processing and in attention
to users, the State’s modernization has not escaped from measuring itself by
the indicators of the private sector or the market. Restoring the State’s role
as leader, regulator, and protector remains a priority task, without which the
problem of inequality cannot be solved. It should be recalled that the State’s
share in the national output is very small and that there is a long way to go
from a liberal to a social democratic model without affecting growth.
The third problem has to do with the consequences of the economic
situation in the social area. They include a relative stagnation, especially as
regards employment, socioeconomic inequalities, and the most affected social
groups’ capacity to act.
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In respect of employment, although there has been undeniable progress,
including the introduction of unemployment insurance and the creation of new
work posts by the State, and though unemployment has declined in the past
year, the fundamental issue remains: growth has ceased to mean development,
social integration, and, in ILO’s expression, “decent work for all.” This calls
for modications in the growth model or for complementary initiatives that
may contradict some premises or presuppositions, so as to restore the link
between growth and development.
As to socioeconomic inequalities, it should be recalled that this is Chilean
society’s Achilles’ heel. Poverty, at least in statistical terms, has signicantly
declined owing in large measure to growth and to the State’s effective social
policies. In the 2005-2006 presidential campaign, though, the inequality issue
surfaced again as Chilean society’s major problem, which was addressed by
all candidates, including those on the right. Yet, the main element to ensure
greater equality, namely, redistribution, for which a tax reform is absolutely
necessary, has been absent from the programs of both the opposition right
and the Concertación, as well from government initiatives. The only measure
adopted in this regard was a highly regressive VAT increase.
Thus, just as the previous development model based on industrialization
and the State had some intrinsic aws that required outside correction, the
current model also has perversities that are part of its nature. Indeed, the
prevailing economic model does not favor, as industrialization and the State
did in other decades, the laying of material and institutional foundations on
which social actors could properly organize the new demands and express
themselves or negotiate with the political sector, i.e., with the parties. As
collective action is dismantled, the action of the corporative sector, which
is linked to economic power, is favored, giving rise to sporadic defensive
actions. To this should be added the absence of adequate institutionality as
regards both norms and regulations and the State’s organization for addressing
conicts and demands, as demonstrated by the scandals involving perquisites
and fraud in the public sector in 2002 and 2003, which led to signicant partial
reforms that nevertheless left untouched the State’s structure and its relations
with society.
The imbalance between social organizations, particularly those of
the more vulnerable segments, and the more powerful actors that act on
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the economy, seems to have aggravated instead of declining. This forces the
weakened social actors to set as their sole objective the solution of their particular
problems, to the detriment of their concern over major national issues and
heightens their purely corporative demands. This is reinforced by the fact that
they cannot count, as in another time, on a party system under which the social
sectors felt that they were heard and taken in by the political class, with the
exception of the right, which represents solely the interests of the entrepreneurs
and the military, or of the Communist Party, without much political inuence
to embody dissatisfaction with the Concertación governments.
An area in which the Chilean economic model seems to have been
successful is its integration into the globalization process. It is evident that
globalization had a stronger impact on Chile’s economy than on other
economies of the continent. One of the reasons was its traditional dependence
on external factors in every respect, coupled with the fact that it is more
open by nature, partly because its opening and adjustments took place before
globalization established itself as the central phenomenon of the twentieth
century. Over fty percent of Chile’s GDP is linked to the external sector.
As regards poverty, the Concertación governments’ policy has included
among other measures a steady increase of social spending, the establishment
of special agencies, such as Social Investment and Solidarity Fund-Fosis, the
actors’ own projects, and the National Commission for the Eradication of
Poverty, the Chile Solidario and the Puente Programs, all of which call for
signicant direct assistance to all indigent families. There have been also recent
social policies that go beyond the aspects mentioned to include respect for
and guarantee of legally protected rights under the aegis of a protector state,
as exemplied by the Maximum Health Plan, the expansion of pre-school
programs, and the contemplated social security reform.
It is worth pointing out that the last National Socioeconomic Survey-
Casen data, released in June 2007, indicate improvement of the poverty and
indigence situation as a result of the aforementioned programs.
Two observations are in order in this respect, though. First, there is a
debate about the method of calculating poverty: if the value of the basic basket
is recalculated on the basis of current prices, poverty gures will be twice
those obtained by the Casen Survey; this does not negate the positive trend
but makes statistics relative. On the other hand, it is obvious that whatever
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the calculation method, what varies is a statistical line, not a sociological line,
i.e., it is possible for people to fall below the line at a given moment or not
to have the structural conditions to sustain a situation of no poverty – this
means that people can continue to be sociologically poor, even though they
may be above the poverty line at a given moment.
As to income distribution, some improvement has been achieved only
recently, although this is more apparent than real, if one calculates the difference
in terms of deciles or percentiles. It should be noted also that autonomous
income distribution improves considerably in favor of the poorest when the
State intervenes with aide and subsidies.
Summary and conclusions
Chile’s classic sociopolitical matrix favored the coordination and
integration of social forces and political parties. It was the parties, of both the
center and the left, acting together in the thirties and separately in the sixties,
which played a “redistributive coalition” role, as was manifest in politics’ central
role in the denition and in the application of the development model.
The military regime and the socioeconomic changes impelled by it,
which basically meant moving toward a new development model, had a more
profound meaning than just the dismantling of the society that predominated
until the seventies. The attempt was made to replace that society with another.
In essence, it was a question of a neoliberal project that, rather than making the
economy autonomous in relation to politics, implied the utopian subordination
of the latter to the former. The market mechanisms were supposed to be the
“new backbone” consisting of social actors, which had replaced both the
system of party representation and the State’s key referential role.
From the standpoint of the dismantling of the previous matrix, the
military regime was successful. From the standpoint of its replacement with
the neoliberal matrix, it failed. Neither did the old socioeconomic model remain
nor was the neoliberal one consistently applied in respect of growth strategy, at
least not since a democratic regime was established, poor as its quality may have
been. Despite the disintegration of the previous model, some of its elements
persist in a new coordination scheme that has some features of the neoliberal
project as well as some new features borrowed from neither model.
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Thus, post-transition Chile inverts Anibal Pinto’s thesis applicable to the
classical matrix, which expressed a basic contradiction between an atrophied
economy and a developed cultural, institutional, and political system. This
weakness of the economic system favored the severing of the economy’s ties
to politics. Today, the problem is just the opposite: an economy that has taken
off, at least until the mid-nineties, and recovered its pace by 2005, dissociated
from the country and from society. In contrast to this, an atrophied political,
institutional, and cultural system. Sufce it to recall the authoritarian enclaves
(Constitution and unconstitutionality, a climate of impunity for the violation
of human rights under the dictatorship, and partial solution to matters of
justice, the existence of nondemocratic actors whose expression is ‘political
Pinochet-ism’); the debility of decentralization and regionalization; the crisis of
the educational system and the collapse of higher education; the social actors’
acute weakness, especially for negotiating with the economic power; the only
recently overcome lag of institutionality in regard to family organization; and
the difculties in redening a new role for the State as leader and protector.
Without downplaying the progress achieved by the democratic regime in
several of these areas, progress has always been incomplete because it remains
circumscribed by the inherited institutional framework. In addition, at moments
of crisis, such as in 1998 and 1999, the socioeconomic model has prevented
reliance on institutional resources capable of addressing it.
Thus, it seems that we are faced with a sociopolitical matrix or a society
of a hybrid type in relation to the prevailing model in most of the twentieth
century. This matrix displays both continuation and rupture features, in addition
to independent, emerging elements.
The rupture consists in the fact that the economy has become independent
from politics and apparently follows its own development dynamics, while the
State sets boundaries but not direction. This does not mean that the economy
obeys the dynamics of national development, but only that this autonomy vis-
à-vis politics or the State coincides with a new subordination or dependence,
now to the markets’ transnational forces. The key point is perhaps the fact
that the socioeconomic growth model has ceased to be a development model,
or in other words, that the economy alone cannot ensure social integration,
as can be seen in the case of employment.
The social conicts seem to reect the contradiction between a country
that solves relatively well its short-term economic problems but has left pending
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or unresolved its institutional, political, and cultural problems, as well as those
related to a development model that is socially sustainable in the long term.
Thus, the central problem is social inequality. Faced with the development
formulas followed by the military dictatorship and with the neoliberal model,
the democratic governments dened their strategy as development with
equity. Both in the economic eld until the 1997-1998 crisis and in respect of
poverty elimination and the State’s social spending, there has been signicant
progress. Nevertheless, socioeconomic inequalities persist and even increase
in some cases.
Obviously, the Chilean problem is no longer “transition to democracy and
to a market economy,” as pointed out in the early nineties. As the democracy
achieved is incomplete and of precarious quality but is democracy nevertheless,
we are no longer in a transition situation but faced with the need for a profound
political reform. On the other hand, the neoliberal market economy model,
or “privatizatizing model,” has exhausted itself as the basis for integrated,
sustainable national development, here and the world over. The world moves
with difculty today between globalizing trends and the need to restore the
guiding role of the national States’ and their alliances.
Without going back to the former subordination of the economy
to politics, which would be practically impossilbe anyway, we should seek
alernatives to current formulas, so as to restore the State’s guiding role in
respect of development, both internally and in supranational blocs, and
to establish normative, regulatory frameworks for the market forces and
ensure the citizens’ contol over these frameworks and forces. In other words,
recognizing that politics and the economy are two different things independent
from each other, we must also introduce democracy’s ethic principles into the
functioning of the markets.
What will be at stake in the next few years is the country’s existence as
a real community, in which plurality and diversity have a place. The counttry’s
project, its forms of community life, its identities, and its autonomous
integration into the globalized world are the substance of politics today.
Thus, the country’s post-transition problems have to do with the
organization of the polis, the conduction capacity, the ability to ensure that
cultural and social issues are expressed in politics and that the economy is
linked to society’s overall development. This means that there is no politics
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and legitimacy crisis as such, not even among the young people. But there is a
crisis as to the political capacity and activity to address political issues instead
of becoming an end in itself. In the long run, there is a risk that this might
lead to a real crisis.
Under the present circumstances, the freezing-up of the political and
institutional dimension vis-à-vis an economic base that is dependent on the
transnational economy might be explained by two factors: the existence of
authoritarian institutional enclaves defended by the rightist opposition, heir
to the military regime; and the lack of alternative political and cultural models
and projects, owing among other things to the Concentración governments’
very success. In this void, the transnational economy‘s “natural forces”
predominate.
It might be too soon for settling the question as to whether we are
faced with an emerging matrix of relations between the State and society
or whether we are living a transition to another as yet unknown model. The
open questions about the world economy and the future of globalization and
economic integration further reinforce this incognita.
Be as it may, the future of Chilean society depends on its capacity to build
a sociopolitical system that recovers the idea of a national community that is
not reduced to a market or to a series of instruments and techniques. What
the country needs is no longer an “economic miracle” but a great political,
institutional, and cultural jump forward.
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Translation: João Coelho
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Colombia: foreign
policy, economy and
the conict
Marta Lucía Ramírez
*
1. The Colombian conict and its regional and
international repercussions
Antecedents
T
he current Colombian conict should not be looked at from today’s
perspective. It results from a prolonged process of territorial fragmentation,
political exclusion, poverty, and a traditional political polarization. It should
thus be seen as being of medium duration. The illegal armed groups active
in the country today use historical factors to legitimize their actions, combat
the State, and attack the country’s political and economic elites. Some people
even claim that Colombia’s armed conict is the outcome of Colombians’
historical inclination toward belligerence, thereby ignoring the achievements
and signicant conquests of national institutionality, as illustrated by
the fact that Colombian democracy is the oldest on the South American
* Senator of the Republic of Colombia
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continent and by the nearly total absence of authoritarian dictatorships in
the twentieth century.
Beginning in the 1830s, after Gran Colombia’s dissolution, the new
nation became immersed in a series of political and ideological disputes and
struggles for power that pitched not only Liberals against Conservatives by
also entire regions against each other. Between 1899 and 1903, the so-called
Thousand Days War occurred.
1
This last war ended with the Liberals’ defeat and
introduced a long period of Conservative governments. But the real outcome
of that war and of all internal wars was the fragmentation of the territory, the
reigning in of the country’s economic development, and the precariousness
of a central State. The most visible consequence of this situation was the loss
of the Panama isthmus, heretofore a Colombian territory.
In April 1948, Presidential candidate Jorge Eliecer Gaitán, a charismatic
popular leader was assassinated. Conspiracy theories, mutual accusations, and
despair unleashed the fury of the popular classes nationwide and polarized the
country still further. This event introduced the blood-drenched period known
as “The Violence,” seen by many as the birth of Colombia’s current conict.
During those years, the two political parties – the Conservative and the Liberal
– once again took up arms to solve their differences. It should be made clear
that this time it is not the case of a civil war similar to the nineteenth century
wars. In today’s case, the initiatives came also from Colombian society and
the peasantry. These are violent ways of solving economic, land tenure, and
political exclusion problems, among others, framed in ideological differences.
This is allegedly an undeclared war involving serious political persecution on
the part of both the conservative government and the liberal’s self-defense.
The gure of a bandolero emerges – a staunch liberal peasant eeing political
persecution, who seeks inhospitable lands in the country’s southwest, where
he establishes his own communities apart from the central government and
becomes the germ of the future guerrilla.
“The Violence” period is put to an end by the brief dictatorship of
General Rojas Pinilla (1953-1957), the only dictator in Colombia’s recent history.
In 1957, the National Front came into being as a reaction to the dictatorship.
To end the political disputes in the country, liberal and conservative leaders
1 Acosta, Gutiérrez; Leonardo, Coronel (R). Conicto Colombiano Historia y Contexto. Imprenta de las
Fuerzas Militares del Ejército de Colombia.
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agreed to the alternation of the parties in power for four Presidential terms.
Although it managed to reduce the two-party polarization and the violence
indicators, this agreement left out of the political arena many sectors that did
not belong to the traditional parties’ elites. This political exclusion was seen as
another instance of the Colombian oligarchy’s hold on power and led many
of these sectors to assume more radical positions. This marked the beginning
of the new guises of violence associated with the communism-oriented
discourses, whose objective was also to carry out revolutionary changes in
the State, incubating guerrillas such as the Colombian Revolutionary Armed
Forces-FARC and the National Liberation Army-ELN, among others.
Other factors contributed to the emergence of these criminal
organizations in the rst half of the fties and in the sixties, including the
dynamics of the Cold War; the Cuban revolution; Colombia’s internal and
institutional crisis; the country’s agrarian problems; youth’s radicalization,
particularly the students’; the remains of the liberal peasant self-defenses of
the time of “The Violence;” and the tendency to political radicalism in some
segments of the workers’ leadership, all of which led to the consolidation of
the guerrillas as we know them today.
Next, we shall proceed to review the emergence and the current state of
the two most important guerrilla groups ever in Colombia, namely, the FARC
and the ELN. We will ignore other guerrillas that emerged in the seventies,
such as the EPL and the M-19, as they no longer exist and thus have no part
in the current Colombian conict.
The FARC-EP guerrilla
The FARC guerrilla formally emerged in 1964 through the merge of
various bandolero groups that decided to forgo the general amnesty offered
by President Alberto Lleras Camargo to all outlaw groups that had moved to
the Colombian eastern plains. There they managed to establish a signicant
social basis that often lled the gap left by the State. They dened themselves
as guerrilla groups of a Marxist-Leninist cast and, encouraged by Fidel Castro’s
victory in Cuba,
2
began striving for assuming power by militarily overthrowing
the government.
2 Pizarro Leon-Gomez, Eduardo. “Marquetalia: el mito fundacional de las FARC.” Unimedios, publication of
Colombia’s University, No. 57, May, 9, 2004.
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The sixties and seventies went by without major changes in the FARCs.
They were a group of armed peasants that appropriated themselves of remote
lands that were cut off from national events. It was only in 1982, during their
Seventh National Conference that the FARCs adopted a strategy that combined
“all forms of ghting,” that is, ghting on the political, economic, social, and
military fronts. The organization adopted the acronym “EP,” for Ejército del
Pueblo [People’s Army], whose strategy moves from defense to all-out offensive
to assume political power, and thus became a constant threat to the Colombian
State and to all legitimately elected governments until today.
3
The ELN guerrilla
4
The National Liberation Army-ELN made its appearance on the public
stage in the sixties by attempting to overthrow the government through a
Marxist-style revolution and a socialist type of system meant to eradicate
capitalism from the Colombian State. From the beginning, the major difference
between the ELN and the FARCs was that the former was started by university
students inspired by the Cuban Revolution and under strong inuence of
the political theories of Ernesto “Che” Guevara as well as of the Liberation
Theology.
5
The FARCs, though, are a peasant movement born of the need
for self-defense rather than of a real political purpose. Today, the FARCs
are engaged in a peace process with the current government. Although the
organization persists, it is fragmented and clearly debilitated by harsh military
coups dealt on them by the Colombian Public Forces.
Expansion and consolidation of the guerrillas and emergence
of paramilitary groups
During President Belisario Betancur’s Administration (1982-1986),
another peace process was started, which created conditions for a dialogue
with the FARCs and other guerrilla groups. While several of these groups
accepted the amnesty proffered, the FARCs and other guerrilla groups chose
to expand and to assume control of some areas where the State’s presence was
3 Ibid.
4 www.Semana.com/wf_ImprimirArticulo.aspx?Idart=100803&ver=COIXOxSMba April 14, 2008.
5 Rangel Suarez, Alfredo. El conicto armado em Colombia y la experiencia internacional. Intermedio Editores, 2001,
Cap. 6, Guerra Insurgente, p. 166.
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scarcer; at the same time, the inuence of drug-trafcking grew, particularly
that of the Medellín cartel.
During this period, the rst paramilitary groups began to organize
themselves in those areas where the guerrilla was harassing the civilian
population, especially the big cattle-raisers and merchants through kidnapping,
extortion, and the stealing of goods and cattle. In the beginning, the paramilitary
groups consisted of civilians and were formed allegedly to provide security
for populations neglected by the State. Despite their rapid growth, they were
treated as an isolated phenomenon and were not seen as a real threat to the
State’s stability.
These groups’ expansion was due to various factors, including the support
of civil society and of entrepreneurs, cattle-raisers, and merchants in the
regions where they pushed back the guerrilla. The support of some members
of the Public Forces was also important. The self-defense groups began to
perform the “dirty” tasks that the forces of the State could not. They often
acted independently, with the complacence of the Military Forces. It should be
noted, however, that neither the creation of or the support to these groups were
part of a State policy, as was the case in other countries, such as in Guatemala,
where such groups were regulated during Ríos Montt’s military government.
In 1991, a new political Constitution was drafted. Its main ideal was to
bring together all those sectors that felt excluded from Colombia’s political
arena, through a democratic opening that created room for new sectors and
new political parties.
6
As Gaviria’s government’s priority was ghting the
drug cartels, and particularly the Medellín Cartel headed by Pablo Escobar,
the paramilitary organizations, which were already openly allying themselves
with other drug lords, were neglected. The most famous case was that of “Los
Pepes,” an alleged alliance of the Castaño brothers, self-defense leaders, with
the Cali cartel to dislodge Pablo Escobar, Colombia’s major drug trafcking
leader. The “Paras,” as the paramilitary groups were called, further intensied
the complexity of the internal conict, as another source of violence. They
disputed with other guerrilla groups and other drug cartels over the drug trade.
Cold-bloodedly, they took control of entire regions that functioned as strategic
corridors or where large-scale illicit crops were cultivated. As they advanced,
6 Gutiérez Sanín, Francisco. Professor, Polítical and International Relations Studies Institute, University of
Colombia, Revista Análisis Político, No. 57, Bogotá, May-August 2006, pp. 106-125.
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these organizations weaved a series of maa-like networks around the mid-
nineties, intertwined with drug trafcking, allegedly to obtain resources for their
campaign against subversion. Ultimately, drug trafcking proceeds were used
to nance their local power and the incommensurate wealth of the main maa
leaders. The establishment of the United Self-defenses of Colombia-AUC in
1997 and the concealing of their drug-trafcking nature from public opinion,
showed them at that time and until the beginning of the current decade as an
organization with some political motivation, opposed to the guerrillas, which
justied their emergence and persistence as an anti-subversion group.
Meanwhile, the FARCs, which during the Public Force’s drive against the
main leaders of the Medellín cartel had moved from protecting the illicit crops
and drug-processing laboratories to assuming control of all drug-trafcking
phases, increased their numbers from 900 hundred men and nine combat fronts
in the eighties to nearly 15,000 men and 60 combat fronts by the late nineties.
At the same time, the ELN grew from 70 combatants and three action fronts
to 3,500 men and 30 fronts. By the mid-eighties, these armed groups occupied
175 of Colombia’s approximately 1,092 municipalities.
President Ernesto Samper’s Administration
President Ernesto Samper Pizano’s term (1994-1998) was seriously
affected by the scandals connected with the inltration of drug-trafcking
money into his political Presidential campaign. This led the guerrilla groups
to ght against the State, on grounds that the State was a drug-trafcker and
illegitimate. The grave political crisis, coupled with the lack of legitimacy, led
the Armed Forces and State action into paralysis.
President Andrés Pastrana’s Administration
President Andrés Pastrana (1996-2002) agreed to withdraw from 42,000
sq km of the national territory as a condition of peace negotiations with the
FARCs. This strategy, as is well-known, resulted in a resounding failure owing to
the guerrilla group’s lack of political will and to the mutual mistrust between the
parties. During those years, the FARCs consolidated their hold on the country’s
Southwest and increased their drug-trafcking activity and the number of
kidnappings. It was during this peace process that kidnapping of Presidential
candidate Ingrid Betancourt and of most political hostages took place.
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President Álvaro Uribe Vélez’s Administration
The failed peace dialogue and the Colombian population’s perception
of the lack of political will on the part of some guerrilla groups catapulted
Álvaro Uribe and his strong-hand policy toward these groups to the Presidency
of the Republic (2002-2010). One of his agship policies was the Colombian
Plan, which forms part of his Democratic Security policy, to be explained in
more detail further on.
The conict after 11/9
In Colombia’s internal context, the communism-oriented armed groups
on the margin of the law should have lost their justication with the collapse
of the Socialist world, coupled with the State’s reorganization that started
after the promulgation of the 1991 Constitution. And yet, the new forms
of nancing, such as extortions, drug trafcking, kidnappings, and the illicit
trafc in weapons imparted further dynamism to the Colombian conict from
a nancial and military viewpoint, thereby causing its prolongation.
After the terrorist attacks of September 2001 in the United States and
the 11-M bombings in Spain, a new world order came into being, focused on
combating terrorism in all its guises. Because they are drug-trafcking groups
and employ terrorist methods against the civilian population, as well as being
considered a threat to U.S. national security, the guerrillas and paramilitary
are included on the European Union’s and the United States’s list of terrorist
organizations.
Colombia’s foreign policy and the new challenges
Colombian diplomacy has adapted to the new requirements of a globalized,
interdependent world. It has instilled dynamism into bilateral relations with
nearly all the countries of the American continent. It has conceived strategies
for integration with the entire Latin American region, especially with the Andean
countries. The concept of integrated development of the region, particularly
of the Amazon regions, has been further developed. To this end, neighbors’
commissions have been established with Brazil, Nicaragua, Panama, Peru, and
Venezuela. The country has paid special attention to the cultural and economic
potential of Caribbean and Central American countries, promoting cooperation
with governments that until recently had not gured in the national interest.
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Moreover, the Colombian Foreign Ministry has become the major player
in the ght against drugs, drug trafcking, and the armed groups on the margin
of the law. In association with the Presidency of the Republic, it has waged
campaigns to disseminate the “Shared Responsibility” concept. The purpose
of these campaigns is to make drug users aware of the devastating effects of
“each line of cocaine inhaled, which is not only doing harm to yourself but
also killing a Colombian.” The direct consequences of drug use in Europe
and in the United States are an increase in organized crime, assassinations,
kidnappings, and the destruction of the environment owing to the chemicals
and herbicides used on the illicit crops.
The transnationalization of the Colombian armed conict can no longer
be ignored, particularly after the military operation that put an end to the life
of aka “Raúl Reyes,” the FARCs’ second in command, on Ecuadorian territory.
The computers seized from his camp reveal these groups’ persistent inltration
and different activities in the Andean countries. Even more disturbing is the
proven tolerance of some of our neighbors toward these groups, as shown
by these and many other evidences gathered by the Colombian state and by
international agencies. Countries that were involved in last March’s crisis and
that criticized the Colombian government and military forces for Raúl Reyes’
death had been systematically warned of the situation by the Colombian
intelligence services.
7
The diplomatic crusade led by the Colombian Foreign Ministry has
also yielded positive results. Today we have the rm support of governments
determined to combat terrorism on their own territories. Such is the case of
Brazil, with which we maintain close cooperation in matters related to drug
trafcking and money laundering. Colombian foreign policy is also committed
to ghting against the new global threats that affect not only our country
by the entire hemisphere – drug trafcking, arms trafc, organized crime,
environmental deterioration, natural disasters, poverty, and emigration, among
others.
8
Protection of human rights and international humanitarian law is also
on Colombia’s internal agenda. Under the Uribe Administration, Colombia’s
7 The countries were warned – Bolivia, twice; Ecuador, 16 times; Venezuela, 10; Peru, 4; Argentina, 4; Brazil,
7 – about terrorist groups’ presence and contacts, the location of their camps, and even about their illicit
activities in Ecuador, such as the radio stations on the latter’s territory.
8 Rojas Aravena, Francisco. Seguridad en las Américas, los desafíos pos-conferencia: operacionalizar los consensos y articular
los conceptos. p. 7.
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foreign policy has conceived programs to improve the living conditions of our
fellow countrymen in different countries and to help with their inclusion into
local societies. Agreements have been celebrated on labor, migration, education,
social security and reduced cost of remittances from countries that receive
Colombian immigrants, and these Colombians have been encouraged to save
and buy their own homes.
9
The Colombian government has thus converted a
“foreign policy for the State into a foreign policy for society.”
10
2. Defense and Democratic Security Policy
When Álvaro Uribe Vélez took ofce as President of the Republic in
2002, the FARCs were revitalized and rmly entrenched in major areas of the
country after its impressive strengthening during the peace conversations with
the previous Andrés Pastrana government. The likelihood of a negotiated way
out of the conict was minimal.
Uribe Vélez led the formulation of a defense and democratic security
policy grounded on the recovery of the national territory by the public forces
and state institutions, and on the recognition of drug trafcking as a threat to
the civilian population’s integrity and of terrorism as its main weapon.
The total success of this policy was due not only to the focus on the war’s
military component and the strengthening of the armed forces but also on
the recognition that without coordinated action by all the state bodies and the
civilian population it would not be possible to maintain the territorial control
achieved by the military forces. Uribe Vélez determined that, simultaneously
with the military recovery of the territory, the state apparatus should step
in bringing education and economic and social development to the regions,
so as to strengthen the civilian population and thus win its cooperation in
preventing the drug-trafcking terrorist groups to regain control of the area.
This would also prove the most effective tool to prevent the recruiting of
more civilians.
The Armed Forces adopted a policy aimed at fostering efciency,
transparence, and accountability to improve their nances. Their defense of
9 Conceptos Rectores de la Política Exterior Colombiana 2002-2006.
10 Ardila, Marta; Cardona, Diego; Tickner, Arlene B. Prioridades y desafíos de la política exterior colombiana. Bogotá.
Fescol-Hans Seidel Stiftung. 2002.
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human rights has been extremely important and has made the military one of
the country’s most legitimate institutions. These guarantees have elicited the
civilian population’s rm support of the Armed Forces and of the government
as well.
The Armed Forces’ nances are managed as follows
• “Sixty-two percent of resources are allocated to actions aimed at
protecting the population through the enhancement of the military’s
capabilities, so as to ensure its presence throughout the national
territory and to permit the economic and social development of
regions traditionally affected by violence;
• Sixteen percent have been allocated to restoring governability
conditions in areas previously under the inuence of groups on the
margin of the law and narcoterrorist organizations;
• Fourteen percent have made possible the maintenance of a suasion
capacity in the face of external threats;
• Six percent have been allocated to combating illicit drugs production,
and
• Two percent have been allocated to the establishment and maintenance
of management and accountability systems through the strengthening
of administrative systems.”
11
Democratic Security policy results
As the democratic security policy rests on the implementation of the
Comprehensive Action, to be carried out through the Political War understood
in its full sense, is aimed at defeating the agents of violence in Colombia,
including transnational threats such as terrorism, drug trafcking, and organized
crime, its results are the same as those of the Comprehensive Action.
It should be recalled that when President Álvaro Uribe Vélez took ofce
in 2002, over half of the national territory had no civilian authorities, as mayors,
governors, deputies, and council members had been forced to resign because of
death threats against them and their families and to seek refuge in the country’s
major cities. One of the rst achievements of the President and his working
11 Ministerio de Defensa Nacional. Memorias al Congreso 2005-2006: Camilo Ospina Bernal. Bogotá, July 2006.
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team was to return these ofcials to their respective regions, which had been
left at the mercy of narcoterrorist groups and criminals without any State
presence; as a result, the population had no alternative other than submitting
itself to the command of the agents of violence. Today, all municipality seats
can count on the presence of at least the National Police.
In his 2005-2006 Report to Congress, Camilo Ospina Bernal, the
then-Minister of National Defense, summed up the excellent results of the
democratic security policy aimed at “improving the country’s economic and
social conditions,” as it had led to the “consolidation of authority, based on
sound legitimacy, legality, and governability principles, which has permitted the
recovery of control over most of the national territory, particularly in those
areas where armed groups on the margin of the law were asserting their power
and in zones of strategic importance to the country.”
12
In respect of the specic objectives of the Political War and Comprehensive
Action, the democratic security policy achieved the following results between
2002 and 2006: 9,897 individual and 30,635 group demobilizations of members
of illegal armed groups; extensive protection of the civilian population owing
to the reduction in the number of homicides (40.3 percent), massacres
(63 percent), internal displacement (24 percent), and kidnappings (72
percent). The civilian Cooperating Network has proven a vitally important
instrument for these achievements. A successful, major advance has been
achieved against drug trafcking, the illegal groups’ ultimate source of funds
and the fuel of violence in the country, owing to the implementation of
mechanisms such as Forest Ranger Families and Action Families, also part
the Comprehensive Action.
As to the social and economic component, for the rst time since 1974-
1978 the average quarterly growth reached 4.6 percent; investment rose from
8.61 percent to 15.23 percent of GDP; unemployment declined sharply in the
last four years; school enrollment rose by 18.3 percent, equivalent to 1.4 million
basic and secondary education students; eight million new beneciaries were
covered by subsidized health care; and poverty dropped from 57 percent to
49.2 percent.
12 Ministerio de Defensa Nacional. Memorias al Congreso 2005-2006: Camilo Ospina Bernal. Bogotá, July 2006.
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No less important, the international community recognized the armed
groups for what they really are: merely terrorist organizations devoid of
political ideals to benet the civilian population.
13
In 2005, though, the Foreign Policy and the Fund for Peace
nongovernmental organizations ranked Colombia as the 14
th
state on the
Failed States index. The items that earned the highest (worst) rating were
demographic pressures, human exodus, unequal development, and the State’s
loss of legitimacy.
In just one year, i.e., in 2006, Colombia rose to the 27
th
place, owing to
signicant improvement in its indicators. It should be noted that the State’s
loss of legitimacy indicator dropped from 9.8 to 8.7 on a scale of 1 to 10, 10
being the worst, while the overall indicator fell from 95 to 91.8 points.
14
Considering that this index was developed precisely to measure the
probability of a State’s failure, whereby its territory becomes a source of insecurity
for itself and for the international community, the improved classication shows
how the State’s action n these strategic areas has managed to reduce risks, thereby
ensuring the preservation and guarantee of national security.
The last public opinion survey undertaken by Invamer-Gallup in
Colombia, released in March 2007, which measured, in Mao Tse-tung words,
the temperature of the water in which the sh swim, showed that 72 percent of
Colombians approve President Álvaro Uribe Vélez’s administration, 76 percent
approve the military, and 72 percent approve the UN and the Colombia Plan,
while The FARCs, the ELN, and the Self-defense Forces are disapproved by
92 percent, 91 percent, and 86 percent, respectively.
15
The triumph of institutionality is crushing as is notorious the failure
of illegality in a political war whose main objective is to win over the
civilian population, because, as President Álvaro Uribe said on June 2, 2006,
13 National Defense Minister Juan Manuel Santos. “Conquista de la paz; nueva fase de consolidación de la
Política de Seguridad Democrática.” Interview by Tarazona Estrada, Jacqueline. Bogotá. Revista Ejército, ed. 135,
March 2007.
14 Fund for Peace and Foreign Policy. 2005 and 2006 Reports. http://www.redri.org/noticias/estados_
falidos_2006_fundforpeace.htm.
15 Invamer-Gallup. March 2007. Survey among men and women over 18 in the cities of Bogotá, Medellín, Cali,
and Barranquilla. Method used was random telephone calls. Has a 3-percent margin of error and 95 percent
reliability.
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“In the realm of opinion, the most important element for guaranteeing
the citizenship’s security and the defeat terrorism is the citizens’ trust in
the Public Forces.”
Democratic security’s consolidation policy
The democratic security’s consolidation policy was established for the
defense sector for 2006-2010 under the national development plan known as
“A community-based State: Development for all.” Changes were determined
by the new strategic conditions in 2006, created by the successes of the defense
and democratic security policy between 2002 and 2006. Some of these changes
included the demobilization of the United Self-Defenses of Colombia under
the Justice and Peace Law, and the FARCs’ shifting from a war of movements
to a war of positions.
The policy’s main objective also changed: instead of territorial control,
which had to a large extent been already achieved, it became the social recovery
of the territory through the State’s integrated action. This gave the policy a
new name, as now control over the territory had to be consolidated.
To this end, the country was divided into three zones according to the
degree of State control and the persisting threats: areas where the illegal armed
groups were active, areas where the process of institutional recovery was under
way, and already stabilized areas.
In the rst zone, colored red on the map, the objective is to break up and
expel the illegal armed groups and regain territorial control through intensive
military action. In the second zone, colored yellow, where the institutional
recovery process is ongoing, the objective is to maintain order and security
within the community, while seeking to attract stable institutions, through an
intensive police and military effort. In the green, stabilized areas, the State
seeks to consolidate its authority and to establish state institutions and public
services through intensive political and social action.
As to the ght against the drug trafc, the conict’s main fuel as the
terrorist groups’ prime source of funds, the emphasis shifted from spraying
to the manual extirpation of crops.
In respect of citizens’ security, a strategy was adopted to dismember the
groups and gangs responsible for serious crimes in the cities.
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A crucial element of this policy is military education, accompanied by
a comprehensive human rights policy, and the reform of institutions, such as
the military penal system.
In essence, though, the consolidation policy is the continuation of the
defense and democratic security policy, adapted to the new strategic conditions
resulting from the great success of the former policy.
Preliminary 2006-2007 results
• Common homicide: 17,479 (2006) – 17,198 (2007).
• Assassination of labor union leaders: a 68 percent reduction between
2006 and 2007.
• Assassination of Indians: a 15.6 percent reduction.
• Assassination of journalists: a 66.7 percent reduction.
• Mass murders: 37 cases (2006) – 26 cases (2007).
• Kidnappings: 687 (2006) – 486 (2007).
• Illegal custody: 6 (2006) – 2 (2007) (177 in 2002).
• Terrorist attacks: 646 (2006) – 387(2007).
• Oil pipeline explosions: 106 (2006) – 57 (2007).
• Hectares of coca crops sprayed: 152,960.
• Hectares of manually eradicated coca crops: 43,054 (2006) – 66,396 (2007).
• Members of criminal gangs killed: 198 (2006) – 636 (2007).
• Members of subversive groups killed: 2,165 (2006) – 2,067 (2007).
• Individual demobilizations: 2,460 (2006) – 3,192 (2007).
• Displacements: 194,877 individual and 22,229 collective (2006) – 97,186
individual and 12,690 collective (2007).
• There were 2,581 combats in 2007, with a daily average of 27 counteractions.
• Members of the public forces killed in combat: 597 (2006) – 471 (2007).
• Antipersonnel mine victims: 795 military and 370 civilians (2006) – 693
military and 181 civilians (2007) – 10 percent of victims were minors.
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• In 1998, two military for each guerrilla were killed; in 2002, one military
for each three guerrillas; today, one military for each nine guerrillas.
• Today, the FARCs number 8,576 troops and approximately 3,000
militiamen (as compared with 17,000 troops and over 20,000
militiamen in 2002).
• The ELN has 2,140 troops today.
• The criminal gangs have 5,096 members.
16
Democratic security as a State policy
The current administration’s term will end in a little more than two years
and nobody can assure that the next one will maintain the same line of national
security and defense. Discontinuation of this policy would risk a retrocession,
which Colombia can ill afford, as the country has no more lives to sacrice to
this struggle that has torn us apart for nearly ve decades.
Hence, the importance of the bill establishing the National Security and
Defense System, which I introduced in the Congress of the Republic a few
months ago, and which in addition to regulating other fundamental defense
issues, such as the reestablishment of the National Security and Defense
Council, should ensure that the structural principles that led to the democratic
security policy’s resounding success will endure, thereby becoming a true State
instead of a given government’s policy subject to the mere will and whims of
the administration in place. The bill does not aim at making this policy into law
but rather at laying the foundation on which the national security and defense
policy should rest and without which we would be plagued by uncertainty as
to the continuation and sustainability of the victories won in the ght against
violence in our country.
3. Colombia’s economy
Current situation
Colombia’s economy grew 6.6 percent in the third quarter of 2007, after
growing seven consecutive quarters at a rate of over 5.5 percent.
16 National Defense Ministry gures: www.mindefensa.gov.co.
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Chart I
Colombia’s GDP growth variation
Both external and internal factors have contributed to Colombia’s GDP
growth: the inuence of the world’s largest economies, and factors inherent
to the country’s own development.
Internal factors included the surge of investments, household
consumption, and the availability of credit to economic agents during 2007.
The improved economic circumstances, resulting to a large extent from
democratic security, have permitted the economic growth of recent years and
the consumers’ increased condence in the economy.
Consumption plays a crucial role in the economy’s current expansion
phase. Household consumption (63 percent of GDP) grew at an annual rate of
6.2 percent in the third quarter of 2007. Durable goods grew at an annual rate
of 22.1 percent (6.3 percent of GDP). Construction’s growth was moderate:
12.2 percent a year between January and September 2007 (buildings, 1.6 percent
a year; public works, 28 percent a year).
GDP growth was explained in part by an increase of 22 percent in
investments, 6.4 percent in exports, and 16.6 percent in imports from January
to September 2007, which resulted in an average growth of 7.3 percent in the
third quarter.
Major external factors that had a positive effect on the Colombian
economy included better terms of trade and the capital ows toward emerging
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economies in 2007, which enhanced GDP’s expansive cycles. Circumstances
are changing, though, and will be less favorable in 2008, owing to the U.S.
recession: for each 1 percent of less growth in the world economy, Colombia
will grow 1.4 percent less.
In addition, world growth dropped from 3.9 percent in 2006 to 3.6
percent in 2007. This deceleration was led by the member countries of the
Organization for Economic Cooperation and Development-OECD, whose
GDP fell by 0.3 percent points to 2.5 percent last year.
The lower growth was more marked in the United States, where it
dropped from 2.9 percent in 2006 to 2.2 percent in 2007, largely as a result
of the weakening of the housing market, the rapid decline of investment, and
the restriction of credit for both enterprises and consumers.
After four years of solid GDP and trade growth, the steady rise in the
prices of basic products, the narrow margins on the bonds market, and the
gradual variation in the relatively stable interest and exchange rates, the volatility
of international markets aggravated.
Despite the propitious scenario, a current account decit of -3.6 percent
of GDP and a structural scal decit of -4 percent of GDP still persist;
inationary pressures of about 6 percent also persist, as compared with
the Bank of the Republic’s 2007 target of 3.5 percent and 4.5 percent. The
exchange rate’s nominal appreciation of 10 percent a year seriously affects
exports, increases imports, and widens the current account decit; on the
other hand, this reduces the foreign debt in dollars.
Projections
The Colombian economy’s soundness in 2008 will depend on how far
the U.S. crisis will go and on the maintenance of trade relations with other
trading partners, including Venezuela and Ecuador.
Several Colombian economic entities, including ANIF, predict that the
economy will grow about 5.5 percent in 2008, helped by an employment rate
of less than 10 percent and an ination rate of 4.4 percent. It is expected that
the current account decit will be 3.2 percent of GDP and that the Central
Government’s primary decit will not exceed 1.7 percent of GDP.
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Orientation and results of the national competitiveness policy
17
The competitiveness and productivity policy aims at making Colombia
into one of Latin America’s three most competitive countries by 2032, with
a per capita income equal to that of a country with high average per capita
income, based on exports of high aggregate value goods and services;
innovation; a propitious business environment for both local and foreign
investment and regional convergence; better formal employment opportunities;
better quality of life; and substantially lower poverty levels.
To realize this vision, the policy calls for the following: (a) development of
world-class sectors; (b) a jump in productivity and jobs generation; and (c) labor
and entrepreneurial formalization – all of which based on the development
of science, technology, and innovation. These pillars are complemented
with strategies aimed at the elimination of obstacles to competitiveness and
(domestic and foreign) investment growth, which encompass different aspects,
such as macroeconomic and judicial stability, education and labor skills,
regulation and institutions at the service of production, physical infrastructure,
provision of public services, and respect for property rights, quality of life,
pleasant cities, and higher savings rate.
Colombia has had an average record in developing competitiveness
and is proceeding with the hard work toward its consolidation as one of
the region’s most competitive nations. In 2007, the following results were
achieved:
• Colombia managed to maintain the same position in terms of
competitiveness only in relation to higher education and training,
ranking 69
th
in both years. This failure, though, is offset by the advance
toward higher competitiveness levels in the country; and
• Outstanding achievements in 2007-2008 include increased
competitiveness under stable macroeconomic conditions, as the
country climbed two notches over the previous year and rose from the
65
th
to the 63
rd
position, as well as climbing 24 notches in respect of
health and elementary education, thanks to the national government’s
efforts to ensure universal coverage in the two areas. Nevertheless,
17 Colombia construye y siembra futuro. Política nacional al fomento de la investigación y la inovación. Colciencias. 2008.
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Colombia still came down 6 notches in absolute terms as regards
competitiveness, dropping from the 63
rd
to the 69
th
position between
2007 and 2008.
These were the reasons that drove Colombia to a lower competitiveness
level:
• Institutions: Colombia came down 11 notches in respect of
institutional efciency, accountability, and transparence in the handling
of markets and the national economy. This decline is associated with
the parapolitical scandals the country experienced in 2007 and the
intensication of lese humanity crimes (such as the assassination of
Cali deputies). In 2006-2007, the country ranked 68
th
and dropped to
the 79
th
position in 2007-2008.
• Infrastructure: Colombia went down 11 notches from the previous
year in this respect. Trade and economic growth failed to be supported
by infrastructure’s performance, state, and investment. The World
Economic Forum points to the infrastructure’s ineptness for fostering
national economy activity. In 2006-2007, Colombia ranked 75
th
but
fell to the 86
th
position in 2007-2008.
• Market efciency: this was the sharpest drop in the competitiveness
index. Colombia dropped 34 positions from the previous year, from
the 51
st
to the 85
th
position of the general ranking in 2007-2008.
• Labor market efciency: Despite the country’s economic development
and increased output, investment, and savings, unemployment remained
constant in 2007. In this respect, Colombia lost 9 positions, dropping
from the 65
th
rank in 2006-2007 to the 74
th
in 2007-2008.
• Business sophistication: Colombia lost the entrepreneurial thrust
to business sophistication, according to the WEF, dropping from the
48
th
position in 2006-2007 to the 65
th
in 2007-2008, coming down 17
notches.
• Innovation: Despite advances in science and technology, Colombia
continues to lose positions in these vital areas for the country’s
competitiveness, dropping 13 notches, from the 59
th
position in
2006-2007 to the 72
nd
in 2007-2008.
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Results of the economy’s internationalization
To enhance the benets derived from trade and by adopting economic
and political strategies to t into the globalized system, Colombia took the
rst step towards its economy’s internationalization and integration by signing
the 1969 Cartagena agreement that established the Andean Group, of which
Bolivia, Chile, Ecuador, Peru, and Venezuela are also signatories.
The Cartagena Agreement had its beginning in 1966 with the Declaration
of Bogotá and went into effect on October 16, 1969. This political instrument
led to signicantly closer trade integration among the members and to increased
trade between countries.
In 1976, Chile withdrew from the Andean Group, turning its trade
integration policy toward the Southern Cone and to Brazil. The reason for
its withdrawal was its disagreement over the application of industrialization
model based on imports substitution, the so-called Cepal model that was still
adopted by the other signatories of the Agreement, in conjunction with strict
control of foreign investment. In 2006, notwithstanding mediation attempts
by the Andean countries, Venezuela also withdrew from the trade bloc.
But policies have changed in Colombia as well as in most Latin American
countries, and Chile is now negotiating its return to the bloc. As a matter of
fact, Chile became a CAN Associate Member last year.
As the next signicant step toward internationalization, Colombia signed
the 1980 Montevideo Treaty that established the Latin American Integration
Association-LAIA.
This association’s objective was to promote the region’s integration
and harmonious, balanced development with a view to establishing a Latin
American common market. The agreement was signed by Argentina, Bolivia,
Brazil, Chile, Colombia, Ecuador, México, Paraguay, Peru, and Venezuela.
Cuba adhered to it recently.
The treaty contemplated various mechanisms for the achievement of
national objectives – regional tariff preferences, regional scope agreements,
and partial scope agreements.
This treaty was considered as a framework integration treaty, which allows
the countries to adopt a wide range of integration strategies and to crate and
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regulate the requisite mechanisms. LAIA has thus provided a platform for
Colombia’s trade agreement negotiations.
In the eighties, Colombia negotiated several partial scope agreements
with a view to intensify trade by granting tariff and nontariff preferences.
Such agreements were then signed with Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, and Panama.
Since 1991, Colombia has made a major turnaround in respect of political
and juridical matters. The Political Constitution was amended, to the effect
that foreign policy should seek integration with other countries, and with Latin
American countries in particular. Juridical changes reect a profound change in
the economic model adopted by the state and the beginning of the economy’s
opening with a view to the country’s transformation and development. The
Cepal model was left behind and replaced by a development model based on
the country’s enterprises’ competitiveness and productivity.
Part of this policy in response to the globalization’s challenge was
the reduction of trade barriers, the opening to foreign investment, and
the intensication of integration with countries of the region through the
celebration of trade agreements.
Agreements were thus celebrated within the LAIA context, such as the
Economic Complementation Agreement between Colombia and Chile signed
in December 1993, and the agreements with Panama that same year and with
Cuba in 2000, among others. Also worth pointing out was the signing of the
Economic Complementation agreement by Colombia, Mexico, and Venezuela,
known as the G3.
In 2004, a Free Trade Agreement was signed with the Can and the
Mercosur member countries, thereby deepening Colombia’s integration with
South American countries.
Colombia’s current internationalization strategy is focused on the
negotiation of Free Trade Agreements that reect major developments in this
regard at the international level. These agreements assigned priority according
to the importance of our trade partners.
This explains the negotiation of a Free trade Agreement with the United
States, the agreement under consideration with the so-called Northern Triangle
(El Salvador, Guatemala, and Honduras). Negotiations are also proceeding
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in 2008 with Canada, the European Union, the EFTA countries (Iceland,
Liechtenstein, the Kingdom of Norway, and the Swiss Confederation), and the
APEC member countries, among others, as well as the Free trade Agreement
with Chile, which is pending Presidential sanction.
Lastly, it should be mentioned that as part of its internationalization,
Colombia joined the World Trade Organization in 1994.
DEP
Translation: João Coelho
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Ecuador, perspectives
from an ex-President
Rodrigo Borja
*
Latin America
A
s they stepped for the rst time on American soil, in 1492, the caravel
navigators thought they had reached the west coast of India instead of a new,
unknown continent. This is why Christopher Columbus and his adventure
companions called Indies the lands they had discovered, a name born of a
geographical mistake and maintained by Spain throughout the colonial period.
Until then the Europeans knew about the existence of only three continents,
i.e., their own continent, Africa, and Asia. They already maintained relations
with Africa, quite intense neighborly, war, and trade relations. From Asia they
imported china, silk, jewelry, aromatic plant substances, pearls, precious stones,
gold, silver, spices, and other products. With the conquest of Constantinople
by the Ottomans in 1453, the traditional route linking Europe to Asia Minor
was cut off by the Turk conquerors, who extended their dominion over
vast imperial territories, the Spanish and the Portuguese were forced to seek
another route to reach the Eastern peoples and continue to ply their trade.
It was under these circumstances that it occurred to Christopher Columbus
* Former President of the Republic of Ecuador.
rodborja@hoy.net
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to reach the East by way of the West, as he suspected the Earth to be round.
After two and a half months of prolonged, exhausting sailing, he arrived on
October 12, 1492 at an island the natives called Guanahani, which he renamed
San Salvador, and at other islands he supposed to be part of the west coast of
India, and for this reason called them Indies. Only twenty years later, after Balboa
discovered the Pacic Ocean and Magellan and El Cano sailed its waters, did
the Europeans realize that they had discovered a new continent – a mundus
novus – about which an obscure Florentine navigator named Americo Vespucci
had written to his Italian patrons, saying that those lands were not Asia; they
were something else. They were so immensely vast, with such colossal valleys
and mountains, such voluminous rivers, and such luxuriant, fertile soil, that
the European notions of space and distance were totally inadequate here.
The name America occurred for the rst time in 1507 in a small book
titled Cosmographie Introductio that mistakenly attributed the discovery of the
new lands to the Italian navigator Americo Vespucci. The name given the
new lands caused much dissension later. Some found it inadmissible that an
adventurer should lend his obscure corsair name to the vast lands discovered
by Columbus in one of the most daring and impressive feats in history. The
logical thing to do would be to call them Colona¸ Colombia, or Columbia, as some
suggested, as a tribute to the intrepid navigator.
Arturo Ardao, in his Génesis de la idea y el nombre de América (1980), and
Ignácio Hernando de Larramendi y Montiano, in his Utopía de la Nueva América.
Reexiones para la Edad Universal (1992) say that it was the Colombian José María
Torres Caicedo who, well into the 19
th
century, rst used the expression Latin
America to refer to the ensemble of countries colonized by Spain, Portugal,
and France on this part of the planet.
This brand new denomination was promptly adopted by the Vatican,
which in 1862 changed the name of the Colegio Americano del Sur to Instituto
Eclesiástico de la América Latina. Later, France and England also adopted the
name, with a touch of hostility toward Spain. Subsequently, the name fell into
general use.
And yet, I have often wondered: Why this name? Why the adjective Latin
was chosen instead of another, considering France’s colonial endeavors at that
time? What led to such a denomination of this new world?
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The reason was probably the colonizers’ languages, all three derived
from Latin, the dialect of the city of Rome, which spread beyond Latium and
then to the Roman Empire’s colonies in the Iberian Peninsula and in Gaul.
There was the cultivated or scholarly Latin, used in the works of the admirable
Roman literature and in the pieces of incomparable eloquence of its orators;
and there was the vulgar Latin, spoken by the people and from which came the
modern Romance languages, including Spanish, Portuguese, Italian, Romanian,
Sardinian, Provencal, Rhaetian, and Dalmatian, among others.
The Latins were the inhabitants of Latium, the capital of which was Rome
and whose language was Latin. During the Roman Empire, they dominated the
territories that would eventually become France, Spain, and Portugal, which in
turn would one day conquer part of America and, through blood and cultural
intermingling, produce the so-called Latin American nations.
These nations differ in culture and language: the Iberian-American were
conquered by Spain and Portugal and speak Spanish and Portuguese, while
the others, conquered by France, speak French and the native languages of
the indigenous populations.
The expression Latin America is neither precise nor felicitous, as it
applies to a heterogeneous continent consisting of continental and insular,
large and small countries with different political regimes that may or may not
be democratic, different economic systems, and diverse ethnic groups, and at
different stages of economic and social development. There is no such thing
as Latin American homogeneity.
Ecuador
Geography
Situated in northwestern South America, Ecuador is a country with a
surface area of 256,370 square kilometers. As it straddles the equator, it belongs
to both the northern and the southern hemispheres. It shares borders in the
north with Colombia, in the south and east with Peru, and on the west with
the Pacic Ocean.
The Andes Cordillera, with two parallel ranges, runs from north to south,
dividing the country into three well-dened continental regions – the coast, the
Andean tablelands, or altiplano, and the Amazon – with a multiplicity of climates
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and microclimates and great many ecosystems. Its territory encompasses also
the Galapagos Islands, located a thousand kilometers off the coast.
The coastal area consists of fertile plains, sedimentary basins, and hills,
crossed by the rivers that ow down from the Andes into the Pacic Ocean.
The Guayas River basin is the most important, with about twelve tributary
streams. This area has a shoreline of 640 km, with wide, beautiful beaches and
attractive resorts. It is inuenced by two oceanic phenomena: the warm, moist
El Niño current from the north and the cold, dry Humboldt Current from
the south. This region encompasses the provinces of Esmeraldas, Manabí,
Guayas, Santa Elena, Los Ríos, and El Oro.
The region lying between the two Andean branches – the eastern and the
western cordilleras – boasts many extremely beautiful and fertile valleys and
dales at altitudes ranging between 800 and 3,000 meters. On the cordilleras
are found the high, snow-capped volcanoes: the Chimborazo, 6,310 meters
above sea level; the Cotopaxi, 5,897 m; the Cayambe, 5,790 m; the Antisana,
5,758 m; the Altar, 5,320 m; the Illiniza, 5,248 m; the Tunguragua, 5,023 m; and
the Cotacachi, 4,944 m. They feed numerous rivers with deep beds, cascades,
and falls. This sierra region encompasses the provinces of Carchi, Imbabura,
Pichincha, Santo Domingo de los Tsáchilas, Cotopaxi, Bolívar, Tungurahua,
Chimborazo, Cañar, Azuay, and Loja.
The dense Amazonian rainforest runs toward the east, a part of the
largest tropical, humid rainforest in the world and the largest hydrographic
system, which accounts for a fth of the planet’s fresh water reserves. Its
biodiversity is so rich and varied that a square mile of the rainforest harbors
more animal and plant species than the United States and Canada together.
The Amazonian region encompasses the provinces of Sucumbíos, Napo,
Pastaza, Orellana, Morona Santiago, and Zamora Chinchipe.
Each region is known for specic crops. The coastal region produces
mainly cocoa, rice, maize, tropical fruit, farm-raised shrimp, seafood, and beef.
The altiplano grows mainly wheat, barley, maize, owers, legumes, vegetables,
and a large variety of temperate climate fruit. In the Amazonian region are
located the major oil and natural gas reserves.
The fourth region consists of the Galapagos Islands located on the
Equator, 1,000 km off the coast. These volcanic islands emerged above sea
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level approximately four million years ago, forming an archipelago with a
surface area of 8,000 square kilometers, encompassing three islands and
seventeen islets.
The Galapagos were discovered by Panamanian Archbishop Tomás de
Berlanga in 1535 when sea currents took his ship off its route. They were
shown for the rst time on a navigation chart by Abraham Orteluis in 1570.
The rst scientic mission to reach the islands was sent by Spain’s Emperor
Charles V and was headed by Sicilian captain Alexander Malaspina.
The Ecuadorian government took possession of the islands on February
12, 1832 and called them Archipiélago del Ecuador. In 1979, Unesco added them
to the list of World Heritage Sites.
These fascinating islands, where time seems to have stood still, were the
main natural laboratory where the English scientist Charles Darwin established
the foundations of his evolution theory, which he exposed in his The Origin of
Species, published in 1859, of which 1,250 copies were sold on the same day
of its release. Since then, the Galapagos have stirred the interest of the world
scientic community.
Their isolation from the continent and other factors explain their
extraordinarily high degree of endemism, unrivaled in the world. A third of
the planet’s plant, 90 percent of reptile, 80 percent of mammal, and 20 percent
of sh species are endemic to them.
In 1992, to protect the ecosystems, biodiversity, and incomparable beauty
of the island scenery, the Ecuadorian government introduced a comprehensive
plan for managing the Galapagos marine and tourist resources.
History
The area that is Ecuador today was inhabited since approximately eleven
thousand years ago by hordes, clans, and indigenous tribes at different stages of
development. The most important were the Quitus, Shyris, Puruhaes, Cañaris,
Mochas, Paltas, Zarsas, Huacas, Tuzas, Tulcanes, Quillasingas, Quinches,
Chillos, Ambatos, Tiquizambis, Chimbos, and Caras. It was the Shyris that
established the Kingdom of Quito on the lands belonging to the primitive
aborigine societies.
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In his Historia General de la República del Ecuador, published in various tomes
in 1890, Archbishop Federico González Suárez, an Ecuadorian historian, says
that the people who inhabited the area in antiquity “did not know writing and
preserved the memory of the past in oral traditions subject to changes and
alterations (…) not a history as such but a panorama drawn in large brush
strokes is the only thing the indigenous nations that inhabited these provinces at
the time of the Spaniards’ arrival can offer a historian.” However, he identies
two periods in the pre-history of the indigenous groups that lived and warred
on these lands: “the period preceding the Incas’ dominion and the period after
the Children of the Sun subdued the various nations that existed in this part
of the American continent, subjecting them to the Cuzco Empire.” The rst
period was that of the Kingdom of Quito, established by the Shyris after they
subdued the Quitus and other tribes; the second was that of Inca dominion,
which lasted about a century and ended with Francisco Pizarro’s arrival in the
Ecuadorian coast.
The conquest of the Kingdom of Quito by the Incas began in the second
half of the 15
th
century under the monarch Túpac Yupanqui and continued
under his son Huayna Cápac, who established the vast empire which he called
Tahuantinsuyo. This empire ranged from the Pasto plains in the north to the
border with the Araucanians in the south and from the Pacic in the west to
the eastern Andes cordillera. It extended from today’s Colombia to Chile. Its
main cities were Cuzco and Quito.
The Tahuantinsuyo was shaken by the civil war between Huáscar and
Atahualpa, Huayna Cápac’s heirs. In his will, the father had left the northern
part of the Empire to Huáscar and the southern part to Atahualpa. But
soon, moved by their ambition to rule the Tahuantinsuyo, the brothers were
embroiled in a dynastic civil war. Huáscar advanced toward Quito with his
veterans’ army; Atahualpa went out against him and, after many protracted
battles, carried the day and had his brother executed. But then the ‘bearded
ones’ came and captured and killed Atahualpa. This marked the end of the
Inca Empire and the beginning of the conquest and colonization of this part
of the Americas.
By royal decree, Spain’s King Philip II established the Audiencia Real
de Quito [Royal Audience of Quito], which included the Spanish possessions
in what is today’s Ecuador. Audiencias were political and administrative units
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with jurisdiction over well-dened areas, run by religious, political, and judicial
authorities. The Audiencia’s President was the highest political authority as
representative of the Spanish monarch, while the Oidores [judges] were the
highest judicial authorities.
The city of Quito, nestled on the foothills of the Pichincha volcano at
2,800 m above sea level, was founded by the Spaniards in 1534 on the same
site where the Shyris had established their monarchy. From Quito issued
the expedition organized by Gonzalo Pizarro, numbering 4,000 Indians and
220 Spaniards, in search of “el Dorado.” The expedition’s second leader was
Francisco de Orellana, who after a hard journey that lasted one year over 4,000
km discovered the Amazon River on February 12, 1542 and sailed down it all
the way to its estuary on the Atlantic Ocean, accomplishing after unimaginable
difculties and human sacrice one of history’s most notable odysseys.
When the Spanish possessions secured their independence from Spain,
they adopted as the criterion for delimitating their respective territories the uti
possidetis doctrine of Roman Law, on which were based possessory actions –
interdicto – to claim in summary proceedings real possession of something by
someone that had possessed it without violence, concealment, or for a given
period. Later, this doctrine was incorporated into International Law to solve
problems of denition of boundaries between States.
The formula the former Spanish colonies used for territorial delimitation
was the uti possidetis, ita possideatis, which means “that which you posses you
shall continue to possess.” It provided the basis for dening the boundaries of
the States that started independent life after the colonial period and assumed
their territories according to the political-administrative divisions established
by the colonial metropolis. The uti possidetis doctrine was taken up from Civil
Law into International Law for the rst time at the Peace of Breda celebrated
between the Netherlands and England in 1667. It has been used since to
regulate the territorial situation between states after a war or at the end of a
colonial situation.
In the Hispanic-American Territorial Law, the uti possidetis juris gained
much force in the 19
th
century in the determination of the territorial rights
of the former Spanish colonies at independence, in accordance with the
land deeds issued by the King of Spain. On the basis of this principle, States
were formed on the territories assigned by the metropolitan authority to the
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respective colonial circumscriptions until 1810, which was considered the
emblematic year of independence from Spain.
As of the denitive victory of the independence forces over the Spanish
army in 1822, what is today’s Ecuador became part of the Gran Colombia
State, established at that time under the inspiration and political leadership
of Liberator Simón Bolívar. Gran Colombia encompassed three districts:
Venezuela, Cundinamarca, and Quito, whose capitals were Caracas, Bogotá,
and Quito, respectively. Its existence was ephemeral, though, as centrifugal
forces were stronger than centripetal ones. On May 6, 1830 Venezuela separated
itself and immediately convened a Constituent Assembly that gave birth to
the new State. At that same time, an “Assembly of Notables” convened in
Quito on May 13, 1830 proclaimed the South District’s severance from Gran
Colombia. On August 14 of the same year, a Constituent Assembly meeting
in the city of Riobamba, south of Quito, drafted the rst Constitution for
the new State, which similarly to all the other contemporary Latin American
Constitutions, was inspired on the 1787 United States Constitution.
Gran Colombia disintegrated under the separatist pressure of local
leaders and thus vanished Bolívar’s dream of establishing through integration
a great, powerful State to steer South America’s destiny.
Thus began Ecuador’s independent life.
The historical center of Quito, the capital, is Hispanic America’s most
important and best preserved, with its narrow, steep streets, plaza mayor,
monumental convents, and baroque churches built in the 16
th
and 17
th
centuries.
In 1978, Unesco inscribed it as a World Heritage Site. Its emblematic center is
the Plaza Mayor built on the traditional Andalusian model and on instructions
from the metropolis. Here are located the government palace, the town hall,
the cathedral, the archiepiscopal palace, and major mansions. In colonial times,
common sights on the plaza were friars, pious women, carousers, water carriers,
Indian sandals sellers, horse riders, night musicians – all of them characters
that lived again on the pages of Latin American novels, such as Manuela, by
Eugenio Díaz Castro; María, by Jorge Isaacs; El Chulla Romero y Flores, by Jorge
Icaza, among many others who portrayed the protagonists of the Hispanic-
American colonial plaza. Both in colonial and in Republican times, the Plaza
Mayor, whose name was changed after independence to Plaza de la Independencia,
was the meeting place, the public forum, and the main source of information
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on the life of the community. At the “hora del paseo,” the strolling hour, the
elegant gents of the ruling class gathered to discuss politics, conspire against
the government, and exchange gossip. On festive days, the plaza was the scene
of religious processions and military parades.
The Quiteña painting school was formed during the XVI, XVII
and XVIII centuries, leaving wonderful testimonies to the arts. Those are
exhibited particularly in museums, old churches and convents in Quito, in
which the splendor of the Baroque, captured in its walls and ceilings, reached
incredible heights.
The primarily religious Quiteño Baroque is a mestizo art resulting from
the fusion of cultures. It is a blend of Spanish, Italian, Flemish, Byzantine,
Mudejar, and Quiteño elements. Half imitation, half originality, the Quiteña
school mixes European with American decorative elements in bombastic,
heavy ornamentation applied to canvas, wood, stone, or walls. Many extremely
talented Indian and mix-blood painters, image makers, and sculptors – such
as Pedro Bedón, Alfonso Chacha, Francisco and Jerónimo Vilcacho, Cristóbal
Naupa, Sebastián Gualoto, Diego de Robles, Bernardo Legarda, Manuel Chili,
a.k.a. Caspicara, Miguel de Santiago, Nicolás de Goríbar, Bernardo Rodríguez,
Hernando de la Cruz, Manuel Samaniego – left richly ornamented sculptures
and paintings.
The Quiteña School, many works of which were anonymous, enjoyed
prestige throughout Latin America and much has been written about it in
works on painting and sculpture.
Ethnic and demographic makeup
Ecuador has a population of 13 million according to the 2001 census:
fty percent in rural zones and fty percent in urban areas. Demographic
density is fty inhabitants per square kilometer.
It is an ethnically diverse country. Its population is composed of cholos and
mulatos 83%, natives 8%, whites (or predominantly white) 7%, and blacks 2%.
As most States, Ecuador is plurinational. There are in the world about
two thousand nations living in about two hundred States, so that most of
the latter have a plurinational character. On Ecuadorian territory, many small
indigenous nations coexist, the most important of which are the quichua, the
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huaorani, the shuar, the cofán, the siona, the secoya, the shiwiar, the zápara, the epera,
the awa, the chachi, and the tsáchila. Most of them inhabit remote places of the
Amazonian region, keeping their old, primitive religions and customs.
Miscegenation, according to philosopher of history Gabriel Cevallos
García, is a major historical reality in Ecuador and the Andean peoples.
According to him, the “blending of human types of various origins began
thousands of years before the Spaniards set foot on American soil and started
a new kind of miscegenation.” Our human types, culture, and historical prole
are thus the result of the migratory waves that came to these lands thousands
of years before the Incan armies conquered and dominated the Quiteños and
before the caravel men landed here.
According to Peruvian historian Carlos Daniel Valcárcel, the term cholo
comes from Quichua. The Inca Garcilaso de la Vega (1539-1616), though, an
informed man about such things, said cholo comes from the Windward Islands,
meaning “dog,” which was applied to the mulatto children as an insult.
The word has now various meanings. In some Hispanic-American
countries, such as Chile and Costa Rica, it means a “civilized Indian.” In
other countries, it means a brown-skinned person. In Chile, it may also mean
a “coward,” probably as a vestige of the Pacic War. In some countries,
the word has a pejorative meaning, but not in others. It may even be an
endearing word in its diminutive form, as “cholito” or “cholita.” In the
Andean countries – Ecuador, Peru, and Bolivia – it is applied to the offspring
of an Indian and a white person, with visible indigenous traits. In these
countries, the word is made into the verb “cholear,” pejoratively used to
discriminate against someone, with the meaning of “to treat somebody as
a cholo.” In Peru, though, the word does not have any pejorative meaning.
There, “cholo” is the mixed-blood that rises on the social ladder and succeeds.
A recent President of obvious mixed-blood origin took pride in being called
the “Cholo Toledo.”
In general, in the Andean countries, the word has a pejorative meaning
among upper-scale people. A “pure-blood White” often sees the Cholo as a
complicated person, a mixture of social resentment and rebelliousness, with a
violent, introverted, and contentious temperament. The Cholo, in turn, looks
down on the Indian, even knowing that Indian blood runs in his veins, and
dislikes the White, whom he sees as discriminating and abusive. The “one-eyed
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Rodríguez” of Jorge Icasa’s novel Huasipungo and the “Cisneros Cholo” of
José María Argueda’s Todas las sangres come to mind. The Cholo’s perception is
that the social system in which he lives – an unjust system with little mobility –
denies him the opportunity for advancing in life and makes any change in life
impossible. The system is too inexible. This has nourished in him a strong,
understandable feeling of inconformity.
The preceding might explain the political and social instability in the
Andean countries.
From an Indian’s point of view, a Cholo is not trustworthy because
he tends to sever himself from his roots and to assimilate with Whites,
ultimately to serve his interests. The Bolivian Fausto Reinaga, the founder
of the Bolivian Indian Party in 1962 and of the World Indian Community in
1977, thus advocates a radical “Indianity” with no room for Cholos or Whites.
According to him, the “Indian revolution” will happen when the “Incan,
Mayan, Aztec, Red Skin society will wake up and start moving” in search of
“Indian power.” Reinaga mercilessly rails against the mestizo, accusing him
of “racism” against the Indian. For him, the mestizo – the Cholo – whether
he is a friar, a historian, an anthropologist, or a politician, is always a puppet
in the service of the Europeanization of America’s Indian communities.
The movement advocating the values of miscegenation, which began
with the Mexican Revolution, found an echo in Peru with José Carlos
Mariátegui and with Jorge Icaza in Ecuador. At that time, in the Andean
mestizo countries, a pitched battle was raging between the “Hispanists,”
who sang the glories of Spain, and the “Indigenists,” who extolled the
Inca Empire. Literature dramatized the dichotomy between the inhuman,
savage White boss and the subjugated Indian. One speaks Spanish, the
other speaks Quichua. The novels El Tungsteno (1931) by César Vallejo and
Huasipungo by Jorge Icaza were in Peru and in Ecuador a prime expression
of this Manichaean world. The mestizo was until then the great absentee
from the social reality and literature of the Andean countries. Indeed,
photos and drawings of the early decades of the past century showed only
mestizos with sh baskets and poncho-wrapped Indians. The mestizo had
not yet entered the social scene. Even Marxist indigenism, which ascribed
to the Indian the redemptive role Marx assigned the proletariat, forgot the
mestizo. In the midst of this cross re, the mestizo emerged as a fundamental
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element of Andean and Mesoamerican social reality and as a protagonist of
a denunciation literature. In his veins runs Indian and White blood. Peruvian
historian Carlos Daniel Valcárcel writes that the mestizo “suffers under the
twofold tragedy of two irreconcilable souls and the twofold rejection by
those above and those below.” Nevertheless, the Cholo vigorously ghts
and struggles to win a place in social life, succeed culturally, make known his
original view of life, and defend his rights. Ultimately, the great truth about
the discovery of America is miscegenation, which is fraught with potential
and originality.
Biodiversity
From a taxonomic standpoint, some places on the planet are richer than
others in respect of species varieties. In his 1997 book titled Megadiversity:
Earth’s biologically wealthiest nations (1997), written after doing eld work in
over twenty tropical countries, Russell Mittermeier, then Conservation
International’s President, identied seventeen countries that concentrate the
planet’s greatest biodiversity. Nearly all of them are located in the Amazon
basin. These countries have an impressive “megadiversity” in respect of plants,
birds, mammals, amphibians, and river and marine ecosystems.
An ecosystem’s biodiversity is measured by the heterogeneity of species,
i.e., by the number of species in a given area and their relative abundance.
Ecuador boasts 324 species of mammals, 1,559 species of birds, 710
of sh, 409 of reptiles, and 402 of amphibians. This means that in a small
country with a surface area of 256,370 square kilometers there are more bird
species than in all of the United States, more sh species than in the seas of
North America or Europe, and more amphibian species than in all of Europe.
These gures do not include arthropods (insects, arachnids, and crustaceans).
There are also 20,000 species of vascular plants. This means that although it
accounts for only 0.17 percent of the Earth’s surface, Ecuador harbors over 11
percent of the entire planet’s vertebrate species (mammals, birds, amphibians,
and reptiles). Ecuador’s opulent megadiversity and wealth of sceneries, beauty,
and ecosystems come from the fact that it straddles the Tropic of Cancer and is
crossed by the Andes Cordillera that divides its continental territory into three
major regions characterized by a multiplicity of climates and microclimates
and a huge quantity of ecosystems.
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Judiciary and political structure
Ecuador is a unitary State politically and administratively divided
into twenty-four provinces, each one consisting of various cantons. The
decentralization of administration and services does not affect the State’s
unitary condition.
Most populous cities are Guayaquil, Quito (the capital), Cuenca, Amato,
and Santo Domingo.
The central government is republican and Presidential, consisting
of three branches: the Legislative, whose function is discharged by the
unicameral National Congress and whose members are elected by the provinces
proportionately to their population; the Executive, headed by the President
of the Republic and consisting of ministers of State and other civil servants;
and the Judiciary, consisting of a Supreme Court of Justice, provincial courts,
and judicatures.
The constitutionality of the laws is ensured by the Constitutional Tribunal,
an independent body consisting of nine members appointed by the National
Congress as follows: two chosen from a triple list submitted by the President
of the Republic; two from a triple list submitted by the Supreme Court of
Justice; two chosen by the National Congress among its members; one chosen
from a triple list submitted by Provincial Prefects and municipal mayors; one
chosen from a triple list submitted by labor, Indian, and peasant organizations;
and one chosen from a triple list submitted by producers associations.
Authorities are elected by universal, direct, and secret vote: the President
and the Vice-President of the Republic, and the legislators for a four-year term.
Immediate reelection of the President and the Vice-President is prohibited.
The Supreme Electoral Tribunal and the provincial electoral tribunals,
which enjoy administrative and economic autonomy, are in charge of organizing,
directing, and monitoring the universal, direct electoral processes as well as the
referendums called for in cases contemplated by the Constitution, the counting
of returns and popular consultations; settling disputes and complaints arising
in connection with these processes; and auditing the electoral expenditures
of parties and political movements as well as the origin of their resources.
The Supreme Electoral Tribunal consists of seven members elected by the
National Congress.
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The mandate of members of parliament, provincial prefects, and mayors
can be revoked by popular initiative; for this a minimum of 30 percent of the
electors in the respective circumscription is required.
The Constitution guarantees the functioning of political parties, whose
establishment and operations are regulated by law. To be legally recognized, a
party must adopt specic doctrinal principles that set it apart, have a program
of action, a national organization, and the minimum number of members
established by law. A party loses its rights if it does not obtain at least 5
percent of valid votes in two successive pluripersonal elections. To guarantee
these political organizations’ independence from pressure groups, the Political
Parties Law provides them with State funding proportionate to the number
of votes they obtain and grants them some tax exemptions but sets a ceiling
on their electoral expenditures and prohibits them from receiving nancial
contributions from foreign States or enterprises and from individuals or
institutions that have contracts with the State.
Supreme Court justices are appointed by the National Congress for life,
but can be removed from ofce by Congress for reasons contemplated by the
Constitution and the legislation.
Each province has a governor appointed by the President and a Provincial
Council consisting of the Provincial Prefect, who is the executive authority,
and a collegiate body made up of a variable number of provincial councilmen
elected by the voters of their respective circumscriptions in proportion to the
population.
One of the political rights is the right to vote; to exercise it a person
must be an Ecuadorian citizen by birth or naturalization and be 18 years old
and fully entitled to the enjoyment of his citizen rights. Members of the
Armed Forces and the National Police cannot vote or run for elections. An
individual sentenced to imprisonment will have his voting rights suspended
for the duration of imprisonment.
Ecuador is a member of the United Nations-UN since its foundation
in 1945, as well as a member of the Organization of American States-OAS,
the Group of Rio, the Amazonian Treaty, the Organization of the Petroleum
Exporting Countries-OPEC, the Andean Community of Nations-CAN,
the Union of South American Nations-Unasur, and other international
organizations.
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Ecuador participates in the Andean economic integration process
launched in May 1969 under the Cartagena Agreement, or Andean Pact, by
Colombia, Ecuador, Peru, Bolivia, and Chile, to which Venezuela accessed in
1973 and from which Chile withdrew under Pinochet’s dictatorship in 1976
and Venezuela in 2006.
Three phases can be identied in the Andean integration process. The
rst, which lasted through 1975, was very dynamic; during it, transnational
bodies were created to conduct the process; customs exemption programs were
introduced; a common regime was established for treating foreign investment,
trademarks, and patents; and industrial development sectoral programs were
implemented. There followed a phase of stagnation, when the process lost
dynamism owing to the participating countries’ nancial difculties; reciprocal
trade decreased; and commitments undertaken went unfullled. Then came a
phase of recovery and reactivation of the Andean Pact, which began in 1989,
based on a decision adopted in Caracas by Presidents Virgilio Barco, Rodrigo
Borja, Alan García, and Carlos Andrés Pérez to closely monitor the integration
process and to meet twice a year as the Andean Presidential Council – the new
highest instance created by them – to review the initiatives implemented in
each semester. This injected great dynamism into the process and intensied
subregional trade. According to Junac gures, between 1990 and 1995 the
Andean group increased subregional trade by 27 percent a year. This increase
was not uniform, though: Ecuador increased its sales from US$188.5 million
to US$364 million, as compared with Bolivia’s trade increase from US$59.9
million to US$199 million; Peru’s increase from US$214 to US$412; Colombia’s
from US$327.7 million to US$1.805 billion; and Venezuela’s from US$493.6
million to US$1.847 billion. This shows that Colombia and Venezuela beneted
far more from integration, as they increased their sales on the Andean market
vefold and fourfold, respectively.
From a technical and institutional standpoint, the Andean integration
process is, despite all hitches and limitations, the most successful to date in
Latin America and the only one that has a common judicial instance – the
Andean Tribunal of Justice – to settle disputes among member countries that
may arise from or because of integration agreements.
In April 1966, the Presidents of the Andean countries, meeting in the
city of Trujillo, Peru, adopted two formal resolutions: to replace the name
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of Andean Pact by which this integration system had been known from the
beginning to Andean Community, probably on the European model, and to
create an intermediate instance for conducting the process, namely, the Andean
Foreign Ministers Council.
The Presidents of the twelve South American States, meeting in Cuzco
on December 8, 2004, decided to establish a Community of South American
Nations “to create an integrated South American space encompassing the
political, social, economic, environmental, and infrastructure spheres.” This
decision was ratied at the Presidential summits held in Brasília in September
2005 and in Cochabamba in December 2006. At the latter summit, the
Presidents declared that “South American integration is required not only to
solve the great calamities affecting the region, such as persistent poverty, social
exclusion, and inequality – which in the last few years have become a central
concern of every national government – but also as a decisive step to develop
a multipolar, balanced, fair multilateral world based on a culture of peace.”
This initiative was made into reality on April 16, 2007 on Venezuela’s Margarita
Island. At that time, the Presidents of Argentina, Bolivia, Brazil, Chile,
Colombia, Ecuador, Guyana, Paraguay, Suriname, Uruguay, and Venezuela
established the Union of South American Nations-Unasur, with headquarters in
Quito, and invited me to assume the new organization’s Secretariat.
I accepted this responsibility because of my integrationist vocation,
which had led me, 28 years ago, to write a short essay on the unionization of
poor countries, in which I earnestly advocated the union of our countries and
the establishment of an international “union” capable of strengthening our
position in the outside world.
I promptly offered the Presidents my views on what Unasur should
do. The gist of my suggestions was to include in the new regional institution
all the existing subregional entities so as to move on from subcontinental
integration, to be carried out by the Andean Community of Nations-CAN and
the Southern Common Market-Mercosur, toward South American continental
integration, taking into account the experiences, accomplishments, and
failures of the subregional systems. This seemed to be the way for achieving
the South American countries’ development objective and fostering their full
participation in post-Cold War’s implacably competitive world. The idea was
to face – on the force intensied by union – the blocs of developed countries
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and the constellation of transnational corporations that gained unprecedented
power during the Cold War.
Endowing the project with appropriate instruments met with obstacles,
though. The senior ofcials’ commission appointed by the governments to draft
the organization’s statutes opted for creating another integrationist institution in
addition to the existing ones. This, in my view, adversely affected the Presidents’
project, conceived on the basis of a clear vision of the future.
Political life
Overview
The Ecuadorian political society is affected by internal political,
economic, social, cultural, religious, ethnic, and regional differences and
contradictions that militate against social cohesion. This is the source of a
tempestuous history marked by an alternation of democratic governments and
military dictatorships, coups d’état, different Constitutions, political instability,
economic backwardness, and social injustice.
In Ecuador’s 178 years as a Republic, only one revolution deserves this
name: the Alfarista Revolution in the late 19
th
century, of a liberal-radical cast,
which bisected Ecuadorian history. All other insurgent movements have been
nothing but military successful complots under the cover of night, although
their protagonists called them “revolutions.” It has been a history plagued by
abrupt changes of government, made possible by weak institutions. It has
seen eighteen different constitutions – 1830, 1835, 1843, 1845, 1851, 1852,
1861, 1869, 1878, 1884, 1897, 1906, 1929, 1945, 1946, 1967, 1978, and 1998.
Each one was drafted and promulgated by a different constituent assembly,
except for the 1978 Constitution, which was approved by referendum. This
constitutional “ination” is due to the idea that a change of Constitutions will
change political behavior. Obviously, this never happened. Constitutional norms
have been conceived from above without being anchored in society. This very
day, the nineteenth constituent assembly is meeting and by the end of the year
it should bring forth a draft Constitution to be submitted to a referendum.
The truth is that in Latin America there have been many coups d’état
but few revolutions. Perhaps the only changes that, owing to their depth
and irreversibility, have had a revolutionary character were the 1895 Alfarista
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revolution in Ecuador, the 1910 Mexican revolution, the 1952 Bolivian
revolution, the 1959 Cuban revolution, and the 1979 Sandinista revolution
in Nicarágua, although the latter lacked the characteristic irreversibility of a
true revolution. The other disruptions of the constitutional order in Latin
America’s tortuous history have been nothing but coups d’état that have
changed the people in government but kept intact the established economic
and social order.
The liberal-radical revolutionary process of the late 19
th
century in
Ecuador was led by general Eloy Alfaro – who earned his general braids
ghting for freedom at the head of his popular army – it lasted three decades
of guerrilla combat, or montonera combat as it was called then, and had as
its objective to overthrow Ecuador’s feudal ancient régime, under which the
Catholic Church was the country’s major landowner. The Church owned the
best and largest estates on the Andean highlands as well as the Indians that
worked on them. The children of the Indians also belonged to the Church.
These “señores de misa y olla” [illiterate priests], as they were called by
Ecuadorian writer Juan Montalvo, one of the best prose writers in Spanish
in the 19
th
century, ran the country as their feudal domain. The revolutionary
government of Alfaro issued a Benecence Law in 1908 expropriating
Church lands in favor of the State, which used them to establish a public
welfare fund. The higher Catholic hierarchy did not wait long to protest,
saying that “this law is a crime against Religion, an attempt against sound
morals, an abuse of authority, and a violation of the rights on which the
social order is grounded.” The protest ended thus: “Communism has been
granted citizenship chart.”
The Alfarist revolution effected a profound institutional transformation
in Ecuador. It replaced one social class with another in the exercise of
power, separated Church and State, secularized the government, instituted
religious tolerance, and proclaimed freedom of worship; abolished concertaje (a
contract under which the Indians obligated themselves for life as well as their
descendants to do farming work for the hacienda owner for no salary or for
minimum wages); suppressed imprisonment for debt and failure to meet an
obligation; eliminated the wool mills, the tax of three thousandths on farming
land, and the payment of tithes and rst production to the Church, as well as
other feudal charges.
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Although it was a liberal revolution, it introduced the rst regulations
on working days, obligatory rest, social security, work by women and minors,
individual work contracts, accountability for work accidents, maternity
protection, farming land distribution, and expropriation of idle lands. It
also set other norms of a social nature, which were later embodied in the
1906 Constitution to endow the revolution accomplishments with an
institutional character.
In the 20
th
century, instability was a constant in Ecuadorian history,
owing to rebellions, coups d’état, dictatorships, removals from power, and
resignations. There have been only brief periods of constitutional continuity,
when elected governments alternated: from 1948 to 1961 and since 1979. In
this last period, though, three Presidents were toppled: Bucaram in February
1998, Mahuad in January 2000, and Gutiérrez in April 2007 – at the rst clamor
on Independence Plaza they ed by the backdoor or over the Palace’s roof,
without displaying the elemental bravery of Mariano Ospina Pérez who, at
the tumultuous time of the 1948 “bogotazo,” i.e., the riots that followed the
assassination of Colombian President Jorge Eliécer Gaitán, when the out-
of-control popular fury demanded his head, exclaimed: “a dead President is
worth more to Colombia than a fugitive President; or of Salvador Allende,
who preferred to blast his brains in the Presidential palace to being humiliated
by Pinochet’s henchmen.
In the past decade and a half the widening gap between politics and
morals has entailed serious governability crises. Corruption, in Ecuador as
elsewhere, poses a great obstacle to governablity, as it makes rulers illegitimate,
robs their credibility, and takes away their ethical credentials to order and to be
obeyed. Power rests on a system of beliefs: to govern means to be believable,
to have credibility, to inspire condence.
The lack of these elements has led to a period of insubordination and
social convulsion. Multitudes have taken to the streets to demand that rulers
be ousted. The rst was Bucaram, removed from power by Congress owing to
his mental incapacity to govern, as provided under Art. 76 of the Constitution,
which determines that: “The President of the Republic shall denitively forego
his functions and vacate his ofce… if declared by the National Congress to
be physically or mentally incapacitated.”
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Evidently, “mental incapacity” under constitutional law does not mean
the mental alienation or madness of psychiatry. That label is applicable to
[a President] for misgovernment, ineptitude for governing, and constant
absence from his ofce at the National Palace “for fear of ghosts,” as the
incumbent frankly admitted himself. Five months proved enough to exhaust
popular patience.
Similar cases occurred soon after with Jamil Mahuad and Lucio Gutiérrez.
Mahuad harmed millions of Ecuadorians by freezing bank deposits, causing a
macro-devaluation of the sucre ve times, and adopting the dollarization of
the economy. The people became furious and took to the streets. Gutiérrez
displayed a monumental incapacity for governing and, in response to protests,
ordered the police to shoot. The two ed the Palace when the people surged
on the Independence Plaza, and sought refuge at Embassies: Mahuad at the
Chilean and Gutiérrez at the Brazilian Embassy. The legal and political effect
of diplomatic asylum is the safe-conduct and the exile’s departure from the
country. In both cases, the Vice-President was called to complete the term
of the incumbents.
The international press did not explain these events properly.
Political parties
The origin of political parties in Ecuador goes back to the times of the
struggle for independence from Spain in the early 19
th
century. The Quiteño
fathers of August 10, 1809 themselves, who were the rst to shout for freedom
in Spanish America, split soon after into monarchists and republicans.
Later on, divergences arose in Simón Bolívar’s political circle between
those in favor of a President for life and even of a restoration of the monarchy
and those who, imbued with the ideas of the French Encyclopedists, advocated
a republican government and the expansion of liberties.
The Conservative Party – or what may be considered such – was
founded in 1883 under the name of Catholic Republican Party, later changed
to “Conservative Party,” although remaining a “party of Catholics.” The origin
of the Liberal Party is less clear. It came into being by stages. There was an
“advanced” thinking on the part of keener minds of the time, all of them
drawing inspiration from the 18
th
century French Enlightenment. A convention
meeting in Quito on 24 July, 1890 declared the new political party established.
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Be as it may, both parties were “parties of notables,” quite characteristic
of the times, which were not interested in attracting the masses but in appealing
to socially or economically outstanding people. The “Conservative Party”
belonged to the highland landowners and the clergy, and its strength was
concentrated in Quito, while the “Liberal Party” consisted of representatives
of the nascent trade and banking bourgeoisie on the Coast and had its bastion
in Guayaquil.
Those were the seeds of the conservative-liberal two-party system that
under one guise or another operated in the second half of the 19
th
century.
Their two emblematic caudillos were, respectively, Gabriel García Moreno, the
mid-century authoritarian theocrat; and the liberal revolutionary Eloy Alfaro,
who took power in 1895 after nearly thirty years of guerrilla combat.
The Ecuadorian Socialist Party, of a Marxist-Leninist cast, was founded
in 1926 as a small elite of rst-rate intellectuals and artists, but had no effect
on the dominating two-party system.
In the early 1930s, a sui generis political organization called National
Labor Compact, consisting of workers, artisans, small traders, and peasants
came into being to support the Presidential bid of Neftalí Bonifaz, a
distinguished and cultivated landholder from the highlands. Bonifaz won the
election but was disqualied by the National Congress because there were
doubts about his being an Ecuadorian national, as in his “carefree youth” he
had, as he used to say, used a Peruvian passport. Under the circumstances,
a young lawyer called José María Velasco Ibarra, a notable speaker, lled
the vacancy and, from Congress, was catapulted into political visibility. The
movement behind him became known as “Velasquismo” and displayed, as is
often the case with populist caudillismo, the most incongruent membership:
from the so-called “Knights of Our Lady Immaculate,” of deep clerical and
conservative roots, to philocommunists, all of them rallied round the gure of
Dr. José María Velasco Ibarra, who was President of the Republic ve times,
although he succeeded in completing only one term in ofce (1952 to 1956).
Out of the twenty years of his ve Presidential mandates he exerted power
for only eleven years for he was ousted several times.
In the 1950s, another populist organization came into being in Guayaquil,
called “Popular Forces Concentration (CFP),” a blend of quite contradictory
ideas, led by a charismatic, daring politician named Carlos Guevara Moreno,
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who made his appearance around here claiming that he had fought in the
Republican ranks during the Spanish civil war and been “bitten by the
cruel Fascist grapeshot.” This group – which introduced into the country
hitherto unknown mass mobilization techniques and employed in its political
choreography hymns, marches, ags, and shock groups in the purest Mussolini
style – managed to achieve strong political force at one point, even though its
leader failed in his bid for election.
In 1951, Camilo Ponce, a distinguished leader of the Ecuadorian right,
founded the Social Christian Movement, which started as just a small elitist
circle of highly-placed personalities in society, but assumed power in 1956
with the help of Velasquismo.
In the early 1970s, I founded a movement of young people, called
the Democratic Left, which soon became a large mass party of a socialist-
democratic cast, with particular appeal in the cities’ poor neighborhoods and
among peasants. In its declaration of principles, this movement dened itself
as “a democratic, revolutionary party that expresses and promotes the desires,
ideas, and aspirations of Ecuadorian intellectual and manual workers.” It
was the rst party to raise –nearly four decades ago – the economic issue in
the political debate and to present new issues for public consideration, such
as environmentalism, relations between the State and the market, human
development, and international relations.
In 1988, the Democratic Left arrived at power under my leadership, after
an impressive mobilization of masses.
In the early 1980s, Abdala Bucaram, a brother-in-law of President Jaime
Roldós, who died in a plane crash in 1981, formed a populist group, which he
called the Roldosista Party in a pretended tribute to the memory of the dead
young President.
The movement founded by Camilo Ponce became later the Social
Christian Party, which nearly disappeared after the death of its caudillo but
was recovered from ruin in 1984 by an entrepreneur and politician from the
Guayaquil Chamber of Industries, called León Febres-Cordero, who won the
Presidential elections that year and governed from 1984 till 1988.
Political parties proliferated in Ecuador because there was no juridical
regime to regulate their existence and operation. They were actually mini-parties
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devoid of representativeness, consisting of some individuals, their typewriters,
and press releases, formed in the heat of political opportunism and ideological
delirium. It is long but of little signicance the list of these tiny parties that did
not dare to produce their own candidates but instead struck alliances with the
big parties to secure bureaucratic advantages. Electoral volatility was deplorable.
The leaders’ practice of changing parties was scandalous. Ecuadorian political
slang even coined the expression “change of undershirt” to refer to the
politicians’ party-changing in an analogy with what happens in professional
soccer, when the player of a team is hired by another team for a new season.
In February 1979, though, the military dictatorship, in its last stages,
anticipated consultations with the political leadership, and promulgated the
Political Parties Law, which provided (1) that the political parties enjoy the
protection of the state; (2) that only political parties may present a candidate
to run in popular elections; (3) that to run for an elective ofce, a candidate
must be afliated with a party; and (4) that to be legally recognized and allowed
to intervene in the State’s public life a party must (a) subscribe to doctrinaire
principles that individuate it; (b) have a program of action consistent with the
democratic system; (c) have the minimum number of members established
by law; and (d) have national coverage.
The law further provided for public funding of political parties from
budgetary resources, in proportion to the number of votes obtained by each
party in the previous pluripersonal elections, for which alliances were forbidden.
The law aimed at introducing some order into the chaotic world of parties
but did not manage to prevent system deformations or abuse. Some parties
had lost – or never had – internal democracy, ideological debate, or internal
mobility. They were caudillistas without ideology, with populist leanings. This
caused the encystment of their leadership and the parties’ bureaucratization
and conversion into a stranglehold that suffocated the wishes of the mid-level
ofcials and base militants.
This led the media to unearth the term “partycracy” – which had been
coined in postwar Europe to denounce the parties’ decision-making power
in political life and in the democratic reconstruction of Europe after the fall
of Fascism – and to invest it with a pejorative meaning to denigrate all parties
equally, without attenuations or differences, thereby creating a strong current
of opinion against them.
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Correa, the incumbent President, forging on with his infantry through
the press’s bombing nished the destruction of the parties, which have been
reduced to their minimum expression.
I do not deny that there were motives for some criticism. Some
parties restricted internal mobility and solidied in place their self-elected,
authoritarian leadership or demanded from the government “power shares”
for their leaders – the famous lottazione that was spoken of on the side wings
of Italian politics – or did away with meritocracy in their members’ promotion
system, or incurred in corruption, or slid into populism. This is true. But this
does not invalidate the assertion that political parties are indispensable to
democracy in the contemporary world. There is no democracy without parties.
Parties are intermediaries between society and government. They assimilate,
enhance, and channel diffuse popular aspirations and present them to those
that exercise public authority.
Nothing has been yet devised to replace political parties. Despite all
their defects, they remain indispensable elements in democratic regimes
and as intermediaries between the people and the government. Numerous
associations have been formed – environmentalist, feminist, labor, religious,
consumers, producers associations, and so on and so forth – but they cannot,
either individually or collectively, take the place of the political parties with
their comprehensive view of a country’s problems. Associations are interest
groups and as such have excessively partial, compartmentalized views. Indeed,
labor unions, business corporations, pressure groups, nongovernmental
organizations, the new social movements, and other entities that intervene in
the public life of the State represent partial, sectoral interests within society
and lack an overall view of a country’s problems, as the parties do have or
should have.
Economy
The Constitution denes the Ecuadorian economy as a “social market
economy” that “shall organize itself and develop in coexistence and concurrence
with the public and the private sectors.” This concept was embraced in the
postwar period by German economists of the Freiburg School – Alfred Müller-
Armack, Walter Eucken, and Leonhard Miksch, among others – who added the
word “social” to the expression “market economy” to establish the “principle
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of market freedom linked with social compensation,” so as to nd a “third
way” between a free market economy of a liberal cast and a directed economy
on a Marxist model. But although its proponents say that the social market
economy is not a replication of laissez faire, the truth is that it is actually a
market economy, i.e., a system whereby private economic agents plan and
decide their actions in decentralized way.
The Ecuadorian economy has all the characteristics of capitalist systems:
private ownership of the means of production, abstention of the state vis-à-
vis the activity of the private economic agents, an open economy, exploitation
of salaried labor, and submission of economic activity to the laws of the
market, i.e., supply and demand, private initiative, entrepreneurial freedom,
free competition, pursuit of prot, accumulation.
Fiscal recovery is accomplished on the basis of taxes, charges, and special
contributions. Taxes are direct and indirect. Some are levied by the central
government and others by provincial and local governments. Tax rates are
relatively low.
In 1989 my government undertook a drastic reform of the tax system,
reducing a tangle of over one hundred indirect taxes that yielded very little to
three: income tax, value added tax (VAT), and special consumption tax (ICE).
The reform broadened the income tax base and improved collections but
exempted the middle class and the low-income segments of the population.
Simultaneously, a thorough overhaul of the customs duties structure was
undertaken, which corrected duties dispersion, lowered duties on some
imports, and discouraged contraband. On the whole, these reforms have been
maintained until today.
Ecuadorian economy is divided into the categories proposed by economist
Colin G. Clark, which have become classic: primary, secondary, and tertiary
sectors. As in any economically underdeveloped country, the activities that
have made most progress in Ecuador fall into the primary category: mining,
agriculture, cattle-raising, forest exploitation, and shing, among others, which
provide basic products for direct consumption, raw materials for industry, and
primary products for export.
Industry and other secondary activities, similarly to the tertiary sector,
which consists in the provision of services and not in the production of material
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goods, are at an incipient stage of development. Trade, banking, nances,
insurance, communications, data processing, administration, advertising,
public relations, marketing, transportation, and professional services have not
advanced very far and their share in the domestic product is very small.
Per capita indicators in Ecuador, as in the other Latin American countries,
are very low and internet use is very limited.
Advertising abuse, typical of open economies, with its exacerbated
publicity, subverted values, and alienation, has created a consumer society in
Ecuador. The handling of advertising, as in other Latin American countries, has
led to market manipulation, in opposition to the tenets of classic economists:
instead of the market’s telling producers what they should produce to meet
consumers’ needs, it is the producers who tell the market, through the magic
of advertising, what consumers should consume.
Economic gures in Ecuador are as follows:
GDP (2007): US$44.449 billion
GDP (per capita): US$3,419
GDP (2008 proj.): US$48.508 billion
Oil GDP declined from 0.1 percent in 2006 to 0.0 percent in 2007, while
the non-oil sector decline by 0.1 percent in the same period.
Ination in 2007 ran at 3.32 percent; in a dollarized economy, this is not
a low rate. Ination projected for 2008 is 4.25 percent.
GDP growth in 2008 is projected at 1.9 percent, according to international
organizations.
Oil sector
Crude oil production between January and November 2007: 170,515,000
b/d, with a daily average of 509,000 barrels, 257,000 of which were produced by
Petroecuador, a state enterprise, and 252,000 by private foreign companies.
In 2007, oil output dropped 5.4 percent as compared with 2006.
External sector
Ecuador’s six major trade partners in 2007 were the following:
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United States
Exports: US$6.029,8 billion
Imports: US$2.794,8 billion
Trade surplus: US$3.235 billion
European Union
Exports: US$1.753,9 billion
Imports: US$1.245,8 billion
Trade surplus: US$508.1 million
Peru
Exports: US$1.491,9 billion
Imports: US$481,1 million
Trade surplus: US$1.010,8 billion
Chile
Exports: US$658.1 million
Imports: US$503.3 million
Trade surplus: US$154.8 million
Colombia
Exports: US$650.6 million
Imports: US$1.458,8 billion
Trade decit: US$838.2 million
Venezuela
Exports: US$484.1 million
Imports: US$1.318,5 billion
Trade decit: US$834.4 million
Percentwise, the prole of foreign trade was as follows: US market, 43.6
percent exports and 20.5 percent imports; Aladi markets, 31.4 percent exports
and 36.6 percent of imports; the rest of the Americas, 8.6 percent exports
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and 5.9 percent imports; Europe, 10.9 exports and 10.6 imports; and Asia,
5.3 percent exports and 22.3 percent imports.
Within Aladi, the Andean Community (Venezuela, Colombia, Ecuador,
Peru, and Bolívia) accounted for 20 percent of exports and 21.7 percent
of imports.
Main export products are as follows:
• Crude oil;
• Banana and plantain;
• Oil byproducts;
• Shrimp;
• Metal manufactures;
• Cut owers;
• Cocoa;
• Tuna;
• Coffee (processed), and
• Timber.
In 2007, FOB exports totaled US$13.852,36 billion, of which US$8.279,44
billion were from oil exports and US$5.572,92 were from non-oil exports. FOB
imports totaled US$12.583,97, of which oil imports accounted for US$2.588,28
billion and non-oil imports for US$9.995,7 billion. Trade balance surplus was
US$1.268,39, as the oil surplus of US$5.691,16 billion offset the non-oil decit
of US$4.422,77 billion.
The growth rate of the main nontraditional exports has decelerated
in recent years. Shrimp, seafood, cut ower, and metal manufacture exports
growth rates have declined while those of processed cocoa have risen.
Foreign direct investment has remarkably increased, from US$124.2
million in 2006 to US$470.8 million in 2007.
Emigrant remittances totaled US$2.259,6 billion in 2007.
Financial sector
The State’s freely available international reserves totaled US$3.481,1
billion as of December 31, 2007.
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As of December 31, 2007 credit to the private sector totaled US$11.372,1
billion.
Between January 2006 and October 2007, private banks attracted deposits
totaling US$10.096,909 billion, while demand deposits totaled US$6.652,687
billion and term deposits totaled US$3.082,725 billion.
In the same period, gross credit portfolio totaled US$7.444,945 billion
while the net portfolio totaled US$6.994,173 billion.
2007 Trade Balance
Oil sector surplus: US$4.509 billion
Non-oil sector decit: US$3.353 billion
Total surplus: US$1.156 billion
Fiscal sector
The central government revenues in 2007 were as follows: non-oil
revenues, 79 percent; oil revenues, 21 percent. US$ 4.315,47 billion were from
tax collections; US$1.154,04 billion from transfers; and US$390.49 million
from nontax revenues.
Expenditures were as follows: current expenditures, 70 percent; capital
expenditures, 30 percent. Current expenditures broke down as follows: salaries,
49 percent; interests on the debt, 16 percent; transfers, 14 percent; goods and
services, 8 percent; other, 14 percent.
Debt 2007: US$13.864 billion
Foreign: US$10.626 billion
Domestic: US$3.238 billion
Total debt: 31.2 percent of GDP:
Foreign: 23.9 percent
Domestic: 7.3 percent
2007 Budget: US$14.1 billion
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Dollarization
Early in 2000, the Christian Democrat government of President Jamil
Mahuad decreed the replacement of the Ecuadorian sucre by the U.S. dollar
for all nancial and commercial transactions. The US dollar thus became our
legal tender. Since then the U.S. currency has been the unit of account, means
of payment, measure of value, exchange instrument, and savings mechanism
in Ecuador.
This measure was adopted for political rather than for economic reasons.
Amidst serious social convulsions, when the entire population was decrying
the rulers’ corruption and incompetence, the decision was taken as a lifeboat
at the imminent political shipwreck.
Dollarization meant the State’s renunciation of the right to mint currency
and to formulate monetary and exchange policy, a right transferred to the U.S.
Federal Reserve, as well as of the right to reap the benets of seigniorage.
Only ve States in the world have formally adopted dollarization: Panama,
Liberia (1944-1989), East Timor, Ecuador, and El Salvador. The rst three did
so for very specic reasons: Panama, because the companies that built the Canal
paid their 75,000 workers in dollars, and this made the dollar into the actual
ofcial currency; Liberia, because it was founded in 1847 by freed black slaves
from the United States, who promulgated a Constitution modeled on the U.S.
Constitution and effected the dollarization of their economy between 1944
and 1989; East Timor, because, as it won its independence after 350 years as
a Portuguese colony, it was invaded by the Indonesian army on December 7,
1975 and fell into social disorder and convulsion, forcing the United Nations
Security Council to send in an international peace force, assume the country’s
political and administrative control, and introduce dollarization to put an end
to the monetary chaos.
According to Harvard professor Jeffrey Sachs in an article published in
Foreign Policy in the fall of 1999, the imposition of such a monetary regime
means putting a straight jacket on the economy, as it deprives the government
of any possibility of managing monetary and exchange variables to regulate
the money stock, ensure exports’ competitiveness, discourage superuous
imports, and attenuate the world markets’ blows. Under these circumstances,
the authorities tend to offset the inexibility the system instills in the economy
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with labor exibility and adjustments in jobs, salaries, social benets, and
labor guarantees, thereby counteracting the economy’s rigidity caused by the
discarding of some economic policy instruments.
Under this system, the Central Bank loses its issuing capacity and ceases
to be the lender of last resort for commercial banks in difculties. It ceases
to serve as a government bank, that is, as the lender of last resort for banks
with liquidity problems, as well as handling foreign exchange, and to carrying
out open market operations, which consist mainly in the purchase and sale of
negotiable papers as a way of injecting money into the economy.
The advocates of dollarization, however, maintain that it is capable of
restoring investors’ condence in the local currency, namely, the dollar, driving
away the danger of devaluation, lowering interest rates, minimizing exchange
risk, reducing transaction costs on the exchange market, stabilizing prices,
and subjecting local banks to the surveillance of the United States Federal
Reserve.
I recall that under my administration, as we labored against the tide at
the apogee of neoliberalism in Latin America, it was the government, not the
market, that set the economy’s main prices: the price of labor, which is the
salary; the price of money, which is interest; and the price of foreign exchange,
which is the exchange rate.
Social indicators
Ecuador was one of the rst countries to promulgate a labor code
to regulate workers-entrepreneurs relations and to guarantee the workers’
inalienable rights. The code was promulgated in 1938.
The North-American and European precedents of collective bargaining
do not go too far back in time. In 1904, the Geneva legislation regulated
collective bargaining; France did so in 1906, Sweden in 1910, and Norway
in 1911. The Weimar government in Germany introduced the issue in the
Constitution. Italy, on the eve of Fascism, introduced collective bargaining
into its legislation. The United States, in the new deal years of President
Franklin D. Roosevelt, passed the Wagner Act regulating this contractual
form. The rst Latin American State to adopt it was Mexico with its 1931
Federal Labor Law and its example was followed by various Latin American
countries.
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Collective bargaining is a very efcient mechanism that allows workers
to obtain better working conditions. The strength of a group united on a
negotiation front can achieve this.
In Ecuador, the social legislation provides especial protection to children,
the elderly, workers, peasants, and poor tenants.
The main social indicators in 2006 were as follows:
Poverty
National: 38.3 percent
Urban: 24.9 percent
Rural: 61.5 percent
Indigence
National: 12.8 percent
Urban: 4.8 percent
Rural: 26.9 percent
Open unemployment: 7.5 percent of the economically active population
Underemployment: 39.37 percent of the economically active population
Gini coefcient: consumption distribution: 0.46
Illiteracy
National: 9.1 percent
By ethnic group:
Indian: 28.2 percent
Afro-Ecuadorian: 12.6 percent
Mestizo: 7.5 percent
White: 6.7 percent
Chronic malnutrition
National: 18 percent
Urban: 13 percent
Rural: 26 percent
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Overall malnutrition
National: 9 percent
Urban: 7 percent
Rural: 11 percent
Population without health insurance
Urban: 79.4 percent
Rural: 78.9 percent
Own housing
National: 65.7 percent
Coastal area: 70.2 percent
Highlands: 60.6 percent
Amazon: 69.1 percent
Housing decit
National: 60.9 percent
Coastal area: 70.3 percent
Highlands: 49.2 percent
Amazon: 79.5 percent
Piped water
National: 48 percent
Urban: 65.7 percent
Rural: 13.6 percent
My government
When I handed over power on August 10, 1992, it was gratifying to
be able to tell my successor that the economy was growing at 5.4 percent,
exports were expanding at 16 percent a year, private investment had hit historic
records, ination had been slashed to half, and that I was transferring power
in conditions of peace, juridical security, and respect for human rights.
My government team had performed an extraordinary task and, as
result of team work, we had been able to implement 1,300 potable water and
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sewerage programs that beneted 1.2 million people; provided electricity
to 600,000 rural inhabitants; increased irrigated agriculture by 40 percent;
distributed nearly 4 million hectares of farming land to peasants and settlers
(four times as in the previous twenty ve years of agrarian reform); introduced
intercultural, bilingual education in 1,812 schools and created 4,300 new teacher
positions; beneted 700,000 aged people through the Elderly Law; and teachers
were beneted with time-of-service bonus and improved career progression;
established the children’s community network that cared for 230,000 children
during their parent’s working hours; provided daily school lunch to 1.1 million
children; assisted 1.5 million people through a comprehensive family health
system; raised the rate of children’s immunization to 70 percent; and introduced
a government credit program for micro-entrepreneurs.
At a time when the Washington consensus was at full steam, I ecuadorized
all the stages of the oil industry, some of which were in foreign private hands.
I transferred to the State the ownership of two reneries on the Santa Elena
peninsula. The operation of the 506-km long cross-country oil pipeline that
carries crude oil from the Amazonian wells to the port of Esmeraldas on the
Pacic Ocean was transferred to Ecuadorian technicians; and the management
of the Texaco-Corporación Estatal Petrolera Ecuatoriana passed to the full
partner, i.e., the Ecuadorian State.
This was our answer to neoliberalism.
DEP
Translation: João Coelho
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The great divergence:
history or path
dependence?
Results from the Americas
*
Steve De Castro
**
1. Introduction
T
he China historian Kenneth Pomeranz [2000] has argued that until the
mid-19
th
century, there was little signicant difference in the standard of living
between China and the rest of the world. Since his excellent book stopped
just then, the correct title should have been: Before the great divergence. He did
not venture a quantication of this claim in terms acceptable to economists,
the GDP per person (GDPpp) in a common currency, but cited (p.36) Paul
Bairoch’s work. Bairoch [1993] had contested Angus Maddison’s tendency [e.g.
1995] to over-estimate the differences before 1850 between the future rst and
* Acknowledgment: This paper brings together results from our recent research, some of which were obtained
in joint work with Flávio Gonçalves, now at the Federal University of Paraná, Curitiba, Brazil.
** University of the West Indies (UWI). University of Brasília (UnB)
jc010846@unb.br
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third worlds. Robert Lucas’ collection [2002] of his recent papers on growth
used Bairoch’s data to present his theory for the divergence as a sequence of
staggered Rostow-type take-offs.
This paper synthesizes our results from work which has centered on
the GDPpp data for the Americas since the start-up of growth, say 1820-50,
and especially on the former slave regions – the US, Brazil and the Caribbean.
Three topics are treated. Firstly, we found that for these regions, signicant
differences in GDPpp emerged only after slavery was abandoned, either across
them or between them and the rest of the world, including Britain. The rst
industrial revolution did not start the great divergence (see graph 1 in appendix).
At abolition, there was a fall in almost all of them but most started to grow
again, some quite rapidly as did Brazil and the US south, although neither
started to close the gap with the US north until after the second world war
(for up to 1930, see GDPpp table in appendix).
Secondly, we formalized the notion of history dependence in an annual
time series of GDPpp as a homogeneous Poisson stochastic process which
generates xed percentage increments to GDPpp at random intervals, and
tested the sequence of intervals for Brazil, 1822-2000, and the USA, 1869-
1996 (see De Castro & Gonçalves [2003b, 2005]). History dependence here is
the opposite of path dependence since, to pass the test, the stochastic process
must not change along the trajectory. While the US series passed the tests,
Brazil’s did not, due to its stagnation in the late 19
th
century, a growth disaster
shared by almost all the Atlantic slave economies, including the US south. The
US north compensated for the lagging south so that the aggregated US series
hardly deviated from its long term growth rate.
Our third topic is a theory we developed to explain the economics of this
awed transition to free workers. It uses the recent literature on the incentives
of the principal-agent model of the rm. The details can be found in De
Castro [2004]. An outline is sketched here (section 4). Slave plantations evolved
some of the mechanisms that rms now use to coordinate and supervise the
effort of their workers at multiple tasks, which increase productivity over
self-employment and other alternatives. Inserting the labor market in the
slave economy meant plantations had to pay their workers more. If there is
no technical progress or change in product prices, they may become unviable
and the economy can lapse into lower-productivity family farms or worse.
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The extension of this microeconomics argument to growth theory is
that the second industrial revolution, which did start the great divergence,
needed the hierarchical managerial structures of the rm. In the US, where
they were an outstanding success, the polity treated them at rst as cartels
(trusts, combinations), largely because of the product-market power they
exercised. So just when abolition seemed to require the dissolution of the
plantations, their central mechanisms – supervision, coordination, giving and
taking orders, were needed for technical progress to take place, certainly in
the wider economy and perhaps even in agriculture.
Our theory for the transition gives economic content to the statistical
result that Brazil’s GDPpp trajectory was path dependent, because extracting
itself from the 19th century slavery cul-de-sac launched its governance into
resistance to these new institutions. The paradox for US and thus for world
economic history is that it was its region where free workers and farmers were
located in pulverized units with relatively low productivity and little product-
market power that provided the ambience for the “big business” oligopolies
which led its growth surge. In Brazil in contrast, slavery expanded in the 19
th
century, taking hold in almost every region, so that its dismantling required a
rearrangement of incentives in the entire economy.
The rest of the paper is laid out as follows. The next section gives
the methods and sources used for the GDPpp data for these former slave
economies, especially the complete annual time series for Brazil and the US.
Section 3 gives the results of the statistical tests for history dependence, and
the last one presents our theory for the economics of the transition from slave
plantations to rms and free workers.
2. The sources of the GDPpp data
2.1 The 19
th
century slave economies
We now know that from around 1800, all workers in the Atlantic economy,
slave and free, began to increase their productivity. There was no secular decline
in the protability of slave ownership as the 19
th
century progressed. Those
regions which continued to use slaves up to around 1860 showed little sign
of lags in income per head behind those which used free labor. For example,
between 1840 and 1860, the income per head of the US south grew slightly
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faster than the north. The Cuban and Brazilian economies seemed to have
grown in the rst half of the 19
th
century. For Brazil, 1822-1869, Leff [1972
p.364] concluded that “it was a period of perceptible growth”. De Castro and
Gonçalves [2003b] used Leff´s methods to obtain an annual growth rate for
GDPpp of 0.44% per year, 1822-1850.
There are many indications that most slave regions then were somewhat
richer than the non-slave, though by nothing of the order of what happened
later in the century among nations. Our table in the appendix compares the
19
th
century GDPpp data for several mainly Atlantic slave economies. Until
about 1860, the differences across the US, the US south, the US Midwest,
Cuba, Brazil, Jamaica and British Guiana were of the order of measurement
error. For Brazil and the US, the table uses two separate secondary sources,
Maddison [1995] and Coatsworth [1993]. As we mentioned earlier, Maddison
exaggerates the initial difference, putting Brazil in 1820 with half the income
per head of the US. Coatsworth has these two plus Cuba in 1800 with more
or less the same GDPpp. Even in 1850, he has Cuba and Brazil almost equal
and the US with about 35% more. Coatworth’s is the more credible estimate.
However, both showed Brazil’s fall in income per head in the late 19
th
century.
Interestingly, both used the same two primary sources, which we discuss next.
The rst is Contador e Haddad [1975] who give an estimate for 1862-1901 of
real GDP growth at 1.98% per year which, with population growth of 1.94%,
yields a miniscule GDPpp growth of 0.04%. Another source is Leff [1982
p.33] whose rate for 1822-1913 was 0.1%.
Celso Furtado’s classic ([1963] Chap. 25) gives the rate for 1850-1900 as
1.5% which contradicts these sources. He claims (p.163) that between 1850 and
1950 Brazil sustained this rate which was “faster than the average for western
Europe”. Furtado, however, correctly observed the signicant fall in income
in the northeast, then with half the country’s population. So the difference is
due to his over-optimistic assessment of the performance of the center-south.
Leff [1982 table 3.3 p.42] gives a range of growth rates for the region “outside
the Northeast”, for 1822 to1913, all of which are “most probably, well below
(those) in the US”. His intermediate estimate was 0.2-0.4%.
The plausibility of these 19
th
century growth rates can be assessed by
extrapolating backwards from 1900 to obtain income levels. We also examine
the problem of the common currency in which the comparisons are made.
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Haddad [1974] gives a growth for real output per capita excluding services) of
2.3% per year, for 1900 to 1947. Leff [1982, p.215] adds services to Haddad’s
estimate to yield 2.2% for 1908 to 1947, which is higher than the US rate
of 1.8% for 1913 to 1947 (from Kuznets cited in Contador e Haddad [1975
p.413]). Both estimates are in the national currencies.
However, when these primary sources make comparisons, in US dollars,
with the US per capita income, they get huge over-estimates of the gap between
the two economies. For example Contador e Haddad [1975 p.413] has the
US, in both 1860 and 1970, with 10 times Brazil’s income. The main cause is
their use of exchange rates rather than purchasing power parities (PPP). The
Summers-Heston exercise for 1950-2000 corrects such errors. For example,
it gives the ratio for 1960 as just over 4 times and for 1990 3.3 times, as Brazil
closed the gap during its “milagre” which for us is really the period 1950 to
about 1980.
Nevertheless, even after this PPP correction, the gap around 1950 is still
so large (just over 6 times) that Brazil’s higher growth rate in 1900-50 would
imply it had to begin the 20
th
century exceedingly poor. Both Maddison [1995]
and Coatsworth [1993] give the ratio in 1913 at around 7 times, consistent
with the higher subsequent 20
th
century growth. So any monotone growth
in the 19
th
century would put Brazil’s economy below subsistence by 1850.
This argument is similar to the one used by Paul Bairoch [1993] to correct
Maddison’s exaggeration of the early 19
th
century dispersion.
We must conclude therefore that the coherent trajectory for Brazil’s
GDPpp in the 19
th
century must have been some growth, between 1820 and
1860, and a decline at about the same rate or higher, between 1860 and 1900
or 1913 (see rates in Section 2.2). This decline is consistent with the GDPpp
data for the US south, Jamaica and British Guiana obtained from sources with
direct estimates and shown in the appendix. Brazil’s stagnation in the 19
th
century has now reached the recent growth literature. For example Barro &
Sala-i-Martin [1998] put Brazil’s income per head in 1900 on par with India’s
and China’s – $436, $378 and $401 respectively, in 1985 dollars, compared to
$3,101 for the US in 1890 (tables 10.2, 10.3 citing Maddison).
Perhaps the main stylized fact which disguises the fall in average income
as slavery was phased out in Brazil was the massive expansion in the coffee
sector, outside the traditional, dominant northeast sugar region, coupled with
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large-scale European immigration. However, it would appear that this expansion
occurred at an almost constant real wage for free labor which was not very
different from the cost of using slaves (Michael Hall ([1969] Chap. 3 cited by
Leff [1982 p.59]). Further, these labor costs also seemed to have had the two
components of the slavery regime, namely the part which accrues to the worker,
his incentive, and the costs of sponsoring the migration. This realignment of total
labor costs and work incentives at the transition from slavery to labor markets
is the main focus of our theoretical work (De Castro [2004]).
We suggest that the major reason for the different economic performance
in the second half of the 19
th
century relative to the US, with which its
economic history bears the nearest comparison, is that Brazil had no region
outside the slavery regime when free migrants started to become competitive
with slave labor. The two regimes coexisted over many decades until nal
abolition in 1888 when only 4% of the population were then still slaves (Leff
[1982] p.54).
2.2 The annual GDPpp series, Brazil 1820-2000
and the US, 1869-1997
We claim, like Pomeranz and Bairoch, that before around 1850 almost all
economies had more or less the same GDPpp (see graph 1 in the appendix).
However table 1 below with our estimates for Brazil, shows it with implausibly
high average long-term growth rates for 1822-2000 (1.55%) and 1850-2000
(1.76%), when compared to the US with 1.68% (1820-1992) and 1.67% (1800-
1989) calculated respectively from Maddison [1995] (table 1.3) and Engerman
and Sokoloff [1997] (table 10.5 p.270). For 1850-1900, the table also shows
a small positive growth rate of 0.01%, contrary to the decline we asserted
in Section 2.1. Both are due to our under-estimate of Brazil’s GDPpp for the
period 1822-1850/60.
The cause, we suggest, is that all our primary sources for the 19
th
century
used either international trade and/or monetary data. For example, Leff used
deated money stocks to derive what he called “monetized per capita income”.
If, as he asserted, “output was growing at a higher rate in the monetized
(sector)” ([1982] footnote 21, p.361), the omission of the slower growing,
non-monetized incomes of mainly subsistence farmers would lead, with our
method, to lower estimates of initial GDP. Though slaves received incomes
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mostly in kind, these may have been counted in the monetary and trade data
from the revenue side of the plantations.
Table 1
Growth rates
Period Brazil GDPpp Period USA GNPpP
1822-2000 1.55% 1800-1989 1.67%
1822-1950 1.01% 1820-1950 1.56%
1822-1900 0.16% 1800-1913 1.60%
1822-1850 0.44% 1800-1850 1.10%
1850-2000 1.76% 1869-1996 1.74%
1850-1950 1.18% 1869-1950 1.66%
1850-1900 0.01% 1869-1900 1.73%
1900-2000 2.64% 1900-1996 1.76%
1900-1950 2.34% 1900-1950 1.89%
1950-2000 2.93% 1950-1996 1.89%
1950-1975 4.48% 1950-1975 1.52%
1975-2000 1.39% 1975-1996 2.10%
Sources: see De Castro & Gonçalves [2005]
Despite these under-estimates of Brazil’s 1822-1850/60 income levels,
plausible adjustments for this period should not alter the main result of the
statistical tests reported in the next Section because it was generated by the long
period of stagnation in the mid to late 19
th
century. Higher income estimates for
before 1850 would only reinforce the rejection of its history dependence.
3. History or path dependence in Brazil and USA
The basic growth-theoretic reference is Aghion and Howitt [1992],
for whom the source of growth in an economy is some kind of Poisson
stochastic process for the occurrence of innovations, each of which, on arrival,
increases instantaneously and permanently the GDPpp by, in the simplest
case, an exogenous, xed percentage. Given a GDPpp series, the empirical
interpretation is that an innovation is said to occur every time an economy
completed a xed percentage increase. De Castro and Gonçalves [2001,
2003a] showed how to use this notion to interpret the innovation counts as a
simulated world income distribution. The innovation counts are taken from
a set of initially identical economies that were made to follow a theoretical,
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mixed Poisson process since start-up, say 1800. The most general of such
process for a single economy is one in which the Poisson parameter (λ), the
mean arrival rate of innovations varies with both time and the accumulated
number of innovations. In De Castro and Gonçalves [2003b, 2005], we did
the opposite. We converted the annual time series of GDPpp for the Brazilian
and US economies into arrival times of innovations, and tested whether each
sequence of arrivals could have been generated by a homogenous Poisson
process, namely with constant λ. If its trajectory passes these tests, then we
say an economy’s growth is history dependent, in the sense that at start-up it
drew a λ and stayed with it.
Both rich and poor countries may exhibit this type of path. This is because
the tests are not concerned with the average rate of arrival of innovations over
the whole trajectory, the parameter in the theory that would largely generate
rich and poor countries at the end of the 20
th
century, but rather whether this
average rate was sustained or not. If an economy had sustained intervals of
deviations from its average rate, equivalent to long periods of both stagnation
and growth, then it would not pass the tests for history dependence. For
example, we expect that India and China, at least until around, approximately
1980, may also pass the tests because their low average growth rates have
been sustained. Both have now entered a period of rapid growth which, if
continued for long enough, should cause the history-dependence hypothesis
eventually to be rejected.
Brazil, 1822-2000, did not pass the tests but both its truncated series for
1889-2000, as the US, 1869-1996, did. Graphs 2 and 3 in the appendix illustrate
the difference in the trajectories for the two economies. If an economy grew at
a constant rate throughout, its trajectory would be represented by the diagonal.
Brazil’s long period of stagnation if not decline in the second half of the 19
th
century, because it was followed by sustained growth in most of the 20
th
, is
the cause of the rejection of the history-dependence hypothesis. From 1835,
it took nearly 87 years to increase GDPpp by 3%, represented by the nearly
vertical line between the 14
th
and 15
th
innovations, dened as “size” 3% in the
graphs. The US in contrast (graph 3) was never far from the diagonal and thus
from its average growth rate. Its innovations of “size” 3% continued to arrive
at a steady pace over its trajectory. However, treating the US as one economy
obscures the differences in growth rates of its then two main regions, north
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and south. The US south replicated the pattern of Brazil’s trajectory – initial
growth, then decline at abolition, then growth again, at rates more or less
equal to the US north up to 1950, and faster after that. From around 1975-80,
Brazil has faltered for a second time. The resulting lower incomes relative to
the US north were accompanied in both by the usual features – lower levels
of education, industrialization and urbanization.
Even if it exhibits history dependent growth, a country can be poor
today either because it drew a low-valued λ at start-up, or because it had a bad
outcome from a high-valued one. The latter is not a low probability event if
one remembers the shape of the Poisson density function which, given its λ,
would be the theoretical distribution for the number of innovations in each
economy since start-up, provided the trajectory were history dependent.
We addressed this question by using the full Summers-Heston data set
in 2000 to estimate the theoretical, world “mixing” distribution from which
each economy purportedly drew its λ nearly two centuries ago, adopting the
(unproven) assumption that all the economies’ growth paths were history
dependent. As we increased the denition of “size” of innovation, varying it
from 1% to 7%, the “mixing” distribution became more negatively skewed,
that is, the higher values of λ became more likely. An implication of the result
is this: should the view of narrative economic history be that a small number
of isolated, large innovations was the main engine of growth, then very few
economies would have drawn a low λ and the main cause of the divergence
would be outcomes from nearly equal mean arrival rates of innovations in the
same stationary process shared by almost all economies.
4. The transition from slavery to rms and labor markets
4.1. Brief look at previous theoretical interpretations
For us, the distinguishing feature of modern slavery is the perception by
masters, mainly in the Americas and from around the same time as the rst
industrial revolution, that they could obtain more income from their slaves by
offering both incentives and some complementary input in the core activities of
the plantation. This was the fundamental contribution of Fogel & Engerman’s
1974 book, Time on the cross, which caused a furious debate among US economic
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historians (see especially Paul A. David et al [1976, 1979]) some of whom
contested, unsuccessfully in our view and Barzel’s [1977], their nding that
the imputed real income of a slave on large plantations (more than 15 slaves)
in the US cotton belt around 1860, was more than that of a free small farmer
in the same region. To explain why these folk did not offer to compete with
slaves despite their lower incomes, Fogel & Engerman attributed the difference
to the psychic income derived from being free. Barzel’s interpretation of the
extra food, time-off etc is that they were the biological complements of the
forced labor regime, with no incentive component.
Unlike Barzel, we claim that it is not necessary to know whether, under
slavery, an incentive component was present, or even whether the plantation
offered no expertise or managerial ability but just physical punishment or the
threat of it. Once the data on the higher productivity of slaves are accepted as
true, a crucial step in the debate, one can use economic theory to check whether
a free labor regime can reproduce it or not. The extra output is available for
creating incentives to induce free agents to accept the discipline required of
supervised employees, so that the re-distribution of incomes at abolition need
not be a non-cooperative, negative-sum game where both sides lose.
Eisenberg’s work, 1840-1910 [1974 p.213-4], on the dominant sugar
industry in Pernambuco, northeast Brazil, gives the clue to our theoretical
argument for the link between the role of supervision and the fall in incomes:
“after the early 1870s, the wage rate fell steadily. All three types of free labor
(squatters, sharecroppers, and wage workers) could be hired and red at will,
without complications of contract or compensations... one cannot escape the
conclusion that in the later 19
th
century, they enjoyed little material advantage
over the slave”.
Slavery was still legal then but the northeast sugar planters were
increasingly selling theirs to the coffee planters in Sao Paulo. He noted further
that the apparently “better” treatment of slaves may well have been the source
of Gilberto Freyre’s polemical thesis on the paternalism of the northeast’s
slave masters. Our model can explain this without resort to altruism as in
Freyre, or to economies of scale as in Fogel & Engerman, but as the reward
for taking orders which, like in a rm, is justied by the gains to both parties
from supervision of one by the other. With the technology of the time, it
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was probably the economics of supervision which needed scale rather than
the other way round.
Under slavery, however, coercion can never be dismissed entirely. Or to
put it in the language of the model, since slaves did not have the right to quit,
it is likely that plantations paid them less than if they did, even if, as Fogel
& Engerman claimed, they paid them more than free small farmers earned in
the same region. The problem we will try to solve is why after abolition, free
workers did not reproduce the higher productivity.
During slavery, free workers seeking a spot wage would not be hired
even though their intrinsic skills may be identical to that of a slave, because
the wage regime would not be able to offer efcient incentives when effort at
multiple tasks must be coordinated in complex ways. Thus we have a better
explanation than Fogel & Engerman’s psychic income theory. We shall see
that under slavery, a free worker would need to be offered more than a slave
to induce him to accept the discipline of the plantation, simply because he
had the right to quit. Thus, supervisory and incentive schemes cannot be the
same for free workers, even if under slavery, legal sanctions against the use
of violence existed and were effective.
At abolition, the plantation would have to change its incentive scheme.
It will not necessarily be worse off because it will no longer have to pay out
the capital rentals of the slave contract. It does not have to buy its workers.
In fact, slavery would become redundant if these rents were greater than
any potential reduction in its gross income at abolition, due either to higher
worker payments and/or to loss in revenue resulting from induced changes
in the output mix.
These remarks can be made clearer with a bit of elementary
microeconomics. Figure 1 in the appendix shows the 4 institutions of modern
capitalism, the 3 markets as circles, for labor, capital and product and the
hierarchical rm as a triangle. In fact, as it stands the gure is contradictory.
All 4 cannot coexist in any given industry. This follows from the Euler theorem
as applied to a production function with constant returns to scale, a property
necessary in the neighborhood of minimum average cost for a competitive
equilibrium. For example, if all 3 markets are functioning, then factors will
receive their marginal products and their cost will the revenue of the rm
at the competitive price for the product. The hierarchical rm will have no
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economic role. All the incentives will be in the markets. In business school
language, the rm has no slack with which to create its own incentives.
Solow’s growth theory was based on this microeconomics, a fact which
made it almost surely out-of-date some 50 years before its publication.
Another 30 years were needed for the paradigm shift to market power as the
engine. For in modern capitalism, the product market is usually sacriced to
yield monopoly prots for the hierarchical rm’s incentives. Under modern
slavery, it was the labor market, since plantations faced competition for their
products, and ownership of slaves could be nanced in capital markets. In
Soviet Russia, all 3 markets were sacriced, even labor. The Bolsheviks believed
that hierarchical enterprises could have provided all the incentives. So we see
that under slavery, the absence of a labor market would have allowed the slack
for the plantations to create incentives for the supervision which generated
the higher productivity. Like modern oligopolies, plantations may have passed
on some of their super-prots to their slaves, throwing up the polemical data
Fogel & Engerman encountered.
4.2 A theory for the transition – from plantations to rms
Some recent theories of the rm based on incentives and power (for
a survey see Holmstrom [1999]) were used to study this failure of the Coase
argument that, in the absence of transaction costs, property rights determine
only the distribution but not total income (De Castro [2004]). The model
showed how wrong incentives at abolition can induce inefcient choices, in the
levels, of 2 activities. One can be carried out by a single agent, working alone.
The other activity requires a second complementary, cooperating, type 2 agent
for its execution. Neither activity needs physical capital. When done outside
the plantation, the rst is a stylized version of a single-family, small farm. It
is not necessarily conned to subsistence crops. For example in Jamaica such
farms even today grow bananas for export. In late 19
th
century Brazil, many
raised cattle and planted food crops for local markets. The second activity,
combined with the skill and effort of the type 2 agents, the master/supervisor,
is the core of a stylized plantation.
What is important here is that we assume that the incentives for the
effort at the two activities by the type 1 agent is better designed by the type
2 who made the xed investment up front. However, even under slavery,
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he must offer suitable inducements to obtain an effective combination with
the complementary inputs of the plantation. Asymmetric information is not
explicit in this simplied model, but it is crucial to the argument. To see this,
let us suppose that unlike here, there were increasing returns to labor (irl) in the
plantation staple. With increasing returns, the notion that an individual worker’s
effort is observable by an outside party (veriable) becomes tenuous.
The rm’s behavior in the theory can be the opposite of how the market
functions in neoclassical theory. It will pay less than the marginal product for
some activities of its employees, in order to create incentives for others that
are in its core business. The application to the abolition case is simply put.
If sugar or cotton is in the core, then the production by its employees of
subsistence crops like corn and cassava must be carefully monitored if not
discouraged. And if sugar and cotton yield more GDP, then after slavery GDP
will fall, unless some other mechanism than wage labor or sharecropping is
forthcoming. Whether the 19
th
century slave plantation can be regarded in any
sense as a rm remains moot and we return to this central issue later. Wage
labor here means marginal product incentives for effort and not a xed payment
per period plus supervision. However, if the right to quit made hierarchical
economic structures unviable, then, we claim, the technologies of the second
industrial revolution would not have been implemented. The economy may
begin to grow again but it will be in the mode of the rst revolution (mainly
British), namely with small family businesses and spot markets for labor, and
thus will be unable to close the gap with the evolving leaders.
One of two major differences of course, was the lack of the right to quit
on the part of the slaves. The plantation did not have to satisfy the participation
constraint of its workers. This is an important issue in our theory for the
transition. For example, its satisfaction is a necessary though not sufcient
condition for slavery to become redundant. The model allows the possibility
of redundancy but we doubt that this was the motive for abolition. Certainly
up to the US civil war, it was imposed on the planters by some exogenous force
e.g. the British, the US north, Haiti’s slaves. On the other hand, the immediate
resource reallocations required, redistribution in fact, were minor. The other
major difference was the possibility of the use of force by the plantation to
induce its slaves to produce more. This is Barzel’s alternative hypothesis to
our theory. Our model cannot establish whether the cooperating offered by
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the plantation was more something like coordination or managerial ability, and
not simply physical punishment or the threat of it. The rm’s power derives
mainly from its higher marginal product and wage and its right to hire and
re. The latter was not available to the plantation.
While the data uncovered by Fogel & Engerman on the incentives used
by US planters in 1840-60 convince both us and Barzel (see his footnote 7,
p.92), his interpretation is that the extra food, time off etc to eld workers
during the harvest, was just fullling a biological necessity induced by the forced
labor regime with no incentive component. It is not easy to refute such a claim.
Our criticism of his theory however, lies in the fact that it negates a priori
the possibility that with the same technology there can exist, in a free labor
regime, the material incentives to reproduce the high productivity of which
we now know the 19
th
century slave plantation was capable. This is what our
model allows. If there is an incentive scheme which yields a reasonable return
and, at the same time satises the participation constraint of the ex-slave, then
he will submit voluntarily to the authority of the plantation and produce the
output mix it requires, possibly at even higher levels than under slavery.
Freed slaves on small sharecrop farms in the US cotton south produced
even more of the plantation staple than under slavery, an apparent contradiction
to the results of our model. Ransom & Sutch [1975] have argued that freedmen
were forced to do so because of “lock-in” by creditors who insisted on a
minimal level of the cash crop in a crop-lien system, a kind of debt peonage.
Such a binding minimum here would yield our free worker a higher income
than without it but his total effort would have to increase, with all his extra
effort going into cotton. Incomes certainly did not increase, nor did work loads.
A more plausible assumption (not made here) is that the worker’s productivity at
cotton on his farm was lower because of the lack of the crucial complementary
inputs from the plantation (know-how, supervision). Thus for the same total
effort and product mix, his income will fall. He may want to compensate for
this by producing more cotton and less corn than our free worker.
Another issue on which our theory throws some light is the debate about
the role of small-scale slavery, prevalent in many regions of the US south and
Brazil (for Minas Gerais, see Martins & Martins Filho [1984] and the references
therein). The model does not need economies of scale (large plantations)
but it does need supervision and access of the slave to something the master
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has (land, a skill, a machine). Even in the absence of such complements
however, the legality of slavery allows the owner who buys the slave contract
to charge a fee, a tax on the slave’s output, provided his productivity was above
subsistence, as many were. Some were highly skilled workers. Abolition would
destroy these rents but if supervision was not essential, this would not cause
a drop in income in the economy. There would be redistribution since these
ex-slaves could continue the same jobs but now keep all their income. Some
might work even harder. So this type of slavery is not likely to explain the fall
in GDP after slavery ended.
These assertions provide the clue to the central thesis of our theory, that
a new institution, rms using supervision and the right to hire and re was a
superior mechanism to such formal contracts. Managerial expertise allied to
sharecropping contracts was unable to reproduce the previous productivity
levels. We studied the non-marginal product incentives that the rm uses
to combine the two types of skills and argue that, for certain prices and
technologies, it can reproduce the high productivity of the plantation without
the forced labor regime.
4.3 Results of the model
In the model, we showed the conditions under which GDP falls at
abolition if the plantation does not modify its incentives (for mathematical
details see De Castro [2004]). When its staple is more lucrative than the peasant
crop, the fall is much greater. There can be a drastic redistribution of the
reduced total income to the ex-slaves since in some cases they may want to
abandon the plantation staple completely. However, the plantation may then
prefer to switch to a crop which is not socially efcient (less GDP) but is more
lucrative without supervision (coffee?). This may leave the former slave with
the lower income of free peasants. In the switch, the economy would be worse
off in the sense that the average income of both sets of agents will fall as
they switch to less productive activities which do not require the supervision
which rms provide.
This is perhaps a universal dilemma at every change of regime – growth
versus distribution. The main contribution of the model is to show that, at
least in the case of the abolition of Atlantic slavery, the economics did not
pose it. Both growth and redistribution were possible, at least for slaves and
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their masters. Traders would have had to nd alternative employment, perhaps
in the new profession of labor contractor.
However, this stagnation result though historic is not inevitable in our
model. We showed that there can exist an “indenture contract” which can
yield more income for both the former slave and the former master. Indenture
here is not the long-term contract of the history texts. It is simply the static
microeconomic conditions under which the type 1 agent (the now free worker)
will accept voluntarily the authority of the type 2 (the plantation’s supervisor)
and reduce his effort at activity 1 (his peasant crop). In principle, it needs no
third party for enforcement. The existence result depends on the relative price
and technology of the two products
In practice and in principle, our “indenture” contracts require a
functioning market for them. That is, the division of the plantation output
between the two types of agents must be disciplined by an efcient outside
option for the type 1, namely working for other plantations, and not solely on
his own farm. Since like the rm, its division is not based on marginal product
incentives, there is room for much conict. Reputation as good employers
can help plantations to minimize turnover costs and become rms. Labor
legislation may also help.
We suggest that the success or failure of rms versus labor courts
would depend on how fast either can build reputation. If reputation is
basically a public good, say of the planter class as a group, courts would be
dynamically superior, provided they were not perceived to be biased. If it is
mainly a private good, then type 2 agents can learn more quickly to acquire
it and so become rms. Of course, since the emergence of courts and their
jurisprudence (their reputation) may be dependent on the political regime in
place, the resolution of this issue may go beyond economic theory. After all,
the planter class continued to control the legislatures. However, our model
assumed that effort is not veriable and so we would claim that rms should
be the superior mechanism.
4.4 Insights for a growth theory
Although these former Atlantic slave economies eventually began to
grow again, only the US south has enclosed the gap with the richer regions.
Even so it took nearly 100 years to do so. Most of the world’s economies also
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have not closed the gap, these regions are clearly among the richest. How then
can we generalize the argument to the point where it can become a growth
theory valid for all economies?
The argument of the theory is that if world market prices and technology
did not change at abolition, those former slave economies which were
unable to maintain the hierarchical managerial structure with free workers
would not reproduce the higher productivity of the plantations. The formal
microeconomic argument is now well understood. If the cost of supervision
is lower than the (welfare) loss to both of two complementary agents in
a more lucrative, joint activity that is made unviable due to one party (the
principal) having to pay out more to the other (the agent) than the value of
the latter’s outside option in order to get him to perform in the joint activity
at the correct level without supervision, then both can gain by a supervisory
coordinating and monitoring scheme. A rough measure of the static welfare
loss after abolition is the fall in GDP.
The underlying economic rationale for these managerial structures, we
suggest, is that for certain emerging technologies, any incentive-compatible
schemes designed to overcome moral hazard problems in the employer-
employee transactions were less productive than the managerial hierarchies.
The historiography of the so-called, second industrial revolution abounds with
studies of the large-throughput, continuous process industries which needed
them – steel, chemicals from coal, petroleum rening, electricity generation, the
processing of vegetable oils etc. If it were not for its labor and land intensive
agricultural operations, cane sugar production and rening would t easily
into this category. The relevant generalization then is that if an economy was
unable to implement with free workers, the management schemes of these
large production units, whether in agriculture or industry, it will not accompany
the growth in incomes of the emerging leaders.
There were, of course, some economies which achieved high incomes
by 1900 without many such structures or even signicant industrial activity.
For example we can mention the success of the family wheat farms of the
US mid-west. These economized on managerial supervision despite the
introduction of machines which in turn required larger areas for each farm.
In more populous Western Europe, this transition would be less viable, at
least for low value crops like grains. The other rich, primary exporters of the
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period such as Australia and Argentina demonstrate characteristics that seem
to allow a similar explanation. And to take the opposite type of exception,
there were those economies which set up the more productive, hierarchical
structures in only one or two sectors while leaving the workers in the rest at
near subsistence, the phenomenon of dualism.
The common element in the success at growth, when it occurs, of
either type of governance, namely managerial structures or pulverized units,
is technical progress. So the correct underlying hypothesis is whether an
economy can provide the incentives for the generation and implementation
of technological innovations, and not so much the type of production unit.
However, if the activity requires managers for economic viability and growth,
then it is likely that a former slave economy would be less able to sustain it
for lack of consensus over the incentives. Various mechanisms for third party
interventions (labor legislation, trade unions and labor courts) may be required,
especially at start-up when the rm still has no reputation for fair treatment of
its workers. If these were missing or ineffective, it is likely that the economy will
not introduce such innovations and will stagnate even when it obtains workers
from elsewhere whose opportunity costs are lower than its former slaves.
As a tentative hypothesis we suggest that one legacy of slavery and
abolition, which may well be shared by other environments, is the inability to
sustain large rms which use supervision as a mechanism in their incentive
schemes. Although there are many activities in a rich economy which are done
by small, family businesses which operate mainly in spot markets with marginal
benet incentives, it is highly likely that they obtain their innovations from
spillovers, free or bought, from the true engines of growth. The other main
type of production unit to generate innovations is the public and quasi public
enterprises like state companies and research universities. These can replicate
most of the mechanisms for supervised labor mobilized by the monopolies
and oligopolies of modern capitalism. The supervisors however would not
be subject to the discipline of the capital market, which implies that the
incentives they offer to their supervised may well be different in spite of the
labor markets both institutions face.
This insight for growth theory comes from a comparison between the
US north and south in the late 19
th
century. By 1890, when the rst federal
law against cartels was passed (the Sherman anti-trust act), large enterprises
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were being put together in several sectors in the US north – petroleum and
sugar rening are two famous examples. Such institutions were absent from
early British capitalism which had served as the model for the neoclassical
theory. We surmise that these “big businesses”, the visible hand of monopoly
power, were the crucial ingredient in the US overtaking the British level of
income before 1914.
So a general growth theory for all economies may be the ability or
otherwise to sustain large enterprises which use supervision and other complex
incentive schemes to allocate labor. Curiously, this is not a world of Solow’s
marginal-product incentives and perfectly competitive markets which leave
no economic role for the rm. In those sectors where in the 20
th
century
some have become one of the two major sources of the innovations which
drive growth, failure to do so can be fatal. The secret may not have been just
markets. It may have been how to decide on which markets to suppress, to
make room for the incentives of rms.
References
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destruction.” In: Econometrica 60(2), p. 323-351. March, 1992.
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nd
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David, Paul et ali. American Economic Review. March, 1979.
____ Reckoning with slavery. Oxford UP, 1976.
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____“Wrong incentives for growth in the transition from slave plantations
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____ “A test for mixed poisson growth in Brazil’s GDP per person, 1822–2000,
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____ “False contagion and false convergence clubs in stochastic growth
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De Castro, Steve. “In stochastic growth theory, endogenous con sumer-culture
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Annals of the 21st meeting of the Brazilian Econometric Society. Vol. 1, p. 179-197,
1999 e do Econometric Society’s 8
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____ “Demand-side resistance to creative destruction in Schumpeterian growth
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Engerman, S.L. and K.L.Sokoloff. “Factor endowments, institutions and
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economic historians of the United States.” In: Stephen Haber (ed). How
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Pomeranz, Kenneth. The great divergence: China, Europe and the making of the
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Ransom, Roger and Sutch, Richard. “The ‘lock-in’ mechanism and
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49 (April), p. 405-425, 1975.
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Appendix
GDP/head: selected countries, Americas, 19
th
century
*
Moohr Eisner Moohr Eisner Atack & Passell Coatsworth Maddison
British
Guiana
Jamaica
British
Guiana
Jamaica
US
South
US
Midwest
USA
Total
USA Cuba Brazil Brazil USA UK
£ const.
1912 1910
$ current $ const. 1985 $ const. 1990
1775 60
1800 807 904 738
1820 74 670 1287 1756
1830 92
1832 23.9 15.6 100 65
1840 74 65 109
1850 19.4 12.2 77 45 1394 1087 901
1860 103 89 128
1870 20.7 11.9 95 55 740 2457 3263
1880 79
1
205
1890 22.4 12.4 121 67
1900 128
4
704 4096 4593
1910 24.0 13.7 117 67
1913 200
4
399
2
4854 1893 700 839 5307 5032
1920
1930 15.7 93 466
4
847
3
* Table taken from De Castro [2004].
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Graph 1
Incomes per Capita relative to India
From: R. Feenstra & G.Clark [2001] Figure 1.
Figure 1
Firms and markets
All 4 institutions shown cannot co-exist. For example, if all 3 markets are
functioning, the rm will have no economic role. Modern capitalism suppresses
the goods market, Y. Slavery lacked the labor market, L, but inserting it meant
one of the others had to go.
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Graph 2
Observed vs. Uniform Distribution of arrivals: Brazil, 1822 –
2000; 3% size of innovations
Graph 3
Observed vs. Uniform Distribution of arrivals:
USA, 1869-1996; 3% size of innovations
DEP
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149
What has happened
in Paraguay?
*
Fernando Lugo
**
W
hat has happened in Paraguay? The Brazilian union leader, the Bolivian
Indian, the women of Chile and Argentina, the medical doctor from Uruguay,
the military ofcial from Venezuela, and the Ecuadorian economist are now
joined by the former priest of Guaranda and Echandía. There is a saying going
around that the bankrupt State of Paraguay now has “cura”
1
and joins the new
Latin America. We gladly join the progressive governments of Latin America.
We have much to learn from our brethren from our neighbor countries. When I
arrived at my San Pedro de Ycuamandyyú dioceses in 1994, one of the poorest
in my country, I said to people: teach me to listen. And they did teach me.
Now, I have also said to my country, as I do not think that one studies to be
President, to teach me how to be President of all Paraguayans.
The sun is rising over Paraguay. We want to embrace Latin America.
I want to see the light of day and to know its dreams. Today we can say that
the small are also capable of becoming victors. On April 20, Paraguayans
lived a moment I deem not only historic, but also heroic. It was an act of
1 Translator’s Note: an apt pun, as cura in Spanish may mean both ‘cure’ and ‘priest’.
* Conference in Flacso-Quito, June 17, 2008.
** President of the Republic of Paraguay.
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daring that allowed me in only eight months after establishing the Patriotic
Alliance for Change to be elected President of the Republic of Paraguay. In
Uruguay, it took the Broad Front they created in 1973 thirty-one years to
ascend to Government in 2004. We have incurred this tremendous audacity
of wanting to govern after only eight months of accelerated march and after
the establishment of the Patriotic Alliance for Change. In a couple of hours
the tragic history of six decades changed.
The magic word we have heard throughout the national territory was
without any doubt the word “change.” Change! The country could no longer
remain passive. Above private opinions there is an opinion that can no longer
be silenced – the Paraguayan people’s legitimate opinion, which did indeed
say “Enough!”
Change in Paraguay is synonymous with a break with sixty years of
having the Government Party in power. We celebrate that April 20 victory
in humbleness; as we have said, humbleness has vanquished supremacy. We
celebrate the birth of true democracy, introduced by the longed-for political
alternation. Hope has defeated pessimism. Joy has overcome sadness.
Courage has routed fear in our country. The people are the heroes. This
is why we say that the Paraguayan citizenry are the great protagonists, the
agents of change, including social groups, workers, peasants, Indians, and
the country’s political class.
It will be the task of scholars to provide us with a scientic understanding
of political change on the basis of the different social theories and practices,
from the theories of independence to modernity, from structuralism to
institutionalism, from a cultural approach to the property system, and so on.
The implementation of the neoliberal model in many Latin American countries
and the establishment of social regimes in the last decade have given rise to
an intense debate about change of regimes and about the cases of countries
that experience a political transition to democracy, and those that are currently
facing crises.
To the collective effort to attempt to understand the political change
process, the different social theoreticians and social scientists that join this
effort are faced with a new challenge, namely, trying to understand what
happened in Paraguay. Many hypotheses are put forth, perhaps all of them
valid. And many questions are raised. First, why is a bishop running as a
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candidate? How did change come about without violence? Some talk about
an overthrow of the Colorado Party; others talk about the routing of a Maa
ring. Some speak of a new way of conducting politics as a joint undertaking
by social actors and politicians. Why such a protracted, incomplete transition?
And many other questions.
I invite you to think an reect about the change in Paraguay, which
prompts us to ponder the different concepts about man, culture, society, social
change, and the forms of political dominion over our people and the latter’s
struggle to achieve a life with more dignity.
Paraguay has a surface area of a little over 406,000 square kilometers,
where the best bovine herd of over ten million head grazes. It produces
nearly seven million tons of soybeans on more than two million hectares for
producing biofuel. About 77 percent of landownership is concentrated on
one percent of proprietors, while 40 percent of farmers with less than ve
hectares own only one percent of the land. There are 350,000 families without
land, while 151 landowners concentrate nine million hectares.
Paraguay is a country that in 365 days a year produces the technological
and neoliberal miracle of converting water into energy to enrich multinationals
and impoverish the people. It is a country rich in natural resources but with
a corrupt, patronage apparatus that for decades has left the resources that
belong to all in the hands of a few.
This country that is rich in resources shelters a population of six million,
of which 42 percent are immersed in poverty and 19 percent in extreme poverty
by the decision of a group of antipatriotic politickers.
If I were asked about what institutions Paraguay has had in the last
sixty years, the answer would be very easy: the preponderant institution, the
Government Party, from which all institutions in the country depend. But
although we were able to do much on April 20, we may not be able to do as
much now, as reconstruction after the institutional chaos will take time and
demand commitment and much solidarity on the part of the international
community. The support of Mercosur, the Group of Rio, the United Nations,
and the recently created Unasur will be fundamental. Also required will be
recourse to multilateral mechanisms and the commitment to and enforcement
of international law.
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Paraguay has been before the eyes and in the thoughts and in the heart
of many people abroad and this requires our commitment. We do not want
ever again to be known as the most corrupt country; we want to be known
by our honesty and efciency. We do not want to deserve only police reports
and news saying that everything illicit passes through Paraguay. We shall leave
behind this island surrounded by land, the country known as a haven for the
maa, piracy, drug trafcking, corrupt politickers, and extreme poverty. We
shall cease to be famous as a country where nothing happens and become a
people studied by scholars to the full extent of our cultural riches, our history,
our people’s silent struggles, and as a nation that wants integration with its
Latin American sister nations.
What did actually happen on April 20? A simple explanation is found in
the mathematics of the ballot polls. At the 2003 general elections, the Colorado
Party won 574,232 votes while the opposition, even though divided, garnered
924,622 votes. At the general elections of last April 20, the Colorado Party
won 572,995 votes, almost the same gure as in the previous elections. Other
candidates accounted for 460,583 votes, while the Patriotic Alliance for Change
won the day with 766.522 votes. On April 20, the Colorado Party obtained
nearly the same number of votes, while the great majority of the votes against
the system went to other candidates. We can thus condently say that the
victory went to an alternative, different political project with an identity and
ideology of its own and with clear proposals. Unity triumphed in diversity.
The union between some political parties and social movements achieved a
new majority in the Patriotic Alliance for Change, in which the people saw a
real alternative for change and that collective leadership is possible.
Change triumphed thanks to the citizens’ participation, to citizens
endowed with a strong civic consciousness, who for the rst time had the
opportunity to choose among thirty-eight political groups and among about
20,000 candidates to ll 681 positions. A civic consciousness and an electoral
system established under the 1992 National Constitution, which bore fruit
after sixteen years.
How could we fail to celebrate what is in reality a triumph of the
Paraguayan people? How did this happen? The main legacy of Stroessner’s
dictatorship was cultural illiteracy. The designing of cultural policies was
seen as a revolutionary and thus forbidden act, as every cultural revolution
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ghts corruption, crime, and illegality, and calls for change, for thinking
differently. Our dominant class left the people without a history, respect for
its own culture, a doctrine of its own, and without its heroes and martyrs.
Every struggle is a new beginning, distinct from what went on before. Missed
collective experience and forgotten lessons. History is the possession of the
owners of all other things.
Paraguay’s political experience of last April 20, heralds a new way political
phenomena occur in twenty-rst century Latin America; these phenomena are
the best expression of the enduring dynamism inherent in the collectivity’s will
to decide who will be the public ofcials that will represent the popular will.
During the years when the Colorado Party held so much power, the
lack of respect for rights prevailed, as did repression. It governed rst as a
military dictatorship from 1947 thru 1953, which was replaced by Stroessner’s
dictatorship from 1953 thru 1989, which in turn was followed by a transition to
democracy. Since 1947 Paraguay has suffered under the government of a single
party, the Colorado Party, which grasped hegemonic political, military, and
economic power, maintaining the people in poverty and excluding the majority
of the Paraguayan population, particularly the peasants. All the peasants’ basic
needs have been deferred. There has been a lack of land, health, education,
technical assistance, communications, decent housing, jobs, etc.
The Colorado Party remained in power, maintaining an autocratic,
discretionary regime backed by a political unity that ruled until 1989. The
regime managed to come out from under the dictatorship through a new
military coup in 1989, instead of a democratic revolution. In a memorable
speech after General Stroessner’s overthrow, an illustrious Paraguayan
philosopher referred to politics then as gatopardismo, which meant ‘changing
something so that everything remains the same.’
After Stroessner’s fall in 1989, all the control structures and all the
political, juridical, military, and legislative institutions remained in the hands
of his followers. The accumulation model that for many years sustained the
dictatorship was based on agroexports, on fat State contracts, and principally
on the income from the great dams of Itaipu and Yaciretá. But the most
serious crisis was when political violence was directed against the people as a
way of settling accounts among the main power factions intertwined with the
groups that used politics as a venue of business. With the end of dictatorship,
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discourse became centered on democracy, but the people remained absent.
Paraguayans had been accustomed for twenty years to vote always with a
majority, cronyism-based party for President, Senators, Deputies, Governors
and Mayors. This continuous practice paradoxically became a signicant civic
capital of a people that political circumstances had for decades deprived of a
choice for change or alternation in power.
The political leaders of different ideological currents that presented
themselves on the political scene after 1989 failed often owing to their historical
complicity or because they did not measure up to the circumstances. They were
too accustomed and attached to their opposition stand and were never able
to overcome such limitations and stand up as potential government leaders.
This caused transition to democracy to halt and remain unnished, while the
model of coexistence among party top leaders exhausted itself.
The National Constitution put an end to the peaceful rupture of
hegemonic power. In contemporary society, the law is the means of deliberate
political change. But in Paraguay the law does not represent society but its
rulers. We do not have the Rule of Law but apparent legality, where the
law is permanently broken by the very authority that demands that the law
be respected. Without any doubt, an extremely important event led to the
overthrow of the Colorado regime with the promulgation of the new National
Constitution, which set power limits, provided for direct voting, established
an electoral tribunal under the control of the political parties, and municipal
elections, entrusted the judgment of the President of the Republic to Congress,
and banned reelection. But as new areas of political life became prey to
patronage, the model lost legitimacy. People voted, but did not elect.
Politicians continued to violate the Constitution, failing to comply with
many rights and duties. But when they intended to reform the Constitution to
permit reelection, the people took to the streets and more than forty thousand
cried out: ‘Dictatorship, never again!’ That was the beginning of the Citizens’
Resistance Ruralist Movement. Political power must not be held for ever. Power
must also be relinquished. Anyone who enters politics thinking that he is going
to enter eternity is mistaken. All government is and must be transitory.
The country’s new political actors – the social groups – have understood
that the time has come for the country to look politically at its social problems.
Peasants, workers, the young, and women were fundamental factors in the
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peasant struggle and in the neat rupture by the middle class. The peasantry
waged many battles that climaxed in March 2003 in the mobilization of
thousands in Asuncion, which cost one dead and several injured. There have
been also seizures of land and many actions by young people, who have also
had their martyrs.
Late in 2005, peasant movements emerged, determined to make part
of the country’s political life through their own representatives in Congress
to defend their rights. The peasants’ combativeness played a key role in this
process. The middle class, tired of corrupt governments, of watching the
country’s decadence, and of the lack of a democratic environment, began to
question its political leaders, to face up to them, nally breaking up with the
Government Party and joining the Patriotic Alliance for Change.
One element that greatly helped us in Paraguay – as it does anywhere
– was a free press. The unrestricted exercise of freedom of expression was
crucial for arousing civic consciousness and showing the hidden, perverse
face of power. Valiant journalists also had their martyrs in the ght for the
unimpeded exercise of their profession of telling people the truth despite the
pressure of the powerful.
I believe that the Colorado Party became severely debilitated because in
sixty years it was not able to provide effective answers to the great challenges,
particularly the social and economic challenges faced by the large mass of
peasants and workers and by the Paraguayan population in general. Its lack
of leadership helped us, as did its lack of unity. Today the Colorado Party is
fragmented. A Colorado fragment forms part of the Patriotic Alliance for
Change, something unthinkable in Paraguayan politics.
The Authentic Radical Liberal Party also realized that it could not go on
trying to arrive at power alone, as its numbers were not enough. A year ago,
the party’s assembly decided not to have a Presidential candidate of its own
and instead nominated Fernando Lugo as its candidate, provided one of its
members would run for vice-President.
On August 27, 2007 most parties, political movements and social
organizations for national conservation formally established the Patriotic
Alliance for Change. The stakes were impossibly high owing to the failure of
the original coalition, from which two parties split off – the Unace [National
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Union of Ethical Citizens] and the Patria Querida [Beloved Fatherland] parties.
Unace won 21 percent of the votes, while Patria Querida won three percent.
The power elites, the possessors of power proved incapable of
interpreting the great social needs and continued to lead a political life that had
nothing to do with the social and economic situation, creating an increasing
institutional vacuum until arriving at today’s situation in which, strictly speaking,
the Republic does not function, as the political elites only think of enriching
themselves.
A new, important element that deserves further study and reinforcement
is collective leadership. Finally, on December 17, 2006, the former priest of
Guaranda and Echandía received over one thousand signatures authorizing
him, with the help of the political parties and social movements, to organize
a collective leadership to arrive at the country’s highest position.
One swallow doesn’t make a summer. We have asked the people never
to leave us alone, as we must pursue democracy together. The star actors are
the citizens that day by day constituted this silent, patient, and perseverant
majority rm in its convictions and certain that the Fatherland deserved a
different future. This forgotten people excluded from the ofcial banquet
table, this suffering, working, migrant people in search of opportunities,
whose new determination to build a new Paraguay could not be shaken by
ofcial propaganda, awaited the moment to celebrate the great civic festivity
of April 20.
Today Paraguay is a privileged space appropriate for social, political,
economic, cultural, and ethical reection. No rational model can be imposed
on a society. Belief in a Cartesian social methodology is a fallacy on the part
of those that pretentiously wish to transform their dreams and passions into
social realities. A rational design of social change is not possible. Social change
is a spontaneous product of cultural development. It is peculiar to each people,
and Paraguay will have its own. There is no one-size-ts-all democracy model.
Each people must learn democracy on its own. Thus, when we are asked
whether we will adopt Chávez’s, Evo’s, or Correa’s model, we say that Paraguay
will have its own process and will build its own democratic model.
The Patriotic Alliance for Change was formed to benet the country’s
poorer. In the rst place come the Indians, the landless, the homeless, those
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deprived of educational and health services. They ask us, they demand from
us, they clamor all around the country for a real change in Paraguay. It is not
a question of changing Presidents; we have already done this. Our vision is to
change history, to put an end to over sixty years of a hegemonic party.
The Patriotic Alliance for Change’s six programmatic axes did not come
out of a laboratory, or of Fernando Lugo’s head or of his circle. They were
dened as we traveled throughout the country three times, in over six hundred
meetings at which no speeches were made and at which people were listened
to instead.
The six axes are integral agrarian reform; economic reactivation with
social equity; recovery of the Republic’s institutionality, so that institutions
will serve all Paraguayans, without any sign or banner of any political party or
institution; a sovereign, independent Judiciary; a national emergency plan; and
recovery of sovereignty, particularly energetic sovereignty. These six axes are at
the same level. We want public institutions to recover their institutionality.
Paraguay’s image is going to change, we are convinced of that. I remember
a poem by Paraguayan poet-magistrate Manuel Ortiz Guerrero when I think
of Paraguay’s and Latina American predominantly social and progressive task
today: “Out of the mire morning lilies raise their heads, drink up the impurities
of pleasant shade, whose bunches yield the sacred wines.”
Ours is a major task, as it requires a twofold endeavor. The rst is to
represent the interests of the vast, politically excluded sectors, to aim real
politics at those groups that could fall victims to inciters and demagogues or to
the destructive action of extremist, violent parties. The second is to preserve
the political space, which is a much more difcult task, if one considers that this
space must often be created, which in turn implies the citizen’s politicization.
Casting a vote took nearly twenty years of protracted transition; but it was
the outcome of the creation of a civic consciousness based on constitutional
rights that inspired peasants, workers, citizens in general, and the free press
to ght on.
Paraguay has demonstrated that owing to the disruption of its juridical
order, the right of law, the possibility of having functional political and juridical
institutions, its citizenship virtues, democratic calling, capacity for work, and
social commitment have all been perversely and consistently compromised, as
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has its self-esteem, owing to the imposition of all sorts of stigmas that have
hurt its citizens, both at home and abroad.
Prosperity is the result of millions of private exchanges in a State-
guaranteed environment with more liberty, more justice, and more solidarity.
Only just political institutions can engender a just society, in which they not only
play their role according to the rules of the political game but also determine
the values to be established in the political community.
Citizenship, sovereignty, human dignity, unrestricted freedom of thinking
and expression, solidarity, collective identity, and cooperation instead of
competitiveness must be subsumed in justice.
Latin America’s great hope and what it can offer the world is the vast
array of vibrant social movements that dare to put everything into question,
from their own governments to the way corporations contaminate their land
– and this questioning may or may not be expressed at the ballot polls. Some
allege to embody the left, others allege to represent the people, while others
allege nothing. But what ultimately matters are not labels but the pursuit of
a new way of governing that enhances actual democracy and puts an end to
hunger and poverty.
Let us together make Latin America into eternal springtime, so that our
peoples may have abundant soil to cultivate their mind, work in freedom, have
their own nest, their shelter, their bread, and the medicine they need, so that
each may develop its own identity in its community.
I do believe that, with God’s help and the invaluable contribution of all,
we will live better in our beloved Latin America.
DEP
Translation: João Coelho
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159
The Peruvian paradox:
economic growth and
political disapproval
Julio Cotler*
S
ince the “transition to democracy” in 2001, Peru has experienced
a paradoxical situation: despite strong, sustained economic growth, the
population disapproves of the government in place, the ofcial institutions,
and the democratic regime. This situation aggravates the problems and conicts
that date from way back and persist to this day, when precarious leadership,
divided political representations, and obsolete state organisms are unable or
unwilling to devise new social and political cohesion mechanisms appropriate
for the new times in which the country is living.
Owing to the liberalization and economic opening embraced in the
early nineties of the past century and to the macroeconomic equilibrium
public administration has maintained since then, the explosive demand
for commodities and the favorable terms of trade have fueled Peru’s
vigorous economic growth with low ination for seven consecutive years.
Notwithstanding the unfavorable external environment now, it is estimated
* Universidad Nacional Mayor de San Marcos
jcotler@iep.org.pe
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that this trend will continue in the next few years, leading some to speak of a
possible “Peruvian miracle.”
Indeed, between 2001 and 2008, the economy grew at an average yearly
rate of 6.5 percent; export earnings increased fourfold; and GDP grew by 50
percent. This has allowed the Treasury to accumulate international reserves
and to anticipate payment of the external debt and signicantly reduce it.
These facts have also helped double private investment and ensured that
public administration can count on rising scal revenues to promote poverty
reduction policies and decentralization, and in general to give impetus to
internal demand, thereby fostering jobs and income generation.
President García’s strong political support of macroeconomic stability
and investment has created a propitious economic environment and lowered
the country’s risk, leading the Fitch ratings agency to accord investment grade
to Peru’s government-guaranteed debt, and it is expected that other ratings
agencies will do the same. These circumstances have favored the signing of
a Free Trade Agreement with the United States and the ongoing negotiation
of similar agreements with Asian countries and the European Union.
And yet, despite this unprecedented economic picture, President
Alejandro Toledo’s administration (2001-2006) was disapproved by a huge
majority, and now, two years into Alan García’s government, about two thirds
of the population disagree with the current administration. This explains why
Toledo and García have been the most unpopular Presidents in Latin America.
This rejection of government policies has been reected in complaints
and protests by different social and regional sectors, often involving varying
degrees of violence. Criticism of the government is also expressed through
opinion polls. This fuels speculations about the possibility that an outsider
might win the majority of votes in 2011 and change the current state of affairs,
as was the case in 2006, when Ollanta Humala lost the election to Alan García
by a mere two percent of votes.
Together, these critical protests point to a state of social instability
and public insecurity, a more than sufcient reason for entertaining doubts
about the country’s future course and for some ratings agencies to delay the
granting of investment grade to Peruvian nances, despite the country’s
excellent economic performance, and for transnational enterprises to sign
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agreements with the governments to ensure the juridical stability of their
investments.
As a rule, the widespread complaints and the violent protests against the
Toledo and the García governments may be attributed to the fact that they
did not ll, nay, that they betrayed their campaign promises to give priority
to satisfying the demands of the popular classes and the Andean regions
through the creation of jobs and income opportunities not only to reduce but
to end poverty and social exclusion. The alleged explanation for this was the
neoliberal model adopted by the authoritarian regime headed by Fujimore and
Montesinos, which favored exclusively foreign enterprises and the rich.
Rejection of the government and of the political system in general might
thus be due to the fact that economic growth has not been accompanied
by distributive policies geared to the sectors excluded from the market and
from the state apparatus, which makes even more visible the unequal, unfair
distribution of social resources.
But these justiable arguments ignore the sustained economic growth
of recent years, which has also favored the growth or employment, income,
and consumption, thereby helping lower the poverty level from 44 percent to
39 percent of the population, presumably creating new possibilities of social
mobility. Such arguments ignore also the fact that regional governments have
received an unprecedented volume of resources and that public services
have been and will continue to be extended to sectors and regions heretofore
excluded from the public budget.
Attempts have been made to explain this popular discontent by
psychological factors. In this regard, IADB specialists have concluded that
“as economic growth increases, satisfaction declines, at least initially,” owing
to expectations and frustrations that encourage comparison with “others”
supposedly in a better condition,
1
an assertion, which, incidentally, recalls
Albert Hirschman’s “tunnel effect.” This argument is equally plausible but does
not take into due account, among other things, the persistence and intensity
of the dissatisfaction of the majority of Peruvians with the authorities after
seven years of continuous economic growth.
1 Luis Alberto Moreno y Eduardo Lora. La brecha de satisfacción. El crecimiento y sus consecuencias.
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To address these questions and complement these interpretations, we
shall briey review the structural conditions surrounding economic growth
and the disapproval of the political system: social inequality, the State’s debility,
and the fragmentation of political representation; then, we shall also proceed
to a summary review of relations between the authorities and the different
sectors of society under neoliberal policies.
Social divisions
Peru has been faced with sharp regional and class-based social divisions
that have caused a double fracture: between the dominant sectors and the rest
of society, and between the populations settled in the capitalist and “modern”
urban centers on the coast and the peasants anchored in a “traditional,”
community-based, and indigenous universe. Hence, the notion that circulates
freely about the existence of “two countries” that are socially, racially, regionally,
and culturally separated, each with few, weak bonds uniting its members.
The rapid, profound social changes of the last decades, though, have
helped overcome this dualist view and favor a perception more closely attuned
to the country’s social and cultural diversity. Since the mid-twentieth century,
migration from the rural areas and the sierra toward the urban coast have
modied the population’s geographical distribution, and expanded capitalism
and the labor market, just as the expansion of education and the means of
communication have diversied the composition of the social strata, with
emphasis on the development of the middle, professional, and entrepreneurial
classes of diverse origin and trajectories – all of them “mestizo.”
Simultaneously, the dissemination of new consumption patterns and life
styles by the media and by those residing abroad contribute to the emergence
and development of new urban cultural expressions that favor the fusion of
traditional and cosmopolitan conceptions and practices.
This new circumstance, however, does not manage to dissipate the
traditional view of the sierra’s “backwardness,” as this region concentrates
the poverty and indigence of the indigenous peasantry that constitutes the
majority of the “marginalized,” actually exploited population. This view is
prolonged in the descendants of Andean migrants in the cities, who make up
the bulk of the popular segments.
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These conditions explain the fact that the high-income, privileged sectors
– both white and mestizo – discriminate on a daily basis the popular urban
sectors of Andean origin, thereby hindering social mobility and intensifying
their low self-esteem, and reinforcing the traditional distance and the mistrust
and hostility between these social classes.
2
Paradoxically, this behavior tends to
aggravate as the popular sectors increasingly enter different public scenarios
– entrepreneurial, cultural, political – challenging the traditionally privileged
sectors and pressuring to have their citizens’ rights and cultural practices
recognized. This exclusion and discrimination context is a major factor of
the unstoppable emigration toward developed countries, which has reached
10 percent of the country’s population.
Moreover, these social divisions are accompanied by the historical
opposition of the country’s “interior” to Lima’s traditional bureaucratic
centralism, an opposition forged around patronage and renter practices of
the dominant groups that have controlled the State. Today, these conictive
relations tend to revive owing to the restrictions imposed by the “central”
government on regional governments.
Lima’s classic dominion over the provinces tend to decline, though,
as democratic opening and decentralization have led to the attempt to elect
political representatives capable of mobilizing local and national opinion
against the limitations imposed by Limeño authorities. Also, these phenomena
favor the emergence of new leaders and social movements capable of
negotiating with the government the distribution of resources for propelling
regional development.
In turn, in some areas of the country, economic growth and the expansion
of informal, or even criminal activities, such as contraband, drug trafcking,
and illegal logging, contribute to the development of private activities and
the attendant emergence of new social actors that foster social and political
dynamics in relative independence from the capital.
These social divisions become very clear at elections and in opinion
polls about economic policies. At the 2006 elections, it became clear that
2 A world values survey done by Michigan University in 2002 showed that Peru had the highest index of
interpersonal mistrust of 163 countries. The same survey done last year, indicate that Peruvians consider
themselves the least happy among Latin America’s twelve countries.
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the urban, coastal population voted for García, while the sierra and the rural
rainforest populations voted for Humala. The high- and the medium-high
income segments (A/B) living on the coast – the “winners” – in their majority
are in favor of “neoliberal” choices and thus have supported Toledo and
now support García, while most of the middle and popular classes (C/D/E),
especially those living in the sierra and in the rainforest – the “losers” – incline
toward politics of a nationalist and populist cast and constitute the bulk of
the population that rejected Toledo’s administration and now criticize García’s:
by mid-2008, García had the approval of 40 percent of the population of
Lima and the northern coast, as compared with 7 percent in the south and 11
percent in the rainforest.
In sum, despite the major changes Peruvian society has experienced
for some decades, traditional social, cultural, and regional divisions persist
in different degrees and guises, bringing into relief the unequal nature of
development. Thus, there are still factors that hinder the establishment of
new forms of social cohesion that are necessary to the gestation of a political
community’s “corpus of ideas.”
State’s debility
Similarly to other Andean countries, Peru has also suffered from frequent
interruptions of the constitutional order, owing to intermittent military
interventions, an evidence of the lack of legitimacy of state authority and of
the consolidation difculties the state faces.
After independence and throughout the nineteenth century, the continuous
factious struggles between power groups in Lima and in the provinces led to
the installation of about seventy governments, which means that each lasted
for an average of one year. Then, beginning in the last century, the ght
against the oligarchic regime headed by the American Popular Revolutionary
Alliance-APRA led to a long dictatorial period that was interrupted in 1945
owing to international circumstances. Nevertheless, in a few years the historical
tendency was resumed. Since then, ve interruptions of the constitutional
order occurred, with corresponding “transitions to democracy.” That is, in
the second half of the twentieth century, at an average of every eleven years,
the country experienced an abrupt change of political regime.
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Since 1945, the democratically elected governments sought to redistribute
income to solve the profound inequalities through economic policies that
affected the dominant interests, the reason why these policies entailed economic
disorder and political crisis. The military coups and authoritarian regimes that
followed those governments checked the distributive pressures, persecuting
popular organizations and their political representations, while privileging the
expectations of investors, preferably foreign investors, liberalizing the economy,
and restricting the role of the State to discharging repressive task functions.
The successive political changes were accompanied by unceasing
institutional changes that responded to the varying interests of the political
protagonists, while administrative personnel was recruited indifferently from
among the clients of the de facto powers under the dictatorial periods and from
among the militant parties under the democratic governments. This favored
the establishment of private interest networks that supported and fostered
corruption, consenting to and allowing the privatization of public resources
and spaces under any of the political regimes.
Cronyism of the State militated against civil service’s professionalization
and the consolidation of the central authority, which thus lacked the economic
and institutional resources to control the vast, mountainous territory or to
enforce the law in society. This is still the case today, leading different sectors to
complain about the “lack of State,” a complaint that has different connotations
for different social sectors, of course.
For the workers, the poor, and the excluded, this lack elicits an acute
feeling of abandonment and insecurity; this is why their spokesmen call for the
State’s active, direct participation in meeting their needs in respect of jobs and
income, education, health, and housing. This demand is particularly insistent
because public investment in these areas has been traditionally small – the
government’s social spending is equivalent to the Latin American average.
This lack of State has given rise to widespread “informality,” which
involves about 60 percent of the active population, based on practices that
ignore or blatantly reject ofcial rules, thus facilitating the activity of those
engaged in drug trafcking, illegal logging, and contraband, who share the life
of the remains of subversive movements on the sierra and in the jungle.
For the high-income segments, though, steeped in neoliberal ideology,
the State’s presence should be limited to promoting private investment and
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enforcing the laws of the market; and rmly ensuring property rights and
encouraging better economic competitiveness as necessary conditions for
maintaining the current pace of economic growth and for “including” the
popular segments into the market, as recent governments have been doing,
albeit partially.
Given the State’s evident “debility” in meeting social demands, controlling
the territory, and enforcing legal order, one should not be surprised at the
very low rating given by the different social sectors to public bodies and
State powers, with the attendant loss of prestige by judges and Congress
members, political parties, and the democratic regime in general. This is why
the Latin Barometer assigns to Peru the region’s highest index of disapproval
of government performance and the democratic regime.
As a rule, the Head of State is seen as being responsible for these
shortcomings, because its central political position and the undiluted cult of
Presidentialism help consolidate the idea that these aws are due to “lack of
political will” or to the government’s lack of interest in redressing them and
in putting things in proper order.
Despite constant pressure from society and multilateral organizations,
governments have failed to implement “second generation” reforms to
adapt the obsolete public institutions to the requirements of globalization
and social demands. Except for highly specialized agencies, the advance of
public administration reforms has been uneven and limited, owing mainly to
the opposition or lack of interest on the part of the fragmented, discredited
political representation.
The crisis of political representation
Beginning in the thirties and continuing well into the past century, the
sharp social divisions gave rise to antagonistic, intolerant political positions.
During this time, the intermittent installation of authoritarian regimes entailed
protracted crisis of representation that, coupled with the repression and
political exclusion of political organizations of the popular and the middle
classes, favored their fragmentation and political impotence.
Difculties in organizing legitimately and advance their demands through
institutional means encouraged popular and middle classes to ignore authority
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and its legal framework, reinforcing rejection of the State; on the other hand,
State repression lead both to clandestine channels to secure political participation
and violence as an instrument of social change and political inclusion.
The rupture of the oligarchic regime and the signicant social changes
under the military regime in the seventies, and the extension of the voting
right to the illiterate – indigenous peasants in their majority – under the 1979
Constitution encouraged the participation of sectors heretofore excluded
from public affairs. As a result, the voting population grew twofold in the
following decade.
After the 1980 transition to democracy, society and politics ran on opposite
tracks, which triggered intense conicts and serious governability crises. This
“lost decade” was a particularly critical period in modern Peruvian history.
The frequent general and municipal elections brought into light the
voters’ extreme volatility and political fragmentation, which contributed, as on
previous occasions, to the hardening of classical antagonistic and intolerant
positions in the agitated parliamentary life and to the failure of the efforts to
establish a constructive relationship among the actors toward the consolidation
of a political party system capable of endowing the democratic regime with
stability and legitimacy.
Under these circumstances, the subversive activity of Sendero Luminoso
[Shining Path] and then of the Tupac Amaru Revolutionary-MRTA Movement
exposed the rejections and alienation of signicant contingents of young
people and professionals vis-à-vis the State,
3
while these organizations’ alliance
with drug trafcking enabled them to checkmate the public forces and terrorize
society. Indeed, between themselves, the subversive movements and the armed
forces killed 70,000 people, in their vast majority sierra indigenous peasants
from the south.
Moreover, the permanent political instability and the constant changing
of economic policies in the sixties and seventies entailed frequent disequilibria
that hindered the capitalization of the entrepreneurial sector and of the country
in general. The per capita income recorded in 1975, for instance, remained
3 Also exposed were their differences and mutual intolerance: while the Sendero militants were mainly from
the sierra and were identied with the Maoist ideology, the MRTA members were from the coast and followed
Che Guevara’s orientation. These movements were clear expressions of the existing hostile social, cultural, and
regional divisions.
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stagnated over the following thirty years. Under such difcult circumstances,
the effects of the 1982 international debt crisis, the disasters caused by the
El Niño phenomenon in 1983, and the destruction of public property that
caused losses totaling twenty-ve billion dollars, equivalent to half of GDP,
aggravated the fragile economic situation that had painfully dragged on. Lastly,
the uncontrolled hyperination under the García administration, 1987-1990,
and the intense social conicts ended up by dismantling the State and the
political and social organization.
Owing to the conjunction of all these factors in the late eighties, Peru
experienced a serious organic crisis of the social system, would put into question
the country’s governability. The widespread discredit of public institutions and
political parties favored the rise and triumph of the “outsider” Fujimore at
the 1990 elections. Inciting society’s disapproval of the “partycracy,” Fujimore
staged the “self-coup” of 1992 under general acquiescence, and seized
power in alliance with the national and international de facto powers, thereby
inaugurating another authoritarian regime that promised to last twenty years
for denitively completing “national reconstruction.”
The successful economic adjustment and the capture of the leaders
of the subversive movements consolidated society’s approval of President
Fujimore, while control of the power structure ensured his reelection in 1995.
However, the frequent evidences of arbitrariness and corruption by Fujimore
and Montesinos triggered internal and external reaction against the President’s
fraudulent attempt to be reelected again in 2000.
The “betrayals” of the “lesser evil”
The last transition to democracy in 2000 opened a wide range of
opportunities to address the widening social split, the State’s lingering weakness,
and political fragmentation. The way these pending issues were tackled and
its consequences explain in large measure the levels of social dissatisfaction
with the performance of the authorities and the public institutions, and with
the democratic regimes, despite sustained economic growth.
In view of the mobilizations against “Fujimorism,” Alejandro Toledo
convened “all bloods.”
4
With the backing of democratic gures and human
4 A reference to J. M. Arguedas’ famous work alluding to the different social segments.
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rights advocates, he headed the mobilization of the “four suyos,”
5
which
allowed him to consolidate his candidacy for President by rallying a motley
group of sympathizers, friends, and relatives (and many opportunists) to form
the “Peru Posible” party and run against Lourdes Flores, a representative of
the neoliberal right, and Alan García who, having returned from exile, was
restoring APRA’s shakey organization to run for President again.
Toledo managed to win popular support by stressing his Andean origin.
He had come from a popular neighborhood of Chimbote, a provincial town,
who had by his own efforts achieved a successful professional career abroad.
To further stress his origin and his ties to the indigenous peasantry, he identied
himself with Pachacútec
6
and celebrated this triumph at the elections with
allegedly Inca ceremonies in Cuzco and Macchu-Picchu.
Toledo sought to represent the “original peoples” that made up the
poorest segments but also attempted to fulll the social mobility aspirations of
the popular classes, not only because he knew from experience their needs but
also because he felt capable of doing so owing to his professional qualication.
Moreover, Toledo endeavored to win the support of entrepreneurs and
the middle class by emphasizing his international academic and professional
background and by showing himself as determined to take into consideration
their aspirations in the context of the ongoing globalization, for which he
surrounded himself with renowned professionals and experts.
Thus, Toledo tried to represent two divided, opposite worlds. But often
this attempt was expressed through stereotypes and caricatural formulas that
elicited animadversion and mockery as well as racist remarks from different
gures and urban segments. Notwithstanding these reactions and Fujimorism’s
hatred of him, the possibility that García might return to power allowed Toledo
to win over the varied, dispersed social opposition to the APRA and win the
runoff elections as a “lesser evil.”
From the beginning, Toledo set himself the task of furthering both
stabilization and economic growth and the strengthening of the democratic
system, a task that in the view of radicals of any political shade was tantamount
to nding the quadrature of the circle.
5 The “suyos” were the components of the Inca Empire.
6 To Pachacútec is attributed the organization and consolidation of the Tawantinsuyo Empire.
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While the government maintained the “neoliberal” policies introduced by
Fujimorism, Toledo took the initiative of making into reality the pact among
“all bloods” under a “National Agreement” by means of which representatives
of the parties and workers organizations, and of the churches and “civil
society” organizations would conrm their support for certain “State policies,”
aimed at ensuring their continuation in the long run. At the same time, the
Executive agreed with the Legislative about going forward with political and
economic decentralization to fulll a long-standing provincial aspiration.
Toledo ratied the establishment of the “Truth and Reconciliation”
Commission entrusted with investigating the causes and consequences of the
subversive movements, while supporting the prosecution of cases of corruption
and human rights violations under Fujimore, but also those committed by the
governments of the eighties headed by Belaúnde and García, involving over
one thousand people, including entrepreneurs, military ofcers, and politicians.
Toledo attempted to address political fragmentation and the State’s
debility by associating certain actors and social interests, while excluding
others, so as to ensure the necessary economic growth for reducing poverty
and social inequalities.
However, the President’s uneven and frivolous deportment left him bereft
of credibility, which hindered the consolidation of his “Perú Posible” party
and induced its leaders and the members of the government’s support base
into pursuing their private interests, thereby undermining the wobbly party
foundations, as well as into actual sabotage of government proposals. Once
again, party fragmentation and irresponsibility were seen as shady political
maneuvering, which further discredited the political system.
As was to be expected, democracy encouraged the sectors that had
remained silent under authoritarianism to voice their demands of every
sort, while electoral campaign promises kindled social expectations. The
brand-new regional governments demanded the immediate relinquishing of
attributions and the allocation of economic resources to pursue their objectives
independently from the “central” government. Lastly, the new conditions
favored the development of social movements opposed to the proposed
privatization of public services, while Alan García and APRA’s well-oiled
machinery proposed nationalist-populist measures contrary to “neoliberalism,”
which entitled them to head the opposition to the government.
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As the country’s economy was beginning to come out of the international
crisis, the proliferating social demands were never heeded owing to inefcient
public administration. This, together with the frivolity and nepotism
surrounding the President, soon instilled in the popular segments a generalized
feeling that Toledo had “betrayed” his promises. This feeling was reected
in his rapid discredit: early in this administration, Toledo was approved by 62
percent of the population, but after three months this approval fell by half
and did not stop falling until the end of his term.
While APRA ignored the National Agreement, García supported the
frequent mobilizations against the government to force it to implement
the distributive policies that had such disastrous consequences under his
own administration. Even more, García led the calls for revoking Toledo’s
Presidential mandate.
In brief, the technocratic dictates of the economic policies and the
fragmentation of political representations made the National Agreement
unviable as an umbrella under which strategic social actors could negotiate,
leading to the classic clash between agents that held to antagonistic
visions and interests. History thus seemed to repeat itself with predictable
consequences.
While the social environment’ agitation mounted and it looked as if the
governability crisis would put an end to the democratic regime, the economic
recovery and growth provided a breathing space on the eve of the 2006 elections.
This time, García was running against Lourdes Flores, in a replication
of the old rivalry between populists and liberals. Suddenly, the appearance of
Ollanta Humala with his ethnic-populist, xenophobe positions changed the
political scene, given the extraordinary support he won from the excluded
masses on the sierra and in the jungle.
At the rst round, García defeated Flores on the basis of the urban
and coastal votes, as he accused her of representing the “wealthy.” The
runoff opposed Humala to García. As García recognized his responsibility
for the failure of his rst government and asserted that he had changed his
economic orientation, and faced with the danger represented by Humala,
the coastal electorate had no alternative but to give the victory to García as
the “lesser evil.”
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Early on in his second administration, it became clear that, as he
had tardily announced, García had indeed undergone a drastic political
conversion: he had abandoned APRA’s historic positions of a nationalist,
distributive nature, and renounced the measures that had red him to make
life impossible for Toledo; on the other hand, he adopted the entire range
of liberal proposals put forth by Flores, whom he had defeated by accusing
her of representing the rich. Thus, for the APRA camp and for the middle
and popular classes on the coast, who had bet on García, this conversion
was a “betrayal,” while Humala’s followers did not cease classifying
this sudden change of behavior as the discarding of the People’s Party
historical ideals.
As economic growth reached cruising speed, it became clear that results
were unevenly distributed, favoring the middle and the upper classes on the
coast, which initially held bigger and better assets. Under these circumstances,
a silent opposition to the government mounted, as shown by opinion polls.
But this opposition is now assuming more aggressive forms, with regional
strikes and roadblocks. These local manifestations do not nd political
expression, though. The organized APRA camp takes advantage of the political
fragmentation to make punctual alliances which temporarily manage to lower
the temperature in Congress, while efforts to (re)establish political fronts to
put up an organized opposition to García and APRA fail.
The public dissatisfaction shown by opinion polls and the media and by
protests and roadblocks with the incapacity of the political system and public
administration to improve the distribution of the fruits of economic growth
has elicited unusual reactions from President García. In a series of articles
published under the generic title of “El perro del hortelano” he shows an
authoritarian face as he indiscriminately accuses critics of his government
of being “archaic”, “communists”, “fake environmentalists”, among other
defamations and takes the opportunity to attack human rights supporters
and criminalize social protests; thus he calls “terrorists” the promoters of
the July 2008 national strike, and makes use of the armed forces to maintain
the public order.
As the rising prices of consumption goods strain the narrow budgets of
the popular sectors and the Executive is bent on checking growth to contain
ination, the ood of supreme decrees to propel the “capitalist revolution”
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and modernization may add fuel to confrontation and society’s dissatisfaction
and may have unforeseen consequences soon to be seen.
In conclusion, two years into his administration García faces growing
protests against the technocratic mechanisms he uses to address pending
issues – social division, State debility, and political fragmentation. Faced with
protests, he seems to be inclined to authoritarian solutions.
Thus, Peru once again exposes its structural difculties in democratically
advancing toward capitalist development.
DEP
Translation: João Coelho
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Political, economic and
social introduction of
Suriname
C.A.F. Pigot
*
1. General characteristics of Suriname
Suriname can be considered a ‘small island state’
S
uriname has a small population of 492.829 (Census held in 2005) that
is ethnically diverse. Ethnicity inuences the political (party) structure, the
economic (facilitation and sector claims) structure and social life (marriage
preference). Suriname can also be considered as an “island” in its region
because it has better relations and connections with countries at a distance
(8 direct ights per week to Holland, 3 to Brazil, 2 to Guyana and 2 to French
Guiana) and the country is struggling at the periphery of Caricom, Latin
America and new globalization structures.
Suriname has a dualistic economy
The country has a highly modernized international oriented export sector
of alumina [Alcoa/BHP Billiton], shrimps [Korean/Japanese/Surinamese],
* National Party of Suriname (Nationale Partij Suriname)
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rice [national producers], crude[State-oil], logging local and far east] and gold
[IAM-gold and Newmont]. At the other hand there is small scale subsistence
production that is partly commercial and oriented towards the local market
[also to the Surinamese ethnic market in Holland]. This segment of the
production is ad hoc modernized but mostly traditional, labor intensive and
predominantly informal.
Suriname is a young independent state
It became independent only since 1975 and still has strong relations
with Holland. The relation with Holland can be assessed through several
indicators. Suriname gets extensive economic aid when governments are on
speaking terms and nancial transfers from private households are considered
a major source of foreign currency inow. Social relations with Holland are
also intensive if assessed by the amount of direct ights (8 direct jumbo
ights a week in mid season) and formal and informal relations between
public and private entities in the two countries. Family ties are also strong as
some 300,000 persons of Surinamese origin or with Surinamese roots live in
Holland. Political post colonial inuences are also eminent as political parties
in both countries have ties on party level. Local issues, regarding Suriname,
are often publicly discussed in Holland.
Suriname has a colonial spatial structure
Paramaribo is dominant and an outward oriented colonial city on the
Atlantic coast. Paramaribo is exploitative towards other parts of the country
that do the production. Paramaribo has no basic activities but has the best
infrastructure and only redistributes what other areas are producing. Population
concentration in Paramaribo and its rural-urban fringe in the districts of
Wanica and Commewijne amounts up to 310,000 of the total population. All
quality services are concentrated in Paramaribo. The modern time suburbs
of Paramaribo resemble social classes (enclosures), with the well-to-do in the
north and poorer segments in the south, whereas the older neighborhoods
are socially integrated. The old colonial inner city with Dutch colonial style
wooden buildings is on the World Heritage List.
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2. The political situation
The National Assemblee, Suriname’s parliament, has 51 seats. The
President and Vice-President are elected in parliament with a 2/3 majority or,
when no qualied majority is reached in parliament, in the people’s assembly,
that is an extended forum with all regional elected representatives and members
of important state organs. Ministers are selected by coalition partners after
the positions are allocated and are appointed by the President. As ministers
are nominated by their respective parties they seem to be more loyal to their
parties than to the President. Suriname still respects the trias politica.
Political parties are predominantly based on ethnicity and religion. Parties
now represented in parliament are: Indians/Hindus: VHP 8, PVF 2, NK 1;
Indonesian: Pajama Luhur 6, KTPI 1; Creoles: NPS 8, DNP 3 SPA 1, DA
91 1, Maroons (comparable to the Kilombo’s) 5. An ethnic more integrated
party is NDP 15.
The ruling coalition consists of the VHP, NPS, SPA, PL, A-combinatie
and DA 91. This combination is called Nieuw Front +. It gained 28 seats on
the May 25
th
2005 election. The next elections are scheduled for May 2010.
During its recent years of independence the country has repeatedly
experienced that the government mismanages the country to such an extent
that rehabilitation of the economy by implementing a structural adjustment
program and by the re-introduction of moral values is considered a must.
The newspapers and media in general are critical of government
performance.
Important structural issues that inuence political situation are:
• Restructuring of the economy so it will guarantee a transparent,
competitive economic environment with sustainable growth and a
balanced budget. Restructuring actions are not embedded in a formal
structural adjustment program but are part of the government priorities.
Execution is highly inuenced by the political momentum. Monetary
markets are now liberal and the new Surinamese dollar is a stable and
convertible currency. The stable monetary environment of the last 5 – 6
years has been the basis of economic recovery and a steady growth of
6% per year. Privatization of state enterprises and civil servant reforms
are slow and pushed “forward” without taking difcult decisions;
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• Rehabilitation of the social sector is not according to what the people
expect. Obviously the government income cannot nance all the
requested basic needs and the government and the people miss the
political courage to publicly choose priorities. In the social sector not
everything is affordable (available) for all members of the society.
Education, health care and democratic rights are guaranteed by the
government. The housing situation is deplorable. In the eld of safety
and security private enterprises are getting a stake within these sectors:
security companies, private health care insurance, etc;
• Improvement of the situation in the interior. Some 40.000 Surinamese
citizens and guest workers, mainly from Brazil, live and work in the
interior. Infrastructure is bad in this region (education, health care, land
property rights, licenses, etc.). Discontent with the central government
lead to ethnic political mobilization and a gain for the A-combinatie
party, with a maroon based membership structure, and
• Control of drug trafcking and the inuence of the drug lords on
social, economic and political life. Strong inuence of drugs money
disrupts legitimate career planning and morality. Parliament is now
discussing an anti-corruption law as one of the mitigation measures.
But it may be that even in this forum the inuence of drug lords is
the reason for signicant delays in approving the concept law.
3. Economic and social situation
Suriname belongs to the developing countries and can both be seen
as part of the Caribbean (considered the small scale of the economy) and
as part of Latin America (considered the most important constraints in its
development).
Ethnicity, dependence on a small group of export products (bauxite
and crude oil), nancial aid from abroad and strong outward migration, are
Caribbean characteristics.
Strong military inuence in the early 80’s on economic, political and social
life, that fueled large scale structured corruption and ineffective government
policy, ineffective regulatory laws and control are rather Latin American trade
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marks. Development constraints are more in the eld of (good) non target
oriented governance than in the eld of lack of natural resources and nance.
4. Stages in the development planning of Suriname
Development planning in Suriname strongly resembles the international
thinking on development issues. Some 5 stages can be distinguished that are
parallel with world development.
a. The period of the ‘India Congress Consensus’
This period started after World War 2, stressing state planning. Suriname
started this period with the ‘Welvaartsfonds’ followed by a ten year plan and 5
year plans. Centralized planning with strong government inuence in building
farms, remote sensing of natural resources, and so on. The general idea was
to make an inventory of our natural resources and to exploit them. Improved
development was expected to be reachable by copying western technology,
by modernizing institutions, by raising the education level of the population
and by stressing agricultural development as the basis for growth for the
majority of the population. Improved home base would eliminate big business
inuence and prove that the free market mechanism was not adequate for Third
World economies.
b. The period of the ‘dualistic economy paradigm’
Inuenced by Latin American structuralists with quick x solutions as
interest regulation, exchange rate control, price and wage controls, Suriname
developed an ideology of ‘mobilizing its own potential, human resources
included’ and the introduction of spatial ‘growth poles’. In the years 1970
this urge for modernization emerged in Suriname after the construction of
the Afobaka dam. Large scale urbanization of displaced persons was rather
seen as an acceptable symptom of modernization and logic consequences
of the paradigm of ‘unbalanced growth’. Large parts of the rural areas were
considered not interesting enough and development efforts and investments
were concentrated in growth areas such as western Suriname (Bakhuys bauxite
mine and Kabalebo dam), Commewijne (LOC), and so on. These places
were expected to have a much larger growth potential than other parts of the
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country. The planning concept was inward oriented. Suriname thought it would
make tremendous development progress on its own and with development
assistance from Holland.
c. The outward oriented development
At the end of the 1970 it became clear that Suriname and Holland had
different opinions on the development approach for Suriname. The Dutch
for instance refused to fully nance the Kabalebo dam out of the agreed
Treaty funds. It was the rst time that Suriname had to go shopping on
its own for large amounts of money. The essence was also that Suriname
had to start thinking about investment facilities for foreign companies but
having a large amount of money earmarked for its development by the
Dutch, could not easily mobilize foreign funds. So Suriname was not part
of the debt crisis of 1990 and the collapse of the Brazilian and Mexican
capital markets.
d. The Washington Consensus
Forced by mismanagement of the economy in the military period,
Suriname had to think about structural adjustment, when it returned to
democracy at the end of the 1980’s. Rules for macro economic management
from nancial institutions became eminent. Elements that became important
were: scal discipline, investments in high interest yielding activities and
not in ‘political’ projects, tax reforms, partial liberalization of the capital
market, free exchange rates, elimination of import quota, privatization,
guaranteed private property ownership protection and importance of the
environment.
Although Suriname refused to go into an IMF monitored structural
adjustment program it had to comply with rules of an external monitor, the
Warwick Research Institute, as agreed with the Dutch. The Suriname structural
adjustment program was a blend of the Washington consensus model with a
social safety net nanced from the Treaty funds. The Washington consensus
had its positive effects on Suriname because it promoted transparency and
so it mitigated corruption and promoted democracy. On the other hand it
was too nancially oriented and did not incorporate enough the political and
social effects.
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e. The global village
As we all are inuenced by processes of globalization we now see that
every economy is being judged by indicators focussing on good governance
and poverty reduction.
Suriname is striving for ‘sound management’ that is assessed by the
following indicators:
• Indicators for economic policy: a. ination in Suriname was 8.3 % in
2007; b. Budget decit for this scal year is estimated SRD. 405 million
or 5.4 % of GDP; c. trade liberalization is in line with Caricom and
WTO targets;
• Indicators for institutional quality: a. law enforcement is good; b. quality
of the bureaucracy: needs improvement; corruption sensitiveness: very
high as the anti corruption law is not in place yet, and
• Other indicators: a. education improvement: slow; health improvement:
good progress; support agriculture research: slow; solidarity within
the society: slow because of lack of funds for pension reforms and
for general health care.
Some social and economic indicators
The crude birth rate is on average 25.7 (little increase the last 4 years
but steady decline from 1972 (32.9). Death rate is as in a modern developed
country with a gure on an average of 6.8. Outward migration has always
been a factor.
Export value in 2007 was US$ 1,311 million: consisting of alumina,
aluminum and crude, rice, bananas/plantains and vegetables, shrimps/sh,
wood and wood products and other products. Monetary reserve end 2007 was
Surinamese $ 1,181 million with SR $ 1,087.5 foreign currency and SR $ 94.5
I gold. Large scale illegal export of gold must be considered.
Until now the government has not been able to streamline pork-knockers
gold production in the interior. Gold generates little tax and is a major polluter
of surface drinking water with clay particles and mercury.
Land use is mainly agricultural 65,110 ha. (34,743 large scale and 30,367
small scale); 53,495 paddy, 2057 bananas, 1768 tomatoes and other vegetables,
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1419 oranges, 1148 coconut are most important. Livestock is not important
in quantity: 88,865 cattle, 19,615 pigs, some 2 million poultry, etc.
Through time the development policy has aimed on modernization and
strengthening of institutions. Reforms of the last years to come to a more
effective public sector are eminent. Also the role of the private sector and of
NGO’s has become pivotal in the concept of development. On the other hand
donor countries have become more critical in giving Suriname development
aid as Suriname is more part of their global concept of structures. Impact
studies have become a must on all development activities, be it hospitals,
schools, roads, etc.
If no positive impact is expected from an activity it will be almost
impossible to get aid or borrow money. The opinion of strong local leaders, be
it political, economic, nancial, social, tribal, etc., is crucial for the mobilization
of funds and for effective dialogue with international partners.
Relation with the Dutch
Discussions with the Dutch on development have a long time been a
mayor issue for every administration. When Suriname became independent, the
Dutch pledged development aid for 10-15 years of about US $ 1,000,000,000.
The Dutch ministers of development aid and the Surinamese government
agreed on a sector approach for the remaining Dutch aid. Sectors for Dutch
assistance are Education, Health care, Governance, Environment, Housing
and Agriculture. Progress in these sectors has been slow.
Holland and Suriname are now on the brink of reformulating their
policies towards a new relationship, one between two independent states, with
mutual respect and sovereignty. Suriname has intensive ties with Holland and
cannot become just another country that is on Holland’s priority list.
Government investments were low as the support of the Dutch has not
really materialized the last years. (Public health, education, infrastructure, social
safety net, development in the interior). Long processes of formulating sector
plans are blamed for these delays. Civil society is becoming more important in
the social sectors related to Holland. Assisted by foreign partner funds, links
are established on the levels of municipalities, environmental agencies, school
to school, city to city, etc.
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Public sector
Civil servants salaries have been frozen from 2002 till 2005. They are
expected to rise and to fuel demand for consumer goods and for foreign
currency which might lead to a higher demand of foreign exchange. Suriname
has an open exchange market since June 11
th
2002.
The interior
Situation in remote areas in the interior is bad as government services
lack the funds to make expensive trips to the interior and commitments to
services cannot be upheld.
Constraints
Important economic constraints are frequently mentioned since World
War 2, but most of these negative aspects of the Surinamese economy are
still eminent. The mentioned constraints were supposed to be tackled by
various development plans. The general public opinion is that Suriname’s
economy is not growing as it could be and that without structural reforms
even deterioration will occur. On the other hand statistics show a growth of
the GDP of 5-6 % a year over the last years.
Options for rapid growth are with the bauxite industry and hydro plant
in West Suriname and with gold in other parts of the country, such as Gros
Rosebel.
Key issues
Interesting issues going on with a possible strong public impact in the
future are:
1. Discussions with the Suralco (Alcoa) and BHP-Billiton, who both
asked for bauxite mining concessions in the Bakhuys area. Suriname
s’ economic future will be highly shaped by this decision of the
government and the expected investments;
2. Border dispute with Guyana. The maritime border dispute is settled
and expectations on oil reserves are high. The land dispute of the
southern triangle (Curuni River and Kutari River versus the Upper
Corantyne River) is still unsolved;
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3. Crime prevention to sustain the public safety perception, and
4. Trafc especially in Paramaribo is becoming a major spatial problem
as the increased quantity of cars has to be accommodated in an old
city infrastructure.
5. Some thoughts about the world’s development paradigm
and Suriname in the 21st century
“We cannot predict the future, but we can prepare it. The future is
construction.”
1
5.1. Assortative matching
World development is inuenced by the scientic revolution that led us
into an age of uncertainties and doubts on a global scale. In this paradigm
of complexity, globalization and uncertainty we need political creativity. As
the third industrial revolution, based on the information age and the rapid
introduction of new technologies into all facets of human life, is radically
transforming our societies into an order of computer codes today and genetic
codes tomorrow, a new globalized network of public and private alliances is
emerging. It is obvious that the old political structure of the world, namely
country boundaries, is not anymore effective to contain the new developments
as the technology, carried by micro waves on information super highways,
does not abide to the borders of countries. The rst industrial revolution
was carried by railways and the second one by cars, airplanes, electricity and
fordism. The new industrial revolution has led to a new division of the world
in globalizers (about 20% is engaged) and the globalized. In Suriname, based
on education and the kind of work, only an expected 10% of the population
is engaged in the new developments.
We are in a new world of segregation, dividing society, work, friends,
schools and homelands through assortative matching. The logic of assortative
matching is based on exclusive grouping of the best performers such as highly
visible in top sport and in the show business and now becoming eminent in
1 Statement by Ilya Prigogine, Nobel prizewinner. Quoted from: “The World Ahead”, our future in the making,
by Frederico Mayor and Jerome Binde. Unesco publishing, 2001.
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health care, banking, consulting businesses and even in physical production.
This process also excludes good educated people that do not belong to the best
performers. It affects national identity as far as the answer to these questions
goes: are Seedorf and Rijkaard Surinamese? Is Ronaldinho Spanish? Is Alain
Belda, the President of Alcoa world wide an American? Is the director of
BHP/Billiton, who is of Surinamese origin, a Surinamese? We even experience
segregation within our family structures when many of our children study
abroad and obtain a different nationality than ours. Even educational systems
are splitting up, leaving the bunch of students only with general education
on a bachelor level and the brilliant few will get excellent high level training,
linked to international training centers. With regard to schooling it has
become a must that we attend international training courses like the one from
Itamaraty because to our perception these courses are globalized and give us
an opportunity to become globalizers in our profession. But also businesses
and institutions are breaking themselves up and reconstructing themselves in
high pace in a global perspective. Take for instance the Bandeirantes airplane
production in Brazil that has become a global product now. Families undergo
the same fate, making single parent families a phenomenon not by default but
by choice. People are selecting whom they want a child with, and a couple
becomes a fragile, often temporary system of living together.
Another threat to the Surinamese society is that the large growth of the
private sector in controlling modern technology such as computers, mobile
phones, not to mention human reproduction, is leading to a change in cultural
control by the government or the traditional family.
New alliances become even stronger than the government and they all
shout for democracy which in their vision means less government control
and more de-nationalizing of the development strategy. From this perspective
we experience several powers that undermine the traditional power structure
within our society.
• Industrial conglomerates like BHP-Billiton and Suralco in Suriname,
seem to be in the drivers’ seat to say what will happen in Western
Suriname with the bauxite deposits and the hydro potential and so
they determine the future of the economy;
• NGO’s like WWF, CI-S are the lead agencies when it comes to
environment, and
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• Within Suriname the names of companies and entities that are probably
involved with crime, that are in money laundering and even within
drugs activities are well known. They have for a long time been out of
reach for the police and justice. For instance it is only in 2007 that the
government was able to start the process of bringing the December
1982 murders to trial.
In Suriname, and probably in the majority of Latin American and
Caribbean countries, this process of globalization is accompanied by a
continuing process of urbanization, notwithstanding the fact that the majority
of our populations already live in cities. In Suriname a large group of mostly
uneducated people from maroon origin are coming to the southern part of
the city of Paramaribo with no possibility to be employed in any modern job
and they are adding fuel to a system of self generating spatial social apartheid
within the city and undermining the very basis of democracy.
Youngsters in the interior do not obey tribal leaders anymore and neglect
tribal laws. The government and parents cannot control what information
ow from the internet is reaching our children. We cannot fail to observe new
emerging prosperous segments in the Surinamese society that seem to be best
protected from misfortune and social categories that are excluded and seem
to become prey of indifference, exclusion and of a lack of solidarity. Private
controlled modernization has given way to crime working its way up into the
decision taking centers. Whereas the governments of the rich countries are
most occupied with economic and nancial affairs, the development of the
Surinamese society is a comprehensive challenge.
Remarkable is the fact that the majority of the people do not demonstrate
any involvement in the development discussion. It is their perception that
their voice will not be heard and that they are, economically spoken, not that
bad off compared to the pictures they see on CNN to what is happening in
other parts of the world. And indeed, if we look at the gures supplied by
the General Bureau of Statistics the health care situation, the infrastructure,
mobility and the GDP per capita have increased. But we are watching a system
with economic success based on the concepts of liberty that has forgotten to
implement equality and solidarity in our country. It demonstrates an ethical
vacuum. People and the government are also content that Suriname is not a
racial battleground but that until now the society has managed to avoid ethnic
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battles and different ethnic segments of our society have managed the art of
living peaceful together. But lack of interest in the political process results in
the outcome that at the end of the day the government is elected by about
60% of the population, with a major inuence of the oating votes.
So what are our challenges ahead?
• Peace in our society. Without peace every development effort is
deemed to fail;
• Eradication of poverty with special immediate attention to eradicating
extreme poverty that is regionally signicant. This poverty has lead to a
new form of urban apartheid in Suriname with unprecedented wealth
in certain parts of Paramaribo. The fact is that for instance the only
golf club in Suriname, owner of a course in the middle of low income
segments of the city, is more interested in building walls to segregate
itself from neighboring communities instead of involving the poor
caddies in a personal improvement program is clearly demonstrating
the aforementioned ethical vacuum. This proliferation of exclusion
tends to destroy the very foundation of democracy. So how can we
bring economic growth to the areas of extreme poverty?;
• Sustainable development and the wise management of the global
environment. Suriname with its fast natural resources has the ability
to stop the spiral of poverty. The country is also in the position to
stop excessive use of natural resources and apply ecological wisdom.
In the forestry sector for instance Suriname is well on its way to a
more economic, more intelligent and more caring use of this natural
resource. In September 2008, we will host the UNFF conference on
a new global non legal binding instrument for sustainable income
generation from the world forests, and
• It is important for the country to evaluate its existing alliances that
are mostly based on the paradigm of the free market and laisser-faire
and to restructure them according to a well dened set of goals and
targets. In my opinion, we will have to demonstrate the political
courage to implement a different strategy of piloting. Discussing the
Memorandum of Understanding between the Ministries of Foreign
Affairs of Brazil and Suriname I learned that we lacked a general
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conceptual framework for the cooperation with other countries. And
it became clear what the Roman philosopher Seneca had said: ‘There
is never a favorable wind for the one who doesn’t know where he is
heading’. A country needs to have a direction and a long term plan
as one has certainly learned here at Itamaraty. The more because the
new challenges cannot be solved at a local or national level. Look at
for instance the exchange rates, the prices of commodities, climate
change, nancial markets, crime, money laundering, pollution, fresh
water, energy, etc.
So why is so little national and international action taken. Often because
of short sighted self interest, like the USA with the Kyoto protocol, or because
of a lack of vision and political courage. Can we call our former leaders to
account for decisions they did take and for the one’s that they adopted too
late? But as Pier Paolo Pasolini stated in ‘A thousand and one Nights’: the
future is not a single dream but a multitude of dreams.
Framework for action in Suriname
I agree with the opinion that to make progress a country needs four
contracts:
1. A Social contract. The rst priority of Suriname is to rebuild solidarity
through the eradication of poverty and the reduction of scandalous
disparities that lead to apathy and exclusion;
2. The Natural contract. An alliance between science, development and
environmental preservation is needed. We have to put into action the
commitments of Rio 92, of Kyoto and of Bali 2007. We have to put
production and research in service of sustainable development and
consider the Unesco concept of ‘Biosphere Reserves’;
3. The Cultural contract. This contract focuses on life long quality
education for all and excellent professionalism as a basic facet of
democracy and the key tools to poverty eradication. We see that the
‘wise’ states now see quality education as the corner stone for the
development of their people and they mobilize funds to nance
their education. Suriname is well behind these states with regard to
this strategy. We have to combat illiteracy. We have to move from
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an information society into a knowledge society with cross cultural
fertilization, and
4. The Ethical contract. We have to strive to reinvest our experience in
such a way that we promote intelligence above the material and keep
in mind that we have to prevent rather than to cure. Basically this
means that the implementation of democracy and of rules and rights
has to be on a supra national level and applicable to all countries.
Within this context we can get a just redistribution of the benets
of globalization.
Development will be meaningful if we manage to:
• Create a world infrastructure that is acceptable to all;
• Redistribute the gains of globalization;
• Involve all to participate;
• Condemn crime, ght against it and discourage it;
• Obey human rights to all;
• Stick to non interference in the national policy of other states and
their democratic elected governments;
• Only use force against others with UN consent;
• Exercise solidarity and share with others;
• Give students from other countries access to your education system, and
• Implement equality and not exercise only professional democracy.
Let me nish with bringing under your attention the principles for future
students. And I quote from Unesco:
• Trust the people, unless you have proof that your condence is
misplaced, because it is impossible to build a lasting future on mistrust;
• Care for the planet because we have borrowed it from the future
generations and have to pass it to them exactly as we have found it;
• Smart is beautiful because our future lies in our spirit and not in material
things we have today. Not simply Smart in the meaning of: Specic,
Measurable, Accepted, Realistic and Time bound, but in the sense that
our development has to be founded on wisdom and intelligence if we
want to leave a ‘good’ earth for the future generations;
C.A.F. Pigot
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
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• Prepare for peace if you want peace because if you prepare for war
you will get war;
• Give to others if you wish to receive because love and knowledge are
the only things that grow while sharing;
• In a global world and market we need a global democracy that is not
restricted by national borders and national policies;
• Our future is not written in advance, it is in the hands of all of us, and
• The amount spent per year in our war machines is approximate
US $ 700 billion. The amount estimated by UNDP to guarantee the
basic needs for all of humanity is US $40 billion per year.
Figure 1
Picture map of Suriname
Political, economic and social introduction of Suriname
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190
Bibliography
Merlande, Adelaide. Histoire contemporaine de la Caraïbe et des Guyanes. Paris:
Karthala, 2002.
Binde, Jerome. Keys to the 21
st
Century. Paris: Unesco, 2001.
_______. The future of values. Paris: Unesco, 2004.
“Global Governance and its Critics.” In: International Journal of Social Science.
Unesco, 2001.
Mayor, Frederico. The world ahead, our future in the making. Paris: Unesco, 2001.
Pleskovic, B. e Stiglitz J. Annual World Bank Conference on Development Economics.
Washington, 1997-2002.
Pigot, C. De grenzen van ons land en onze districtgrenzen. Paramaribo.
_______. Inleiding tot het Caraibische gebied. Paramaribo.
Sedney, J. De toekomst van ons verleden. Democratie, etniciteit en politieke: machtsvorming
in Suriname. Paramaribo, 1998.
International Monetary Fund: www.imf.org/external/pubs/ft/scr/2007/cr07179.pdf
Banking sector information: www.desbank.sr
•
www.cbvs.sr/english/statistieken.htm
Information about the author: www.p-allprojectssupply.com
C.A.F. Pigot
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
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Annex 1
General country information
(Predominantly derived from IMF, OAS, IADB and EU reports)
The UN Human Development Report ranks Suriname as a medium
development country, placing it 86
th
in human development (out of 177
countries). However, the country ranks 17
th
highest in the world for natural
resources.
With 80% of the total population living in Paramaribo and the coastal
areas, Suriname’s GDP per capita annual income is US$2,300 and unemployment
currently hovers around 8.4%, while ination is expected to moderate to around
8% in 2006. Real GDP increased by 8% in 2004 and by around 5% in 2005,
boosted by the opening of a new gold mine and investment in the alumina
and bauxite sector. The IMF asserts that “the strong recent growth of the
economy has been supported by a cautious macroeconomic policy stance.
The central government overall decit declined from around 3 percent of
GDP in 2004 to an estimated 1 percent of GDP in 2005. This improvement
resulted from a substantial increase in revenues from the oil sector, which
more than offset higher capital expenditure during the pre-election period,
and revenue losses from delays in adjusting domestic fuel prices. Reecting
the lower nancing needs of the government, scal nancing by the central
bank declined from about 1 percent of GDP in 2004 to 1/2 percent in 2005.”
As a Caricom member, Suriname lifted trade barriers in preparation for the
Caricom Single Market. It is currently beneting from the global boom in
commodity prices and from increased mining output, but it remains isolated
in world trade and needs large investments and/or structural reform to
increase export revenues. The country still depends on traditional exports of
oil, gold, bauxite, wood, bananas, shrimps and rice to its main trade partners
(the Netherlands, the United States and the Caribbean). Oil has overtaken
bauxite as the main revenue earner and remittances from abroad, particularly
from the 300,000+ Surinamese people residing in the Netherlands, account
for about 10% of the GDP.
Dutch is the principal and ofcial language and English is widely spoken
among Suriname’s 492,829 inhabitants. In addition, a number of ethnic groups
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retain their own languages. There is no one main religion and the various ethnic
groups and religions have developed ways to coexist peacefully. Hindustanis
make up the largest population segment (27.4%), with Creoles (17.7%),
Javanese (14.6%), Maroons (14.7%) and Amerindians (3%) also present. The
rest of the population is made up of Chinese, Europeans, and recently arrived
Brazilian immigrant workers, in addition to a small Jewish community. The
main transport ways in the interior are the rivers, although there is also air
travel via small planes.
Though 95% of the population has access to clean drinking water
and 83% to sanitation, problems remain in those areas and in education.
Communities in the interior are among the most marginalized and tend to
lack access to sustainable economic activities and social services. Bottlenecks
to their development include lack of transport facilities, electricity, basic
education, schools, health care, telephone and internet. Three-quarters of
school-age children in the country are in primary and secondary schools, but
children in the interior lack access to secondary schools. On the other hand,
traditional leaders in the interior seek to share decision-making with respect to
land and natural resources. Suriname has recently signed the ILO Indigenous
and Tribal Peoples Convention (1989) covering land rights, access to natural
resources, health, education, vocational training, employment conditions and
border crossings.
Although Suriname has no specic poverty reduction strategy, the
Multi Annual Development Plan 2006-2011 (MOP) addresses the issues of
poverty reduction as part of the Millennium Development Goals (MDGs).
Furthermore, the President’s Government Policy Statement 2005-2010 issued
in November 2005, makes it clear that the MDGs are the cornerstone of a
sustainable development policy based on respect for the rights of the people.
This is to entail “a proper allocation of tasks between Government, private
sector, trade unions and civil society”. “It is equally essential that there is
a partnership between parties with regular consultations.” Since the right
of employment is provided for in the Constitution, job creation is a “vital
point of interest”. And efforts are to be devoted to creating “the required
conditions to stimulate micro, small-scale and medium-sized businesses”
as well as to “promoting modern technologies and advancing management
labour relations.” Nonetheless, much needs to be done to help the domestic
private sector grow. There are more than 120 state owned enterprises as well as
C.A.F. Pigot
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numerous SMEs in Suriname requiring a more liberal economic environment
to operate efciently. The Public Sector Reform currently under preparation
includes a target that by 2015 seventy ve percent of the working population
should be employed by the private sector. Yet the GoS currently employs 60%
of the workforce and spends 25% of its income in salaries. Government is
mostly centralized in Paramaribo, but steps are being taken to decentralize
into the other 9 existing administrative districts.
In the Transparency International Corruption Index, Suriname moved
from 49
th
position (2003-2004) to 78
th
among 159 countries (2004-2005).
However, the current government has committed itself to become corruption-
free. The Anti Corruption Act is yet to be approved, but the GoS has formally
recognized that international and national action plans are to be linked to
“good governance” and “human rights”. Thus the MOP incorporates a “rights
based approach” to development, and assumes “democratic Rule of Law”
with consultation of economic, social and cultural actors as a central theme.
On the other hand, having recognized that the use of the latest information
and communication technologies is signicantly lagging behind, the GoS now
wants to make maximum use of ICT for business and development. It is now
committed to the creation of the National ICT Institute to move forward with
ICT development in both the government and the private sector.
With respect to environment, friction prevails today between Surinamese
and foreign workers in the small scale gold mining industry. Illegal immigration
of workers (garimpeiros from Brazil and pork knockers from Guyana) in the
unregulated gold mining industry is generating river and sh contamination.
Their use of mercury for gold extraction affects the local population’s health.
The proposed, but not yet enacted, Environment Act would outlaw the use
of mercury for gold mining. Indeed the MOP stresses the importance of
environmental preservation as a prerequisite of sustainable development.
Likewise a recent EC Country Environment Prole points out that it is
“a basic condition that the environment must be a crucial factor in social
and economic development to guarantee a healthy environment for future
generations.” The Prole proposes that it can no longer be seen as a separate
issue, and biodiversity conservation and the preservation of the interior and
the coastal zones receive great support in most Surinamese political and civil
society organizations.
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Risk summary
As part of a drive to consolidate the Caribbean’s commitment to
international justice, the Coalition for the International Criminal Court
(CICC) has called on eight Caribbean states (the Bahamas, Grenada, Haiti,
Jamaica, St. Lucia, St. Kitts and Nevis, and Suriname) to ratify or accede to
the Rome Statute of the International Criminal Court (ICC). Suriname has
shown increasing interest in ratifying the treaty – President Ronald Venetiaan
has asked his government to consider the treaty and Suriname has already
co-hosted the rst Caricom regional conference on the issue. To date, 100
countries, including Antigua and Barbuda, Barbados, Belize, Dominica, St.
Vincent and the Grenadines, Trinidad & Tobago and the Dominican Republic
have joined the ICC. Caricom would welcome Suriname’s ratication of the
treaty, which would consolidate the Rule of Law in the country and increase
political stability in the long term.
Economic outlook
Clear Progress. Suriname’s economy continues to benet from the global
commodity boom and increased mining output. The economy expanded
by 7.8% y-o-y in 2004, boosted by investments in the mining sector. As
commodity prices climbed, gold, oil, banana and rice exports and investment
in the modernization of the bauxite sector are estimated to have fuelled
growth of around 5.0% in 2005. Ination meanwhile, moderated to around
9.0% y-o-y in 2004, according to IMF estimates while the exchange rate
stabilized. With commodity prices set to remain high in the coming years, it
is anticipated that growth will continue at about 4.0% y-o-y. Ination is kept
steady at around 8.0% y-o-y. Suriname’s progress over recent years has seen a
stable macroeconomic performance overall. Moreover, international ratings
agencies are also beginning to recognize these achievements with a B+ rating
from Standard and Poor’s.
Key sector outlook
All Good For Alumina, gold, oil, rice and bananas. Bauxite, used in
alumina production, is the central pillar of Suriname’s economy. It accounts
for more than 15% of national GDP and 70% of export earnings.
DEP
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Uruguay and the
learning divides
Rodrigo Arocena*
U
ruguay is a small, peripheral, South-American country. Early on, it
achieved remarkable though little predictable political and social progress. This,
coupled with the scarce economic and ideological dynamism of recent decades,
characterizes the national scene. Longing for the past and misgivings about
the future hinder the country from taking advantage of the really favorable
conditions of the present to set itself on a new integrated development path.
I. A peripheral country
Vast regions of the world became peripheral when the “central countries”
asserted themselves as such as they changed from agrarian into industrial nations.
The resulting differences in economic and military power extended to the
political and the ideological spheres. The peripheral condition did not become
an ineluctable fate, though, but a sort of siege difcult to break. Relatively few
countries managed to break it, thanks to “subjective” energies that allowed them
to take advantage of favorable “objective” circumstances, usually by transforming
difculties into stimulus through original, heterodox responses.
* Chancellor of the University of the Republic, Uruguay.
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Today, the peripheral condition displays a mixture of continuity and
change. The subordination, to a greater or lesser degree, of some nations and
regions to others involves long-standing factors. But other factors steadily
grow in relevance, directly linked to the new pressure of advanced knowledge.
For better as well as for worse, knowledge has become the main source of
change and destabilization of contemporary life. Not only the capabilities
for producing, destroying, polluting, or healing have changed; the various
occupations, customs, human relations, and relations between man and nature
have also changed.
This phenomenon affects the entire world, although in a highly unequal
manner. It can be succinctly but not mistakenly said that in certain regions
varied but similar forms of society emerge, in which knowledge is the decisive
force in the production of goods and services. This is the key to the dominating
position of the new or the old “centers” of the current world system. The
rest of the world is extremely heterogeneous, of course, and consists of
peripheries, semi-peripheries, central enclaves, and marginal zones. Today as
yesterday, though, the peripheral condition shared by quite different regions
is characterized by lack: industry was not a decisive force in their economic
dynamics in the past; something similar happens today with knowledge.
The peripheral condition still exists. Its effect on various facets of social
life is no less than what has been pointed out by the masters of Latin American
thinking about development. To identify and address current peripheral
conditions, new approximations and strategies are needed.
II. The learning divides
Lately, a silent, drastic revolution has gained impetus. Since the dawn
of civilization, rst characterized by the appearance of writing, access to the
varying forms of higher education has been restricted to a small, tiny minority.
This is rapidly changing in some places, though.
An antecedent of this phenomenon is worth pointing out. In the
predominantly illiterate world of agrarian societies, a few countries began to
offer universal elementary education as of the 18
th
century. This occurred
especially in the rst countries to become industrialized, followed by others
that took up industrialization at a remarkable speed. Although correlation is
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not the same as causality, the correlation between education and development
has always been very strong.
In his pioneering 1973 study on the advent of post-industrial society,
Daniel Ball analyzed an already noticeable tendency in the United States,
namely, the expansion of higher education. It is well-known that this is a
characteristic of today’s “central” countries, where most young people enter
some form of higher education program.
Early in the current decade, a study sponsored by Unesco and the World
Bank called attention to the differences between developed and developing
countries. The study’s focus is signicant, because previous World Bank
documents had recommended that developing countries should not give
priority to higher education, allegedly because of its lower social “returns.”
The aforementioned study claims that the differences in access to higher
education are responsible for the “widening enrollment gap” between the
two groups of countries.
We see the “enrollment gap” as a major facet of underdevelopment
in the 21
st
century’s world. However, it is only a partial indicator of the new
dimensions of the peripheral condition in a world marked by the emergence
of “centers” of a knowledge society that has no worldwide coverage but exerts
a profound global impact. Briey speaking, the great divides refer not only
to access to knowledge but above all to the possibilities of creatively using it
and translating it into practice.
Uruguay, for instance, still educates far fewer highly qualied people
than are required for development today and even so experiences a signicant
exodus of university students. This phenomenon reaches dramatic proportions
in the neediest regions of the world, which, in relative terms, are precisely those
with the least access to higher education. A tendency in many countries shows
that the smaller the number of people that have access to higher education,
the higher the number of those with a higher education who cannot nd jobs
commensurate with their training. This is just the opposite of what happens
in several “central” countries, where the “demand” for highly-qualied people
exceeds a growing “supply.” We would say that the “qualied occupation gap”
is even wider that the “enrollment gap.”
Without going into details, we might resort to the following graphic
illustration of the preceding: let us think of two coordinated axes, one of
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which measures higher education enrollment while the other measures qualied
occupation. According to its coordinates, each country would be represented
by a “point.” Now, on the upper right would be grouped a small number
of countries with high enrollment in higher education and high qualied
occupation. The other countries would be dispersed through the remainder of
the gure and would signicantly differ from the former group in respect of
one or another of the dimensions considered, or of both. The gure shows
a clear separation between the two groups. The “learning divides” between
centers and peripheries could be thus represented. These divides constitute
the nerve center of the new underdevelopment model.
III. Small countries
To say that in addition to being peripheral Uruguay is a small country
may sound inane. This is obvious, as seemingly is the disadvantage this entails:
small nations are weak, less capable of independently choosing their strategies,
more susceptible to accept decisions by others.
This notwithstanding, some reservations are due. History shows that
smallness does not mean inevitable delaying. An example is provided by
the experience of Uruguay, a country that early in the 20
th
century was a
comparatively advanced political and social democracy with high schooling
indicators.
The ensemble of phenomena known as “globalization” makes the
isolated experience of signicant progress by a small country less likely.
But it is also common knowledge that in the last half century several countries
that most notably improved the living conditions of their peoples were
not large.
Indeed, reection about development has for long paid attention to
“smallness.” It has been said, jokingly and with reason, that one thing small
countries have in common is the fact that they are all different. But many of
them have in common something that, more than a reality, is a possibility: the
fact that their small institutional apparatus may favor a nationwide interaction
among various collective players and that although such interaction may be
conictive at times, it makes possible the rallying of efforts round shared
projects. The reverse side of this possibility is that the institutional impediments
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to cooperation among players have much more harmful consequences in small
countries than in others.
This view has been expounded with lucidity and originality over thirty
years ago by the versatile Uruguayan scholar Carlos Real de Azúa. A similar
approach later emerged from a totally different source, namely, the theory of
technical production innovation systems, in its primarily Scandinavian version.
This theory can be found in the book edited twenty years ago by Christopher
Freeman and Bengt-Ake Lundvall, titled Small countries facing the technological
revolution. We mention the title because the surge of technical changes has,
for notorious cost and scales reasons, aggravated the challenges facing small
countries, when it is necessary to move ever faster just to maintain positions.
What that book shows – unknowingly concurring with Real de Azúa’s view
– is that the social conditions of technological change today entail not only
difculties but also possibilities for small countries, provided they are capable
of uniting the efforts of all players, including the public sector and the
entrepreneurs as well as workers, technicians, educators, and other civil society
players. Assuming that the success of the social processes of technical change
depends not only on technology but also on the institutional and cultural
elements, this is even truer in the case of “small countries.”
IV. South America at the dawn of the 21
st
century
Small and not-so-small countries that have experienced signicant,
sustained development processes in a broad sense have generally beneted
from specic strategies in a wider, more favorable context. South Korea’s
justly admired experience reects a creative heterodoxy that allowed it to take
advantage of the surrounding geopolitical situation. The cases of Australia
and New Zealand, so often compared with those of Argentina and Uruguay,
would be difcult to understand apart from the conditions stemming from
their quite special membership in the British Empire. It is no detraction from
the recognition of the “Scandinavian model” to note that its considerable
success is associated with the Scandinavian countries’ position vis-à-vis
industrialization’s pioneering countries.
The small, peripheral country of Uruguay has no bright destiny in the
long run apart from South America. It may quite successfully take advantage of
favorable international circumstances to improve the placement of its primary
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products on international markets and thereby ensure a possibly prolonged
growth cycle. But development, even economic development, is more than
economic growth. This was clearly explained a century ago by Schumpeter. In
brief, growth means more of the same, while economic development is growth
with mutation, the biological parallel used by Schumpeter to illustrate his concept
of innovation. Today, economic development requires the incorporation of
advanced knowledge and highly qualied personnel for the production of goods
and services in the broadest sense of the expression. It is thus necessary to follow
the interconnected paths of higher education and qualied occupation.
Parentheses are in order at this point for dispelling any misunderstanding
of the preceding, which might be interpreted as further praise of high
technology and a call to concentrate efforts solely on advanced technology.
This would reect a lack of understanding of both the historical development
experience and of what the new role of knowledge actually is. Economic
development is supported by productive forces conducive to innovation; it
can occur on the basis of quite different production branches; and it reaches
cruising speed when the capacity of innovation is extended to various sectors.
On the basis of some particularly dynamic, potentially expansive technologies,
knowledge revolutionizes all productive activities.
A peripheral country, even if small, must bet on new sectors. Uruguay is
experiencing success in the software sector. But progress in high technology
cannot be to the detriment of traditional sectors or dispense with them. It
is necessary to capitalize on comparative advantages and on production and
marketing experience to “rise” on the ladder of aggregated value of knowledge
and qualication. It is thus necessary to ght against this new “international
labor division” that leaves peripheral countries below the learning divides. This
is the battle Uruguay has to wage in ever closer association with South America.
We do not ignore that in respect of integration rhetoric has far exceeded
reality in our region. Although there is plenty justication for the intelligentsia’s
pessimism in this regard, we must keep our will’s optimism alive. There is
simply no alternative. This optimism ought not to be naïve or static, but
cautious and attentive to the changing signs of the times. It is precisely the
latter that tell us that as the 21
st
century begins, a new, great opportunity has
opened for Latin America, which is difcult to be made use of but which it
would be tragic to miss.
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After the “lost half-decade” of 1997-2002, new possibilities have arisen
in the economy, politics, ideas, and values. The mere fact that the “low-
intensity democracies” of the nineties did not succumb to the often calamitous
economic crisis late in the decade is worth bearing in mind. Moreover, various
governments newly installed or reinstated through democratic channels enjoy
broad citizen support. This is encouraging, regardless of the degree of one’s
rapport with this or that government. There is no point in minimizing the
needs and failures that afict several South American democracies or the
problems that all of them face in varying degrees. For that matter, when was
democracy’s situation in South America less difcult?
What has few precedents is the conjunction of what is still called the
“third wave” of democratization in our region and a different situation, as
regards both the economy and ideology. One should not exaggerate its novel,
positive aspects, which are nevertheless visible. Economic growth fueled above
all by external demand for our primary products has no intrinsic guarantee of
lasting, as some have assumed in regard to this or to previous versions of the
phenomenon. At this writing, specialists are talking about economic deceleration
on an international scale owing to the crisis in the United States. Be as it may, the
region has enjoyed ve years of signicant growth, which will probably continue
to be signicant in the short run. As to ideology, although the ‘post-Washington
consensus” retains elements of its antecessor, the fact is that that unfortunate
“consensus” no longer dominates the stage as it did in the past decade.
Currently, particularly as it looks forward, South America is once again
more than just a geographical datum. Different options are shaping up for its
full participation in the global economy, but more inuential countries, and
Brazil in particular, stake their bets on the vital diversication of production so
that such participation will not display a markedly neo-peripheral character. The
key issue is whether the strategic and power differences can be compatible with
cooperation that does not replicate inside the region the external asymmetries
it seeks to attenuate.
V. A fourfold approach
For addressing an issue so that reection leads to action, it is convenient
to adopt a fourfold approach: normative, factual, prospective, and proposition-
oriented.
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The normative approach spells out the values to be promoted, answering
to questions such as: What do we want to achieve? This will direct proposals
toward action, ensuring that they take actual possibilities fully into account.
The factual approach, at once empirical and conceptual, aims at describing and
understanding to the extent possible the reality to be acted upon. To grasp the
substance and reason of any phenomenon, it is often necessary to consider
it as a process. By incorporating a temporal dimension, the factual approach
becomes a historical approach as well. For proffering a proposal, it is necessary
rst to study the facts not only in their current conguration but also from
the standpoint of their possible evolution. The prospective approach, solidly
grounded on an analysis of what has happened hitherto (prospect is based
on retrospect), purports to catch the main trends and dynamics at play, so as
to arrive at an idea of possible future scenarios, without ever forgetting that
the future is not written down but is built: “Trend is not destiny,” as Lewis
Mumford would say. The combination of guiding values, factual analysis,
and reection about the possible future ought to provide the foundation for
the suggestion of specic policies, which are the subject of the proposition-
oriented approach.
The interconnections among these four approaches are many and
obvious. These approaches are not independent from each other, but it is
important not to confuse them. In particular, proposals should be based on
ethical aspirations but should not limit themselves to stating those aspirations;
they ought to take into account both actual and foreseeable reality. By not
losing sight of the normative approach, one is impelled to unceasingly seek
new ways of expanding the room for the possible.
In respect of Uruguay’s development, we will offer an outline of a
normative approach that combines general criteria with what we see as the
best of our people’s collective construction.
We think about development from a perspective deeply inuenced by the
pithy ideas of Amartya Sen. According to Sen, the expansion of capabilities
and freedoms is development’s goal as well as its main tool. This is the starting
point, as both the individual and the collective reality are asserted, which
places freedom, equality, and fraternity, or solidarity, on the same level. Hence,
a comprehensive concept of human, sustainable development, particularly
important in our time, as the expansion of the capacity to act and create leads
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directly to the incorporation of knowledge and qualication into socially
valuable collective practices.
This normative concept of development is “activist” – it sees people
not as patients but as agents, according to Sen. At this point, a proposition-
oriented notion already insinuates itself, recognizing with the maturity derived
from historical experience the role of both the state and the market, thereby
transcending the dichotomy between market-centered and state-centered
concepts, while stressing the importance of the various protagonists. A concept
of development centered on players naturally coincide with the teachings
found in factual studies about innovation systems in medium-sized or small
countries that have achieved greater social progress.
Now, a similar concept of development may have validity as a proposition-
oriented view if it is signicantly attuned to the values and aspirations of
the contemplated citizenry. This is where our normative approach draws
inspiration from the best of Uruguayan tradition. At the hardest moments
of our national history, during the terrible dictatorship under which Uruguay
lived until 1984, the most eloquent spokesmen of democratic resistance,
such as Wilson Ferreira Aldunate, evoked that which in their view makes our
country a real country, so as to keep alive the hope of a different future from
that opprobrium situation. They dened the best of Uruguay as the capacity
“to live together”, with respect for everyone’s rights and without forgetting
the words of a humble man of yore, who said that it was worth living on this
land because here “nobody is more than anybody.”
Freedom, equality, and solidarity as shared values and means of social
progress – this is our normative approach.
VI. History’s support and weight
A long view of Uruguayan reality shows some deeply-rooted trends of
great importance for a development concept as outline above.
The comparatively high value attached to freedom and equality found
a fertile soil on which to grow; and grow it did but in an often conictive,
generally contradictory way, without yielding relatively signicant results, the
most important of which are related to education, the political system, and
social protection.
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Early on – in the 1870s – Uruguay made access to elementary education
universal: “laic, free, and obligatory” education, a successful undertaking. In the
collective mind as well as in actuality, the public school is the best achievement
in the nation’s history and the main support of the notion of equality – often
contradicted – according to which ours is a country where “nobody is more
than anybody.”
The experience with technical education showed much greater
shortcomings, which had lasting consequences. An Arts and Crafts School was
established mainly as a correctional facility for delinquent boys, but despite
great efforts, including those of Pedro Figari, one of the greatest, most original
gures in national culture, technical education has not completely overcome the
traditional undervaluation of manual and technological labor. This disregard,
which has its roots in the colonizers’ culture, was offset by contingents of
immigrants at the end of the 19
th
and the beginning of the 20
th
century, but
has not been completely eradicated. While the valorization of education is an
asset of considerable importance in our history, the persistent undervaluation
of technical education is a burden.
From a political standpoint, our country lived in a nearly endemic state of
civil war in the rst three quarter-centuries of independent life, from 1830 to
1904. Uruguay, to be later known as a peaceful country as compared to others,
was then a blood-stained country – a “purple land” memorably described by W.
H. Hudson. A very special set of circumstances, which included a near power
“tie” between the traditionally opposing groups, as well as immigration, made
possible an early democratization that proved quite stable. This democratic
institutionality had two major interruptions: one in the 1930s and another
in the 1970s; from each one, the nation emerged with greater democratic
conviction than before. This historical legacy provided the foundation for
a smooth transition, completed in March 2005, when the left assumed the
national government for the rst time.
Before 1920, Uruguay was already what is called today a social democracy,
when the name had other meanings. Its emblematic gure, naturally, is
José Battle y Ordóñez, the President whose rst term (1903-1907) saw the
denitive end of the cycle of civil wars and with which is associated the social
reformism that Ordóñez undertook with special vigor during his second term
(1977-1915). He lent his name to “Battlismo,” with which most Uruguayan
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governments of the last century identied themselves, but which has a much
broader meaning. The term applies to a widely held expectation, signicantly
supported by the facts, that the State must and can redistribute wealth so as
to attenuate inequalities and ensure basic welfare for all. It also presupposes
an active willingness to organize sectoral groups to demand and ght for their
rights before the government. In general, this includes the ability to combine
mobilization and negotiation and to obtain agreements, without placing undue
hope in radical change. This generic attitude has met with strong opponents
but has generally prevailed.
If to understand Argentina it is necessary to understand Peronismo – not
an easy task – to understand Uruguay it is necessary to understand that the
country has been and continues to be “Battlist.” Today, when the traditional
Colorado Party, of which José Battle y Ordóñez was the not uncontroversial
leader for nearly three decades, it is remarkable to see that “Battlist” ideas
are embraced not only by the majority of the other traditional political camp,
the National or Blanco Party, but also by most of the Frente Amplio [Broad
Front] currently in power, a quite sui generis popular front formed in 1971,
which encompasses practically all the left.
Actually, the features most commonly associated with this political style
became consolidated not during the foundational period but in the so-called
“second Battlismo,” particularly associated with Luis Battle, the founder’s
nephew, who also became President and was perhaps the most inuential
political gure in national politics between 1947 and 1958. That was Uruguay’s
“golden age” of import-substitution industrialization (ISI), social protection, and
national self-satisfaction. Many thought they were living in a “model country;”
there was no lack of motives for this assumption, particularly on a comparative
basis, but exaggeration led to paralyzation. This was expressed by the period’s
emblematic gure, who said that although Uruguay was said to be the Americas’
Switzerland, while traveling in the Old World he had been able to see that in
fact Switzerland was Europe’s Uruguay. In reference to the prevailing optimism,
Carlos Quijano, the leading gure of the minority “critical conscience” at the
time, said that they were living “years of bovine euphoria.”
Uruguay had experienced “early industrialization” directly associated
with immigrant waves, just as other countries with a similar experience. When,
after the 1930s crisis, import-substitution industrialization gained impetus in
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almost the entire region, its economic and social impact in our country was
very strong. Battlism’s inclination for industrialization asserted itself; the share
of manufactures in total production increased, as did the political inuence of
industrial entrepreneurs; and a unionism independent from the government
acquired strength, supported by strong bases in packinghouses and in textile
and metallurgical plants.
But the country is also an example of “frivolous protectionism,”
which in Fernando Fajnzylber’s keen analysis characterized Latin America’s
“truncated industrialization.” As shown by the experience of every country
that built a solid modern industrial foundation, a nascent industry does
need some sort of protection. The relevant question is another. It has to
do with the type or protection, its timetable, counterparts, and objectives.
On our continent, protectionism was a frequent practice that concentrated
efforts on seeking further protection rather than on learning to produce
better, with more advanced technology, better organization, and workers’
involvement. Still according to Fajnzylber, the East Asian countries, whose
industrial development awed the world in the second half of the 20
th
century,
practiced a “learning protectionism” that was strict and attuned to changing
circumstances; this helped industrialization to surge forward and prevented
it from becoming truncated, as occurred with Latin America’s import-
substitution industrialization, although this happened to a lesser degree than
it was fashionable to claim in the eighties. The importance of learning as the
kernel of economic development has been forcefully expressed in a recent
work by Alice Amsden, which contains a vigorous revendication of the import-
substitution industrialization as formulated by Raúl Prebisch.
Turning our attention back to Uruguay, we note that on the whole
industrial protection had a positive effect in respect of equality and
redistribution. Employment increased in relatively modern sectors, with better
remuneration and social protection. Small and micro-entrepreneurs were able
to expand their activities.
In general, social protection and protection of production improved
living conditions and reinforced the country’s commitment to equality, but
caused more reactive and revendicative than proactive and creative attitudes.
The welcome social protection was not accompanied by the promotion of
training and qualication. Neither was the indispensable industrial protection
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accompanied by the promotion of technical and productive innovation.
Education’s considerable expansion had only a thin connection to the world
of labor and production. The less intense promotion of culture assigned little
room to science and almost none to technology.
A comparative study between Scandinavia and three Southern Cone
countries –Argentina, Brazil, and Uruguay – maintains, on solid empirical
grounds, that in(equality) differences are the main explanation for their
different development paths. This conclusion is pertinent but should be
ne-tuned. Uruguay is not a very unequal country by comparison. But the
main difference between our countries and Scandinavian countries seemingly
lies in the different approaches to inequality. Some approaches stimulate
individual and collective capabilities to learn, create, and work innovatively,
which leads to further reduction of inequality; we label these approaches
proactive equality. Other approaches to attenuating inequality do not foster the
inclination to be an agent. They have more to do with redistribution than
with production and technical, institutional, education, and cultural creation
in general; these forms of reactive equality are hardly sustainable in the long
run, except perhaps if the “commodity lottery” of which Bulmer-Thomas
speaks yields great, lasting prots.
In sum, a retrospective look suggests that the building of the future in
Uruguay nds a solid foundation on the national experience of combating
inequality but also a heavy burden in the reactive forms of equality that have
predominated.
VII. Uruguay today
After an extremely serious crisis that reached dramatic levels in 2002,
the Uruguayan economy experienced a remarkable recovery, and in the last
three years has been growing at an average of 7 percent a year, which is really
unusual for the country.
The crisis accentuated a long-standing growth trend in the leftist
opposition. The Broad Front-FA obtained 21 percent of the votes in 1989,
when it won the government of the capital of Montevideo, where nearly half
the country’s population lives and whose control it still holds. In 1994, it got
30 percent of the votes, leading its opponents to see it, with good reason,
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as the likely winner in the following elections and to have the Constitution
changed to permit runoff voting. In 1999, the Broad Front, with 40 percent
of the votes, obtained the majority at the rst round but was defeated in the
runoff elections. In 2004, it won by absolute majority at the rst round, amidst
exuberant popular jubilation, which occurred again when new President, Tabaré
Vázquez, was inaugurated on March 1, 2005.
Several changes have marked these first three years of the left’s
government in Uruguayan history.
Investigation of the dictatorship’s crimes, practically blocked in the
previous twenty years, gained new impetus. An impressive report about
disappeared persons was prepared, their remains were tenaciously sought,
and unprecedented possibilities opened for trying those responsible for the
crimes committed under the dictatorship, various of whom were brought to
trial, including the President that had led the 1973 coup d’état.
Another area in which substantial progress has been achieved had to do
with the situation of the neediest, aggravated by the crisis. Getting round many
difculties, the National Social Emergency Plan-Panes helped reverse the trend,
providing direct assistance to many families, who in turn had to keep their
children in school. Panes is being renamed Equality Plan, while preserving its
concern for providing education for the neglected segment of the population
and intensifying the efforts to incorporate it into the labor market.
Although poverty is still all too visible, the social situation has considerably
improved owing to the economic and social policy factors already mentioned, in
addition to others, including the labor policy. Unions faced difcult conditions
as of 1990, particularly because the State stopped tripartite negotiations
pertaining to salaries and other aspects of labor relations, but also because
union persecution in various quarters was barely curbed by the government. In
both respects, the ofcial policy has considerably changed, resulting in a marked
increase in union afliation and in the improvement of working conditions.
This was helped by the economy’s performance and the attendant decline
in unemployment, which was slower than the increase in production, though,
a further example of growth that has difculty in creating jobs, a marked
tendency in today’s economies.
The factors here pointed out have contributed also to an unequal but
signicant increase in real salaries.
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Management of the macroeconomic policy attracted some criticism
also, either for increasing expenditure or for the contractive bias of the
exchange and monetary policies. But it has not been faulted for lack of
technical capacity on the part of those that conduct it, who are met with
signicant approval.
The same cannot be said of ofcial announcements about the setting
in motion of a “productive country,” as the pertinent policies have not been
actually implemented.
Be as it may, the country’s productive apparatus is changing in
connection with a reassertion of the role of natural resources, which is
particularly noticeable in respect of agricultural exports, especially soybeans,
and even more so in the combination of forestation and pulp production.
These items are attracting a relatively high volume of foreign investment,
which far exceeds the modest national contribution, as our economy’s
historically low investment in this area has not changed much in this phase
of unexpected apogee.
Two “structural” reforms focus their attention and discussions on today’s
Uruguay. The most ambitious is the establishment of the National Unied
Health System, whose positive social impact is cause for optimism, although
management difculties seem considerable. If these difculties are properly
addressed, this reform will be the period’s most important.
Currently, polemics are centered on some court decisions that exempt
retirees from personal income tax, tax reform being very much in the government’s
interest; but actual results of this reform are still difcult to assess.
In 2009, there will be Presidential and legislative elections, which will
be preceded by internal party elections. The coming fall will thus be one of
intense campaigning. At present, the President of the Republic’s popularity
remains high, but intentions to vote for the government party have diminished,
introducing a degree of incertitude as to whether it will obtain a much higher
number of votes than a year ago.
In sum, what will be done or fail to be done in the next twelve months
will have a special impact on both the remainder of the current government’s
term and the choice of his successor.
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VIII. An unresolved issue
In the early nineties and to a lesser degree in the beginning of the
following decade, the government implemented a program with a clear
neoliberal bias, with mixed results. In comparison with the country’s own
past, the change was in no way less pronounced; but in comparison with the
region, neoliberalism was considerably blunted in Battlist Uruguay.
A change of government in 2005 led to the assumption that there would
be a much more marked change in the ideological sphere. Now, in these
times of the “post-Washington consensus,” actual possibilities for a drastic
change of course are not many, particularly in small countries. At this point,
we return to the considerations in this article’s preceding sections, particularly
as regards the South American region’s prospects.
Regional relations are an area in which the Uruguayan government
has met with profound frustration. Great hopes were pinned on a Mercosur
consisting of governments seen as akin. Although I have no intention
of assigning blame, the fact is that reality did not meet expectations. An
unexpected conict about the building of a pulp plant on our bank of the
Uruguay River brought relations with Argentina to their lowest level in a long
time. Although we have had no serious conict with Brazil, which is once
again our major trade partner, the hopes placed in relations with our great
northern neighbor have faded somewhat.
In addition, the Uruguayan government has attempted to establish close
relations with the United States, to the point of considering the signing of a
Free Trade Agreement, which proved to be inconsistent with its continued
membership in Mercosur; though an FTA elicits rm support from opposition
parties, it is strongly opposed within the government’s own party. The result
was that after intense debate nationwide, President Vázquez discarded that
possibility at the end of 2006 but did not cease to pursue closer cooperation
with the United States.
Full participation in the world economy is thus not only an unresolved
issue but also a major source of incertitude. Succinctly speaking, those that
see Mercosur as a privileged space for implementation of a long-term strategy
have difculty in nding arguments favorable to a short-term perspective,
while those in favor of looking more at the world rather than at the region are
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not able to test the sustainability of said long-term strategy against possible
short-term advantages.
IX. Scenarios for tomorrow
In moving from a summary review of relevant past and current
processes and events to a forward look, one of the main factors for envisaging
different futures is precisely the outcome of the country’s full participation
in the external world.
With Gerardo Caetano, we have recently edited a compilation titled
Uruguay. Agenda 2020, at the nal summary of which we analyzed different
scenarios in light of the social inequality picture and of the distinction
between reactive and proactive approaches to equality. Our starting point
was Fajnzylber’s well-known thesis, according to which, under the different
combinations of high or low inequality with slow or rapid growth, show
an “empty slot,” as there are no examples that sustainedly combine low
inequality with rapid growth. The fascinating thing now is that this empty
slot may begin to be lled, thereby making our societies less unjust and their
integrated development more likely.
In Uruguay’s case, if it were only possible to aspire to full participation in
the external world apart from a shared regional strategy – as a lone participant
– the performance of international demand for primary products would have
a decisive weight and there could hardly be greater, specic incentives for
a sustained expansion of capabilities and innovation, and for incorporating
knowledge and advanced qualication into the production of goods and
services. Should the current external bonanza conditions prevail, the country’s
social and political tradition would lead to a reinforcement of equality,
although of a predominantly reactive character, while deterioration of external
conditions would translate into greater inequality and slow growth.
If, on the other hand, full participation in the world economy were
sought on the basis of cooperation with Mercosur or with the South American
region, in other words, on the basis of integration for development, this would
make possible the expansion of capabilities even if the external bonanza did
not prevail, while, should the latter remain favorable, the empty slot might
begin to be lled on the basis of proactive equality.
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The following, schematic picture illustrates the alternative scenarios:
Participation alone in the
world economy
Integration for development
Unfavorable external
conditions
Increased inequality and
slow growth amidst
Expansion of capabilities
difculties
Favorable external
conditions
Reactive equality growth
and limited development
Proactive equality rapid growth
and real development
This schematic picture could and should be considerably enriched; this
simplied presentation is meant simply to suggest an approach.
X. Responsibility
Under a proposition-oriented approach, it seems appropriate to limit
ourselves to an area in which we are strong, namely, education and, more
specically, the University of the Republic. This is Uruguay’s only university,
with an enrollment of over eighty thousand students. It accounts for most
knowledge created in the country and enjoys a signicant degree of autonomy.
It has thus major responsibility for addressing the “learning divides.”
It is also engaged in a new university reform, impelled by its traditional
commitment to society, which we consider the best Latin American university
ideal bred in the continentwide movement known as the Cordoba Reform.
The new reform’s major goal should be the universalization of quality
higher education geared throughout life to work. In terms of Uruguayan
tradition, a transformation of such magnitude is no more ambitious and
no less necessary than the late 19
th
century’s universalization of elementary
education, whose actualization is one of the country’s strongest foundations
on which to build the future.
Addressing the “enrollment gap” requires the continuous expansion of
higher education opportunities, which in turn requires a thorough change in
education in at least three aspects: (i) renewed emphasis on active teaching,
in which the main protagonists in education are individually and collectively
those that learn; (ii) wide diversication of learning modalities and institutions;
and (iii) in particular, an ever closer connection between the worlds of
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education and work. To teach so as to foster the capacities for doing new
things throughout one’s active life, it is necessary to combine what happens
in traditional classrooms with the full use of veritable “potential classrooms”
anywhere – hospitals, farms, factories, laboratories, professional studios, means
of communications, public services, sustainable tourism centers, etc. – where
socially valuable work is efciently done.
This suggestion links the solution to the rst learning divide, i.e., the
enrollment gap, and the task of closing the qualied occupation gap.
In this connection, a key role is played by the revalorization of a dening
component of the Latin American ideal of university, namely, university
extension. Understood as cooperation between the university and the collective
actors in cultural creation and in the socially valid use of knowledge, extension
should be part of the education offered all students, as this would mean: (i) an
opportunity of serving the nation that offers them free tertiary education; (ii)
early connection with society, with particular attention to the underprivileged;
(iii) teaching geared to problem solution; and (iv) an opportunity to show what
highly-qualied youth can accomplish.
We thus see extension as an ethical component of university education,
which can render a major contribution to the closing of the two learning divides.
Obviously, extension is conceived in close relation with teaching and
research, as well as with the search for new solutions for practical problems,
that is, with innovation. It has already been recalled that throughout Latin
America and quite especially in Uruguay a major contribution to knowledge
creation comes from university research. Thus, the linking of the university’s
research and innovation capacity with production policies, as well as – what is
usually less stressed – with social policies is crucial to development, understood
as the expansion of capabilities and freedoms based on the promotion of
proactive equality.
Throughout the whole world one witnesses what it would be no
exaggeration to call a combat for the university’s soul: What is its dening
mission? This old question acquires new relevance today owing to the inux
of knowledge into all social relations. In this serious discussion about the
role of higher education institutions, some views favor their contribution to
economic growth, without much concern for social change, to the point of
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proposing as the core idea the notion of “entrepreneurial university;” other
views, on the contrary, insist on the traditional university ideal, related solely
to properly academic values. From the periphery, we seek our own alternative,
suggested by the notion of “university for development.”
XI. Toward a project of nation
A century ago, a project of democratic, equalitarian nation conceived
in Uruguay inspired many successful endeavors, particularly joint efforts to
restore public freedoms when these were suppressed.
The fact that ours was considered a model country, though, gave rise
to a twofold mistake: that of believing rst in national self-sufciency and
that of later giving in to self-satisfaction. When, late in the 1950s, “Americas’
Switzerland” began to come apart, the dominant spiritual tonic started a
descent from a facile, frivolous optimism into little-encouraging pessimism
that assumed that the country could not be better than it had once been. The
implicit proposition is usually a return to the past, which is simply not feasible
and, in our view, even less desirable.
The remarkable thing about the present is that both in material and
spiritual terms no lesser opportunities have opened in Uruguay for starting on
a new development path that draws inspiration from the best from the past
and takes advantage of the currently prevailing conditions.
The periphery’s response to the new importance of knowledge has been
to aim at building learning societies. Combating underdevelopment today requires
the interconnection among various players to expand capabilities and to learn,
through shared practices, with a view to solving old and new problems. This
conjunction of efforts is quite possible in Uruguay, a small country with a
rich democratic tradition, where now and then initiatives born in the bosom
of civil society have displayed their vigor.
Should internal political capabilities point in a clear direction and regional
integration for development take shape, a new national project could become
reality for the construction of a learning country closely integrated into South
America.
DEP
Translation: João Coelho
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Energetic integration
in Latin America and
the Caribbean
María A. Hernández-Barbarito
*
T
he discussion of energetic integration in Latin America and the
Caribbean links energy to the comprehensive, independent, and sovereign
development of peoples as a determinant binomial in mankind’s economic
development. This view encompasses the environmental variable, which
expresses the quality of life, the preservation of cultural identities, and the
degree of deterioration and depletion of resources – in sum, everything that
reects the survivability of the tangible and intangible elements proper to
mankind. Hence, the need to consider the prospects for regional energetic
integration in light of the concept of integrated development understood
as the requisite socioeconomic process to ensure the eradication of poverty,
ecological balance, improved quality of life accompanied by social justice,
independence, sovereignty, and respect for cultural identities. The Venezuelan
proposal that is being realized through Petrocaribe, Petrosur, and Petroandina
is part of this picture and an element of the Bolivarian Alternative for the
peoples of America. Although progress has been signicant, challenges are still
* Institute of Diplomatic Studies Pedro Güal, Venezuela.
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daunting. This will be the subject of this article, to be examined in connection
with integrated development, with a view to valorizing that which has been
accomplished and at dening some lines of action for its consolidation, to the
benet of the peoples of Latin American and the Caribbean.
1. Energy, development, and the environment
To appreciate the interrelation of energy, development, and environment,
it is sufcient to recall the role of animal energy in the agrarian revolution
that preceded the industrial revolution, of the windmills in the textile industry,
of vegetal and then of mineral coal, which gave a decisive thrust to the
development of manufacturing and transportation, as well as of the steam
engine (Paul Bairoch, Revolución Industrial y el Subdesarrollo, 1967), followed by
the combustion engine and oil, which in turn gave rise to the automobile
and electric home appliances revolution in the early 19
th
century, based
on an energetic model that prevails to this day, with the addition of major
technological components of electronics and communications.
Although scarceness of energy has generally been an obstacle to
development, its abundance has not always been a source of progress and
welfare. This is the case of the underdeveloped oil-producing countries, whose
revenues have served to create unequal societies that are highly vulnerable
to external factors. In developed countries, this revolution has not been
balanced either, as the pursuit of ever-greater capital accumulation has led to
the depletion and higher prices of nonrenewable resources, with the attendant
consequences for the natural environment and for man’s quality of life.
Thus, all development proposals should avoid a replication of the
nefarious relation between economic growth and pollution, economic growth
and depletion of nonrenewable resources, as illustrated by the history of oil in
the United States, a country with a widening oil decit, the highest production
costs, and an international posture that militates against environmental
protection, as demonstrated by its refusal to sign the Kyoto Protocol on
controlling carbon dioxide gas emissions into the atmosphere. A simple story
can corroborate this fact.
The overt incentive to the extraction of crude oil originated with the
Appropriations Law, which granted ownership of the extracted product to
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the extractor and not to the deposit’s owner. This encouraged the overdrilling
of wells, which led to the depletion of U.S. oil reserves and led to intensive
consumption. Subsequently, the U.S. oil policy was geared to curbing
overproduction rather than to conserving this resource. The prorating statutes
were thus approved to balance supply and demand and prevent falling prices,
with the attendant decrease in capital accumulation by the oil monopolies that
were coming into being. Lastly, the imports programs also aimed at balancing
the market and guaranteeing stable prices for reners, as this prevented the
shutting down of the less competitive internal production. Only after the 1970s
energy crisis did talk start about the need for the rational use of energy, but
without altering the massive goods consumption model. (Hernández-Barbarito,
Karam, Ramírez, et. Al., 2005)
For a reection on this subject, we have chosen, among many possibilities,
a French analyst known as being a Marxist-ecologist – André Gorz, whose
inspiring ideas can be found in Ecology as Politics (1979). This choice does not
mean neglecting Gorz’s thinking as summarized by Ramón Tamanes in his
book Ambiente y Desarrollo [Environment and Development] (1982), which
presents the Rome Club’s discussion of Zero Growth, the various contributions
on the subject, and the international efforts to address the problem after
the 1972 Stockholm Conference, when the idea arose for a United Nations
Environmental Program (UNEP). But Gorz goes further in discussing the
rationality of the so called “development” and the need to overcome it by
countering the capital accumulation tendency typical of capitalism and some
versions of socialism. He proposes “four theses by way of conclusion,” which
can be thus summarized:
• Capitalism’s crisis is caused by the overdevelopment of production
capacity and by destructivity, which lead to scarcity. This crisis may
be overcome by a new production model that, breaking away from
economic rationality, is based on resources and energy saving ;
• Overcoming economic rationality and reducing consumption can be
accomplished through techno-fascism or through self-regulation. The
former can be avoided if civil society and the sovereignty of base
communities are strengthened;
• The unity of more and better has been severed. Better can be obtained
by less. It is possible to live better by working and consuming less,
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provided more endurable goods are produced, which generate neither
pollution nor scarcity and are accessible to all;
• Poverty in rich countries is not due to insufcient production but to
the nature of goods produced and the way they are produced and
distributed. Poverty can be eradicated only if the production of scarce
wealth, i.e., reserved, exclusive wealth is stopped;
• Unemployment in rich societies reects a shortening of the socially
necessary working hours. All could work much less, provided all of us
worked. Recognition of equal remuneration for all socially necessary
work is the way to the elimination of poverty and the distribution of
work among all those that are capable of working;
• If work is limited to the production of what is socially necessary, an
expansion of self-created, free activities will occur. The production
of an unlimited number of goods and services would be left to self-
managed organizations such as cooperatives, and
• The uniform consumption and living model will disappear at the
same time as social inequalities. Individuals will differ from each other
by the way they employ their free time and not by their earnings or
power. The utilization of their capacities and creativities in their free
time will be the only source of wealth.
Gorz concludes his recommendations with a call to work less, consume
better, and incorporate culture into daily living.
This is why, in presenting and evaluating Petroamerica’s experience, we
choose to do it in a comprehensive way, so as to point out and emphasize the
objectives still to be achieved so that our region may indeed advance toward
comprehensive, sustainable development. (Lolola Hernández-Barbarito).
Petroamérica y la Integración Energética de América Latina y el Caribe [Petroamerica
and Energetic Integration in Latin America and the Caribbean] (2007).
2. Regional integration as an alternative
Now more than ever the guarantee of integrated development lies in
the integration of peoples, as neoliberal globalization is bent on doing away
with borders, identities, and sovereignties, imposing the transnationalization of
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capital to satisfy needs induced by voracious, accelerated capital accumulation.
Peoples’ plurality is the only trend capable of checking the unilateralism that
has given rise to power blocs to ensure equilibrium. Latin America and the
Caribbean form one of these blocs. Hence, the idea of integration conceived
by Raúl Prebisch, which was further developed by Eclac and applied in all the
countries under an economicist view that gave birth to the Central-American
Common Market, the Alalc-Aladi, the Andean Community of Nations,
and Mercosur, among its major accomplishments. This concept has been
subsequently evaluated from the standpoint of Raúl Prebisch himself, who
stressed the need to complement his idea with the requirements of social
justice through surplus distribution (1980). Today, we assess it on the basis
of is achievements and its capacity to integrate peoples. Regrettably, balance
has not yet been achieved, and thus the pursuit continues: Community of
Nations? Southern Union?
Against this complex background, there arises a proposal for energetic
integration and a new way of conceiving it, inspired on the integrationist
thinking of freedom ghters Simón Bolívar and José Martí, to mention only
two of the fathers of our America. This proposal, impelled by the need to meet
energetic requirements, has given rise to Petroamérica, Petrocaribe, Petrosur,
and Petroandina. Its inspiration, though, is not a technicist or mercantilist
concept but rather the Bolivarian Alternative for the Peoples of America-
ALBA, its ideological support, whose salient principles are social solidarity and
economic complementariness to ensure food and energy security. This is the
reason for calling for both fair trade in hydrocarbons and energy in general
and investment in energetic infrastructure, such as storage tanks, electric power
plants, reneries, and transportation, accompanied by literacy programs and
health care. This new binomial also aims at achieving the region’s nancial
independence from the IMF, the World Bank, and the Inter-American Bank
through Banco del Sur, ALBA’s bank. To restore our cultural fabric, Telesur
was created to guarantee our peoples’ right to protect their identities and to
have access to truthful information, and the South University was conceived to
educate individuals committed to the subcontinent’s social transformation. The
peoples of Latin America and the Caribbean, heretofore unable to dream about
overcoming underdevelopment and dependence, can now do so, impelled by
the construction of their own models based on the need to achieve social
justice. In this connection, President Chávez, speaking at the 21
st
Mercosur
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Summit in Cochabamba in December 2006, when it was agreed to hold the 1
st
Latin American Energy Summit in April, said: “we are truly and structurally
building the integration we need (PDVS Avances, Jan. 21, 2007).”
3. Petroamerica is born under ALBA
The Petroamerica project, conceived as the Bolivarian Republic of
Venezuela’s energetic integration proposal for Latin America and the Caribbean,
has gained strong impetus since 2005 and is speedily moving forward through
its three components – Petrocaribe, Petrosur, and Petroandina, the latter of
which has been given a further thrust with the arrival of Bolivia’s Evo Morales
and Ecuador’s Rafael Correa to power. All Caribbean nations participate
in Petrocaribe, with the exception of Barbados and Trinidad and Tobago,
the latter owing to its commitments to transnational capital. Some Central-
American governments or municipalities and provincial governments are also
joining the initiative, thanks to indirect diplomacy, which has beneted their
populations with the supply of electricity and fuel for public transportation,
at privileged prices and unbeatable payment terms. Petrosur has agreements
with Mercosur countries, while Petroandina has had do resort to bilateral
agreements, because of the countries’ current or potential commitments to
the United States, based on free trade agreements-FTAs.
Starting as a cooperation proposal to facilitate the purchase of energy
by the countries of the region, the project has since incorporated the idea of
a Southern Gas Pipeline and the addition of a Trans-Caribbean Gas Pipeline.
Projects are now under way for the construction and overhauling of reneries
in other countries, including Brazil, Argentina, Cuba, Nicaragua, Ecuador,
and Jamaica. Also under way are petrochemical projects between Brazil and
Venezuela as well as projects to increase fuel storage capacity in Caribbean
countries, which are net oil importers; to supply transportation at freight cost;
to build electric power plants and install windmills; to implement policies on
the rational use of energy; and to go ahead with the setting-up of Opegasur,
with the participation of countries such as Brazil and Uruguay in the Carabobo
and Ayacucho blocs of the Orinoco Petroliferous Strip, etc.
ALBA, the Bolivarian Alternative for the peoples of the Americas,
originated in Havana, Cuba as a principles framework in 2004, with the objective
of combating poverty and asymmetries, on the basis of complementariness,
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and to ensure food security and the sovereignty and independence of the Latin
American and Caribbean peoples. ALBA subscribers are Cuba, Venezuela,
Bolivia, Dominica, and Nicaragua, while Ecuador and Haiti will soon join it.
Its initial Declaration states,
among other things, that the previous integration processes undertaken in
the region were far from achieving independent development and economic
complementariness and have served as a mechanism to increase dependence
and internal [sic] domination. It makes clear that, for the Latin American
and the Caribbean countries, integration is a sine qua non of development
amidst the creation of major regional blocs that occupy salient positions in
the world economy. Only integration based on cooperation, solidarity, and
a common will to raise all peoples to the highest development levels can
meet the needs and satisfy the desires of the Latin American and Caribbean
countries and preserve their independence, sovereignty, and identity. The
Declaration also stresses that ALBA will not become a reality on the
basis of mercantilist criteria or egotistical interest in business prots or
national benet at the expense of other peoples. Accordingly, investment
should not be an end in itself; it should be an instrument for achieving fair,
sustainable development based on norms that protect the environment and
that, through different means of communication, such as Telesur, defend
the culture and the identity of the peoples of the region, giving particular
attention to respect for and promotion of autochthonous and indigenous
peoples (Gramma, 2004:5).
This new view of integration includes a Continental Literacy Program,
scholarships in areas that are pertinent to economic and social development,
and a plan for free health care for citizens that lack such services, on the model
of Operación Milagro [Miracle Operation] (Luis Suárez Salazar, 2005).
4. Strengths, weaknesses, opportunities, and threats
pertaining to regional energetic integration
Although Petroamerica’s intention is to link the potentialities, needs, and
will of the peoples and governments of the region, it is subject to internal
weaknesses and serious external threats.
An assessment of the region’s energetic conditions points to the availability
of huge energetic resources to ensure self-supply. So far, consumption has
favored oil, while hydroelectric power ranks second, except in oil-producing
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countries, such as Mexico and Venezuela, which consume more gas, which
comes third in most other countries. There follow in importance coal and
nuclear energy, the latter only in Mexico, Argentina, and Brazil (B.P. Annual
Report, 2006). Oil supply is concentrated in Venezuela, Mexico, Ecuador,
Bolivia, Brazil, Trinidad and Tobago, and to a lesser degree in Peru and
Colombia. As regards gas, there are three major producers in the South –
Venezuela, Argentina, and Bolivia. In the North, Mexico stands out.
In addition to these strengths, there are others no less signicant:
• Some command of technological capacity in the energy area;
• Investment capacity on the part of Venezuela and other countries, such
as Brazil and Argentina, which have begun to overcome crises;
• Prior experience in energetic exchange under cooperation agreements
and through gas pipelines and power lines among Southern Cone
countries and between Brazil and Venezuela;
• Express interest on the part of many governments to move forward
with this line of action to overcome their energy insufciency;
• Awareness of the uncertainty of oil supply from the Middle East
owing to the invasion and occupation of Iraq by the United States
and England, the intervention in Lebanon, and Iran’s threats;
• Experience of periods when neoliberal packages were applied, which
led to the awareness of the risks of the FTAA and the Hemispheric
Energy Alternative (Venezuelan and Mexican oil for the United States)
and FTAs with the United States;
• Prior experience of regional organization in the Grand Caribbean
with Mexican and Venezuelan efforts to give impetus to the Energetic
Cooperation Program of the 1980s, known as the San José Agreement.
To this should be added the Bolivarian Republic of Venezuela’s
initiative that led to the signing of the Caracas Energetic Cooperation
Agreement (2000) and the Comprehensive Cooperation Agreement
with Cuba (2000), and
• Establishment by the region’s state enterprises of Latin America, of
the State Reciprocal Oil Assistance (Arpel), the rst cooperative effort
among state enterprises, which soon changed its name, membership,
and objectives, opening its doors to private enterprises. Subsequently,
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the governments established the Latin American Energy Organization-
Olade, for coordinating the desired energetic integration but which
has been devoting its attention almost exclusively to studies on the
sector in the region.
One of the opportunities open to the regional energetic integration
project is a nascent feeling in the Southern peoples, which seek to overcome
unipolarity and to consolidate pluripolarity by forming blocs capable of
undertaking international negotiations from a Southern perspective, aimed at
combating poverty and achieving peace. In addition, this particular moment
witnesses the strengthening of OPEC, which has led to the stabilization of the
oil market in favor of oil-producing, rather than oil-consuming countries.
Lastly, the fact that Venezuela is going through a change with a high
social content and is internationally projecting its commitment to solidarity,
integrity, and poverty eradication heralds an opportunity for the peoples of
the region. The times are receding when international management distanced
our country from the region, as shown by some facts.
The displacement of Venezuelan oil from the region beginning in the 1960s
led to its gradual replacement by crude from the Middle East and Africa. As
a result, our oil exports became concentrated on the United States. During
this period, companies that operated in the Middle East and in Venezuela
preferred to ship oil from that region to Brazil. Such was the case of Shell,
which in 1969 shipped 50 percent more oil from Iraq than from Venezuela to
Brazil. A similar thing occurred with Esso International, now Exxon, which
sold similar amounts of Arabian and Venezuelan oil to Brazil. Kuwait oil was
sold to Brazil at considerably lower prices than Venezuelan oil. Petrobras
proposals to undertake operations in Venezuela went unheeded (Hernández-
Barbarito, Karam; Ramírez et al., 2005).
Moreover, our oil’s history shows submissive dependence on the United
States, without any counterpart:
1. In 1939, a Free Trade Agreement was signed with the United States
on customs duty exemption for all goods imported by Venezuela as a
counterpart for slashing in half the new U.S. $0.21/bl duty on light and
medium crude and reducing to a fourth the duty on heavy crude. But the
sacrice did not result in any comparative advantage to Venezuela, as this
treatment was soon extended to all Middle Eastern countries.
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2. In the 1950s, there begun in the United States the initially voluntary
then obligatory imports control and Venezuela was excluded from the
special treatment accorded Mexico and Canada. This special treatment
consisted in determining domestic consumption and deducting from it
imports from neighboring countries. The balance was distributed among
all importers, including Venezuela, under a quota system.
3. In the 1960s, after qualication of our oil as highly polluting owing to its
sulphur content, Venezuela was forced, under risk of suspension of residual
imports, to grant concessionaries accelerated depreciation for investment
in desulphuring facilities they were obliged to build in the country. This
reduced scal revenues, as the tax on net taxable earnings had to be raised.
This investment was lost because, with the outbreak of the Energy Crisis,
the desulphuring plants ceased operations. Thus, Venezuelan reneries
were forced to specialize in the production of residuals for export to the
United States at a much lower price than the price of crude.
4. These practices, which are damaging to national revenues, survived the
faulty nationalization of the 1970s. A clear example was the strategy
employed to overcome the domestic gasoline decit, which required a
change in the rening facilities that devoted themselves 60 percent to
producing residuals. The onerous deal, eventually denounced by Juan
Pablo Pérez Alfonso, consisted in contracting extremely high investment
with each former concessionaire instead of calling for bids to determine
the best choice for the country. The expenditure was of such magnitude
that an OPEC founder refused to approve it, suggesting instead the
importation of the gasoline needed. This was one of the most visible deals
of oil’s new transnational management, which set about to deteriorating
the industry’s assets, deviating funds through marketing and technology
contracts, and nally depressing oil prices and putting the state enterprise
in conditions to be privatized at an advantageous price for big capital
when President Chávez assumed power (Hernández-Barbarito, Karam,
Ramírez et al., 2005).
Dependence dynamics, as seen in our oil industry, prevented Venezuela
from playing a major role in Latin America and the Caribbean, which remained
exposed and subjected to the Oil Cartel. Today, though, our country can and
wishes to play this major role, as it holds 62 percent of the area’s oil reserves
and accounts for 25 percent of its production. As regards gas, the gure is 52
percent. The region could be self-sufcient not only in oil and gas but also
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in coal (B.P. Annual Report, 2006). The region’s strength and Venezuela’s
major role are enhanced by the addition of the reserves of the Orinoco Strip.
These gures make us think about what we are and what we can accomplish
together. Are we going to be vulnerable or self-sufcient in the area of energy?
Everything will depend on the alliances and decisions made.
However, the proposal faces weaknesses. Some are historical and some
are contemporary, but all must be addressed head-on. They include the
following:
• Border disputes;
• Some governments’ lack of consistency in respect of integration,
owing to commitments to the United States;
• Limited technological development in some specic areas of the
energy sector, which forces countries to negotiate with transnational
capital;
• The countries’ limited capacity to nance rening, transportation,
and petrochemical projects, and
• Presence, in many countries, of transnational enterprises that have
partial or total control of the oil sector.
Moreover, there are threats that originate in the efforts on the part of
the Northern power to weaken any regional integration process, particularly
if it is excluded from it. These threats come from the pressure by the United
States’ and big transnational capital’s effort to impose opening alternatives,
disintegration, and intervention, as illustrated by the following:
• The FTAA and the Hemispheric Energy Initiative;
• Free trade agreements;
• Military backing such as for the Colombian and the Patriot Plans;
• Multilateral actions originating in the World Trade Organization –
WTO;
• Threat of preventive war against Cuba and Venezuela, principally
against the latter;
• Tendency to replace oil with gas, through which transnational capital
intends to weaken OPEC’s role in the world energy market. This
process is known as the new energetic transition, and
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• Establishment of an OPEC of ethanol and other agrofuels produced
from grain and tubers, pushing of transgenic seeds, and reduction of
the supply of food for hungry populations.
As the FTAA proposal and its component, the Hemispheric Energy
Initiative, began to loose impetus, pressure for the celebration of FTAs
increased. This, coupled with the proposed extension of the Colombian Plan
and the threats of preventive war against Venezuela and Cuba, purports to
achieve Monroe’s objectives: America for the Americans (meaning the United
States) and neutralization of the liberation spirit of the peoples that continue
to be subjected, such as those of Nicaragua, Ecuador, Bolivia, Argentina,
Uruguay, and Brazil – peoples that increasingly demand from their governments
the assurance of a life with dignity.
In addition, the threat of the new energy transition (from oil to gas)
stirs up a new debate in Venezuela about the need to resort to orimulsion to
guarantee the immediate production of electricity in the region, instead of
counting on new gas reserves, which would prevent the world’s largest oil reserve
from being placed at the service of the development of the region’s strategic
electric sector and from giving impetus to the region’s hoped-for endogenous
industrialization. A further factor is the new lure of agrofuels, as proposed
by an extreme developmentism bent on subtracting farming land from food
production, which is susceptible of dazzling more than one government with
the mirage of the Northern nation’s energy-guzzling market. Control and
divide – this is the strategy. Let us look more closely into these two threats.
The new energetic transition seeks to submit to the control of the
industrialized countries and of transnational corporations the new gas
deposits of the former Soviet Republics in the Caspian Sea and of West
Africa. To counter this intent, the President of Iran introduced the idea of an
organization of gas-exporting countries also and invited Russia to join it. This
is a key issue for Venezuela, particularly if we associate it with the need to take
up orimulsion again and to ensure that it is seen as oil and not as bitumen. As
it seems, this product has been rejected because of the need to valorize our
reserves in the Orinoco Oil Strip, as it was thought that the protability of
the Strip would be higher if crudes were mixed with light petroleum or were
improved. There was also the fear that in time orimulsion would be included
in OPEC’s quota, which would not be protable at the agreed prices. It was
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thought then that orimulsion should not compete with coal but with gas in the
generation of electricity and that its price should be xed on the basis of this
relation, adjusted according to is content of vanadium, which is highly valued
on the market, but whose presence in the byproduct was unknown at that time.
Orimulsion’s advantages are many: Venezuela has exclusivity over this
product and its technology; it can be transported through the same channels
as oil and, differently from gas, does not require special liquefaction and
gasication facilities; it is sufciently available to meet national and regional
needs; and its use does not have to wait for years, as is the case of gas, whose
most valuable use is in the petrochemical industry. It is not for nothing that
China, India, Japan, and Italy are interested in this energetic novelty (Travieso,
2005; MRE, The markets for Venezuelan oil, 2005).
As regards the discussion about ethanol, it should be noted that it takes
place in the context of a strategy that attempts to weaken regional energetic
integration and to create false expectations about the impetus it might receive
from the United States. Any eventual support would be tailored to the needs of
the Northern economy; this is illustrated by the United States’ refusal to meet
Brazil’s request for reducing the U.S. tariffs that protect its own production.
This strategy became clear in the rst weeks of 2007, when the discussion
about ethanol began, as this was one of the key issues on the agenda of the
U.S. President’s visit to some Latin American countries.
As we know, ethanol is produced in the United States from corn, while
in Brazil its raw material is sugarcane. Biodiesel, in turn, is produced from
oilseeds, such as palm, soybeans, and sunower. Until now, production of
these two agrofuels was prompted by the need to use the product in small
ratios to replace lead and methyl-tercier-buthyl-ether, but has also proven to
be an aquifer pollutant in case of spills.
The polemics arise because the proposal proffered by President Bush
on his tour envisages replacing all gasoline with agrofuels, which is an
absurd, as this would require farming several planets to be able to meet fuel
requirements worldwide. Ramón Pichs, of the World Economy Research
Center (CIEM), says that “to ll a ve-gallon tank with biofuel for two
weeks would require grain sufcient to feed 26 people for a year” (Ultimas
Noticias, Oct. 3, 2007). To this should be added its effect on prices, the
raising of which has already led to protests by the Mexican population
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against the higher price of the traditional tortilla. Arguments pertaining to
the production’s energy costs deal a last blow to the choice of ethanol as a
fuel substitute, as to produce it, it is necessary to apply fossil energy to the
soil through fertilizers, fungicides, and pesticides derived from oil in ever
greater proportion because of the monoculture required, as well as the oil and
electricity necessary for planting, harvesting, processing, and transporting.
Moreover, this strategy could encourage the use of transgenics and speed
up the destruction of biodiversity. In this regard, FAO points out in its last
report that between 1900 and 2005, Latin America’s forest coverage shrank by
19 percent in Central America and by 9 percent in South America. Our region
ranks rst in the world in the number of tree species that are threatened or
susceptible of extinction (Ultimas noticias, March 14, 2007).
This discussion is necessary, as all the region’s countries have projects
in this area. Here are some facts:
Brazil produces 18 billion liters a year, which allows it to reduce its crude
imports by 40 percent; Colombia produces 300 million liters of ethanol
from sugarcane and expects to raise production of biodiesel from African
oil palm to 645,000 tons. Argentina produces biofuel from soybeans and
expects to reach 800,000 tons a year by using sea algae also. In Chile, eld
studies are at an advanced stage and 170,000 hectares are to be used for
producing diesel and ethanol. Paraguay intends to process about 100,000
liters a day of biodiesel from castor beans, and other countries, such as
Bolivia, Guatemala, Honduras, and Nicaragua also have projects at an
advanced stage to build plants. In Venezuela, the Pdvsa Plan contemplates
investing 86 billion in ethanol between 2006 and 2012 and it has been
recently announced that eleven plants will be built to blend it with gasoline,
with Cuba’s assistance.
Of particular concern is the fact that Brazil has strengthened its alliance
with the United States with this strategy, as stated in the cooperation protocol
it signed with the United States, indicating that “it will drastically change the
world’s energetic matrix in the next 20 to 30 years” (Ultimas noticias, March
13, 2007)” and that Colombia intends to advance plans in this connection
in regions where our rivers have their headwaters. These are issues to be
considered by the region’s governments.
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5. Summary and nal considerations
By way of conclusion, it can be said that the Latin American energetic
integration project is advancing apace and gaining in depth, encompassing
sectors that are vital for giving impetus to the development of our peoples.
The aforementioned strengths of the project have provided it with a sound
foundation, as is the case of abundant energy sources, which have even
prompted the idea of the establishment of a gas OPEC for South America
– the Opegasur linking Argentina, Bolivia, and Venezuela for the purpose of
protecting gas from the voracity of big transnational capital.
The recent repudiation of neoliberalism and the favorable moment
the region is experiencing in terms of growth, with the nationalization of
hydrocarbons in Venezuela and in Bolivia, and with Argentina’s recovery
continue to work for this energetic integration strategy, thereby offsetting the
weaknesses pointed out earlier. This is illustrated by the newly moderate tone
of the discussion about Bolivia’s right to a sea outlet, Guyana’s incorporation
into Petrocaribe, and the Trans-Caribbean-Colombian gas pipeline; these
projects have taken over the space previously occupied by border disputes.
A major progress has been the obligation to negotiate among state enterprises,
which has laid aside the transnational corporations and fortied the public
sector in respect of energy, even though this may refer only to the marketing
of hydrocarbons in the case of non-producing countries.
Tensions do exist, though, and the divisive strategy persists, as shown by
Washington’s recent offensive to push ethanol and the recent Colombia-U.S.
intervention in Ecuador, as well as the inconsistency of some governments, as
seen particularly in Colombia’s and Peru’s alliance with the United States. Against
this background, energy supply functions as a moderator and an instrument
of approximation, given its importance for fostering development.
Threats have lost force as shown by the nearly generalized rejection of
the FTAA and by the Latin American Regional Energy Initiative; by the curbs
the Southern countries have imposed on the WTO; and by the rm alliances
among the region’s governments, which erect protection barriers against
Washington’s preventive war threats. Another positive fact is the emergence
of ALBA, involving Cuba, Venezuela, Bolivia, Dominica, and Nicaragua,
and the expected adhesion of Ecuador and Haiti. Another is the close bonds
of friendship Venezuela has established with Argentina and Brazil. The
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international scenario of war of attrition in Iraq and Afghanistan, and Iran’s
threats maintain the Middle East as the most important war front for the U.S.
government. This, coupled with the economic recession it is currently facing,
makes a military intervention on our continent less likely.
These advances and achievements in respect of Latin American and
Caribbean energetic integration do not keep us from insisting on the need
to reect about the risks of development based on a rising consumption of
energy. We insist that the endeavor to overcome the energy decit of the
countries of the region should follow highly rational criteria and promote
the most appropriate use of each type of fuel. Public transportation should
be favored over private transportation and productive and energetic solutions
should be promoted in accordance with local characteristics. As Gorz says,
we must live better with less, avoid the production of residues, rationalize
consumption, valorize and democratize the productive apparatus, favoring
creative, and favor cooperative work.
The use of alternative renewable sources should also be promoted to
meet the energy needs of remote areas, such as borders, rural zones, and
rainforest zones. Here are some examples:
The experience of the Las Gaviotas Center in Colombia, which explores
energy sources appropriate to the Colombian plains, such as biogas and
hydroelectricity. Brazil has also developed biogas. In Venezuela, the Energetic
Revolution has permitted the replacement of conventional lamps with more
efcient ones – a Cuban experience, by making lamps with photovoltaic cells
in Caracas and other regions of the country, as well as beginning the building
of the Paranaguá peninsula windmill park, etc. The miniplants proposed
and built on the Andes by our popular technologist Luis Zambrano should
be multiplied and the use of direct solar energy should be encouraged for
crops such as manioc, as is the case year-round in Brazil. Also encouraged
should be hydroponic and organoponic crops (Cuba) or simply mixed forms
of cultivation as in the traditional Venezuelan smallholdings, which display
high energetic rationality. This would foster the development of integrated
agriculture, ecologic tourism, the rational settlement of uninhabited regions,
and food self-sufciency.
Latin American and Caribbean energy integration should focus on
combating poverty, creating productive jobs, and ensuring sustainable
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development, a Latin American commitment undertaken at the United Nations
Conference on Environment and Development, also known as the Earth
Summit (Rio, 1992) and at the World Summit on Sustainable Development
held in Johannesburg in 2002.
Lastly, it should be stressed that energy integration through Petroamérica
is a fundamental, or rather the most important component of the regional
integration process. It aims rst at solving supply problems at fairer prices and
conditions. Its mission, though, is comprehensive and addresses the challenge
of promoting energetic rationality, environmental preservation, and creating
a cleaner, sustainable world, thereby ensuring greater well-being or, in the
words of Liberator Simón Bolívar, “the highest sum of happiness possible”
for the population.
References
Bairoch, Paul. La Revolución Industrial y el subdesarrollo. México: Editorial siglo
XXI, 1967.
Gorz, André. Ecologie et politique. Paris: Ed. Du Senil, 1982.
Granma. La Habana, Cuba.
B.P. Informe estadístico sobre la energía mundial. Londres, junho, 2006.
Hernández-Barbarito Lolola. Petroamérica y la integración energética de América
Latina y el Caribe. Caracas: Instituto de Altos Estudios Diplomáticos Pedro
Güal, Mppre, 2007.
Hernández-Barbarito, Karam, Ramírez et ali. Los mercados para el petróleo
venezolano. Caracas: MRE, 2005.
Pdvsa Avances. Caracas, 2005-2007.
Prebisch, Raúl. Capitalismo periférico. Crisis o transformación. México: FCE, 1980.
Suárez Salazar, Luis. “El ALBA: un hito en la proyección de la revolución
cubana hacia América Latina y el Caribe.” In: Política Internacional. nº 6,
julho-dezembro, 2005. Instituto Superior de Relaciones Internacionales
Raúl Roa García. MRE da República de Cuba.
Tamames, Ramón. Ambiente y desarrollo, los límites al crecimiento. Madrid, 1979.
Energetic integration in Latin America and the Caribbean
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
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Travieso, Fernando. Orimulsión. Determinantes geopolíticos de la Orimulsión y sus
consecuencias político-económicas para Venezuela, Latinoamérica y el mundo. Caracas:
Editorial Buchivacoa, 2005.
Últimas Notícias. Imprensa diária, 2005-2008. Caracas: República Bolivariana
de Venezuela.
DEP
Translation: João Coelho
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Fernando de Szyszlo
F
ernando de Szyszlo (Lima, July 5, 1925) is a renowned Peruvian plastic
artist known especially for his paintings and sculptures. One of Peru’s most
outstanding avant-garde artists, he has been a key gure in the development
of abstract art in Latin America.
“Sol Negro” [Black Sun] Series (2003).
Acrylic on canvas, 100 x 100 cm.
Fernando de Szyszlo
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Biography
Fernando de Szyszlo was born in the Lima district of Barranco in 1925,
the son of Vitold de Szyszlo, a Polish physicist settled in Peru, and María
Valdelomar, sister of the writer Abraham Valdelomar. He was married to
Blanca Varela, the notable Peruvian poetess.
After nishing secondary education at Colegio de la Inmaculada, Szyszlo
attended the school of architecture of the National Engineering University
but left it before graduating and entered the School of Plastic Arts of Peru’s
Pontical Catholic University. At 24, he traveled to Europe, where he studied
the works of the masters, particularly of Rembrandt, Titian, and Tintoretto,
and absorbed the various inuences of cubism, surrealism, and informal
and abstract art. While in Paris, he met Octavio Paz and André Breton and
frequented the group of writers and intellectuals that gathered at Café Flore,
where he carried on feverish discussions about how to participate in the
international modern art movement and at the same time preserve his Latin
American cultural identity.
Back in Peru, Szyszlo became a major champion of artistic renovation
in the country, introducing new ways of portraying Peruvian subjects in a
non-gurative style.
He was a faculty member of the Art School of Peru’s Pontical Catholic
University from 1956 to 1976 and a visiting professor at Cornell, Yale, and
Texas Universities.
Color lyricism, enhanced by rich texture effects and a masterly handling
of light and shadow are the salient features in Szyszlo’s paintings. Strongly
marked by a blending of images from ancient cultures and a modernist artistic
language, his art displays a vast culture nourished in different sources that range
from science to philosophy to literature. His evocation of the rituals, myths,
and geography of the coastal and desert landscapes is often associated with
that of pre- Columbian religious monuments.
Since his rst exhibit in Lima in 1947, Szyszlo has had over one hundred
individual shows in museums and galleries in Latin America, Europe, and the
United States and participated in prestigious international biennials, such as
those of São Paulo and Venice. His works are in important public and private
collections around the world.
Fernando de Szyszlo
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In addition to his work as a painter, his appreciation of literature and
friendship with several writers inspired him to engage in major projects,
including the launching, with the poet Emilio Adolfo Westphalen, of the
Las Moradas magazine (1947-1949), which was of great importance for the
development of cultural activity in Peru. In 1996, he published Miradas Furtivas,
a compilation of articles written since 1955, mostly about contemporary
and pre-Columbian art. Szyszlo is a member of the Peruvian Language
Academy.
Prizes and distinctions
• Ph.D. Honoris Causa, San Martín de Porres University.
• Ph.D. Honoris Causa, Pontical Catholic University of Peru.
• Knight of the Order of Arts and Letters of France.
• Grand Ofcer of Chile’s Bernardo O’Higgins Order.
DEP
Translation: João Coelho
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Construtora
Norberto Odebrecht
Odebrecht Perú: a successful partnership
R
elations between Construtora Norberto Odebrecht and Peru are the
story of a long-standing, successful partnership. In 2009 we will be celebrating
thirty years of our operations in Peru, a historic milestone that testies to
the solidity and maturity of our relationship that goes back to 1979, when
Odebrecht began its internationalization process, as it was awarded the
construction contract for the Charcani V Hydroelectric Plant in the Arequipa
province in southern Peru.
Located on the slopes of the Misti volcano on the Andes Cordillera, the
hydroelectric plant, with its almost completely subterranean works, catches
water from the Chili River. The power generated by Charcani V meets the
power needs of Arequipa, one of Peru’s major cities, and of the Cerro Verde
mining complex.
In the late 1970s, when construction began, the Arequipa population had
to live with power rationing, as electricity was available only for three hours
a day to allow local enterprises to operate. In addition, the scarcity of water
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prevented the expansion of local agriculture. There was an urgent need to
implement a project to overcome these difculties.
The Charcani V works began in 1980; eight years later, the hydroelectric
power plant was inaugurated. Once completed, it did away with the daily
shutoff of the power supply, thereby signicantly improving the arequipeños’
quality of life. The availability of power also permitted the establishment of
a metal-mechanic industrial zone, which attracted more people to the district,
leading to the emergence of new neighborhoods and commercial centers.
Currently, Charcani V generates approximately 70 percent of the power
supply in southern Peru. Owing to the advanced technology used in its
construction, today, two decades later, the hydroelectric power plant is still
one of the country’s most modern plants, operating at one of the lowest costs
of electric power production in the region.
In 1988, the same year we nished Charcani V, we signed a new contract.
This time, Odebrecht would be responsible for making into reality an over
fty years-old project, namely, the Chavimochic Irrigation Project. Located
in the desert region of La Libertad, the project included the execution of two
hydraulic engineering works to divert water from the Santa River to irrigate
the Chaco, Virú, and Pampas de Pur-Pur valleys. A hydroelectric plant with a
capacity of 7.5 MW was built, which catches water from the main channel of
the Chavimochic Irrigation Project and generates sufcient power to supply
the city of Virú.
Figure 1. The Chavimochic irrigation system and its results.
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The irrigation work made possible the addition of new lands to regional
agriculture by supplying water to the cities of Trujillo and surrounding rural
populations. This impressive set of synergically-operating initiatives entailed
a qualitative jump in the local economy and opened new job and income-
generation opportunities for the population. Today, the formerly desert La
Libertad region is one of Peru’s major exporters of agricultural products.
Owing to the trusting relationship cemented by these rst joint projects,
Odebrecht’s operations in Peru gained impetus and expanded considerably
in the 1990s. Since 1993, not one year has gone by in which we have not won
new contracts pertaining to some additional phase of some recently completed
work or to completely new projects.
Among these initiatives implemented by Odebrecht Perú, some projects
deserve special mention. In Olmos, a city in northern Peru, we have executed
works that permitted the damming and subsequent deviation of the
Huancadamba River, a project planned eighty years earlier but never tackled.
Owing to this initiative, made possible by a public-private partnership – PPP,
part of the river ow will be redirected to the Pacic Ocean through the
Transandean Tunnel, which will be 19.3-km long and 4.8-m wide. When
completed, the project will allow 460 million cubic meters of water to irrigate
over 40,000 hectares of fertile land on the Cordillera slopes. In addition the
ow will also feed two power plants.
As was the case in Chavimochic, the Olmos Project will impart a strong
impetus to the local economy, creating jobs and improving the population’s
quality of life, as it will transform this formerly unproductive region into a
prosperous area.
The project is being executed with utter care and attention, as it is
located in the proximity of an archeological site of the pre-Incan Mochica
civilization that thrived in the area over two thousand years ago. Something
similar occurred during the execution of the irrigation work in Chavimochic,
when a pyramid by the equally pre-Incan Chimú civilization was discovered
precisely at the outlet of the main tunnel. The discovery area was isolated, the
engineering plans were redrawn, and the canal was detoured so as to preserve
the archeological site. In both cases, past and present, Odebrecht’s conduct has
been governed by respect for local history and culture and for the preservation
of the peculiarities of the areas and communities where we work.
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Figure 2. Map showing Odebrecht’s operations in Peru.
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In addition to the Olmos Project, Odebrecht Perú is developing other
major initiatives. On the shore of the Pampa Melchorita region, 169 km from
Lima, a natural gas liquefying plant is being built. As member of the CDB
Melchorita Consortium, Odebrecht participates in the building of the auxiliary
marine facilities, including a 1,350-m long docking bridge; PLG ship loading
facilities; an approach canal; and an 800-m long offshore breakwater. Including
nancing costs, this Peru LNG Project will involve US$3.8 billion, the largest
direct foreign investment ever in Peruvian history. Of this amount, US$247
million refer to a contract signed between Odebrecht and Peru LNG. When
completed, the Melchorita complex will allow the country to export its gas
surplus to international markets.
Currently, the Peruvian economy is constantly showing signs of vigor
and maturity. In the last few years, the country has maintained one of the
highest GDP growth rates in Latin America. Recently, Peru has achieved
investment grade, an international recognition that attests to the soundness
of the country’s business environment.
The continuous improvement of infrastructure has undoubtedly been a
crucially important factor of this sustained growth, as investment in this key
sector has had signicant impact on the entire economy. The improvement
of the transport infrastructure, for example, has helped overcome logistic and
geographical obstacles, and thus enhanced the competitiveness of Peruvian
goods both at home and abroad.
This vision, which favors physical integration as an essential instrument
of sustainable economic growth, has guided two other initiatives in which
Odebrecht participates in Peru. The Iirsa North and the Iirsa South projects,
for instance, are being developed in the country to create the two interocean
corridors that will interconnect the Brazilian and the Peruvian transport
networks. Odebrecht leads the two consortiums in charge of executing
the works.
As members of the Iirsa North Construction Consortium-Concin,
we participate in the construction, rehabilitation, and improvement of 955
kilometers of a road that will connect the Amazon region to the Pacic.
Odebrecht is responsible for the stretch linking the Paita seaport on the Pacic
to the Yurimaguas river port on the Peruvian portion of the Amazon River.
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Our activity in the area, just as in all the regions where we operate, is
oriented not only toward the execution of works. We also have a rm social
and environmental commitment to integrated, sustainable development
of both the inner community consisting of the Odebrecht personnel and
the local community. In this respect we promote different initiatives. In
the environmental area, we have contributed to the Projecto Biodiversidad, by
expanding the animal custody center, an institution that provides support to
the spectacled, or Andean bear, a typical, endangered species of the region.
In the eld of education, the consortium of which we are part has channeled
resources to the Escuela para Todos, a literacy program that has been expanded
to offer quality elementary education to 177 students.
These projects and other initiatives we have undertaken in the areas
of health and vocational training provide a brief glimpse of the many social
benets associated with the works done in connection with the North Amazon
Multimodal Axis. They reect at the local level a broader strategic partnership
for continental physical integration, which has already generated manifold
advantages for Peru’s northern region and will certainly continue to do so in
the near future.
A similar process is under way in southern Peru, where once again
Odebrecht is combining the provision of engineering and construction services
with the exercise of environmental responsibility, as we participate in the
Southern Interocean Highway-Conirsa. After completion of its 710 kilometers,
the road will establish Brazil’s rst link with the Pacic Ocean, connecting the
Peruvian town of Iñapari, which adjoins the Brazilian town of Assis Brasil,
in the state of Acre, to the Pacic port of San Juan de Marcona. The work
contract calls for the construction, operation, and maintenance of roads
connecting Iñapari to Inambari (stretch 3, in the Madre de Dios Department)
and Inambari to Urcos (stretch 2, in the Cuzco Department).
As is the case with Iirsa North, we implement different initiatives to
benet local communities along the Interocean Highway Corridor South-Iirsa
South. Since 2006, assuming our role as agents of change and our commitment
to improving the quality of life of the populations living in our eld of
operations, Odebrecht and Conirsa are implementing the Social Responsibility
Integrated Plan. In 2007, we also introduced the Programa Itinerante de Apoyo a
la Salud y Educación – PASE [Itinerant Program in Support of Health and
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Education], an extensive project aimed at providing information and training
to the population in respect of preventive health. As regards the environment,
a Plan de Desarrollo “Interoceánica” Sul is under way, in which representatives of
Odebrecht, Conirsa, Conservation International, and Pro Naturaleza have worked
in close cooperation, promoting conservation and development initiatives
along stretches 2 and 3 of the South Interocean Highway Corridor.
Figure 3. Already built Iirsa south roads.
The joint implementation of these projects illustrate Odebrecht’s and
Conirsa’s close cooperation with the Peruvian government and with private
enterprises and organized civil society in Peru, aimed at combining sustainable
development in the regions where we operate and at improving the quality of
life of the populations that will be the beneciaries of the services we provide.
These and so many other initiatives testify to Odebrecht’s commitment
to Peru’s socioeconomic development. Between 1970 and 2007, over 43,000
people made part of the enterprise and contributed to our projects. Including
concessions already under way, paved roads total more than 2,300 kilometers.
In addition, we have built 240 kilometers of irrigation canals and over 180
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kilometers of potable water systems. We have dug more than 85 kilometers
of tunnels for irrigation projects and built over 60 kilometers of power
transmission lines.
Odebrecht has opened roads to the future in Peru on the coast, in the
jungle, and on the sierra. In nearly thirty years of partnership, we have worked
consistently to satisfy our clients and with the rm commitment to respect the
social and environmental peculiarities of the regions where we make ourselves
present. Under the orientation of Tecnologia Empresarial Odebrecht – TEO,
we believe in our collaborators’ potential and invest in their education through
work. We are the only Engineering and Construction enterprise of a foreign
origin that has worked in Peru without interruption since 1979. All these
factors are a great incentive to work ever more vigorously and ever better so
as to perpetuate and further strengthen the successful partnership between
Odebrecht and Peru.
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Grupo
Andrade Gutierrez
Brazil-Peru: a mature partnership
The weight of history
B
razil and Peru, similarly to the other South American countries, still
suffer from what one might familiarly describe as the effects of a historical
hangover from “ve hundred years on the periphery,” to borrow an expression
from Samuel Pinheiro Guimarães. Their economic life and even their political
perceptions still bear the marks of centuries of asymmetrical ties to the great
world power centers, a connection that was changed but not extinguished by
political independence won in the rst quarter of the nineteenth century. It
subsists owing not only to actual asymmetries but also to the general notion
of a center-periphery relationship that, though still real, is now less striking
than is seemly perceived and accepted by important, inuential sectors of
national opinion in the two countries.
An illustration of this state of affairs on our continent is the fact that
to this day a road starting from Brazil and crossing the Andes toward South
America’s west coast is seen by signicant segments of public opinion more
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as “an outlet to the Pacic” than as an infrastructure undertaking capable of
facilitating the economic integration of neighbor countries. Or, conversely, that
access to the Amazon region is perceived primarily in the Andean countries
as “an outlet to the Atlantic Ocean.” In both cases, such an attitude betrays
a widely disseminated opinion in South America that what is important is
maintaining ties to the major centers of world economic power rather than
promoting the approximation of neighbor economies.
In its broad lines, this picture still persists, but it is also clear that it
has signicantly changed, both objectively and subjectively. Objectively, at
the global level the relative importance of the major centers, particularly of
the United States, has declined, not owing to absolute decadence but to the
increasing importance of others, particularly of the major emerging economies
and to the attendant worldwide diffusion of power. It is signicant that back
in 2004 The Economist already pointed that four out of the world’s ten major
economies (in terms of the parity of their currencies’ purchasing power) were
those of developing countries or countries in transition.
1
In January 2006,
the same publication indicated, based on the same criterion, that in 2005 the
ensemble of the developing economies had accounted for slightly over half
of the world output and for over half of the global GDP in current U.S.
dollars.
2
Today, without going into greater statistical details, one can point to
the notorious economic rise of China and India, the already commonplace
reference to the BRIC countries (Brazil, Russia, India, and China) as major
ascending powers, and the growing agreement on the need to change the vote
composition and/or structure at important international institutions (IMF,
U.N. Security Council, G-8), so as to better reect the current international
distribution of power. All of this reects the gradual emergence of a new
international order and the growing awareness of this trend.
A new regional reality?
South America will not be able to face these global changes without also
changing the perception of its position on the world scene and of the kind
of relationship that must prevail among its countries.
1 “A Survey of the World Economy – The Dragon and the Eagle.” The Economist, Oct. 2-8/2004.
2 The Economist, 1/21/2006.
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In a world in which the position of the developing countries as a whole
was characterized above all by an asymmetric relationship between the center
and the periphery, relations among peripheral nations tended to move in one
of two directions: adhesion of some to the center and, which resulted in their
relative alienation from the rest of the periphery; or attempt to agglutinate the
peripheral countries with a view to change a world economic order seen as
harmful to the interests of the poorer countries, or at least better to protect
themselves from its effects. To some extent, this dichotomy still exists, albeit
to a lesser degree.
Historically, though, the second possibility has been often hindered by
mistrust and sharply diverging interests among supposed allies. We have seen
the debilitating consequences of this divergence in, for instance, the weak
operational capacity of the Group of 77 in the 1960s and 1970s. Countries
that should form a cohesive group united in advocating measures aimed at
promoting the reform of the standing international order to their common
benet, were united only in their discourse and had difculty in agreeing on
specic, corrective mechanisms.
At the regional level, similar problems have hindered the realization
of the grand vision of full Latin American integration. In this regard, the
South American integration objective may be seen as the expression of a
strategic retreat: as Latin American integration cannot be achieved, South
American integration is being attempted – so far with debatable results. At
the time the First South American Summit was convened, Ambassador Luís
Felipe Lampreia, our then-Foreign Minister, implicitly admitted as much
in a Carta Internacional article, in which he stated that Central America and
the Caribbean had been left out of that meeting not only because of South
America’s specicities but also because of those two regions’ too close, direct
connection with North America, and with the United States in particular. In
other words, some peripheral Latin American countries had already adhered to
the center and thus there was no reason to invite them to the South American
encounter in Brasilia. The evident aw in this argument is that the attitude of
a given country toward the center is dened on the basis of political option
and not of geography. As we know, there is a diversity of positions within
South America itself and not only as regards South America vis-à-vis Central
America or the Caribbean.
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In a world in which international concentration of power tends to become
diluted, political cooperation and economic integration among developing
countries may in principle assume a more constructive, less defensive character,
although possible differences of perception or conicting objective interests
may persist. The central idea now is the establishment or consolidation of
equitable, productive links instead of confrontation of a common adversary
– the center, in this case. The objective is to pool resources for a synergetic
effort to ensure that the nal outcome will exceed the sum of what one of
the parties could achieve by itself. This is the spirit of the current pursuit of
South American integration and, more specically, as well as more relevant to
this article, of cooperation between Brazil and Peru. This allows President Luís
Inácio Lula da Silva to announce the high priority his government attaches to
South American integration, while his Foreign Minister reveals the intention to
maintain a mature, more strategic relationship with the United States, in which
Washington would see Brazil as a partner indispensable to the development of
stable relations with South America and even with Africa. In other words, in
Brasilia’s perception, there is no antinomy between South American integration
and good relations with the United States, as the objective is to strengthen the
South American countries and not to antagonize the center.
This reasoning seems to guide Brazil’s foreign policy on the continent, but
does not eliminate the difculty of achieving the stated goal of South American
integration. In addition to the inevitable obstacles to the realization of a project
of such magnitude, two additional problems come up. First, the perceived
lack of equity in a project of integration among economies that, in spite of
being all considered as “developing economies,” have marked asymmetries in
relation to each other. In the perception of the weaker ones, this would lead to
a clear bias toward the region’s stronger economies, particularly toward Brazil.
The dissatisfaction on the part of countries such as Paraguay and Uruguay is
public and notorious. The second problem is the divergence about the attitude
toward the center, particularly toward the United States. While some seek to
establish special ties to Washington, or have already done so, either in the form
of bilateral trade agreements, as is the case of Chile and Peru, or in a broader
sense, as Colombia has done, other countries, such as Venezuela, can only
conceive of South American union against the United States, seen by Caracas
as the great enemy. Differently from these countries, others, such as Brazil, see
no contradiction between South American integration and good relations with
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Washington, even though they do not wish a formal, closer economic association
with the great northern power. In brief, given these differences, even the idea
of South American instead of Latin American integration seems at best a very
long-term project. Under these circumstances, one should not, at risk of losing
sight of the ultimate South American integration objective, downplay less grand,
but more pragmatic efforts toward bilateral cooperation.
Brazil-Peru
To a different degree, Brazil and Peru as countries with a vast territory,
low population density, and considerable geographical diversity, face internal
problems related to regional disparities and to the functional integration of
their different regions.
According to Enrique Cornejo Ramírez, “el Perú es un país megadiverso en
el que conuyen diversas razas, lenguas y ecosistemas, lo que le da una gran potencialidad
en sectores como la agroindustria, el turismo o la industria forestal. Su compleja geografía,
sin embargo, diculta la integración física entre los peruanos y pone a prueba a la más
sosticada ingeniería.” [Peru is a country of great diversity, encompassing various
races, languages, and ecosystems that make for a great potential in areas such
as agroindustry, tourism, or forestry. Its complex geography, however, poses
difculties for the physical integration of the Peruvian peoples and tests the
most sophisticated engineering.]
3
Brazil, without the extreme cultural diversity
and with a much less complex geography, has substantial experience in dealing
with problems of regional inequalities and the physical integration of its
vast territory. It has also developed a diversied industrial base, including an
important civil construction sector, with technically advanced and economically
solid enterprises with extensive international operations.
These complementary needs and experiences offer, thus, a wide eld of
possible cooperation in the development of the Peruvian infrastructure, a eld
that has been explored for sometime by Brazilian companies with very good
results and promising perspectives. It is an area that is not only benecial to
the bilateral exchange of services but also important to the development of
the Peruvian economy as a whole and specically to commerce between the
two countries.
3 Cornejo Ramírez, Enrique. “La economía peruana y el dasafío del crecimiento com inclusión social” in DEP:
Diplomacia, Estratégia y Política, No. 7, July/September 2007.
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A good example of the importance of infrastructure works and
international cooperation is the rehabilitation of the Fernando Belaúnde Terry
Road in the San Martín region. In 2000, the area mayors, members of the
Municipalities Association, met at Tocache to adopt measures to reverse the
process of the region’s increasing exclusion and to join efforts to implement
those measures. It was soon agreed that the most important, pressuring
measure was the rehabilitation (reconstruction, actually) of the Fernando
Belaúnde Terry Road. Early in 2007, the diagnostic was conrmed by a survey
done under the Poverty Reduction and Mitigation Project funded by Usaid-Peru
to identify the bottlenecks that hindered the region’s development. The study
concluded that the main problems were “the Fernando Belaúnde Terry Road’s
precarious condition” and the “scarcity and high price of electric power.”
By itself, the road’s deterioration along which 107,000 people live allegedly
accounted for yearly losses of 250 million dollars. Finally, in September 2002,
the U.S. and the Peruvian Governments signed a Special Objective Grant
Agreement, for the main purpose of ongoing reduction of the cultivation of
coca for illicit ends. Under the agreement, Usaid donated 25 million dollars
for the rehabilitation of the Fernando Belaúnde Terry Road between Juanjuí
and Tocache. The U.S. Army Corps of Engineers was charged with calling for
bids and for overseeing and controlling the work, whose execution fell to the
Brazilian construction company Andrade Gutierrez. Work began in 2004 and
was delivered to the Peruvian government eighteen months later by Usaid,
which had contracted Andrade Gutierrez.
However, the importance of bilateral cooperation is not limited to taking
advantage of such a propitious opportunity related to the needs and attendant
possibilities of an area of particular relevance for development and integration.
Peru has a considerable potential and has known how to expand its economy at
an accelerated rate in recent years, although it faces, as pointed out by Enrique
Cornejo’s article, the huge challenge of ensuring that the benets of this
growth are more equitably distributed. Between 2002 and 2005, Peru’s GDP
grew at an average annual rate of 5 percent and even at a higher rate in the
two following years. Thus, between 2000 and 2007, Peru recorded the second
highest per capita income growth rate in Latin America, second only to Chile’s.
In the rst half of the decade, this expansion was due mainly to increased
exports, but in the two following years it was due mainly to domestic demand,
which grew 9-10.6 percent a year, a substantially higher rate than the GDP and
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exports growth rate. The economically active population-EAP also grows, but
at a rate of only 350,000 people a year, while employment could be ensured
only by a growth rate of about 7 percent. It is thus not surprising that in 2004
underemployment affected 8.5 percent of the economically active population
and underemployment reached 54 percent. In sum, nearly two thirds of the
economically active population were unemployed or underemployed. We could
add to the list of economic and social indicators, which would only conrm
the overall evaluation that Peru today has good economic performance,
but faces a mighty challenge of social inclusion. Sustaining such economic
development and thus creating conditions for solving social problems can only
be reinforced by a bilateral cooperation environment, in which the elimination
of infrastructure bottlenecks is highly important.
The presence of Brazilian civil engineering enterprises in Peru is thus an
important part of mature cooperation between the two countries, cooperation
that is not limited to the elimination of trade bottlenecks and the attendant
increase in trade in goods. This is convincingly illustrated by the case of
Andrade Gutierrez, which has a signicant portfolio of projects, already
completed or under way, that are relevant both to a better performance of the
Peruvian economy and to closer continent integration in some cases.
Andrade Gutierrez arrived in Peru a little over fteen years ago, in 1992,
and began its civil engineering operations in the country with the construction,
under a consortium with local enterprises in the Piura region, almost 1,200
kilometers north of Lima, of the Talara liquid cargo pier, to serve the country’s
oldest renery, the second largest in capacity. The dock to be constructed
should have a capacity to accommodate ships of up to 35,000 traveller tons,
and a ballast water treatment plant. Today, the facility allows the safe docking
of tanker ships to load up the renery’s products and the discharging of ballast
water at sea under ecologically appropriate conditions.
That was the rst step toward a long, rich cooperation history. Other steps
would follow, particularly in respect of roads, but also of power generation,
through a series of major civil engineering projects that continues today.
In 1993-1995, Andrade Gutierrez executed for the Peruvian government
an important work of recuperation of a 235-km stretch of the Pan-American
Highway South. This is one of the most traveled roads in the country, which
allows cars and trucks to travel without interruptions between Ica and Lima,
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thereby facilitating the outow of the region’s predominantly agricultural
production to Lima, the main domestic consumer market. Other projects
would follow, including the rehabilitation and paving of the Tarma-La Merced
road (1996-1998) and the La Merced-Shankivironi highway (1997-1999), which
overlapped with the construction of the water intake structure and related
works for the San Gabán II hydroelectric plan (1996-1999)
However, even more important than a listing of individual projects,
signicant as they may be, is the political vision embraced by all the South
American Heads of State at the First South American Summit held in Brasília
in 2000, that it is not sufcient to execute individual projects. It is necessary
to discuss together the integration of the continent’s infrastructure. Only this
can maximize the contribution of such undertakings to the achievement of the
ultimate integration objective. Accordingly, the summit approved the Initiative
for the Integration of Regional Infrastructure in South America-Iirsa as a
forum for comprehensive discussion of infrastructure projects susceptible of
contributing to the unanimously endorsed integration objective, which would
remain mere dead letter without the continent’s physical integration.
Iirsa approved nine Integration and Development Axes, four of which
involve Peru and three involve Brazil:
• Amazon Axis – Iirsa North (Peru-Ecuador-Colombia-Brazil)
• Iirsa South (Peru-Brazil-Bolivia)
• Interocean Axis (Brazil-Paraguay-Bolivia-Peru-Chile)
• Andean Axis (Peru-Ecuador-Colombia-Venezuela-Bolivia-Chile)
As can be seen, the “integration axes” approved by Iirsa are extremely
important for a serious cooperation effort between Brazil and Peru in the
area of transport and communications infrastructure. The Amazon North
multimodal axis, for instance, extends for 960 kilometers and encompasses not
only the road stretches between Paita and Yurimaguas but also the Yurimaguas
and Iquitos river ports, and the Huallaga and Marañon waterways that complete
the linking with the Brazilian border. The projects contemplated under Iirsa,
many of which are already under implementation, with the participation of
Andrade Gutierrez and other Brazilian enterprises, enhance the possibilities
of increased interchange between a country with Peru’s potential and Brazil,
South America’s major domestic market.
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By way of conclusion
As mentioned in the beginning of this article, the idea of the Latin
American countries’ integration as a positive sum game, in which the countries’
association could yield greater gains than a mere aggregation of the region’s
national products, was a long time in taking root in the respective capitals.
Its rst formal expression, heavily inuenced by the Eclac thinking, was
the 1960 Treaty of Montevideo I, which created the Latin American Free
Trade Association (Lafta/Alalc). In principle, integration should eliminate or
attenuate some evils that plague developing economies, such as the narrowness
of the respective domestic markets and the attendant difculties hindering
specialization and the achievement of economies of scale.
Due to reasons briey discussed in this article, the ideal of integration
did not go forward in the context of the treaty. Two decades later, we have
the II Treaty of Montevideo which created the Latin American Integration
Association (Aladi) that also fell short of its goals.
In 2000, forty years after the signing of the Treaty of Montevideo I,
Brazil took the initiative of convening a summit meeting of South American
countries considered less bound to the United States than the countries of
Central America and the Caribbean, and endowed in their ensemble with
specicities that should theoretically facilitate a closer approximation than
would be possible if all of Latin America were involved. Thus, still under
the Fernando Henrique Cardoso’s government, the concept arose of a new
continental regionalism, or South Americanism, which is still current.
Today, based on the wisdom gained from retrospection, it seems that
any ambitious idea of regional integration – whether South American or
Latin American – should be taken as a long-term objective, of desirable but
remote realization. Thus, without losing sight of this distant goal, we should
pragmatically develop bilateral approximation schemes with our neighbors,
particularly in respect of projects susceptible of contributing also to the far-
off objective of regional integration. This is the context of our cooperation
with Peru in the area of infrastructure.
Translation: João Coelho
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Embraer – Empresa Brasileira
de Aeronáutica S.A.
Embraer goes international
Introduction
A
irspace industry, of which Aeronautics is the most signicant segment,
has a wide range of highly demanding characteristics that make it special and
differentiated.
Few industries in the world are faced with such an array of awesome
challenges as aeronautics – from the simultaneous employment of multiple
advanced technologies to highly qualied manpower to the requirements
of a global industry by denition to the requisite exibility to respond to
abrupt scenario changes to the enormous amounts of capital required for its
operations.
Based on the experience amassed in over three decades of activity in
this competitive, aggressive, and sophisticated market, we at Embraer like to
say that the aeronautics business rests on ve major pillars, which in turn rest
www.embraer.com.br
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on a single foundation – our clients’ satisfaction, the source of the results
that will ensure our stakeholders’ gains and the enterprise’s continuity over
time. These pillars are as follows:
• Advanced technologies: in view of the highly demanding operational
requirements pertaining to safety, drastic environmental changes, and
weight and volume restrictions, the aeronautics industry employs a
wide range of point technologies and serves as a lab for their ne-
tuning before they are passed on to other productive segments and
activities. Complex, sophisticated technologies are involved not
only in the product but also in the development and manufacturing
methods and processes, in addition to the use of the best practices
available in nancial and human resources management.
• Highly qualied manpower: to ensure the efcient, productive, and
consistent use of these advanced technologies, it is essential
that qualied personnel be available at all levels of the industry’s
operations: computer-supported projects, relations with suppliers
and clients around the world, manufacturing using sophisticated
numerical control machines, and the devising of elaborate nancial
solutions with international institutions.
• Flexibility: abrupt scenario changes that affect the world economy
and the geopolitical order, the most recent example of which were
the terrorist attacks of September 11, 2001, have immediate impact
on the air transport industry and thus on aircraft manufacturers.
Flexibility in adapting to such changes with a minimum loss in terms
of efciency and costs is of crucial importance for ensuring survival
and preservation.
• Capital intensity: owing to the massive investment required for
developing new products and raising quality and productivity, coupled
with long development and maturation cycles, capital intensity
is another major feature of this business sector. For example: the
development of the Embraer 170/190 aircraft line required an
investment of US$1 billion and the new A350 Airbus plane should
require no less than US$15 billion!
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• Global industry: low output and the high cost of production
makes the aeronautic industry an exporting and global concern
by nature, as regards both its client and supplier base and the
nancial institutions that back it. The same Embraer 170 aircraft
that operates under the ag of Finnair, Finland’s airline, in the
severe Scandinavian winter must also stand the high humidity and
temperature levels of southern United States, where it operates
under United Express’s ag. In both cases, Embraer must be
permanently available to its clients, providing local technical
support and immediate access to parts and components, thereby
honoring its commitment to the success of their business and
aiming always at their full satisfaction, which will in turn ensure
additional orders in the future. At the same time, Embraer must
experience the different environments in which it operates, so
as to detect positive or negative tendencies and changes in the
scenarios and to be able to provide a speedy response.
Legacy 600
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All these characteristics make the aeronautic industry into a fascinating as
well as a high-risk business. Failure of a new product may make the enterprise
that developed it unviable and force it out of the market. The disappearance
of traditional enterprises, such as the Dutch Fokker’s and the Swedish Saab’s
exit from the civil aeronautic market are two examples of this harsh reality.
Notwithstanding the major risks involved, developing an autochthonous,
strong, and autonomous aeronautic industry has been part of the strategic
agenda of many nations, which invest heavily in its development over the
years, recurrently supporting it by various schemes – celebrating major
Defense systems and products contracts, nancing new aircraft development
programs under favorable terms, and providing all sorts of tax incentives.
Embraer goes international
Aware that winning new markets, which are essential for is growth and
consolidation will become effective only if backed by its physical presence
in these markets, through industrial plants or units for rendering post-sale
services and support to clients, Embraer has, since its privatization in 1994,
gradually extended its operations internationally as a strategic objective.
Far from losing its Brazilian identity and distancing itself from its origins,
Embraer will, through internationalization, ensure new business deals, the
strengthening of its trademark, and the generation of higher-qualication
jobs in Brazil, in proportionately higher numbers than in its subsidiaries and
controlling enterprises abroad.
In 1997, as it regained strength after introducing in the market its
ERJ 145 commuter jet, Embraer launched its internationalization strategy
by adopting measures that included (1) expanding or opening sales and
marketing ofces and replacement parts distribution centers; (2) participating
in joint ventures; and acquiring traditional, renowned enterprises specializing
in aeronautic services.
United States and Europe: consolidated presence
Embraer has long been active in the United States and in Europe –
since 1978 and 1983, respectively – through sales and marketing ofces and
client support units (parts and services).
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The two units have had and continue to have a vital role in the expansion
of its operations in those two main commercial aviation markets in the world.
Including Brazil, 950 commercial jets, in addition to 800 turboprop planes as
well as military planes made by Embraer are now ying. The U.S. and the
European markets account for 95 percent of its total exports.
Facilities at the U.S. unit, located in Fort Lauderdale, FLA have been
expanded to keep up with Embraer’s operation since it delivered the rst ERJ
145 commuter jet in December 1996 in that market. In November 2006 it
had 234 employees and a spare parts stock of over 50,000 items.
With the increase of its business and client base in Europe, Embraer
decided to concentrate into one place, located in Villepinte, near the Paris
Roissy-Charles de Gaulle airport, its sales and marketing and client support
units, including a major spare parts warehouse, one of which was already
located in Villepinte while the other was previously located at the Le
Bourget airport. The new integrated facilities should enhance the operational
efciency of a body of 194 employees charged with managing assets totaling
172 million euros and providing services to 37 clients.
Phenom 100 and Phenom 300
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China and Pacic-Asia: strategic markets
Given the importance of its economy, which has steadily grown at high
rates for the last two decades, as well the strategic signicance of air transport
as and integrating factor and a development engine on a continental-size
territory, China has been selected by Embraer as a strategic goal, which
requires specic, differentiated treatment in view of its cultural characteristics,
far removed from the Western world.
Embraer’s presence in China started in May 2000, with the opening of
a sales and marketing ofce in Beijing, followed soon after by the opening of
a spare parts distribution center in the same city.
In 2001 and 2002, it negotiated an agreement with Chinese authorities
under which it would be allowed to install an industrial plant to make ERJ
145 family aircraft for the Chinese market.
Finally, in December 2002, an agreement was signed with Aviation
Industry of China II (AVIC II), establishing the Harbin Embraer Aircraft
Industry (HEAI), a joint venture controlled by Embraer, which holds 51
percent of voting shares.
In February 2004, Embraer announced its rst sale in China through
HEAI: six ERJ 145 jets sold to China Southern. Other signicant sales
followed: the same number of the same model sold to China Eastern Jiangsu
in March 2005 and to China Eastern Wuhan in January 2006.
In August 2006, Embraer announced the sale of 50 WRJ 145 planes and
50 EMBRAER 190 jets to the HNA Group, China’s fourth largest air company.
This deal was the rst sales contract of an E-Jet on mainland China, with a list
price of US$2.7 billion. ERJ 145 delivery will start in September 2007. The
50-seat jet will be made by HEAI in Harbin, in the Heilongjian Province.
By end-2006, HEAI will have delivered 13 ERJ 145 planes, which,
together with the ve sold in 2000 to Szechuan before the establishment of
the joint venture, will bring to 18 the total number of these jets currently
operated by Chinese airlines.
As regards the Pacic Asian region, in December 2000 Embraer opened a
sales and marketing ofce in Singapore, entrusted with implementing the enter-
prise’s trade strategy for the region’s markets, including the Indian subcontinent.
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The Indian aeronautic market is undergoing a deregulation process
and shows bright growth prospects. In this context, Paramount, a recently
established company, has announced the start of its operations, based on the
operational leasing of two jets: Embraer 170 and Embraer 175.
Also in India, Embraer has signed a major contract with the government
for the sale of ve Legacy 500 jets, particularly adapted to meet the comfort
and safety requirements of that country’s authorities.
Expansion of Embraer’s client services and support base
Embraer plans to continue expanding its client services sector not only
to ensure that its clients will achieve excellent dispatchability rates for their
aircraft eet but also to provide them with other services, such as aircraft
maintenance and repair, to their full satisfaction, which is essential for the
achievement of our goals and the growth of our operations.
Embraer’s Headquarters. São José dos Campos
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Thus, in addition to consolidating its client services in Brazil through
the transfer of its Services Center to the Gavião Peixoto Unit, it has
expanded its services operations in the United States, with the addition of
the new facilities of the Embraer Aircraft Maintenance Services-EAMS, in
Nashville, Tennessee, and in Europe, with the acquisition of OGMA-Indústria
Aeronáutica de Portugal S.A., in Alverca, Portugal, announced in December
2004, at the completion of its privatization process.
Early in 2005, EAMS expanded its facilities at the Nashville International
Airport to raise its services capacity, in view of the growing eet of Embraer
aircraft in the United States. This major decision led to the progressive hiring,
as of 2005, of additional EAMS employees, bringing their total to 277 by
November 2006.
Since its establishment in 1918, OGMA has devoted itself to aircraft
maintenance and is today a major representative of the European aeronautic
industry, providing maintenance and repair services for civil and military
aircraft, engines and components, and modication and assembling of
structural components, as well as engineering support.
Its main clients are the Portuguese, the French, and the U.S. Air Forces
and the U.S. Navy, Nato’s Maintenance and Supply Agency, and the Dutch
and Norwegian Navies, among others. In the trade area, OGMA also provides
services to airlines such as TAP, Portugalia, British Midland, and Luxair, and
to enterprises, including Embraer and Rolls-Royce.
In addition to doing maintenance work, OGMA also manufactures
structural components and composite materials for Boeing, Airbus, Lockheed
Martin, Dassault, and Pilatus. By November 2006, its work force totaled 1,606
employees, which makes it Embraer’s largest unit and subsidiary.
Preserving culture, values, and attitudes – an enduring
challenge
The velocity of Embraer’s expansion since 1996, when its ERJ 145
aircraft went into operation, has brought with it formidable challenges in
respect of the preservation of culture, values, and attitudes, a concern that
continues to guide the enterprise’s actions.
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To illustrate the magnitude of such a challenge, sufce it to mention
that in April 1997, Embraer had only 3,200 employees scattered through ve
operational units – three in Brazil and two abroad. Today, nine years later,
it has 18,670 employees, scattered through thirteen operational units – ve
in Brazil and eight abroad. In just one of its units, located in France, 26
nationalities and 19 languages are represented in a work force of 194.
One of the managers’ top priorities is to recognize the worker’s ethnic
and cultural diversity and their different working environments, including
specic labor legislations, while developing their maximum potential by
directing their energy toward the business’s objective, in perfect consonance
with the enterprise’s ethical and moral values.
The main element for the achievement of this intent is the so-called
Management Methodology through Action Plan. Each year Embraer
prepares an Action Plan based on a ve-year perspective and follows a
strategic planning model that takes into consideration markets, competitors,
the enterprise’s capabilities, opportunities, and risks, priorities, and results,
among other factors.
Embraer 170/190 family
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The Enterprise’s Action Plan is based on the equivalent internal plans
for each corporate, functional, and business area, reaching down all the way
to the plant oor, all in accordance with the general guidelines issued by the
enterprise’s top management. The enterprise’s variable pay policy, encompassing
all employees, takes into account the targets agreed by the leaders and the led
along the entire chain of command. The Action Plan is thus the key instrument
for the management of the business, and for all the employees’ alignment with
and commitment to the agreed targets and results.
In addition to the Action Plan Methodology, Embraer maintains
a strong Internal Communication culture aimed at integration with its
employees and their families and at disseminating Embraer’s central values
and concepts.
Internal Communication works in a global, integrated manner, through
the use of tools that are both modern of highly attractive to the employees:
• Embraer’s Director and President has his own tool for communicating
with employees, called Em Tempo, issued simultaneously in Portuguese
and in English. More recently, Em Tempo has been issued in special
editions on video;
• Embraer Intranet is a tool of corporate reach and our employees’
main source of information, which is accessed an average of 24,500
times a day;
• Some 600 internal communiqués are issued annually and made
available to employees through Intranet and bulletin boards; 25
percent of these communiqués are of corporate reach;
• The Embraer Notícias [Embraer News] is devoted to issues that
are essential to Embraer’s culture: the Management Methodology
through the Action Plan, the importance of cost discernment and
contention, combating waste, team rallying around Embraer’s broad
entrepreneurial objectives, etc.;
• Interviews with Embraer’s top executives are translated and sent
to the units located abroad. As they consistently address market
evaluation and the enterprise’s strategies and objectives, they are well
heeded by employees;
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• Articles published in the national and international media on themes
of interest to Embraer’s business are translated and made available
to employees.
Armed with this vision and determination, grounded on ethical and
moral values, and having integrity as the spring of it actions, Embraer
embarks upon an extremely challenging and competitive entrepreneurial
activity. And in so doing it brings to the markets the image of an efcient,
agile Brazilian enterprise known for its quality products and technological
state-of-the-art.
Translation: João Coelho
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5
34
47
59
105
116
Argentina and Brazil: structural differences and
similarities
Torcuato S. Di Tella
Bolivia: changes and foreign policy
Jean Paul Guevara Avila
Culture, diversity and access
Gilberto Gil
Major turns in Chilean economic policy and their legacy
Osvaldo Sunkel
Colombia, a country of contrasts
Alfredo Rangel
Ecuador: fundamental issues
León Roldós
Summary
D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Number 8 October / December 2007
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Guyana: the impact of foreign policy on developmen-
tal challenges
Robert H. O. Corbin
Paraguay: identities, substitutions, and transformations
Bartomeu Melià, s.j.
Peru: electoral surprises and the pending exclusion agenda
Martín Tanaka · Sofía Vera
The Suriname Republic and regional integration
Robby D. Ramlakhan
Uruguay: a brief overview of its economy and politics
Alberto Couriel
The Rule of Law and social justice under the Bolivar-
ian Alternative for America and the Caribbean-ALBA
Isaías Rodríguez
Koki Ruiz
131
152
165
181
197
209
221
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7
25
47
78
90
112
141
The recovery of Argentina’s economy
Aldo Ferrer
The Bolivian economy: diagnosis and plans for 2008
Luís Alberto Arce Catacora
A qualitative approach of the Brazilian economy
João Paulo de Almeida Magalhães
Chile’s economy and development challenges
Mauricio Jelvez M.
The Colombian economy: a critical approach
Darío Germán Umaña Mendoza
The Ecuadorian economy: overview and a new concept
of development
Fander Falconí Benítez
The Guyana economy, review and prospect
Rajendra Rampersaud
D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Number 7 July / September 2007
Summary
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156
171
192
206
217
235
Paraguayan economy at a slow pace: current situation
and outlook
Dionisio Borda
The Peruvian economy and the challenge of growth with
social inclusion
Enrique Cornejo Ramírez
Surinam: macroeconomic evolution
André E. Telting
The Uruguayan economy: an entrepreneurial standpoint
Jorge Abuchalja
The present growth period of the Venezuelan economy
Nelson Merentes
Philip Moore: an ancient soul in a modern body
Agnes Jones
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D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Number 6 April / June 2007
Summary
5
15
35
48
59
73
88
Reality of Argentina and the region
Cristina Fernández de Kirchner
Diplomacy for life
Pablo Solón
Brazil 2007: ready to grow again
Guido Mantega
Regional integration: factor of sustainable development
Emílio Odebrecht
The quest for development with equity
Ricardo Ffrench-Davis
Colombia: challenges until 2010
Álvaro Uribe Vélez
A plan for Ecuador
Rafael Correa Delgado
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272
Cultural identity & creolization in Guyana
Prem Misir
Paraguay: State patronage and clientelism
Milda Rivarola
Coloniality of power, globalization and democracy
Aníbal Quijano
Drug trafc combat in Suriname
Subhaas Punwasi
Mercosur: project and perspectives
Luis Alberto Lacalle de Herrera
About the utmost importance of a party
Hugo Chávez
Guayasamín by himself
94
105
127
173
186
194
221
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D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Number 5 January / March 2007
Summary
5
25
35
39
54
74
82
Ideas, ideologies, and foreign policy in Argentina
José Paradiso
Infrastructure integration in South America:
stimulating sustainable development and regional
integration
Enrique García
Elections and patience
Antônio Delm Netto
The outlook for Chile-Bolivia relations
Luis Maira
Colombia’s strengths
Fernando Cepeda Ulloa
Foreign policy and democratic and human security
Diego Ribadeneira Espinosa
Cheddi Jagan’s global human order
Ralph Ramkharan
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88
103
123
137
171
179
Paraguay’s economic situation and prospects
Dionisio Borda
A strategic regional view of Peru’s foreign policy
José Antonio García Belaunde
Suriname by its authors
Jerome Egger
Mercosur: quo vadis?
Gerardo Caetano
Full Petroleum Sovereignty
Rafael Ramírez
Silvano Cuéllar – Allegory of the Nation
María Victoria de Robayo
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
275
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DIPLOMACIA ESTRATÉGIA POLÍTICA
Number 4 April / June 2006
5
16
27
44
66
84
100
Summary
Objectives and challenges of Argentina’s foreign policy
Jorge Taiana
Bolivia, a force for integration
Evo Morales
The brazilian economy’s challenges and prospects
Paulo Skaf
Program of government (2006-2010)
Michelle Bachelet
The trap of bilateralism
Germán Umaña Mendoza
The Amazonian Cooperation Treaty Organisation
(Acto): a constant challenge
Rosalía Arteaga Serrano
Guyana – linking Brazil with the Caribbean:
potential meets opportunity
Peter R. Ramsaroop
Eric M. Phillips
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
276
Paraguay’s political crossroads
Pedro Fadul
The great transformation
Ollanta Humala
Suriname: macro-economic overview, challenges
and prospects
André E. Telting
Uruguay’s insertion into the world economy:
a political and strategic view
Sergio Abreu
“There is another world and it is in this one”
José Vicente Rangel
Pedro Lira
Milan Ivelic
118
131
151
164
200
226
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
277
D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Volume I Number 3 April / June 2005
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
278
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
279
D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Volume I Number 2 January / March 2005
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
280
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
281
D E P
DIPLOMACIA ESTRATÉGIA POLÍTICA
Volume I Number 1 October / December 2004
Di p l o m a c y , St r a t e g y & po l i t i c S nº 9 – Ja n u a r y /ma r c h 2009
282
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