Scholars Grapple with End of Latin America’s “Golden Decade”

Español Latin America, the region many overlook for its weak economies and unstable politics, has come a long way in the past decade, with Chile and Brazil currently leading the way toward full development. However, despite the notable successes of the last decade, the Latin-American economy as a whole is coming to a standstill.

Top scholars agreed with that central theme and predicament last week at the University of Miami’s Ninth Annual Latin America Symposium at the Conrad Hotel in downtown Miami. Although specialists in different aspects of Latin America, selected by the Center for Hemispheric Policy, all saw plenty to praise in recent history.

One of Latin America’s best steps forward was the widening of the middle class. As most of the scholars mentioned, Latin America now boasts a stronger middle class that is not afraid to make its needs heard. Currently, there are even more people in the middle class than in poverty, said headline speaker Augusto de la Torre, chief economist of Latin America and the Caribbean at the World Bank.

“We used to say ‘when the US catches a cold, we catch pneumonia,’ but not anymore,” he said. “Latin America has built a better immune system.”

Augusto de la Torre of the World Bank
Augusto de la Torre of the World Bank speaks about Latin America at a crossroads. Source: Marisol Medina.

That improved immune system he dubbed “the golden decade,” when 75 million Latin Americans came out of poverty, has seen a reduction of the region’s poor to less than one third of the population.

During this last decade, Latin America has also shifted sides in the world economy, going from lender to creditor, said de la Torre, pointing out that the region has managed to become a great user of FDI (foreign direct investment).

Another of the region’s successes is the Pacific Alliance, formed by Mexico, Colombia, Peru, and Chile in 2012. According to Carl Meacham, director of the Americas Program at the Center for Strategic & International Studies in Washington, D.C., it has yielded real results in a short period of time.

“The alliance has liberalized 92 percent of inbound trade and permitted the free movement of people between states,” he said. “The Pacific Alliance is more than 50 percent of the region’s trade.”

But despite the young alliance’s achievements, and the region’s overall economic improvement, there is still a lot of work to be done.

The Slowdown Has Arrived

Jorge Castañeda, former secretary of foreign affairs of Mexico and now professor at New York University, recognized the region’s progress, but said it is not enough.

“The region as a whole had not seen this economy boom since the 70s,” he said. “There is a beginning of a reduction on inequality, but the problem is things have run out of steam.”

He explained that although the economy is still growing on the books, its extremely slow development means it’s not actually growing for those who got used to a booming economy.

“People got used to it and now they’re taking on credit, and that’s a problem because now there’s no money for the second kid,” he said, referring to an example of a family that was used to a more comfortable lifestyle, which is now increasingly harder to maintain.

He also pointed out that governments are becoming too unresponsive to the needs of constituents, such as in Brazil and Mexico.

“Governments reach office democratically but don’t govern democratically,” he said. “They are insensitive to popular demands.”

Jorge Castañeda
Jorge Castañeda is former secretary of foreign affairs of Mexico and now professor at New York University.
Source: Marisol Medina.

According to Castañeda, the expanding middle class will not stand by seeing their tax money misused and ending up in politician’s pockets, which is why they take to the streets — as they did in recent months in Brazil.

“In Brazil, people pay high taxes and don’t see anything in return,” he said. “They are not happy. They want more, and they are not getting it.”

That combination of high expectations and a slow-paced economy is the reason why De la Torre said Latin America is at a crossroads. It is impossible at current growth rates (2.5 percent in 2013), he points out, for Latin America to continue to deliver the overall progress it was delivering.

The World Bank economist believes 2.5 percent growth may be the new normal in the future but is optimistic about the region not returning to its traditional instability.

In order for the region to continue improving, he said, it is vital that governments take advantage of the growing middle class and invest in education with a high degree of intergenerational mobility.

“The place in society where you are born matters too much,” he said. “It suggests our societies don’t provide equal opportunity.”

He suggested a model like South Korea’s as one in which someone’s social status at birth does not cut opportunities short.

The Venezuelan Crisis

Talk of Venezuela was a priority for the scholars, who pondered Venezuela’s future in the final panel. It was composed of scholars such as the PanAm Post’s columnist and professor of international studies at the Central University of Venezuela, María Teresa Romero, and Brian Latell, a senior research associate at the Institute for Cuban and Cuban-American Studies at the University of Miami.

María Teresa Romero
Professor María Teresa Romero speaks during the “Venezuela: What comes next?” panel at the University of Miami’s Center for Hemispheric Policy’s Ninth Annual Latin America Symposium on May 22. Source: Marisol Medina.

Latell spoke of about the beneficial relationship Cuba has with Venezuela, saying that Fidel Castro has had his eye on Venezuela since the start of his revolution. The current relationship between the two countries then must be the most successful case of foreign policy in Cuba’s revolutionary history.

“Cuba is really the most valuable source of stability for the Maduro government,” he said.

Romero, on the other hand, released her comments in a column, “Reconciliation or Radicalization? Maduro’s Vulnerability and Self-Inflicted Predicament.” She sees only bad options for President Nicolás Maduro and fears that he faces either deepening the destructive revolution or a coup from his own crony military.

If he does not work with the opposition and backtrack, however, she predicts an accelerated, mass exodus.

What Can Be Done?

Susan Purcell, director of the Center for Hemispheric Policy, believes the slowdown has been regional, rather than confined to specific nations. She offers shifting commodities demand from the Chinese, towards the Middle East, as one key explanation.

While commodities demand allows for “fairly easy growth,” she says, Latin-American leaders have “to make a series of reforms that would allow their economies to become globally competitive…”

However, this is not easy, she acknowledges, since there are so many vested interests that impede such reforms.

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